Commonwealth of Kentucky Court of Appeals
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1 RENDERED: APRIL 1, 2016; 10:00 A.M. NOT TO BE PUBLISHED Commonwealth of Kentucky Court of Appeals NO CA MR CAMI WATKINS; AND SUNNI WATKINS APPELLANTS APPEAL FROM LAUREL CIRCUIT COURT v. HONORABLE THOMAS L. JENSEN, JUDGE ACTION NO. 14-CI HOMETOWN CONNECTIONS, INC.; AND COMMONWEALTH OF KENTUCKY, KENTUCKY UNEMPLOYMENT INSURANCE COMMISSION APPELLEES OPINION AFFIRMING ** ** ** ** ** BEFORE: J. LAMBERT, MAZE, AND TAYLOR, JUDGES. TAYLOR, JUDGE: Cami Watkins and Sunni Watkins bring this appeal from a November 12, 2014, Order of the Laurel Circuit Court that affirmed orders of the Commonwealth of Kentucky, Kentucky Unemployment Insurance Commission
2 (Commission) determining that Cami and Sunni were disqualified from receiving unemployment benefits. We affirm. Cami and Sunni are sisters and were previously employed by Hometown Connections, Inc. Hometown Connections is a family business that was incorporated in Kentucky and provided assistance to individuals with developmental disabilities. The assistance was paid for by Medicaid or Medicare programs. Hometown Connections was operated from a building owned by Carrie Watkins, Cami and Sunni s mother, and Hometown Connections paid monthly rent to Carrie. It appears that the officers and ownership of Hometown Connections is much disputed by the parties, and a separate civil action has been filed concerning same. The record reveals that as of October 2012, the website for the Kentucky Secretary of State listed Carrie Watkins as the executive director of Hometown Connections, and the sole shareholder is listed as Brett Watkins, Cami and Sunni s brother. The underlying facts relevant to Cami and Sunni s unemployment benefits are also in controversy. It is clear that Sunni started working for Hometown Connections in January 1998 and that Cami started working in June According to them, Sunni held the position of executive director, and Cami served as corporate secretary/accounts payable manager. The events leading to the dismissal of Cami and Sunni were summarized by the Commission as follows: A dispute arose among the Watkins family over an alleged unauthorized stock transfer to Brett Watkins (brother of Sunni and Cami Watkins). The dispute -2-
3 reached its apex on the evening of October 24, [Sunni] was moving a fence dividing her residential property from that of her parents. Her father (Jack Watkins) and brother (Brett Watkins) approached. During the ensuing argument [Sunni] contends that her life was threatened by her father and/or brother; however, she was unsuccessful in obtaining a protective order against either party. On Thursday, October 25, 2012, [Sunni] told the office staff that her life had been threatened and Cami Watkins advised that she had found a tape recorder hidden in her office. The office staff was told to remove their personal property in preparation of working from home until a new office location could be found.... On Friday, October 26, 2012, [Sunni] and Cami Watkins decided to initiate the plan allowing the staff to work from home. Accordingly, the office staff was instructed to take whatever office equipment, paperwork, and forms were needed, and work from home until further notice. Workers were advised that the removed equipment had been gifted to them, although the equipment had been depreciated by the employer and there was no corresponding indication that the value of the equipment had been included as taxable income for any employee receiving the gift(s). [Sunni] left the workplace around noon with the computer and related accessories from her office. On a subsequent unknown date, [Sunni] and/or Cami Watkins authorized direct deposits of bonuses to various employees, with the understanding that the monies would be refunded to allow operation of the business from a new location. When Carrie Watkins arrived on the afternoon of October 26, 2012, she observed Chassidy Turner (staff member) removing company property from the office. When confronted, Ms. Turner advised that she was doing as she was told, as all staff members had been instructed to work from home until further notice. Ms. Watkins entered the office to find the staff and most of the office equipment missing; she had the locks changed to prevent further removal of company property. -3-
4 At some point over the weekend of October 27 and 28, 2012, Cassidy Turner discovered the locks had been changed and so advised the other office staff. [Sunni] called Lisa Hyde (BHDID Quality Administrator),[ 1 ] advising that the locks on the office had been changed and expressing concern about the ability of the operation to go forward and provide required client care. In response to [Sunni s] stated concerns, Ms. Hyde and Pam Taylor (BHDID Regional Supervisor) met with Carrie Watkins at the central office location on October 29 and 30, The purpose of these visits was to verify that the employer remained open and insure compliance with regulatory requirements. On October 30, 2012, in response to inquiry about the status of Sunni and Cami Watkins and the remainder of the office staff, Carrie Watkins verbally advised that all office staff and case managers had been terminated, effective October 26, 2012, for failing to return her phone calls or return to work ; [sic] she did not provide a written list of terminated employees. Cami and Sunni filed applications for unemployment benefits. The applications were initially approved, and they started receiving benefits. Hometown Connections then appealed the determination to a referee. Kentucky Revised Statutes (KRS) (2). Hometown Connections maintained that Cami and Sunni were ineligible for unemployment benefits as they were discharged for misconduct. The referee found that Cami and Sunni were not discharged for misconduct and were entitled to unemployment benefits. Hometown Connections then sought review with the Commission. KRS (2). By orders mailed January 14, 2014, the Commission reversed the 1 The BHDID is the Cabinet for Health and Family Services, Department of Behavior Health, Developmental, and Intellectual Disabilities. -4-
