                                                                                     02/17/2017




               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                               January 19, 2017 Session

   PAVEMENT RESTORATIONS INC. v. THOMAS E. RALLS, ET AL.

                Appeal from the Chancery Court for Gibson County
                     No. 21757 George R. Ellis, Chancellor
                    ___________________________________

                           No. W2016-01179-COA-R3-CV
                       ___________________________________

Employee’s employment was terminated for smoking in a company truck in violation of
the employer’s rule. Employee’s initial request for unemployment benefits was denied.
The Appeals Tribunal affirmed the denial of benefits, but the Commissioner’s Designee
later reversed, finding that employee’s conduct was exempt from the definition of
misconduct and concluding that the employee was, therefore, not terminated for work-
related misconduct as defined in the unemployment compensation statutes. On appeal to
the chancery court, the trial court concluded that evidence in the record supported the
Commissioner’s Designee’s decision. Discerning no error, we affirm.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

J. STEVEN STAFFORD, P.J.,W.S., delivered the opinion of the court, in which BRANDON
O. GIBSON, and KENNY ARMSTRONG, JJ., joined.

Michael R. Hill, Milan, Tennessee, for the appellant, Pavement Restorations, Inc.

Herbert H. Slatery, III, Attorney General and Reporter; W. Derek Green, Assistant
Attorney General for the appellees, Burns Phillips, Commissioner, Tennessee Department
of Labor & Workforce Development.


                                       OPINION

                                     BACKGROUND

       Defendant/Appellee Thomas E. Ralls (“Mr. Ralls”) was employed as a field
laborer with Pavement Restorations, Inc. (“Pavement Restorations”) from September 28,
2011, until the termination of his employment on March 9, 2015. On March 16, 2015,
Mr. Ralls filed a claim for unemployment benefits. The Defendant/Appellee Tennessee
Department of Labor and Workforce Development (“the Department”) rendered its initial
decision on March 25, 2015, finding that Mr. Ralls had been discharged for work-related
misconduct and was thus not entitled to receive unemployment benefits. On April 1,
2015, Mr. Ralls appealed the decision to the Department’s Appeals Tribunal.

       The hearing officer for the Appeals Tribunal conducted a telephonic hearing on
April 22, 2015. Neither Mr. Ralls nor Pavement Restorations was represented by counsel
during the hearing. Instead, Mr. Ralls appeared on his own behalf, and Pavement
Restorations’ president and co-owner, Jon Hargett, appeared on its behalf.

       Mr. Hargett testified first, explaining that another co-owner1 noticed an employee
smoking in the back of a company crew cab truck on the crew’s return trip from a job site
to the Pavement Restorations shop. According to Mr. Hargett, the co-owner informed
him that “someone in the back seat” was smoking and requested that he “find out who
was in that truck.” Mr. Hargett’s account thereafter is as follows:

       And so, I called the – the foreman on the job that was driving the truck to
       find out who was sitting in the back seat. And so, that was – they were
       about five minutes from the office. When they got here and [Mr. Ralls]
       came inside, I told him I needed to talk to both of them and he came inside
       and said he was embarrassed that he – he had fallen asleep on the way
       home and when he woke up, he just pulled out a cigarette and lit up and had
       only taken a couple of puffs off of it and then threw it out. So, but that’s
       against ou[r] policy. So, due to that and the previous instances of violations
       of things, that I did the separation notice based on that.

Mr. Hargett further clarified that the “previous instances of violations” referenced Mr.
Ralls’s four instances of tardiness in 2014. Mr. Hargett testified that Mr. Ralls was aware
of the rules because they are located in the company handbook given to all employees
and that employees are subject to termination upon even a single violation of any of the
rules. Mr. Hargett added that Pavement Restorations had just discussed the no-smoking
rule during an annual safety meeting only one month prior to the termination Mr. Ralls’s
employment.2

       Mr. Ralls testified that he had received “verbal warnings maybe twice in one
year.” Although Mr. Ralls concedes that he was aware of the company’s no-smoking
policy in company vehicles, Mr. Ralls asserted that “everybody at the company smokes
and they all smoke in the vehicle.” According to Mr. Ralls’s account:

       1
           From what we can discern from the record, the other co-owner appears to be Mr. Hargett’s wife.
       2
           An exhibit in the record indicates that Mr. Ralls attended the February 20, 2015 safety training
meeting.
                                                   -2-
      Well, I had just woken up and that’s just, you know, when you wake up,
      that’s what I – what I did and then I remembered and I threw it out. We
      was almost to the shop because I’m not trying to smoke in the vehicles. I
      was usually awake the whole time, you know, and I wait till we get to
      where we’re going or whatever, but I mean, I don’t think it’s misconduct.

