Sokol v. Labor & Industrial Relations Commission of Missouri

LAURA DENVER STITH, Judge.

Appellant Steve Sokol appeals the decision of the Labor and Industrial Relations Commission that he was not entitled to unemployment benefits because he left work voluntarily without good cause attributable to his employer. Because we find that Mr. Sokol did not leave his employment voluntarily, and further that, had he done so, it would have been for good cause, we reverse.

I. Factual Background of Termination of Claimant

Mr. Sokol was employed by respondent TAI Services, Inc. (TAI), a Georgia corporation. TAI’s business principally involves eddy current testing of air conditioning equipment. TAI is based in Georgia, and operates in the Southeastern United States. It also, however, has customers in other parts of the country, including the Midwest. On October 10, 1988, TAI Services hired Mr. Sokol to run its Kansas City regional operations.

When hired, Mr. Sokol signed an employment contract which provided that either party could terminate his employment with or without cause upon 30 days written notice. It also provided that for two years after termination of his contract by either party for any reason, he could not “engage generally in direct competition with the Employer in the business of eddy current testing of tubes” and that this limitation would apply “within the existing marketing area of the Employer in the southeastern states of the United States or any future marketing area of the Employer began [sic] during employment under the terms of this Agreement.”

*22Mr. Sokol continued in TAPs employ until he was terminated on July 15, 1994. The parties disagree as to whether Mr. Sokol was involuntarily discharged or whether he voluntarily left employment. Both agree, however, that he left employment because he refused to sign a revised employment contract.

It is undisputed that the revised contract was offered to Mr. Sokol on July 5, 1994. That morning, TAI President Ray Joseph called Mr. Sokol from Georgia. Mr. Joseph said he was flying into Kansas City and wanted to meet Mr. Sokol at the airport. Mr. Sokol later testified that when they met, Mr. Joseph demanded that Mr. Sokol immediately sign a new contract. Mr. Sokol objected that he did not understand the contract, but Mr. Joseph insisted that he would not leave until the document was signed and allegedly made numerous threats to Mr. Sok-ol. Mr. Joseph also allegedly told Mr. Sokol that the new contract had only minor changes from the old contract.

According to Mr. Sokol, he tired after three hours of wrangling and agreed to sign the new contract with a handwritten modification that it would be in effect for one year and would be renewed yearly thereafter unless written notice of termination was given within 30 days of the termination date.

The following day Mr. Sokol consulted with an attorney. He was told that some of the basic provisions of the contact were very one-sided, and further that some major changes had been made between the first and second contracts. A comparison of the two contracts reveals that most important among the changes were: (1) a requirement that Georgia law would apply; (2) an increase in the guaranteed base salary to an amount above that of the original contract but below that which Mr. Sokol was actually then earning; and (3) a complete revision to the non-competition clause.

Whereas the non-competition clause in the first contract had barred Mr. Sokol from competing with TAI only in the eddy current testing business and only in the Southeastern United States and in future marketing areas 1 for two years after termination, the new clause barred Mr. Sokol from competing throughout the United States, barred him from soliciting business from or contacting any TAI customer with whom he had worked, and applied to both eddy current testing and any other product, equipment or service sold, provided or under development by TAI, for 18 months after termination.

Believing that he had been lied to in an effort to coerce him into signing the new contract, Mr. Sokol sent a letter to Mr. Joseph on July 6, 1994, rescinding the new contract.2 The letter stated:

This letter is to notify you that the contract which I signed yesterday should be considered null and void.
I feel I was coerced into signing the contract without the benefit of consulting with my lawyer or receiving any counsel
... Again, this letter should be considered a formal rescission of the above mentioned contract.
I truly would like to work for TAI Services for many years to come and I hope this doesn’t effect our working relationship. If you wish to discuss this matter further, please feel free to call.

On July 15, 1994, Mr. Joseph called Mr. Sokol and told him that he accepted the rescission letter. He then told Mr. Sokol to again sign the new contract. Mr. Sokol claims that when he refused, Mr. Joseph told him that he would take Mr. Sokol’s July 6, 1994 letter as a letter of resignation. Mr. Sokol said that he was not resigning and that he wanted to continue to work for TAI. Mr. Joseph finally told him that he would have the weekend to reconsider and if he did not *23sign by Monday then he would be terminated. On July 18, 1994, Mr. Sokol received a notice from TAI that he was terminated effective July 15, 1994. He received four weeks severance pay.

