STATE OF MICHIGAN EMPLOYMENT SECURITY BOARD OF REVIEW

In the Matter of the Claim of

MARY BENCZKOWSKI, Appeal Docket No. B77-14530-56917

Claimant Social Security No.llllllllllll.-a FORD MOTOR COMPANY,

Employer

DECISION OF BOARD OF REVIEW ON REHEARING

This case is before the board of review on the claimant's request for rehear­ing. The board heard oral argument on February 25, 1980 . At the oral argu­ment, the claimant and the employer were represented by counsel . In addition, Wayne County Neighborhood Legal Services appeared as a friend of the board. Counsel for the claimant and the friend of the board supplemented their oral arguments with thoughtful written arguments. The Michigan employment security commission did not appear.

This case raises difficult questions of statutory construction .

FINDINGS OF FACT

The claimant worked for the employer until the end of May, 1976. time, she took a leave of absence for a maximum period of one year.

At that

In the spring of 1977 the claimant attempted to return to work . However, she was told by the employer that her job had been eliminated and that she should apply for unemployment benefits (Transcript, page 8, hereinafter "Tr, p ").

On May 13, 1977, the claimant applied for unemployment benefits. 1pn her MESC claim form, she wrote that her last day worked was May 30, 1976.- Her last day worked actually may have bee n a few days earlier (Tr, p 6) . The disparity is immaterial.

1./ This date was later cancelled. 1977, was written above it. The change was made or who made it.

A new (and incorrect) date, May 9, record does not indicate when this

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On May 17, 1977, the comm~ss~on mailed the employer a request for information. In its request, the commission states that the claimant last worked for the employer on May 30, 1976 (the date recorded by the claimant on her claim form) and that the claimant filed her new claim on May 13, 1977. In addition, the request not ifies the employer that a prompt response is required: "The law requires that you furnish the requested information even if you · ...f>.eth:~ the claimant is not entitled to benefits." In capital letters the request states: "THE LAW REQUIRES YOU TO MAIL OR DELIVER THIS WITHIN 7 DAYS AFTER THE DATE OF MAILING."

The 7-day period pas sed without the employer complet ing and returning the commission's request for information.

On May 26, 1977, the commission issued the claimant a benefit check in the amount of $194.00. This check covered the two calendar weeks May 8 through May 21, 1977. The issuance of this check was immediately followed by a deter­mination dated May 27, 1977. The determination states that the claimant had one base period employer - the employer in this case - and that the claimant had earned the maximum of 35 credit weeks from the employe r during her base period. The determination further states that the claimant was being allowed unemployment insurance benefits for a 26-week period. The determination was not appealed . On June 9, 1977, the commission issued a second benefit check to the claimant in the amount of $194.00 for the two-week period May 22 through June 4, 1977 .

A time stamp reveals that the comm~ss~on received the employer's untimely response to the commission's request for information on June 9, 1977 at 11:30 a.m. As stated above, this was the date the claimant received her second check.

The information submitted by the employer showed that the claimant had earned only four credit weeks in her base period. On the basis of the employer's information, the commission issued a redetermination holding (1) the c laimant was entitled to no unemployment benefits because of insufficient credit weeks, (2) the claimant must make restitution of the $388.00 she had received from the commission, (3) the employer was entitled to a credit to its rating account for the second check paid the claimant but not for the first check paid th e claimant, and (4) the claimant was not guilty of intentional misre­presentation with the result that the penalty provisions of Section 62(b) did not apply to her.

Only the claimant appealed this redetermination. On September 2, 1977, the referee affirmed it. Only the claimant appealed to the board of review. On July 19, 1979, the board of review, in a 2-1 decision , affirmed the referee decision except as to the credit to the employer's rating account. On this question, the board held the employer entitled to no credit . The claimant then requested rehearing by the board of review. As a result of this request, the board accepted written argument and heard oral argument.

B77-14530-56917 Page 3

RESTITUTION OF BENEFITS

The claimant argues that she should not be required to $388.00 of unemployment benefits which she received. follow, the board of review agrees.

make restitution of the For the reasons that

We note by way of introduction that rules of restitution should be easily understood if this part of the law of unemployment insurance is to be effec­tive. However, because of their treatment in theMES Act and the commission's Regulations, restitution ru les are extremely difficult to understand and apply. As a result, it appears to us that the commission often fails to record or maintain sufficient records to permit appellate authorities to rev1ew restitution issues. Amending the MES Act to clarify the law of resti­tution would be most desirable.

Having said this, we believe there are two independent lines of analysis why the claimant is not required to make restitution. Each line begins with Sec­tion 62(a) of the MES Act. It states that restitution is required where 11 a person has obtained benefits to which the person is not entitled . ''

This language standing alone would require restitution in every case where it comes to light 2yhat for any reason a claimant was incorrectly paid unemploy­ment benefits.- However, it does not stand alone. It is modified by a n umber of provisions appearing at various places in the MES Act and the commission Regulations. We refer to Sections 29(10), 32(d), 32a(3), the remainder of Section 62(a), and Regulation 205(6). Sections 20(a) and 32(b) of the MES Act are arguably involved as well.

