in a "using" block is a SqlConnection closed on return or exception?

1. Yes
2. Yes.

Either way, when the using block is exited (either by successful completion or by error) it is closed.

Although I think it would be better to organize like this because it's a lot easier to see what is going to happen, even for the new maintenance programmer who will support it later:

using (SqlConnection connection = new SqlConnection(connectionString)) 
{    
    int employeeID = findEmployeeID();    
    try    
    {
        connection.Open();
        SqlCommand command = new SqlCommand("UpdateEmployeeTable", connection);
        command.CommandType = CommandType.StoredProcedure;
        command.Parameters.Add(new SqlParameter("@EmployeeID", employeeID));
        command.CommandTimeout = 5;

        command.ExecuteNonQuery();    
    } 
    catch (Exception) 
    { 
        /*Handle error*/ 
    }
}

Yes to both questions. The using statement gets compiled into a try/finally block

using (SqlConnection connection = new SqlConnection(connectionString))
{
}

is the same as

SqlConnection connection = null;
try
{
    connection = new SqlConnection(connectionString);
}
finally
{
   if(connection != null)
        ((IDisposable)connection).Dispose();
}

Edit: Fixing the cast to Disposable http://msdn.microsoft.com/en-us/library/yh598w02.aspx

Here is my Template. Everything you need to select data from an SQL server. Connection is closed and disposed and errors in connection and execution are caught.

string connString = System.Configuration.ConfigurationManager.ConnectionStrings["CompanyServer"].ConnectionString;
string selectStatement = @"
    SELECT TOP 1 Person
    FROM CorporateOffice
    WHERE HeadUpAss = 1 AND Title LIKE 'C-Level%'
    ORDER BY IntelligenceQuotient DESC
";
using (SqlConnection conn = new SqlConnection(connString))
{
    using (SqlCommand comm = new SqlCommand(selectStatement, conn))
    {
        try
        {
            conn.Open();
            using (SqlDataReader dr = comm.ExecuteReader())
            {
                if (dr.HasRows)
                {
                    while (dr.Read())
                    {
                        Console.WriteLine(dr["Person"].ToString());
                    }
                }
                else Console.WriteLine("No C-Level with Head Up Ass Found!? (Very Odd)");
            }
        }
        catch (Exception e) { Console.WriteLine("Error: " + e.Message); }
        if (conn.State == System.Data.ConnectionState.Open) conn.Close();
    }
}

* Revised: 2015-11-09 *
As suggested by NickG; If too many braces are annoying you, format like this...

using (SqlConnection conn = new SqlConnection(connString))
   using (SqlCommand comm = new SqlCommand(selectStatement, conn))
   {
      try
      {
         conn.Open();
         using (SqlDataReader dr = comm.ExecuteReader())
            if (dr.HasRows)
               while (dr.Read()) Console.WriteLine(dr["Person"].ToString());
            else Console.WriteLine("No C-Level with Head Up Ass Found!? (Very Odd)");
      }
      catch (Exception e) { Console.WriteLine("Error: " + e.Message); }
      if (conn.State == System.Data.ConnectionState.Open) conn.Close();
   }

Then again, if you work for EA or DayBreak games, you can just forgo any line-breaks as well because those are just for people who have to come back and look at your code later and who really cares? Am I right? I mean 1 line instead of 23 means I'm a better programmer, right?

using (SqlConnection conn = new SqlConnection(connString)) using (SqlCommand comm = new SqlCommand(selectStatement, conn)) { try { conn.Open(); using (SqlDataReader dr = comm.ExecuteReader()) if (dr.HasRows) while (dr.Read()) Console.WriteLine(dr["Person"].ToString()); else Console.WriteLine("No C-Level with Head Up Ass Found!? (Very Odd)"); } catch (Exception e) { Console.WriteLine("Error: " + e.Message); } if (conn.State == System.Data.ConnectionState.Open) conn.Close(); }

Phew... OK. I got that out of my system and am done amusing myself for a while. Carry on.