Lee v. Employment Appeal Bd., 99-0183.

• Decision Date: 07 September 2000
• Docket Number: No. 99-0183.,99-0183.
• Parties: John W. LEE, Appellee, v. EMPLOYMENT APPEAL BOARD, Appellant, Mitchell County Secondary Roads, Intervenor-Appellant.
• Court: Iowa Supreme Court

616 N.W.2d 661

John W. LEE, Appellee, v. EMPLOYMENT APPEAL BOARD, Appellant, Mitchell County Secondary Roads, Intervenor-Appellant.

No. 99-0183.

Supreme Court of Iowa.

September 7, 2000.

Richard Ramsey, Des Moines, for appellant.

Mark L. Walk, County Attorney, for intervenor-appellant.

John S. Allen and Lois K. Cox, University of Iowa Clinical Law Program, and Bridget Butler, Myra Emerson, Tria Lawton-Russell, and Rodney P. Weber, Student Legal Interns, Iowa City, for appellee.

Considered en banc.

LAVORATO, Justice.

Mitchell County Secondary Roads (county) and the Employment Appeal Board (agency) appealed from a district court decision on judicial review reversing the agency's decision to deny John W. Lee unemployment benefits based on misconduct. The county and the agency contended that the district court erred because there was substantial evidence to support the agency's finding of misconduct. We transferred the case to the court of appeals, which agreed and reversed. We granted further review and now hold that there was no substantial evidence of misconduct. We therefore vacate the court of appeals decision and affirm the district court judgment.

I. Background Facts and Proceedings.

The county hired Lee on August 30, 1982. His duties included plowing snow and using a dump truck to spread gravel and sand during and after snowstorms.

On December 5, 1991, Mitchell County Engineer James Hyde gave Lee an oral warning about his poor job performance. The written record of the warning mentioned that Lee had experienced a drop in attitude and morale and had damaged property but failed to report the damage. The written record also mentioned that the county had received several public complaints about his snowplowing. The written record concluded that Lee's "job is apparently of little importance" to him and that "[i]mprovements need[ed] to be made in attitude, morale, job performance, initiative, and desire."

On January 26, 1995, Lee received another written warning about his job performance. The warning noted that Lee had "continued to destroy county property" and avoided work assignments. The warning also noted that employees had expressed "concern for their safety working around" Lee as well as their "concern for the safety of the traveling public when [he is] operating heavy equipment on the highway." The warning concluded that Lee continued to "exhibit a poor attitude, lack of respect for county property, low morale, poor job performance, and little or no initiative or desire to perform the task at hand." The warning demanded that Lee improve in these areas or otherwise face possible termination.

Shortly after this warning, the county issued Lee a notice of termination with the understanding that he could return to work if he successfully completed an alcohol treatment program. Lee successfully completed the program.

Later in 1995, Lee hit an overhead electrical wire with a county truck, tearing away one end of the wire from a nearby house. The incident caused damage to the house, and a resulting power surge damaged several household electrical appliances. Apparently, the county issued Lee no warning following this incident. Lee received no warnings between the January 25, 1995 warning and 1998.

Hyde testified that despite the warnings that Lee received he—Hyde—saw no effort on Lee's part to improve his job performance. According to Hyde, Lee's typical response to any comment about his job performance was "get the union in here." Hyde further testified that he saw no concern on Lee's part about his job performance nor any effort by Lee to initiate any discussion on how he could improve.

On April 14, 1998, Lee was spreading rock and gravel on a slippery road. At the time, he was driving a county dump truck. He was traveling at the recommended speed limit of twenty miles per hour when he was forced to swerve the truck off to the right side of the road to avoid being hit by an oncoming car. In doing so, Lee hit and broke an overhead utility wire with the box of the truck that he had earlier raised to spread the rock and gravel.

Two days later, Lee, while driving a county dump truck, hit and broke a support wire for an overhead utility line partially hidden by overhanging trees. At the time, Lee was spreading rock at an intersection in a wooded area.

Lee immediately reported both incidents to the county.

On April 21 Hyde met with the county board of supervisors to discuss the two incidents. Shortly after this meeting, Lee was notified that the board had decided to conduct a termination hearing on April 27. Lee attended the hearing with his union representative.

In lieu of termination, Hyde recommended to the board a two-week suspension provided Lee would submit to a physical exam and agree to four drug and alcohol tests per year. The county would pay for one test and Lee would be responsible for the other three. (The union contract provided for only one annual drug test.) Several days later, Lee rejected the offer. Lee testified he rejected the offer because he did not want to pay for three drug and alcohol tests per year.

