Merlino v. Commonwealth

Opinion by

Judge- MacPhail,

Anita M. Merlino (Claimant) appeals an order of the Unemployment Compensation Board of Review (Board) which affirmed a referees denial of unemployment compensation benefits under Section 402(e) of the Unemployment Compensation Law,¹ 43 P.S. §802(e). (willful misconduct). We reverse the Boards order.

Claimant was employed by Nordic Fisheries, Inc. (Employer) in both its wholesale operation and retail fish business. On July 16, 1986, Claimant and her husband, who was the manager of Employers fresh fish department, informed Employer that they were going to open their own retail fish store three miles from Employers store, in the Squirrel Hill section of Pittsburgh. As found by the Board, Employer draws a substantial portion of its business from Squirrel Hill. Boards Finding of Fact No. 8. Upon discovering that Claimant and her husband intended to remain in Employers employ, Employer advised them that their new store would be a conflict of interest and that the . Merlinos could not continue as employees while in competition with Employer. Employer subsequently discharged both Claimant and her husband when they refused to resign.

Claimant was denied benefits by both the Office of Employment Security and the referee, based on willful misconduct. The Board, after making findings of fact consistent with those of the ■ referee, concluded that Claimants actions in operating a competing fish store with her husband constituted a conflict of interest sufficient to support a ' finding of willful misconduct. Claimants appeal of this order' is now before our Court.

Our scope of review is, of course, limited to a determination of whether constitutional rights have been violated, an error of law committed, or whether necessary findings'of fact are not supported by ■ substantial evidence. Estate of McGovern v. State Employees’ Retirement Board, 512 Pa. 377, 517 A.2d 523 (1986). The question of whether or not a claimants conduct constitutes willful misconduct is a question of law, subject to our review. Richner v. Unemployment Compensation Board of Review, 95 Pa. Commonwealth Ct. 572, 505 A.2d 1375 (1986). Claimant argues here that the Boards findings are not supported by- substantial eviderice and that the Board erred as a matter of law in concluding that Claimant committed willful misconduct.

“Willful misconduct,” which renders a claimant ineligible for benefits under Section 402(e), has been defined by this Court to include the wanton- and willful disregard of the employers interest, the deliberate violation of rules, the disregard of standards of behavior an employer can rightfully expect, or negligence manifesting culpability, wrongful intent, evil design, or intentional and substantial disregard of the employers interests or the employees duties and obligations. Kentucky Fried Chicken of Altoona, Inc. v. Unemployment Compensation Board of Review, 10 Pa. Commonwealth Ct. 90, 309 A.2d 165 (1973). Such conduct must be willful and not merely that which appears to be contrary to the employers interests. Penflex, Inc. v. Bryson, 506 Pa. 274, 485 A.2d 359 (1984).

In this case, the Board concluded that because the testimony established that Claimant was involved in the operation of her husbands .competing fish store, Employer had met its burden of proving Claimants willful misconduct based on a conflict of interest. We agree with Claimant, however, that there is .nothing in the record to support a finding of willful misconduct.

The Boards findings of fact, on which its conclusion of conflict of interest is based, include the following:

9. Claimant made no statement at the meeting on July 16, 1986, to indicate that she would not be involved in her husbands business and it was the employers clear understanding, of which claimant was aware, that both claimant and her husband would be operating the retail store.

16. The ownership of the new retail fish store was placed only in the claimants husbands name and the lease was only signed by claimants husband even though the employer had been advised by the husband, with no dissent from claimant, that the ownership and the lease were in both names and that both were involved in the ownership and operation of the new store.

The Board found, additionally, that notices of the new stores opening were distributed in both the Squirrel Hill area, where the new store was located, and near Employers store, and that an advertisement had been placed in a local ethnic newspaper. See Boards Finding of Fact No. 13.

We conclude that the Boards findings do not support the conclusion that Claimants husbands fish store presented a conflict of interest with Claimants employment with Employer. At the time of Claimants discharge, the only action she, individually, had taken on behalf of her husbands business was to use a personal day off from Employer to assist in the stores opening day and to sign a health department inspection report. See Boards Findings of Fact Nos. 12 and 14. This conduct does not manifest a willful disregard of Employers interests or any degree of misconduct sufficient to sustain Employers burden of proving Claimants willful misconduct.

We, accordingly, reverse the Boards order denying benefits to Claimant for willful misconduct.²

Order

The order of the Unemployment Compensation Board of Review in the above-captioned proceeding is hereby reversed.

1 Act of December 5, 1936, Second Éx. Sess., P.L. (1937) 2897, as amended.

2 In so holding, we are - mindful of the cases in which this Court has affirmed a finding of willful misconduct under circumstances more clearly exhibiting “conflict of interest.” See, e.g., Burke v. Unemployment Compensation Board of Review, 99 Pa. Commonwealth Ct. 500, 512 A.2d 1367 (1986) (claimant deliberately referred away employers business); Lee v. Unemployment Compensation Board of Review, 73 Pa. Commonwealth Ct. 264, 458 A.2d 629 (1983) (claimant revealed confidential information to a business competitor); Cahill v. Unemployment Compensation Board of Review, 42 Pa. Commonwealth Ct. 566, 401 A.2d 405 (1979) (contrary to a supervisors directive, claimant helped a competitors employee install a dishwasher manufactured by the competitor and not claimants employer).