KERRY A STAMM, Claimant
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:
The claimant worked for about 121/2 years as a production worker and extrusion machine operator for a manufacturer of electrical products in Monroe. His last day of work was November 20, 2003 (week 47), when he was laid off due to lack of work. The claimant's former employer had been certified on November 21, 2002 as adversely affected by foreign competition under the Trade Act of 1974, as amended. The effect of that certification was to make the claimant potentially eligible for benefits under the Trade Act, including Trade Adjustment Allowances (TAA) covering expenses of approved training and, after exhausting regular UI benefits, weekly Trade Readjustment Allowances (TRA payments).
In early January of 2004, the claimant started attending a full-time, nine-month specialized automotive repair course in collision repair and "street rod" fabrication at a technical school in Laramie, Wyoming. The expenses of tuition, books, supplies and tools were approximately $19,000. The claimant applied to the department for approval of his training program under the Trade Act so that he could receive TAA benefits to pay for his school tuition and expenses. However, in January, 2004 the department issued a determination denying his request for approval of the training under the Trade Act. The department denied approval of the training based on "excessive cost". The claimant appealed this determination, and the Appeal Tribunal affirmed. The claimant then filed a petition for commission review.
The issue for decision is whether the department properly decided to not approve the training program sought by the claimant under the Trade Act.
Applicable legal standards -- The relevant provisions of the Trade Act concerning approval of training programs are found in 19 U.S.C. § 2296(a)(1), which provides:
§ 2296. Training (a) Approval of training; limitation on expenditures; reasonable expectation of employment; payment of costs; approved training programs; nonduplication of payments from other sources; disapproval of certain programs; exhaustion of unemployment benefits; promulgation of regulations.
1) If the Secretary determines that--
(A) there is no suitable employment (which may include technical and professional employment) available for an adversely affected worker,
(B) the worker would benefit from appropriate training,
(C) there is a reasonable expectation of employment following completion of such training,
(D) training approved by the Secretary is reasonably available to the worker from either governmental agencies or private sources (which may include area vocational education schools, as defined in section 195(2) of the Vocational Education Act of 1963, and employers)[,]
(E) the worker is qualified to undertake and complete such training, and
(F) such training is suitable for the worker and available at a reasonable cost,
the Secretary shall approve such training for the worker. . .(1)
As noted above, the department denied approval for the training on the basis of "excessive cost". This can be understood as a reference to the "available at a reasonable cost" condition in subparagraph (F) of § 2296(a)(1).
The U.S. Department of Labor has promulgated regulations concerning the conditions for approval of training described in 19 U.S.C. § 2296(a)(1). These are found in 20 C.F.R. § 617.22, "Approval of training", which provides, in relevant part, as follows:
(a) Conditions for approval. Training shall be approved for an adversely affected worker if the State agency determines that:
. . .(6) Such training is suitable for the worker and available at a reasonable cost.
. . .(ii) Available at a reasonable cost means that training may not be approved at one provider when, all costs being considered, training substantially similar in quality, content and results can be obtained from another provider at a lower total cost within a similar time frame. It also means that training may not be approved when the costs of the training are unreasonably high in comparison with the average costs of training other workers in similar occupations at other providers. This criterion also requires taking into consideration the funding of training costs from sources other than TAA funds, and the least cost to TAA funding of providing suitable training opportunities to the worker. Greater emphasis will need to be given to these elements in determining the reasonable costs of training, particularly in view of the requirements in § 617.11(a) (2) and (3) that TRA claimants be enrolled in and participate in training.
(iii) For the purpose of determining reasonable costs of training, the following elements shall be considered:
(A) Costs of a training program shall include tuition and related expenses (books, tools, and academic fees), travel or transportation expenses, and subsistence expenses;
(B) In determining whether the costs of a particular training program are reasonable, first consideration must be given to the lowest cost training which is available within the commuting area. When training, substantially similar in quality, content and results, is offered at more than one training provider, the lowest cost training shall be approved; and
(C) Training at facilities outside the worker's normal commuting area that involves transportation or subsistence costs which add substantially to the total costs shall not be approved if other appropriate training is available.