5 referee s determinations and concluded that both Cami and Sunni were discharged for misconduct. In particular, the Commission reasoned: At the outset, we note that the evidence presented by both parties as to the nature and timing of the separation from employment lacks consistency and credibility. However, the following facts are undisputed or established by substantial evidence of record. [Sunni] and Cami Watkins held positions of authority with the employer and had fiduciary responsibilities to enforce the employer s rules and policies, to safeguard the employer s resources, and to use their best efforts to promote the employer s business and protect the employer s interests. [Sunni] and Cami Watkins instructed subordinate employees to remove whatever resources were needed (e.g., office equipment, paperwork, forms, etc.) and work from home until further notice. [Sunni] and Cami Watkins advised employees that whatever items of office equipment were removed would be considered a gift from the employer, despite prior depreciation by the employer and inclusion of the value of the property taken as taxable income. [Sunni] and Cami Watkins removed office equipment, files, paperwork, checkbook, and other items of employer property needed to continue the operation of the business from another location. [Sunni] and Cami Watkins intended to relocate the business to a new office and continue operating the business without authority or consent of the employer and using the employer s office staff, equipment, and other resources removed from the workplace. [Sunni] and Cami Watkins took steps to cause undetermined sums of money to be deposited into the bank accounts of various staff members with the intent that the money be returned in order to fund operation of the business from a new location and under their sole supervision and control. The evidence of record will not support the finding that [Sunni], by her individual actions or participation in the actions set forth above, personally violated any of the -5-
6 known employer rules aforementioned; therefore, misconduct is not found under the cite statutory example. However, substantial evidence supports the finding that [Sunni] did, by individual actions or participation in the listed behaviors, suborn violations of the employer s rules and fail in the duties owed to the employer. As suborning violations of an employer s rules; failure to enforce the known rules of an employer; failure to perform the duties of the position held; or actions undertaken in a deliberate attempt to take over an employer s business are not behaviors covered by a specific example of misconduct in KRS (6), these behaviors are appropriately adjudicated under the definition provided in Boynton Cab which encompasses the broad standard of general duties a worker owes to their employer. Under the common-law definition, misconduct is behavior which shows a willful or wanton disregard of the employer s interests. Such may be shown by a deliberate disregard of the standard of behavior which the employer has the right to expect, negligence of such degree or frequency as to manifest culpability, or intentional disregard of duties and obligations owed to the employer. An employee is obligated to render loyal, diligent, faithful, and obedient service to his employer and failure to do so is a disregard of the standards of behavior which the employer can rightfully expect of his employee. Brown Hotel Co. v. White, 365 S.W.2d 306, 307 (Ky. 1962). It is axiomatic that workers are to abide by the known and reasonable rules of their employer and supervisors, as a function of their position, are to uniformly enforce such rules and discipline offenders for known violations. When a supervisor directs subordinate employees to violate an employer s rules, such demonstrates a willful and wanton indifference and disregard for the employer s interests. -6-
7 When a supervisor allows or facilitates the removal of company property and attempts to gift that property to workers with the intent to usurp operational control of the business, such demonstrates a willful and wanton indifference and disregard for the employer s interests. When a supervisor attempts to relocate the employer s business to a new office and continue operations without the consent or approval of the employer and using the employer s office staff, equipment, and other resources removed from the workplace; and further attempts to fund the operation by money misappropriated from the employer, such demonstrates a willful and wanton indifference and disregard for the employer s interests. Here, substantial evidence supports the finding that [Sunni] acted or participated in behaviors falling in each of the categories listed above. Her behavior shows a deliberate disregard for the standard of behavior which the employer had the right to expect from her as an employee and corporate officer, a willful and wanton disregard for the employer s interests, an intentional disregard for the fiduciary duties owed to the employer, and meets the common-law standard of misconduct. For these reasons, the Commission ruled that Cami and Sunni engaged in misconduct and were not entitled to unemployment benefits. Cami and Sunni then filed complaints in the Laurel Circuit Court seeking judicial review of the Commission s orders. KRS Their cases were consolidated by the circuit court. By order entered November 12, 2014, the circuit court affirmed the Commission s decision that Cami and Sunni were discharged for misconduct and were not entitled to unemployment benefits. This appeal follows. -7-
