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Frank v. Heartland Automotive Services, Inc.: EMPLOYMENT - intentional fraud not single-incident exception to misconduct

Filed January 15, 2008
Ross, Judge
Department of Employment and Economic Development
Agency File No. 468945540
David Frank, P.O. Box 585, Big Lake, MN 55309 (pro se relator)
Heartland Automotive Services, Inc., P.O. Box 6007, Omaha, NE 68106-0007
Lee B. Nelson, Department of Employment and Economic Development, First National
Bank Building, 332 Minnesota Street, Suite E200, St. Paul, MN 55101-1351 (for
respondent Department of Employment and Economic Development)
Considered and decided by Dietzen, Presiding Judge; Ross, Judge; and Harten,
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, 10.
David Frank,
Heartland Automotive Services, Inc.,
Department of Employment and Economic Development,
When an employee on one occasion intentionally charges one of his employers
customers for a service that the employee knows was not performed, the employees
fraudulent charge does not qualify as a single-incident exception to employee misconduct
in Minnesota Statutes section 268.095, subdivision 6.
ROSS, Judge
This case arises from an automobile-service managers fraudulent charge to a
customer for a service that the manager knew had not been performed on the customers
car. David Frank appeals from an unemployment-law judges finding that Frank was
discharged for employee misconduct and was therefore disqualified from receiving
unemployment benefits after his employer discharged him for the fraudulent charge.
Frank denies knowing that the service had not been performed, and he alternatively
contends that if he did knowingly charge the customer incorrectly, it was merely an
isolated incident that is excepted from employment misconduct. Because we hold that
substantial evidence supports the unemployment-law judges finding that Frank
intentionally charged the customer for a service that Frank knew was never performed,
and because an employees fraudulent charge to his employers customer is not the kind
of single incident that is excepted from misconduct under the statute, we affirm the
decision that Frank committed disqualifying employee misconduct.
David Frank worked as a store manager for Heartland Automotive Services at a
Jiffy Lube store in Monticello. On May 27, 2006, Frank sold a customer a signature
service oil change, serpentine belt service, and transfer-case service. Frank asked
employee Jon Shinnick to perform the requested services, but Shinnick soon informed
Frank that he would be unable to perform the transfer-case service because the vehicles
structural design made it impossible. Frank came to the service bay to examine the
vehicle, and he determined that Shinnick was correct; the cars design prevented access.
Frank told Shinnick to proceed without doing the transfer-case service, and he informed
two other employees that the transfer-case service could not be performed.
Shinnick completed the other services. As Frank was preparing the invoice,
assistant manager Jake Zoccoli reminded Frank that the transfer-case service had not
been performed. Frank expressed disappointment, noting that transfer-case service was
one of the big nine, which is a group of services that employees are encouraged to sell
and that entitle them to bonuses. But the invoice that Frank completed charged the
customer for the transfer-case service, and the customer paid in full. Another employee
later pointed out to Zoccoli that the company computer reflected the charge for the
transfer-case service. Zoccoli spoke with Shinnick, who confirmed that he had not
performed that service. Zoccoli reported the discrepancy to the district manager.
It violates Heartlands code of conduct for an employee to create a false invoice or
include unperformed services on an invoice to increase statistics or to deceive a customer
or the company. Heartland investigated Zoccolis report and then discharged Frank for
falsifying an invoice and charging a customer for a service that was not performed.
Frank sought unemployment benefits from the Department of Employment and
Economic Development, and Heartland opposed the request, contending that it had
discharged Frank for employment misconduct. An unemployment-law judge (ULJ)
conducted a hearing in September 2006 to decide the issue. Frank contended that he had
not intentionally billed the customer for the transfer-case service, which he admitted was
not performed on the customers car. The ULJ found that Zoccolis inculpatory
testimony was more credible than Franks denial and that the preponderance of the
evidence showed that Frank knew that the transfer-case service was not performed but
billed to the customer regardless. He found that Franks action exposed Heartland to
liability for fraud and possible property damage and demonstrated a substantial lack of
concern for Heartland. The ULJ concluded that Heartland terminated Franks
employment for employee misconduct and that Frank was therefore disqualified from
receiving unemployment benefits. Frank requested reconsideration and the ULJ
affirmed. This certiorari appeal follows.
I. Is the unemployment law judges decision that Frank intentionally and
fraudulently billed a customer supported by substantial evidence?
