Bauserman v Unemployment Insurance Agency – 20.09

Bauserman v Unemployment Insurance Agency
Digest No. 20.09

MCL 600.6431

Cite as: Bauserman v Unemployment Insurance Agency, unpublished decision of the Court of Claims, entered May 10, 2016 (Case No. 15-000202-MM).

Bauserman v Unemployment Insurance Agency, unpublished opinion per curiam of the Court of Appeals, issued July 18, 2017 (Docket No. 333181).

Court: Court of Claims and Court of Appeals
Appeal pending: Yes
Claimant: Bauserman
Employer: N/A
Date of decision: May 10, 2016; July 18, 2017

View/download the full Court of Claims decision

View/download the full Court of Appeals decision

View/download the full complaint

HOLDING: The Court of Claims held that the Agency’s motion to dismiss was denied because plaintiffs complied with the notice provisions of MCL 600.6431, the Court has subject matter jurisdiction, and the plaintiffs’ claims are not barred by governmental immunity.

The Court of Appeals reversed the Court of Claims holding. The case was remanded for entry of an order granting summary judgment for the Agency

The matter is currently under review by the Michigan Supreme Court.

FACTS: Named plaintiff was terminated from his employment and applied for unemployment benefits. He received benefits for a over a year. While he was receiving benefits, he received from his former employer a lump sum deferred payment of his pro rated bonus from the previous year, which he earned prior to his termination. MIDAS detected a discrepancy and concluded that plaintiff received benefits while he was earning income.

The UIA sent a request for information relative to ineligibility or disqualification to plaintiff’s online MiWAM account, however he was not checking the account as he was no longer receiving benefits at the time. When he finally saw the message months later, he began writing to the Agency to explain the lump sum. The Agency never responded.

Eventually, they notified plaintiff that he had been overpaid benefits and would be assessed a penalty. Plaintiff again contacted the Agency explaining the bonus. Then the United States Department of Treasury notified plaintiff that his federal income tax refund had been seized by the State of Michigan to collect on his unemployment debt. Similar action was taken by the State of Michigan Treasury.

Finally, Plaintiff received a redetermination that its earlier fraud determination was null and void. Plaintiff had filed a complaint in the Court of Claims alleging that the Agency’s fraud detection program, and its collection and seizure of assets, violated the due process clause of the Michigan Const 1963, Art 1, § 17.

DECISION: The Court of Claims decided that plaintiffs’ causes of action did not accrue when Agency first notified them of their liability for unemployment but rather when the Agency issued a redetermination which concluded that the plaintiff had not received UIA benefits fraudulently. The administrative process fails to afford sufficient relief to plaintiff’s challenging an entire statute and policy, therefore a constitutional court claim is viable and there is no governmental immunity.  The Agency’s motion to dismiss on lack of standing is denied.

The Court of Appeals decided that the plaintiffs’ cause of action accrued when “the wrong on which they base their claim was done.” The Court decided the garnishment of wages and interception of tax returns was not the initial event given rise to their claim. Rather, when the Agency issued notices of its determinations and the plaintiffs were not given requisite notice or opportunity to be heard was the initial wrong.

RATIONALE: The Court of Claims found that the plaintiffs’ causes of action did not accrue when the Agency first notified them of their liability for unemployment benefits and penalties, but much later. The causes of action accrued when the Agency issued a redetermination that concluded that plaintiffs had not received UIA benefits fraudulently. At the time the Agency issued the redetermination, then plaintiffs could fully allege the elements of the claim. The amended complaint was filed within six months of the redetermination dates, therefore the plaintiffs complied with statutory requirements.

Furthermore, the Court found that the administrative process by which the plaintiffs could appeal within the Agency failed to afford sufficient relief to plaintiffs wishing to challenge the entire statutory and policy scheme. Therefore the Court found no governmental immunity existed in this case.

