96-187

                                                             No.       96-187

                              IN THE SUPREME COURT OF THE STATE OF MONTANA

                                                                    1996




                                                        JAMES DEAN MOODY,

                                                 Plaintiff and Appellant,

                                                                      v.

                                                NORTHLAND ROYALTY CO. and
                                                 THE DEPARTMENT OF LABOR
                                                       & INDUSTRY,

                                              Defendants and Respondents.




              APPEAL FROM:          District Court of the Ninth Judicial District,
                                   In and for the County of Glacier,
                            The Honorable Marc G. Buyske, Judge presiding.



                                                       COUNSEL OF RECORD:

                                                          For Appellant:

                             Jeff R. Lynch, Lynch & Chisholm, Great Falls,
                                                Montana

                                                         For Respondent:

                          Robert J. Emmons, Emmons & Sullivan, Great Falls,
                         Montana (Northland); Melanie Symons, Department of
                                  Labor & Industry, Helena, Montana




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                                    Submitted on Briefs:                     October 31, 1996

                                                Decided:           January 3, 1997
                                                                  Filed:



                                __________________________________________
                                                   Clerk

           Justice William E. Hunt, Sr. delivered the Opinion of the Court.

                  Appellant James Dean Moody (Moody) appeals the order of the
              Ninth Judicial District Court, Glacier County, affirming the
              decision of the Board of Labor Appeals that Moody be denied
          unemployment benefits because his discharge from employment was a
                                 result of his own misconduct.
                                              We reverse.
                 The sole issue for our review is whether Moody was discharged
                                         for misconduct.
                                                             FACTS
                    In November 1994, Moody was employed by Northland Royalty
          Company (Northland) as a gas plant field operator. Moody received
                                   a monthly salary of $2500.
                      On November 19, 1994, Moody informed his supervisor at
           Northland, Bill Sheehan, that one of Northlandþs competitors had
           offered Moody a job. Sheehan told Moody that they would discuss
                the situation on the following Monday, November 21, 1994.
                   On Monday morning Moody explained to Sheehan that he would
            remain working for Northland if he were given a $100 per month
           raise. Moody stated that he needed a decision from Northland by
         noon that day. Moody informed Sheehan that if he left Northland he
             would take with him Randy Brown, Northlandþs only other field
           operator. When Sheehan asked what would happen if Moody did not
          get a raise, Moody replied that "they would address that when the
                         time came and would live with the decision."
                       Later Monday morning Sheehan approached Randy Brown,
          Northlandþs other field operator. Brown informed Sheehan that he,
         like Moody, had been offered a job by the competitor. Sheehan then
                         offered Brown a raise, which Brown accepted.
                    Next, Sheehan drove to the Four Corners Cafe to make some
          phone calls. Sheehan had explained to Moody earlier that he would
                need to contact Northlandþs Billings office to discuss the
          situation before giving Moody an answer. One of the calls Sheehan
          made was to Steve Jackson, who had recently expressed his interest
                in working for Northland as a field operator. Jackson had
            previously been discharged by the same competitor now offering
               employment to Moody. Sheehan offered Jackson Moodyþs field


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                  operator position with Northland, which Jackson accepted.
                   While at the Four Corners Cafe that morning, Sheehan received
                a call from Moody, who advised Sheehan that he would not be
                    quitting Northland and that he had already declined the
         competitorþs offer. Sheehan told Moody that they would discuss the
                            matter when Sheehan got back to the field.
                      When Sheehan returned to the field shortly after noon, he
            asked Moody to join him for a ride in his truck. After they had
            driven only a short distance, Moody asked Sheehan what was going
              on. Sheehan replied, "Youþre done," and when Moody asked why,
           Sheehan informed Moody that it was "about money" and that Jackson
           was "cheaper." Moodyþs employment with Northland was terminated.
                     Moodyþs starting salary with the competitor would have been
                    $1800 per month. When Moody informed Sheehan about the
         competitorþs employment offer, he did not disclose the competitorþs
                                           salary offer.
                    On November 21, 1994, Moody filed for unemployment benefits.
               Initially, the Department of Labor and Industry, Unemployment
                 Insurance Division, determined that Moody was eligible for
                     unemployment benefits. After Northland protested this
            determination, the Department of Labor and Industry reconsidered
               Moodyþs eligibility and issued a redetermination letter which
          stated that Moody was not eligible for unemployment benefits. The
         benefits examiner concluded that Moody had been the moving party in
             the employment separation. The examiner further concluded that
            Moodyþs voluntary separation was without good cause attributable
         to, or the fault of, Northland, and that therefore Moody was deemed
                          disqualified to receive unemployment benefits.
                        After the redetermination, the matter proceeded to two
           separate hearings conducted by the Legal Services Division of the
            Department of Labor and Industry. At the first hearing, Appeals
             Referee James L. Keil determined that the benefits examiner had
         erred in concluding that Moody was the moving party responsible for
         his separation from employment. Keil concluded that Moody had been
                                   discharged from employment.
                       At the second hearing, on May 9, 1995, the issue before
           Appeals Referee David Frazier was whether Moody was qualified or
               disqualified from receiving unemployment insurance benefits.
                 Specifically, Frazier considered whether or not Moody was
         discharged for "misconduct" as that term is defined and interpreted
              in the Montana Code Annotated and the Administrative Rules of
             Montana. Frazier concluded that Moody had been discharged for
                reasons other than "misconduct," and reversed the benefits
          examinerþs determination that Moody be disqualified from receiving
                                      unemployment benefits.
                  Northland appealed Referee Frazierþs decision to the Board of
         Labor Appeals. The Board initially affirmed Frazierþs decision on
          June 26, 1995, but then issued another statement on September 20,


