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COA Splits On "Substantial Fault" Standard For Unemployment Benefits

By Sean E. Andrussier

Today the Court of Appeals (COA) issued a split decision applying the "substantial fault" standard governing unemployment benefits claims. The majority (Judges McGee and Elmore) ruled in favor of the employee and reversed the decision of the Employment Security Commission (ESC). Judge Tyson dissented. The case seemingly lowers the barrier for employees seeking to excuse their failure to comply with employer policies, particularly in cases of absenteeism and tardiness. The case is Applewhite v. Alliance One Int'l, Inc.

By statute, an employee is disqualified from receiving unemployment benefits if he is discharged "for substantial fault on his part" in failing to comply with the employer's reasonable job requirements. The statute defines "substantial fault" to include acts or omissions over which the employee "exercised reasonable control."

Thus, when an employee is discharged for failing to comply with the employer's reasonable policy (e.g., attendance), the question boils down to this: Did the employee have the physical and mental ability to comply?

So, for example, in a 2006 case, James v. Lemmons, the COA upheld the ESC's finding of no substantial fault (i.e., upheld the award of benefits) in the case of an employee discharged for excessive absenteeism, based on the ESC's finding that she missed work after failing to take medication prescribed for her bipolar disorder. James was based on precedent stating that "serious physical or mental illness" can support a finding of no substantial fault.

Today's case involved an employee discharged for excessive absenteeism. Her employer has a three-strikes-and-you're-out policy: after two written warnings, the third infraction results in dismissal. The employee, who had multiple incidents of excessive breaks and tardiness, committed the third infraction when she took an excessive break by returning 15 minutes late from lunch. She was late because, according to her account, she had become sick and needed to go to the bathroom before returning to work. The ESC nonetheless concluded that she bore substantial fault for her dismissal. Thus, she was denied benefits.

The COA majority reversed. The COA held that the employee didn't have reasonable control over her tardiness for the third incident that triggered her dismissal, because she was late "due to illness"; she "had become sick, and needed to go to the bathroom before returning to her work area." The majority concluded that this was enough to find no substantial fault, and thus the majority voted to reverse the ESC and award the employee benefits.

Judge Tyson dissented, emphasizing that the employee's "undescribed and undiagnosed 'personal illness'" didn't constitute a serious physical or mental condition that prevented her from conforming to the employer's policy. He deemed James inapplicable because the employee in James had a previously diagnosed mental illness which was serious (bipolar disorder); the ESC in James had found that her absences were caused by her condition; and the employee in James had provided doctors' excuses for the time she missed work.

Judge Tyson emphasized that, in contrast to James, in today's case there was no evidence or diagnosis of serious illness. The record showed that the employee had exhausted her entire lunch break before returning to her workplace, and then used an additional 15 minutes without informing her employer she was sick. And the earlier incidents of tardiness that preceded the third infraction and which contributed to her discharge were not linked to her alleged illness. "Despite the repeated written and oral warnings and [her] awareness of [the] employer's policy regarding termination, [she] failed to give [her] employer any notice of her 'illness' to excuse her actions or provide any medical excuse for her repeated absenteeism while employed." Thus, Judge Tyson would uphold the ESC's conclusion that bore "substantial fault" for her discharge.

Judge Tyson warned that the majority's decision "would subject the Commission and our Courts to a number of claims and appeals asserting unsubstantiated claims of 'illness' with no medical evidence or excuse as a pretext to excuse employees' non-compliance with employers' rules and regulations in order to receive unemployment benefits." An employee could simply claim that he was sick without any diagnosis and competent substantiation of illness.

Today's case does seem to depart from the COA's earlier cases which have said that the employee's failure to comply with the employer's policy must result from "a serious physical or mental illness."

Full post as published by North Carolina Appellate Blog on January 15, 2008 (boomark / email).