Spencer Law Office v. Department of Workforce Services , 302 P.3d 1257 ( 2013 )

2013 UT App 138_________________________________________________________
THE UTAH COURT OF APPEALS
SPENCER LAW OFFICE, LLC,
Petitioner,
v.
DEPARTMENT OF WORKFORCE SERVICES,
WORKFORCE APPEALS BOARD,
Respondent.
Memorandum Decision
No. 20110915‐CA
Filed May 31, 2013
Original Proceeding in this Court
Stephen D. Spencer, Attorney for Petitioner
Jaceson R. Maughan, Attorney for Respondent
JUDGE STEPHEN L. ROTH authored this Memorandum Decision, in
which JUDGES GREGORY K. ORME and JAMES Z. DAVIS concurred.
ROTH, Judge:
¶1 Spencer Law Office, LLC (Spencer) challenges the decision
of the Workforce Appeals Board (the Board) that a former
employee (the Claimant) was entitled to unemployment benefits
because Spencer had not discharged him for just cause. We decline
to disturb the Board’s decision.
¶2 In the middle of a work week, Spencer was approached by
one of his employees, a first‐year associate attorney (the Attorney),
who explained that he would be leaving his position effective the
following Monday and going into practice for himself. The
Attorney also informed Spencer that the Claimant, a non‐attorney
legal assistant, would be leaving with him. Immediately after his
conversation with the Attorney, Spencer confronted the Claimant
and asked him how long he had been planning to leave and join the
Attorney’s new practice. The Claimant did not deny that he was
considering a job offer from the Attorney but explained that the
Spencer Law v. Department of Workforce Services
Attorney had made the offer only a day or two before. The
Claimant also described some of the ways he thought that he and
the Attorney could better run a practice—for example, reducing
overhead costs by leasing a more cost‐effective office space in the
downtown area. However, the Claimant told Spencer that he
needed to discuss the matter with his wife before making a
decision to leave Spencer’s employment. That evening, Spencer
contacted both the Claimant and the Attorney and terminated their
employment.
¶3 The Department of Workforce Services (the Department)
initially denied the Claimant’s application for unemployment
benefits. The Claimant appealed the Department’s decision, and a
hearing was held before an Administrative Law Judge (the ALJ).
The ALJ awarded unemployment benefits to the Claimant,
concluding that Spencer did not have just cause to discharge the
Claimant. Spencer appealed, and the Board affirmed the ALJ’s
decision. We decline to disturb the Board’s decision.
¶4 Even if an employer has a legitimate reason for discharging
an employee, “not every legitimate cause for discharge justifies a
denial of [unemployment] benefits.” Utah Admin. Code R994‐405‐
201. Rather, unemployment “[b]enefits will be denied if [a]
claimant was discharged for just cause.” Id. (providing further that
benefits may also be denied if the claimant was discharged “for an
act or omission in connection with employment . . . which was
deliberate, willful, or wanton and adverse to the employer’s
rightful interest”). “To establish just cause for a discharge , . . . three
elements must be satisfied:” culpability, knowledge, and control.
Id. R994‐405‐202. Culpability is established if “[t]he conduct
causing the discharge [is] so serious that continuing the
employment relationship would jeopardize the employer’s rightful
interest.” Id. R994‐405‐202(1). Next, “[t]he claimant must have had
knowledge of the conduct expected” by the employer. Id. R994‐405‐
202(2). And finally, “[t]he conduct causing the discharge must have
been within the claimant’s control.” Id. R994‐405‐202(3)(a).
¶5 On review, the Board’s factual findings will be reversed only
if they are not supported by substantial evidence. EAGALA, Inc. v.
Department of Workforce Servs., 2007 UT App 43, ¶ 8, 157 P.3d 334.