The Court of Appeals found that the forfeiture of monetary assets was the damage resulting from the wrongful conduct of the Agency and therefore did not rise to the event given cause for a claim. The Court said this is consistent with the Michigan Supreme Court’s recent decision in Frank v Linkner, 894 NW2d 574 (2017) where the court held that the plaintiffs’ argument “conflates monetary damages with harm.” Frank involved a shareholder oppression action not an unemployment benefits action.

Since the parties did not dispute the date of named plaintiff’s notices of redetermination were December 3, 2014, the action filed on September 9, 2015 is well beyond the six months following the event that gave rise to the cause of action.

Digest author: Sara Posner, Michigan Law, Class of 2017
Digest updated: December 5, 2017

 

Article: Legally Insufficient Notice and UIA Determinations

Legally Insufficient Notice and Unemployment Insurance Agency Determinations
By: Leila McClure, Marina Hunt, and Steve Gray
University of Michigan Law School Unemployment Insurance Clinic
April 2016

Sections: 421.32a, 421.33

Download a PDF version of this article

Frequently, unemployment insurance claimants and employers must rely only on short letter determinations and redeterminations (notices) they receive from the Agency that provide little or no information about why the Agency has taken the action of which it is notifying the party. This confuses most parties and can often prevent them from adequately responding to a negative action taken against them by the Agency. The sparse or confusing notices prevent them from either making, effective protest and appeal decisions, or unable to prepare for hearings. The following article discusses the circumstances in which Agency  notices are legally insufficient and what effect that should have on administrative proceedings.

Agency Required to Comply with US Department of Labor Standards
In the administration of its duties enumerated in the Michigan Employment Security Act, the State of Michigan must “cooperate with the appropriate agency of the United States under the Social Security Act.” M.C.L. 421.11(a). Per this requirement, the Unemployment Insurance agency is statutorily required to comply with relevant regulations promulgated by the Department of Labor.

Relevant Department of Labor Notice Standard
Section 6013 of Appendix A to Part 602 of the Employment Security Manual requires the State of Michigan to include “in written notices of determination furnished to claimants sufficient information to enable them to understand the determinations, the reasons therefor, and their rights to protest, request reconsideration, or appeal.” 20 CFR § 602 App. A, 6013(C)(2)

With regards to disqualification from benefits, the Department of Labor provides that: “If a disqualification is imposed, or if the claimant is declared ineligible for one or more weeks, he must be given not only a statement of the period of disqualification or ineligibility and the amount of wage-credit reductions, if any, but also an explanation of the reason for the ineligibility or disqualification. This explanation must be sufficiently detailed so that he will understand why he is ineligible or why he has been disqualified, and what he must do in order to requalify for benefits or purge the disqualification. The statement must be individualized to indicate the facts upon which the determination was based, e.g., state, “It is found that you left your work with Blank Company because you were tired of working; the separation was voluntary, and the reason does not constitute good cause,” rather than merely the phrase “voluntary quit.” Checking a box as to the reason for the disqualification is not a sufficiently detailed explanation. However, this statement of the reason for the disqualification need not be a restatement of all facts considered in arriving at the determination.” 20 CFR § 602 App. A, 6013(C)(2)(h) (2012) (Emphasis Added).

In the Department of Labor Advisory, Unemployment Insurance Program Letter, No. 01-16 concerning “Federal Requirements to Protect Individual Rights in State Unemployment Compensation Overpayment Prevention and Recovery Procedures, the Department of Labor specifically instructed on what qualifies as sufficient notice for fraud determinations. To satisfy federal law, the individual accused of fraud must “be provided with a written determination which provides sufficient information to understand the basis for the determination and how/when an appeal must be filed and must also include the facts on which the determination is based, the reason for allowing or denying benefits, the legal basis for the determination, and potential penalties or consequences.” USDOL Unemployment Insurance Program Letter No. 1-16, page 2 (emphasis added). The Letter also provides a description of the information that must be included in a written determination:

  1. A summary statement of the material facts on which the determination is based;
  2. The reason for allowing or denying benefits; and
  3. The conclusion of the decision based on the state’s law

