Appeals Court: Employee Had Just Cause to Resign to Avoid Jeopardy to Security Clearance and Is Entitled to Unemployment Compensation; But Claimant Who Declined Employment Offer Was Not

The Franklin County Court of Appeals issued an interesting unemployment decision this week in which it reversed the UCBR and common pleas court in order to award unemployment compensation to the employee of a military contractor who resigned over a difference of opinion with her boss about reviewing the Wikileaks materials.  Turner v. Mission Essential Personnel LLC, 2012-Ohio-5470.   In that case, the employer had prevailed at every level before reaching the Court of Appeals and had not even entered an appearance or produced evidence at the evidentiary hearing.  The hearing offer described the issue as whether the claimant had just cause to resign her employment from a military contractor doing business in Iraq and Afghanistan based on her disagreement over being asked to access and review the classified materials leaked through Wikileaks for the names of company employees and contractors (in an effort to warn them of their disclosure).   She had contended that her manager’s direction violated directions from the DOD and Secretary Gates (that a single task force would conduct the review) and would have jeopardized the security clearance of herself and the company.  When he directed her subordinates to disregard her objection and demoted her, she resigned.   The company subsequently changed its policy to comply with her interpretation of DOD directives. The Court found the company’s subsequent actions were not relevant to whether she had just cause to resign.  However, upon closer review, it contended that she had just cause to resign in order to preserve her own security clearance because she had been asked to not only access the information, but to scrub (i.e., alter) it and this clearly violated DOD directives as testified by a retired government employee witness who had so advised the claimant at the time at issue.  “[T]he perceived threat to appellant's own security clearance alone would have given her just cause to leave her employment rather than lose this credential, which would have necessarily curtailed her ability to work in her field of experience and expertise.”

 The claimant’s assignment of error reads as follows:

The trial court erred in upholding the Ohio Unemployment Compensation Review Commission's finding that Appellant did not have just cause to quit her employment with Mission Essential Personnel LLP given the uncontroverted evidence that she was pressured to access classified military documents on WikiLeaks.org in contravention of the National Industrial Security Program Operating Manual procedures and a directive by Secretary of Defense Robert Gates, and in refusing to cooperate, was told that she was being demoted from her position as Corporate Director for MEP's National Industrial Security Program.

As explained by the Court, employees who resign have a higher burden of proving their entitlement to unemployment compensation of proving that they had just cause to resign:

In order to collect unemployment benefits, an employee who resigns from employment bears the burden of proving that he or she resigned for just cause. R.C. 4141.29(D)(2)(a);  . . . The term "just cause," in this context, is defined as " 'that which, to an ordinarily intelligent person, is a justifiable reason for doing or not doing a particular act.' "  . . . . A significant factor in assessing whether an employee resigned with just cause is the employee's fault in creating the situation that led to the resignation.  . . .  In cases in which an employee encounters circumstances that might force resignation, the employee must first notify the employer of problems prior to resigning or risk a finding of resignation without just cause. The purpose of such notice is to provide the employer an opportunity to resolve the conflict before the employee is forced to resign.  . . .  Notice to the employer, however, is not alone enough to establish just cause; the employer must have a realistic opportunity to correct the problem.

To support her burden of just cause to resign, the claimant produce evidence of the DOD directive on Wikileaks, a newspaper article about the response of various military organizations to the directive, an extensive collection of emails between the claimant and her manager about the dispute, and a company memorandum reflecting its change in policy to confirm with the claimant’s interpretation of the DOD directive.  “This last memorandum announces that the company may take disciplinary action up to and including termination of employment for unauthorized access because of the risk to future security clearance eligibility for the company and its employees.”
 

At the time, the claimant conferred with a government employee about the issue and had been advised that the actions would jeopardize her security clearance and that of her employer.  Apparently, her manager had directed her to not only access the information, but also to scrub (i.e., alter it).   (Emails were produced with this terminology by one of her subordinates about what he had been asked to do).  That government employee subsequently retired, but testified during the unemployment hearing on behalf of the claimant.

 

The Court refused to consider the employer’s subsequent actions in conforming to the claimant’s interpretation because that information was not available to her at the time she resigned.  Instead, the Court focused on the uncontroverted evidence produced by the claimant about what her manager was asking her and her employees to do and the government employee’s testimony about how it violated the DOD directive to the extent that both the claimant and the company could have lost their security clearances.