20110915‐CA 2 2013 UT App 138Spencer Law v. Department of Workforce Services
“Substantial evidence is more than a mere scintilla of evidence
. . . though something less than the weight of the evidence.” Grace
Drilling Co. v. Board of Review of Indus. Comm’n, 776 P.2d 63, 68
(Utah Ct. App. 1989) (omission in original) (citation and internal
quotation marks omitted). It “is such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion.” Id. (citation and internal quotation marks omitted). In
addition, the Board’s application of the law to a particular set of
facts is given a degree of deference and will not be disturbed if
within the realm of reasonableness and rationality. EAGALA, Inc.,
2007 UT App 43, ¶ 9.
¶6 Here, the Board found that the Claimant had been
considering a job offer but had not yet decided to accept it and
leave Spencer’s employment. The Board reasoned that the
Claimant’s mere consideration of a job offer did not jeopardize
Spencer’s “rightful interest” and therefore concluded that Spencer
did not have just cause to discharge him. In challenging the Board’s
decision, Spencer argues that the Board’s factual findings are not
supported by substantial evidence and fail to accurately describe
the Claimant’s conduct that led to his discharge. Spencer also
argues that the Board’s application of the facts to the law in
reaching its conclusion that Claimant was not discharged for just
cause is not reasonable or rational. We address each of these
arguments in turn.
I. The Board’s Factual Findings
¶7 Spencer asserts that the Board’s finding that the Claimant
was only considering a job offer is not supported by substantial
evidence. Rather, Spencer argues that the facts show that the
Claimant had decided to leave his employment and join the
Attorney in his new practice. Spencer also argues that the Board’s
findings are otherwise insufficient because they understate the
gravity of the conduct that led to the Claimant’s discharge. We
conclude that the Board’s factual findings are supported by
substantial evidence.
A. There Is Substantial Evidence To Support the Board’s Finding
that the Claimant Was Only Considering a Job Offer.
20110915‐CA 3 2013 UT App 138Spencer Law v. Department of Workforce Services
¶8 At a hearing to determine whether the Claimant had been
discharged for just cause, the Claimant testified that when
confronted by Spencer, he had not yet decided whether to accept
the job offer. Rather, he described many of the competing
considerations he was having to weigh in deciding whether to stay
at his current job with Spencer or accept the new job offer. The
Claimant testified that he felt like he was forced to consider the
Attorney’s job offer for his own “economic survival.” However, he
had hoped that there might still be an opportunity to “cure the
relationship” between him and Spencer.1 The Claimant also
explained that he wanted to discuss such an important issue with
his wife before making a decision. According to the Claimant,
when Spencer confronted him, he had not yet decided whether to
remain at his job or depart with the Attorney. At a second hearing
on a related but separate issue involving only the Claimant,
however, the Claimant explained that he had been “realizing [that
he] probably [was] not going to see any kind of an immediate
result” and felt that the situation with Spencer was not reparable
and that he “had no other decision except to try to launch off [with
the Attorney] on [their] own.”
¶9 Spencer contends that the Claimant’s testimony at the two
hearings was contradictory and that his statements at the second
hearing prove that he was not simply considering a job offer but
had already made up his mind to leave. Spencer thus argues that
in light of the totality of the evidence, the Board’s factual finding
that the Claimant was only considering a job offer and had not yet
1. Spencer and the Claimant’s relationship was strained, apparently
because Spencer had fired the Claimant once before, a few weeks
earlier as part of a reduction in force. According to Spencer, he had
hired the Claimant based on the Claimant’s representation that he
would generate a certain weekly revenue, for which he would
receive a certain weekly pay. But after a few months, the revenue
generated by the Claimant was not as high as the Claimant had
predicted, so Spencer laid him off. The next day, however, the
Claimant and Spencer negotiated the Claimant’s return to work at
a lower salary.
20110915‐CA 4 2013 UT App 138Spencer Law v. Department of Workforce Services
made up his mind when Spencer confronted him is not supported
by substantial evidence. We cannot agree. Although Spencer
himself offered testimony that would have supported a contrary
finding, there is nevertheless substantial evidence to support the
Board’s finding.
¶10 The Claimant testified that when he spoke with Spencer, he
had not yet decided whether to leave, thus providing direct
evidence of his state of mind at the time. We cannot conclude that
the Claimant’s testimony at the two hearings is as fatally
contradictory as Spencer argues. At both hearings the Claimant
addressed the various considerations that supported a decision to
leave Spencer’s employment and join forces with the Attorney, and
his statement at the second hearing suggests that his intention to
leave Spencer’s employment was more definite than does his
testimony at the just cause hearing. But his testimony at the just
cause hearing focused on his mind‐set at the particular moment
when Spencer confronted him, while the testimony at the later
hearing addressed his thinking more generally. The fact that a
comparison of the two may support a conclusion that the Claimant
was telling the truth at the second hearing and not at the first does
not foreclose a conclusion that the opposite is true or that the
Claimant was simply irresolute until Spencer discharged him, even
if leaving Spencer’s employment enticed him more than staying.