       On April 24, 2015, the Appeals Tribunal issued a written decision affirming the
Department’s decision. On May 14, 2015, Mr. Ralls appealed the decision to the
Commissioner’s Designee. On May 21, 2015, Mr. Hargett signed and returned an
acknowledgment of appeal form wherein he indicated that Pavement Restorations did not
“wish to have another hearing to present additional evidence.” On June 1, 2015, the
Commissioner’s Designee reversed the Appeals Tribunal’s decision, finding the
following:

      The record establishes that [Mr. Ralls] had received one prior warning
      which was issued because [he] was tardy four times in 2014. [Pavement
      Restorations] had recently discussed the prohibition against smoking in
      company vehicles, though [Mr. Ralls] noted that most employees smoked
      and most smoked in the company vehicles, even his supervisor.
      [Mr. Ralls] was in the back seat of company vehicle and fell asleep. When
      he woke up, he lit a cigarette out of habit but immediately realized what he
      had done and threw it out. [Pavement Restorations] learned about [Mr.
      Ralls] lighting the cigarette and discharged him.

Based upon these facts, the Commissioner’s Designee made the following conclusions of
law:

      . . . [T]he Appeals Tribunal incorrectly applied the law under T.C.A. § 50-
      7-303(a)(2).
      There is insufficient evidence that [Mr. Ralls’s] discharge was for
      disqualifying misconduct. The record establishes that one warning had
      been issued to [Mr. Ralls] in his three and a half year employment and the
      warning was not at all related to the infraction leading to . . . his discharge.
      His accidental, habit-based lighting of a cigarette before immediately
      throwing it out is not misconduct in this case. It seems that this infraction
      was an isolated incident without harmful intent.

As a result, the Commissioner’s Designee concluded that Mr. Ralls was eligible for
unemployment benefits under Tennessee Code Annotated section 50-7-303(a)(2).

       Mr. Hargett, on Pavement Restorations’ behalf, filed a petition to rehear the
Commissioner’s Designee’s decision on June 10, 2015, claiming that the “facts [had]
been distorted by [Mr. Ralls]” and describing additional evidence that was not introduced
                                           -3-
at the April 22, 2015 hearing. Specifically, Mr. Hargett asserted that the other co-owner
witnessed Mr. Hargett smoking for a total of 4.7 miles before he disposed of the cigarette.
The Commissioner’s Designee denied Pavement Restorations’ petition on June 16, 2015,
noting that Pavement Restorations “ha[d] not explained why this information, if relevant,
was not presented during the Appeals Tribunal hearing as required” and concluding that
Pavement Restorations was “essentially requesting a second opportunity to meet its
burden of proof.”

       On July 27, 2015, Pavement Restorations timely filed a petition for judicial review
of the agency decision in the Gibson County Chancery Court. The trial court heard oral
argument on Pavement Restorations’ petition on April 18, 2016. By order of May 10,
2016, the trial court affirmed the Commissioner’s Designee’s decision, concluding that
there was evidence in the record to support the findings of the Commissioner’s Designee
and a reasonable basis in law for its decision to award unemployment benefits to Mr.
Ralls. This appeal followed.

                                          ISSUES

       Pavement Restorations raises two issues for review, which we have slightly
restated, as follows:

      1.     Whether the Commissioner’s Designee and the trial court erred in
      ruling that Mr. Ralls was not guilty of misconduct for violating Pavement
      Restorations’ known policy.
      2.     Whether the Commissioner’s Designee acted arbitrarily and
      capriciously by denying Pavement Restorations’ petition to rehear.

                                 STANDARD OF REVIEW

       Tennessee Code Annotated section 50-7-304(i) contains the standards by which
chancery courts are to review administrative decisions involving claims for
unemployment compensation. This Court employs the same standard of review
applicable to the trial court. See Armstrong v. Neel, 725 S.W.2d 953, 955 & n.1 (Tenn.
Ct. App. 1986). Tennessee Code Annotated section 50-7-304(i)(2) provides that:

      The [court] may affirm the decision of the commissioner or the chancellor
      may reverse, remand or modify the decision if the rights of the petitioner
      have been prejudiced because the administrative findings, inferences,
      conclusions or decisions are:

      (A) In violation of constitutional or statutory provisions;
      (B) In excess of the statutory authority of the agency;
      (C) Made upon unlawful procedure;
                                            -4-
      (D) Arbitrary or capricious or characterized by abuse of discretion or
      clearly unwarranted exercise of discretion; or
      (E) Unsupported by evidence that is both substantial and material in the
      light of the entire record.

