White Water Construction, Inc. v. Dep't of Employment Security

FILED
JANUARY 19, 2021
In the Office of the Clerk of Court
WA State Court of Appeals Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
WHITE WATER CONSTRUCTION, )
Inc., ) No. 37414-9-III
)
Respondent, )
)
v. )
) UNPUBLISHED OPINION
STATE OF WASHINGTON )
EMPLOYMENT SECURITY )
DEPARTMENT, )
)
Appellant. )
FEARING, J. — This appeal raises questions surrounding judicial review of an
administrative agency’s findings of fact and concerning disqualification for
unemployment compensation based on alleged employee misconduct. The superior court
reversed a ruling of the Employment Security Department (ESD) commissioner that
granted Fred Stevens unemployment benefits. Because substantial evidence supported
one of the commissioner’s rulings, we reverse the superior court. Because of the lack of
an explicit finding on another important issue, we remand to the ESD commissioner to
enter further findings of fact.
No. 37414-9-III
White Water Construction, Inc. v. Washington State Department of Employment Security
FACTS
We borrow our facts primarily from the administrative record. We emphasize the
administrative law judge’s (ALJ’s) and the ESD commissioner’s findings of fact and
conclusions of law.
Beginning on August 6, 2018, Fred Stevens worked for respondent White Water
Construction, Inc. as a construction foreman. Stevens completed time sheets pursuant to
White Water’s payroll policy.
On August 27, 2018, Fred Stevens injured his right hand while at work. The
injury required surgery. After Stevens’ surgery, he required time off work, and White
Water Construction placed him on Kept-on-Salary (KOS) status. KOS allowed Stevens
to continue to receive full pay regardless of the hours he worked or his temporary
disability status. White Water did not require Stevens, while he was on KOS, to prepare
time sheets. Stevens, with White Water’s knowledge, opened an industrial insurance
claim with the Department of Labor & Industries (DLI).
In mid-December 2018, Fred Stevens returned to work for White Water
Construction and performed light duty. He did not always work full shifts, due to
medical and physical therapy appointments.
On January 7, 2019, White Water Construction, while Fred Stevens remained on
light duty, directed Stevens to resume submitting time sheets, including a sheet for the
previous pay period, December 24, 2018 through January 6, 2019. According to Stevens,
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he did not understand the need to prepare time sheets because he remained on KOS while
he worked light duty. Stevens attempted to clarify the procedure regarding his KOS
status with his DLI case manager, but could not reach her. Stevens sought to ask White
Water representatives about the direction to complete a time sheet, but neither the office
manager nor the owner was present in the office. In the past, Stevens communicated with
White Water’s owner, Wayne Terry, via text messages. Stevens did not text Terry on this
occasion.
According to Fred Stevens, when he completed the time sheet for December 24 to
January 6, he was uncertain as to whether he remained on KOS, since no recent
paperwork confirmed this status. Stevens also believed that White Water Construction
would pay him for holidays, because, according to Stevens, Wayne Terry informed him
that, “‘I will pay you for the holidays.’” Administrative Record at 51, 53. Therefore, he
inserted hours on the time sheet for holidays. He also incorporated time for hours he
spent at physical therapy and placed those hours in parentheses. His completed time
sheet read:
Date Description Hrs Worked
12/24 Xmas Eve 8-2 6.0 (+4.0)
12/25 Xmas day 10
12/26 8-5 ½ lunch 8.5 (+1.5)
12/27 sick day pay 10
12/31 New Years [sic] Eve 10
01/01 New Years [sic] Day 10
01/02 9 (+1)
01/03 9 (+1)
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See AR at 69-70. Stevens believed that, if he provided erroneous information on his time
sheet, White Water would correct the error.
Since 1984, White Water Construction had not paid employees for holidays unless
they performed work on those days. At an evidentiary hearing, Wayne Terry denied
telling Fred Stevens that the construction company would pay him for unworked
holidays.
At 5:00 p.m. on January 9, 2019, Fred Stevens submitted his time sheet for
December 24 to January 6. He expected to speak with Wayne Terry the following day
about the sheet.
White Water’s Office Manager, Jan Kopet, had prepared notes of when Fred
Stevens arrived at and left work. Her notes reflected that Stevens worked the following
hours:
Date Hours Mr. Steven Actually Worked
12/24 6.0
12/25 0
12/26 4.25
12/27 0
12/31 8
01/01 0
01/02 8
01/03 8
See AR at 109-10. Jan Kopet compared her notes with Fred Stevens’ completed time
sheet and found that the two did not match.
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Wayne Terry and Jan Kopet concluded that Fred Stevens fabricated his time sheet.
On January 10, 2019, Wayne Terry fired Fred Stevens from White Water Construction
employment for falsifying the time sheet.
After his termination from employment at White Water Construction, Fred
Stevens applied for unemployment compensation with ESD. ESD initially granted the
application and began payments to Stevens. ESD later denied Stevens’ application after
determining that Stevens falsified his time sheet and the falsification constituted
misconduct that disqualified him from benefits. ESD issued a written determination
letter, which denied Stevens future benefits and demanded repayment of $2,690 in
benefits received since January 6, 2019.
Fred Stevens appealed ESD’s decision to the Office of Administrative Hearings.
In response to the appeal, White Water Construction argued that Fred Stevens falsified
his time sheets when he claimed hours that he had not worked for two holidays and when
he claimed extra hours on work days beyond those he worked.
