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Wilson v. Mortgage Resource Center, Inc.

Supreme Court of Minnesota

December 28, 2016

Nina Wilson, Respondent,
v.
Mortgage Resource Center, Inc., Respondent,

          Thomas H. Boyd, Kyle R. Kroll, Winthrop & Weinstine, P.A., Minneapolis, Minnesota, for respondent Nina Wilson.

          Lee B. Nelson, Minnesota Department of Employment and Economic Development, Saint Paul, Minnesota, for appellant.

          Charles H. Thomas, Paul Onkka, Southern Minnesota Regional Legal Services, Inc., Saint Paul, Minnesota, for amicus curiae Southern Minnesota Regional Legal Services, Inc.

         SYLLABUS

         1. Because the statutory definition of "employment misconduct" in Minn. Stat. § 268.095, subd. 6(a) (2016), is the exclusive definition for determining employee eligibility for unemployment benefits, the court of appeals erred in applying an incompatible common law materiality definition.

         2. Because respondent Wilson's misrepresentations on her employment application constitute "employment misconduct" under section 268.095, subdivision 6(a), she is not eligible for unemployment benefits.

         Reversed.

          OPINION

          GILDEA, Chief Justice.

         In this case, we are asked to decide what qualifies as "employment misconduct" under the Minnesota Unemployment Insurance Law. Minn. Stat. ch. 268 (2014). Concluding that respondent Nina Wilson was discharged for "employment misconduct" under Minn. Stat. § 268.095, subd. 4 (2016), an Unemployment Law Judge (ULJ) determined that she was ineligible for unemployment benefits. The court of appeals reversed, applying its own precedent to conclude that Wilson's conduct did not constitute employment misconduct. Wilson v. Mortg. Res. Ctr., Inc., No. A15-0435, 2015 WL 9264038, at *2 (Minn.App. Dec. 21, 2015). Because we conclude that the court of appeals applied an improper definition of "employment misconduct" and that under the proper definition, Wilson's conduct was "employment misconduct, " we reverse.

         Nina Wilson applied for employment as a Client Services Representative with Mortgage Resource Center, Inc. (MRC) on June 6, 2014. MRC is an electronic information provider that offers online manuals and educational services to the mortgage and banking industry. The "primary purpose" of the client services position was to "handl[e] incoming customer service and sales inquiries, [and] various product fulfillment activities." The person hired would also have been responsible for "end-user product support, moderately complex technical support, invoicing support, order placement and lead qualification." The position required, among other things, a "2 or 4 year undergraduate degree or equivalent experience" and "[a]t least 5 years of account management or customer service experience."

         On Wilson's application, she circled "12" as her highest grade completed, and wrote that she had received a GED (general educational development diploma) from the "MN Educational Center" in Minneapolis.[1] She also noted that she had almost 20 years of relevant experience. On the last page of the application, above the signature line, MRC required its applicants to attest that "the answers given by me to the foregoing questions and any statements made by me are complete and true to the best of my knowledge and belief." That section also required applicants to certify that "I understand that any false information, omissions, or misrepresentations of facts regarding information called for in this application may result in rejection of my application, or discharge at any time during my employment." Similar language appeared on the first page of the application. An applicant's signature also authorized MRC to order a background check. Wilson signed the application.

         MRC offered Wilson the client services position on June 9, 2014, "contingent upon the successful result of this background search." The next day, MRC ordered a background check from a third party provider. On June 17, 2014, the third party provider returned a report to MRC stating that it could not verify that Wilson had received a GED. Wilson began her employment on June 23, 2014.

         In mid-August, MRC noticed, as it reviewed its files as part of the process of being acquired by another company, that the background check had not verified Wilson's GED. MRC's human resources manager attempted to verify Wilson's GED by contacting state officials but was not able to confirm that Wilson had received a GED.

         On September 10, 2014, MRC sent a letter via e-mail to Wilson stating that it had been unable to verify her GED and asking her to submit documentation no later than September 17, 2014, proving that she had received a GED. The letter informed Wilson that if she did not reply by the deadline, MRC would "proceed under the assumption that the representation in [her] application was not accurate." Wilson, who was on medical leave at the time, did not respond. She testified that she received the letter but did not respond to MRC's request because of her health condition.

         On September 19, 2014, MRC sent Wilson a second letter via e-mail terminating her employment. The termination letter stated that because Wilson did not respond to MRC's September 10 letter, the company assumed the representation she made in her application was "not accurate, " and her employment was terminated effective immediately.