The issue in this case concerns whether the agency’s decision was supported by
substantial and material evidence. Courts “generally interpret the substantial and material
evidence requirement as requiring ‘something less than a preponderance of the evidence,
but more than a scintilla or glimmer.’” Dickson v. City of Memphis Civ. Serv. Comm’n,
194 S.W.3d 457, 464 (Tenn. Ct. App. 2005) (quoting Wayne Cnty. Tenn. Solid Waste
Disposal Control Bd., 756 S.W.2d 274, 280 (Tenn. Ct. App. 1988) (citations omitted)).
“Substantial evidence is not limited to direct evidence but may also include
circumstantial evidence or the inferences reasonably drawn from direct evidence.”
Wayne Cnty., 756 S.W.2d at 280 (citing Radio Officers Union v. NLRB, 347 U.S. 17,
49, 74 S. Ct. 323, 340, 98 L. Ed. 455 (1954)). “An agency’s factual determination should
be upheld if there exists ‘such relevant evidence as a reasonable mind might accept to
support a rational conclusion and such as to furnish a reasonably sound basis for the
action under consideration.’” Id. at 279 (quoting Southern Ry. v. State Bd. of
Equalization, 682 S.W.2d 196, 199 (Tenn. 1984)). In addition, Tennessee Code
Annotated section 50-7-304(i)(3) provides:

      In determining the substantiality of evidence, the chancellor shall take into
      account whatever in the record fairly detracts from its weight, but the
      chancellor shall not substitute the chancellor’s judgment for that of the
      commissioner’s designee as to the weight of the evidence on questions of
      fact. No decision of the commissioner’s designee shall be reversed,
      remanded or modified by the chancellor, unless for errors that affect the
      merits of the final decision of the commissioner’s designee.

                                       DISCUSSION

       The first issue raised by Pavement Restorations is a question of statutory
construction. Accordingly, we are guided by the following “familiar rules of statutory
construction” as outlined by the Tennessee Supreme Court:

              A court’s primary aim “is to carry out legislative intent without
      broadening or restricting the statute beyond its intended scope.” Lind [v.
      Beaman Dodge, Inc.], 356 S.W.3d [889,] 895 [(Tenn. 2011)]. Courts
      presume that every word in a statute has meaning and purpose and that
      these words “should be given full effect if the obvious intention of the
      General Assembly is not violated by so doing.” Id. Words “must be given
      their natural and ordinary meaning in the context in which they appear and
      in light of the statute's general purpose.” Mills [v. Fulmarque, Inc.], 360
                                           -5-
       S.W.3d [362,] 366 [(Tenn. 2012)]. When the meaning of a statute is clear,
       “[courts] apply the plain meaning without complicating the task” and
       enforce the statute as written. Lind, 356 S.W.3d at 895. At the same time,
       courts “must be circumspect about adding words to a statute that the
       General Assembly did not place there.” Coleman v. State, 341 S.W.3d 221,
       241 (Tenn. 2011).
              We are also cognizant that “statutes ‘in pari materia’—those relating
       to the same subject or having a common purpose—are to be construed
       together, and the construction of one such statute, if doubtful, may be aided
       by considering the words and legislative intent indicated by the language of
       another statute.” Graham v. Caples, 325 S.W.3d 578, 582 (Tenn. 2010)
       (quoting Wilson v. Johnson Cnty., 879 S.W.2d 807, 809 (Tenn. 1994)).
       Courts must adopt the most “reasonable construction which avoids
       statutory conflict and provides for harmonious operation of the laws.”
       Carver v. Citizen Utils. Co., 954 S.W.2d 34, 35 (Tenn. 1997). Even though
       “‘the rules of civil procedure are not statutes, the same rules of statutory
       construction apply.’” Lind, 356 S.W.3d at 895 (alteration in original)
       (quoting Thomas v. Oldfield, 279 S.W.3d 259, 261 (Tenn. 2009)).
              Additionally, “new statutes change pre-existing law only to the
       extent expressly declared.” State v. Dodd, 871 S.W.2d 496, 497
       (Tenn.Crim.App.1993); see also In re Deskins’ Estates, 214 Tenn. 608,
       381 S.W.2d 921, 922 (1964). A statute “‘not repealing directly or by
       implication any previous law, is cumulative to such law’ and ‘repeals by
       implication are not favored.’” McDaniel v. Physicians Mut. Ins. Co., 621
       S.W.2d 391, 394 (Tenn. 1981) (alteration in original) (quoting Hibbett v.
       Pruitt, 162 Tenn. 285, 36 S.W.2d 897, 900 (1931)). Indeed, we presume
       that the Legislature knows the law and makes new laws accordingly. Lee
       Med., Inc. v. Beecher, 312 S.W.3d 515, 527 (Tenn. 2010).


