                                          No. 88-242
                        I P J THE SUPREME COURT OF THE STATE OF MONTANA

                                             1988




ASHLAND OIL, INC., d/b/a SUPERAMERICA,
                          Petitioner and Appellant,
            -vs-
DEPARTMENT OF LABOR AND INDUSTRY AND
J,ABOR APPEALS BOARD, Agencies of the
State of Montana, and CHARLES HYATT,
                          Respondents and Respondents.




APPEAL FROM:             District Court of the First Judicial District,
                         In and for the County of Lewis & Clark,
                         The Honorable Thomas Honzel, J~tdgepresiding.

COUNSEL OF RECORD:
            For Appellant:
                         Francis X. Clinch; Jardine, Stephenson, Rlewett and
                         Weaver, Great Falls, Montana.
            For Respondent :
                 i-
       3-
                 L       Ann Smoyer; Smoyer, Vaznelis & Berry, Helena, Montana
       4                 Karl Nagel, Dept. of Labor G Industry, Felena, Montana
                 -.




  -
  LL
       in     c , c,>                        Submitted on Briefs:   Sept. 9, 1988
                                               Decided: December 5, 1988




                                             Clerk
Mr. Justice 11. C. Gulbrandson delj-vered the Opinion of the
Court.

      Appellant Ashland Oil, Inc.       (Ashland) appeals a
decision from the First Judicial District, Lewis and Clark
County, awarding unemployment benefits to the respondent on
the basis that the respondent's actions did not constitute
misconduct within the meaning of the law. We reverse.
      Charles Hyatt was employed by Ashland as an assistant
manager at its SuperAmerica store in Helena, Montana, from
March 1, 1986 to February 12, 1987. One of Hyatt's duties as
assistant manager included the recording of non-sufficient
fund checks (NSF) returned by banks.         On two separate
occasions in or around June of 1986, Hyatt notified the store
manager when other employees had checks returned.
      In August of 1986, Hyatt ordered some sporting goods
equipment for his personal use through one of the store's
suppliers. This was an accepted practice, and employees who
took advantage of the practice were expected to pay for the
merchandise when it arrived.   However, Hyatt did not have
sufficient funds to pay for the equipment he ordered, so the
amount was billed to the store.     This amount went unpaid
until an internal audit in December, 1986 revealed the fact
Hyatt still had not paid for the goods. The store required
Hyatt to pay for the goods and gave him a written warning.
      In November of 1986, Hyatt's bank began returning his
personal checks because of insufficient funds in his account.
Between November 13, 1986 and. the end of December, 1986,
Hyatt issued four checks to Ashland. These NSF checks were
written to pay for gas and merchandise and to obtain cash.
Hyatt recorded the amounts of these checks on the NSF ledger
he maintained for his employer. However, the ledger did not
list the name of the person issuing the check.     Hyatt was
notified by both his bank and Check-Rite, Ashland's check
collection agent, of these returned checks.    These checks
amounting to $220 were finally paid in late December, 1986.
      From December 28, 1986 to February 5, 1987, Hyatt wrote
seven more NSF checks to his employer, amounting to a total
of approximately $119.   Both the bank and Check-Rite again
notified Hyatt of each returned NSF check. Check-Rite set up
a payment schedule to help Hyatt repay the amounts, but he
failed to meet this schedule.     Each Friday he promised to
come in the next week and pay the amount owing. Finally on
February 12, 1987, Check-Rite notified Hyatt's supervisors of
their problem with him.   When Hyatt came in to pick up his
check that day, he was confronted with the information. He
informed his supervisors that he was on his way to pay for
the checks. When he returned from Check-Rite, he met with
his supervisors. At the conclusion of that meeting, Hyatt's
employment was terminated.
      Hyatt filed for unemployment benefits, but his employer
objected to the payment of said benefits.        Following a
hearing on April 6, 1987, the Appeals Referee found Hyatt's
conduct did not constitute misconduct within the meaning of
the law and awarded benefits. The Board of Labor Appeals and
the District Court both affirmed the findings.
      Ashland raises the following issues for our review:
      1. Did the District Court err in determining whether
Hyatt committed misconduct on the basis of his employer's
conduct?
      2. Did the District Court err in holding that Hyatt's
issuance of NSF checks to his employer did not constitute
misconduct, even though his conduct violated a Montana
criminal statute?
      3.   Did the District Court err in holding that Hyatt's
admitted violation of the policy of his employer did not.
constitute misconduct?
      4. Did the District Court err in holding that Hyatt
did not breach his fiduciary duty by issuing NSF checks to
his employer?
      Section 39-51-102, MCA, contains the declaration of
state public policy with regard to unemployment benefits. In
subsection (3) of the statute, the legislature provides that.
unemployment benefits are "[tlo be used for the benefit of
persons unemployed through no fault of their own. " Section
39-51-102(3), MCA.  The code further provides employees m : '
                                                         a,
be disqualified for unemployment benefits when their
discharge is     due    to   "misconduct connected with the