Mr. Sokol applied for unemployment benefits, claiming that he had been discharged without cause. His employer contested his claim, stating that he had been fired for refusing to sign the second contract, and that this was in effect a voluntary quit because the changed provisions were not unreasonable and thus Mr. Sokol had it within his power to remain employed just by signing the second contract.

II. GOVERNING LAW AND STANDARD OF REVIEW

The burden is on the claimant to prove eligibility for benefits. See Kansas City Club v. Labor & Indus. Relations Comm’n, 840 S.W.2d 273, 275 (Mo.App.1992). In determining whether this burden has been met, we are guided by the public policy set out in Section 288.020. It states that we should liberally construe the provisions of that Chapter so as to achieve the purpose of promoting economic security for those unemployed through no fault of their own:

1. As a guide to the interpretation and application of this law, the public policy of this state is declared to be as follows: ... setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own.
2. This law shall be liberally construed to accomplish its purpose to promote employment security both by increasing opportunities for jobs through the maintenance of a system of public employment offices and by providing for the payment of compensation to individuals in respect to their unemployment.

§ 288.020. Under this standard, the provisions of § 288.040 governing eligibility for benefits are liberally construed to provide coverage.

The employer, TAI Services, has not contested Mr. Sokol’s qualification for benefits under Section 288.040. Instead, it claims that Mr. Sokol is disqualified from receiving benefits for which he would otherwise be eligible by reason of Section 288.050. Section 288.050 provides reasons for disqualifying otherwise eligible individuals from receiving benefits. It states in relevant part that:

Notwithstanding the other provisions of this law, a claimant shall be disqualified ... if the deputy finds:
(1) That he has left his work voluntarily without good cause attributable to his work or to his employer; ...

§ 288.050.1. This and the other disqualifying provisions of Section 288.050 are strictly and narrowly construed in favor of finding that an employee is entitled to compensation. Citizens Bank of Shelbyville v. Industrial Comm’n, 428 S.W.2d 895, 898 (Mo.App.1968); Kroger Co. v. Industrial Comm’n, 314 S.W.2d 250, 254 (Mo.App.1958).3 Nonetheless, where, as here, the employer claims that the employee voluntarily left his employment without good cause attributable to his employer, the employee has the burden of proving that this is not the case, either by showing that he left work for good cause attributable to Ms employer, or by showing that he did not voluntarily leave work but rather was discharged. Id.

The Commission found that Mr. Sokol did not meet his burden. In support, it stated that it believed that the new contract “was substantially and predominantly similar” to Mr. Sokol’s original contract and that the changes to wMch Mr. Sokol objected were “minor changes to the contract [wMch] did not constitute a substantial change in wages or working conditions.” It found that because the changes were minor and reasonable, it was unreasonable of Mr. Sokol to *24refuse to sign the new contract, and thus he should be considered to have voluntarily quit without good cause attributable to his work or to his employer. It thus disqualified him from benefits. Mr. Sokol appealed to the circuit court, which affirmed.

We review the determination of the Commission, not of the circuit court. Charles v. Missouri Div. of Employment Sec., 750 S.W.2d 658, 661 (Mo.App.1988). We will affirm a factual determination by the Commission as to whether an employee voluntarily left his employ or was discharged if it is supported by competent and substantial evidence on the record as a whole. Chilton v. Labor & Indus. Relations Comm’n, 805 S.W.2d 722, 723 (Mo.App.1991). We will, however, engage in a de novo review of whether the facts found by the Commission can, as a matter of law, be considered to constitute a voluntary departure from employment. Haynes v. Unemployment Compensation Comm’n, 353 Mo. 540, 183 S.W.2d 77 (1944).