Johnson v. Hopkins, 432 S.W.3d 840, 848 (Tenn. 2013). Essentially, Pavement
Restorations argues that a somewhat recent change in the statute governing
unemployment benefits defining the term “misconduct” negates an earlier adopted
provision in the statute in which certain activities are specifically exempted from the
definition of misconduct. Respectfully, we cannot agree.

       Tennessee Code Annotated section 50-7-303(a)(2)(A) provides that “[a] claimant
shall be disqualified for [unemployment] benefits: . . . [i]f the administrator finds that a
claimant has been discharged from the claimant’s most recent work for misconduct
connected with the claimant’s work[.]” Tenn. Code Ann. § 50-7-303(a)(2)(A) (emphasis
added). A definition of “misconduct” was added to the unemployment compensation
statutes, Tennessee Code Annotated section 50-7-303(b)(3), effective January 1, 2010, by
Chapter 479 of the 2009 Public Acts of Tennessee:
                                         -6-
      (A) “Misconduct” includes, but is not limited to, the following conduct by a
          claimant:

             (1) Willful or wanton disregard of the rights or interests of the
             employer;
             (2) Deliberate violations or disregard of standards of behavior which
             the employer has the right to expect of an employee;
             (3) Carelessness or negligence of such a degree or recurrence to
             show an intentional or substantial disregard of the employer’s
             interest or to manifest equal culpability, wrongful intent or evil
             design;
      (B) In addition to the provisions of subdivision (A), “misconduct” also
      includes any conduct by a claimant involving dishonesty arising out of the
      claimant’s employment that constitutes an essential element of a crime for
      which the claimant was convicted.
      (C) “Misconduct” does not include:

             (1) Inefficiency, or failure to perform well as the result of inability or
             incapacity;
             (2) Inadvertence or ordinary negligence in isolated instances; or
             (3) Good faith errors in judgment or discretion[.]

Clearly, this provision defines misconduct in subdivision (A) then provides certain
specific exemptions from the definition in subdivision (C).

      In 2012, effective September 1, 2012, by Chapter 1050 of the 2012 Public Acts of
Tennessee (“2012 Amendment”), section 50-7-303(b)(3), was amended by deleting
subdivision (A) in its entirety and substituting in its place the following:

       (A) “Misconduct” includes, but is not limited to, the following conduct by
           a claimant:

             (i) Conscious disregard of the rights or interests of the employer;
             (ii) Deliberate violations or disregard of reasonable standards of
             behavior that the employer expects of an employee;
             (iii) Carelessness or negligence of such a degree or recurrence to
             show an intentional or substantial disregard of the employer’s
             interest or to manifest equal culpability, wrongful intent or shows an
             intentional and substantial disregard of the employer’s interests or of
             the employee’s duties and obligations to the employee’s employer;
             (iv) Deliberate disregard of a written attendance policy and the
             discharge is in compliance with such policy;
                                           -7-
             (v) A knowing violation of a regulation of this state by an employee
             of an employer licensed by this state, which violation would cause
             the employer to be sanctioned or have the employer’s license
             revoked or suspended by this state; or
             (vi) A violation of an employer’s rule, unless the claimant can
             demonstrate that:

                    (a) The claimant did not know, and could not reasonably
                    know, of the rule’s requirements; or
                    (b) The rule is unlawful or not reasonably related to the job
                    environment and performance[.]

Essentially, the 2012 Amendment reworded the existing provisions and added subparts
(iv) through (vi) to the definition of misconduct in subdivision (A). Significantly, the
provision exempting certain conduct from the definition of misconduct remained intact,
albeit moved to subdivision (D). For reference, the current version of section 50-7-
303(b)(3) reads, in relevant part:

      (A) “Misconduct” includes, but is not limited to, the following conduct
          by a claimant:

             (i) Conscious disregard of the rights or interests of the employer;
             (ii) Deliberate violations or disregard of reasonable standards of
             behavior that the employer expects of an employee;
             (iii) Carelessness or negligence of such a degree or recurrence to
             show an intentional or substantial disregard of the employer’s
             interest or to manifest equal culpability, wrongful intent or shows an
             intentional and substantial disregard of the employer’s interests or of
             the employee’s duties and obligations to the employee’s employer;
             (iv) Deliberate disregard of a written attendance policy and the
             discharge is in compliance with such policy;
             (v) A knowing violation of a regulation of this state by an employee
             of an employer licensed by this state, which violation would cause
             the employer to be sanctioned or have the employer’s license
             revoked or suspended by this state; or
             (vi) A violation of an employer’s rule, unless the claimant can
             demonstrate that:

