DWAYNE A MC KAY, Claimant/Petitioner
ALWAYS CONSTRUCTION LLC, Respondent
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 initiated an unemployment benefits claim in April 2012, and provided information about his previous employment to the department's bureau of benefits (BOB). He did not report working for Always Construction LLC (AC), a construction business in which his nephew had an ownership interest. He had previously loaned AC $10,000, and been repaid by the business. However, he had never worked for the business. The department computed his monetary entitlement based upon the employment that he reported, and he began to receive weekly benefits in the amount of $363.
Coincidentally, in April 2012, the department's bureau of tax and accounting (BTA) was performing an audit of AC (for the period from January, 2011 through April, 2012) to determine whether AC had employees and was subject to unemployment insurance laws (a tax case, also known as a status case, i.e., a case related to the employing unit's status). BTA discovered that a total of $4,500 was paid to the claimant during a calendar quarter of his base period. The claimant's nephew told the auditor that the payment to the claimant was in repayment of a loan, and not for services performed. However, the auditor wanted confirmation from the claimant that he had not performed services for AC, and sent the claimant a questionnaire on May 16, 2012 about the money he received from AC. The claimant did not respond to the questionnaire. When the claimant did not complete and return the questionnaire, it appears that the auditor concluded that the claimant had performed services for AC as an employee. The $4,500, apparently per procedures in the department, was then placed as wages in the claimant's wage file, the system recomputed the monetary for his claim, and a new computation was sent to him on June 2, 2012, in which his weekly benefit rate stayed the same ($363), but his maximum benefit amount increased. He continued to receive weekly benefits through week 40 of 2012 (the week ending October 6, 2012).
The claimant initiated a new benefit claim in April 2013. In response to a question by the adjudicator about his previous employment, he said that he had not worked for AC, but had received payments from AC in repayment of a loan he had previously made to AC. However, the adjudicator either ignored or discounted the claimant's statement to her, and in a determination dated April 23, 2013, found that the claimant was an employee of AC and received wages from AC in the first quarter of 2011 and the first quarter of 2012. This determination identified the "issue week" to be week 14 of 2012. That is the determination at issue here.
AC appealed that determination, and two hearings were held on the matter(1). The ALJ issued an appeal tribunal decision finding that the claimant was not an employee, and that he had erroneously received benefits totaling $3,252 that he must repay to the department. The decision also found that AC's account should not be charged for the erroneously paid benefits because AC had provided sufficient information to the department to establish that payments to the claimant were repayments of a loan, and not payments for services performed.
The claimant petitioned the commission for review of that part of the ALJ's decision that required that he repay $3,252 to the department, arguing that he should not have to repay the erroneously paid benefits.
There is no evidence in the record that the claimant ever performed services for pay for AC. In addition, the claimant does not dispute that the department correctly computed the amount of benefits he had been erroneously paid. Therefore, the only issues in this case are whether the claimant must repay the erroneously paid benefits to the department and whether such erroneously paid benefits should be chargeable to AC's account.
Generally, as noted by the ALJ, a claimant who receives unemployment benefits in error is required to repay those overpaid benefits to the department. However, Wis. Stat. � 108.22(8)(c) provides that recovery of the overpayment shall be waived if the overpayment resulted from department error and did not result from employee fault(2) or a false statement or misrepresentation by the claimant. "Department error" is defined in Wis. Stat. § 108.02(10e)(am), and includes an error relating to paying benefits resulting from a mistake of evidentiary fact. An employee is at fault, as described in Wis. Stat. § 108.04(13)(f), for an act of concealment or for a failure to provide correct and complete information to the department.
Clearly, the department erred in this case. The BTA, in the tax case involving AC's subjectivity to unemployment insurance laws, came to the conclusion that the claimant was an employee of AC, a mistake of evidentiary fact. It is important to note that the BTA came to that conclusion even though AC's owner correctly advised the BTA that the payments to the claimant were in repayment of a loan previously made by the claimant, and that the claimant had not performed services for AC. It was unnecessary to draw the claimant into the inquiry since the BTA could have confirmed that fact by requesting a copy of the loan check or the loan agreement from AC.