¶11 Furthermore, Spencer’s testimony that the Attorney told him
that the Claimant had decided to leave and join his practice does
not necessarily undermine the Claimant’s explanation of the
events. Because this information was secondhand and there was no
testimony from the Attorney to explain why he had told Spencer
this, it is not apparent whether Claimant actually had decided to
leave or whether the Attorney only thought the Claimant had made
up his mind. Further, that the Claimant did in fact go into business
with the Attorney after being discharged by Spencer does not
prove that he actually had made up his mind to do so when
confronted by Spencer. Indeed, it is unsurprising that, after being
discharged, the Claimant would accept an available job offer and
that he and the Attorney would proceed with starting a practice
consistent with their prospective plans, regardless of how certain
those plans were at the time of the Claimant’s discharge.
20110915‐CA 5 2013 UT App 138Spencer Law v. Department of Workforce Services
¶12 Ultimately, both the Claimant and Spencer similarly
described their conversation, but they offered conflicting
interpretations of what was said. The Board resolved those conflicts
in favor of the Claimant, and we cannot say that the Board acted
unreasonably in doing so. In the end, “it is the province of the
Board, not the appellate courts, to resolve conflicting evidence,”
and we cannot conclude that the evidence supporting the Board’s
decision was either insubstantial or, as a matter of law, required a
different decision than the Board arrived at with regard to the
Claimant’s intentions at the time he was confronted by Spencer. See
EAGALA, Inc. v. Department of Workforce Servs., 2007 UT App 43,
¶ 16, 157 P.3d 334 (“It is not this court’s place to substitute its
judgment as between two reasonably conflicting views . . . .”
(citation and internal quotation marks omitted)). We therefore
decline to disturb the Board’s finding.
B. Spencer’s Other Factual Allegations Are Not Supported by the
Evidence.
¶13 Spencer also argues that the Board’s findings are inadequate
because they understate the gravity of the conduct that led to the
Claimant’s discharge. Spencer argues that the evidence should
have been construed so as to reach a conclusion that the Claimant
had been plotting with the Attorney to start a new practice and
take Spencer’s clients and then attempted to deceive Spencer about
their plan. Spencer’s argument is not supported by the evidence.
For example, on appeal Spencer has accused the Claimant of
attempting to purposefully conceal his decision to leave so that he
could steal Spencer’s clients. However, at the hearing before the
ALJ, Spencer himself stated that he had “no evidence” to suggest
that the Claimant “had any part in compiling [a] client list before
anyone ever announced . . . [a] contemplation of departure.”2
2. At the hearing, Spencer testified that he had several clients call
and ask for refunds within two to three days after he had
discharged the Attorney and the Claimant. All of these clients,
however, appear to have been “domestic relations clients,” and the
(continued...)
20110915‐CA 6 2013 UT App 138Spencer Law v. Department of Workforce Services
Spencer also relies on evidence that he says shows that the
Claimant was involved in a similar scheme in 2005 to prove that
the Claimant was repeating the same behavior. The Board declined
to consider this evidence, however, and Spencer has not challenged
the basis for the Board’s evidentiary decision. Therefore, there is no
basis in the record for Spencer’s argument in this regard. Spencer’s
arguments that the Board misconstrued the gravity of the
Claimant’s conduct associated with his departure from Spencer’s
employ do not raise a viable challenge to the Board’s findings.
II. The Board’s Determination that the Claimant Was
Discharged Without Just Cause
¶14 Spencer next challenges the Board’s determination that he
did not have just cause to discharge the Claimant. Spencer’s
challenge seems to focus most directly on the culpability element
of the just cause analysis: whether the conduct that resulted in the
Claimant’s discharge was “so serious that continuing the
employment relationship would jeopardize . . . [Spencer’s] rightful
interest.”3 See Utah Admin. Code R994‐405‐202(1). To define the
scope of his “rightful interest” as an employer, Spencer generally
relies on the employee’s fiduciary duty of loyalty to the employer,
in particular an employee’s duty not to compete with his or her
2. (...continued)
Claimant had been involved only with clients who were
defendants in criminal cases where Spencer had been the attorney
of record; there is no evidence that any of the criminal‐defendant
clients called asking for refunds after the Claimant’s discharge.
Based on this information, Spencer conceded at the hearing that
Claimant had not been involved in compiling a client list.
