## Facts

- Gloria A. Hayes worked for K-Mart in Minneapolis from November 1996 until she quit in June 2002.
- K-Mart policy provided for annual wage adjustments each November; by March 2001 Hayes had not received her November 2000 adjustment.
- In March 2001, the store manager provided the overdue adjustment retroactive to November 2000, promoted Hayes to toy-department manager, and gave her a promotion-related raise.
- At that meeting Hayes requested an additional hourly raise beyond the promotion raise; the manager said they would meet again in May and that he would “do something” about a raise.
- Hayes made repeated efforts to schedule the May follow-up meeting but was unable to meet with the manager.
- In November 2001, Hayes received her regular annual adjustment.
- In June 2002, after learning the manager was leaving, Hayes again asked about the additional raise; the manager said he would “take care of it” before he left.
- The promised additional raise was never provided; Hayes resigned and applied for unemployment benefits.
- An unemployment law judge and the commissioner’s representative denied benefits, although the commissioner’s representative found that the manager made and breached an oral promise to secure an additional raise, reasoning Hayes failed to prove the specific amount promised.

## Issues

1. Whether an employer’s failure to provide a promised pay increase constitutes “good reason caused by the employer” under Minn. Stat. § 268.095, such that an employee who quits is not disqualified from unemployment benefits.
2. Whether eligibility depends on the employee proving the precise amount of the promised raise.

## Decision

- The Minnesota Court of Appeals reversed the commissioner’s representative.
- The court held that K-Mart’s failure to provide the promised additional raise was a substantial breach of the employment agreement.
- The breach supplied good reason caused by the employer for Hayes to quit under Minn. Stat. § 268.095, subd. 1(1).
- Hayes was not required to establish the exact amount of the promised raise to show good reason caused by the employer.

## Legal Principles

- An employee who quits is not disqualified from unemployment benefits if the employee quit for a good reason caused by the employer under Minn. Stat. § 268.095, subd. 1(1).
- Good cause to quit is generally established when an employer substantially breaches a term of the employment agreement, including compensation terms.
- An employer’s unfulfilled promise of a pay increase may be treated as part of the employment agreement when made by management and relied upon in the employment relationship.
- For unemployment eligibility based on breach, the material fact is the employer’s failure to honor the promised compensation term; proof of the specific dollar amount is not a prerequisite.

## Conclusion

The court held that K-Mart’s breach of its manager’s promise to provide an additional pay increase gave Hayes good reason caused by the employer to quit, so she was not disqualified from receiving unemployment benefits even without proving the precise amount of the promised raise.


Hayes v. K-Mart Corp., 665 N.W.2d 550 (Minn. Ct. App. 2003)