(b) Allowable amounts for training. In approving a worker's application for training, the conditions for approval in paragraph (a) of this section must be found to be satisfied, including assurance that the training is suitable for the worker, is at the lowest reasonable cost, and will enable the worker to obtain employment within a reasonable period of time. An application for training shall be denied if it is for training in an occupational area which requires an extraordinarily high skill level and for which the total costs of the training are substantially higher than the costs of other training which is suitable for the worker.
These are thus the legal standards that should apply to a decision on whether to approve a training program under the Trade Act, and specifically to the question of whether approval should be denied for a proposed training program on the grounds of its cost.
The basis for the department's decision -- The department's determination to deny approval for the training in this case was not based on consideration and application of the foregoing standards. Instead, it was based primarily if not exclusively on a provision of the department's internal "TAA Manual" setting a fixed dollar limit on the amount allowable for training costs.
That this training cost limit was the primary if not sole reason for the decision is evident from testimony by the department representative who evaluated, and issued the determination denying, the claimant's request for training. This testimony focused on the training cost limit and the procedures for seeking a waiver of it. The department representative testified to the following effect:
There aren't a lot of specific restrictions about the types of training that can be provided. We need to be sure that we are approving training at an approved training provider. And also we have certain restrictions on time, the length of time that a person can be in approved training, which is a maximum of 104 weeks. We also have a maximum dollar amount that we can have approved without a waiver which is $12,000 for training, tuition, books, related fees, costs, subsistence and mileage reimbursement. So those are things that often enter into the equation when determining if training is appropriate.
Subsequent questioning by the ALJ quickly elicited the information, that the training provider involved in the proposed training was an approved one, and that the training program was less than 104 weeks in duration. The remaining factor was thus the $12,000 training cost limit.
The primary if not exclusive role played by the $12,000 training cost limit in the decision to deny approval for the training is also indicated by the department representative's testimony to this effect:
ALJ: Did you make any determination one way or the other as to whether that was a high-demand occupation in which he might secure employment once he completed the training?
A: We didn't get to that point in the process because we kind of stopped the process when we started talking about the cost of the training. So there wasn't necessarily an investigation done on our end as to whether or not we would consider it to be a demand occupation. In coordinating or collaborating with our state TAA coordinator in the state of Wisconsin it was determined that the training would not necessarily be appropriate based on the cost of tuition alone.
and by his testimony to this effect:
Ordinarily what we will do, is to request some information about costs of training, duration, contact information for the school, that sort of thing, and after having conversations with Kerry, I found that the costs associated with it, the costs that were provided to us, seemed cost-prohibitive based on policies that we were currently observing at that time for training costs that we could authorize payment for.
(emphasis added). From the context of this testimony, it was evident that the "policies" referred to were the TAA Manual provisions concerning the $12,000 training cost limit. The department representative also testified:
. . . after talking with Kerry I made contact with our state TAA coordinator to get his input regarding the status of the training that Kerry was requesting. After sharing information that I had gotten regarding the cost of training at Wyotech, the TAA state coordinator indicated to me that the cost of the training was excessive because we had a $12,000 cap for training assistance.
(emphasis added). It is thus quite clear that department's decision was based primarily if not exclusively on the department's $12,000 training costs limit.
Discussion -- The commission begins by considering whether the reasons on the basis of which the department actually made the decision to deny approval of the training, are legally sufficient to support that decision.
There is nothing in the Trade Act or the regulations promulgated thereunder which creates, or which expressly allows states to create, a training cost limit such as the one on the basis of which the department denied approval of the training in this case. The department acknowledges that
[t]he federal regulations require only that the cost of training be reasonable. . . the federal government has not established a cap or even a range of costs that it deems reasonable. Nor has it required states to establish a cap on the costs of training that will be considered reasonable in a particular state.
DWD Brief, p. 3. The department also acknowledges that "there are no federal provisions mandating or even suggesting that states establish a cap on training costs." Id.