                    (a) The claimant did not know, and could not reasonably
                    know, of the rule’s requirements; or
                    (b) The rule is unlawful or not reasonably related to the
                    job environment and performance;

                                          -8-
                                    * *            *
       (D) “Misconduct” does not include:

              (1) Inefficiency, or failure to perform well as the result of inability or
              incapacity;
              (2) Inadvertence or ordinary negligence in isolated instances; or
              (3) Good faith errors in judgment or discretion[.]

(emphasis added). Accordingly, the current version of this statute again defines
misconduct in subdivision (A) while providing certain specific exemptions from the
definition in subdivision (D).

        Here, Pavement Restorations somewhat confusingly argues that, in relying on
subdivision (D)’s exemptions, the Commissioner’s Designee “appears to analyze the
definition of misconduct prior to the enactment of the statutory definition of misconduct”
at issue in this case. We simply cannot agree. Pavement Restorations’ interpretation of
section 50-7-303(b)(3) essentially requires that this Court define misconduct pursuant to
subdivision (A) to the complete exclusion of the language provided in subdivision (D).
The current statute in effect both at the time of the termination of Mr. Ralls’s
employment and this appeal provides both a provision defining misconduct as, inter alia,
a violation of an employer’s rules and an exemption from the definition of misconduct
when the complained-of misconduct resulted from, inter alia, “[i]nadvertence or ordinary
negligence in isolated circumstances.” Tenn. Code Ann. § 50-7-303(b)(3). The Tennessee
Supreme Court has directed that courts must “construe all provisions of [a] statute
consistently and reasonably, and . . . give effect to every sentence, clause, and word in the
statute.” Lee Med., Inc. v. Beecher, 312 S.W.3d 515, 530 (Tenn. 2010). Indeed, the
Tennessee Supreme Court has held that “it is improper to take a word or a few words
from its context and, with them isolated, attempt to determine their meaning.” Eastman
Chem. Co. v. Johnson, 151 S.W.3d 503 (Tenn. 2004). Moreover, the more recent
amendment of subsection (A) does not indicate that we should ignore the exemption to
the definition of misconduct simply because it was enacted earlier; as previously
discussed, “‘new statutes change pre-existing law only to the extent expressly declared.’”
Johnson, 432 S.W.3d at 848 (quoting Dodd, 871 S.W.2d 497). As such, we cannot read
subdivision (A) in isolation; it must be construed given the language of the entire section.

       Furthermore, section 50-7-303(b)(3)(A), defining what misconduct “includes, but
is not limited to, the following conduct[,]” indicates that the provided list is non-
exhaustive and may include any other conduct not specifically mentioned in the statute.
Section 50-7-303(b)(3)(A), therefore, contemplates that the definition of misconduct may
encompass a broader scope than expressly stated. Section 50-7-303(b)(3)(D), however,
provides for a very narrow and limited list of what actions are specifically exempt from
the definition of misconduct, allowing three—and only three—exemptions from the rule.
Thus, it appears that section 50-7-303(b)(3)(D) is the more narrow provision compared to
                                           -9-
section 50-7-303(b)(3)(A). “Where a conflict is presented . . ., a more specific statutory
provision takes precedence over a more general provision.” Graham v. Caples, 325
S.W.3d 578, 582 (Tenn. 2010) (citing Arnwine v. Union Cnty. Bd. of Educ., 120 S.W.3d
804, 809 (Tenn. 2003)). As this Court has explained:

       The reason and philosophy of the rule [giving effect to specific statutory
       provisions over general ones] is that where the mind of the legislature has
       been turned to the details of a subject and they have acted upon it, a statute
       treating the subject in a general manner should not be construed as
       intended to affect the more particular provision.

Lambert v. Invacare Corp., 985 S.W.2d 446, 448 (Tenn. Ct. App. 1998) (quoting
Woodroof v. City of Nashville, 183 Tenn. 483, 192 S.W.2d 1013, 1015 (Tenn. 1946))
(emphasis added). As a result, we, likewise, cannot ignore the more specific statutory
section, section 50-7-303(b)(3)(D), as Pavement Restorations suggests; rather, the general
provision providing for the definition of misconduct must give way to the more specific
provision providing for the exemptions.

