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Minnesota Supreme Court holds that Employee Discharged for Lying on her Job Application was Ineligible for Unemployment Benefits due to “Misconduct”

In Minnesota, as in most every state, terminated employees are not eligible for unemployment benefits if they are dismissed for misconduct. In 2003, the legislature amended the statute to define “employment misconduct” as “any intentional, negligent, or indifferent conduct, on the job or off the job that displays clearly: (1) a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee, or (2) that demonstrates a substantial lack of concern for the employment.” However, despite this effort to more clearly define employee misconduct for purposes of unemployment compensation, there remains plenty of room for disagreement, depending upon the facts in each particular case. This dilemma was recently born out in Wilson v. Mortgage Resource Center, Inc. The Minnesota Supreme Court overturned an earlier decision of the Court of Appeals that had found an employee’s misrepresentations about her education on her job application, did not constitute “employment misconduct.” In disagreeing with the Court of Appeals, the Minnesota Supreme Court in effect recognized that employers have the right to reasonably expect the truth from job applicants. Still, the outcome of this case was determined by the particular facts of the case and therefore employers can learn from (and take advantage of) its lessons.

The Wilson case involved an employee, Nina Wilson, who misrepresented on a job application that she had a high school education and GED. The application was for a position at Mortgage Resource Center (MRC), which required, at minimum, a college degree or equivalent experience. Importantly, the MRC application included a notice that providing falsified information was a dischargeable offense. MRC required that applicants sign an acknowledgement of the notice, which Wilson did.

MRC offered Wilson the job, contingent upon a successful background check to verify the details of her application. When the investigation could not verify Wilson’s educational level or GED, MRC requested that she provide documentation. When Wilson failed to do so, she was terminated.

Wilson applied to the Minnesota Department of Employment and Economic Development (DEED) for unemployment benefits, but was denied by an Unemployment Law Judge (ULJ) who found that her discharge was “in large part” a result of the false statements on her application. Wilson appealed her case to the Minnesota Court of Appeals, which found in her favor. Applying a different, more stringent standard of “misconduct” than the ULJ, the Court of Appeals determined that to prevail MRC needed to prove it would not have hired Wilson had it known her true educational background.

Reversing on appeal, the Minnesota Supreme Court rejected the Court of Appeals’ definition of “employment misconduct” under the unemployment compensation statute. The Court reasoned that requiring an employer to prove it would not have hired a candidate if it knew of the false information, though supported by prior precedent, failed to acknowledge the legislature’s amendments to the statute in 2003. Applying the language of the statute as amended, the Court agreed with the DEED ULJ’s decision that, based on the facts in this particular case, Wilson’s false representations in her application about something as important as her educational level met the statutory definition of “employment misconduct.”

It is important for employers to realize that not all resume fraud or falsified statements made by applicants will automatically amount to employment misconduct for purposes of eligibility for unemployment compensation. The following facts proved important to the outcome in the case, and employers are well advised to duplicate them if the job in question warrants doing so:

1. The false statement in this case – achieved level of education – was critical to the job in question; so much so that the written job requirements specified a minimum level of education as a qualification.

2. The application explicitly warned that falsification of information would be grounds for termination. Note: presumably most employers include similar language on their applications; however, a written statement of this sort standing alone probably would not be enough to support misconduct (especially for an employer that did not uniformly enforce it).

3. MRC’s job offer specified that it was conditioned on a satisfactory background check, and although, for various reasons, some time passed between Wilson’s hiring and her discharge, there was no indication that the employer knowingly condoned her false statements on her education.

4. Before discharging Wilson, MRC gave her an opportunity to explain discrepancies between her application and the information from her background check. Of course this likely was legally required under the Fair Credit Reporting Act (FCRA), but Wilson’s failure to respond when given the chance to explain factored into the Court’s decision that her lie was intentional and her educational level was important to MRC’s job offer in the first place.

The Wilson case is highly important to employers because it reversed outdated precedent relied on by the lower courts and clarified the legislature’s intention in amending the statute to favor a more objective definition of “employment misconduct” in the context of unemployment benefits. Employers may now take advantage of this decision by clearly specifying qualifications for each job; requiring each applicant’s written acknowledgement that providing untruthful information in their resume or application, is grounds for discharge; and, of course, paying attention to the results of background checks when discrepancies are identified. Minnesota employers are well aware that if they can prevail before DEED on the “misconduct” issue for purposes of unemployment compensation, their odds are very good in the event their decision to discharge an employee is challenged in some other forum.

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