Employee Conduct Outside of Work Can Jeopardize Unemployment Benefits

Virginia employees are eligible for unemployment benefits so long as the employee’s termination did not result from the employee’s misconduct connected to his work.  (Va. Code Ann. § 60.2-618(2)(a)).  In a decision that has employers celebrating, the Virginia Court of Appeals held that employee misconduct outside of the workplace can, in some cases, be deemed to be connected to the employee’s work, and render the employee ineligible for unemployment benefits.

In Francis v. Va. Empl. Comm’n, Jennifer Francis (Francis) worked as a merchandizing supervisor for Wal-Mart, which entailed pricing merchandise, stocking shelves, and operating the cash register.  Francis held this position from 2006-2008, and during that time there were no problems with her performance and no disciplinary actions were taken against her.  In April 2008, Francis volunteered to her supervisor that she was going to be charged with two counts of felony welfare fraud.  While this charge was unaffiliated with Francis’ employment , Wal-Mart asserted that she nonetheless violated a financial integrity clause in the company’s code of ethics requiring “honest and accurate recording and reporting of financial information . . . in order for that Associate to make responsible decisions.”  Because of this violation, Wal-Mart chose to sever the employment arrangement and allowed Francis to choose between resignation or termination; Francis chose to resign and filed a claim for unemployment benefits.

While the Virginia Employment Commission (VEC) considers cases where the employee is given a choice of either resigning or being terminated as an involuntary separation, it nonetheless denied Francis’ claim.  The VEC reasoned that Francis’ operation of the cash register placed her in a fiduciary capacity and position of trust with the employer.  Her commission of welfare fraud constituted a crime of moral turpitude which destroyed the employer’s trust and violated the employer’s interests.

The Virginia Court of Appeals, in upholding the VEC decision, provided further insight into why the charge against Francis for welfare fraud violated the duties Francis owed to Wal-Mart.  Citing  Branch v. Virginia Employment Commission, the court set forth a two-prong test whereby an employee is guilty of misconduct “connected to his work” when 1) the employee deliberatively violates a company rule or 2) commits and act (or fails to act) of such a nature or on a recurrent basis “as to manifest a willful disregard of the employer’s interests and the duties and obligations the employee owes the employer.”    The court held that Francis failed to meet the second prong of this test.  It reasoned that because Francis operated the cash register, she held a position of trust with Wal-Mart, and her commission of a crime of moral turpitude placed her in a position of distrust and “manifested a willful disregard of Wal-Mart’s interests and the duties and obligations Francis owed Wal-Mart.”

The obvious take away for employers is that an employee’s conduct outside of the workplace can constitute “misconduct connected to work.”  The decision, however, seemingly leaves the door open for broad denial of unemployment benefits.

Here, the court’s decision was heavily influenced by the fact Francis operated a cash register, and had access to cash- duties that were given to her based on the employer’s trust that she was unlikely to steal cash from the cash register.   It certainly makes sense that Wal-Mart would not want someone charged with or convicted of a crime of moral turpitude running its cash registers since crimes of moral turpitude call into question a person’s honesty.   However, the reasoning used to make the decision was that by committing a crime of moral turpitude and creating distrust, Francis willfully disregarded Wal-Mart’s interests and the duties she owed Wal-Mart.  A “willful disregard of an employer’s interests” is incredibly broad.  What if Francis had been a janitor?  Obviously, janitors have access to merchandise and Wal-Mart has an interest in not having its merchandise stolen.  Another interesting aspect is that Wal-Mart had an ethics code in place requiring honest financial reporting, and thereby creating a duty which Francis violated.  The court did not discuss the importance of this fact to its decision, and so it will be interesting to see how broad of a reach this case has on future unemployment benefit cases from the perspective of applicability to employees and in instances where an ethics policy does not create a duty.