Labor & Employment Law

Employee fired for filing a fraudulent claim with his private insurance company

By Harvey Randall, Esq.

Employee fired for filing a fraudulent claim with his private insurance company
Matter of Louis Maldarelli v Doherty, 2007 NY Slip Op 04407, decided on May 24, 2007, Appellate Division, First Department

Louis Maldarelli, an employee of the New York City Department of Sanitation [DOS], was convicted of insurance fraud in the third degree. Maldarelli filed a claim for lost earnings as a result of an accident with his private insurance company. He supported his claim by submitting forged documents and memoranda that he represented were issued by DOS that falsely indicating that he was not entitled to employee sick leave benefits.

Relying on New York City Charter Section 1116, DOS summarily dismissed Maldarelli from his position on the grounds that his perpetration of a fraud on his insurance company constituted a violation of his ?oath of office.? Maldarelli appealed and won reinstatement to his former position when Supreme Court ruled that DOS?s reliance on Section 1116 was misplaced.

The Appellate Division affirmed Supreme Court?s holding [see Maldarelli v Doherty, 7 AD3d 384]. The court said that New York City?s Charter Section 1116 defines an oath-of-office violation as a violation of ?any provision of law relating to [the employee?s] office or employment,? ?any fraud upon the city,? or the conversion of ?any of the public property to [the employee?s] own use.?

Here, however, there was nothing in the record supported a finding that Maldarelli perpetrated a fraud upon the City, violated any law relating to his employment or converted any public property to his own use. In contrast, Maldarelli pled guilty to committing a fraud against an external, non-City entity, his insurance company. Accordingly, his termination pursuant to Section 1116 was in violation of lawful procedure and thus, said the Appellate Division, it was properly annulled by Supreme Court.

DOS subsequently served with administrative disciplinary charges alleging that Maldarelli violated Rule 3.2 of DOS?s Personnel Rules and Regulations. DOS Rule 3.2 bars ?conduct ?prejudicial to good order and discipline, or which tends to discredit the City or the Department.? Found guilty as charged, Maldarelli was dismissed from his position.

Again Maldarelli appealed, only to have his appeal dismissed by the Appellate Division. The court said that the administrative disciplinary determination was supported by substantial evidence that Maldarelli ?was guilty of misconduct, as indicated by his conviction of insurance fraud in the third degree.?

Although the fraud was not committed against the City or DOS, but, rather, against Maldarelli?s private insurer, the Appellate Division concluded that Maldarelli?s action constituted a violation of Rule 3.2 of the DOS Personnel Rules and Regulations prohibiting conduct that ?? tends to discredit the City or the Department.?

In addition, the Appellate Division pointed out that New York City Mayoral Executive Order 105, Section 5 authorizes the dismissal of any City employees ?convicted of a crime relating to their office or employment, involving moral turpitude or which bears upon their fitness or ability to perform their duties or responsibilities.?

Although, said the court, it is not clear whether the Executive Order limits the authority to terminate the individual to those situations where the crime is related to the individual?s employment, ?we agree that while the crime did not involve [Maldarelli?s] actual employment, it was sufficiently related to his employment in that he misused his job status to perpetrate this fraud, and that unethical conduct could be construed as an act of moral turpitude or, at the very least, one that would bear on his fitness to continue in that position.?

Citing Matter of Kelly v Safir, 96 NY2d 32, the Appellate Division said that the penalty imposed, dismissal, ?does not shock the conscience, particularly in view of [Maldarelli?s] disciplinary record, which consists of over a dozen violations of Departmental rules, with penalties ranging from reprimands to the loss of seven days? pay.?

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1 Formerly Mayoral Executive Order of 1978, Number 6, Section 5(c)

Full post as published by New York Public Personnel Law on March 13, 2008 (boomark / email).