An administrative law judge conducted an evidentiary hearing. During the
evidentiary hearing, Fred Stevens testified:
JUDGE BEEBE: And does anything limit your ability to accept a
job, such as injury, illness, or childcare?
MR. STEVENS: No.
JUDGE BEEBE: Are you available to work any hours that would be
offered to you?
MR. STEVENS: Yes.
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AR at 32.
Wayne Terry cross-examined Stevens at the hearing:
Q: [MR. TERRY] Yeah, I, uh, would like to ask him, um, if you had
questions and you were only 20 steps away from the office, why did you
not ask for clarification?
A: [MR. STEVENS] I believe that would be under the hostile
environment that you created, I did not feel welcome or that I could
proceed. I was waiting for L&I to respond, my caseworker, to my request
for a callback.
AR at 56.
Wayne Terry testified during the evidentiary hearing:
MR. TERRY: Well, he [Fred Stevens]—it shows that he worked ten
hours on New Year’s Eve and ten hours on New Year’s Day, and he
showed that he worked nine hours on the 1st and nine hours, um, uh, on the
2nd and on the 3rd, and those are all false. Um, also, on the previous time
sheet, which is, uh, Supplemental Page 58, um, on the 24th—uh, correction.
On the 26th, he worked 4 hours and 15 minutes and claimed 8 and a half.
AR at 38.
Following the evidentiary hearing, the ALJ affirmed ESD’s decision to deny Fred
Stevens unemployment compensation. The ALJ determined, in a written order, that,
although Stevens was able and available to work, White Water Construction discharged
him for misconduct. The ALJ further ruled that Stevens did not qualify for a waiver of
the overpayment and must repay the benefits he received. Fred Stevens submitted a
petition for review of the ALJ’s decision with the ESD commissioner.
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During the ALJ hearing, Fred Stevens did not state that he was disabled. In
Stevens’ petition to the ESD commissioner, however, he sought release from the duty to
return benefits received, while claiming:
Repayment of benefits received would cause an unfair hardship for
me. I am now a disabled employee after being injured while working with
this employer [White Water Construction]. I am an unemployed father who
has sole custody of three teenaged children. There should be no
overpayment in this case due to the financial burden this would place upon
me.
AR at 136 (emphasis added). White Water Construction replied to the petition:
Additionally, Fred makes a statement . . . where his quote states that
he is now a disabled employee after being injured while working with this
employer… That is not a valid statement.
I [owner Wayne Terry] talked with Labor & Industries and it has
never been established that he is ‘disabled’ from working with White Water
Construction, Inc. As of June 11th, 2019, no paperwork has been received
from L & I to substantiate any claim of ‘disability’. They [sic] do show
that he was injured—not disabled. Again, he was released on December
18, 2018 to be able to work without restrictions.
AR at 140 (boldface and underline in original).
The ESD commissioner issued a decision that adopted and augmented the ALJ’s
findings of fact and conclusions of law. The Commissioner agreed that Fred Stevens was
able and available to work, but rejected the ALJ’s conclusion that Stevens committed
misconduct. Stevens instead, according to the commissioner, committed a mistake. The
commissioner ruled that Fred Stevens was entitled to benefits and need not return any
payments received. The ESD Commissioner entered the following findings of fact:
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Findings of Fact Nos. 3 and 4 [of the ALJ] are adopted and are
augmented. On August 27, 2018, while at work, the claimant’s hand was
injured. The employer was notified, and the claimant proceeded to an
emergency room for medical attention. The claimant required surgery and
was unable to work for approximately four months. He opened an
industrial insurance claim, which remained open for the remainder of the
employment relationship. The employer maintained consistent
communication with a Department of Labor and Industries representative
and complied with procedure, as directed. The record indicates the
claimant did so, as well.
In mid-December 2018, the claimant was released by his physician
to return to work. Based on information provided by the claimant’s
physician, the employer limited the claimant’s work to light duty. The
employer determined that light duty field work (which the claimant
preferred) could not be consistently planned, and office work (also
acceptable to the claimant), such as conversations with clients, were duties
that already were performed by others. The claimant was instead assigned
to answer a phone in the shop. The claimant sometimes could not work a
full shift, primarily due to medical appointments and lengthy physical
therapy sessions. The office manager noted the claimant failed to
consistently work full shifts, and his absence for appointments seemed
unduly long.
Findings of Fact Nos. 5 through 10 [of the ALJ] are adopted and are
augmented. During the weeks that he was unable to work, pursuant to an
industrial insurance related KOS (kept on salary) option, the claimant was
paid his full wage by the employer.
On or about January 7, 2019 (approximately three weeks after the
claimant had returned to work), the claimant was informed by the
employer’s owner that he (the claimant) was required to submit time cards,
beginning with the pay period ending December 30, 2018, and that his time
card was due. The claimant had completed time cards prior to his injury,
but given his ongoing medical/therapy appointments, coupled with his prior
KOS status, the claimant wanted to clarify procedure with his Department
of Labor and Industries case manager. The claimant tried to contact his
case manager, but to no avail. The claimant completed his time card to the
best of his recollection.
When the claimant completed his time card, he reported hours on
December 24 and December 25, as well as December 31 and January 1.
