Little Hands Childcare & Preschool, Inc. v. Employment Appeal Board

IN THE COURT OF APPEALS OF IOWA

No. 19-1072
Filed November 6, 2019

LITTLE HANDS CHILDCARE & PRESCHOOL, INC.,
Plaintiff-Appellee,

vs.

EMPLOYMENT APPEAL BOARD,
Defendant-Appellant,

and

AMY A. HARBST BASCHKE,
Respondent.
________________________________________________________________

Appeal from the Iowa District Court for Dickinson County, Don E. Courtney,

Judge.

The Employment Appeal Board appeals the judicial review ruling by the

district court reversing the Board’s determination that the claimant was discharged

for no disqualifying reason. REVERSED AND REMANDED.

Rick Autry, Des Moines, for appellant.

A. Eric Neu of Minnich, Comito & Neu, P.C., Carroll, for appellee.

Considered by Bower, C.J., and Mullins and May, JJ.
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BOWER, Chief Judge.

The Employment Appeal Board (EAB) determined Amy Harbst Baschke

(“Amy”) was discharged for no qualifying reason from her employment with Little

Hands Childcare & Preschool, Inc. The district court reversed, and the EAB

appeals.1 Because the EAB’s decision was supported by substantial evidence and

was not unreasonable or wholly unjustifiable, the district court erred in reversing

the EAB’s ruling. We reverse and remand for dismissal of the employer’s petition.

A claimant for unemployment benefits may be disqualified by misconduct.

See Iowa Code § 96.5(2) (2018). Iowa Administrative Code rule 871–24.32(1)(a)

defines “misconduct”:

“Misconduct” is defined as a deliberate act or omission by a
worker which constitutes a material breach of the duties and
obligations arising out of such worker’s contract of employment.
Misconduct as the term is used in the disqualification provision as
being limited to conduct evincing such willful or wanton disregard of
an employer’s interest as is found in deliberate violation or disregard
of standards of behavior which the employer has the right to expect
of employees, or in carelessness or negligence of such degree of
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, inadvertencies 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.

See Huntoon v. Iowa Dep’t of Job Servs., 275 N.W.2d 445, 447–48 (Iowa 1979).

Misconduct must be “substantial” to warrant a denial of job insurance benefits.

1
The employer has waived filing an appellate brief. See White v. Harper, 807 N.W.2d
289, 292 (Iowa Ct. App. 2011) (noting an appellee failing to file a brief does not require
reversal; “we will not search the record for a theory to uphold the decision of the district
court,” and we confine ourselves to the objections raised by the appellant).
3

Newman v. Iowa Dep’t of Job Serv., 351 N.W.2d 806, 808 (Iowa Ct. App. 1984).

Disqualification for a single misconduct incident “must be a deliberate violation or

disregard of standards of behavior which the employer has a right to expect.”

Diggs v. Emp’t Appeal Bd., 478 N.W.2d 432, 434 (Iowa Ct. App. 1991).

Here, after a telephonic hearing, an administrative law judge (ALJ)

determined Amy was disqualified for misconduct. Amy appealed to the EAB, which

reversed the ALJ’s ruling.

The EAB wrote:

