Hale v. Neeley

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

October 5, 2010 Session

ALBERT J. HALE, v. JAMES NEELEY, COMMISSIONER, et al.

Appeal from the Chancery Court for Hawkins County

No. 17150 Hon. Thomas R. Frierson, II., Chancellor

No. E2010-00475-COA-R3-CV - FILED NOVEMBER 19, 2010

Claimant, an employee of Wal-Mart, was charged with possession of cocaine and pled guilty

to a misdemeanor possession, and was then discharged for violating company policy.

Claimant was not at work nor on Wal-Mart's property when the offense occurred. The

agency found that claimant was discharged under disqualifying conditions and denied

unemployment benefits. Throughout the appeals process, denial of benefits was upheld. On

appeal to this Court, we hold that claimant violated Wal-Mart's policies by failing to report

his conviction under a criminal drug statute to his employer within three days as required

under the employer's policy. We affirm the denial of unemployment benefits to claimant.

Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.

H ERSCHEL P ICKENS F RANKS, P.J., delivered the opinion of the Court, in which C HARLES D.

S USANO, J R., J., and J OHN W. M CC LARTY, J., joined.

Eric D. Miller, Johnson City, Tennessee, for the appellant, Albert J. Hale.

John M. Russell and Lauren A. Wong, Memphis, Tennessee, for the appellee, Wal-Mart

Associates, Inc.

Robert E. Cooper, Jr., Attorney General and Reporter, Michael E. Moore, Solicitor General,

and Lindsey O. Appiah, Assistant Attorney General, Nashville, Tennessee, for the appellee,

James Neeley, Commissioner, Tennessee Department of Labor and Workforce Development.

OPINION

Petitioner, Hale, filed a Petition for Judicial Review, stating that he was employed by

respondent Wal-Mart from October 27, 2004, until October 12, 2008, when he was

discharged. Also named was respondent James Neeley, Commissioner of the Tennessee

Department of Labor and Workforce Development.

Hale averred he was seeking judicial review of the decision that denied him

unemployment benefits, pursuant to Tenn. Code Ann. §50-7-304.

Hale averred that on September 23, 2008, he was arraigned for possession of cocaine,

and stated that he notified his manager of the arraignment and was suspended pending trial.

He stated that on October 6, 2008, he pled guilty to misdemeanor possession, and on October

12, 2008, he was discharged for violating company policy. Further, that when he was

arrested for possession, he was not at work nor on Wal-Mart's property, but rather was on

vacation. He further stated that on October 22, 2008, he applied for unemployment, and on

November 20, 2008, the agency found that he was discharged under disqualifying conditions,

and denied unemployment benefits.

On appeal to the Board of Review, the Board affirmed the decision of the appeals

tribunal.

Wal-Mart filed a Response, arguing that the decision was correct and supported by

the evidence. In Neeley's Response, several documents were filed, including a Claimant

Separation Questionnaire, which states that Hale was discharged for possession of a

controlled substance, but that he did not possess it on the job or on the employer’s premises,

and did not report to work after consuming it. The Questionnaire states that Hale was

arrested for possession in September 2008 when he was in the car with someone else and the

substance was found in the car. The Questionnaire states that Hale was aware of his

employer’s rules regarding this behavior.

The record also contains Wal-Mart’s response to a request for information from the

Department, which states that Hale was discharged for possession of drugs and violation of

company policy. Hale’s separation notice states that he was discharged for gross misconduct.

There is a document from the court, showing Hale’s guilty plea. There is also a copy of the

Wal-Mart Alcohol and Drug Abuse Policy, which states that conviction under any criminal

drug statute, or the failure to notify management of conviction under a criminal drug statute

within three days, will result in termination of employment. Hale signed a document when

he was hired which acknowledged his receipt of the above policy statement. Wal-Mart also

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provided a copy of another policy dealing with associates who are arrested, and it also states

that conviction under a criminal drug statute or the failure to report the same in three days

will result in termination.

The record contains a telephonic statement taken from Hale, who stated that he was

not aware that he had to report his arrest or conviction within three days, even though he did

report the arrest within three days. Hale reported that his conviction occurred on October 6,

2008, but he did not report it to his employer until October 16, because he "wasn’t sure what

papers they needed". He did not specifically remember signing the drug policy, but admitted

that he signed a lot of papers when he was hired. The agency decision denied benefits to

Hale because he was aware of the company’s policies and violated the same.