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               1995, reversing itself and overturning Frazierþs decision.
                 On October 18, 1995, Moody submitted a petition for judicial
              review to the Ninth Judicial District Court, Glacier County,
             requesting that the court reverse the decision of the Board of
             Labor Appeals. The District Court affirmed the Board of Labor
                     Appeals on March 12, 1996. This appeal followed.
                                                 STANDARD OF REVIEW
                     Recently, in Hafner v. Montana Department of Labor and
          Industry, No. 96-105 (Mont. Dec. 10, 1996), this Court stated that
         "the question of whether conduct rises to the level of þmisconductþ
            is a question of law which this Court reviews for correctness."
          Hafner, No. 96-105, slip op. at 6. This standard we enunciated in
             Hafner required us to reverse two previous cases, Connolly v.
          Montana Bd. of Labor Appeals (1987), 226 Mont. 201, 734 P.2d 1211
         and Stine v. Western Federal Savings Bank (1994), 266 Mont. 83, 879
                                          P.2d 53:
                Having reviewed this issue [of whether the determination
                  of "misconduct" is a question of fact or a question of
                 law] in the present case, we reverse Connolly and Stine
                    to the extent that they hold that "misconduct" is a
                                    question of fact[.]

                     Hafner, No. 96-105, slip op. at 6. We explained that
                     [t]he question of whether an employee has disregarded
                     standards of behavior, been careless or negligent, or
                    violated company rules is a question of fact. Whether
                       those "facts" then constitute "misconduct" involves
                      interpretation and application of the Administrative
                   Rules of Montana and is a legal conclusion reviewable by
                                           this Court.

          Hafner, No. 96-105, slip op. at 6-7. Therefore, we must determine
           whether the District Courtþs conclusion that Moody was discharged
                               for "misconduct" is correct.
                                                      DISCUSSION
                 Moody concedes that the undisputed facts of this case, stated
            in Referee Frazierþs written decision and set forth in the Facts
             section of this Opinion, are supported by substantial evidence.
               Moody contends, however, that these facts do not constitute
         "misconduct" as that term is defined and interpreted in the Montana
         Code Annotated and the Administrative Rules of Montana. We agree.
                      Section 39-51-2303, MCA, provides in relevant part:
                  An individual shall be disqualified for benefits after
                                     being discharged:

                    (1) for misconduct connected with the individualþs work
                         or affecting the individualþs employment ....



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           Section 39-51-2303(1), MCA. The Administrative Rules of Montana
          define "misconduct." Section 24.11.460, ARM, states, in pertinent
                                         part:
                              DISQUALIFICATION FOR MISCONDUCT
              (1) Misconduct as used in    39-51-2303, M.C.A., includes,
                  but is not limited to, the following conduct by a
                                       Claimant:

                             (a) Willful or wanton disregard of the rights,
                          title, and interest of a fellow employee or the
                                            employer; . . .


           Section 24.11.460(1)(a), ARM. Section 24.11.461, ARM, identifies
          a number of specific acts which constitute "misconduct." Relevant
                               for our purposes here is:

                    (c) Dishonesty related to employment, including but not
                   limited to, deliberate falsification of company records,
                           theft, deliberate deception or lying; ....


           Section 24.11.461(1)(c), ARM. The Board of Labor Appeals, in its
                September 21, 1995 decision finding Moody ineligible for
                               unemployment benefits stated:
                Testimony and evidence before the Board clearly indicate
                  that the claimant tried to negotiate a raise by giving
                    his employer an ultimatum requiring a raise within
               several hours and by also threatening to leave taking the
                    only other employee of the company with him. This
                     conduct was deliberate and was a disregard of the
                 interests of the employer. That fact is underscored by
                 the evidence that the claimant was making $2,500.00 per
                month with Northland and had only been offered $1,800.00
               per month by the competitor. It is found that claimantþs
                 actions and statements amounted to deception related to
                his employment. It is concluded that such action by the
               claimant arose [sic] to the level of misconduct according
                           to 39-51-2303 MCA, and ARM 24.11.461.

              We do not agree that Moodyþs actions "arose to the level of
              misconduct according to 39-51-2303 MCA, and ARM 24.11.461."
                   In the briefs submitted to this Court and in the Boardþs
         findings, much was made of Moodyþs failure to disclose to Northland
         that his job offer included a monthly salary $700 dollars less than
               his existing monthly salary. Both Northland and the Board
               characterize this non-disclosure as "dishonesty related to
           employment." However, the record reveals that Northland did not


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               know, prior to terminating Moodyþs employment, that Moody had
          failed to disclose this salary disparity. Therefore, even if this
          failure to disclose can be considered a deceptive or dishonest act
             as contemplated by the definition of "misconduct," it logically
          could not have been a basis for Moodyþs discharge; Moody could not
                possibly have been terminated for dishonesty or deception if
           Northland did not know prior to termination that Moody was or had
                                  been dishonest or deceitful.
                       Both the Board and Northland have characterized Moodyþs
           statement that he "had to have a decision by noon that day" as an
             "ultimatum," and his statement that he would "take" Randy Brown
           with him if he left Northland as a "threat." They argue that the
            statements constitute misconduct. There is no indication in the
              record that Moody did not need a decision by noon. The record
         establishes that Sheehan was operating under the understanding that
            Moody did need a decision by noon. The appeals referees and the
           Board did not find, and we cannot locate in the record, any facts
         showing that Northland believed prior to terminating Moody that his
            "ultimatum" was untrue. We fail to see the negative connotation
          given by Northland and the Board to Moodyþs statement that he "had
               to have a decision by noon that day." This statement did not
                                      constitute misconduct.
                   Similarly, Northland and the Board have characterized Moodyþs
              statement that he would "take" Randy Brown with him if he left
          Northland as a "threat." Brown is an adult. There is no evidence
                    that Moody had any control over Brownþs actions. It is
            unreasonable to believe that Moody could have "taken" Brown with
         him if Brown himself did not want to leave Northland. Instead, it
            is reasonable to believe that Brown could have left Northland of
                 his own volition; indeed, he had been offered a job by the
               competitor, as Sheehan discovered shortly after speaking with
         Moody. Further, nothing prevented Northland from taking such steps
         as were necessary to counteract Moodyþs "threat" and secure Brownþs
          continuing employment, as in fact occurred when Sheehan sought out
         Brown and gave him a raise. Moodyþs statement that he would "take"
         Brown with him if he left Northland cannot reasonably be considered
                  a threat to Northlandþs interests, and did not constitute
                                           misconduct.
                     The parties have characterized Moodyþs conduct differently.
                  Our review of the undisputed facts establishes that Moody
         essentially demanded a raise from his employer, Northland. Moodyþs
             particular actions and statements in demanding a raise may well
          have been undertaken in order to exert leverage in the bargaining
               process. Moody may have been somewhat deceptive. We cannot,
               however, conclude that upon the particular facts of this case
                 Moodyþs conduct fits within the definition of "misconduct"
          contemplated by          24.11.460 and 461, ARM, and   39-51-2303, MCA.
            Moreover, and more importantly with respect to the issue in this


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               case, we cannot conclude that Northland fired Moody for
         "misconduct." When Northland terminated Moodyþs employment, it was
           largely unaware of conduct which it only later, after Moody was
         terminated, determined was dishonest or deceptive. The court erred
         in affirming the incorrect conclusion of the Board of Labor Appeals
                      that Moody was discharged for misconduct.
                                         Reversed.


                                                                                 /S/      WILLIAM E. HUNT, SR.




                                                              We Concur:


                                                    /S/ J. A. TURNAGE
                                                  /S/ CHARLES E. ERDMANN
                                                     /S/ KARLA M. GRAY
                                                 /S/ W. WILLIAM LEAPHART




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