Furthermore, the department's TAA Manual can not be viewed as any sort of valid legal authority for sustaining a decision made on the basis of the $12,000 training cost limit, since it has never been properly promulgated as an administrative rule. The Administrative Procedure Act, Ch. 227, provides in § 227.10(1) that "[e]ach agency shall promulgate as a rule each statement of general policy and each interpretation of a statute which it specifically adopts to govern its enforcement or administration of that statute." (emphasis added). The courts have repeatedly held that this means that policy statements and guidelines which are developed by and used by agencies to govern enforcement and administration of a statute, which are not duly adopted as administrative rules, are invalid. See, Wisconsin Telephone Co. v. DILHR, 68 Wis. 2d 345, 365-66, 228 N.W.2d 649 (1975) ("guidelines" adopted by the department without being adopted as rules were invalid); State ex rel. Clifton v. Young, 133 Wis. 2d 193, 200, 394 N.W.2d 769 (Ct. App. 1986) (memorandum announcing general policies and specific criteria governing all decisions made by an agency in a particular area is a "rule" and must be promulgated properly as such, and in the absence of proper promulgation as a rule is invalid); Mack v. DHFS, 231 Wis. 2d 644, 647-50, ¶¶ 8-13, 605 N.W.2d 651 (Ct. App. 1999) (written policy adopted by DHFS to describe standards and procedures for recouping or waiving benefit overpayments was subject to rule-making requirements of Chapter 227, should have been adopted as a rule, and was invalid because it was not). The commission itself has previously held that it will not consider department "policies" which, although clearly designed to implement and interpret specific statutes and to be of general application, have not been duly adopted as administrative rules. See, Jones v. Seek (LIRC, July 6, 1999). The contents of the department's TAA Manual are no different in terms of legal effect (or lack thereof) than the policies rejected in these cases.
It is understandable that an agency such as the department might wish to develop policies intended to guide its own internal processes and decision-making. Presumably, such policies are developed by deriving them from the applicable external law. Ideally, if those policies have been developed consistently with that external law, following them will generally get the department to the right result under that external law. The department may thus come to view these internal policies as themselves defining what the legally correct result in a case is. However, once a department determination has been appealed and is pending before another tribunal, the question of whether the department got to the legally correct result is, by the very nature of the process, no longer a question which the department gets to decide. The tribunals with responsibility for deciding such appeals -- ALJs, and the commission -- are expected to be independent from the department in regard to how they decide those appeals. Those tribunals must decide such appeals based on the applicable statutory law, administrative rules having the force of law, and decisional precedent. For the ALJs or the commission to instead look to internal department policies and guidelines never adopted as rules -- which basically represent no more than the department's views about what the legally correct result in a case should be -- would undermine the independence of the appeal pathway. For these reasons, the commission can give no weight to TAA Manual provisions relied on by the department in this case.
In addition to the foregoing concerns, there is another reason that the department TAA Manual's training cost limit should not be given any weight or authority in deciding this case. That reason is, that the limit is not merely without the force of law, but is actually contrary to law.
In Hampe et al. v. Sec'y, Pennsylvania Dept. of Labor and Industry and Chao, 364 F.3d 90 (Third Circuit, 2004), a number of workers potentially eligible for benefits under the Trade Act sued the Pennsylvania Labor & Industry Department (as well as the U.S. Department of Labor), challenging policies which had been adopted by Pennsylvania to limit training costs which would be paid by that state under the Trade Act. One policy was that approval would be refused for any training program for which travel costs exceeded more than half of the amount of tuition and fees. The workers argued that the "one-half tuition policy" was an improper "blanket" policy which did not allow for individualized evaluations of training programs. The Court of Appeals agreed with the workers, that a blanket policy rejecting training programs without individualized determinations of appropriate training options violated federal law. 364 F.3d at 96. The court stated:
The [Trade Act]'s legislative history makes it clear that training programs cannot be disapproved through blanket rules, but only on a case-by-case basis. H.R. Conf. Rep. No. 100-576, at 700-01 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1733-34. The DOL regulations implement this case-by-case approach: "Available at a reasonable cost means that training may not be approved at one provider when, all costs being considered, training substantially similar in quality, content and results can be obtained from another provider at a lower total cost within a similar time frame." 20 C.F.R. § 617.22(a)(6)(ii). Thus, Labor & Industry cannot institute a blanket denial policy, but must take each individual's particular training request into consideration on its own merits.