III. WHETHER THE CLAIMANT IS CONSIDERED TO HAVE VOLUNTARILY QUIT HIS EMPLOYMENT WITHOUT GOOD CAUSE ATTRIBUTABLE TO HIS EMPLOYER WHERE HE WAS TERMINATED FOR REFUSING TO SIGN A NEW CONTRACT

A. Mr. Sokol did Not Voluntarily Leave Employment.

We first address the issue whether the Commission erred in the first instance in holding that Mr. Sokol should be considered to have voluntarily left his employment where he was terminated for refusing to sign a new contract. He claims that he did not quit, but was fired after making clear to the employer that he wanted to continue his employment with TAI. The employer claims, to the contrary, that the Commission properly considered Mr. Sokol to have, in effect, voluntarily left his work in that it was within his power to continue working by signing the second contract offered to him by his employer.

We find the Commission’s determination that Mr. Sokol’s dismissal should be considered a voluntary quit because he could have signed the second contract offered by his employer is in conflict with the law as set out in Von Hoffman Press, Inc. v. Industrial Comm’n, 478 S.W.2d 403 (Mo.App.1972).

In Von Hoffman Press, the court discussed the same issue: whether a discharge for failure to agree to new terms of employment can be considered a voluntary quit. In that case, the claimant was employed part-time. Her employer offered her full-time employment with benefits, but at a lesser hourly wage. The claimant declined the offer, and the employer located and trained someone else for the full-time position. The employer then fired the claimant and the new full-time employee took over her old job.

The employer opposed the claimant’s application for unemployment benefits on the basis that she in effect voluntarily left her work without good cause. It argued that because she was only discharged for refusing to accept the offered full-time employment, she thus had it within her power to continue working. The court rejected that argument, stating:

Obviously, the plain meaning of the words used prevent us from construing this portion of the section to include a termination of employment by dismissal or discharge. Mrs. Lorenzen did not voluntarily quit her job at Von Hoffman Press. She wanted to continue, but only on a part-time basis. All through her testimony she characterized her termination of employment as a dismissal. She did not voluntarily sever her employment relations with Von Hoffman.

Von Hoffman Press, 478 S.W.2d at 404-05.

Other cases have also held that where the employer tells the employee to take a certain action or accept a certain situation or be fired, and the employee refuses to agree to what was asked by the employer and is fired, then the employee should be considered to have been discharged for cause rather than to have voluntarily left employment. For example, in Francis Howell Sch. Dist. v. Labor & Indus. Relations Comm’n, 687 S.W.2d 681 (Mo.App.1985), we held that em*25ployees fired for engaging in a wrongful strike may not have been entitled to benefits because their firing was justified by their illegal strike. We remanded the ease for a finding on whether the employees were available for work. However, we decided that the employees did not quit, but were discharged. We found that the employees could not be considered to have quit their jobs just because they refused to return to work in protest of the firing of two fellow employees. We reasoned that the employer’s ultimatum to return to work or be fired, combined with the fact that the employees picketed the employer, indicated that the employees were on strike, and not that they quit. Thus, we considered the employees discharged, and not as having quit.

We applied similar reasoning, but reached the opposite result in Price v. Labor & Indus. Relations Comm’n, 811 S.W.2d 457 (Mo.App.1991). In Price, a store manager with a new baby was fired after she refused to report to work for two evenings per week. We held that competent and substantial evidence supported the finding that the manager voluntarily quit her job. A preexisting store policy stated the evening work requirement, and the manager refused temporary alternative daytime employment at a lower paying job.

In Francis Howell School we relied on Diversified Case Co., Inc., 268 N.L.R.B. No. 119, 111 LRRM (BNA) 1145 (1982), a ease applying federal law. In Diversified Case Co., two employees failed to return to work after lunch because they were dissatisfied with certain pay deductions and shop conditions. The workers told their employer of their intent not to return, and were warned that failure to return would end their jobs. When they failed to return to work until the next morning, the employer refused to allow them to work. The NLRB held that the workers were discharged. The fact that they came in the next day indicated that they did not intend to quit.

Similarly, in Ridgeway Trucking Co., 243 N.L.R.B. 1048, 1049 n. 8 (1979), enforced, NLRB v. Ridgeway Trucking Co., 622 F.2d 1222 (5th Cir.1980), an employer’s telling recalcitrant employees to “work or leave” was held to be a discharge ultimatum. They were not considered to have quit, but to have been fired.