Relevant Michigan Law
In Snyder v. RAM Broadcasting, No. 82 23718 AE, Washtenaw Circuit Court (April 26, 1983) (Digest No. 16.39), the Circuit Court held that a “Notice of Hearing which [does] not give a plain statement that claimant’s eligibility pursuant to Section 28(1)(a)… might be raised was not an adequate notice of the issue when it merely used the words ‘Ability/Availability/Seeking Work/Eligibility.’” The reasoning the court used in deciding this notice was inadequate was that it was “not a plain statement of the matters asserted,” meaning that “words and phrases divided by slashes and followed by a string citation to given sections of the Act do not provide a reasonably understandable notification that an issue will be considered, especially where the notification is intended for a lay person.”

Recently in Proulx v. Horiba Subsidiary Inc., 14-006880-241108 (Oct. 2, 2014) (Digest No. 18.21), an unpublished decision by the Michigan Compensation Appellate Commission (MCAC), the body held in part that the agency’s fraud redetermination was insufficient because “it merely provide[d] a conclusory statement with no fact-finding to support it.”

Agency Practice
The Unemployment Agency’s practice of sending conclusory statements of disqualification or findings of misrepresentation violates both the mandatory Department of Labor standards and existing Michigan law. Examples of insufficient notice under the Department of Labor standard include:

  • “Your actions indicate you intentionally misled and/or concealed information to obtain benefits you were not entitled to receive”
  • “You quit your job with COMPANY on DATE due to other personal reasons”
  • Redeterminations including only the underlying issue and relevant statute number, such as: “Ability 28(1)(c)”

Good Cause to Re-Open
Pursuant to UIA Rule 270(1)(e), ““fail[ure] to receive a reasonable and timely notice” is good cause for reconsideration and reopening. Section 32(a) of the MESA provides that “the claimant and other interested parties shall be promptly notified of the determination and the reasons for the determination.” Based on the failure to comply with Department of Labor standards and existing Michigan law, any agency determination or redetermination is void if it does not include:

  • An explanation of the reason for the ineligibility or disqualification that is sufficiently detailed so that the claimant knows why he or she is ineligible
  • Information about what the claimant must do to appeal or requalify for benefits
  • Individualized facts to indicate how the decision was reached

Effect of Insufficient Notice

Void ab initio
Insufficient notice of an agency decision makes that decision null and can be treated as void ab initio. The Michigan Court of Appeals has held that a failure to give proper notice as required by the applicable statute “is a jurisdictional defect that renders the subsequent proceedings void.” Kanouse v Montcalm County Drain Comm’r, unpublished opinion per curium of the Court of Appeals, issued March 19, 2002 (Docket No. 236285), p 2. Likewise, the Court of Appeals held in a workers’ compensation case that improper notice renders a subsequent judgment potentially voidable. Abbott v Howard, 182 Mich App 243 (1990).

Procedural Due Process
The notion that insufficient notice renders a subsequent decision void also comes from a two-step analysis:

(1) Inadequate notice is a violation of procedural due process rights, and

(2) Decisions that relied on a lack of due process cannot be sustained.

Under step (1), it is clear from U.S. Supreme Court jurisprudence that proper notice is fundamental to due process. See, e.g., Mullane v Central Hanover Bank & Trust Co., 339 US 306 (1950). In a case specifically about the rights of welfare recipients, the U.S. Supreme Court said that due process requires “timely and adequate notice detailing the reasons for” an agency decision, and“[t]hese rights are important in cases such as those before us, where recipients have challenged proposed terminations.” Goldberg v Kelly, 397 US 254 (1970). See also Cosby v Ward, 843 F2d 967 (CA 7, 1988) (failure to provide adequate written notice of issues to be raised at unemployment compensation hearing violated fair hearing requirement).

