                    IN THE COURT OF APPEALS OF IOWA

                                   No. 19-1072
                             Filed November 6, 2019


LITTLE HANDS CHILDCARE & PRESCHOOL, INC.,
     Plaintiff-Appellee,

vs.

EMPLOYMENT APPEAL BOARD,
    Defendant-Appellant,

and

AMY A. HARBST BASCHKE,
     Respondent.
________________________________________________________________


      Appeal from the Iowa District Court for Dickinson County, Don E. Courtney,

Judge.

      The Employment Appeal Board appeals the judicial review ruling by the

district court reversing the Board’s determination that the claimant was discharged

for no disqualifying reason. REVERSED AND REMANDED.




      Rick Autry, Des Moines, for appellant.

      A. Eric Neu of Minnich, Comito & Neu, P.C., Carroll, for appellee.



      Considered by Bower, C.J., and Mullins and May, JJ.
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BOWER, Chief Judge.

       The Employment Appeal Board (EAB) determined Amy Harbst Baschke

(“Amy”) was discharged for no qualifying reason from her employment with Little

Hands Childcare & Preschool, Inc. The district court reversed, and the EAB

appeals.1 Because the EAB’s decision was supported by substantial evidence and

was not unreasonable or wholly unjustifiable, the district court erred in reversing

the EAB’s ruling. We reverse and remand for dismissal of the employer’s petition.

       A claimant for unemployment benefits may be disqualified by misconduct.

See Iowa Code § 96.5(2) (2018). Iowa Administrative Code rule 871–24.32(1)(a)

defines “misconduct”:

              “Misconduct” is defined as a deliberate act or omission by a
       worker which constitutes a material breach of the duties and
       obligations arising out of such worker’s contract of employment.
       Misconduct as the term is used in the disqualification provision as
       being limited to conduct evincing such willful or wanton disregard of
       an employer’s interest as is found in deliberate violation or disregard
       of standards of behavior which the employer has the right to expect
       of employees, or in carelessness or negligence of such degree of
       recurrence as to manifest equal culpability, wrongful intent or evil
       design, or to show an intentional and substantial disregard of the
       employer’s interests or of the employee's duties and obligations to
       the employer. On the other hand 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.

See Huntoon v. Iowa Dep’t of Job Servs., 275 N.W.2d 445, 447–48 (Iowa 1979).

Misconduct must be “substantial” to warrant a denial of job insurance benefits.




1
  The employer has waived filing an appellate brief. See White v. Harper, 807 N.W.2d
289, 292 (Iowa Ct. App. 2011) (noting an appellee failing to file a brief does not require
reversal; “we will not search the record for a theory to uphold the decision of the district
court,” and we confine ourselves to the objections raised by the appellant).
                                          3

Newman v. Iowa Dep’t of Job Serv., 351 N.W.2d 806, 808 (Iowa Ct. App. 1984).

Disqualification for a single misconduct incident “must be a deliberate violation or

disregard of standards of behavior which the employer has a right to expect.”

Diggs v. Emp’t Appeal Bd., 478 N.W.2d 432, 434 (Iowa Ct. App. 1991).

       Here, after a telephonic hearing, an administrative law judge (ALJ)

determined Amy was disqualified for misconduct. Amy appealed to the EAB, which

reversed the ALJ’s ruling.

       The EAB wrote:

