Pro-Benefit Staffing, Inc. v. Board of Review of Indus. Com'n of Utah

• Decision Date: 02 June 1989
• Docket Number: No. 880595-CA,PRO-BENEFIT,880595-CA
• Citation: 775 P.2d 439
• Parties: STAFFING, INC., Petitioner, v. BOARD OF REVIEW OF the INDUSTRIAL COMMISSION OF UTAH and Richard J. Riddle, Respondents.
• Court: Utah Court of Appeals

Page 439

775 P.2d 439

PRO-BENEFIT STAFFING, INC., Petitioner, v. BOARD OF REVIEW OF the INDUSTRIAL COMMISSION OF UTAH and Richard J. Riddle, Respondents.

No. 880595-CA.

Court of Appeals of Utah.

June 2, 1989.

Stephen W. Cook, Midvale, for petitioner.

R. Paul Van Dam and Winston M. Faux, Salt Lake City, for respondents.

Before BILLINGS, GARFF and JACKSON, JJ.

OPINION

BILLINGS, Judge:

This is an appeal from the Board of Review of the Industrial Commission's ("Board") decision awarding Richard J. Riddle unemployment compensation benefits. The Board concluded Mr. Riddle was not discharged from his employment for disqualifying conduct under Utah Code Ann. § 35-4-5(b)(1) (1988), and was therefore entitled to benefits under the Utah Employment Security Act. We affirm the Board's determination.

FACTS

We review only those facts relevant to the issues presented. Mr. Riddle was employed at Pro-Benefit Staffing, Inc. as an accountant from July 12, 1987, until his discharge on February 4, 1988. Mr. Riddle's primary responsibility was managing accounts receivable which included crediting customer accounts and making bank deposits. On or about January 25, 1988, Master Services, one of Pro-Benefit's clients, contacted Pro-Benefit to report that a check Master Services had submitted for the balance of a December invoice had been returned to them by Mr. Riddle even though Master Services's account had been credited for the invoice amount.

It was later determined that Mr. Riddle had credited a check issued by another client, Chief Fire Protection, in the amount of $6,793.70 to Master Services's account. Mr. Riddle claimed he mistakenly credited the wrong account. He stated that clients frequently submitted payments without attaching the corresponding invoices, and he believed such was the case with the Chief Fire Protection check. Mr. Riddle further stated that checks and invoices occasionally became separated which he believed happened with the Master Services check and invoice. Consequently, Mr. Riddle testified that when he ultimately discovered the payment from Master Services, his records reflected a zero balance because he had already mistakenly credited the Master Service's account with the check issued by Chief Fire Protection. Thus, believing the check from Master Services was a duplicate payment, Mr. Riddle returned it to Master Services.

After learning of the incident, Pro-Benefit audited its records but no other mistakes or discrepancies in Mr. Riddle's work were discovered. Nonetheless, Mr. Riddle was suspended from his position on January 26, 1988, and subsequently terminated on February 4, 1988. Pro-Benefit stated the basis for Mr. Riddle's discharge was "errors and discrepancies found in ... handling of the Master Services account."

The Board upheld an initial determination by the Department of Employment Security awarding Mr. Riddle unemployment benefits. In its decision, the Board affirmed the appeal referee's determination that Mr. Riddle was not terminated from his employment for "just cause" within the meaning of Utah Code Ann. § 35-4-5(b)(1) (1988). The Board also denied Pro-Benefit's request to remand the case to the appeal referee to take additional testimony. In this appeal Pro-Benefit raises three issues claiming: 1) The Board erred in concluding that Mr. Riddle was not terminated for "just cause," 2) the appeal referee erred in excluding hearsay testimony, and 3) the Board abused its discretion in refusing to remand the case for additional testimony.

STANDARDS OF REVIEW UNDER THE UTAH ADMINISTRATIVE PROCEDURES ACT

These proceedings were commenced after January 1, 1988, and therefore our review is governed by the Utah Administrative Procedures Act ("UAPA"), Utah Code Ann. §§ 63-46b-1 to -22 (1988 Supp.). ¹

It is difficult to determine precisely the challenges raised by Pro-Benefit on appeal. Pro-Benefit does not appear to dispute the Board's findings of operative facts. Moreover, even if Pro-Benefit is claiming the Board's findings of fact are not supported by substantial evidence, see Grace Drilling Co. v. Board of Review, 776 P.2d 63, (Utah Ct.App. 1989), it has failed to meet its burden of marshalling the evidence, and therefore, we treat the Board's findings of operative facts as conclusive. See, e.g., Cornish Town v. Koller, 758 P.2d 919, 922 (Utah 1988); Sampson v. Richins, 770 P.2d 998, 1002 (Utah Ct.App.1989).