The claimant did not work those days but reported the hours because he
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understood he would receive holiday pay. The claimant was mistaken; the
employer did not provide holiday pay. The claimant did not contact the
owner to clarify that he would receive holiday pay. When the claimant
submitted his time card, it was late in the day, and neither the office
manager nor the owner were in the office. The claimant assumed that, if
the owner questioned the claimant’s time card, the owner would tell the
claimant, which would provide an opportunity for clarification. That
evening, the owner reviewed the claimant’s reported hours and realized the
claimant had reported hours on holidays (when work was not performed).
The following morning, the office manager likewise noted the claimant’s
time card was not accurate. The owner (as well as the office manager)
regarded the claimant’s inaccurate time card to be an inherently dishonest,
falsified record. Consequently, when the claimant arrived for work on
January 10, 2019, he was discharged.
AR at 146-47. The ESD commissioner also adopted the ALJ’s finding of fact 12, which
states:
During the weeks Claimant sought unemployment benefits,
Claimant was physically able to work, was available for work, and actively
sought work, as required.
AR at 125.
The ESD commissioner adopted the ALJ’s conclusion of law 3, which states:
Here, during the weeks Claimant sought unemployment benefits,
Claimant was able to work, was available for work and actively sought
suitable work as required by RCW 50.20.010(1)(c)(ii).
AR at 126. The commissioner also entered the following conclusions of law:
Conclusion of Law No. 10 [of the ALJ] is adopted. As stated in the
Initial Order, testimony of the parties conflicted on a material point:
Whether the employer informed the claimant that holiday pay would be
provided. In unemployment benefit appeals, proof beyond a reasonable
doubt is not required, but it must be determined what more likely happened.
In re Murphy, Empl. Sec. Comm’r Dec.2d 750 (1984). To that end, all the
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evidence should be considered and weighed. Id. In this case, the
administrative law judge determined the employer’s testimony regarding
holiday pay policy was more persuasive. Because there is evidential
basis—sworn testimony based on personal knowledge of conversations at
issue—the credibility finding will not be disturbed. However, the
credibility finding does not preclude a conclusion that the claimant
misunderstood the employer’s holiday pay policy.
AR 147-48. The ESD commissioner augmented the ALJ’s conclusions of law, as
follows:
Conclusions of Law Nos. 12 and 13 [of the ALJ] are not adopted.
We conclude instead as follows. Here, the claimant reported holiday hours
that he had not worked, which understandably gave the employer reason for
concern. However, there were mitigating circumstances. First, after
several months of KOS payment of his wage, the claimant was told he must
submit a time card and that his time card was immediately due. Although
the claimant knew how to complete a time card, he evidently had questions
regarding the transition (from the KOS system) but was not able to contact
his case manager within the limited time he had been given. The
significance of reporting holiday hours he had not worked is not discounted
but is excusable because the claimant (albeit mistakenly) thought his
employer paid provided [sic] holiday pay. The claimant should have
consulted the owner for clarification but was given little meaningful
opportunity to do so. Time was short, and when he submitted his time card,
he saw nobody in the office to question. More significantly, the claimant’s
course of action does not reflect dishonest intent. On the contrary, having
reported four days of holiday pay (which evidence indicates nobody
worked), the claimant submitted his time card with the knowledge that the
hours he reported would be reviewed by the owner and the office manager.
He anticipated that, if there were issues, the owner would tell him, which is
exactly what happened. In short, the inaccuracy was too blatant to be
described as deceptive. Absent evidence of prior dishonesty/falsification of
records, the claimant’s report of holiday hours reflects an isolated incident
of mistake or poor judgment, which does not equate with willful or wanton
disregard for his employer’s interest. The decision to discharge the
claimant is not questioned, but for purposes of unemployment benefit
eligibility, misconduct has not been established.
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Conclusions of Law Nos. 14 and 15 [of the ALJ] are not adopted. In
light of the foregoing, there is no overpayment and therefore no issue
regarding liability for repayment.
AR at 148 (emphasis added).
After the ESD commissioner’s ruling, DLI awarded Fred Stevens a permanent
partial disability award in the amount of $35,754.42.
PROCEDURE
White Water Construction filed, with the superior court, a petition for judicial
review of the ESD commissioner’s decision. White Water again asserted that Fred
Stevens committed disqualifying misconduct and he must repay benefits received. White
Water alleged in the petition that Stevens falsified his time sheets by claiming hours
worked on holidays and by inflating his hours worked on days that he worked. Before
the superior court and for the first time, White Water challenged Stevens’ ability and
availability to work and argued that his receipt of permanent partial disability benefits
from DLI disqualified him from receiving unemployment benefits.
The superior court reversed the ESD commissioner’s order. The court concluded
that Fred Stevens was discharged for disqualifying misconduct. The superior court held
that: (1) substantial evidence did not support the commissioner’s decision, (2) the
commissioner erroneously interpreted or applied the law, (3) the commissioner’s decision
contravened ESD rules, and (4) the commissioner’s decision was arbitrary or capricious.
The superior court ordered Stevens to repay benefits received.
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LAW AND ANALYSIS
ESD appeals, to this appellate court, the superior court’s decision. Although
White Water Construction is the respondent on appeal to this court, we label it the
challenger because, as supported later, the ESD commissioner’s, not the superior court’s,
ruling, is under attack. RAP 10.3(h) demands that the respondent, who challenges any
findings of fact of an administrative adjudicative order, but who won before the superior
court, assign errors to the contested findings of fact.