       Although Pavement Restorations argues that previous opinions by this Court
halted the analysis of whether a finding of misconduct under subdivision (A)(iv) justifies
the denial of unemployment benefits, none of the cases cited by Pavement Restorations
can be fairly read to hold that the analysis necessarily ends once a violation of an
employer’s rule has been found. See Sanders v. Comm’r of Dep’t of Labor &
Workforce Dev., No. W2015-00796-COA-R3-CV, 2015 WL 5242924 (Tenn. Ct. App.
Sept. 8, 2015) (concluding that substantial and material evidence supported the
Commissioner’s Designee’s finding that claimant committed work-related misconduct
when she invited another employee to “take [the argument] outside,” constituting a
physical threat or invitation to physical violence in violation of the employer’s
threatening behavior policy)3; Sparkman v. Phillips, No. M2013-01235-COA-R3-CV,
2014 WL 3058443, at *6 (Tenn. Ct. App. July 7, 2014) (concluding that claimant was
terminated for work-related misconduct when she showed up to work smelling of alcohol
and refused to take an alcohol test despite having received a warning that she would be
terminated if she showed up to work smelling of alcohol again and refused to take an
alcohol test); Newman v. Davis, No. W2013-00696-COA-R3-CV, 2014 WL 507100, at
*10 (Tenn. Ct. App. Feb. 7, 2014) (concluding that, based on case law prior to the
statutory enactment of misconduct in 2010, the finding of misconduct was sufficiently
supported in the record when claimant failed to provide medical documentation excusing
her prolonged absence from work even after receiving reminders by the employer that

       3
           Pavement Restorations appears to have ignored the fact that the Commissioner’s Designee
acknowledged in Sanders that, although “a good faith error in judgment or discretion is not work
connected misconduct [pursuant to T.C.A. § 50-7-303(b)(3),]” this exemption did not apply in this
particular case. Sanders, 2015 WL 5242924, at *2.
                                              - 10 -
she would be terminated based on her failure to do so); Hale v. Neeley, 335 S.W.3d 599,
603 (Tenn. Ct. App. 2010), perm. app. denied (Apr. 13, 2011) (concluding that, based on
case law prior to the statutory enactment of the definition of misconduct, claimant was
discharged for work-related misconduct because he “breach[ed] of a duty owed to the
employer, as distinguished from society in general[,]” by failing to report his conviction
under a criminal drug statute to the employer within the requisite three day window).4
From our review, the question of whether a section 50-7-303(b)(3)(D) exemption applied
to negate the claim of misconduct was simply not asserted or addressed by the parties in
any of these cases. These Opinions are, therefore, not instructive on the issue before this
Court.

        Consequently, in order to disqualify Mr. Ralls from unemployment benefits, the
fact-finder must find (1) that Mr. Ralls’s conduct qualifies as misconduct under the
statute and (2) that Mr. Ralls’s conduct is not nevertheless exempt from the definition of
misconduct. Here, it is undisputed that Mr. Ralls lit a cigarette and smoked in the
company truck, constituting a violation of the employer’s rule. We, therefore, proceed to
the next part of the analysis: whether Mr. Ralls’s conduct is nevertheless exempt as
contemplated under section 50-7-303(b)(3)(D). In order to resolve the second prong, we
must determine whether substantial and material evidence supports the Commissioner’s
Designee’s finding that Mr. Ralls’s action is exempt from the definition of misconduct so
as to qualify him for unemployment compensation. In this case, we cannot conclude that
the Commissioner’s Designee erred in finding that Mr. Ralls unintentionally and out-of-
habit lit a cigarette when he woke up from a nap but almost immediately threw it out. At
the Appeals Tribunal hearing, Mr. Hargett recalled that Mr. Ralls informed him that, on
the trip back to the Pavement Restorations office, Mr. Ralls had fallen asleep, and, upon
waking up, lit a cigarette, took “a couple of puffs,” and then threw it out. Indeed, Mr.
Ralls also testified that after he woke up, he lit a cigarette before “remember[ing] and . . .
thr[owing] it out.” “Findings of fact made by the agency may not be reviewed de novo
by the trial or appellate courts, and courts should not substitute their judgment for that of
the agency as to the weight of the evidence on factual issues.” Sanifill of Tenn., Inc. v.
Tenn. Solid Waste Disposal Control Bd., 907 S.W.2d 807, 810 (Tenn. 1995) (Southern
Ry. Co. v. Tenn. Bd. of Equalization, 682 S.W.2d 196, 199 (Tenn. 1984)). This Court is
not permitted to reweigh the evidence or substitute our judgment for that of the
administrative agency. Miller v. Tenn. Bd. of Nursing, 256 S.W.3d 225, 229 (Tenn. Ct.
App. 2007). No evidence was presented showing that Mr. Ralls had violated the same
rule in the past or that he had been given a warning not to smoke but deliberately ignored
the warning. It appears from the record that Mr. Ralls’s violation of the no-smoking
policy was therefore an isolated incident, and his “previous instances of violations”
referred to an unrelated matter of attendance. Given that the only evidence presented at

