## Facts

- Anita Merlino worked for Nordic Fisheries, Inc. (Nordic) in both its wholesale and retail fish operations.
- Merlino’s husband also worked for Nordic.
- While still employed by Nordic, Merlino’s husband opened a retail fish store about three miles from Nordic’s retail store, in an area from which Nordic drew a substantial portion of its business.
- Merlino’s husband signed the new store’s lease in his individual capacity, and the business was owned solely in his name.
- Merlino acknowledged she would be involved in operating her husband’s new business.
- At the time Nordic discharged Merlino, the only acts attributed to her in connection with the new store were:
  - using an approved personal day to attend the store’s grand opening; and
  - signing a health-department inspection report for the new store.
- Nordic discharged Merlino (and her husband), stating that the new store created a conflict of interest because it competed with Nordic.
- Merlino applied for unemployment compensation benefits.
- The claim was denied under Section 402(e) of the Pennsylvania Unemployment Compensation Law on the ground that Merlino’s conduct amounted to willful misconduct.
- The Unemployment Compensation Board of Review affirmed the denial, and Merlino appealed to the Commonwealth Court.

## Issues

1. Whether Merlino’s limited, pre-termination actions relating to her husband’s competing fish store constituted willful misconduct connected with work under Section 402(e), disqualifying her from unemployment compensation benefits.
2. Whether the employer met its burden to show that Merlino, by her own conduct (as opposed to her husband’s business activity), intentionally disregarded Nordic’s interests or violated a work rule to a degree that bars benefits.

## Decision

- The Commonwealth Court reversed the Board’s denial of benefits.
- The court concluded the record did not support a finding that Merlino engaged in willful misconduct under Section 402(e).
- Merlino’s use of an approved personal day to attend the grand opening and her signing of a health inspection document were insufficient, without more, to show disqualifying disloyal competition or a deliberate violation of Nordic’s work expectations.

## Legal Principles

- Under Section 402(e), an employee discharged for willful misconduct is ineligible for unemployment compensation benefits.
- The employer bears the burden of proving willful misconduct connected with work.
- Willful misconduct may be shown by conduct such as a deliberate violation of an employer rule, a wanton or willful disregard of the employer’s interests, or a disregard of standards of behavior an employer may reasonably expect.
- In conflict-of-interest or competition cases, disqualification requires proof of the claimant’s own intentional, work-connected misconduct; a discharge based on an employer’s concern about competition does not, by itself, establish willful misconduct.
- Minimal or incidental involvement in a spouse’s separate business—especially conduct occurring on personal leave and not shown to misuse the employer’s time, property, customer relationships, or confidential information—may be insufficient to prove willful misconduct.

## Conclusion

Merlino holds that an employer’s decision to terminate an employee due to a perceived conflict arising from a spouse’s competing business does not automatically bar unemployment compensation; where the claimant’s proven conduct is limited to minor, authorized, and largely administrative acts, the employer fails to establish willful misconduct under Section 402(e), and benefits must be awarded.


Merlino v. Unemployment Compensation Board of Review, 113 Pa. Commw. Ct. 209, 536 A.2d 863 (1988)