3. Spencer similarly argues that the Claimant is ineligible for
benefits because he was discharged “for an act or omission in
connection with employment . . . , which was deliberate, willful, or
wanton and adverse to the employer’s rightful interest.” Utah
Admin. Code R994‐405‐201. However, he does not assert any
significant legal distinction between these two bases for discharge,
so we focus on the just cause analysis, as did the Board.
20110915‐CA 7 2013 UT App 138Spencer Law v. Department of Workforce Services
employer. Spencer argues that the Claimant engaged in a wide
spectrum of conduct that would violate this duty. At one end of the
spectrum, assuming that the Claimant had decided to accept the
Attorney’s job offer, Spencer argues that the Claimant had a duty
to disclose his plans to leave his current employment and start a
competing practice with the Attorney. But on the other end of the
spectrum, Spencer argues that even if the Claimant was merely
considering the Attorney’s job offer, he nonetheless had a duty to
disclose to Spencer the Attorney’s plans to start a competing
practice as well as the fact that the Attorney had offered him a job.
According to Spencer, the Claimant’s failure to disclose any of this
information violated the duty of loyalty and thus jeopardized his
rightful interest, giving him just cause to discharge the Claimant.
¶15 Spencer criticizes the Board’s decision for not addressing
whether the Claimant breached the duty of loyalty. Indeed, having
found that the Claimant was merely considering a job offer, the
Board did not specifically address whether the Claimant had
breached a duty of loyalty but simply concluded that the
Claimant’s consideration of a job offer was not conduct that would
jeopardize Spencer’s rightful interest. In addition, the Board
reasoned that “[t]here is no indication [that the Claimant] did
anything wrong or acted in a manner that jeopardized [Spencer’s]
rightful interests,” noting that Spencer “testified that he had no
evidence to suggest the Claimant was involved in poaching clients
or using [Spencer’s] resources or proprietary information in order
to work at the new firm.” Notably, some of the facts on which
Spencer’s argument is premised—those that fall on the more
extreme end of the spectrum and involve interpreting the evidence
to find that the Claimant had already made a decision to join the
Attorney in his new practice—are contrary to the Board’s factual
findings, which we have declined to disturb. Those arguments
therefore fail because they lack factual support. But Spencer also
argues that certain conduct by the Claimant that is not foreclosed
by the Board’s factual findings—facts that fall on the other side of
the spectrum and involve the Claimant’s consideration of a job
offer and knowledge about the Attorney’s plan to leave—was also
a violation of his duty of loyalty. He therefore asserts that the
Board erred in failing to address this argument. However, we
conclude that the Board did not err in this regard because the case
20110915‐CA 8 2013 UT App 138Spencer Law v. Department of Workforce Services
law on which Spencer relies does not extend the duty of loyalty as
far as he contends.
¶16 As support for his argument that the Claimant breached a
duty of loyalty by planning to leave for other competing
employment, Spencer cites to Prince, Yeates & Geldzahler v. Young,
2004 UT 26, 94 P.3d 179. There, the court explained that “an agent[,
such as an employee,] is subject to a duty not to compete with the
principal[, such as his employer,] concerning the subject matter of
his agency [or employment].” Id. ¶¶ 20–22 (citation and internal
quotation marks omitted). Based on this rule, the court concluded
that, in particular, lawyers have an “obligation to not compete with
their employer,” which the court defined as “any law firm or legal
service provider who may employ them in a legal capacity, without
the employer’s prior knowledge and agreement.” Id. ¶ 23. Further,
to support his contention that the Claimant should have disclosed
to him not only the job offer but also the Attorney’s plans to leave
and start a competing business, Spencer cites Rash v. J.V.
Intermediate, Ltd., 498 F.3d 1201 (10th Cir. 2007), for the proposition
that an “employee has a duty to deal openly with the employer and
to fully disclose to the employer information about matters
affecting the company’s business.” Id. at 1210 (emphasis, citation,
and internal quotation marks omitted). The court in Rash also
explained that “[a]lthough an employee does not owe an absolute
duty of loyalty to his or her employer, at the very least, an
employee’s independent enterprise cannot compete or contract
with the employer without the employer’s full knowledge.” Id.(citation and internal quotation marks omitted). Based on this
authority, Spencer concludes that the Claimant’s knowledge of or
participation in a plan to depart and start a competing business,
whether or not it involved wrongful conduct such as taking client
lists or poaching clients while still employed, violated the
Claimant’s duty not to compete with Spencer and, therefore,
jeopardized Spencer’s “rightful interest,” giving him just cause to
discharge the Claimant.