Thereafter, the county issued Lee a written notice of termination on May 4, 1998. The notice explained that the decision to terminate Lee's employment was "based on Section 4.02 of the current contract which addresses the history of similar and/or past offenses, and Section 4.03(D) gross negligence resulting in willful destruction of property."

Shortly thereafter, Lee applied for unemployment insurance benefits. On May 19, 1998, the Iowa Workforce Development Center determined that Lee was eligible for benefits. The decision determined that the "employer did not furnish sufficient evidence to show misconduct." The county, as intervenor, appealed the decision.

On June 9 an Administrative Law Judge (ALJ) held a hearing at which Lee and Hyde testified. On June 18, in a written decision, the ALJ reversed the earlier decision that had allowed benefits. The ALJ found that the county had established misconduct on the part of Lee. The decision resulted in a disqualification for benefits.

Lee appealed to the Employment Appeal Board, which affirmed the ALJ's decision. Lee petitioned for judicial review in the district court. The district court reversed, concluding that "the Employment Appeal Board erred as a matter of law in finding that Lee's conduct was misconduct for which he could be denied benefits."

II. Scope of Review.

The Iowa Administrative Procedure Act, Iowa Code ch. 17A, governs our review of unemployment benefits cases. See Dico, Inc. v. Iowa Employment Appeal Bd., 576 N.W.2d 352, 354 (Iowa 1998)

. When engaging in judicial review under Iowa Code section 17A.19(8) (1999), a district court acts in an appellate capacity to correct errors of law on the part of an agency. Holland Bros. Const. v. Board of Tax Review, 611 N.W.2d 495, 499 (Iowa 2000).

When this court reviews a district court's judicial review decision, we apply the standards of section 17A.19(8) to the agency action to determine whether our conclusions are the same as those of the district court. Here, the issue concerns whether there was substantial evidence to support the agency's determination of misconduct. Therefore, the standard we apply is whether the agency's decision is supported by substantial evidence in the record made before the agency when that record is viewed as a whole. See Iowa Code § 17A.19(8)(f).

We are bound by agency findings of fact that are supported by substantial evidence. Norland v. Iowa Dep't of Job Serv., 412 N.W.2d 904, 913 (Iowa 1987). Evidence is substantial when a reasonable mind could accept it as adequate to reach the same finding. Id.

III. Did Substantial Evidence Support the Agency's Decision That Lee's Actions Constituted Misconduct?

A. The law regarding misconduct. Iowa Code section 96.5(2) (1997) provides that a claimant is disqualified from unemployment benefits if the department of workforce development finds that the claimant has been discharged for misconduct in connection with the individual's employment. The Iowa Administrative Code defines misconduct

as a deliberate act or omission by a worker which constitutes a material breach of the duties and obligations arising out of such worker's contract of employment. Misconduct as the term is used in the disqualification provision [is] limited to conduct evincing such willful or wanton disregard of an employer's interest as is found in deliberate violation or disregard of standards of behavior which the employer has the right to expect of employees, or in carelessness or negligence of such degree of recurrence as to manifest equal culpability, wrongful intent or evil design, or to show an intentional and substantial disregard of the employer's interests or of the employee's duties and obligations to the employer. On the other hand mere inefficiency, unsatisfactory conduct, failure in good performance as the result of inability or incapacity, inadvertencies or ordinary negligence in isolated instances, or good faith errors in judgment or discretion are not to be deemed misconduct within the meaning of the statute. Iowa Admin. Code r. 871-24.32(1)(a) (1997). We have previously noted that this definition "accurately reflects the intent of the legislature." Reigelsberger v. Employment Appeal Bd., 500 N.W.2d 64, 66 (Iowa 1993).

The employer bears the burden of proving a claimant is disqualified for benefits because of misconduct. Id.; see Iowa Code § 96.6(2) ("The employer has the burden of proving that the claimant is disqualified for benefits pursuant to section 96.5.").

"`Misconduct must be substantial in order to justify a denial of unemployment benefits. Misconduct serious enough to warrant the discharge of an employee is not necessarily serious enough to warrant a denial of benefits.'" Reigelsberger, 500 N.W.2d at 66 (quoting Breithaupt v. Employment Appeal Bd., 453 N.W.2d 532, 535 (Iowa App.1990)).

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