By Debra H. Dawahare

The Kentucky Supreme Court usually does not consider unemployment cases, but made an exception in the recent matter of Kentucky Unemployment Insurance Commission et al v. Diana Cecil, 2012 WL 5273867 (Ky).  Claimant Cecil, who worked for the Louisville Water Company (“LWC”) from 2001 through 2005, was often late to work.  LWC had a written Code of Conduct that stated, among other things, that employees were to maintain an acceptable attendance and punctuality record as a condition of employment.  LWC also had a progressive disciplinary system, which its handbook described.  Under LWC’s disciplinary system, an employee who committed three violations of the Code of Conduct within any rotating twenty-four month period was placed on a one-day paid “decision making leave” after which the employee could either resign or sign a last chance agreement that required the employee to admit the violations in question, commit to improvement, and acknowledge that further violations could result in termination.

During 2004, LWC repeatedly counseled Cecil about tardiness.  In late 2005, LWC suspended her and offered her the last chance agreement.  Cecil said that she did not agree she had been tardy on all of the occasions LWC cited.  She requested to modify the last chance agreement or provide a written denial of chronic tardiness.  LWC informed Cecil that the statements in the last chance agreement would not be modified, and that if she did not sign the document she would be fired.  Cecil refused to sign the document and was fired.  LWC stated it would have not have fired her had she signed the last chance agreement.

The Kentucky Unemployment Insurance Commission (“KUIC”) denied Cecil’s application for unemployment benefits.  The KUIC awarded benefits following a referee hearing, but LWC was able to persuade the KUIC to reverse that decision on administrative appeal.  The Jefferson Circuit Court affirmed the denial of benefits, but the Court of Appeals reversed, stating “we cannot find that it was reasonable to force Cecil to choose between being terminated or signing a statement containing admissions she believed to be false.”  The Kentucky Supreme Court reversed the Court of Appeals, concluding that Cecil was disqualified from receiving benefits.  The Supreme Court reasoned that although “Cecil could have kept her job by signing the agreement, this is a red herring.  Cecil was not discharged for refusing to sign – she was discharged ‘for repeated code violations regarding attendance’”.  Thus, said the Supreme Court, the previous conclusions that Cecil was terminated for refusing to sign the last chance agreement were in error, as was the KUIC’s ultimate conclusion that Cecil was disqualified from receiving benefits for refusing to obey reasonable work instructions.  The Kentucky Supreme Court decided that “Cecil was discharged for tardiness,” which KRS 341.370(6) specifically lists as disqualifying misconduct, unless the claimant can show good cause. 

With the Cecil decision, the Kentucky Supreme Court’s specifically abrogated longstanding case law holding that disqualifying misconduct, for the purposes of KRS 341.370, requires a showing of bad faith or culpability in the form of willful or wanton conduct.  The Cecil decision is helpful for employers contesting unemployment claims because it lowers the standard for proving disqualifying misconduct.  Employers should be mindful of KRS 341.370’s definitions of disqualifying misconduct, and should ensure that they have concrete evidence establishing violations of consistently enforced policies in order to prove discharge for misconduct.