STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

DUSTIN F. RICHARDS, Claimant

TRADE ACT DECISION
Hearing No. 07601701MW


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

A determination of the Department of Workforce Development ("department") established that the claimant had been ineligible for certain Trade Readjustment Allowances which he had received and that this resulted in an overpayment of $22,683 which the claimant was required to repay. The claimant filed an application for waiver of the overpayment

The questions of whether repayment of an overpayment of TRA benefits can be waived is governed by provisions in the Trade Act. Specifically, 19 U.S.C. § 2315(a) provides that if it is determined that a person has received any payment under the Trade Act to which the person was not entitled; such person shall be liable to repay such amount, except that:

the State agency or the Secretary may waive such repayment if such agency or the Secretary determines, in accordance with guidelines prescribed by the Secretary, that--

(A) the payment was made without fault on the part of such individual, and

(B) requiring such repayment would be contrary to equity and good conscience.

Pursuant to this statute, the Secretary of the U. S. Department of Labor has promulgated guidelines for determining whether an overpayment of benefits was "made without fault on the part of such individual" and whether requiring repayment would be "contrary to equity and good conscience." These guidelines are found in 20 C.F.R. § 617.55, which provides as follows:

§ 617.55 Overpayments; penalties for fraud.

(a) Determination and repayment. (1) If a State agency or a court of competent jurisdiction determines that any person or individual has received any payment under this part 617 to which the person or individual was not entitled, including a payment referred to in paragraph (b) or paragraph (c) of this section, such person or individual shall be liable to repay such amount to the State agency, and the State agency shall recover any such overpayment in accordance with the provisions of this part 617; except that the State agency may waive the recovery of any such overpayment if the State agency determines, in accordance with the guidelines prescribed in paragraph (a)(2) of this section, that:

(i) The payment was made without fault on the part of such person or individual; and

(ii) Requiring such repayment would be contrary to equity and good conscience.

(2)(i)(A) In determining whether fault exists for purposes of paragraph (a)(1)(i) of this section, the following factors shall be considered:

(1) Whether a material statement or representation was made by the person or individual in connection with the application for TAA that resulted in the overpayment, and whether the person or individual knew or should have known that the statement or representation was inaccurate.

(2) Whether the person or individual failed or caused another to fail to disclose a material fact, in connection with an application for TAA that resulted in the overpayment, and whether the person or individual knew or should have known that the fact was material.

(3) Whether the person or individual knew or could have been expected to know, that the person or individual was not entitled to the TAA payment.

(4) Whether, for any other reason, the overpayment resulted directly or indirectly, and partially or totally, from any act or omission of the person or individual or of which the person or individual had knowledge, and which was erroneous or inaccurate or otherwise wrong.

(5) Whether there has been a determination of fraud under paragraph (b) of this section or section 243 of the Act.

(B) An affirmative finding on any one of the factors in paragraphs (a)(2)(i)(A) of this section precludes waiver of overpayment recovery.

     (ii)(A) In determining whether equity and good conscience exists for purposes of paragraph (a)(1)(ii) of this section, the following factors shall be considered:

(1) Whether the overpayment was the result of a decision on appeal, whether the State agency had given notice to the person or individual that the case has been appealed and that the person or individual may be required to repay the overpayment in the event of a reversal on appeal, and whether recovery of the overpayment will not cause extraordinary and lasting financial hardship to the person or individual.

(2) Whether recovery of the overpayment will not cause extraordinary financial hardship to the person or individual, and there has been no affirmative finding under paragraph (a)(2)(ii)(A) of this section with respect to such person or individual and such overpayment.

(B) An affirmative finding on either of the foregoing factors in paragraphs (a)(2)(ii)(A) of this section precludes waiver of overpayment recovery.

(C)(1) For the purpose of paragraph (a)(2)(ii) of this section, an extraordinary financial hardship shall exist if recovery of the overpayment would result directly in the person's or individual's loss of or inability to obtain minimal necessities of food, medicine, and shelter for a substantial period of time; and an extraordinary and lasting financial hardship shall be extraordinary as described above and may be expected to endure for the foreseeable future.

(2) In applying this test in the case of attempted recovery by repayment, a substantial period of time shall be 30 days, and the foreseeable future shall be at least three months. In applying this test in the case of proposed recoupment from other benefits, a substantial period of time and the foreseeable future shall be the longest potential period of benefit entitlement as seen at the time of the request for a waiver determination. In making these determinations, the State agency shall take into account all potential income of the person or individual and the person's or individual's firm, organization, or family and all cash resources available or potentially available to the person or individual and the person's or individual's firm, organization, or family in the time period being considered.

The ALJ found that the overpayment in this matter occurred without fault on the part of the claimant. The commission agrees. None of the factors described in the applicable regulations for finding fault on the part of the claimant are present here. The commission therefore finds that the overpayment in this matter was made without fault on the part of the claimant, within the meaning of 20 C.F.R. § 617.55(a)(1)(i) and 19 U.S.C. § 2315(a)(1)(A).

The applicable legal standards for determining whether requiring repayment would be "contrary to equity and good conscience" initially distinguish between situations where the overpayment was the result of a decision on appeal, and other situations. See, 20 C.F.R. § 617.55(a)(2)(ii)(A)(1), (2). Here, the overpayment was not the result of a decision on appeal, and thus the applicable legal standard is whether recovery of the overpayment will cause "extraordinary financial hardship" to the individual. See, 20 C.F.R. § 617.55(a)(2)(ii)(A)(2).

The applicable legal standards for determining whether recovery of the overpayment will cause "extraordinary financial hardship" to the individual are that an extraordinary financial hardship shall exist if recovery of the overpayment:

would result directly in the person's or individual's loss of or inability to obtain minimal necessities of food, medicine, and shelter for a substantial period of time.

