Sheila Callahan & Friends, Inc. v. State, Department of Labor & Industry

June 26 2012

DA 11-0728

IN THE SUPREME COURT OF THE STATE OF MONTANA
2012 MT 133

SHEILA CALLAHAN & FRIENDS, INC.,

Petitioner and Appellee,

v.

STATE OF MONTANA, DEPARTMENT
OF LABOR AND INDUSTRY,

Respondent and Appellant.

APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DV 11-455
Honorable John W. Larson, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Patricia L. Bik; Department of Labor-Legal Services; Helena, Montana

For Appellee:

Elizabeth O’Halloran; Milodragovich, Dale, Steinbrenner & Nygren, P.C.;
Missoula, Montana

Submitted on Briefs: May 16, 2012

Decided: June 26, 2012

Filed:

__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.

¶1 The State of Montana, Department of Labor and Industry, appeals from the order

of the Fourth Judicial District Court, Missoula County, granting the Petition for Review

filed by Sheila Callahan & Friends, Inc. (SC&F) and reversing the decision of the Board

of Labor Appeals.

¶2 We affirm the District Court’s ruling and address the following issue:

¶3 Did the District Court err by determining that SC&F is not chargeable for a pro
rata share of the unemployment insurance benefits paid to a former employee because
the employee voluntarily terminated her employment?

FACTUAL AND PROCEDURAL BACKGROUND

¶4 SC&F is a radio broadcasting company based in Missoula, Montana. Joni Mielke

(Mielke) was employed by SC&F as a radio personality. Mielke and SC&F entered a

one-year contract covering the time period from June 1, 2008 to May 31, 2009. Mielke

performed programming, live “remotes” at station events, production, and voice tracking

duties for SC&F. During the term of employment, SC&F evaluated Mielke as being an

excellent radio personality and announcer but as underperforming other responsibilities

because she either did not want to do them or preferred announcing-related duties.

During the one-year contract period, SC&F’s president Sheila Callahan and CFO Max

Murphy discussed with Mielke the possibility of reconfiguring the contract for 2009-

2010.

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¶5 SC&F offered Mielke a one year contract for the 2009-2010 term with a different

payment schedule and slightly different job duties. On May 28, 2009, shortly before the

expiration of the 2008-2009 contract, Mielke sent the following e-mail to Murphy:

Even before you handed me the new contract to consider, I had concerns
about making a commitment for the next year. After discussing it with my
family we decided it would be best if I focus on helping my mother through
her current health crisis instead of accepting your offer.

I am grateful for the opportunity you and Sheila have given me here. I
honestly mean that . . . thank you. So, I’m scheduled to work Saturday
until 6 and I know there is a remote that day . . . will my final check be June
3rd?

¶6 Mielke completed an exit interview prior to her departure and completed a form

used by SC&F for departing employees. On the form, Mielke indicated her reason for

leaving was that she had “quit” and that her letter explaining why was “on file.” Mielke

initialed the exit interview form next to each entry, including the entry indicating her

reason for leaving was that she had quit, and she also signed the form.

¶7 After Mielke left her employment with SC&F, she was hired by another radio

station. After a brief employment with this subsequent employer, she was laid off and

filed for unemployment benefits in October 2009.

¶8 The Department of Labor and Industry (Department) sent a Notice of

Chargeability Determination to SC&F assessing a pro rata share of the costs of Mielke’s

unemployment insurance benefits to SC&F’s experience rating account. The Department

administratively determined that Mielke was employed for SC&F on a contract basis

during her base period of employment and that SC&F’s account was chargeable for a

portion of benefits drawn by Mielke. SC&F requested a redetermination, arguing that
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Mielke had voluntarily left her employment. The Department issued a Redetermination

on May 18, 2010, affirming the initial Determination. An administrative hearing was

then conducted by telephone on January 7, 2011. The hearing officer determined that

Mielke neither voluntarily quit nor was discharged for misconduct and affirmed the

decision to charge SC&F’s account.

¶9 SC&F appealed to the Board of Labor Appeals (Board). The Board conducted a

hearing and held that, under applicable statutes and rules, Mielke did not voluntarily

terminate her employment but had “worked out the terms of her employment contract,”

which was of limited duration, and that SC&F’s rating account was chargeable.