At the hearing before the appeals tribunal, Hale's former manager testified that he told

her of his arrest, and that she suspended him pending trial, and then he was fired after he was

convicted based on the company policy. She testified that he was made aware of company

policy at the time he was hired, during his orientation, and also during computer based

learning courses that he took throughout his employment. Hale testified that he was arrested

while on vacation. He stated that he was riding in a car with a friend, they were pulled over,

and cocaine was found in the floorboard of the car. He testified that he pled guilty to the

misdemeanor charge because he thought that might help him keep his job. Hale admitted,

however, that he was aware of Wal-Mart's policy that he could be terminated for pleading

guilty to a criminal drug offense.

The appeals tribunal affirmed the agency decision, stating that Hale was guilty of

work-related misconduct, which was an intentional act or violation of policy that materially

breached the standard of behavior that the employer had a right to expect. The appeals

tribunal found that the evidence showed that the claimant was discharged for violation of

company policy, and that he was thus not entitled to benefits. At the next appeal level to the

Board of Review, the Board of Review adopted the findings, conclusions, and determination

of the appeals tribunal.

The Trial Court affirmed those decisions, finding that Hale engaged in work-related

misconduct. The Court found that the Board of Review correctly applied the law to the

facts, and that its findings and conclusions were not contrary to applicable law.

On appeal, Hale has raised this issue:

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1. Whether the claimant’s drug activities that occurred when he was off duty

should be considered misconduct connected with work under Tenn. Code Ann.

§50-7-303(a)(2)?

On this appeal, we are required to review the decision utilizing the same standard of

review as that applied by the Trial Court, which is set forth in Tennessee Code Annotated

section 50-7-304(i):

(2) The chancellor may affirm the decision of the board or the chancellor may

reverse, remand or modify the decision if the rights of the petitioner have been

prejudiced because the administrative findings, inferences, conclusions or

decisions are:

(A) In violation of constitutional or statutory provisions;

(B) In excess of the statutory authority of the agency;

(C) Made upon unlawful procedure;

(D) Arbitrary or capricious or characterized by abuse of discretion or clearly

unwarranted exercise of discretion; or

(E) Unsupported by evidence that is both substantial and material in the light

of the entire record.

(3) In determining the substantiality of evidence, the chancellor shall take into account

whatever in the record fairly detracts from its weight, but the chancellor shall not

substitute the chancellor's judgment for that of the board of review as to the weight

of the evidence on questions of fact.

Dura Automotive Systems, Inc. v. Neeley, 2010 WL 204090 (Tenn. Ct. App. Jan. 21, 2010).

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Hale argues that it was error for him to be found guilty of work-related misconduct

so as to deny him unemployment benefits, since the drug possession arrest was made while

he was on vacation and not on Wal-Mart’s premises, and had no connection whatsoever to

his work. Tenn.Code Ann. § 50-7-303(a)(2)(A) provides that a claimant shall be disqualified

for unemployment benefits if it is determined that he was discharged for misconduct

connected with his work. Misconduct connected with a claimant’s work was not defined in

the statute at the relevant time, but the Supreme Court has defined it as including a breach

of a duty owed to the employer, as distinguished from society in general. Weaver v.

Wallace,565 S.W.2d 867, 870 (Tenn. 1978).

Unless the employee's wrongdoing violates a duty owed to the employer, it cannot

amount to that misconduct connected with his work which serves to disqualify him to receive

unemployment insurance benefits, although it may fully justify the employer in discharging

him. Id. The Supreme Court also explained:

Depending on the specific provisions of the statute, in order to disqualify an employee

for unemployment benefits his misconduct must be in the course of his most recent

work, connected with his work, or connected with the employment. Under such

provisions, it is not necessary that the act of misconduct occur during the working

hours or at the place of employment, so long as it is connected with the employment,

and the fact that misconduct relates to the private life or off-duty activities of the

employee does not necessarily preclude its having a connection with the employment

requisite to bar the right to compensation. Ordinarily, however, an employee's conduct

off the working premises or outside the course or scope of his employment is not

considered as misconduct in connection with employment.

Weaver, at 870.

Reviewing the relevant cases on this issue, it is clear that an employee’s off-duty drug

use (or even an off-duty arrest for drug possession) is not necessarily a breach of duty to the

employer, even if the employer has a policy prohibiting the use of drugs on or off-duty. Hale

relies on the facts of the Weaver case, wherein the employee was charged with possession

of drugs while at home, and the court found that this was not misconduct connected with his

work. Id. In that case, however, there was no implication of an anti-drug policy of the

employer. Id.

