Sharon Anderson, Relator v. YUM Design, LLC, Department of Employment and Economic Development

• Court: Court of Appeals of Minnesota
• Decided: July 25, 2016
• Docket: A15-1876
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A15-1876

Sharon Anderson, Relator,

vs.

YUM Design, LLC, Respondent,

Department of Employment and Economic Development, Respondent

Filed July 25, 2016 Affirmed Worke, Judge

Department of Employment and Economic Development File No. 33702439-4

Munazza Humayun, Prior Lake, Minnesota (for relator)

Patrick Gerard Knight, Berns Knight, P.A., Plymouth, Minnesota (for respondent employer)

Lee B. Nelson, Department of Employment and Economic Development, St. Paul, Minnesota (for respondent department)

Considered and decided by Hooten, Presiding Judge; Worke, Judge; and Smith,

Tracy M., Judge. UNPUBLISHED OPINION

WORKE, Judge

Relator challenges an unemployment-law judge’s (ULJ) decision that she is

ineligible for unemployment benefits because she was discharged for the employment

misconduct of starting a business competitive with her employer. We affirm.

FACTS

Respondent-employer YUM Design, LLC runs a home-manager business and

stages homes that are on the market. A home manager lives in a home while it is on the

market to maintain upkeep and prepare it for sale. The staging business predictably

follows the ebbs and flows of the real-estate market; some months are busier than others.

In August 2013, relator Sharon Anderson started as a home manager for YUM.

Shortly thereafter, YUM’s president, Karen Galler, enlarged the scope of Anderson’s

position. Because Anderson would have access to confidential information, she was

required to sign a non-compete agreement, which she did in September 2013. By the

latter part of 2014, Anderson was a secondary stager.

In December 2014, Anderson gave very little notice for a vacation, which

inconvenienced YUM. After Anderson’s vacation, Galler offered her less work because

other people were available to do the work and she felt that Anderson was unhappy with

the employment.

In early 2015, Galler saw an advertisement for a new staging business that

included a picture of Anderson. On March 9, 2015, Galler asked Anderson to terminate

her competing business. After Anderson stated that she had no intention of terminating

2 her business, Galler discharged Anderson and asked her to return the key she had to

YUM’s warehouse.

Anderson applied for unemployment benefits with respondent Department of

Employment and Economic Development (DEED), claiming that she had been

discharged for violating a non-compete agreement after seeking new work when her

hours were reduced. DEED initially concluded that Anderson was eligible for

unemployment benefits, and YUM appealed. A ULJ held a telephone hearing, with the

stated purpose of gathering evidence to determine whether Anderson was discharged for

employment misconduct.1

Anderson testified that she did not quit her employment; instead, “[Galler] just

said she didn’t want [her] anymore.” Anderson testified that she started her staging

business in February 2015, because business at YUM had significantly dropped. She also

wanted more control of the business and her schedule. Despite acknowledging that she

did staging at YUM and does staging for her own business, Anderson testified that she

did not believe that she was a competitor because YUM also does the home-management

program and her new business does not. Anderson also stated that Galler seemed to be

focusing more on selling real estate than on staging, leading her to believe that Galler was

going to discontinue staging altogether.

The ULJ found that Galler discharged Anderson on March 9, 2015, after Anderson

refused to terminate her business that directly competed with YUM. The ULJ concluded

1 The ULJ also considered whether Anderson was an employee or an independent contractor, but that is not at issue on appeal.

3 that Anderson was discharged for employment misconduct and ineligible for

unemployment benefits.

Anderson requested reconsideration, arguing that the non-compete agreement was

invalid and that she was not in competition with YUM because YUM “no longer had any

viable staging business with which to compete.” Anderson submitted “additional

evidence,” including a statement that she had been “effectively laid off” after working

few hours in November 2014, and had been “constructively laid off . . . on December 1,

2014,” after being offered only limited work. A ULJ noted the claims Anderson raised in

her request for reconsideration, but determined that Anderson’s decision to start a

competitive business amounted to employment misconduct regardless of whether the

non-compete agreement was valid because Anderson’s conduct breached a duty of

loyalty to her employer. The ULJ found Galler’s testimony credible because it was

“straightforward, direct, and certain”; conversely, the ULJ found Anderson’s testimony

“less certain” and “vague.” Anderson petitioned for a writ of certiorari.

DECISION

We may affirm, modify, or reverse the decision of the ULJ or remand the case for

further proceedings if the substantial rights of the relator may have been prejudiced

because the findings, inferences, or decision are unsupported by substantial evidence in

the record, or are arbitrary or capricious. Minn. Stat. § 268.105, subd. 7(d)(5)-(6) (Supp.

2015).

We view the ULJ’s factual findings in the light most favorable to the decision and

will not disturb them provided that evidence substantially sustains them. Rowan v.

4 Dream It, Inc., 812 N.W.2d 879, 882 (Minn. App. 2012). Substantial evidence is

“(1) such relevant evidence as a reasonable mind might accept as adequate to support a

conclusion; (2) more than a scintilla of evidence; (3) more than some evidence; (4) more

than any evidence; or (5) the evidence considered in its entirety.” Minn. Ctr. for Envtl.

Advocacy v. Minn. Pollution Control Agency, 644 N.W.2d 457, 466 (Minn. 2002).

Credibility determinations are the exclusive province of the ULJ. Skarhus v. Davanni’s

Inc., 721 N.W.2d 340, 345 (Minn. App. 2006).