Pro-Benefit does assert the Board erred in concluding the operative facts and the reasonable inferences drawn therefrom did not demonstrate that Mr. Riddle's conduct was "culpable" and therefore, his discharge was not for "just cause" within the meaning of Utah's Employment Security Act. Whether an employee was terminated for "just cause" is a mixed question of law and fact, and thus on appeal we must determine whether the UAPA alters the standard for reviewing such a determination. No reported Utah case has directly addressed this issue therefore, the issue is one of first impression.

Mixed Questions of Law and Fact Under the UAPA

Prior to the UAPA, our courts uniformly applied an intermediate standard of reasonableness and rationality in reviewing mixed questions of law and fact, otherwise referred to as the application of "basic facts ... to the legal rules governing the case." Utah Dep't of Admin. Servs. v. Public Serv. Comm'n, 658 P.2d 601, 610 (Utah 1983). ² Under the intermediate standard, the Board's conclusions must be reasonable and rational "as measured against the language and purpose of the governing legislation." Clearfield City v. Department of Employment Sec., 663 P.2d 440, 444 (Utah 1983).

Under the UAPA, our review of mixed questions of law and fact is governed by Utah Code Ann. § 63-46b-16(4)(d) (1988). This section provides that we shall grant relief if an "agency has erroneously interpreted or applied the law." Id. (emphasis added). Section 63-46b-16(4)(d) is identical to its Model State Administrative Procedures Act counterpart § 5-116(c)(4) ³ and the comments to § 5-116(c)(4) provide that:

Paragraph (c)(4) includes two distinct matters--interpretation and application of the law.... [W]ith regard to the agency's application of the law to specific situations, the enabling statute normally confers some discretion upon the agency. Accordingly, a court should find reversible error in the agency's application of the law only if the agency has improperly exercised its discretion.... ⁴

We conclude our existing intermediate standard for reviewing the Board's determinations is consistent with the approach set forth above, and therefore we will continue to embrace the analysis described in Administrative Services for reviewing mixed questions of law and fact. Accordingly, under Utah Code Ann. § 63-46b-16(4)(d), we will not disturb the Board's application of its factual findings to the law unless its determination exceeds the bounds of reasonableness and rationality. ⁵

With the foregoing principles in mind, we address Pro-Benefit's contentions that Mr. Riddle was discharged for "just cause" within the meaning of Utah's Employment Security Act.

TERMINATION FOR "JUST CAUSE"

Pro-Benefit bears the burden of establishing that Mr. Riddle was terminated for "just cause." See, e.g., Stegen v. Department of Employment Sec., 751 P.2d 1160, 1163 (Utah Ct.App.1988).

In a discharge, the employer initiates the separation and, as such, is the primary source of information with regard to the reasons for the dismissal. The employer has the burden of proof which is the responsibility to establish the facts resulting in the discharge.

Utah Admin.R. 475-5b1-3 (1987-88).

Under the Board's interpretive rules and Utah case law, a successful showing of just cause requires an employer to establish the employee's conduct warranting dismissal involved three factors: 1) culpability, 2) knowledge of expected conduct, and 3) the offending conduct was within the employee's control. See, e.g., Utah Admin.R. 475-5b1-2 (1987-88); Grinnell v. Board of Review, 732 P.2d 113, 114 (Utah 1987) (per curiam); Stegen, 751 P.2d at 1163. The failure to establish even one of the three factors is fatal to Pro-Benefit's claim that Mr. Riddle was terminated for "just cause" and therefore not entitled to unemployment compensation benefits.

As we noted earlier, Pro-Benefit does not challenge the Board's findings of operative facts, but rather it challenges the inferences drawn therefrom. Pro-Benefit's principle challenge is that the Board erred in concluding the facts do not demonstrate that Mr. Riddle's conduct was "culpable." ⁶

Culpable Conduct under the Utah Employment Security Act

In Lane v. Board of Review, 727 P.2d 206, 208 n. 3 (Utah 1986), the Utah Supreme Court held that the administrative rules interpreting the statutory standard of "just cause" are reasonable and rational and may properly serve as the basis of an agency decision. See Utah Admin.R. 475-5b1-2 (1987-88). As a result of these interpretive rules and case law, "culpable conduct," often considered a factual determination in other circumstances, has become a part of the legal definition of "just cause" in unemployment compensation cases. Accordingly, we review the Board's determination that an employee's conduct was or was not culpable, under the intermediate standard of review to determine if it is reasonable and rational in light of the evidence in the record. See, e.g., City of Orem v. Christensen, 682 P.2d 292, 294 (Utah 1984) (court reviewed the Board's decision that employee's conduct was culpable under the reasonableness and rationality standard). Accord Clearfield City v. Department of Employment Sec., 663 P.2d 440, 443 (Utah 1983).

Utah Admin.R. 475-5b1-2(a) (1987-88) provides guidance to the Board in determining whether an employee's conduct was sufficiently culpable, and provides in relevant part, with our emphasis:

This is the seriousness of the conduct or the severity of the offense as it affects continuance of...