Hale also relies on Jackson v. Hayes, 1993 WL 248046 (Tenn. Ct. App. July 8, 1993),

wherein the employee was off-duty when charged with possession of cocaine, and then

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discharged pursuant to the employer’s anti-drug policy when the employee’s supervisor read

about his indictment in the paper (approximately one year after his arrest). The court found

that there was no evidence of misconduct connected with the employee’s work because the

employee had worked for the ensuing year with no problems and no indicia or drug use, and

the violation of the duty was to society in general and not to the employer specifically.1

Hale further relies on the case of Dura Automotive Systems, Inc. v. Neeley, 2010 WL

204090 (Tenn. Ct. App. Jan. 21, 2010). In Dura, the employee was discharged after he was

asked to take a random drug test by his employer, admitted to his supervisor after taking the

test that he had used marijuana off-duty in the prior week, and was fired for same pursuant

to the employer’s anti-drug policy. (The drug test results came back negative). The court

found that there was no misconduct connected with the claimant’s work, because "Dura did

not demonstrate that Mr. Flores' actions had any adverse effect on his work, and Mr. Flores

passed the drug test required by Dura. As in Jackson, we conclude that the duty relied upon

by Dura was owed to society in general." Id.

These cases illustrate, a charge or conviction of drug use/possession while off-duty

is not always considered a breach of a duty to the employer which would disqualify the

claimant from benefits, even where the employer has an anti-drug policy. Were that Mr.

Hale’s only issue, this case could possibly have been decided differently below, as Mr. Hale

would have been guilty of violating a duty owed to society in general. However, that is not

the only issue, because he failed to notify Wal-Mart of his conviction within the three day

window provided by its policy. It is undisputed that Mr. Hale was convicted on October 6,

but did not notify his manager until October 16. Thus, Hale also violated the duty he owed

to Wal-Mart by failing to timely notify Wal-Mart of his conviction.

The case law demonstrates that an employee who violates a known company policy,

or fails to follow any legal/reasonable employer directive, is considered guilty of

work-related misconduct. For example, we have found that an employee who knowingly

failed to follow her manager’s directive to tuck her shirt in and comply with the company

dress code and was fired, was not entitled to benefits because she was guilty of work-related

misconduct. Hallowell v. Vestco, Inc., 2005 WL 1046795 (Tenn. Ct. App. May 4, 2005).

1

Hale also relies upon City of Morristown v. Long, 2005 WL 735028 (Tenn. Ct. App. Mar 31, 2005),

but his reliance on that case is misplaced because in it, the Board of Review found that there was not

sufficient evidence that the employee engaged in drug use at work, as alleged, and thus granted benefits,

finding no work-related misconduct. The trial court reversed, and this Court reversed the trial court, finding

that it had exceeded its scope of review.

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Other examples of employees disqualified from receiving unemployment benefits for

work-related misconduct include a Federal Express employee who knowingly violated the

employer’s policy about scanning packages at the time of pick up; an employee who was

asked by the employer to stop asking female co-workers out in violation of company policy

but failed to do so; an employee who was dishonest with management when questioned about

an improper voice mail left for his supervisor, and an employee who repeatedly failed to call

in sick even though she had a valid excuse. Ridley v. Neeley, 2010 WL 4272711 (Tenn. Ct.

App. Oct. 28, 2010); Ruff v. Neeley, 2006 WL 3734641 (Tenn. Ct. App. Dec. 20, 2006);

Schwartz v. Neeley, 2008 WL 539223 (Tenn. Ct. App. Feb. 28, 2008); Stanford v. Commissioner,

2005 WL 1833734 (Tenn. Ct. App. Aug. 2, 2005).

In this case, Hale violated Wal-Mart’s drug policy by being charged and convicted of

possession of cocaine, and we reiterate this off-duty behavior does not always amount to

work-related misconduct, even if the employer has a drug policy. However, as the tribunal

and the court below found, Hale violated Wal-Mart’s policies by failing to report his

conviction under a criminal drug statute to his employer within the requisite three day

window. It is undisputed that Hale violated this policy, and it is also undisputed that he knew

about it, as his signature on the written acknowledgment shows. This was a violation of a

duty that Hale owed to his employer as opposed to society in general, and thus constituted

work-related misconduct, disqualifying him from unemployment benefits.

We hold the Trial Court and the other tribunals below correctly applied the relevant

law to the facts, and there is material evidence in the record to support Hale’s

disqualification. Thus, his appeal is without merit.

The Judgment of the Trial Court is affirmed and the cause remanded, with the cost of

the appeal assessed to Albert J. Hale.

_________________________________

HERSCHEL PICKENS FRANKS, P.J.

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