Subsequently, and most significantly, the BTA misapplied the law in concluding that the claimant was AC's employee. In employment status cases (both benefit and tax cases), determining whether an individual performed services as an "employee" under Wis. Stat. § 108.02(12) is a two-step process. The first step is to determine if the evidence establishes that the individual "is or has been performing services for pay for an employing unit, whether or not the individual is paid directly by the employing unit," within the meaning of § 108.02(12)(a). For this step, the department carries the burden of proof. Gilbert v. LIRC and DWD, 2008 WI App 173, 33, 315 Wis. 2d 726, 762 N.W.2d. 671. In this case, the BTA had absolutely no evidence that the payments by AC to the claimant were for his performance of services for AC. In fact, the evidence the BTA received from AC was to the contrary. The BTA relied entirely on the claimant's failure to return the questionnaire sent to him as evidence that he performed services for AC for pay.
The commission does not dispute that the claimant should have responded to the questionnaire that was sent to him. However, it is a fact of life that not all department inquiries receive responses and, in this case, it appears that the claimant thought that his nephew, an owner of AC, was going to straighten things out with the department. Regardless, the BTA's unwarranted reliance on the claimant's lack of response in the tax case set the entire chain of events in motion. This mistake of evidentiary fact was transmitted to the BOB, even though the claimant had not reported to the BOB that he was an employee of AC. The BOB aggravated that error by changing the claimant's benefit claim to add "wages" to his base period, and there is no evidence in the record that the BOB made efforts to question the claimant about this matter before changing the amounts in his wage claim.
The commission recognizes the tension inherent in the relationship between the BTA and the BOB, both part of the same department and both making determinations that may involve the same law, but in different contexts. However, the law is clear and longstanding that a decision in a status case is not binding on a benefits case, and vice versa. Wis. Stat. § § 108.101(2) and (3). Although it is understandable and laudable that the department strives for consistency in the decisions issued by both bureaus, it cannot disregard the requirement that each bureau's determinations be grounded in adequate evidentiary support and that meaningful and proper due process be afforded to the parties in the process.
Clearly, there was no act of concealment here by the claimant. However, the ALJ concluded that the claimant, by failing to respond to the questionnaire sent by the BTA, failed to provide correct and complete information to the department, constituting employee fault; therefore, the repayment of the erroneously paid benefits should not be waived. The commission disagrees.
In his benefit claim, the only matter at issue, the claimant provided correct and complete information to the department, i.e., he had never provided services for pay to AC and the payments he received from AC were in repayment of a previous loan he had given AC. The matter of AC's subjectivity is an entirely separate matter from the claimant's benefits claim, and the claimant's failure to respond to a questionnaire in that separate matter should not be used to determine the question of "employee fault" in this benefit case. The commission concludes, therefore, that there was department error, but no employee fault, in the revision of the claimant's wage claim and the increase in his maximum benefit amount. Accordingly, repayment of the erroneously paid benefits shall be waived.
As to whether the overpaid benefits should remain charged to AC's account, the commission agrees with the ALJ that AC's account should not remain charged with those benefits. Wis. Stat. § 108.04(13)(d) provides that an employer's account shall not be charged with erroneously paid benefits if those payments were made without fault by the employer. In this case, AC provided correct and complete information to the department about the payments to the claimant being repayments of a loan and not payment for services performed by the claimant. Accordingly, the benefits erroneously paid to the claimant shall not be charged to AC's account.
The decision of the administrative law judge is affirmed in part and reversed in part. Accordingly, the monies paid to the claimant by AC shall not be included in the department's computation of the claimant's base period wages for determining benefit eligibility. The claimant is not required to repay the sum of $3,252 to the Unemployment Reserve Fund. Erroneously paid benefits shall not be charged to AC's account.
Dated and mailed September 13, 2013
BY THE COMMISSION:
/s/ Laurie R. McCallum, Chairperson
/s/ C. William Jordahl, Commissioner
/s/ David B. Falstad, Commissioner
mckaydw_urr . doc : 120 :
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(1)( Back ) The ALJ did not address the matter of a potential overpayment in his decision after the first hearing, so set aside his first decision issued on June 6, 2013, finding the claimant not to be an employee of AC. A second hearing was held on June 27, 2013, addressing several issues: whether the claimant was an employee of AC and, if not, whether he had been erroneously paid benefits that must be repaid to the department and whether AC's account should remain charged for those erroneously paid benefits. In addition, the record from the first hearing was incorporated into the record of the second hearing.
(2)( Back ) Although the claimant was not an employee of AC, his benefit claim was based on his having previously worked for at least one other business as an employee.