Wisconsin Supreme Court Rules Thieving Employees Were Wrongfully Terminated

The court held that municipal theft citations qualify as "arrest records" under the Wisconsin Fair Employment Act.

The Wisconsin Fair Employment Act prohibits terminating an employee because of an “arrest record.” In Oconomowoc Area School District v. Cota, 2025 WI 11, the Wisconsin Supreme Court interpreted “arrest record” broadly to include municipal theft citations. And while this interpretation makes some intuitive sense, the odd result is that an employer was held to have wrongfully terminated two employees who received municipal theft citations for stealing from their employer.

The Wisconsin Fair Employment Act’s restriction on terminating an employee for an “arrest record” turns on the statute’s expansive definition of that term. Wisconsin Stat. § 111.32(1) defines “arrest record” to include, without limitation, all of the following:

information indicating that an individual has been questioned, apprehended, taken into custody or detention, held for investigation, arrested, charged with, indicted or tried for any felony, misdemeanor or other offense pursuant to any law enforcement or military authority.

In this case, two brothers, Gregory and Jeffrey Cota, worked on the Oconomowoc Area School District’s grounds crew. A co-worker accused them of pocketing cash from scrap metal sales the Cotas performed for the District. The District conducted an investigation and determined that more than $5,000 in scrap metal proceeds failed to make it to the District. However, the District could not definitively determine that the Cotas were at fault, so it turned the investigation over to the local police.

The police investigation did not uncover any new information, but eleven months after the investigation began, the Cotas were cited for municipal theft. Then, another year later, an assistant city attorney told the District that he believed he could obtain convictions against the Cotas. The next day, the District terminated the Cotas, explaining that it had learned that the Cotas “were, in fact, guilty of theft of funds from the School District.”

Thereafter, the Cotas filed claims of arrest-record discrimination with the Wisconsin Department of Workforce Development. After two stages of administrative review, the Labor and Industry Review Commission (LIRC) held that the District wrongfully terminated the Cotas based on their municipal theft citations. On appeal, District II of the Wisconsin Court of Appeals reversed, holding that a municipal theft citation does not qualify as an “arrest record” under § 111.32(1).

In a 5-2 decision authored by Justice Dallet, the Wisconsin Supreme Court reversed and reinstated LIRC’s wrongful termination determination. It concluded (1) that the definition of “arrest record” is broad enough to include municipal theft citations, and (2) that LIRC’s determination that the District terminated the Cotas based on their municipal theft citations was supported by substantial evidence.

On the statutory interpretation question, the majority explained:

The District argues that the phrase “any . . . other offense” in § 111.32(1) refers only to criminal offenses under the laws of jurisdictions that do not classify crimes as either felonies or misdemeanors. Under this interpretation, the Cotas are not protected by the Act, since they were cited for a non-criminal offense. By contrast, the Cotas and LIRC assert that “any . . . other offense” includes both criminal offenses from jurisdictions that do not classify crimes as either felonies or misdemeanors and non-criminal offenses under Wisconsin law.

We agree with the Cotas and LIRC. The ordinary meaning of the phrase “any . . . other offense” includes violations of both criminal and non-criminal laws. Indeed, this is how the term “offense” is consistently used throughout our statutes, and nothing in the structure or remaining text of § 111.32(1) suggests a narrower meaning. Furthermore, interpreting “any . . . other offense” to include non-criminal offenses serves the Act’s express statutory purpose of “protecting by law the rights of all individuals to obtain gainful employment and to enjoy privileges free from employment discrimination because of . . . arrest record . . . .” Wis. Stat. § 111.31(2).

In light of the court’s interpretation of “arrest record,” the question became whether the District terminated the Cotas because of their municipal theft citations (as opposed to the District’s own investigation). This issue implicated Wisconsin’s so-called “Onalaska defense.” Named for the court of appeals’ decision in City of Onalaska v. LIRC, 120 Wis. 2d 363, 354 N.W.2d 223 (Ct. App. 1984), the Onalaska defense stands for the proposition that an employer may terminate an employee with an arrest record, provided it does not (1) rely on the arrest record when making the termination decision or (2) discriminate against the employee because of the arrest record.

Here, the court held that the Onalaska defense did not apply because LIRC found, as a factual matter, that the District did rely on the municipal theft citations when it terminated the Cotas. As a factual finding, that determination was subject to the deferential “substantial evidence” standard of review, which the court held was satisfied here. Thus, the court held that the District wrongfully terminated the Cotas based on municipal theft citations they received for stealing from the District itself.

Even the majority appeared to acknowledge this was a strange result. It went out of its way to clarify that its decision does not forbid terminating employees with arrest records:

Before we conclude, we clarify that the Act does not prohibit terminating employees with arrest records. Rather, it prohibits terminating employees because of their arrest records. The District thus 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 District in fact believed the Cotas were guilty independent of their arrest records, it could have terminated them because of that belief.

Justice Protasiewicz added a solo concurrence “to call attention to the oddity of this outcome and to recommend that our statutes better accommodate employers who are victims.” She elaborated:

So we are left with a strange result. The District was the victim of an offense and suspected its employees did it. It could have fired the employees, but instead asked law enforcement to investigate. Because law enforcement investigated, the employees had an arrest record which limited the District’s ability to fire the employees. In the end, under today’s decision, the District may not fire the employees it believes stole from the District.

. . .

[T]his case highlights how our statutory scheme breaks down when an employer is the victim of an offense and seeks law enforcement intervention. I urge the legislature to address this unjust situation.

The two dissenters—Chief Justice Ziegler and Justice Rebecca Grassl Bradley—each filed their own dissents. Both dissents advanced arguments that the majority applied the wrong standard of review. Justice Bradley’s dissent argued: “The majority mistakes a conclusion of law for a finding of fact. Whether an employer unlawfully terminated an employee based on his arrest record is a conclusion of law . . . .” Chief Justice Ziegler agreed that “the majority erroneously treats a legal question—whether the employer terminated the employees because of their arrest records—as a factual one.” Both dissents also argued that even if the basis of the District’s termination decision presented a question of fact, LIRC’s finding was not supported by the record.

As noted at the outset, this case yields a strange result. After Cota, employers will think twice before contacting the police to investigate employee misconduct. A police investigation will inevitably produce an “arrest record,” which will limit the employer’s options when deciding whether to discipline or terminate the offending employee. In an era of divided government, I’m not sure the legislature will heed Justice Protasiewicz’s call for legislative intervention, but it is an area where clarification would be beneficial.