individual's     work     or    affecting  the    individual's
employment.  .. " Section 39-51-2303(1), MCA.    Misconduct is
defined in § 24.11.418, A.R.M. as:
           Conduct on the part of the employee
           evincing such willful or wanton disregard
           of an employer's interest as is found in
           deliberate violations or disregard of
           standards of behavior which the employer
           has the right to expect of his employee,
           or in carelessness or negligence of such
           degree or recurrence as to manifest equal
           culpability, wrongful intent or evil
           design, or to show an intentional or
           substantial disregard of the employer's
           interest or of the employee's duties and
           obligations to his employer.         Mere
           inefficiency,   unsatisfactory   conduct,
           failure in good performance as a result
           of inability or incapacity, inadvertences
           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.   (Gaunce v. Board of Labor
           Appeals, 164 Mont. 442, 542 P.2d 1108,
           (1974), Boynton Cab Co. v. Neubeck et
               al., 237 Wis. 249, 296 N.W. Reporter 636,
               (1941)1 .
        When   reviewing   a   Board    of   Labor Appeals1 decision
awarding or denying unemployment benefits, the courts are
governed by § 39-51-2410(5), MCA.
           [Tlhe findings of the board as to the
           facts, if supported by evidence and in
           the absence of fraud, shall be conclusive
           and the jurisdiction of said court shall
           be confined to questions of law.
In the case of Jordan v. Craighead (1943), 114 Mont. 337, 136
P.2d 526, this Court found that the evidence necessary to
sustain the Board's findings as conclusive must be more than
"a mere scintilla."   There must be " [s]ubstantial evidence,
-- 'such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion. ' " Jordan, 136 P.2d at
528.    Further, while the court may not consider the
preponderance of the evidence the question of whether there
is substantial evidence to sustain the findings is one of
law. Jordan, 136 P.2d at 528.
        Ashland contends in its first issue that the District
Court    erroneously    examined       the   employer's   conduct   in
discharging Hyatt to determine whether or not Hyatt was
eligible for unemployment benefits. The District Court found
Ashland's disciplinary policy was unclear and that its normal
procedure of giving an employee two written warnings was not
followed.   This Court has previously upheld the Board of
Labor Appeals1 examination of conduct, policies and motives
of an employer. See Gaunce v. Board of Labor Appeals (1974),
164 Mont. 445, 524 P.2d 1108; Connolly v. Montana Board of
Labor Appeals (Mont. 1987), 734 P.2d 1211, 44 St.Rep. 587. A
reviewing body should remain primarily focused upon whether
or not the employee's actions constitute misconduct, keeping
in mind that when the employer allows or condones other
instances of similar conduct, the activity may lose the
stigma of misconduct under those circumstances.
      The record in this case shows Ashland's policy on bad
checks was to allow an employee to pick up the check and
avoid the Check-Rite fee on the first occurrence.      On the
second occurrence an employee had to "deal" with Check-Rite.
While it is unclear at what point or number of bad checks an
employee would be discharged, it is clear the employer
discouraged this conduct and expected the employee to
reimburse the employer for the NSF check when the employee
became aware of it. Yet, Hyatt issued eleven NSF checks to
his employer over a three month period and allowed them to
remain unpaid for up to six weeks. Hyatt's actions clearly
went beyond the conduct an employer may reasonably expect
from its employee.    See S 24.11.418(2), A.R.M.   We do not
find any action in the record condoning or allowing Ashland's
employees to pass repeated bad checks without paying for them
promptly.
      The   second   issue   raised   on   appeal   is   whether   an
employee's violation of a criminal statute will constitute
misconduct as a matter of law, thus prohibiting unemployment
benefits.
      The Legislature of this state has determined that the
issuing of bad checks is a criminal offense.         Section
45-6-316, MCA. In making this determination the Legislature
requires that the person knowingly issued the bad check.
However, realizing the inherent difficulty involved in
determining whether or not a person "knowingly" issued the
check, subsection (2) states that the "failure to make good
the check or other order within 5 days after written notice
of nonpayment has been received by the issuer is prima facie
evidence that he knew that it would not be paid by the
depository."   Section 45-6-316(2), MCA.
      Hyatt admitted at the Appeals hearing that he knew he
was incapable of maintaining a checking account without
writing NSF checks. He further stated, however, that he did
not know when he wrote the checks at issue that his account
contained insufficient funds. Because of this claimed lack
of knowledge, the Appeals Referee, Board of Labor Appeals and
the District Court, all erroneously found Hyatt should not be
denied unemployment benefits.
      Section 24.11.430, A.R.M. provides that an employee's
violation of law while acting outside of the scope of his
employment may or may not disqualify a claimant for benefits.
To disqualify an individual, the matter must "impact or
affect the ability of the employee to perform his job duties
or substantially injure the employer's ability to do business
. . .   I1


