Published by the Law Offices of Manbir S. Chowdhary, Newport Beach, CA

EDD Denial of Unemployment Insurance Benefits Due to Misconduct

You’ve been dismissed for alleged misconduct arising from a violation of company policy/procedures. Your former employer is now challenging your right to receive Unemployment Benefits, and you receive a Notice from the EDD stating that you’ve been denied benefits.

Please note that you have 20 days (including weekends and holidays) from the EDD’s Notice of Determination to request a hearing before an Administrative Law Judge (ALJ) who is employed by the California Unemployment Insurance Appeals Board (CUIAB).

What happens at the Hearing?

The ALJ will explain the hearing process, request documentary evidence and/or other exhibits, and question parties and witnesses under oath. The proceeding will be recorded.

The ALJ will give you, or your attorney, an opportunity to:

a) Present all necessary witnesses, exhibits, and declarations that support your case;

b) Question the opposing party (employer) and its witnesses; and,

c) Respond to testimony and evidence presented by the opposing party.

The Law

Unemployment benefits will be denied by the EDD if an employee has been discharged for misconduct connected with his or her most recent work (Unemployment Insurance Code, Section 1256).

At the hearing, the issue before the ALJ is whether the former employee’s actions rose to the level of misconduct, as required by law, to deny unemployment benefits. Employees should note that this analysis is largely fact-specific and subjective.

What Constitutes Employee Misconduct for a Denial of Unemployment Benefits?

The leading case on the definition of misconduct within Unemployment Insurance Code, Section 1256, is Maywood Glass Co. v. Stewart, 170 Cal. App. 2d 719 (1959). The Maywood case held that “misconduct”, as used in section 1256, “is a substantial breach by the employee of an important duty or obligation owed to the employer, willful or wanton in character, and tending to injure the employer”.

The test for misconduct is essentially volitional. “The conduct may be harmful to the employer’s interests and justify the employee’s discharge; nevertheless, it evokes the disqualification for unemployment insurance benefits only if it is willful, wanton or equally culpable.” Jacobs v. California Unemployment Ins. Appeals Bd., 25 Cal. App. 3d.

Actions that do NOT Constitute Misconduct

The Maywood court drew a critical distinction in its analysis of employee misconduct: “Mere inefficiency, unsatisfactory conduct, failure in good performance as the result of inability or incapacity, inadvertencies or ordinary negligence in isolated instances, or good faith errors in judgment or discretion are NOT to be deemed “misconduct” within the meaning of the statute.”

This means that common reasons for termination such as unsatisfactory conduct, inefficiency, ordinary negligence/inadvertence, and poor work performance, are typically not construed as misconduct for purposes of denying unemployment benefits.

Cases in Which Misconduct Has Been Found

Examples of misconduct in which the denial of unemployment benefits have been upheld include: fraud against the employer, theft of company property, fraudulent time-card entry, bringing a weapon to work, excessive absenteeism/tardiness, setting fire to the employer’s premises, and physical assault against patrons or co-workers.

A comprehensive history of the CUIAB Precedent Decisions regarding misconduct can be found here.

Did the Employee have “good cause” for failure to comply with Employer’s rules/policies?

During the hearing, employers, or their representatives, often rely on the CUIAB’s Precedent Decision P-B-190, which states, “An employee’s deliberate disobedience of a lawful and reasonable instruction of the employer, related to the employer’s business, is misconduct”.

The employer will also present evidence of disciplinary actions, write-ups, and offer oral testimony (from HR, co-workers, or other personnel) to show that the employee willfully violated company protocol as delineated in written policies and/or handbooks.

However, the California Supreme Court has held that an employee’s refusal to comply with a reasonable rule or direction is NOT misconduct if the employee has good cause for his or her action(s). The employee has the burden of proving good cause exists for the refusal to comply. This is where the analysis becomes fact-specific and subjective.

An employee who fails or refuses to comply with a reasonable rule or direction, and establishes good cause for doing so, has at most made a good faith error in judgment, not amounting to misconduct.  Amador v. California Unemployment Insurance Appeals Board, 35 Cal. 3d 671 (1984).

Examples where Administrative Law Judges have accepted arguments for good cause for violating an employer’s policy include: 1) an employee’s concern for his/her health, safety, or morals, 2) transportation difficulties (to negate tardiness/absenteeism); and, 3) an employee’s good faith error in judgment by using lewd language where there was a history of “dark humor” between co-workers.

Due to the highly fact-based and subjective nature of what constitutes misconduct in order deny unemployment benefits, it is prudent to seek competent legal counsel as soon as you receive the Notice of Determination from the EDD. Contact the Law Offices of Manbir S. Chowdhary, at 949.260.2025, for a free consultation regarding your rights.