14840932266_15e966355eThe Illinois Unemployment Insurance Act provides that benefits may be denied when an employee is terminated for a “deliberate and willful violation of a reasonable rule or policy” of the employer. Last week, in a unanimous opinion by Justice Burke in Petrovic v. The Department of Employment Security, the Illinois Supreme Court held that misconduct may be found absent a written rule only in very narrow circumstances. Our detailed summary of the underlying facts and agency and court rulings in Petrovic is here. Our report on the oral argument is here.

Petrovic began in January 2012 when the plaintiff, a longtime tower planner for a major airline, received a call from a friend at another carrier. The friend asked whether the plaintiff could do something for a passenger flying the airline that day. The plaintiff asked catering whether a bottle of champagne could be provided to the passenger, and asked a flight attendant whether it would be possible to upgrade the passenger’s seat. Three weeks later, the airline fired the plaintiff, citing two rules: misrepresentation of facts and dishonesty in relations with the company.

Plaintiff filed for unemployment benefits. The airline protested, arguing that the plaintiff had been terminated for violation of a “reasonable and known policy.” A claims adjuster, referee and the Board of Review all denied the plaintiff’s claim, holding that she had been terminated for misconduct. Plaintiff sought administrative review, and the Circuit Court reversed. But the Appellate Court reversed the Circuit Court, holding once again that the plaintiff had been fired for misconduct.

The Supreme Court reversed the Appellate Court, holding that no misconduct within the meaning of the unemployment insurance statutes had been shown. The Court began by addressing a challenge to the appellants’ standing (the airline had declined to pursue the matter – the appellants were the Director and Department of Employment Security and the Board of Review). The Court found that the appellants’ function was not purely adjudicatory – they also had independent interests in maintaining a uniform body of law involving the Act and protecting the fund, giving them separate standing to defend the lower courts’ rulings.

The Court then turned to the merits. It began by pointing out that review was of the final decision of the Board, not of the referee or the Circuit Court. Because the main purpose of the Act is to relieve the economic insecurity caused by involuntary unemployment, the Court stated that the Act is to be liberally construed in favor of awarding benefits.

Three factors must be satisfied to prove misconduct sufficient to deny benefits – (1) a deliberate and willful violation; (2) of a reasonable rule or policy governing the individual’s behavior; (3) that either harms the employer or a fellow employee, or is repeated despite a warning or explicit instructions. Thus, “misconduct” within the meaning of the Act is not synonymous with an employee who got fired. A rule or policy need not be written or formalized, but it must be clearly expressed to the employee, so as to put the employee on notice.

The Court held that no one had satisfied the burden of showing these factors. There was no evidence at the hearing regarding the rules cited in the plaintiff’s letter of termination. If the employer had a rule requiring a manager’s approval for upgrades, there was no evidence that the employee knew about it. Even if the employer had a rule against employees “issuing” unauthorized upgrades, such a rule wouldn’t apply, according to the Court – the plaintiff had merely made inquiries of other employees, as opposed to issuing any upgrade herself. “Plaintiff cannot be disqualified from receiving benefits based on others’ conduct,” the Court found.

The Board had held that no written rule was needed, because “there are some acts of misconduct that are so serious and so commonly accepted as wrong that employers need not have rules covering them.” The plaintiffs argued that the “common sense” exception to the misconduct provision could not be reconciled with the plain language of the statute. The Court agreed, but said that the “common sense” exception had an exceedingly narrow scope – benefits could be denied without proof of a written rule only given proof that the employee’s conduct was illegal or constituted a prima facie intentional tort. The plaintiff’s conduct in Petrovic was neither, so proof of a written rule was required. Since the employer had failed to offer such proof, the misconduct exception wasn’t triggered, and the plaintiff was entitled to benefits.

Image courtesy of Flickr by Grempz.