Id. The court upheld the "one-half tuition policy" in Hampe only because it concluded that it was not a blanket policy, basing that conclusion on evidence in the record that the Pennsylvania department would individually consider requests for exceptions and could make such exceptions. In the case of DWD's $12,000 training cost limit, however, the evidence establishes that it is indeed an inflexible, "blanket" limit. While the department's policy provides that waivers of the $12,000 training cost limit may be requested and granted in individual cases, it appears that this waiver can apply only to certain limited classes of expenses. The department's witness testified:
According to state, our state TAA Handbook, I believe that document indicates that the maximum allowable limit for a training contract is $12,000, in the state of Wisconsin, and I do believe that that amount varies from state to state depending on their state budget for TAA programming, so that's kind of the magic number that we have worked from in the entire amount of time that I've been working with TAA programs, is that, in some special situations that amount is higher if subsistence is considered there, but the cost of the training itself, tuition, books, costs, fees, tools, those sorts of things, is capped at $12,000 or less.
(emphasis added). Other statements by the department representative at a number of points during his testimony made it clear that the potential for a waiver only applied to mileage or subsistence costs.
Q: Have requests for TAA training in excess of $12,000 been granted for laid off workers through the Green County TAA program?
A: Not for tuition, books and related costs. We have gone above the $12,000 limit to accommodate additional ancillary-type costs such as mileage reimbursement. One of the things I talked about earlier in my testimony is that we don't approve training contracts in excess of $12,000 for the base costs of the training . . . We will usually have TAA contracts approved for greater than $12,000 only if the costs that's carried over that $12,000 is associated with getting the person to and from their training.
(emphasis added). The fact that after the claimant informed the department that the expenses for tuition, books, supplies and tools would be about $19,000, the department did not inquire into the other expenses, is also evidence that as to the "base costs of the training" the $12,000 limit was fixed. So is the fact that after hearing of the tuition amount, the state TAA office decided that a waiver would not be granted even without considering a formal application for a waiver.
The record here convincingly establishes that the department's training cost limit is indeed a hard-and-fast one as applied to what the department representative referred to as the "base costs of the training", i.e., the total amount of tuition, books, fees and tools. That is, while a waiver of the limit may be considered if it is mileage expenses and/or subsistence costs which will push the total above $12,000, where expenses for tuition, books, fees and tools exceed $12,000, no waiver is possible. Thus, in cases in which these "base costs of the training" exceed $12,000, there is no individualized assessment of whether the training is at "a reasonable cost" within the meaning of the Trade Act and regulations. This is a "blanket" limit of the type condemned by the court in Hampe.
For all of the reasons discussed above, the commission concludes that the reasons on the basis of which the department actually made the decision to deny approval of the training, are not legally sufficient to support that decision. The provisions of the department's TAA Manual, including the $12,000 training cost limit, have no legal weight or authority and can provide no basis for supporting the department's decision that the costs of training were excessive. The $12,000 training cost limit is also an improper "blanket" limit not permitted under the law. The department erred in making its decision on that basis.
The question which next arises is whether, notwithstanding the department's reliance on an insufficient and improper basis for its decision, that decision can nevertheless still be justified by proper application of the standards of 19 U.S.C. § 2296(a)(1)(F) and 20 C.F.R. § 617.22(a)(6). The commission cannot answer that question, because the record is insufficient.
Because it based its decision primarily if not exclusively on the $12,000 training cost limit, the department apparently did not actually consider and apply the relevant legal standards which are, pursuant to 20 C.F.R. § 617.22, supposed to be considered in making a determination as to whether a training program is available at "a reasonable cost" within the meaning of 19 U.S.C. § 2296(a)(1). As a result of this, and also of the manner in which the department's decision was defended at the hearing, the record is lacking in the kinds of evidence that would be necessary in order for the commission to attempt to make the decision itself following the correct legal standards.