8 To begin, judicial review of the Commission s decision is limited. The Commission s findings of fact are not disturbed if supported by substantial evidence of a probative value. Southern Bell Tel. & Tel. Co. v. Ky. Unemployment Ins. Comm n, 437 S.W.2d 775 (Ky. 1969). As fact-finder, the Commission is empowered to assess the weight and credibility of the evidence. Thompson v. Ky. Unemployment Ins. Comm n, 85 S.W.3d 621 (Ky. App. 2002). And, we must determine whether the Commission properly applied the correct rule of law. Id. Our review proceeds accordingly. Cami and Sunni contend that the Commission erroneously concluded that they were dismissed due to misconduct. For the following reasons, we disagree. KRS (6) provides that a worker is disqualified from receiving unemployment benefits if such worker was dismissed due to misconduct. Misconduct has been recognized under the common law as a willful or a wanton disregard of the legitimate business of the employer. Ky. Unemployment Ins. Comm n v. King, 657 S.W.2d 250, 251 (Ky. App. 1983). And, KRS (6) provides a statutory list of specific instances of misconduct: Discharge for misconduct as used in this section shall include but not be limited to, separation initiated by an employer for falsification of an employment application to obtain employment through subterfuge; knowing violation of a reasonable and uniformly enforced rule of an employer; unsatisfactory attendance if the worker cannot show good cause for absences or tardiness; damaging the employer's property through gross negligence; refusing to obey reasonable instructions; -8-
9 reporting to work under the influence of alcohol or drugs or consuming alcohol or drugs on employer's premises during working hours; conduct endangering safety of self or co-workers; and incarceration in jail following conviction of a misdemeanor or felony by a court of competent jurisdiction, which results in missing at least five (5) days work. In this case, the Commission found that Cami and Sunni attempted to usurp operational control of Hometown Connections, to relocate the office of the business without prior approval, and to fund the [new] operation by money misappropriated from Hometown Connections. These findings were supported by substantial evidence of a probative value. See Southern Bell Tel. & Tel. Co., 437 S.W.2d 775. From the transcript of the hearing, it is evident that the evidence introduced was conflicting; however, we cannot substitute our judgment for the Commission as to weight and credibility of the evidence. See Thompson, 85 S.W.3d 621. We also agree with the circuit court s analysis of the evidence and cite approvingly to relevant parts herein: The Commission found that the record is replete with evidence indicating that the familial dispute over ownership and control of the business was long-lived, and further found that [Cami and Sunni s] assertion that their actions were for the benefit of the corporation were neither credible nor persuasive. While the Commission did not note any specific examples of such evidence in that order, a review of the record indicates that [Cami and Sunni] claimed ownership of Hometown on tax documents for the taxable year Sunni Watkins testified at the hearing that she and Cami owned the stock because Brett Watkins transferred his interest in Hometown to them because he could no longer own it, due to a criminal record and such transfer of ownership was listed in the UI408I Fact-Finding Report as -9-
10 occurring on September 12, Thus, the record contains evidence that [Cami and Sunni] held themselves out as owners in official documents, well before the disputed transfer of ownership took place. (Citations omitted.) The evidence satisfies the Court of the Commission s ruling that [Cami and Sunni] had attempted to usurp ownership and control of Hometown was supported by substantial evidence of a probative value. Upon the whole, we conclude that the Commission s findings of fact were supported by substantial evidence and that the Commission correctly applied the law. Therefore, the circuit court properly affirmed the Commission s conclusions that Cami and Sunni were dismissed due to misconduct and not entitled to unemployment benefits. affirmed. For the foregoing reasons, the Order of the Laurel Circuit Court is ALL CONCUR. BRIEFS AND ORAL ARGUMENT FOR APPELLANTS: Scott M. Webster London, Kentucky BRIEF FOR APPELLEE, HOMETOWN CONNECTIONS, INC.: Jaron P. Blandford Douglas T. Logsdon Lexington, Kentucky BRIEF AND ORAL ARGUMENT FOR APPELLEE, KENTUCKY UNEMPLOYMENT INSURANCE COMMISSION: Patrick B. Shirley Frankfort, Kentucky -10-
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