¶10 SC&F petitioned the District Court for judicial review. The District Court

reversed the decision of the Board, holding that Mielke clearly stated she voluntarily left

employment with SC&F due to a family illness, not because her contract was expiring,

although continued employment was offered.

¶11 The Department appeals.

STANDARD OF REVIEW

¶12 Findings of the Board of Labor Appeals as to the facts are conclusive, and the

jurisdiction of the court will be confined to questions of law if the findings are supported

by evidence and in the absence of fraud. Section 39-51-2410(5), MCA; Johnson v. W.

Transp., LLC, 2011 MT 13, ¶ 16, 359 Mont. 145, 247 P.3d 1094 (citations omitted).

“Supported by evidence” means supported by substantial evidence, which is “something

more than a scintilla of evidence, but may be less than a preponderance of the evidence.”

Am. Agrijusters Co. v. Mont. Dept. of Lab. and Indus., 1999 MT 241, ¶ 15, 296 Mont.
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176, 988 P.2d 782. We review questions of law for correctness. Am. Agrijusters Co.,

¶ 17.

DISCUSSION

¶13 Did the District Court err by determining that SC&F is not chargeable for a pro
rata share of the unemployment insurance benefits paid to a former employee because
the employee voluntarily terminated her employment?

¶14 Montana law directs that unemployment compensation benefits paid to an

unemployed worker “must be charged to the account of each of the claimant’s base

period employers” on a pro rata basis. Section 39-51-1214(1), MCA. A “base period” is

defined as “the first 4 of the last 5 completed calendar quarters immediately preceding the

first day of the individual’s benefit year.” Section 39-51-201(2)(a), MCA. Generally, a

“benefit year” is the 52-week period “beginning with the first day of the calendar week in

which an individual files a valid claim for benefits.” Section 39-51-201(3), MCA.

¶15 SC&F does not dispute that it is a base period employer, but argues it qualifies for

a statutory exemption from a charge to its account for Mielke’s benefits under § 39-51-

1214(2)(a), MCA. That section provides that a charge may not be made to the account of

a covered employer with respect to benefits paid under the following situations: “(a) if

paid to a worker who terminated services voluntarily without good cause attributable to

a covered employer or who had been discharged for misconduct in connection with

services.” Section 39-51-1214(2)(a), MCA (emphasis added). SC&F argues that the

District Court was correct in determining that the uncontroverted evidence established

that Mielke voluntarily left employment.

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¶16 The Department argues that Mielke did not voluntarily leave her employment with

SC&F, but rather, the 2008-2009 contract expired by its terms, and Mielke was not

obligated to negotiate or entertain a further contract with SC&F. The Department argues

that the Board properly deemed Mielke’s termination of employment a “layoff” by

operation of Admin. R. M. 24.11.454A(6)(a), which applies to employment of “limited

duration.” The parties agree that Mielke’s employment was pursuant to a

limited-duration contract. The Rule provides:

(6) The department shall impute the reason for separation from work of
limited duration in the following manner:

(a) when a worker agrees to accept employment of limited duration as
specified by the employer, the department shall consider the worker to have
been laid off due to a lack of work at the end of the duration agreed upon
and the last day worked; or

(b) when an employer agrees to employ a worker for a limited duration as
specified by the worker, the department shall consider the worker to have
voluntarily left work only when the worker has refused an offer by the
employer to continue the same work beyond the limited duration. In the
absence of a valid offer by the employer to continue the same work, the
department shall consider the worker to have been laid off due to a lack of
work on the last day worked.

¶17 The Department’s argument focuses on the contract provisions and cites the

standards for contract interpretation, as did the Hearing Officer, arguing that the language

of the 2008-2009 contract is unambiguous, and the duty of the court is to apply the

language as written. The Department then points out that SC&F’s offer for the

2009-2010 contract “significantly modified terms and conditions of Mielke’s

employment” and that the two contracts “differed in important ways.” The Department

argues that these differences demonstrate that SC&F failed to offer Mielke the
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opportunity “to continue the same work” as required by Rule 24.11.454A(6)(b), and

consequently, the Rule requires that “the department shall consider the worker to have

been laid off due to a lack of work on the last day worked.” If Mielke is thus deemed to

have been laid off by SC&F, then the company’s account must be charged for a portion

of Mielke’s unemployment benefits.