Here, Mr. Sokol was discharged for refusing to accept a new contract which, as discussed below, substantially changed his terms of employment. As in Von Hoffman Press and the other cited cases, Mr. Sokol did not voluntarily sever his employment relationship. Rather, he specifically refused to allow the employer to consider his refusal to sign the new contract as a resignation, stating that he wanted to continue employment under his initial contract. It was the employer who decided to terminate Mr. Sokol rather than have him continue to work under his existing contract.

This distinguishes this case from those cited by the employer in which an employee quit rather than accept reasonable changes in employment proposed by the employer and then argued that he or she had quit for good cause.4 Here, the employee did not quit and had a right to continue employment under his first contract, which was still in effect because he rescinded the second contract.5

Of course, under the terms of the first contract, the employer could have given Mr. Sokol thirty days notice and terminated him *26with or without cause at any time. If he had done so, however, Mr. Sokol would have been entitled to unemployment compensation benefits unless the employer met the burden of showing that the employee was dismissed for misconduct connected with his work. See § 288.040(2); General Motors Corp. v. Labor & Indus. Relations Comm’n, 658 S.W.2d 702, 708 (Mo.App.1983) (worker fired for fighting at work who showed that he acted in self-defense was entitled to benefits).

But TAI does not claim that Mr. Sokol was fired for misconduct connected with his work, and in any event TAI did not take the option of terminating Mr. Sokol’s contract in accordance with its provisions. Mr. Joseph instead offered Mr. Sokol a new and substantially changed contract and ordered him to immediately sign it or be fired. This in itself violated the 30-day notice provision of Mr. Sokol’s contract. Now the employer wants us to hold that it could not only violate Mr. Sokol’s contract rights with impunity, but could also benefit from that violation by preventing Mr. Sokol from recovering unemployment benefits to which he would otherwise be entitled. We decline to adopt this approach.

For these reasons, we hold that the Commission erred in reaching the legal conclusion that Mr. Sokol voluntarily left his employment where he was terminated for refusing to sign a new contract. Under the law, this conduct did not constitute a voluntary quit; to the contrary, Mr. Sokol was discharged.6

B. The Contract Changes Were Substantial and Constituted Good Cause for Mr. Sokol to Leave His Employment

The dissent indicates that he believes that Mr. Sokol should be considered to have been discharged rather than to have voluntarily quit because he had it within his power to sign the new contract offered to him by his employer. It therefore goes on to address the issue whether Mr. Sokol quit for good cause attributable to his employer, and concurs with the Commission’s determination that the addition of a non-competition clause in the circumstances of this case does not constitute good cause.

We disagree. We hold that, even if Mr. Sokol were considered to have voluntarily quit, he had good cause to do so in that the changes in the contract were substantial and were pushed on him in a manner which violated his prior contract. We disagree with the Commission’s determination that the reasons Mr. Sokol did not sign the second contract — such as dissatisfaction with the revised non-competition agreement and with other contract provisions — did not constitute substantial changes in his employment and thus did not constitute good cause to quit attributable to his employer.

Whether Mr. Sokol’s reason for leaving his employment constituted “good cause” is a legal issue on which we do not defer to the Commission’s determination below. Heavy Duty Trux v. Labor & Industrial Relations Comm’n, 880 S.W.2d 637, 641 (Mo.App.1994). The phrase “good cause” has no fixed or precise meaning, and is judged by the facts of each case. Belle State Bank v. Industrial Comm’n, 547 S.W.2d 841, 846 (Mo.App.1977). The standards by which good cause is judged can be summarized, however, as an objective determination of what a reasonable person would do in the same or similar circumstances. In this regard, we have previously stated that:

the circumstances motivating an employee to terminate employment must be “real not imaginary, substantial not trifling, and reasonable not whimsical and good faith is an essential element.” Belle State Bank v. Industrial Commission, 547 S.W.2d 841, 846 (Mo.App.1977). Good cause is limited to instances where the unemployment is caused by external pressures so compelling that a reasonably prudent person would be justified in terminating employment.

Charles, 750 S.W.2d at 661. Charles farther explains that absent “discriminatory or *27unfair or arbitrary treatment, mere dissatisfaction with working conditions does not constitute good cause for quitting employment unless the dissatisfaction is based upon a substantial change in wages or working conditions from those in force at the time the claimant’s employment commenced.” Id.