        4
          This Court also acknowledged that “an employee’s off-duty drug use (or even an off-duty arrest
for drug possession) is not necessarily a breach of duty to the employer, even if the employer has a policy
prohibiting the use of drugs on or off-duty.” Hale, 335 S.W.3d at 602.
                                                  - 11 -
the telephonic hearing was the testimony indicating that Mr. Ralls inadvertently lit the
cigarette after waking from a nap,5 and our limited review, we must conclude that the
Commissioner’s Designee did not err in finding that this action constitutes an “isolated
incident without harmful intent.” Accordingly, there is substantial and material evidence
to support the Commissioner’s Designee’s finding that Mr. Ralls’s action constitutes
“[i]nadvertence or ordinary negligence in isolated instances” as it appears under 50-7-
303(b)(3)(D)(2).

       Pavement Restorations’ next issue concerns whether the Commissioner’s
Designee’s denial of its petition to rehear was arbitrary and capricious. Although the trial
court did not explicitly rule on this issue, its order implicitly found that the
Commissioner’s Designee’s denial of Pavement Restorations’ petition to rehear was
proper. We will therefore proceed to review this issue.

       “The arbitrary or capricious standard requires a court to determine if the agency
made a ‘clear error in judgment.’” A-1 Waste, LLC v. Madison Cnty. Mun. Solid Waste
Planning Region Bd., No. M2013-02265-COA-R3-CV, 2015 WL 4594160, at *10
(Tenn. Ct. App. July 30, 2015) (quoting Jackson Mobilphone Co. v. Tenn. Pub. Serv.
Comm’n, 876 S.W.2d 106, 110–11 (Tenn. Ct. App. 1993)). A decision is arbitrary if it is
“not based on any course of reasoning or exercise of judgment” or if it “disregards the
facts or circumstances of the case without some basis that would lead a reasonable person
to reach the same conclusion.” Jackson Mobilphone Co., 876 S.W.2d at 111. “The
refusal . . . to grant a rehearing will not be found to be arbitrary or capricious unless the
appellant can ‘show specifically why [the appellant] was unable to procure the “newly
discovered” evidence and that [the appellant] exercised due diligence in attempting to
obtain the evidence prior to’ the hearing.” Bridges v. Culpepper, No. 02A01-9704-CH-
00074, 1997 WL 589242, at *4 (Tenn. Ct. App. Sept. 24, 1997) (quoting Brown v. Weik,
725 S.W.2d 938, 947 (Tenn. App. Oct. 3, 1983)).

       According to Pavement Restorations, the Commissioner’s Designee’s decision
advised it of the right to petition for a rehearing, requiring only that Pavement
Restorations explain why the claim should be reconsidered and include any new or
additional evidence that Pavement Restorations wished to offer. Pavement Restorations
argues that the decision did not inform Pavement Restorations that it needed to explain
why the information was not presented during the Appeals Tribunal hearing. Pavement
Restorations further argues that it “merely” followed the instructions it received from the
Commissioner’s Designee’s opinion; however, the Commissioner’s Designee denied
reconsideration of Pavement Restorations’ offer of additional evidence. Regardless of
whether Pavement Restorations was on notice of the requirement that it present evidence
regarding why it was “unable to procure the ‘newly discovered’ [or additional] evidence”

       5
          As discussed, infra, Pavement Restorations attempts to introduce additional evidence not
presented at the telephonic hearing regarding the duration of Mr. Ralls’s violation.
                                              - 12 -
at the time it filed its petition for rehearing, Bridges, 1997 WL 589242, at *4, the
Commissioner’s Designee’s decision denying the rehearing clearly notified Pavement
Restorations of its duty to show why it did not present this evidence at the earlier
hearings. Even at this late date, however, after review in the trial court and this appeal,
Pavements Restorations has still submitted no evidence to this Court showing why it did
not present this evidence during any of the prior hearings.