II. Does Franks single act of intentional and fraudulent billing constitute employee
Frank challenges the ULJs factual determination that led to the conclusion that
Heartland discharged him for employment misconduct. He specifically disputes the
finding that he intentionally billed a customer for work that was not performed on the
customers car. A person who is discharged from employment is eligible to receive
unemployment benefits unless discharged for misconduct. Minn. Stat. 268.095, subd. 4
(2006). Whether an employee has committed misconduct is a mixed question of fact and
law. Schmidgall v. FilmTec Corp., 644 N.W.2d 801, 804 (Minn. 2002). It is a question
of fact whether the employee committed a particular act, and this court reviews an
unemployment law judges findings of fact in the light most favorable to the decision.
Skarhus v. Davannis Inc., 721 N.W.2d 340, 344 (Minn. App. 2006). This court will not
interfere with those factual findings when they are supported by substantial evidence. Id.
The record supports the ULJs factual determination that Frank knew the transfercase
service was not performed and that he knowingly charged the customer for the
service anyway. Frank admits that the customer requested a transfer-case service and that
it was never done. He admits that he knew that the technician he assigned to perform the
service could not perform it. That technician, Jon Shinnick, stated that Frank not only
knew that Shinnick could not perform the service but that Frank told him that service
could not be performed. And Jake Zoccoli testified that, less than one minute before
Frank finalized the bill, he reminded Frank that the service had not been performed. He
also testified that Frank was upset that the transfer-case service could not be done. The
ULJ rejected Franks argument that if he charged the customer incorrectly, it resulted
from his mere clerical mistake. We generally defer to the ULJs credibility assessments
and weighing of the evidence. Id. The ULJ reasonably chose not to credit Franks
testimony. Based on that credibility assessment, the ULJ found that Frank knew that the
service was not performed but that he knowingly charged the customer anyway. This
finding is well supported by the record.
Frank also challenges the ULJs legal conclusion that the fraudulent billing
constitutes misconduct. This court reviews de novo the ULJs conclusion that Franks act
was employee misconduct. Schmidgall, 644 N.W.2d at 804. Employee misconduct is
defined as any intentional, negligent, or indifferent conduct, on the job or off the job (1)
that displays clearly a serious violation of the standards of behavior the employer has the
right to reasonably expect of the employee, or (2) that displays clearly a substantial lack
of concern for the employment. Minn. Stat. 268.095, subd. 6 (2006). Frank cites the
statutory exception that some single incidents may not constitute misconduct, and he
highlights that his misbilling was only a single incident. It is true that a single act that
does not have a significant adverse impact on the employer is excepted from employee
misconduct. Id. But we conclude that even a single fraud on an employers customer is
not an excepted act because customer fraud may be presumed always to have a
significant adverse impact on the employer.
Franks fraudulent billing does not qualify as an exception to employee
misconduct as an isolated incident. In Skarhus, we held that even a single incident of a
cashiers theft from her employer has a significant adverse impact on the employer,
despite the small amount of the theft, because the employer could no longer entrust the
employee with responsibilities necessary to carry out her duty as a cashier. Skarhus, 721
N.W.2d at 344. In that case, we noted that the employees conduct must be considered in
the context of her job responsibilities, and we specifically referenced the employees
responsibility to handle the money of the employer and its customers and to accurately
account for items sold to customers. Id. For the purposes of applying the singleincident
exception to employee misconduct as set forth in section 268.095, subdivision 6,
a cashiers theft from her employer and a service managers theft from his employers
customer carry the same fundamental, significant impact on the employer. They equally
undermine the employers ability to assign to the employee tasks necessary to an
essential function of the employees position. Regardless of the amount or frequency of
the employees fiduciary failing, this sort of integrity-measuring conduct will always
constitute an act that has a significant adverse impact on the employer, who can no longer
reasonably rely on the employee to manage the businesss financial transactions. We
therefore conclude that Franks fraudulent charge to Heartlands customer constitutes a
single act with a significant adverse impact on his employer.
Frank also argues that Heartland arbitrarily selects which policy violations to
punish, and which not to. See Bautch v. Red Owl Stores, Inc., 278 N.W.2d 328, 331
(Minn. 1979) (An employers condonation of an employees wrongful conduct is a
mitigating factor which may cause the employer to waive its right to discharge the
employee on the basis of such misconduct.). But he presented the ULJ with no evidence
that Heartland condones charging customers for services not performed. Franks claim
that Heartland previously encouraged employees to charge customers for a full service
after performing only partial service was unconvincing to the ULJ and is therefore
insufficient to show that Heartland waived its right to challenge Franks request for
unemployment benefits after it discharged him for billing a customer for a service that he
knew was not performed.
We affirm the ULJs decision because the record supports the finding that the
employee knowingly charged a customer for a service that the employee knew was not
performed and because fraud on the customer does not qualify as a statutory singleincident
exception to employment misconduct.


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