White Water Construction assigns error to the ESD commissioner’s findings of
fact 3-10 and 12. Nevertheless, White Water does not provide argument for each discrete
finding of fact that it challenges. We only address those findings for which White Water
supplies argument and analysis. White Water also assigns errors to conclusions of law.
It need not have done so.
White Water Construction contends that substantial evidence does not support a
finding that Fred Stevens did not commit disqualifying misconduct by falsifying a time
sheet. We divide this argument into two categories of alleged time sheet fraud: (1) time
recorded for holidays and medical appointments; and (2) purported inflated time on days
he worked. White Water also contends that Stevens was not eligible for unemployment
compensation because his disability prevented him from working. At least, as argued by
White Water, Stevens claimed he could not work such that judicial estoppel should
preclude him from claiming otherwise in this proceeding. Finally, White Water observes
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that Fred Stevens currently receives DLI benefits, and it argues that a statute does not
permit concurrent recovery from both agencies. The many contentions prolong this
opinion. In addition to rejecting White Water’s arguments, ESD asks that we preclude
White Water from contending Fred Stevens was unavailable to work since White Water
did not assert this position before the ALJ or ESD commissioner.
White Water Construction challenges both rulings of the ESD commissioner that
Fred Stevens is entitled to unemployment benefits and that Stevens need not repay
benefits previously received. The issues forwarded for both challenges overlap, and we
do not separately analyze the two contentions.
Judicial Review
The Washington Administrative Procedure Act (WAPA), chapter RCW 34.05,
governs judicial review of a final administrative decision of the commissioner of the
Employment Security Department. Tapper v. Employment Security Department, 122
Wn.2d 397, 402, 858 P.2d 494 (1993). WAPA requires a reviewing court to reverse an
administrative decision when the court determines that:
(d) The agency has erroneously interpreted or applied the law;
(e) The order is not supported by evidence that is substantial when
viewed in light of the whole record before the court, which includes the
agency record for judicial review, supplemented by any additional evidence
received by the court under this chapter;
....
(h) The order is inconsistent with a rule of the agency unless the
agency explains the inconsistency by stating facts and reasons to
demonstrate a rational basis for inconsistency; or
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(i) The order is arbitrary or capricious.
RCW 34.05.570(3)(d)-(e), (h)-(i).
When reviewing an administrative decision, this court sits in the same position as
the superior court in applying the standards of WAPA to the record before the agency.
Tapper v. Employment Security Department, 122 Wn.2d 397, 402 (1993). We review the
ESD commissioner’s decision, not the ALJ’s decision or the superior court’s ruling.
Michaelson v. Employment Security Department, 187 Wn. App. 293, 298, 349 P.3d 896(2015). We deem the commissioner’s decision prima facie correct. Michaelson v.
Employment Security Department, 187 Wn. App. at 298. The party challenging the
commissioner’s decision, here White Water Construction, bears the burden of
demonstrating the decision’s invalidity. Michaelson v. Employment Security Department,
187 Wn. App. at 298.
Waiver of Challenge to Availability to Work
ESD argues that White Water Construction untimely challenged Fred Stevens’
ability and availability to work, because the construction company raised this contention
for the first time on appeal to the superior court. White Water agrees that it asserted this
argument for the first time before the superior court. White Water answers that it did not
know about Stevens’ disability when the case was pending before the agency, and thus
we should excuse its omission.
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Under WAPA, when a party does not raise an issue before the administrative
agency, it may not be raised on appeal or judicial review, except to the extent that:
(a) The person did not know and was under no duty to discover or
could not have reasonably discovered facts giving rise to the issue;
....
(d) The interests of justice would be served by resolution of an issue
arising from:
....
(ii) Agency action occurring after the person exhausted the last
feasible opportunity for seeking relief from the agency.
RCW 34.05.554(a),(d)(ii). An ESD regulation echoes the content of RCW 34.05.554.
WAC 192-04-170(6) declares:
Any argument in support of the petition for review [to the superior
court] or in reply thereto not submitted in accordance with the provisions of
this regulation shall not be considered in the disposition of the case absent
a showing that failure to comply with these provisions was beyond the
reasonable control of the individual seeking relief.
(Emphasis added.)
When arguing that Fred Stevens was unavailable to work because of a disability,
White Water relies on evidence not before the ESD commissioner. On judicial review,
RCW 34.05.562 allows a court to consider evidence outside of the agency record, but
only if “it relates to the validity of the agency action at the time it was taken and is
needed to decide disputed issues regarding . . . [m]aterial facts in rule making, brief
adjudications, or other proceedings not required to be determined on the agency record.”
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RCW 34.05.562(1)(c). Nevertheless, the reviewing court may remand a matter to the
agency,
with directions that the agency conduct fact-finding and other
proceedings the court considers necessary and that the agency take such
further action on the basis thereof as the court directs, if:
....
(b) The court finds that (i) new evidence has become available that
relates to the validity of the agency action at the time it was taken, that one
or more of the parties did not know and was under no duty to discover or
could not have reasonably been discovered until after the agency action,
and (ii) the interests of justice would be served by remand to the agency.
RCW 34.05.562(2)(b).
ESD contends that White Water Construction knew about Fred Stevens’ disability
claim at the time of Stevens’ appeal before the ESD commissioner. We disagree. In its
reply to Stevens’ appeal, White Water wrote that, as of June 11, 2019, the construction
company had received no paperwork from DLI to substantiate any claim of disability.