      Here, Hyatt issued eleven NSF checks, amounting to over
$300 during a three-month period, to his employer's place of
business     in violation of S 45-6-316, MCA.   Further, when
Hyatt was notified to make payment by both the bank and
Check-Rite, he took up to six weeks to pay the amounts owj-ng
on the checks.
      It is clear from the evidence presented that Hyatt's
ability to perform his job as assistant manager was affected.
Prior to when he began issuing the checks he had notified his
employer when other employees had checks returned.      Hyatt
knew without being told by his supervisors that they should
be notified when an employee abused their privilege of
writing checks at the store.    However, when he had checks
returned he neither notified his supervisors of the problem
nor corrected the problem in a timely manner.        In his
position he was solely responsible for receiving the notices
from Check-Rite and "logging" the amounts on a ledger which
was submitted to the area manager each month.
      The Administrative Rules of Montana in S S 24.11.418
through .431 identify and define examples of misconduct which
warrant denial of unemployment benefits.      Example "C" in
S 24.11.420, A.R.M., on dishonesty provides an example of a
violation of law constituting misconduct sufficient to deny
benefits.    In that example, a motel maid, charged with
several counts of criminal theft of a motel guest's property,
admitted taking the property and offered to return it. Her
employer dismissed her.      The rules state this act of
misconduct was sufficient to deny the employee benefits.
      Here we also have an employee committing repeated acts
at the employer's place of business, directly adverse to the
employer's interests. The employee admits having written the
checks, having received notice that the bank did not honor
the checks and that despite repeated demands he failed to pay
for the checks for up to six weeks.           These repeated
violations of law, directly adverse to the employer's
interests, constitute misconduct as a matter of law
sufficient to deny the discharged employee unemployment
benefits.
      Appellant's third issue concerns whether the District
Court erred in holding Hyatt's admitted conduct in violating
his employer's policy did not constitute misconduct.      The
District Court found Ashland would allow an employee two NSF
checks, but found the record was unclear on "whether a third
offense would result in the employee's discharge." The court
stated,
           [slince Ashland had been so casual in the
           past about permitting employees to bounce
           checks, it is difficult to characterize
           Hyatt's behavior as a "willful or wanton
           act which demonstrates a disregard of the
           employer's interest."
We disagree.
      In his discharge statement signed February 18, 1987,
Hyatt acknowledged he had received one written warning
relating to the reason for his discharge, that he was
discharged for violation of a company rule or policy, that he
actually violated that rule or policy, that he was aware of
the rule or policy when he violated it, and that the rule or
policy was contained in a handbook.     The handbook was not
made a part of the evidence before the Board, but other
evidence showing Hyatt's awareness of the policy was
introduced.
      In his duties as assistant manager, Hyatt had notified
the store manager when other employees had checks returned
NSF. He admitted that when he had notified the store manager
of other employees' NSF checks, he was told the company did
not want their employees to make a habit of this type of
behavior. Also, when asked at the hearing before the Appeals
Referee what he thought would happen if his NSF checks were
reported to his supervisors, Hyatt replied "[they] probably
would have thrown me out."
      The most significant evidence regarding Hyatt's willful
disregard for his employer's policy was the fact he allowed
the checks to go unpaid for such long periods on two separate
occasions. When an employee floats a large number of checks
on his employer for long periods of time he clearly exhibits
a willful disregard of the employer's interest. Such actions
show a willful disregard for the "standards of behavior which
the employer has the right to expect of his employee   . . ."
and    warrant       a     denial of unemployment  benefits.
5 24.11.418 ( 2 ) , A.R.M.
      Appellant's fourth issue is whether the District Court
erred in finding Hyatt did not breach his fiduciary duty to
his employer by issuing the bad checks at his employer's
place of business.  Having previously found Hyatt should be
denied unemployment benefits, we find we need not address
this issue.
      We find Ashland did not allow or condone conduct of the
extent Hyatt exhibited; Hyatt's conduct was misconduct as a
matter of law; and by Hyatt's admitted awareness and
violation of his employer's pol-icies and his willful
disregard for his employer's interests, Hyatt can only be
found to have caused his own termination and unemployment
benefits should have heen denied.
                                              /
                                                ,
                                                '
      Reversed.




