Distinction Between Regular and Gross Misconduct By Employees Revisited

The House Labor Committee heard testimony last week on a bill to reverse a change made last year to New Hampshire's unemployment statute. While the change in either direction has a direct financial impact on only a small subset of employers, last year's change was characterized by some as a "license to steal" and most businesses quietly support reversion to the original language or some other option to improve the law.

The issue is the definition of "gross misconduct". The original statute defined gross misconduct as "arson, sabotage, felony, assault which causes bodily injury, criminal threatening, or dishonesty connected with his or her work". Last year's change deleted "dishonesty connected with his or her work" and replaced it with "theft of an amount greater than $500."

Over time, the dishonesty standard for gross misconduct had been used to sanction employees who stole from their employers. Proponents of last year's change successfully argued that taking a cup of coffee without putting fifty-cents in the petty cash box should not be treated the same as embezzlement of thousands of dollars over a long period of time, and that the enhanced penalty for gross misconduct, namely ineligibility for unemployment benefits at the time of firing and the loss of all wage credits earned prior to the date of such dismissal, is too harsh for small offenses. Indeed, the other offenses listed in the gross misconduct definition are all felonies under the criminal code, and the current $500 threshold was chosen because that was the standard for felony theft when the change was made last year.

Opponents of last year's change, who now support this year's bill, feel differently, however. They believe stealing in the workplace is an increasing problem and is a serious enough offense at any level for the stricter punishment to attach.

It is important to emphasize that whatever the definition of "gross misconduct", an employee who is fired for stealing any amount is not eligible to collect unemployment benefits. This is because stealing any amount would rise at least to the level of regular misconduct under the statute. The difference between regular and gross misconduct becomes significant only when the employee gets a subsequent job, meets criteria to regain eligibility for benefits, and then is discharged from the subsequent job through no fault of his own. If the original firing was for regular misconduct, the time period to regain eligibility at the next job is shorter and the benefits are generally higher. If the original firing was for gross misconduct, all wage credits are lost and it takes longer to become eligible for benefits that are generally lower.

As noted previously, the difference between regular and gross misconduct has a direct financial impact on only a small subset of employers; namely, non-profit organizations that choose to be reimbursable rather than contributing employers. The House Labor Committee was informed, and it is true, that a contributing employer who discharges an employee for either regular or gross misconduct will not have the account charged or the tax rate affected even if the employee becomes eligible for benefits after working for another employer. But, reimbursable employers - in other words, those employers who do not pay the unemployment tax up front but instead reimburse the state for benefits paid out on a case-by-case basis - do have an ongoing financial liability. Ironically, these employers are often health and social services providers who take theft of small amounts even more seriously than do other types of employers because the theft might be from patients, residents or other types of clients rather than from the organization itself. For them, theft in any amount or of any thing is very serious business.

It is true that the dishonesty standard that once existed in the statute, and which HB 26 seeks to reinstate, is somewhat vague and could lead to inconsistent rulings or excessive punishment for some small offenses. However, "theft of an amount greater than $500" is not the right solution and the House Labor Committee should either revert to the previous standard, even with its flaws, or find new language that will provide greater clarity and an appropriate distinction between the two types of misconduct.