April 24, 2025 – After an employer had police investigate possible theft by employees, the employees’ subsequent discharge violated the Wisconsin Fair Employment Act’s (WFEA) prohibitions against termination discrimination because of an arrest record, a 5-2 supreme court majority decided April 10 in Oconomowoc Area School District v. Cota, 2025 WI 11.

Three justices didn’t like that result. Justice Janet C. Protasiewicz’s concurrence said this “strange result” required legislative revision of the WFEA.

Chief Justice Annette Kingsland Ziegler’s dissent concluded the majority’s statutory interpretation failed to include the legislative purpose of the WFEA as necessary context resulting in a holding that goes against the WFEA’s stated intent.

Justice Rebecca Grassl Bradley’s dissent, joined by Chief Justice Ziegler, critiqued the majority’s decision, which they believed resulted from the majority’s errors in standards of review and caselaw interpretation.

Missing Cash

The Oconomowoc Area School District suspected that members of their grounds crew failed to return to the district all the cash earned from recycled scrap metal. The processor paid for the scrap with cash or checks made out to “cash.”

The district’s internal investigation discovered it was short $5,683.81 of the amount originally paid to the three employees. Conflicting accounts among the three employees prevented the district’s human resources director from concluding who was at fault.

The director recommended that police investigate. “Employment-related disciplinary decisions can be better made following the conclusion of any criminal investigation,” she said.

The Town of Oconomowoc Police Department learned additional information about wrongful use of checks received for the district’s scrap metal, but police discovered no new evidence connecting the shortfall to grounds crew employees Gregory and Jeffrey Cota.

Nonetheless, the Cotas were cited for theft. A year later, the assistant city attorney told the district that he thought he could get convictions or at least a settlement with $500 restitution from the Cotas.

The district fired the Cotas, but the citations were dismissed against them later.

The Cotas filed claims of arrest-record discrimination under Wis. Stat. section 111.321 and section 111.322(1) with the Equal Rights Division of the Wisconsin Department of Workforce Development (DWD). DWD ruled against the Cotas. The Labor and Industry Review Commission (LIRC) reversed.

On judicial review, the circuit court affirmed the LIRC, but the Wisconsin Court of Appeals reversed because it concluded that WFEA’s definition for “arrest record” only applied to criminal offenses.

Arrest Record

After deciding that the WFEA’s definition of “arrest record” in Wis. Stat. section 111.32(1) included non-criminal offenses, the supreme court majority faced review of the LIRC decision.

The LIRC’s findings of facts are reviewable under the standard of “substantial evidence,” which means “reasonable minds could arrive at the same conclusion.”

The majority opinion written by Justice Rebecca Frank Dallet and joined by Justices Ann Walsh Bradley, Brian Hagedorn, Jill J. Karofsky, and Protasiewicz concluded that the LIRC correctly decided that the district had acted to fire the Cotas only after it received information in the arrest records.

The district argued that the “Onalaska defense” protected its decision because the human resources director’s internal investigation motivated in part the district’s decision to terminate the Cotas.

Reviewing City of Onalaska v. LIRC, 120 Wis. 2d 363 (Ct. App. 1984), the majority disagreed. In that case, the employee had admitted to the offense before separation – the district had not relied on the arrest record.

In contrast here, the majority emphasized, “the [d]istrict did rely on arrest-record information.”

“The [d]istrict . . . did not lose its ability to terminate the Cotas by referring the matter to the police, and it remained free to terminate the Cotas after such a referral for any lawful reason. If the [d]istrict in fact believed the Cotas were guilty independent of their arrest records, it could have terminated them because of that belief,” the majority advised.

‘Employers Who Are Victims’

In her concurrence, Justice Protasiewicz agreed that the majority interpreted the statute correctly, arriving “at a strange result.” She recommended the Legislature amend the WFEA to protect “employers who are victims.”

For example, WFEA exceptions allow employers to act on a “pending criminal charge” or conviction when those violations “substantially relate to the circumstances of the particular job.”

The district would not have violated the WFEA had it acted when the human resources director “believed the Cotas stole the money.” The “prudent decision” to ask law enforcement resulted in a WFEA violation from that investigation’s record, Protasiewicz wrote.

“Our statutes should not hamstring employers who are victims that way,” Protasiewicz said. “An employer should be allowed to take employment action when it is the victim of an offense and suspects an employee did it, even when it relies on information from law enforcement.”

‘A Defeat for Employees’

The Legislature enacted the WFEA, according to Wis. Stat. section 111.31(3), “to encourage and foster to the fullest extent practicable the employment of all properly qualified individuals regardless” of a series of categories including “arrest record.”

If an employer must act before law enforcement confirms the employer’s suspicions, employers won’t be able to “give their employees the benefit of the doubt,” Chief Justice Ziegler explained.

“So, instead of protecting the employment of employees, the [WFEA], as the court interprets and applies it, promotes the premature firing of employees suspected of committing offenses.”

“Here, it was the employees stealing from the employer – not their arrest records – that formed the basis for the termination of the employees,” Chief Justice Ziegler said. “The arrest records were mere technicalities after the employer already believed the employees had stolen from it.”

She concluded, “[n]o doubt, the court’s decision is a victory for Gregory and Jeffrey Cota. But the decision may ultimately prove to be a defeat for employees across Wisconsin.”

‘Perversely Incentivize’

Justice R.G. Bradley’s dissent, joined by Chief Justice Ziegler, sees errors in the majority’s standard of review and in interpreting Onalaska, resulting in a “misinterpretation” of the WFEA that “will perversely incentivize employers to fire employees without investigating accusations or suspicions against them[.]”

“The majority mistakes a conclusion of law for a finding of fact,” the dissent explained – as labeled in LIRC’s order – that the Cotas “were discriminated against based upon their arrest records.”

The proper standard of review of an agency’s applying facts to a legal standard is a question of law. The majority treated this conclusion as though it were a statement of fact under the lesser “substantial evidence” standard, the dissent wrote.

But even as a review of a fact, “no reasonable person would conclude the [d]istrict fired the Cotas for any reason other than the fact the Cotas stole from their employer,” the dissent said. “Nothing in the law compels this court to reward the offenders and punish the victim.”

In addition, the dissent said the majority misapplied Onalaska and its progeny, which holds that an employer’s conclusion based on its own investigation means it did not rely upon the employee’s arrest record.

“In this case, the arrest records came about only after the” human resources director “believed the Cotas stole from the [d]istrict and then referred the matter to law enforcement,” the dissent wrote.

The majority, similarly, used the WFEA to find a violation based on the employees’ status, the arrest record, instead of from the employees’ conduct, the theft. Previous LIRC decisions properly applied Onalaska to focus on conduct, the majority clarified.

“Nothing in the [WFEA] compels LIRC to penalize an employer for waiting to terminate an employee until law enforcement corroborates the employer’s conclusion that an employee stole from the employer,” the dissent said.

The WFEA “prohibits an employer from terminating an employee ‘on the basis of’ his arrest record, but an employer can certainly terminate an employee because he stole from the employer.”

This article was originally published on the State Bar of Wisconsin’s Wisbar Court Review blog, which covers case decisions and other developments in the Wisconsin Supreme Court, the Wisconsin Court of Appeals, and the U.S. Court of Appeals for the Seventh Circuit. To contribute to this blog, contact Joe Forward.