In 1988, the Michigan Supreme Court issued its decision in Storey v Meijer, Inc. holding that a decision awarding or denying unemployment compensation benefits in Michigan cannot be used by either the employer or the employee in subsequent civil litigation.
William Storey was employed by Meijer, Inc. as a gas station manager in Battle Creek. One of his duties was to check the price of gas and other petroleum products at competing gas stations in that area. Storey used his personal vehicle for this purpose, and was reimbursed for the mileage driven in order to complete this task. In June 1982, Meijer, Inc. discharged Storey for allegedly having submitted expense account vouchers claiming reimbursement for more mileage than was actually driven.
After initially being denied unemployment benefits, a hearing referee concluded that Storey’s failure to complete his expense vouchers according to proper procedures was a “good-faith error in judgment.” The referee concluded that Meijer had established neither employee theft nor misconduct.
Meijer appealed the decision to the MESC Board of Review. The board reversed the referee’s determination and found Storey ineligible for benefits because of theft. Storey appealed the Board of Review’s determination into the court system; however, the board’s decision was upheld.
While the unemployment matter was pending before the Board of Review, Storey filed a wrongful discharge action in circuit court against Meijer. After the board’s finding of disqualification for unemployment benefits, Meijer asked the court to dismiss the wrongful discharge lawsuit. The basis for Meijer’s motion to dismiss was that collateral estoppel barred Storey from relitigating the issue of whether his discharge was for employee theft. The circuit court granted Meijer’s motion to dismiss Storey’s lawsuit.
Storey appealed the dismissal of his lawsuit, and eventually the case made its way to the Michigan Supreme Court. The Supreme Court’s decision reversing the dismissal in favor of Meijer made clear that a ruling in a case before the MESC to determine eligibility for unemployment compensation benefits has no collateral estoppel effect on employment litigation arising out of the same facts and circumstances.
The Supreme Court examined §11(b)(1) of the Employment Security Act – which states that unemployment “information” and “decisions” shall not be used in court or before an administrative tribunal – to determine that the legislature intended to “isolate MESC determinations within the narrow confines of eligibility for benefits, leaving resolution of labor disputes, civil rights violations and contract disputes to forums more uniquely adapted to resolution of those disputes.”
In addition to holding that the Act itself precluded using an unemployment determination to determine the outcome of a subsequent lawsuit, the Supreme Court also reasoned that the Employment Security Act was designed to get “money into the pocket of the unemployed worker at the earliest point that is administratively feasible.” The application of collateral estoppel could penalize an unemployed worker who, unaware of the consequences and perhaps not represented by counsel, pursued a claim for unemployment benefits. Allowing collateral estoppel to be applied to determinations of the MESC could force both claimants and employers to fully litigate the administrative claim, potentially delaying the determination of benefit rights and burdening the unemployment compensation system.
The ruling in Storey v Meijer, Inc. has remained the law in Michigan for over 20 years. An employer either winning or losing an unemployment appeal should not evaluate that decision as a measure of how that former employee may prevail before a court or other administrative agency. Although it is important to fully represent the reasons why a former employee should be ineligible for unemployment compensation, a ruling in favor of the employee does not mean he or she will be equally successful in any other employment related legal proceeding.
If you have any questions about unemployment matters or the interplay between unemployment claims and employment-related litigation, please contact any member of Varnum’s Labor and Employment Practice Team.