         As noted on the job application, MRC had a policy of terminating employees who provided false information on their employment applications. MRC's president testified that other employees had been terminated for violating this policy. For MRC, he stated, "[i]t's an integrity and character issue."

         Wilson applied for unemployment benefits with the Department of Employment and Economic Development (DEED), the department charged with administering and supervising the unemployment insurance program under Minn. Stat. § 116J.401, subd. 2(a)(18) (2016). DEED issued a Determination of Eligibility, finding that Wilson was discharged during the week of August 3, 2014, because of a medical condition, illness, or injury, and so was eligible to receive unemployment benefits.[2] MRC appealed.

         Following a telephonic hearing, the ULJ issued findings of fact and a decision concluding that MRC discharged Wilson, "in large part, "[3] because of its concern about her "false statements" about receiving a GED. The ULJ determined that Wilson's misrepresentations that she had received a high school "degree" were employment misconduct and concluded that she was ineligible for unemployment benefits. Wilson filed a request for reconsideration, after which the ULJ affirmed his findings of fact and conclusions of law.

         Wilson appealed to the court of appeals, relying on that court's precedent that predated Minnesota's codification of a definition of "employment misconduct." Under that precedent, a misrepresentation on an application is employment misconduct only when it is material to the position. In other words, to be ineligible for benefits under the court of appeals' rule, the evidence must show that the employer would not have hired the employee had the employer known the truth about the matter the employee misrepresented on the application. See, e.g., Indep. Sch. Dist. No. 709 v. Hansen, 412 N.W.2d 320, 323 (Minn.App. 1987).

         Following this precedent, the court of appeals reversed the ULJ. The court reasoned that conduct during the hiring process is analyzed differently than conduct during employment. Wilson, No. A15-0435, 2015 WL 9264038, at *1. In particular, the court held that MRC failed to meet its burden of showing that it would not have hired Wilson had it known the truth about her lack of a GED. The court also concluded that MRC did not otherwise demonstrate how a GED was material to the position for which Wilson applied. Id. Because the court determined that MRC did not terminate Wilson for "employment misconduct, " the court held that she was entitled to unemployment benefits. Id. We granted DEED's petition for review.[4]

         On appeal, DEED argues that the court of appeals erred in reversing the ULJ's conclusion that Wilson engaged in employment misconduct. Specifically, DEED contends that the materiality standard the court of appeals applied is inconsistent with the statutory definition of "employment misconduct" in Minn. Stat. § 268.095, subd. 6 (2016). When the statutory definition is applied, DEED argues that Wilson committed employment misconduct and therefore she is not eligible for unemployment benefits.

         We first determine whether, as DEED argues, the court of appeals erred in how it defined "employment misconduct." After we determine the applicable definition, we examine whether Wilson's actions meet that definition.

         I.

         We turn first to the definition of "employment misconduct." DEED relies on the definition in the statute. The statute provides that an employee discharged because of "employment misconduct" is not eligible for unemployment benefits.[5] Minn. Stat. § 268.095, subd. 4(1). The statute specifically defines "employment misconduct" as "any intentional, negligent, or indifferent conduct, on the job or off the job that displays clearly: (1) a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee." Minn. Stat. § 268.095, subd. 6(a)(1).[6]

         Wilson acknowledges the statutory definition but she contends that the court of appeals' materiality standard is applicable to her situation. The materiality standard has its origins in Tilseth v. Midwest Lumber Co., 295 Minn. 372, 374-75, 204 N.W.2d 644, 646 (Minn. 1973), a case we decided before the Legislature adopted a statutory definition of "employment misconduct." Act of Apr. 23, 1997, ch. 66, § 49, 1997 Minn. Laws 357, 387.[7]

         The court of appeals relied on our discussion of misconduct in Tilseth in crafting the materiality standard. See Heitman v. Cronstroms Mfg., Inc., 401 N.W.2d 425, 427 (Minn.App. 1987); see also Hansen, 412 N.W.2d at 323. In Heitman, the court of appeals determined that misrepresentations during the hiring process should be analyzed differently from other types of misconduct. 401 N.W.2d at 427-28. Specifically, the court concluded that a misrepresentation made during the application process must be "material to the position obtained" for the misrepresentation to constitute misconduct under the statute. Id. at 427. And in Hansen, the court of appeals applied Heitman and held that a misrepresentation is material to a position if a truthful answer to the question would have prevented the applicant from being hired. 412 N.W.2d at 322-23.

         DEED argues that under the explicit terms of the statute, no other definition of "employment misconduct, " including prior common law definitions, can apply. Wilson, on the other hand, contends that the court of appeals did not err in applying its prior case law because the materiality standard remains instructive ...


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