DLI records then showed Stevens to be injured, but not disabled. Fred Stevens received
an award for permanent partial disability only months after the ALJ hearing.
We conclude that White Water reasonably did not know of any disability of Fred
Stevens at the time of the proceeding before the ESD commissioner. Although White
Water forwards new facts as to the disability, we could remand the case to the
commissioner for consideration of the new facts. Nevertheless, in the interest of judicial
economy, we agree to review White Water Construction’s contention that Stevens was
unavailable to work because of a disability.
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Availability to Work
White Water Construction argues that, because Fred Stevens claims to be disabled,
he is unable and unavailable to work and thus ineligible for unemployment benefits. In
so arguing, White Water commits a fundamental error. It fails to recognize a difference
between a partial disability and a total disability and that Stevens claimed only a partial
disability.
Washington’s Employment Security Act, Title 50 RCW, seeks to provide benefits
for persons who have become unemployed through no fault of their own. RCW
50.01.010; Cuesta v. Department of Employment Security, 200 Wn. App. 560, 568, 402
P.3d 898 (2017). Consequently, we liberally construe the act in order to reduce
involuntary unemployment and suffering caused thereby to a minimum. RCW
50.01.010; Shoreline Community College District 7 v. Employment Security Department,
120 Wn.2d 394, 406, 842 P.2d 938 (1992); Griffith v. Department of Employment
Security, 163 Wn. App. 1, 8, 259 P.3d 1111 (2011). We view with caution any
construction of the benefits statute that would narrow the coverage of the unemployment
compensation laws. Shoreline Community College District 7 v. Employment Security
Department, 120 Wn.2d 394, 406 (1992).
A claimant is eligible for unemployment benefits, if he or she “is able to work, and
is available for work in any trade, occupation, profession, or business for which he or she
is reasonably fitted.” RCW 50.20.010(1)(c). RCW 50.20.010(1)(c)(i) declares:
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To be available for work, an individual must be ready, able, and
willing, immediately, to accept any suitable work which may be offered to
him or her and must be actively seeking work pursuant to customary trade
practices and through other methods when so directed by the commissioner
or the commissioner’s agents.
At the hearing before the ALJ, Fred Stevens testified that he was able and
available to work. The commissioner adopted the ALJ’s conclusion of law 3, finding that
Stevens was able and available to work. In Stevens’ May 30, 2019 petition to the
commissioner, he stated for the first time that he was disabled. Fred Stevens received a
permanent partial disability award in the amount of $35,754.42. A partial disability does
not necessarily preclude a worker from work. Stevens had performed light duty work
with White Water Construction, and he could have continued that work at the
construction company or served as a foreman, where heavy duty was not required, for
another contractor.
Judicial Estoppel
In addition to assigning error to the finding that Fred Stevens was capable of work,
White Water contends that Fred Stevens should be judicially estopped from
simultaneously claiming that he is disabled and able to work. Judicial estoppel is an
equitable doctrine that precludes a party from asserting one position in a court proceeding
and later seeking an advantage by taking a clearly inconsistent position. Robbins v.
Department of Labor & Industries, 187 Wn. App 238, 255, 349 P.3d 59 (2015). Three
core factors guide whether to apply the judicial estoppel doctrine: (1) whether a party’s
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later position is clearly inconsistent with its earlier position, (2) whether judicial
acceptance of an inconsistent position in a later proceeding would create the perception
that either the first or the second court was misled, and (3) whether the party seeking to
assert an inconsistent position would derive an unfair advantage or impose an unfair
detriment on the opposing party if not estopped. Robbins v. Department of Labor &
Industries, 187 Wn. App. at 255-56.
Fred Stevens commented in his petition to the ESD commissioner that he was
disabled and unemployed. He never wrote, however, that he was not employable or that
he was totally disabled. He garnered a partial, not a total, disability payment from DLI.
Therefore, his testimony that he was available for work was not inconsistent with his
petition to the commissioner. In fact, Stevens worked for White Water Construction
preceding his termination from employment despite his disability.
Receipt of DLI Benefits
White Water Construction contends Fred Stevens may not garner both
unemployment compensation and workers’ compensation at the same time. In so
arguing, White Water repeats the same fundamental error. Stevens received partial, not
total, disability payments from DLI.
Pursuant to RCW 50.20.085, an individual is ineligible for unemployment benefits
if he or she is the recipient of total disability compensation.
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An individual is disqualified from benefits with respect to any day or
days for which he or she is receiving, has received, or will receive
compensation under RCW 51.32.060 or 51.32.090.
RCW 50.20.085 (emphasis added). RCW 51.32.060 governs permanent total disability
compensation and RCW 51.32.090 controls temporary total disability compensation.
Permanent partial disability compensation is governed by RCW 51.32.080, a statute not
listed in RCW 50.20.085.
Disqualifying Misconduct
White Water Construction contends that ESD should deny Fred Stevens
unemployment compensation because Stevens engaged in misconduct. An individual is
disqualified from receiving unemployment benefits if he or she is discharged for
misconduct connected with his or her work. RCW 50.20.066(1); Cuesta v. Department
of Employment Security, 200 Wn. App. 560, 568-69 (2017). The question of discharge is
independent of the question of misconduct. Cuesta v. Department of Employment
Security, 200 Wn. App. at 569. Thus, just because a claimant’s acts sufficed to justify
discharge from employment does not necessarily mean that the conduct constitutes
sufficient grounds to constitute statutory misconduct that disqualifies him from
employment benefits. Cuesta v. Department of Employment Security, 200 Wn. App. at
569.