One of the most critical deficiencies in the record is the lack of any evidence concerning other training programs similar to the one proposed by the claimant. A number of the relevant standards turn heavily on questions of what other, similar training programs are available and what their costs and schedules are, see, 20 C.F.R. § 617.22(a)(6)(ii), where they are located, see, 20 C.F.R. § 617.22(a)(6)(iii) (B) and (C), what the prospects for employability are from such training, see, 20 C.F.R. § 617.22(b), and what the skill level required for the training is, see, 20 C.F.R. § 617.22(b). Properly applying the relevant "available at a reasonable cost" standard of the Trade Act requires that information relevant to these questions be obtained and be considered.
In its brief, the department argues that the "available at a reasonable cost" standard of the Trade Act
"has not been clearly defined by DOL and there is very little precedent on this issue. The minimal guidance provided by DOL has generally only served to create broad guidelines that are not particularly helpful in the present case".
DWD Brief, p. 6. Without intending to indicate that it agrees with this complaint about the adequacy of Department of Labor's standards for interpreting and applying the "available at a reasonable cost" test, the commission would observe that even if true, this does not justify relying on other guidelines (the department's $12,000 training cost limit) when those other guidelines have no legal force or validity and are contrary to the Trade Act. The fact is, that the "broad guidelines" stated in 19 U.S.C. § 2296(a)(1)(F) and 20 C.F.R. § 617.22(a)(6) are all that is available to guide decisions in this area. For better or worse, therefore, they are what decision makers must use.
The commission does not doubt, that accumulating the factual information necessary to make an informed decision on approval of training under the applicable standards of the Trade Act and regulations thereunder involves a fair amount of work. However, the department must do that work. It is within neither the capabilities nor the responsibilities of the commission to do it. The commission's role is to review decisions by the department to determine if they are supported by the relevant facts in the record and by the applicable legal standards; in order to carry out this role there needs to have been a process in which the factual information relevant in and necessary to the application of the appropriate legal standards has been developed and preserved in the record. This has not occurred here.
For the foregoing reasons the commission now issues the following:
The April 15, 2004 decision of the ALJ in this matter is set aside. The January 3, 2004 department determination in this matter is set aside. This matter is remanded to the department for it to issue another determination on the question of whether the claimant's request for approval of training can be approved, based on the applicable legal standards in the Trade Act and Department of Labor regulations thereunder, as discussed above.
Dated and mailed January 12, 2005
stammke2 . trr : 110 : 2 TRA
/s/ James T. Flynn, Chairman
/s/ David B. Falstad, Commissioner
/s/ Robert Glaser, Commissioner
NOTE: The commission has carefully considered the arguments which were made on behalf of the claimant and the department in their briefs.In Part 1. of his argument (Claimant's Brief in Chief, pp. 4-6), the claimant argues that the department failed to follow "state procedure and federal regulations". The first part of this argument is the claim that the department failed to comply with the requirements of 20 C.F.R. § 617.20(b), "State agency responsibilities", that:
The responsibilities of cooperating State agencies under subpart C of this part include, but are not limited to:
. . .
(14) Developing and implementing a procedure for reviewing training waivers and revocations at least every 30 days to determine whether the conditions under which they are issued have changed.Specifically, he argues that although Wisconsin has "developed" procedures, they were not "implemented" here, because the procedure which Wisconsin has adopted for handling requests to waive the $12,000 limit on training costs were not followed. The claimant's argument rests on the fact that the department representative did not submit a written request to exceed the training cost limit to the TAA Coordinator, but instead simply assumed that it would be rejected based on a telephone conversation. He argues that testimony about this telephone call is insufficient to establish that the request to exceed the training cost limit was submitted in writing to the TAA Coordinator in the manner required by the department's procedures.
This argument confuses waivers of the Trade Act's requirement that a person be enrolled in training as a condition of receiving TRA payments, and the "waiver" of the DWD's internal guideline about training costs over $12,000. The section of the regulations cited by the claimant, 20 C.F.R. § 617.20(b)(14), is concerned with the former, that is, with waivers of the training requirement. The claimant's reliance on the provision in 20 C.F.R. § 617.52(a) calling for liberal construction of the Trade Act and regulations so as to carry out the purposes of the Act, can not carry the day in light of this flaw. 20 C.F.R. § 617.20(b)(14) has absolutely nothing to do with "waivers" of state guidelines about what constitutes a reasonable cost for training.