20 C.F.R. § 617.55(a)(2)(ii)(C)(1). A "substantial period of time" is in turn effectively defined as meaning 30 days. 20 C.F.R. § 617.55(a)(2)(ii)(C)(2).

The significant question here is therefore: within the meaning of this regulation, what does it mean to lose or be unable to obtain "minimal necessities" of food, medicine, and shelter?

It is difficult to accept the idea that it means total deprivation of food, shelter and medicine. After all, a person totally deprived of food for 30 days is likely to die of starvation. A person totally deprived of shelter for 30 days may well die of exposure if living in certain climates at certain times of year (such as the climate, and time of year, in which this decision is currently being written). There are any number of medical conditions for which regularly prescribed medicine is necessary to preserve life, such that total deprivation of that medicine for a period of 30 days will likely result in death. The commission finds it unthinkable that the standard in 20 C.F.R. § 617.55(a)(2)(ii)(C)(1) was intended to mean that an overpayment cannot be waived unless it is shown that not doing so will kill the person.

If some deprivation is necessary (as the standard clearly requires), but total deprivation is not necessary, the question then becomes, what degree of deprivation is an individual expected to experience before it can be said that they have lost or been rendered unable to obtain "minimal necessities" of food, medicine, and shelter, within the meaning of this standard?

Obviously, no "bright line" test can be formulated to answer that question. Necessarily, then, the standard contemplates that some discretion must be exercised in its application.

The claimant herein testified that he worked full-time at a wage of $31.55 per hour. That is a gross wage rate, however. The commission believes that given the nature of the applicable standards (which look to whether requiring repayment would "result directly" in the described deprivation), the relevant consideration is the actual take-home pay of an individual, which represents what they actually have available to them to spend on food, medicine and shelter. While the record contains no direct evidence as to what the claimant's actual take-home pay is, this is not critical because it is a reliable certainty that any individual performing services as an employee and being paid by their employer on that basis will have the legally required deductions made from their paychecks. While the precise amount of the claimant's take-home pay cannot be determined, it is reasonable to infer that considering the required deductions for federal and state income tax withholding and social security tax, the claimant's effective take-home rate is significantly less than his gross pay of $31.55 -- probably somewhere in the area of 75% of his gross, or around $24 per hour. Thus, a reasonable estimate of the claimant's actual disposal income available to meet his expenses, would be in the area of $960 per week, or $4,128 per month. The evidence in the record establishes that the claimant has expenses of at least $3,553 per month. The claimant also testified that every chance he gets he helps his parents out financially in supporting the claimant's mentally and physically disabled younger brother.

To take the $22,683 overpayment from the claimant now would leave him without sufficient money to obtain minimal necessities of food, medicine, and shelter for a substantial period of time.

While the department witness indicated that the department would "probably request" the claimant to begin repaying the overpayment at the rate of around $300 per month, there is no guarantee that the department could not seek a higher rate of repayment. Furthermore, under the provisions of 20 C.F.R. § 617.55(5)(i), unless an overpayment is otherwise recovered or is waived, it must be recovered by deduction from "any" sums otherwise due under the Trade Act or any applicable unemployment compensation law. The claimant testified that he is the lowest or close to the lowest in seniority at his present job and that if there is a work slow down he would be the first to be laid off. In such a case, he would of course be without his income from that employment, but he would also not receive any unemployment compensation benefits because the department would be required to deduct the amounts owed by him from those checks. In such a case, with no income whatsoever, he would clearly be left without sufficient money to obtain minimal necessities of food, medicine, and shelter for a substantial period of time.

For the foregoing reasons, the commission finds that requiring repayment of the overpayment in this matter would be contrary to equity and good conscience, within the meaning of 20 C.F.R. § 617.55(a)(1)(ii) and 19 U.S.C. § 2315(a)(1)(B).

The commission therefore finds that pursuant to 19 U.S.C. § 2315(a)(1), the overpayment in this matter should be waived.

DECISION

The decision of the administrative law judge is reversed. Accordingly, repayment of the overpayment in this matter is waived.

Dated and mailed January 7, 2008
richadu . trr : 110 : 1 TRA

/s/ James T. Flynn, Chairman

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

 

NOTE: The commission's decision in this case is not the result of any disagreement with the ALJ regarding assessment of the credibility of any witness. The commission has reached a different result because it differs from the ALJ on the interpretation and application of the relevant legal standards to the undisputed facts.

The commission carefully considered the arguments made by claimant's counsel in his petition for review and brief, but it found those arguments unpersuasive. The commission believes that the type of equitable argument relied on by claimant's counsel is foreclosed by 20 C.F.R. § 617.50(d). See, Christine L. Tracy (LIRC, January 27, 2005). The question of whether an overpayment of TRA benefits can be waived is governed exclusively by the standards set out in the relevant federal statutes and regulations. In addition to the fact that those statutes and regulations have the force of law, the commission is bound to comply with them by virtue of the agreement between the Wisconsin Department of Workforce Development and the U. S. Department of Labor. See, DWD v. LIRC and Mary Robinson et al., 2006 WI App 241, 297 Wis. 2d 546, 725 N.W.2d 304. As noted above, while the commission ultimately arrives at the result urged by counsel on behalf of the claimant, it does so based solely on its interpretation and application of the legal standards set out in the relevant federal statutes and regulations cited above.

cc:
Attorney John V. O'Connor
Powerbrace Corp.


Appealed to Circuit Court.  Affirmed, February 23, 2009.  [Summary of Circuit Court decision]

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