¶18 The problem with the Department’s position is that, regardless of the contract

terms, the rules imputing the reason for work separation simply do not encompass the

evidence in the record about what occurred in this case. Initially, we note that Rule

24.11.454A(6)(a) applies where the worker has agreed to accept employment of limited

duration “as specified by the employer.” Rule 24.11.454A(6)(b) applies where the

employer has agreed to employment of limited duration “as specified by the worker.” No

findings were made regarding which party had specified the limited duration of the

employment, and, as the District Court noted, there was testimony that indicated “the

length of the 2008-2009 contract was mutually agreed on by the parties.” More

importantly, the Rules do not contemplate the facts here, that is, where the worker

declines, without qualification, to consider any future work offered by the employer. The

uncontested evidence is that Mielke told SC&F that she “had concerns about making a

commitment for the next year” even before the 2009-2010 contract was offered to her and

that she had decided to leave employment to help her mother. Under Rule

24.11.454A(6)(b), the Department “shall consider the worker to have voluntarily left

work only when the worker has refused an offer by the employer to continue the same

work.” Here, Mielke refused all offers—necessarily including a theoretical offer to
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continue the same work. Mielke was not merely faced with the lapse of a contract; she

was voluntarily terminating employment altogether.

¶19 The Department argues the District Court improperly failed to defer to the Board’s

findings of facts. However, the error of the Board was primarily premised upon

application of legal standards, in the nature of a conclusion of law (“Under the rules and

guidelines of the Unemployment Insurance Laws, the evidence supports that Mielke did

not voluntarily terminate her services with the employer . . . .”). Given the inapplicability

of the imputation rules to the situation here, the District Court properly concluded that the

evidence did not support the Board’s determination that Mielke’s work separation was

involuntary.

¶20 A charge may not be made to the account of a covered employer with respect to

benefits “if paid to a worker who terminated services voluntarily without good cause

attributable to a covered employer . . . .” Section 39-51-1214(2)(a), MCA. SC&F is

entitled to this statutory exclusion.

¶21 Affirmed.

_________________________________
Justice

We concur:

/S/ MIKE McGRATH
/S/ JAMES C. NELSON

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/S/ PATRICIA COTTER
/S/ BETH BAKER

Justice Beth Baker, concurring.

¶22 The Court properly concludes that, under the unique facts of this case, the

Department misapplied its rule in deeming Mielke to have been laid off when her

contract with SC&F expired. The rule requires the Department to “impute the reason for

separation from work” in different ways, depending on the circumstances of the

separation and the nature of the employment relationship. Admin. R. M. 24.11.454A(3),

(4), (6). Thus, if a worker gives notice of intent to leave work, the Department considers

the worker to have left voluntarily if the “worker’s notice of intent to leave work is

valid.” Admin. R. M. 24.11.454A(3)(a). On the other hand, where the employment

constitutes “work of limited duration,” the Department considers the worker to have been

laid off at the end of the agreed-upon duration “specified by the employer.” Admin. R.

M. 24.11.454A(6)(a). Since the parties here entered into a contract for a specified term,

the Department urges the Court to apply only subsection (6) of the rule.

¶23 Under the rule, a “valid notice” means “a formal, unconditional, specific

communication between an individual worker and an employer . . . that provides notice

of the date a worker intends to leave work voluntarily (quit)[.]” Admin. R. M.

24.11.454A(1). Neither the Hearing Officer nor the Board of Labor Appeals made any

finding that Mielke’s notice of intent to leave work was anything but a valid notice. The

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Department cannot apply subsection (6) in a vacuum when an employee has given valid

notice of her intent to quit.

¶24 The holding in this case should not, however, be seen to undermine the

Department’s legitimate interest, consistent with the unemployment benefits statutes, in

extending benefits to a worker who leaves at the end of a fixed contract period and is

subsequently laid off by another employer. The employer who enjoys the benefits that

accompany short-term employment contracts should not be able to escape responsibility

for the safety net offered by unemployment insurance by unilaterally changing the terms

and conditions of the contract and then arguing the employee was not laid off when she

refused to accept them.

/S/ BETH BAKER

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