I

Our first line of analysis runs from Section 62(a) to Section 32a(3) of the MES Act. The latter section provides:

11If, in the event of fa..ilure on the part of an interested party to file a protest within the 20-day period, the cornmiss ion for good cause reconsiders a prior dete rmina­tion or redetermination and issues a redetermination, a

21In 1977, the Michigan legislature amended Section 62(a). Part of the amendment deletes the phrase 11 for any reason 11 from Section 62(a). We are unsure what to make of the deletion other than that it supports our rea­soning below that Section 62(a) is not pre-emptive.

B77-14530-56917 Page 4

dis qualification or ineligibility imposed thereunder, except ineligibility imposed by reason of receipt of retroactive pay, shall not apply to a compensable period for which benefits were paid or are payable unless the benefits were obtained by reason of an administrative clerical error or a false statement or nondisclosure or misrepresentation of a material fact by the claimant. However, the redetermination shall become final unless within 20 days after the date of mailing or personal serv1ce of the notice of redetermination an appeal is filed for a hearing on the redetermination before a referee in accordance with section 33." [Emphasis added.]

In Zaleski v Lakeview Community Hospital, No . 74-16372-AE, (Ingham County Cir Ct, 1975), the court held that under Sectjfn 32a(3) a claimant who has received benefits incorrectly for any reason- cannot be ordered to make restitution unless the benefits were paid "through administrative clerical error or deceit." The court explained:

"The pivotal issue is whether Subsection 32a(3) or Subsec­tion 62(a) of the Act applies on the facts of this case.

* * * Obviously, 62(a) is not nearly as broad and all-inclusive as the underscored language ["for any reason"] suggests . In the ordinary case, where benefits have been paid and pursuant to 32a(3) the Commission r econsiders and deter­mines that the claimant does not meet the conditions of eligibility expressly set for th by Section 28, restitu­tion is not required unless the benefits were obtained by

l_/The court expressly ruled that "ineligibility" as used in Section 32a (3) is not limited to ineligibil~ty under Section 28 of the Act. This is important because the claimant in our case, like the claimant in Zaleski, was not paid benefits incorrectly under the eligibility provisions of Section 28, but rather for an independent reason. In Zaleski, the claim­ant should not have been paid benefits because she had not worked in covered employment. In our case, the claimant should not have been paid benefits because she had earned insufficient credit weeks to establish a benefit year. We agree with Zaleski's reading of "ineligibility" under Section 32a(3). We find that this reading of ineligibility applies equally to Sections 29(10) and 32(d) as well as to Regulation 205(6). These latter provisions are discussed later in our op1n1on.

B 77-14530-56917 Page 5

reason of administrative clerical error or a false state­ment or nondisclosure or misrepresentat ion of a material fact by the claimant."

In our case, the commission issued a determination on May 27, 1977 awarding benefits to the claimant. The determination was not prot es ted . More than 20 days later, the commi~fion issued a redetermination that the claimant was not entitled to benefits.- As a result, under Section 32a(3), the claimant could not be

57rdered to make restitution absent an administrative clerical error or

fraud.-

The issue of fraud in this case had already been determined in the claimant's favor. The commission's redetermination held: "Intentional misrepresentation is not established; therefore, claimant is not subject to the penalty provi­sions of Section 62(b) of the Act." Neither the employer nor the commi ssion appealed this part of the redetermination. As a result, the holding that the claimant committed no fraud is final and not subject to collateral attack. See Roman Cleanser Co v Murphy, 368 Mich 698 (1972).

The remaining issue under Section 32a(3) is whether the claimant was paid unemployment benefits by reason of an administrative clerical error. It has long been held that an administrative clerical error is "any non-discretionary action resulting in an unintentional mistake committed by someone in the performance of a ministerial duty not requiring the exercise of judgment." Clous (Michigan Tool Co), 1960 AB 23920.

4/ h . . 1 ' - T e redeterm1nat1on was express y based on the employer s late response to the commission's request for i nformation. This newly obtained infor­mation gave the commission good cause under Section 32a(3) for reconsid­er1ng its earlier determination.

~/The court in Zaleski used the term "deceit" to explain the language in Section 32a(3) "a false statement or nondisclosure or mis representation of a material fact by the claimant. 11 The terms "deceit" and "fraud" are synonymous. In Chrysler Corp v Deskovitz, No. 76-634-622-AE (Wayne County Cir Ct, 1978), the court. used the term "fraud" to explain the quoted language. We agree with this reading and hold that the quoted language means claimant fraud.