We have carefully weighed the credibility of the witnesses and
the reliability of the evidence considering the applicable factors listed
above, and the Board’s collective common sense and experience.
We have found [Amy]’s testimony credible. In particular we find
credible that she had a sincere belief that there was black mold in
the infant room, that she based this belief on observation of what
appeared to her to be black mold, and that she did not initiate contact
with parents to inform them of the mold. We find credible [Amy]’s
explanation that one person texted her and she replied mentioning
the possibility of mold. The employer’s testimony to the contrary is
based on what a husband said about a conversation [his] wife had.
It would not be at all surprising that the husband was mixed up about
a detail like who contacted whom first. We also find credible that
[Amy] prompted her father to make report to the State over the
matter. We thus focus on whether [Amy]’s belief in the black mold
was objectively reasonable, and if her actions taken in furtherance of
that belief constitute misconduct. Before doing so we note that
[Amy]’s exhibit was nearly illegible in the form appearing in the record
and so we did not rely on it in making our decision.
In general, “good faith errors in judgment or discretion are not
to be deemed misconduct within the meaning of the statute.” Good
faith under this standard is not determined by the claimant’s
subjective understanding. Good faith is measured by an objective
standard of reasonableness. Otherwise benefits might be paid to
someone whose “behavior is in fact grounded upon some sincere but
irrational belief and where the behavior may be properly deemed
misconduct.” “The key question is what a reasonable person would
have believed under the circumstances.”
It is thus not necessary that the claimant actually be right
about the black mold. All that is necessary is that the claimant had
an objectively reasonable belief that there was black mold which
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might pose a danger to the infants. We find this to be the case. The
employer took substantial actions to try to mitigate the situation, and
had it been patently unreasonable to think the claimant was right it is
unlikely the employer would have done so. Indeed, the trained
ServPro profession was unable to tell if there was black mold based
simply on looking at it. Further the history of rain and [Amy]’s credible
description of her own observations (including olfactory) support that
the belief was reasonable. Moreover since the children are located
in the room where the mold was allegedly located, it would not be
unusual for a parent to be present in that room and thus it is not
incredible that a parent might have observed what looked like mold
and called the claimant to inquire. The record is, at a minimum, clear
that a reasonable person in [Amy]’s position could have reached the
conclusions she did about the mold.
Next up we then examine whether [Amy]’s actions in reaction
to her reasonable belief constitute misconduct. The complaint to the
state need not detain us long, as that is likely privileged, and in any
event is a completely reasonable avenue to take. The
communication with parents is less clear. If we thought, as the
employer asserts, that [Amy] was taking her contact information for
parents and calling or texting each one with a “sky is falling” message
about black mold we likely would find misconduct. Such a
widespread proactive communication would show a lot more
willfulness, going perhaps beyond concern for the infants and more
into a perverse attempt to embarrass the employer. But we do not
perceive that here. Here we have proven by the credible evidence
only a single instance of [Amy] responding to an inquiry. Perhaps
she should have waited and taken the issue to management before
she responded. What she did was give her honest opinion when
asked when she perhaps should have run it by the employer first.
We find credible her testimony that she was motivated out of concern
for the children. Her action of responding when asked, rather than
talking to her superiors first, falls into the category of an isolated
instance of a good faith error in judgment or discretion that is not
misconduct. Turning to the rules the employer alleges to have been
violated the employer alleges falsification but that requires the
claimant to know what she said was false and we do not so find. The
employer also alleges violation of a rule not to contact parents, but
we have found it was the other way around: she responded when
contacted by a parent, she did not initiate the contact. Further any
transgression was at worst a good faith error in judgment. The
employer has failed to prove misconduct.

(Citations omitted.)
5

The employer sought judicial review in the district court. The district court

determined the issue was “one of credibility between the parties, an exercise that

is squarely within the jurisdiction of the EAB, an issue of fact, not law.” The district

court also determined the EAB’s decision was supported by substantial evidence

and “was not unreasonable, arbitrary, capricious, or an abuse of discretion.” These

conclusions required the district court to affirm the EAB’s decision. See Nance v.

Iowa Dep’t of Revenue, 908 N.W.2d 261, 267 (Iowa 2018) (“‘Because factual

determinations are by law clearly vested in the agency, it follows that application

of the law to the facts is likewise vested by a provision of law in the discretion of

the agency.’ We therefore can only reverse the agency’s application of the law to

the facts if we determine the application was ‘irrational, illogical, or wholly

unjustifiable.’” (citations omitted)). The district court thus erred in reversing the

EAB’s ruling. Because the EAB’s factual findings were supported by substantial

evidence and its application of law to the facts was not unreasonable or

unjustifiable, we reverse the district court and remand for a dismissal of the

employer’s petition.

REVERSED AND REMANDED.