RCW 50.04.294(1) declares that “misconduct” includes, but is not limited to, the
following conduct by a claimant:
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(a) Willful or wanton disregard of the rights, title, and interests of
the employer or a fellow employee;
(b) Deliberate violations or disregard of standards of behavior which
the employer has the right to except of an employee;
(c) Carelessness or negligence that causes or would likely cause
serious bodily harm to the employer or a fellow employee; or
(d) Carelessness or negligence of such degree or recurrence to show
an intentional or substantial disregard of the employer’s interest.
WAC 192-150-205 defines language used in RCW 50.04.294, in relevant part:
(1) “Willful” means intentional behavior done deliberately or
knowingly, where you are aware that you are violating or disregarding the
rights of your employer or a co-worker.
(2) “Wanton” means malicious behavior showing extreme
indifference to a risk, injury, or harm to another that is known or should
have been known to you. It includes a failure to act when there is a duty to
do so, knowing that injury could result.
(3) “Carelessness” and “negligence” mean failure to exercise the
care that a reasonably prudent person usually exercises.
WAC 192-150-205(1)-(3).
RCW 50.04.294(2) sets forth a nonexclusive list of behaviors that are per se
misconduct, including:
(a) Insubordination showing a deliberate, willful, or purposeful
refusal to follow the reasonable directions or instructions of the employer;
....
(c) Dishonesty related to employment, including but not limited to
deliberate falsification of company records, theft, deliberate deception, or
lying;
....
(e) Deliberate acts that are illegal, provoke violence or violation of
laws, or violate the collective bargaining agreement. However, an
employee who engages in lawful union activity may not be disqualified due
to misconduct; [and]
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(f) Violation of a company rule if the rule is reasonable and if the
claimant knew or should have known of the existence of the rule.
“Misconduct” does not include:
(b) Inadvertence or ordinary negligence in isolated instances; or
(c) Good faith errors in judgment or discretion.
RCW 50.04.294(3)(b)-(c).
The employer carries the burden to show disqualifying misconduct. Darneille v.
Department of Employment Security, 49 Wn. App. 575, 576-77, 744 P.2d 1091 (1987),
adhered to on remand, No. 1082-3-II (Wash. Ct. App. Sept. 12, 1988) (unpublished).
The burden is by a preponderance of evidence. Darneille v. Department of Employment
Security, 49 Wn. App. 575, 576-77.
The ESD commissioner found that Fred Stevens committed a mistake that did not
give rise to intentional disregard of White Water Construction’s interests. White Water
contends substantial evidence does not support this principal finding.
This court reviews the commissioner’s fact findings for substantial evidence in
light of the whole record. Michaelson v. Employment Security Department, 187 Wn.
App. at 298. “Substantial evidence” is evidence that would persuade a fair-minded
person of the truth or correctness of the matter. Michaelson v. Employment Security
Department, 187 Wn. App. at 298. We will not substitute our judgment on witness
credibility or the weight that should be given to conflicting evidence. Michaelson v.
Employment Security Department, 187 Wn. App. at 299. The law authorizes the
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White Water Construction, Inc. v. Washington State Department of Employment Security
commissioner to render his own independent determinations based on the record, and the
commissioner has the ability and the right to modify or to replace an ALJ’s findings,
including findings of witness credibility. Smith v. Employment Security Department, 155
Wn. App. 24, 35-36 n.2, 226 P.3d 263 (2010).
White Water Construction emphasizes conclusion of law 12, wherein the ESD
commissioner found the employer’s testimony to be more logically persuasive. White
Water impliedly contends that a determination that its testimony is more persuasive
necessarily leads to a ruling that Fred Stevens falsified his time sheets and engaged in
conduct that disqualifies him for unemployment benefits. The ESD commissioner’s
conclusion, however, does not necessarily mean that the commissioner adopted all of the
inferences from the testimony favorable to White Water or that the commissioner
discounted all of the testimony of Stevens. The commissioner could still conclude that
Stevens misunderstood White Water’s holiday pay policy. The commissioner could still
draw the conclusion that the obviousness of Stevens’ errors in the time sheets establishes
that he did not deliberately falsify records or mislead his employer.
Ample evidence supports a finding that Fred Stevens did not engage in deliberate
falsification. Stevens remained on KOS status, whereby White Water Construction paid
him regardless of the hours he worked. He placed parentheses around time spent on
medical appointments in order to alert his employer to the nature of the time he spent
during those hours. Stevens wanted to discuss his situation with his DLI case manager
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before submitting his time sheets, but he could not reach the manager, so he completed
the sheets as best as he could recall despite his confusion. When Stevens submitted his
time card, the day was late, and neither the office manager nor the owner was present.
Stevens assumed that, if White Water questioned the time sheets, his employer would
afford him an opportunity for clarification.
White Water Construction highlights that the ALJ found that owner Wayne Terry
never told Fred Stevens that the construction company paid employees for Christmas or
New Year’s Day. In turn, White Water underscores that the ESD commissioner
confirmed this finding. From this finding, White Water Construction extracts the
conclusion that Fred Stevens must have lied when he testified that Terry informed him he
would receive holiday pay such that Stevens must have deliberately falsified his time
sheet. Nevertheless, just because two witnesses or parties tell a different story does not
mean that one is lying or one engaged in deception.