We concur:
Mr. Justice William E. Hunt, Sr., dissenting.

     I dissent. The majority has set forth their dislike for the
practice of bad check writing. This dislike will be applauded by
reasonable people the world over and I join in that applause. But
I cannot agree with the majority's apparent holding that all those
who write checks without sufficient funds in the bank are unable to
perform their jobs as "a matter of law."
     Even Ashland Oil, the employer, did not go that far.        Its
area manager said, "I could have accepted one or two returned
checks.   There would have been no problem.     I've seen employees
return checks before.    It's excusable.    It's human error."   The
employer, in fact, gave a letter of reference to the employee, and
while it was less than glowing as to his management skill--"until
he gains some additional experience and maturityw--the letter of
recommendation did point out that Hyatt was a "very good
worker . . . whose determination, hard work and initiative, will be
of value to him and his future employer."
     The hearing examiner who heard the case did not find that
Hyatt was discharged for misconduct within the meaning of the
Montana Unemployment Insurance law.     The Board of Labor Appeals
upheld that finding.    The District Court reviewed the file and
after a full and complete discussion of the law and facts
concluded, in the Language of the rule, that " [tlhe statutor:~ term
misconduct shall not be literally applied so as to operate as a
forfeiture except in clear instances of willful or wanton
misconduct by the claimant which affects the employer's interest."
S 24.11.418(6), A.R.M.    The District Court upheld the Board of
Appeals and this Court should do the same. Writing a check without
knowledge of sufficient funds is not a wholesome practice. It does
not, however, constitute misconduct as a matter of law within the
meaninq of the Montana Tlnemployment Insurance act.
                                                            /--   1
                                            :I.(,   c                    /'
                                         /. L( 1 /Justice
                                                   / +919&' //u
                                                          &           s'kki