The determination of just cause necessarily turns upon particular circumstances of employment. Here, appellant worked for an employer undertaking sensitive national security work under particularly stringent government guidelines designed to preserve and protect important confidential information. When told to access the WikiLeaks.org site, appellant made her case that this violated various  security protocols through numerous emails both to her immediate superior and other individuals in her organization. Steadfast in her belief that not only her own security clearance but that of her employer would be compromised, she explained her position in repeated exchanges of correspondence with responsible individuals, giving her superiors every opportunity to re-examine the implications of their actions. She then consulted with Ms. Dugger, an informed person in a responsible position with a relevant government agency, and received confirmation of her belief that access to the WikiLeaks.org documents was a potential, if not certain, breach of those security protocols expressed in the NISPOM.

 . . . . Beyond the ethical questions raised by Mr. Peltier's demands, the perceived threat to appellant's own security clearance alone would have given her just cause to leave her employment rather than lose this credential, which would have necessarily curtailed her ability to work in her field of experience and expertise. In light of the uncontroverted evidence presented in the record of the course of events leading to her resignation and the government regulatory context in which it occurred, we find that the commission erred in denying appellant's unemployment benefits on the basis that she did not have just cause for resignation.

 

This was not on the only interesting unemployment case this month.  Last week, the Court of Appeals affirmed the determination that the claimant was not entitled to unemployment compensation because he was an independent contractor, not an employee. Henderson v. Ohio Dept. of Job & Family Servs., 2012-Ohio-5382.  The issue focused on whether the claimant’s general labor services for the employer constituted “employment” under the applicable provision of the Ohio Revised Code.

R.C. 4141.01(B)(1) defines "employment" as "service performed by an individual for remuneration under any contract of hire, written or oral, express or implied, * * * unless it is shown to the satisfaction of the director that such individual has been and will continue to be free from direction or control over the performance of such service, both under a contract of service and in fact."

 

As relevant here, R.C. 4141.01(B)(2)(k) includes as employment "[c]onstruction services performed by any individual under a construction contract * * * if the director determines that the employer for whom services are performed has the right to direct or control the performance of the services and that the individuals who perform the services receive remuneration for the services performed." R.C. 4141.01(B)(2)(k) lists 20 factors to be considered in assessing direction or control, and provides that the commission must presume that the employer has the right of direction and control if ten or more of the factors apply. Those 20 factors are: (1) the employer directs or controls the manner or method by which instructions are given to the individual performing services, (2) the employer requires particular training for the individual performing services, (3) services performed by the individual are integrated into the regular functioning of the employer, (4) the employer requires that services be provided by a particular individual, (5) the employer hires, supervises or pays the wages of the individual performing services, (6) a continuing relationship exists between the employer and the individual performing services which contemplates continuing or recurring work, even if not full-time work, (7) the employer requires the individual to perform services during established hours, (8) the employer requires that the individual performing services be devoted on a fulltime basis to the business of the employer, (9) the employer requires the individual to perform services on the employer's premises, (10) the employer requires the individual performing services to follow the order of work established by the employer, (11) the employer requires the individual performing services to make oral or written reports of progress, (12) the employer makes payment to the individual for services on a regular basis, such as hourly, weekly or monthly, (13) the employer pays expenses for the individual performing services, (14) the employer furnishes the tools and materials for use by the individual to perform services, (15) the individual performing services has not  invested in the facilities used to perform services, (16) the individual performing services does not realize a profit or suffer a loss as a result of the performance of the service, (17) the individual performing services is not performing services for more than two employers simultaneously, (18) the individual performing services does not make the services available to the general public, (19) the employer has a right to discharge the individual performing services, and (20) the individual performing services has the right to end the individual's relationship with the employer without incurring liability pursuant to an employment contract or agreement.

The evidence, however, established that he was paid – at his request -- on a 1099, not W-2 basis.   He supplied most of his own tools and was not provided with any training.  The parties disagreed about his ability to set his own work schedule.  He worked for a few other companies on weekends and supplied proof of workers compensation coverage and liability insurance.   The company claimed that he even turned down an offer of full employment with employee benefits.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.