Issue raised

Anderson attempts to divert our attention from the issue of misconduct by

suggesting that she was laid off. Anderson claims that “[t]he date of discharge means the

difference between eligibility and ineligibility”—if she was laid off in early February

2015, she is eligible for unemployment benefits, but if she was discharged on March 9,

2015, for starting a competing business, she is ineligible for unemployment benefits. She

claims that she is eligible for unemployment benefits because “[t]here is not even a

scintilla of evidence in the record to support the ULJ’s finding that the discharge occurred

on March 9, 2015.” Based on the record before us, there are two problems with

Anderson’s claim.

First, Anderson is incorrect in asserting that there is no evidence to support the

ULJ’s finding that she was discharged on March 9, 2015. Galler testified that she ended

the working relationship on March 9, 2015, after Anderson refused to terminate her

competing business. Moreover, Anderson testified that she did not quit her

employment—Galler “just said she didn’t want [her] anymore.” Anderson did staging

5 work in January and February and received checks in both months, but did not do any

more staging work after March 9. There is substantial evidence to support the ULJ’s

finding that Anderson was discharged on March 9, 2015.

Second, Anderson failed to raise the issue of being laid off at the hearing before

the ULJ.2 When she applied for unemployment benefits, Anderson claimed that she was

discharged after she was accused of violating a non-compete agreement. While she also

claimed that she needed to start a business because her hours had been reduced, she never

claimed that she was laid off and had no work available.

Additionally, the ULJ made clear at the hearing that the issue was whether

Anderson was discharged for employment misconduct. The ULJ did not state, and

Anderson did not suggest, that the ULJ was to decide whether Anderson had been laid

off.

At the hearing, Anderson testified that she started her staging business in February

2015 because business at YUM had significantly dropped and Galler appeared to be

focused on selling real estate. But, again, she did not claim that she had been laid off.

And Galler explained that she gave Anderson less work because Anderson had given

short notice to take a vacation and seemed unhappy.

In her request for reconsideration, Anderson claimed that she had “additional

evidence,” including a statement that she had been “effectively laid off” after working

few hours in November 2014, and had been “constructively laid off . . . on December 1,

2 Though this issue was not raised before the ULJ, we examine the claim because it is indirectly linked to the issue of when Anderson was discharged from employment.

6 2014.” In her brief, she states that she was “seasonally laid off . . . in early February

2015.” Not only are her statements unclear as to when she was laid off—November,

December, or February—but the record shows that she continued to work in January and

February, received checks in both months, and started her staging business only two days

after receiving her last check. Moreover, although Anderson raised the issue of being

laid off in her request for reconsideration, she offers no explanation as to why she failed

to raise the issue at the hearing before the ULJ.

Thus, because Anderson failed to raise the claim that she was laid off at the

evidentiary hearing, the ULJ did not consider it or make relevant findings, and we,

therefore, will not consider it on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn.

1988) (stating that an appellate court will not consider matters not argued to and

considered by the district court); Peterson v. Ne. Bank–Minneapolis, 805 N.W.2d 878,

883 (Minn. App. 2011) (“[B]ecause this issue was not raised before the ULJ, it is not

properly before this court on review.”).

Misconduct

Our sole issue to resolve is whether the ULJ erred in determining that Anderson

was discharged for employment misconduct. Employment misconduct is “any

intentional, negligent, or indifferent conduct, on the job or off the job that displays clearly

. . . a serious violation of the standards of behavior the employer has the right to

reasonably expect of the employee.” Minn. Stat. § 268.095, subd. 6(a)(1) (2014). An

employee discharged for employment misconduct is ineligible to receive unemployment

benefits. Id., subd. 4(1) (2014).

7 Whether an employee committed misconduct is a mixed question of fact and law.

Schmidgall v. FilmTec Corp., 644 N.W.2d 801, 804 (Minn. 2002). “Whether the

employee committed a particular act is a question of fact.” Skarhus, 721 N.W.2d at 344.

But whether an employee’s act constitutes disqualifying misconduct is a question of law,

which we review de novo. Schmidgall, 644 N.W.2d at 804.

The ULJ found that Anderson started a business competitive with her employer.

There is no dispute that Anderson started a business. We must determine whether that act

constitutes employment misconduct.

“A single incident can constitute misconduct when an employee deliberately

chooses a course of conduct that is adverse to the employer.” Id. at 806. An employer

has a legitimate interest in protecting itself against “the deflection of trade or customers

by the employee by means of the opportunity which the employment has given him.”

Webb Publ’g Co. v. Fosshage, 426 N.W.2d 445, 450 (Minn. App. 1988) (quotation

omitted). An employee owes a duty of loyalty to the employer that prohibits the

employee from competing with the employer during the employment. Rehab. Specialists,

Inc. v. Koering, 404 N.W.2d 301, 304 (Minn. App. 1987).

Anderson testified that she did not believe that her staging business was in

competition with YUM because YUM also does the home-management program and her

business does staging only. She also believed that she was not in competition because,

according to Anderson, Galler appeared to be focusing more on selling real estate and

less on staging. But Galler testified that Anderson’s claims were “absolutely ridiculous.”

Galler testified that she had no intention of terminating the staging business just because

8 the real-estate market, and so too the staging business, are slower in January and

February. The ULJ found Galler’s testimony to be credible. See Skarhus, 721 N.W.2d at

345.

The evidence supports the ULJ’s finding that Anderson was discharged for

starting a business that was a direct competitor of her employer. This reason for

discharge is employment misconduct that makes an individual ineligible for

Affirmed.