        Moreover, we note that the “additional” evidence that Pavement Restorations
wished to introduce is not newly discovered evidence. Pavement Restorations does not
dispute that the evidence—an eyewitness account of Mr. Ralls’s purported violation—
was within Pavement Restorations’ exclusive control throughout the proceedings below.6
Rather, Pavement Restorations argues that it should be allowed to introduce additional
evidence to rebut the purportedly “distorted” evidence presented by Mr. Ralls. As
previously discussed, however, Tennessee law requires that the appellant “show
specifically why [the appellant] was unable to procure the newly discovered evidence and
that [the appellant] exercised due diligence in attempting to obtain the evidence prior to
the hearing.” Bridges, 1997 WL 589242, at *4 (internal quotations omitted). Pavement
Restorations has cited no law, nor has our research revealed any, in which this
requirement was waived simply because the party seeking rehearing complains that the
evidence at the prior hearing was “distorted.” Thus, Pavement Restorations’ contention
otherwise is, respectfully, unavailing.

        Despite Pavement Restorations’ explanation that it, through its petition to rehear,
only wants to correct Mr. Ralls’s “distort[ion]” of the facts relating to how long he had
been smoking, our review of the record reveals that Pavement Restorations had multiple
opportunities to present evidence to refute Mr. Ralls’s version of events before, during,
and after the Appeals Tribunal hearing. First, prior to the Appeals Tribunal Hearing, both
Pavement Restorations and Mr. Ralls received a document labeled “Appeals Tribunal
Pre-Hearing Instructions,” wherein each party was allowed to “bring witnesses who have
first-hand knowledge of the issue.” No reason was ever given to explain why the co-
owner who purportedly witnessed the intentional smoking was absent from the Appeals
Tribunal hearing. In addition, the testimony of Mr. Hargett, as Pavement Restorations’
representative, included discussion of his conversation with Mr. Ralls, reciting that “he
just pulled out a cigarette and lit up and had only taken a couple of puffs off of it and then
threw it out” and that it was “against [Pavement Restorations’] policy.” During his own
testimony, Mr. Hargett had the opportunity to correct any misconception of the evidence


       6
          The evidence Pavement Restorations wishes to introduce is somewhat contradictory to Mr.
Hargett’s own testimony at the Appeals Tribunal hearing. At the hearing, Mr. Hargett testified that the
co-owner saw “someone” smoking and requested that Mr. Hargett find out who was in the truck. The
“additional” information in the petition to rehear stated that the co-owner “recognized Mr. Ralls as the
employee smoking in our company vehicle and called our office to notify me of the infraction.”
                                                - 13 -
to prove that Mr. Ralls had, in fact, smoked longer than he alleged. However, at no time
during Mr. Hargett’s testimony did he attempt to correct this “distorted fact.”

        Mr. Hargett again failed to present the omitted evidence after Mr. Ralls testified to
the hearing officer. After Mr. Ralls’s testimony wherein he purportedly “distorted” the
facts, the hearing officer allowed Mr. Hargett to ask Mr. Ralls any questions regarding
his testimony. Mr. Hargett, however, responded that he did not have any questions for
Mr. Ralls.

       Moreover, after the Appeals Tribunal hearing and Mr. Ralls’s appeal to the
Commissioner’s Designee on May 14, 2015, Pavement Restorations failed to take
advantage of another opportunity to correct the record when Mr. Hargett, on behalf of
Pavement Restorations, signed and returned an acknowledgment of appeal form wherein
he indicated that Pavement Restorations did not “wish to have another hearing to present
additional evidence.” Accordingly, the Commissioner’s Designee made its decision based
on the available evidence in the record.

         Pavement Restorations asserts that the need for the additional evidence results
from the fact that it was not aware of the alleged “distortion” until after the
Commissioner’s Designer’s decision. This contention is simply implausible. As noted
above, Pavement Restorations was given ample notice of the agency proceedings, and its
representative fully participated in the Appeals Tribunal hearing in which Mr. Ralls
allegedly wove his distorted story. As such, there can be no dispute that Pavement
Restorations was on notice of the evidence presented during that hearing. We therefore
determine that the Commissioner’s Designee did not act arbitrarily or capriciously when
it denied Pavement Restorations’ petition to rehear based on Pavement Restorations’ own
failure to fully present the omitted evidence in its case in the first instance.

                                       CONCLUSION

       Based on the forgoing, the judgment of the Gibson County Chancery Court is
affirmed, and this cause is remanded to the trial court for all further proceedings as may
be necessary and are consistent with this Opinion. Costs of this appeal are taxed to
Pavement Restorations, Inc., and its surety, for which execution may issue if necessary.



                                                    _________________________________
                                                    J. STEVEN STAFFORD, JUDGE




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