The rule that one is justified in quitting in the face of arbitrary or unfair treatment was applied in Heavy Duty Trux, 880 S.W.2d at 644. In that case an employee accidentally caused his truck to go into a ditch. He received oral permission to have the truck towed out of the ditch, and the employer never conducted any investigation to determine whether the accident was caused by the employee. Instead, the employer simply charged the driver the substantial cost of the towing. The employee objected to this treatment and quit. The employer said that it was a voluntary quit and opposed the worker’s application for unemployment compensation. Heavy Duty Trux concluded that the arbitrary and unfair approach taken by the employer provided good cause for the driver’s decision to quit, and found the driver qualified for unemployment.

Here, as in Heavy Duty Trux, we find that the employer engaged in arbitrary and unfair treatment of Mr. Sokol. The employer failed to comply with the contract provision requiring thirty days notice of termination by insisting that Mr. Sokol sign the new contract immediately without advice of counsel. This is just the type of arbitrary behavior which we believe justifies a voluntary quit.

In addition, we believe that Mr. Sokol had good cause for quitting because he faced the very type of situation described in the quotation from Charles above, a “substantial change in wages or working conditions from those in force at the time the claimant’s employment commenced.” Id.

First, we note that the second contract required the application of the law of Georgia, where TAI was incorporated. The rights of employees vary greatly from state to state. While Mr. Sokol does not rely on this change on appeal, we believe that as an objective matter an agreement to change the applicable law is at least an important change in the contract which can be considered in combination with other changes in determining whether the new contract provided good cause to refuse to sign the new contract.

Most important of those other changes was the change in the non-competition clause. The Appendix to this opinion contains a side-by side comparison of the clauses. It reveals that one provision of the proposed new clause was beneficial to Mr. Sokol — the non-competition period was shortened from two years to 18 months. The remainder of the changes in this clause were far from beneficial to Mr. Sokol, however.

The non-competition clause in the first contract just limited Mr. Sokol in the Southeastern United States, and did so only in the field of eddy current testing. As Mr. Sokol did not work in the Southeastern United States, this clause really did not affect him negatively. Even if he quit or were fired, it would not affect his future employment or ability to undertake his line of work. The non-competition clause was basically of no practical effect.

The dissent argues, and the Commission found, that the new contract simply “updated” the non-competition clause with “minor” changes. We agree with Mr. Sokol, however, that the changes were far from minor. The non-competition clause in the revised contract was much broader in scope and far more onerous in potential application. While it prohibited competition for only 18 months, it did so throughout the United States and in every field in which TAI might offer products, equipment or services, and applied to all of the customers that Mr. Sokol had worked with in the prior six years. It thus barred Mr. Sokol from undertaking his current work or even related work with any of the persons with whom he had built up contact. As a result, the new contract effectively barred Mr. Sokol from employment in his chosen field anywhere in the United States for 18 months, while the former contract had barred him from employment in that field only in a part of the country in which he was not working.

In this situation we think the analysis of Ryan v. Employment Div., 87 Or.App. 471, *28742 P.2d 707 (1987), is applicable. Mr. Ryan was operations director of his employer’s racquetball club. His contract was oral. Six weeks after he began work the method of compensation was changed, and a few weeks thereafter he was asked to sign a written contract which contained a non-competition clause which barred him from being connected “in any manner with any business of the type conducted by the employer within a 50-mile radius of employer’s business.” Id, at 708. When Mr, Ryan objected, his employer told him that if he refused to sign he would be fired. Mr. Ryan said “Do you want me to leave right now?” His employer answered “Okay,” and Mr. Ryan left the premises after gathering his personal effects.

The employer opposed Mr. Ryan’s claim for unemployment benefits by claiming that Mr. Ryan had voluntarily left his employment without good cause. The appeals board agreed and denied compensation. The court of appeals reversed, finding that Mr. Ryan had good cause to leave work. In so doing, it applied a definition of good cause which is not unlike that in Missouri, stating that good cause is cause:

such that a reasonable and prudent person of normal sensitivity, exercising ordinary common sense would leave work. The reason must be of such gravity that the individual has no reasonable alternative but to leave work.