The claimant also argues that the department representative's failure to submit the request to exceed the training cost limit to the TAA Coordinator ran afoul of 20 C.F.R. § 617.50(d), which provides that
As to matters committed by this part 617 to the applicable State law, a State agency, a hearing officer, or a State court shall apply the applicable State law and regulations thereunder, including procedural requirements of such State law or regulations, except so far as such State law or regulations are inconsistent with this part 617 or the purpose of this part 617 . . .
However, the internal policy by which a request to exceed the training cost limit is to be submitted to the TAA Coordinator, is not part of "State law or regulations" at all. As discussed above, none of the department's internal policies governing the operation of the Trade Act benefit programs have been duly adopted as administrative rules. They are neither "State law" nor "regulations".
The second part of the claimant's "failed to follow state procedure and federal regulations" argument is the claim that the department did not comply with certain expectations stated in Appendices to the federal regulations and in technical materials published by the U.S. Department of Labor, to the effect that state agencies should keep written records of the facts considered in reaching determinations and include in written noticed of determinations furnished to claimants sufficient information to enable them to understand the determinations. However, even assuming arguendo that these complaints are valid here, the commission see no basis for extending the effect of these to the point that, where sufficient records are not kept or determinations are not sufficiently detailed, this results in reversal of the determination.
In Part 2. of the claimant's argument (Claimant's Brief in Chief, pp. 7-12), the claimant initially focuses on a comment made by the ALJ that the department had not presented a particularly clear case as to its rationale but that the training costs were "probably" higher than they would otherwise have been, and thus not subject to a waiver of the department's $12,000 limit, because the training institution was private, and because a waiver of the department's $12,000 limit is applicable only to travel-related costs in excess of the $12,000. The claimant's argument here is difficult to evaluate consistently with the principles discussed above in this decision, because it continually circles back to the matter of the $12,000 cost limit and the possibility of a waiver of that limit. Specific provisions of the relevant federal regulations are cited, but they are cited in support of arguments about the waiver of the $12,000 limit. The claimant also rests some of these arguments about whether there should have been a waiver of the cost limit, on provisions of the federal regulations that relate to the "reasonably available to the worker" condition of 19 U.S.C § 2296(a)(1)(D), which is separate and distinct from the "available at a reasonable cost" condition of 19 U.S.C § 2296(a)(1)(F). As noted above, the department denied approval of training solely on the basis of excessive cost.
While in its brief the department also addresses the $12,000 training cost limit and associated procedures which it follows pursuant to the TAA Manual, it also tries to edge away from that matter, and to suggest that the training cost limit played only a minor role in the process:
The claimant seems to believe that his request was denied simply because it exceeded the cap on training cost. This is an incorrect interpretation of the situation. The request was denied because the cost was deemed to be unreasonable. Although the fact that the cap was exceeded was a factor in this decision, it was neither the sole factor nor the determining factor.
DWD Brief, p. 7. The commission disagrees. As discussed above, it is quite clear from the testimony that the department's decision to deny approval for the training in this case was based primarily if not exclusively on the $12,000 limit. The department does not appear to have ever gone through the process of collecting the information necessary to apply the standards in 20 C.F.R. § 617.22 for determining what a "reasonable cost" is, and it is no doubt for that reason that the record also lacks such information.
Thus, while the commission has considered the arguments of the parties, it has concluded that they are essentially irrelevant insofar as they focus on the $12,000 training cost limit and the procedures associated with it, and that they are not particularly helpful in arriving at a decision using the correct legal standards because, those standards not having been considered to any significant extent by the department in the first place, there is little if anything in the record to equip the commission to consider them now.
cc:
Attorney Catherine Cetrangolo, Boardman Law Firm
Gregory A. Frigo, Director, DWD UI Division Bureau of Legal Affairs
David Shaw, Monroe/Green County Job Service
Advance Transformer Company
Brian Gohlke
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