Thursday, August 25, 2011

Supervisor who is terminated for asking subordinates for a loan is not entitled to unemployment compensation

In Weingard v. Unemployment Compensation Board of Review, No.: 2729 C.D. 2010 (Pa. Cmwlth. 8/10/2011), the Commonwealth Court held, in a matter of first impression, that a supervisor who is fired for requesting a substantial loan from a subordinate is not entitled to receive unemployment compensation, even if the employer does not have a specific rule prohibiting the solicitation of loans in the workplace. The Court held that such a request constitutes a disregard of the standards of behavior an employer has a right to expect from its employees.

In this case, Weingard learned that a co-worker was selling a motorcycle for $1,000.00 and he wanted to buy it. But, due to his poor credit history, Weingard knew that he would be unable to obtain a loan from a bank. So, Weingard asked his supervisor for a $1,000.00 loan and was turned down. Weingard then asked five other employees - at least one of whom was Weingard's subordinate - if he could borrow the $1,000.00 and was similarly rejected. One of the employees who was supervised by Weingard complained to Weingard's supervisor about Weingard's request to borrow money, indicating that it made her uncomfortable. The employer conducted a three-week investigation into the matter, after which it terminated Weingard for his requests to borrow money, deeming such an action to be "coercive."

The employer's handbook did not contain any specific rules regarding the lending or borrowing of money between supervisors and subordinates, but did prohibit employees from "operating or acting in any manner that is contrary to the best interests of Employer."

Weingard then filed for unemployment compensation benefits. The Unemployment Compensation Referee granted benefits to Weingard, finding that the employer had failed to meet its burden to establish the existence of a rule regarding the lending or borrowing of money between supervisors and subordinates, and that a violation of that rule could result in termination.

On appeal, the Unemployment Compensation Board of Review reversed, holding that the employer had in fact established the existence of a policy that prohibited Weingard from acting in a manner that was contrary to the employer's best interests. The Board thus denied Weingard unemployment compensation benefits.

The Commonwealth Court affirmed the decision of the Board that denied Weingard unemployment compensation benefits, but did so on different grounds. The Court found that employer's general policy that prohibited employees from "operating or acting in any manner that is contrary to the best interests of Employer," was "so general as to be meaningless to this appeal." The Court held that the Board committed error when it found that Weingard had knowingly violated this vague standard because "[Weingard] testified that he did not know there was a policy prohibiting him from soliciting loans from co-workers, and he did not believe that asking another employee for a loan harmed Employer's interest in any way. Employer provided no evidence to the contrary." Thus, the Court found the Board's conclusion that Weingard had committed willful misconduct by knowingly violating a work rule, was erroneous.

The Court nevertheless determined that Weingard was ineligible to receive unemployment compensation benefits. Examining for the first time whether a supervisor's request of a substantial loan from a subordinate constitutes willful misconduct, the Court found that in asking to borrow $1,000.00 from a subordinate, "[Weingard] used his position of authority in an unseemly way. He may not have used overt threats or direct coercion, but that fact is not dispositive of the issue. [Weingard] held the upper hand in the relationship with the employees he supervised. . . There is an unspoken, and implicit, coercion when a boss makes a request for a significant loan of an employee under his supervision." Therefore, the Court concluded that while Weingard may not have violated a specific written rule of his employer regarding money-lending between employees, his conduct "violated the standards of behavior his Employer had a right to expect," from its employees, which constituted willful misconduct that disqualified him from receiving unemployment compensation benefits.

The moral of the story? If you need a loan, go to a bank.

You can read the WeingardCourt's full opinion here: