                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                               September 1, 2010 Session

              SHERRY A. RIDLEY v. JAMES G. NEELEY, ET AL.


                Appeal from the Chancery Court for Hamilton County
                  No. 08-0849    W. Frank Brown, III, Chancellor




             No. E2010-00289-COA-R3-CV - FILED OCTOBER 28, 2010


After being discharged from her employment with Federal Express Corporation (“the
Employer”), Sherry A. Ridley filed a claim for unemployment compensation. The Tennessee
Department of Labor and Workforce Development (“the Department”) initially approved her
claim, and its ruling was affirmed by the Appeals Tribunal. Following an evidentiary hearing,
the Appeals Tribunal reversed, concluding that Ridley was disqualified from receiving
unemployment benefits because she was discharged for work-related misconduct. The Board
of Review affirmed the denial of benefits. Ridley filed a petition for judicial review. The
trial court affirmed the Board’s decision. Ridley appeals to this Court and essentially
contends that there is no evidence that she committed work-related misconduct. We
conclude that there is substantial and material evidence to support the decision that Ridley
is disqualified from receiving unemployment compensation benefits because of work-related
misconduct. Accordingly, we affirm.

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

C HARLES D. S USANO, J R., J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and J OHN W. M CC LARTY, JJ., joined.

Joe Timberlake, Signal Mountain, Tennessee, for the appellant, Sherry A. Ridley.

Robert E. Cooper, Jr., Attorney General and Reporter; Michael E. Moore, Solicitor General;
and Lindsey O. Appiah, Assistant Attorney General, Nashville, Tennessee, for the appellee,
Tennessee Department of Labor and Workforce Development.

Colby S. Morgan, Memphis, Tennessee, for the appellee, Federal Express Corporation.
                                            OPINION

                                                 I.

       Ridley worked as a courier for the Employer for some fourteen years. On April 10,
2008, she was terminated for falsifying company documents. On April 18, 2008, she filed
a claim for unemployment benefits. In response to the Department’s request for
information,1 the Employer responded only that she was “discharged for unacceptable and
improper conduct.” Ridley’s claim for benefits was initially approved based on the
Department’s finding that the evidence submitted by the Employer was not sufficient to
prove that she was discharged for misconduct related to her work.

        The Employer sought review by the Department’s Appeals Tribunal. The Employer
did not participate in the scheduled telephone hearing, and the Department’s ruling was
initially affirmed. Subsequently, the Employer was granted a new hearing on August 5,
2008, at which hearing Ridley and the Employer both appeared and presented evidence.

        Scott Sealor, Ridley’s former supervisor, testified on behalf of the Employer regarding
the circumstances that lead to Ridley’s discharge. On Monday, April 7, 2008, a customer
called the Employer to advise that its packages had not been picked up on the previous Friday
as scheduled. In its ensuing investigation, the Employer determined that Ridley had scanned
a different customer’s package as if it were the package of the complaining customer but had
actually missed that customer’s stop. In looking further at Ridley’s pick-up manifest, the
Employer discovered it reflected that Ridley had made seven stops in seven minutes on April
4 within a 10-12 mile radius, a physical impossibility. Sealor noted that according to the
manifest, some of the packages were picked up during the same, brief time span from
customers with different zip codes. Sealor testified to his conversation with Ridley when he
first confronted her with the apparent discrepancies on her pick-up records:

               [W]hen I first talked to her I asked her . . . why the pick up . . .
               had been missed . . . and she stated that she did not pick up
               there, that she overlooked the stop and used the wrong . . .
               number and it caused her to think that she had [received] that
               package, . . . so she failed to go to that stop, then later I asked



       1
         See Tenn. Code Ann. § 50-7-304(b)(2)(C) (providing that “[i]f a separation issue exists, the
separating employer will be asked to supply information describing circumstances leading to the
separation”).

                                                 -2-
              her, . . . how she could have done seven stops in seven minutes,
              basically. . . .

Two days later, Ridley wrote a statement explaining her actions:

              Picked up several stops while I was still in break mode. Trying
              to get the numbers for this route to improve. I have been told
              nearly everyday how important the numbers are. This is the first
              time to do such, need to see how to make my route numbers.
              After being confronted with situation, was told would be
              suspended.

Sealor further related as follows with respect to his conversation with Ridley:

              Counsel for Employer: Now in discussing this with [Ridley],
              what did she tell you about scanning and taking a break?

              Sealor: She told me verbally that she had picked up all these
              stops while she was in break and she sat in a parking lot and
              scanned them all, . . . each number is different, she was still at
              the same location, she just scanned them all together.

              Counsel: At the conclusion of all this, . . . was the decision made
              to terminate her?

              Sealor: It got sent to upper management and human resources
              and they looked over everything and decided it was deliberate
              falsification, that [Ridley] admitted it and that she was aware of
              the policy and the repercussions, if you violated the policy, was
              terminated the next day.

       Sealor explained the importance of accuracy in the electronic tracking system, i.e., the
Employer offered a money-back guarantee to its customers that it could inform a customer
of the location of any package within 30 minutes or shipping was free. In addition to its
business reputation and the money-back guarantee, Sealor noted that tracking records were
also used to measure an employee’s productivity. For these reasons, the Employer’s policy
mandated accurate record keeping. It allows “zero tolerance” for violations.




                                              -3-
       At the conclusion of the hearing, the Appeals Tribunal found that Ridley was
disqualified from receiving unemployment compensation and reversed the Department’s
approval of Ridley’s claim. In its August 6, 2008, decision, the Appeals Tribunal stated:

             FINDINGS OF FACT: The claimant’s most recent employment
             prior to filing this claim was with Federal Express Corporation
             from October 25, 1993 until April 9, 2008 as a courier. On
             April 7, 2008, a customer complained that the claimant failed to
             pickup a package from their place of business. On April 9,
             2008, the operations manager investigated this matter by
             checking the claimant’s documentation of her pickups.
             According to the documentation, the claimant made 7 pickups
             within a 10 to 12 mile radius in 7 minutes. The claimant could
             not have made that many stops in that period of time. The
             claimant also twice documented the same pickup.

             The operations manager confronted the claimant later that day
             concerning her documentation of her pickups. The claimant
             submitted a handwritten statement to him that indicated she
             picked up several stops while on break mode. On April 10,
             2008, the operations manager discharged claimant for violation
             of the employer’s acceptable conduct policy. On February 25,
             2005, the claimant acknowledged she had read and understood
             the seriousness and consequences of violations of the
             employer’s acceptable conduct policy. The policy notified the
             claimant that deliberate falsification of company documents
             including but not limited to business reports, delivery records,
             timecards, benefits eligibility forms, expense reports, and
             employment applications would result in discharge.

             The employer considers falsifications of delivery records a
             serious violation because they guarantee to tell customers where
             their package is located within 30 minutes of an inquiry or the
             customer receives free shipping. The claimant’s conduct
             inflated her productivity but she denied that her conduct was
             deliberate.    The employer is subject to Department of
             Transportation policy violations if employees are found to be
             working while on break.




                                           -4-
                CONCLUSIONS OF LAW: The Appeals Tribunal finds that
                claimant is not eligible for unemployment benefits. The issue is
                whether the claimant is guilty of work-related misconduct under
                TCA 50-7-303(a)(2). Misconduct is an intentional act or a
                violation of policy that materially breaches the standard of
                behavior an employer has a right to expect. The evidence
                establishes that the claimant was discharged for violation of
                company policy. The Appeals Tribunal finds the evidence is
                sufficient to establish misconduct as defined in the statute
                because the claimant’s conduct materially breached the
                standards of behavior the employer had a right to expect.

                The claimant’s negligence may have resulted in her
                documenting that she made a pickup twice. However, her
                documentation of 7 pickups in 7 minutes while she was on break
                was substantial and shows an intentional disregard of the
                employer’s interest. She was made aware that such conduct
                would result in discharge. Therefore, the evidence amounts to
                work-related misconduct as provided under the statute.

        In affirming the denial of benefits,2 the Board of Review found, in relevant part:

                The claimant performed work during her break time (a violation
                of policy) but was discharged because she did not accurately
                record the times the items were actually picked up by scanning
                them at the time of the pick-up. She apparently made several
                pick-ups and later went to a parking lot at which time she
                scanned and entered them into her computer. The paperwork
                did not reflect an accurate pick-up time for those items. The
                employer testified that it insists on accurate scan times for item
                pick-ups. The claimant was aware that her conduct was contrary
                to policy. Misconduct has been reasonably shown.

        2
         The Board affirmed in part and remanded in part the decision of the Appeals Tribunal. As noted,
the Board affirmed the decision denying unemployment benefits to Claimant. It remanded for consideration
of the question of “whether the employer should be charged with any benefits [initially] paid [to Ridley] in
accordance with TCA § 50-7-304(b)(2)(D) . . .” based on the Employer’s failure to respond to the
Department’s request for separation information by “describing circumstances leading to the [claimant’s]
separation” as required by statute. The Board ultimately resolved this issue in Ridley’s favor by ruling that
any benefits paid to Ridley were properly charged to the Employer. This issue is not a subject of this appeal.


                                                     -5-
       Ridley filed a petition for judicial review in the trial court. The court affirmed the
decision of the Board.

       The instant appeal to this Court followed.

                                             II.

       Ridley presents one issue for our review:

              Whether there is substantial and material evidence to support the
              decision of the Board of Review disqualifying Ridley from
              receiving unemployment compensation benefits as a result of
              work-related misconduct.

                                             III.

       Appellate courts and trial courts are subject to the same standard of review when
reviewing administrative decisions pertaining to unemployment compensation. Armstrong
v. Neel, 725 S.W.2d 953, 955 n.1 (Tenn. Ct. App. 1986). That standard, codified at Tenn.
Code Ann. 50-7-304(i)(2)-(3) (Supp. 2009), provides as follows:

              (2) The chancellor may affirm the decision of the board 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;

              (D) Arbitrary or capricious or characterized by abuse of
              discretion or clearly unwarranted exercise of discretion; or

              (E) Unsupported by evidence which is both substantial and
              material in the light of the entire record. 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

                                             -6-
              of the board of review as to the weight of the evidence on
              questions of fact. No decision of the board shall be reversed,
              remanded or modified by the chancellor unless for errors which
              affect the merits of the final decision of the board. Such petition
              for judicial review shall be heard by the chancellor either at term
              time or vacation as a matter of right, any other statute of this
              state to the contrary notwithstanding.

Substantial and material evidence consists of “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.” Sweet v. State Tech. Institute at Memphis, 617 S.W.2d
158, 161 (Tenn. Ct. App. 1981) (quoting Pace v. Garbage Disposal District of Washington
County, 54 Tenn. App. 263, 390 S.W.2d 461, 463 (Tenn. Ct. App. 1965)). Therefore, if the
record contains such evidence, we are limited to examining the issues of law posited by the
plaintiff. See Perryman v. Bible, 653 S.W.2d 424, 429 (Tenn. Ct. App. 1983). On our
review, we accord no presumption of correctness to the Department’s conclusions of law.
Wallace v. Sullivan, 561 S.W.2d 452, 453 (Tenn. 1978); Stanford v. Comm’r of the Dep’t
of Labor & Workforce, No. W2004-02373-COA-R3-CV, 2005 WL 1833734 at *3 (Tenn.
Ct. App. W.S. filed Aug. 2, 2005) (citing Sutton v. Traughber, No. 88-309-II, 1989 WL
48782, at *2 (Tenn. Ct. App. filed May 12, 1989)). Further, we are mindful that
“unemployment compensation statutes should be construed liberally in favor of the employee
and . . . an employer has the burden of proving the employee’s disqualification from
unemployment benefits.” Stanford, 2005 WL 1833734 at *5-6 (citing Sutton, at *2);
Armstrong v. Neel, 725 S.W.2d at 955 n.2 (Tenn. Ct. App. 1986).

                                             IV.

        Ridley challenges the Board’s decision that she was disqualified from receiving
unemployment benefits as a result of work-related misconduct. Basically, she contends that
her actions did not amount to misconduct and therefore there is nothing to support the denial
of her claim. The evidence persuades us otherwise.

       A claimant is disqualified from receiving 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). In the present
case, the Board found that Ridley’s discharge for falsification of company documents
constituted such misconduct and therefore rendered her ineligible for benefits. As a
reviewing court, we are mindful that we must affirm the administrative denials of claims for
unemployment compensation if the record contains substantial and material evidence to
support a finding that an employee has engaged in misconduct related to his or her work.

                                              -7-
        First, we agree that the findings of the administrative bodies below, as affirmed by the
trial court, are supported by substantial and material evidence. The evidence showed that in
2005, the Employer amended its acceptable conduct policy to include falsification of
company documents as a “discharge offense.” A memorandum the Employer sent to all
employees reflected the change and emphasized the importance of maintaining accurate
documents to the Employer’s business and its reputation, among other considerations. It is
undisputed that Ridley was aware of the policy that provided for an employee’s termination
upon the occurrence of “even one” violation. Furthermore, Ridley does not dispute that
while on her route on April 4, 2008, she failed to scan several packages when she picked
them up, instead scanning them all at roughly the same time during a later stop. As a result,
the tracking documents for the packages in question did not reflect accurate pick up times.
We agree with the Board’s finding that Ridley thereby falsified company documents in
violation of the Employer’s express policy prohibiting such conduct. We next consider
whether Ridley’s conduct is properly deemed “misconduct” related to her work for purposes
of her claim for unemployment compensation.

       At the time Ridley was discharged, Tenn. Code Ann. § 50-7-303(a)(2)3 did not define
the types of misconduct that warrant a denial of unemployment compensation. The courts
were left to make this determination on a case-by-case basis. See, i.e., Grandstaff v. Hayes,
No. 01-A-01-9206-CH-00253, 1993 WL 46509, at *2, Tenn Ct. App. M.S., filed Feb. 24,
1993). “At a minimum, however, . . . there must be shown a material breach of some duty
which the employee owes to the employer.” Cherry v. Suburban Mfg. Co., 745 S.W.2d
273, 275 (Tenn. 1988)(citing, generally, Weaver v. Wallace, 565 S.W.2d 867, 870 (Tenn.
1978)).

       On February 11, 2005, Employer issued a memorandum to its Southern Region
employees addressing the “critical importance” of the “change addressing falsification-
related violations” to its “Acceptable Conduct Policy.” The memo stated:

               [C]onduct involving deliberate falsification of Company
               documents is now listed as a “Discharge Offense” along with
               firearm/dangerous-weapons and drug/alcohol violations.

               The policy specifies:

               Discharge Offense:


       3
        Effective January 1, 2010, the statute was amended to include a definition of “misconduct.” See
Tenn. Code Ann. § 50-7-303(b)(3)(A).


                                                  -8-
              An employee is dismissed upon completion of an investigation
              confirming violations related to

              Deliberate falsification of Company documents including but
              not limited to business reports, delivery records, time cards,
              benefits eligibility forms, expense reports and employment
              applications.

              This policy reflects the seriousness of falsification and its legal,
              financial, public relations, and operational impact on the
              Company. Even one failure to maintain our reputation for
              integrity can jeopardize our relationship with customers and
              other groups whose business and goodwill is essential to our
              continued success.

              Do not jeopardize your career or the Company’s reputation by
              engaging in falsification of any kind. In accordance with the
              above-quoted policy, which specifies discharge/dismissal for
              falsification-related violations, there is and will be zero
              tolerance for this type of behavior.

              It is critical that you understand the consequences of conduct
              involving falsification of Company documents.

              I have read this carefully and understand the seriousness and
              consequences if I violate this policy.

(Underlining in original).

        As reflected by her signature, Ridley received the memo on February 25, 2005; she
does not argue that she did not understand its contents. Neither, as we have noted, does
Ridley contest that she created inaccurate records for those packages that she admittedly
failed to enter into the company’s tracking system at the time she received them for shipping.
She simply asserts that “there was no evidence that [her] failure to scan at the time of pick
up was fraudulent or arose out of ‘wrongful intent’ or ‘evil design’ ” and therefore, she
reasons, it is not properly deemed misconduct for purposes of her benefits claim. As the trial
court put it, Ridley’s argument “appears to be that she had no bad motive, i.e. no intent to
harm [the Employer],” and there was “nothing in it” for her either.



                                              -9-
        At the hearing, Ridley essentially contended that she “had no intention of deliberately
falsifying anything,” or to cause damage to anyone, and offered various other possible
reasons for her discharge – her recent wreck of a company vehicle, her age, the physical
effects of the wreck, and making her supervisor “look bad.”

       The hearing officer questioned Ridley further as follows:

              Hearing officer: [B]ut looking at this report, why . . . is it
              documented that way, if you didn’t do anything intentionally,
              what did you do . . . .

              Ridley: When I had the wreck?

              Hearing officer: No, we’re talking about why you were
              discharged mam. All these stops.

              Ridley: They said I was discharged because I falsified

              Hearing officer: Right, so you’re saying

              Ridley: It said deliberately falsifying and I did not deliberately
              falsify

              Hearing officer: I heard that mam, but how did [you] make all
              these stops according to your tracking. How did you make all
              these stops

              Ridley: These stops, . . . . I couldn’t get in, get out, I had to
              walk a distance to get to them.

                                           *    *     *

              I was running a route for another fellow and I overlooked one of
              his stops that they had assigned to me. I did wait til I got, [. . .]
              there was a lot of 18 wheelers in the way so I was trying to get
              out of their way and I was trying to just get somewhere where I
              could stop safety and not get hit. Before I scanned these
              packages, I was not trying to deliberately, I was just trying to get
              them into the system. I was not deliberately trying to falsify
              anything.

                                               -10-
       We have defined “misconduct,” for purposes of disqualification of benefits under
Section 50-7-303(a)(2) as

              conduct evincing such wilful and wanton disregard of an
              employer’s interests 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 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, inadvertence
              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.

Armstrong v. Neel, 725 S.W.2d at 956 (Tenn. Ct. App. 1986) (citing Boynton Cab Co. v.
Neubeck, 237 Wis. 249, 296 N.W. 636, 640 (Wis. 1941)). As can be seen, conduct
manifesting a “wrongful intent or evil design” may certainly constitute misconduct that
disqualifies an employee from unemployment benefits. “Misconduct,” however, is not
limited to acting with such “bad” motives. An employee’s “intentional and substantial
disregard of the employer’s interest or of the employee’s duties and obligations to the
employer,” despite his or her good intentions, may also constitute disqualifying misconduct.

       In its December 29, 2009, memorandum opinion and order, the court denied Ridley’s
petition and upheld the denial of her claim for benefits, in relevant part, as follows:

              [Ridley] has not met her burden of proof to reverse the Board’s
              decision[ ] to deny unemployment compensation benefits to
              [her]. She failed to scan the packages when received. Instead,
              she scanned the packages close in time. The scanned time was
              not the time the package was picked up. Ms. Ridley falsified the
              pickup time for 7 to 11 packages. She committed an intentional
              act by scanning the packages one after the other one [and this]
              was not a mistake. She did an act that was prohibited by
              company policy. She was supposed to scan the packages when
              picked up, not later as a part of a mass scanning. She violated
              a duty she owed to [the Employer]. There is material and



                                             -11-
              substantial evidence to support the decision of the Appeals
              Tribunal and the Board. There are no errors of law.

       On our review, we conclude that there is substantial and material evidence to establish
that Ridley was disqualified from receiving unemployment compensation benefits as a result
of misconduct related to her work.

                                             V.

       The judgment of the trial court is affirmed. This case is remanded to the trial court,
pursuant to applicable law, for the collection of costs assessed below. Costs on appeal are
taxed to the appellant, Sherry A. Ridley.




                                                    _________________________________
                                                    CHARLES D. SUSANO, JR., JUDGE




                                             -12-