¶17 Spencer, however, presents an incomplete analysis of the
case law upon which he relies. In explaining the general concepts
that Spencer uses to support his argument, the court in Rash cites
a case that more fully explains an employee’s duty to disclose
20110915‐CA 9 2013 UT App 138Spencer Law v. Department of Workforce Services
outside employment plans to his employer, Johnson v. Brewer &
Pritchard, PC, 73 S.W.3d 193 (Tex. 2002). See Rash, 498 F.3d at
1207–11. In Johnson, the court explained that an employer‐employee
relationship “is . . . a special [agency] relationship that gives rise to
a fiduciary duty.” 73 S.W.3d at 200. The court cautioned, however,
that “courts . . . should be careful in defining the scope of the
fiduciary obligations an employee owes when acting as the
employer’s agent in the pursuit of business opportunities,” for
although an employee should not compete with the employer for
whom he still works, the “employer’s right to demand and receive
loyalty must be tempered by society’s legitimate interest in
encouraging competition.” Id. at 201. The Johnson court thus
concluded that an “employee may properly plan to go into
competition with his employer and may take active steps to do so
while still employed” and “has no general duty to disclose his
plans to his employer” and, further, that “he may secretly join
other employees in the endeavor without violating any duty to his
employer.” Id. (citation and internal quotation marks omitted). In
contrast, the court in Prince Yeates did not address what an
employee may do in preparing to leave while still acting according
to the duty to not compete with an employer. Rather, Prince Yeates
involved circumstances where the employee clearly competed with
his employer while still employed. See 2004 UT 26, ¶¶ 7, 19, 24.
¶18 Thus, based on the line of authority that Spencer has relied
on, his arguments ultimately fail. Prince Yeates is inapplicable
because it addresses an employee’s duty to not compete with the
employer while still employed. Here, there is no evidence that the
Claimant began competing with Spencer while still employed;
rather, he considered an offer from another employee to leave
Spencer’s employ and then enter into competition with Spencer.
Under Johnson, which seems to fit the circumstances of this case
better than Prince Yeates, the Claimant had “no general duty to
disclose his plans to his employer” and could plan to go into
business with the Attorney and compete with Spencer and could
even “take active steps to do so while still employed” “without
violating any duty to his employer.” Id. (citation and internal
quotation marks omitted). Spencer’s claim that the Claimant
violated a fiduciary duty of loyalty by failing to disclose the
Attorney’s plans or by planning himself to leave with the Attorney
20110915‐CA 10 2013 UT App 138Spencer Law v. Department of Workforce Services
to start a competing practice therefore is not supported by the
authority upon which Spencer relies. As a consequence, Spencer
cannot demonstrate that the Claimant’s conduct “jeopardize[d his]
rightful interest.” See Utah Admin. Code R994‐405‐202(1). Thus, the
Board’s determination was reasonable and rational.
¶19 We conclude that the Board’s factual findings are supported
by substantial evidence. We also conclude that Spencer has not
shown that the Board’s determination that he lacked just cause to
terminate the Claimant exceeds the bounds of reasonableness or
rationality. Accordingly, we decline to disturb the Board’s ruling
that the Claimant was not discharged for just cause.4
4. It may be worth noting that by upholding the Board’s
determination that Spencer did not have just cause to discharge the
Claimant, we are not passing judgment on whether his decision to
do so was unreasonable from the perspective of a business owner
faced with the circumstances that occurred here. An argument can
certainly be made that it was not unreasonable for Spencer to be
concerned about and to take steps to address a perceived threat to
his practice when he discovered that the Attorney was leaving to
compete with him and apparently intended to take another
employee with him, even if the employee was not yet fully
resolved to leave and no breaches of the duty of loyalty had
actually occurred. Under such circumstances, an employer of at‐
will employees might make a legitimate business judgment to
terminate their employment in an effort to protect what he
perceives to be a potential threat to his interests. But as we have
explained, even if an employer has a plausible reason for
discharging an employee, “not every legitimate cause for discharge
justifies a denial of [unemployment] benefits.” Utah Admin. Code
R994‐405‐201.
20110915‐CA 11 2013 UT App 138