Id. at 709. The court of appeals found that the employer’s attempt to require Mr. Ryan to sign a non-competition clause provided good cause for him to refuse to sign the new contract, stating:

[t]he imposition of the noncompetition clause was a matter of such gravity that claimant had no reasonable alternative but to leave work. We do not agree with the referee’s conclusion that the alternatives of signing the contract and latter challenging it or negotiating a more limited geographical area of coverage of the clause were reasonable. We hold that EAB’s findings and reasoning did not support the conclusion that claimant left work without “good cause.”

Id. (emphasis added).7

Here, as in Ryan, we find that the imposition of the non-competition clause was a matter of such gravity that Mr. Sokol could have determined in good faith that he had no reasonable alternative but to leave work. If he did not sign the second contract and then left work, he could still work in his chosen field. If he did sign the second contract, he could not do so.

Indeed, for all TAI’s claims that the change in the contract was minor, it fired Mr. Sokol for refusing to sign it, brought suit to enforce it, and was actually permitted to enforce it against Mr. Sokol despite the fact that the second contract was rescinded before Mr. Sokol was discharged. Mr. Sokol was out of work for 18 months. The new non-competition clause barred Mr. Sokol from engaging in the business for which he was trained. It is hard to conceive of a more critical or substantial change in the terms of employment to which Mr. Sokol was subject. On these facts, we simply disagree with the dissent and with the Commission below that the change was minor and did not constitute “a substantial change in wages or working conditions from those in force at the time the claimant’s employment commenced.” Charles, 750 S.W.2d at 661.

For these reasons we reverse the decision of the Commission and remand for a determination of Mr. Sokol’s unemployment benefits in accordance with this opinion.

ELLIS, J., concurs in this opinion. LOWENSTEIN, J., dissents in separate dissenting opinion filed.

. Respondent does not claim that the portion of this clause barring competition in future marketing areas applied to Mr. Sokol. We therefore will not further address that aspect of the non-competition clause in the first agreement.

. The dissent suggests that we have accepted Mr. Sokol’s version of the facts rather than that of the Commission. The Commission did not anywhere suggest it disbelieved Mr. Sokol's chronology of events, however. It simply found that the changes in the contracts were so minor as to be of no legal significance. For the reasons set out below, we disagree on the legal effect of the facts, not the facts themselves.

. We disagree with the dissent that there is a discrepancy between the statement in Citizens Bank of Shelbyville that the provisions of the employment security law will be liberally construed in favor of coverage and the statement in the same case that the disqualifying provisions will be strictly construed. To the contrary, the strict — that is, narrow — construction of exceptions or disqualifying provisions called for in that case, in reliance on Kroger, is fully consistent with a liberal interpretation of the law so as to effect entitlement to benefits. See Kroger, 314 S.W.2d at 254.

. See, e.g., Bank of Shelbyville, 428 S.W.2d at 899; Belle State Bank v. Industrial Comm’n, 547 S.W.2d 841, 846-47 (Mo.App.1977); Charles, 750 S.W.2d at 659-61.

. The evidence below was that the employer accepted Mr. Sokol's rescission letter of July 6, 1994, and told Mr. Sokol that it had been effective. He apparently did not raise any issues with Mr. Sokol as to whether he was entitled to rescind based on the facts he stated, but instead asked him to reconsider and then fired him for refusing to do so. We thus consider the second contract to have been rescinded. Where a contract is rescinded, it is void and of no effect. The parties are put back in the positions they held prior to the signature of the rescinded contract. Ballenger v. Castle Rock Bldg. Corp., 904 S.W.2d 62, 64 (Mo.App.1995); Haas v. Town & Country Mortgage Co., 886 S.W.2d 225, 228 (Mo.App. 1994); Phillips v. Bradshaw, 859 S.W.2d 232, 235 (Mo.App. 1993). Here, that means that they were continuing to operate under the contract signed in 1988.

. The dissent suggests that we are second guessing the Commission on an issue of fact by so holding. We disagree. We accept the facts found by the Commission, but hold that as a matter of law they do not constitute a voluntary quit. Rather, they constitute a discharge. As in Von Hoffman Press and Francis Howell School District, supra, this is a proper issue for determination by this court on appeal.

. The court stated that because it found that Mr. Ryan had not left without good cause, it did not need to address claimant’s alternative argument that he did not leave work voluntarily when he was fired for refusing to sign the proposed contract.