We observe that even the administrative law judge found that Fred Stevens
believed he would be paid for holidays. Neither the ALJ nor the ESD commissioner
entered a finding that the belief was unreasonable or dishonest. Stevens had been
employed less than one year such that he had not been employed before during the
holiday season.
White Water Construction may argue that the simple fact that the time sheets were
false means that Fred Stevens deliberately falsified the sheets. We disagree. White
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No. 37414-9-III
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Water also suggests that Stevens needed to prove, because of the falsified time sheet, that
he did not deliberately mislead his employer. The law is to the contrary. The employer
carries the burden of showing misconduct.
White Water Construction argues that, at the least, Fred Stevens engaged in
carelessness or negligence. Nevertheless, misconduct for purposes of disqualification
from benefits does not include ordinary negligence. RCW 50.04.294(3)(b).
In addition to contending that substantial evidence does not support the ESD
commissioner’s findings, White Water, while citing several Washington decisions, argues
that the commissioner’s decision was arbitrary and capricious, an erroneous application
of the law, and against ESD’s statutes and rules. We disagree.
White Water contends that submitting a false time card is misconduct per se under
RCW 50.04.294(2). RCW 50.04.294(2)(c) defines “misconduct” as including
“dishonesty related to employment, including but not limited to deliberate falsification of
company records, theft, deliberate deception, or lying.” Falsification of company time
sheets does not constitute misconduct unless the falsification includes dishonesty. The
ESD commissioner found Fred Stevens to lack a dishonest motive.
White Water Construction highlights two decisions: Pacquing v. Employment
Security Department, 41 Wn. App. 866, 707 P.2d 150 (1985) and Cuesta v. Department
of Employment Security, 200 Wn. App. 560 (2017). In the former case, Douglas
Pacquing intentionally forged return-to-work slips with his physician’s signature in order
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to improve his work situation. This court found that Pacquing committed misconduct per
se. In Cuesta v. Department of Employment Security, 200 Wn. App. 560 (2017), Jose
Cuesta failed to inspect airplane parts that he approved and verified as inspected on two
occasions. This court found that he committed misconduct per se.
In both Pacquing v. Employment Security Department and Cuesta v. Department
of Employment Security, this court ruled that the employee committed misconduct per se.
But in each case, the ESD commissioner had found that the employee committed an act
of dishonesty by falsifying records. To repeat, in Fred Stevens’ application for
unemployment compensation proceeding, the commissioner, to the contrary found that
Stevens did not act dishonestly.
White Water Construction also promotes Smith v. Employment Security
Department, 155 Wn. App. 24 (2010) and Griffith v. Department of Employment
Security, 163 Wn. App. 1, 259 P.3d 1111 (2011). In the former decision, employee
David Smith recorded conversations with other people without their knowledge. Smiths’
conduct was found to be in disregard to his employer’s interest because he exposed his
employer to litigation and liability. In Griffith v. Department of Employment Security,
employee Loren Griffith harmed his employer by harassing a customer, resulting in
Griffith being banned from a delivery location. In contrast, Fred Stevens’ conduct does
not expose White Water to harm or potential liability to third parties.
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Finally, White Water Construction analogizes Tapper v. Employment Security
Department, 122 Wn.2d 397 (1993). Karen Tapper’s employer discharged her for an
accumulation of problems, including excessive time away from her work area, failing to
listen to her supervisor and abide his instructions, and engaging in disruptive
conversations and screaming outbursts. Tapper’s employer had previously warned her
about her behavior. On the day of her discharge, Tapper arrived to work 15 minutes late,
and her employer requested that she record her tardiness as leave without pay. Tapper,
instead, recorded eight hours on her time card. ESD denied recovery and the Supreme
Court affirmed. In contrast, Fred Stevens had no history of any problematic behavior.
Stevens did not disobey a direct instruction not to include, on his time sheet, particular
minutes as being worked.
Two Washington decisions, coincidentally involving the same employer, support
the ESD commissioner’s decision. In Kirby v. Department of Employment Security, 185
Wn. App. 706, 342 P.3d 1151 (2014), ESD afforded Sarah Black benefits after her
employer fired her for posting a blog. This court affirmed because Kirby did not commit
misconduct when her employer failed to prove that she knew of a purported employer’s
social media policy. In Kirby v. Department of Employment Security, 179 Wn. App. 834,
320 P.3d 123 (2014), this court affirmed the conclusion that employee Dorothy Thomas
did not commit misconduct when her conduct resulted from apprehension and confusion
about the employer’s instructions and a breakdown in communication with the employer.
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We may agree with White Water Construction that ample evidence would support
a finding by the ESD commissioner that Fred Stevens engaged in deliberate falsification
of employer records such that the commissioner could have disqualified Stevens from
unemployment compensation. Nevertheless, the contrary is also true. Substantial
evidence supported a finding that Stevens did not engage in a deliberate falsehood. We
must defer to the commissioner’s decision when supported by the findings. In the cases
promoted by White Water, this court deferred to the commissioner’s findings when he
found misconduct.
