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Koerkel v. Board of Review


October 2, 2009


On appeal from the Board of Review, Department of Labor, Docket No. 183,810.

Per curiam.


Submitted September 23, 2009

Before Judges Axelrad and Espinosa.

Leona Koerkel was discharged from her employment as a procurement specialist in March 2008. Initially, she was awarded unemployment benefits. Her employer, BKM Resources, Inc. ("BKM"), appealed. The Appeal Tribunal reversed that decision, and disqualified her from receiving six weeks' benefits pursuant to N.J.S.A. 43:21-5(b) on the grounds that she was discharged for misconduct connected with her work. The Board of Review affirmed the Appeal Tribunal's decision. She appeals from that final determination. We reverse.

Koerkel was employed as a procurement specialist, earning approximately $36,000, from May 2, 2005 to March 5, 2008. The only witness for the employer at the appeal hearing was Joyce Mayo, BKM's general manager. She testified that the reason for the discharge was Koerkel's "performance on an IBM bid" that was submitted in November 2007. Koerkel was required to comply with guidelines for the purchasing department regarding pricing. Mayo explained that in the bidding process the procurement person gets all the costs from the vendor in question and then bases the price offered to the customer on those costs. If a bid resulted in a profit of less than $300 per order, management approval was required. Mayo had no personal knowledge as to whether Koerkel communicated with the president of the company regarding the IBM bid.

Mayo stated that Koerkel had received emails alerting her that fuel surcharges must be included in the sale price quoted to IBM. The contract with ChemTrade, the supplier supplying the sulfuric acid for the IBM contract, included a fuel surcharge that was not incorporated in the price to IBM. As a result, BKM would lose money on every order. Mayo stated that BKM "wanted to make sure that it wasn't the vendor that made the error and we found out that it was [Koerkel] that made the error with all the back up information." Although BKM knew as early as January 2008 that the product was "under bid" in the IBM contract, BKM's president signed the final contract in March 2008, knowing that it would result in a financial loss. Mayo stated that BKM had to go ahead with the contract because it could not obtain another source for the product to be sold to IBM. The initial loss was $40 per shipment. However, Mayo stated that the supplier has since increased the price on the product and, as a result, BKM was losing close to $4000 a shipment at the time of the hearing. No evidence was presented to support a conclusion that an error by Koerkel was the cause of anything more than the initial $40 per shipment.

Mayo testified that Koerkel made an error on a different order in August 2007. She told Koerkel that she would be terminated if she made a similar error. However, Mayo admitted that she did not think that Koerkel intentionally submitted a bid to undermine the company and cause it financial loss.

Koerkel testified that she was told that she was discharged for "job performance." She admitted that she failed to ask the vendor if there was going to be a fuel surcharge because BKM had never paid a fuel surcharge to that vendor in the past. Koerkel also admitted that the failure to incorporate the fuel surcharge in the IBM contract resulted in a loss of approximately $40 per delivery.

Koerkel maintained that the only error was in the failure to address the fuel surcharge in the contract. She stated that the pricing to the customer was not below BKM's cost and, further, that the pricing was approved by BKM's president, Reche Kirkland:

The pricing was negotiated with Reche Kirkland. He sat with me and went over all of the prices before I put it in for the last round. He actually was involved in negotiations with a few of the products. He was involved in negotiations with one of the other products to IBM with another vendor.

I spoke with him at least five or six times.

One on one he sat in my office. He went over all the prices. He went over all of the profit margins and he actually approved them.

In fact, Koerkel testified that Kirkland told her, "[D]o whatever you need to do to get this business." She stated that she told Kirkland that she did not negotiate the fuel surcharge. He said, "[O]kay. Fine." He crossed it out of the contract and sent it in. He suggested that they could switch vendors in the following year. The contract was never executed by ChemTrade. As noted, Kirkland did not testify at the appeal and Mayo had no personal knowledge regarding these conversations.

Beginning January 15, 2008, Koerkel was out of the office due to disability for approximately one month. To her surprise, upon her return she learned that the contract had not been renegotiated.

Koerkel denied underbidding the contract intentionally. She admitted that she was negligent regarding the fuel surcharge and that the "mistake" she made was relying upon the past history in which both BKM and its vendors waived fuel surcharges.

Koerkel raises the following point on appeal:



We are mindful of the deference to be paid to administrative agencies' findings of facts. However, we are not "bound by the agency's interpretation of a statute or its determination of a strictly legal issue." Utley v. Bd. of Review, 194 N.J. 534, 551 (2008); see also Brambila v. Bd. of Review, 124 N.J. 425, 437 (1991); Evans v. Atlantic City Bd. of Educ., 404 N.J. Super. 87, 90 (App. Div. 2009).

The gist of the charge against Koerkel is that she made a mistake, did not correct the error and did not advise her supervisor that she had made a potentially costly mistake. She was denied six weeks of unemployment benefits on the grounds that these actions constituted misconduct pursuant to N.J.S.A. 43:21-5(b). That statute provides for such disqualification for "misconduct" but does not define the conduct that would provide a basis for its application. N.J.A.C. 12:17-10.2(a) defines "misconduct" as follows:

(a) For an act to constitute misconduct, it must be improper, intentional, connected with one's work, malicious, and within the individual's control, and is either a deliberate violation of the employer's rules or a disregard of standards of behavior which the employer has the right to expect of an employee. [(Emphasis added).]

The employer bears the burden of proving that the employee's conduct constituted such misconduct. N.J.A.C. 12:17-10.2(b).

To meet this burden, the employer must satisfy the two criteria established by N.J.A.C. 12:17-10.2(a). This requires proof of both intentional conduct that rises to the level of malice and a deliberate violation of rules or disregard of standards of behavior.

In reversing the deputy, the Appeals Examiner stated:

The employer suffered a financial loss due to this omission in the contract to the client. This was not in the best interest of the employer. This, which was the cause of the discharge, and was a disregard of the standards of behavior which the employer has a right to expect of his employees and constitutes misconduct with the work.

[(Emphasis added).]

The Appeals Examiner's decision here reflects an erroneous interpretation of the applicable standard for misconduct. At best, both the charge and the finding support only the second of the criteria required by N.J.A.C. 12:17-10.2(a). The Appeal Tribunal's decision, affirmed by the Board of Review, included no findings as to whether Koerkel's "misconduct" was "improper, intentional, connected with one's work, malicious, and within the individual's control." See N.J.A.C. 12:17-10.2(a). Because these descriptions are included in the conjunctive rather than the alternative, findings of both malice and intent were necessary to satisfy this prong of the criteria.

Moreover, the record here cannot support a finding of malicious intent. Koerkel denied such intent. Upon direct inquiry by the Appeals Examiner, the employer agreed:

Q: My question to you would be do you feel that she intentionally undermined the company's business by intentionally putting this bid out there to the customer to cause you financial loss?

A: I don't think that she intentionally did that. I think she so intentionally did not follow instructions.

In order to sustain its burden of proving misconduct, the employer was required to show both (1) that Koerkel acted with malicious intent and (2) that there was "either a deliberate violation of the employer's rules or a disregard of standards of behavior which the employer has the right to expect of an employee." N.J.A.C. 12:17-10.2(a). The Board of Review's determination that proof of a disregard of standards of behavior constituted disqualifying misconduct was legally insufficient. The lack of any evidence of malicious intent in the record here makes it unnecessary for us to remand for additional findings.



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