UPDATE: Employee’s Refusal to Sign Written Disciplinary Notice Not “Misconduct” Under California Unemployment Insurance Code

Approximately two years ago, a California court of appeal held that an employee’s refusal to sign a disciplinary memorandum amounted to misconduct under the California Unemployment Insurance Code, disqualifying him from unemployment insurance benefits.  The California Supreme Court recently reversed that ruling, reiterating that the fundamental purpose of the Unemployment Insurance Code is to provide benefits for persons “unemployed through no fault of their own.” (Paratransit, Inc. v. Unemployment Ins. Appeals Bd. (— P.3d —-, 2014 WL 2988013, Cal., July 3, 2014). 

Facts

Paratransit, Inc. suspended driver Craig Medeiros (“Claimant”) for two days without pay after an investigation substantiated a passenger complaint against him.  The two-day suspension was issued by Paratransit management in a written memorandum Claimant was asked to sign, but Claimant refused based on his belief that he should not sign anything without a representative from his union present.  Although Claimant was advised that his refusal to sign would constitute insubordination rendering him subject to further discipline, Claimant adhered to his belief and left without signing.  Subsequently, he was terminated.

Following his termination, Claimant applied for unemployment benefits.  His application was denied on the basis that he engaged in “misconduct” under section 1256 of the Unemployment Insurance Code by refusing his employer’s direction to sign.  An administrative law judge affirmed the Employment Development Department’s denial of his application, but the Unemployment Insurance Appeals Board (“Board”) reversed, finding Claimant’s failure to sign was at most, “a simple mistake or instance of poor judgment.”  Upon application by Paratransit, Inc., a trial court issued a writ of mandamus directing the Board to set aside its decision and reinstate the denial of Claimant’s application, once again on the basis that his refusal to sign constituted misconduct.  After a California court of appeal affirmed issuance of the writ, Claimant successfully petitioned the California Supreme Court for review.

Decision

The California Supreme Court held that “to establish misconduct,” for purposes of Unemployment Insurance Code section 1256, an employer must put forth “‘substantial evidence of deliberate, willful, and intentional disobedience’ on the part of the employee.”  The Court noted that in evaluating such evidence, the employee’s intent must be assessed “from his standpoint in the light of the circumstances facing him and the knowledge possessed by him at the time.”  Where no showing is made that the employee’s acts were unreasonable or in bad faith, he or she is entitled to benefits.

Applying these principles, the Court concluded that Claimant was entitled to benefits because his refusal to sign was not unreasonable or in bad faith.  It noted that no evidence was presented to suggest that Claimant refused to sign in order to frustrate the employer’s objectives or to be difficult.  Rather, Claimant “acted out of a genuine belief that signing the notice would be an admission of allegations he disputed, and that belief was not so unreasonable under the circumstances as to constitute misconduct within the meaning of section 1256.”

Questions

If you have any questions concerning this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Bruce A. Scheidt, Laura Izon Powell, David W. Tyra or Kristianne T. Seargeant | 916.321.4500