Under step (2), courts have voided judgments that were founded on violations of procedural due process. Often these cases fall under procedural rules such as FRCP 60(b)(4) and MRCP 2.612(c)(1)(d), which allow courts to provide relief from judgments that are void. Courts have interpreted those rules as applying to judgments that arose from inadequate process. See, e.g., In re Ruehle, 307 BR 28 (Bankr CA 6, 2004) (upholding a lower court’s decision to vacate an order where one party was denied due process of law).

Lack of Jurisdiction

An ALJ’s Authority
Where there is an occurrence of insufficient notice or a void determination, an Administrative Law Judge has the authority to dismiss or adjourn a hearing based on lack of jurisdiction over the matter. An ALJ’s authority to return jurisdiction can be inferred from both the Michigan Employment Security Act and the MAHS hearing rules issued by LARA. Section 33 of the Act authorizes MAHS to accept cases on appeal and then give them to Administrative Law Judges so long as they deal with redeterminations issued by the agency in accordance with Section 32a. MESA 421.33(1). Section 32a(1) details the agency’s decision-making process, by which a determination or redetermination is issued at each step, followed by “a hearing on the redetermination before an administrative law judge.” MESA 421.32a(1). According to these rules, the ability to have a hearing with an ALJ is contingent upon the existence of an agency decision. Without a valid determination or redetermination, the judge does not have jurisdiction over the case under MESA.

Also, it is standard practice for an ALJ to return a matter to the Agency when they can’t find an Agency determination to support it. ALJs commonly return matters to the Agency when no determination can be found in their system or in the hearing file.  Legally insufficient notice is akin to that situation.

The administrative hearing rules, issued by LARA for MAHS, support the principle that the ALJ has broad discretion in deciding how to handle a case, including issues that arise before or after hearings and questions of jurisdiction. For example, Rule 106 contains a lengthy list of powers that the ALJ has, including the power to, “on an administrative law judge’s own initiative, adjourn hearings.” Department of Licensing and Regulatory Affairs Michigan Administrative Hearing System Administrative Hearing Rules (eff. January 15, 2015), R 792.10106(1)(o). In addition, Rule 110 allows the ALJ to decline to consider a document that was not properly served on all parties, which is another form of inadequate notice. Id. R 792.10110(8).

Application to Good Cause
The fact that a claimant or employer received insufficient notice in the determinations provides her with good cause for filing a late appeal. The Agency’s administrative code provides that ‘good cause’ for reconsideration under MCL 421.32a includes among other things failure “to receive a reasonable and timely notice, order, or decision.” Mich Admin Code R 421.270(1)(e). Where a determination is legally insufficient on its face, it does not provide reasonable notice as required by 270(1)(e). On that basis, there is good cause for reopening, rehearing, or late appeals.

Appropriate Remedies
There are two possible appropriate remedies when the UIA has provided notice that does not meet the Department of Labor standards. First, a notice could be deemed unreasonable on its face. With a finding of unreasonable notice, the notice can be voided and jurisdiction should return to the Agency to issue a notice that complies with the above-mentioned standards. Alternatively, the unreasonable notice could form the basis for good cause for reopening or late appeal. Under a finding for good cause for reopening or late appeal, a case would then proceed on the underlying merits of the unemployment claim.

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About the Authors

– Leila McClure, University of Michigan Law School, Class of 2016

– Marina Hunt, University of Michigan Law School Class of 2017

– Steve Gray, Clinical Assistant Professor and Director of the University of Michigan Law School Unemployment Insurance Clinic

Carter v. MLP MFG, Inc. – 16.75

Carter v. MLP MFG, Inc.
Digest No. 16.75

Section 421.38, Section 421.29

Cite as: Carter v MLP MFG, IncMuskegon Circuit Court, No. 02-41720-AE (February 18, 2003).
Appeal pending: No
Claimant: David Carter
Employer: MLP MFG, Inc.
Date of decision: February 18, 2003

View/download the full decision

HOLDING: When both an agent and an attorney have filed an appearance, an order must be served to both of them to fulfill Section 421.1101 (now rescinded).