White Water Construction alleged before the ALJ and the ESD commissioner that,
in addition to Fred Stevens’ falsifying of time sheets for holiday pay and time at medical
appointments, Stevens inflated hours worked on other occasions. White Water presented
testimony at the evidentiary hearing that supported its position of the inflation of time
worked. When finding that Stevens did not intend to deceive White Water, the ESD
commissioner highlighted that the reporting of holiday hours was so obvious that an
employee would not have falsified these hours unless he believed he was entitled to
holiday pay. The commissioner also emphasized that Stevens placed time spent at
medical appointments in parentheses. Neither of these factors, however, help to persuade
a factfinder into finding good faith on behalf of Stevens with regard to inflating the hours
he worked on nonholiday days and when not at appointments.
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The ALJ did not address separately the purported inflated time sheets. Since the
ALJ deemed all entries intentionally misleading to the employer, the ALJ need not have
distinguished the time that Fred Stevens allegedly inflated on his accounting for work.
Nevertheless, because of the ruling of the ESD commissioner, the commissioner, in order
to permit appellate review, should have entered a finding as to whether Fred Stevens
inflated nonholiday hours worked, and, if so, whether the inflation was a mistake or act of
deception. Although ESD argues on appeal that the commissioner addressed the inflated
time in his findings of fact and conclusions of law, we cannot locate any such finding.
REMEDY
Because we cannot determine whether the ESD commissioner concluded that Fred
Stevens inflated his hours on work days or, if so, whether the commissioner excluded
Stevens’ entries as being intentional deception, we remand for further proceedings before
the commissioner. We direct the ESD commissioner to enter at least two findings of fact:
(1) whether Stevens inflated his time worked on work days, and (2) whether any inflation
of time involved a dishonest motive. The commissioner can, at his option, choose to hear
additional evidence or decline to entertain additional testimony.
RCW 34.05.574(1) provides, in relevant part:
In a review under RCW 34.05.570, the court may (a) affirm the
agency action or (b) order an agency to take action required by law, order
an agency to exercise discretion required by law, set aside agency action,
enjoin or stay the agency action, remand the matter for further proceedings,
or enter a declaratory judgment order. . . . In reviewing matters within
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agency discretion, the court shall limit its function to assuring that the
agency has exercised its discretion in accordance with law, and shall not
itself undertake to exercise the discretion that the legislature has placed in
the agency. The court shall remand to the agency for modification of
agency action, unless remand is impracticable or would cause unnecessary
delay.
White Water Construction argues that the undisputed evidence establishes that
Fred Stevens falsified his time sheets by inserting hours on days he worked above his
actual work time. Thus, White Water impliedly contends we need not remand the case to
the ESD commissioner to rule in its favor. Nevertheless, White Water does not identify
any testimony that Stevens agreed that he inflated his time on work days. White Water
inconveniently, if not unfairly, asked Stevens to reconstruct the hours he worked in the
past weeks when he had not expected any need to account for his time. Also, he expected
that White Water would correct his accounting for time if he was inaccurate. Based on
these facts, on remand the ESD commissioner could find that mistakes for hours worked
on work days were made in good faith and that Stevens did not deliberately mislead his
employer.
Our function is to review the decisions of the agency, not to try the case de novo.
Tapper v. Employment Security Department, 122 Wn.2d 397, 402–03, 858 P.2d 494(1993); Shaw v. Department of Retirement Systems, 193 Wn. App. 122, 133, 371 P.3d
106 (2016). When an agency’s decision omits a critical finding, we do not perform our
own review of the record or weigh the credibility of the witnesses. Shaw v. Department
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of Retirement Systems, 193 Wn. App. 122, 134 (2016). We instead remand to the agency
for further proceedings. Shaw v. Department of Retirement Systems, 193 Wn. App. at
134.
Since the employer carries the burden of proving misconduct, we could hold that
White Water Construction failed to establish that Fred Stevens dishonestly inflated work
hours. The absence of a finding on a material issue is presumptively a negative finding
entered against the party with the burden of proof. Golberg v. Sanglier, 96 Wn.2d 874,
880, 639 P.2d 1347, 647 P.2d 489 (1982); State v. Budd, 186 Wn. App. 184, 199, 347
P.3d 49 (2015), aff’d, 185 Wn.2d 566, 374 P.3d 137 (2016). Out of fairness to White
Water, however, we remand for further proceedings because we are uncertain as to
whether the ESD commissioner considered the one distinct argument asserted by White
Water.
Attorney Fees
White Water Construction requests an award of reasonable attorney fees incurred
on appeal pursuant to RCW 4.84.350, a portion of the Equal Access to Justice Act. RCW
4.84.350 declares:
Except as otherwise specifically provided by statute, a court shall
award a qualified party that prevails in a judicial review of an agency action
fees and other expenses, including reasonable attorneys’ fees, unless the
court finds that the agency action was substantially justified or that
circumstances make an award unjust. A qualified party shall be considered
to have prevailed if the qualified party obtained relief on a significant issue
that achieves some benefit that the qualified party sought.
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RCW 4.84.350(1) (emphasis added). White Water has not prevailed in this judicial
review. So we deny the request for fees.
CONCLUSION
We remand this proceeding to the ESD commissioner for the purpose of deciding
and entering a finding of fact as to whether Fred Stevens inflated his hours worked on
work days and whether any inflation disqualifies him from unemployment benefits. We
otherwise affirm the commissioner’s rulings and thereby reverse the superior court.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
_________________________________
Fearing, J.
WE CONCUR:
______________________________
Siddoway, A.C.J.
______________________________
Lawrence-Berrey, J.
32