               We have carefully weighed the credibility of the witnesses and
       the reliability of the evidence considering the applicable factors listed
       above, and the Board’s collective common sense and experience.
       We have found [Amy]’s testimony credible. In particular we find
       credible that she had a sincere belief that there was black mold in
       the infant room, that she based this belief on observation of what
       appeared to her to be black mold, and that she did not initiate contact
       with parents to inform them of the mold. We find credible [Amy]’s
       explanation that one person texted her and she replied mentioning
       the possibility of mold. The employer’s testimony to the contrary is
       based on what a husband said about a conversation [his] wife had.
       It would not be at all surprising that the husband was mixed up about
       a detail like who contacted whom first. We also find credible that
       [Amy] prompted her father to make report to the State over the
       matter. We thus focus on whether [Amy]’s belief in the black mold
       was objectively reasonable, and if her actions taken in furtherance of
       that belief constitute misconduct. Before doing so we note that
       [Amy]’s exhibit was nearly illegible in the form appearing in the record
       and so we did not rely on it in making our decision.
               In general, “good faith errors in judgment or discretion are not
       to be deemed misconduct within the meaning of the statute.” Good
       faith under this standard is not determined by the claimant’s
       subjective understanding. Good faith is measured by an objective
       standard of reasonableness. Otherwise benefits might be paid to
       someone whose “behavior is in fact grounded upon some sincere but
       irrational belief and where the behavior may be properly deemed
       misconduct.” “The key question is what a reasonable person would
       have believed under the circumstances.”
               It is thus not necessary that the claimant actually be right
       about the black mold. All that is necessary is that the claimant had
       an objectively reasonable belief that there was black mold which
                                          4


       might pose a danger to the infants. We find this to be the case. The
       employer took substantial actions to try to mitigate the situation, and
       had it been patently unreasonable to think the claimant was right it is
       unlikely the employer would have done so. Indeed, the trained
       ServPro profession was unable to tell if there was black mold based
       simply on looking at it. Further the history of rain and [Amy]’s credible
       description of her own observations (including olfactory) support that
       the belief was reasonable. Moreover since the children are located
       in the room where the mold was allegedly located, it would not be
       unusual for a parent to be present in that room and thus it is not
       incredible that a parent might have observed what looked like mold
       and called the claimant to inquire. The record is, at a minimum, clear
       that a reasonable person in [Amy]’s position could have reached the
       conclusions she did about the mold.
               Next up we then examine whether [Amy]’s actions in reaction
       to her reasonable belief constitute misconduct. The complaint to the
       state need not detain us long, as that is likely privileged, and in any
       event is a completely reasonable avenue to take.                     The
       communication with parents is less clear. If we thought, as the
       employer asserts, that [Amy] was taking her contact information for
       parents and calling or texting each one with a “sky is falling” message
       about black mold we likely would find misconduct. Such a
       widespread proactive communication would show a lot more
       willfulness, going perhaps beyond concern for the infants and more
       into a perverse attempt to embarrass the employer. But we do not
       perceive that here. Here we have proven by the credible evidence
       only a single instance of [Amy] responding to an inquiry. Perhaps
       she should have waited and taken the issue to management before
       she responded. What she did was give her honest opinion when
       asked when she perhaps should have run it by the employer first.
       We find credible her testimony that she was motivated out of concern
       for the children. Her action of responding when asked, rather than
       talking to her superiors first, falls into the category of an isolated
       instance of a good faith error in judgment or discretion that is not
       misconduct. Turning to the rules the employer alleges to have been
       violated the employer alleges falsification but that requires the
       claimant to know what she said was false and we do not so find. The
       employer also alleges violation of a rule not to contact parents, but
       we have found it was the other way around: she responded when
       contacted by a parent, she did not initiate the contact. Further any
       transgression was at worst a good faith error in judgment. The
       employer has failed to prove misconduct.

(Citations omitted.)
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       The employer sought judicial review in the district court. The district court

determined the issue was “one of credibility between the parties, an exercise that

is squarely within the jurisdiction of the EAB, an issue of fact, not law.” The district

court also determined the EAB’s decision was supported by substantial evidence

and “was not unreasonable, arbitrary, capricious, or an abuse of discretion.” These

conclusions required the district court to affirm the EAB’s decision. See Nance v.

Iowa Dep’t of Revenue, 908 N.W.2d 261, 267 (Iowa 2018) (“‘Because factual

determinations are by law clearly vested in the agency, it follows that application

of the law to the facts is likewise vested by a provision of law in the discretion of

the agency.’ We therefore can only reverse the agency’s application of the law to

the facts if we determine the application was ‘irrational, illogical, or wholly

unjustifiable.’” (citations omitted)). The district court thus erred in reversing the

EAB’s ruling. Because the EAB’s factual findings were supported by substantial

evidence and its application of law to the facts was not unreasonable or

unjustifiable, we reverse the district court and remand for a dismissal of the

employer’s petition.

       REVERSED AND REMANDED.