FACTS: The administrative law judge issued an opinion dated July 20, 2001, which affirmed an agency determination denying the claimant unemployment benefits because of misconduct. The claimant’s agent appealed this opinion. The Board of Review affirmed the decision with an opinion dated November 9, 2001. On December 10, 2001, the claimant’s counsel filed his appearance and a timely request for a rehearing of the November 9, 2001 decision. The Board issued an order denying the application for rehearing on January 24, 2002. This January 24, 2002 order was not sent to the claimant’s attorney. Consequently, on April 29, 2002, the claimant’s attorney moved the Board to reopen the matter so that the claimant could file a timely appeal with the circuit court. In an order dated June 28, 2002, the Board denied the application for reopening, but acknowledged sending a copy of the January 24, 2002 order to the claimant and the claimant’s agent, but not the claimant’s attorney. On July 2, 2002, the claimant filed this appeal to the circuit court.

DECISION: The Board of Review erred in failing to send the claimant’s counsel a copy of the January 24, 2002 order.  When both an agent and an attorney have filed an appearance, an order must be served to both of them to fulfill Section 421.1101 (now rescinded), which is to be read in a manner that does not produce an unjust result, even if the literal language of the rule suggests otherwise. Therefore the July 2, 2002 filing of this appeal was timely, and this Court will adjudicate the appeal on the merits. This Court finds that the ALJ’s decision was not contrary to law and therefore affirms the previous decision disqualifying the claimant for benefits.

RATIONALE: In construing administrative rules, courts apply principles of statutory construction. However, there is an exception “when a literal reading of the statutory language would produce an absurd and obviously unjust result and would be clearly inconsistent with the purposes and policies of the act in question.” AG v LS Wood Preserving, Inc, 199 Mich App 149, 155 (1993). Reading Section 421.1101(1) literally (“A decision, notice, or order shall be served on each party and on the agent or attorney of record of each party . . .” (emphasis added)) would provide an unjust result in this case, as the purpose and policy of the rule is to provide notice. Thus the Board of Review needed to send the January 24, 2002 order to both the claimant’s agent and the claimant’s counsel, even though the rule uses the word “or.” Hence, the 30-day appeal period of Section 421.38(1) was tolled until the Board of Review issued its final order on June 28, 2002, and the July 2, 2002 filing of appeal was timely. Nevertheless, this Court finds that the ALJ’s decision was not contrary to law and was supported by competent, material, and substantial evidence on the whole record. The ALJ found the testimony of the cliamant’s supervisor to be credible. In doing so, he found that the claimant had engaged in three “no-call, no-show” absences which constitutes misconduct within the meaning of Section 421.29.

Digest author: Winne Chen, Michigan Law, Class of 2017
Digest updated: 11/19/2017

Jones v. Pinconning Area Schools – 10.103

Jones v. Pinconning Area Schools
Digest No. 10.103

Section 421.29(1)(a)

Cite as: Jones v Pinconning Area Schools, unpublished opinion of the Bay County Circuit Court, issued April 5, 2007 (Docket No. 187403W).

Appeal pending: No
Claimant: Terese G. Jones
Employer: Pinconning Area Schools
Date of decision: April 5, 2007

View/download the full decision

HOLDING: A claimant’s decision to voluntarily leave her job following a unilateral change in her employment agreement is with good cause attributable to her employer if the claimant notifies her employer about her concerns regarding the change in her employment agreement and gives her employer the opportunity to correct her concerns prior to her resignation.  

FACTS: Claimant began work for Pinconning Area Schools on August 1, 2005 after responding to a job posting that advertised an “initial two-year contract annually renewed for future years”. Claimant was provided with a “proposed” employment contract on the first day of her employment that contained a 30 day “at-will” provision. Claimant found this objectionable since it was contrary to the two-year contract that the job posting had promised. Claimant raised these concerns with her employer and was told that they did not wish to change the contract. A second proposed contract was given to Claimant, which Claimant signed on August 10, 2005. On August 11, 2005, Claimant tendered her resignation. The ALJ found that Claimant was disqualified from receiving benefits. The MCAC reversed, finding Claimant was not disqualified.   

