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Employment Blog

Unemployment Benefits Cannot Be Denied Based on Eight Cash Transaction Inadvertent Errors Out of 80,000 Transactions in a 21-Month Period

The Wisconsin Supreme Court has interpreted the meaning of “substantial fault” in an unemployment insurance case, which will be applicable in worker’s compensation cases, as well.  The case is Operton v. Labor and Industry Review Commission, 2017 WL 1743039.  In doing so the Supreme Court affirmed the ruling of the Wisconsin Court of Appeals, which had reversed the Labor and Industry Review Commission.  This case is about the meaning of “substantial fault” as applied to a cash register clerk who goofed from time to time.

First, what the case is not about is the employer’s right to fire the employee for having made cash transaction errors.  The employer clearly held that right, which was never at issue in the case.  The case was about the employee’s eligibility for unemployment benefits after her employment was terminated.

The Supreme Court’s decision recites the broad policy that underlies unemployment insurance, which is to alleviate the social cost of unemployment.  In furtherance of that policy, eligibility for benefits is liberally interpreted in favor of the unemployed worker.  Recent legislative changes, however, have tightened eligibility based on “misconduct” and “substantial fault.”

The facts in the case were straight-forward.  The clerk had worked for 21 months during which time she would have made roughly 80,000 cash register transactions.  Over the course of that employment she made eight errors while processing payments.  The errors were broadly similar in nature; they were not identical.  For example, in one instance she accepted a Women Infants and Children (WIC) check for $8.67 worth of items when the check was actually worth only $5.78.  Once she allowed a customer to leave without finishing the transaction on the pin pad.  On another occasion she failed to check the identification of a customer who used a credit card for a purchase of over $50.  The errors occurred sporadically over the term of her employment.

The employee is now entitled to receive unemployment benefits based on this ruling because she did not engage in “misconduct” or “substantial fault.”  In fact, the employer did not claim misconduct on her part.  Rather, the employer argued that her unintended errors met the definition of “substantial fault.” That definition is general in the positive sense and specific in the negative sense.  Broadly, “substantial fault” means “acts or omissions of an employee over which the employee exercised reasonable control and which violated reasonable requirements of the employee’s employer.” (My emphasis)  So what does the exercise of “reasonable control” by the employee mean?  And what are “reasonable requirements”?  The legislature did not say.  The legislature did say, however, what does not constitute “substantial fault”:

  1. One or more minor infractions of rules unless an infraction is repeated after the employer warns the employee about the infraction.
  2. One or more inadvertent errors made by the employee.
  3. Any failure of the employee to perform work because of insufficient skill, ability, or equipment.

Exemption number one did not apply because the payment transactions were mistakes, not infractions of rules.  And exemption number three did not apply because the employee, having processed about 80,000 payment transactions, clearly had the skill and ability to do so.  The case came down to whether eight sporadic, broadly similar yet not identical errors out of roughly 80,000 successful transactions in a 21-month span met the exemption criteria of “one or more inadvertent errors.”  The Supreme Court held that there was no substantial fault on the part of the employee because she had merely committed “one or more inadvertent errors” so as to be exempt from the definition of “substantial fault” as a matter of law.

When a court of last resort rules that a particular set of facts satisfies a legal criterion, the message sent is: This case was not close.  We do not want to see cases on similar facts brought again.  Despite the apparent bright line ruling, the Supreme Court decision left the uncertainty door ajar just a bit.  Although the court of appeals decision stated that an employer’s warning as to inadvertent errors is not material (since the legislature did not allow for warnings in exemption number 2), the Supreme Court cautioned “[t]hat is not to say an employer’s warning can never be relevant to whether an employee’s error was inadvertent.”  The Supreme Court also stated it need not determine whether a numerical limit on the number of inadvertent errors may exist before they become intentional.

The definition of “substantial fault” in the unemployment benefits context applies in worker’s compensation where the employer discharges an employee who is on light duty for a work-related injury.  In the past a discharge for whatever reason resulted in worker’s compensation temporary benefits being reinstituted for the duration of the healing period.  In light of recent changes to the Worker’s Compensation Act, however, those benefits are not payable where the employer can prove that its decision to terminate the employee was based on substantial fault (or on misconduct).  Operton shows that the full parameters of “substantial fault” have yet to be developed.  But if the facts are close to those in Operton, employers should think hard before contesting unemployment benefits.  Likewise, worker’s compensation insurance carriers (and employers who are self-insured for worker’s compensation) should consider the wisdom of not reinstituting temporary benefits when the employee is discharged while on light duty from an industrial injury or condition.