DECISION: The Circuit Court affirmed the decision of the MCAC. Claimant is not disqualified from receiving benefits.

RATIONALE: The employer unilaterally changed the terms of Claimant’s employment because the employer’s only offer had been set forth in its job posting, and Claimant’s acceptance of the position was predicated by the terms that were set forth in the posting.

Material changes in an employment contract may constitute good cause for quitting if: (1) a claimant provides the employer with notice and an opportunity to correct the claimant’s concerns; (2) the employer fails to correct these concerns; and (3) the claimant’s concerns are reasonable. Here, it was reasonable for Claimant to be concerned about the unilateral change in her employment contract. Additionally, Claimant did provide employer with notice of her concerns and gave the employer an opportunity to correct her concerns prior to her resignation.

Digest author: Cydney Warburton, Michigan Law, Class of 2017
Digest updated: 10/31/2017

 

Snyder v RAM Broadcasting – 16.34

Snyder v RAM Broadcasting
Digest No. 16.34

Section 29

Cite as: Snyder v RAM Broadcasting, unpublished opinion of the Washtenaw County Circuit Court, issued April 26, 1983 (Docket No. 8223718AE).

Court: Washtenaw Circuit Court
Appeal pending: No
Claimant: Ann Snyder
Employer: RAM Broadcasting
Date of decision: April 26, 1983

View/download the full decision

HOLDING: The court held that a hearing notice was deficient under the Administrative Procedures Act and the due process clause of the Michigan and United States Constitutions where (1)  it was not a plain statement  of the matters asserted and (2) even if understandable, was not listed in the notice of hearing as an issue which would be presented before the referee.

FACTS:  Claimant filed a timely appeal after the Agency disqualified her from benefits under the Voluntary Quit provision of Section 29(1)(a).  During her hearing, testimony was taken regarding her availability to work and efforts to obtain a job during the period in which she claimed benefits. As a result, she was found disqualified for benefits under Section 29(1)(a) and the seeking work provision of Section 28.  On appeal, the claimant sought reversal of the of the judge’s finding on the “seeking work” issue.  She alleged that she did actively seek employment and was denied a fair hearing on this issue in violation of the Michigan Employment Security Act and the due process clause of the state and federal constitutions.

DECISION: The court held that the hearing notice was deficient under the Administrative Procedures Act and the due process clauses of the Michigan and United States Constitutions. In addition, the referee’s failure to inform the claimant of all issues he planned to decide during the hearing, along with the consequences of failing to meet her burden of proof violated the fairness requirement of Section 33 of the Michigan Employment Security Act.

RATIONALE: The court found that the hearing notice violated the Administrative Procedures Act (APA) provision requiring “a short and plain statement of the matters asserted.”  Here, the court found that “words and phrases divided by slashes and followed by a string citation . . . do not provide a reasonably understandable notification that an issue will be considered, especially when the notification is intended for a lay person.”  

In discussing the due process requirements under the state and federal constitutions, the court cited Hanson v State Board of Registration, 253 Mich 601, 607 (1931), holding that unless the right is waived, a party before a state agency is “at least entitled to a reasonably definite statement of the charge or charges preferred against the accused.”  Here, the court found that the notice of hearing was not reasonably calculated to inform the claimant of the pendency of the seeking work issue: “Whatever the purpose of this convoluted array of words and slashes, it was not to intelligibly notify the plaintiff that her entire benefits package prior to the hearing date was in jeopardy if she did not affirmatively prove her efforts in search of employment.” Thus, the hearing notice was deficient under the APA and the Michigan and United States constitutions.

The court further held that Ms. Snyder was denied a fair hearing where she was not apprised of all the issues the referee intended to decide, along with the consequences of the plaintiff’s failure to carry her burden of proof.  As a result, Ms. Snyder’s hearing violated the fairness requirement of Section 33 of the Act.

Digest author: Laura Page, Michigan Law, Class of 2018
Digest updated: December 1, 2017