The alternative reading of the quoted language would make it applicable to innocent as well as fraudulent misrepresentations or omissions of fact. The problem with this reading is that it would produce the unex­pected result that language designed to limit instances of restitution would call for restitution in every case where a material fact adverse to a claimant belatedly came to the surface.

B77-14530-56917 Page 6

In the present case, when the claimant applied for benefits in May of 1977 sh e correctly report ed that her last day worked was at the end of May, 1976. The commission expressly relied on t h is fact in later submitting its request for i nformation to the employer. For an unknown reason, the commission, in its determination of May 27, 19t~· set up a benefit year for t he claimant and paid her unemployment benefits.- Whatever the reason, the fact rema~ns that ordinarily " the actual decision making by certain designated employees 1n respect to determinations and redeterminations requires the exercise of discretion and judgment and is mo r e than an administrative clerical function . " Clous, supra. We add that in a case like this, where the commission could only rely on an "administrative clerical error" to order restitution of benefits, it i s the commission's duty to explain with particularity what its "administrative clerical er ror" is. The commission failed to do so in this case and instead relied on the late submission of required information by the employer.

For the above reasons, the claimant is not required to make restitution under Sections 32a(3) and 62(a) of theMES Act .

Our second line tion runs from 205 (1) and ( 6).

II

of analysis why t he claimant is not required to make restitu­Section 62(a) to Section 29(10) and commission Regulations Section 29(10) states:

"Notwithstanding any of the above provisions of this section, if the employing unit submits notice to the commission of possible ine l igibility or disqualification beyond the time limits prescribed by commission rule, the notice shall not form the basis of a determi nation of ineligibility or di s qualification for a claim period compensated before the receipt of the notice by the commission."

In turn, comm~ss~on Regulations 205(1) and (6) state:

6/ h · • 1 • • • -Perhaps t e comm~sston s adjud~cator thought that the clatmant had earned credit weeks based on her status as an employed individual within the meaning of Section 48 of theMES Act because of her leave of absence. This might expl ain the May 9, 1977 date inserted on her claim form . It appears that t he cla imant was laid off by the employer on this date (Exhibit 7).

B 77-14530-56917 Page 7

"1. When an individual files a new claim for benefits, the Commi$sion shall notify all of his base period employ­ing units thereof, and request wage and/or separation information on a form designed for that purpose. Each employing unit shall respond, within seven days from the date of mailing or personal service of such request, on the form furnished by the Commission and shall direct the response to the Commission's address shown on the form. "

"6. If an employing unit responds to a request from the Commission after such response is due under paragraph 1 or 2, such response shall not (in the absence of a showing that the employing unit could not reasonably comply with the due dates of paragraph 1 or 2 or of a showing of a false statement, misrepresentation or nondisclosure of a material fact on the part of the claimant, or of an administrative clerical error) form the basis of a deter­mination or redetermination, as the case may be, of disqualification or ineligibility for any claim period for which benefits have been paid prior to the receipt by the Commission of such response."

These provisions, like Section 32a(3), show that "62( a) is not nearly as broad and all -inclusive" as it would appear to be at first blush. Zaleski, supra.

In our case, the employer submitted notice of insufficient c redit weeks beyond the time prescribed by commission Regulation 205(1) and also Section 32(b) of the MES Act. Therefore, under Section 29(10) this not ice could not "form the basis of a determination of ineligibility or disqualification f or a claim period compensated before the receipt of the notice by the commission," unless one of the following three exceptions contained in Regulation 205(6) were to apply:

(1) "a showing that the employing unit cannot reasonably comply with the due dates,"

(2) "a showing ... qf an administrative clerical error," or

(3) "a showing of a false statement, misrepresentation or nondisclosure of a material fact on the part of the claimant ."

Exceptions (2) and (3) are the same as the two grounds for restitution set forth in Section 32a(3). We hold that t hey have the same meaning. As a result, "an administrative clerical error" ordinarily does not include "the

B77-14530-56917 Page 8

actual decision making by certain designated employees 1n respect to deter­minations and redeterminations." Claus, supra. In turn, "a false state­ment, misrepresentation or nondisclosure of a material fact" means fraud. Deskovitz, supra; Zaleski, supra.

None of the three exceptions to non- restitution in Regulat ion 20S(6) applies to the present case . First, there was no showing by the employer of inability to comply timely with the commission's request for information. Second, the record does not establish an administrative clerical error . Third, it has been determined with finality that the claimant did no t commit fraud .

The final restitution issue under Section 29(10) and Regulation 205(6) deals with "receipt" by the commission of the employer's late submission of informa­tion. Under Section 29(10) and Regulation 205(6), avoidance of restitution ends with the receipt by the commission of the employer's late information. We hold that receipt occurred in this case lfen the commission marked as "received" the employer's late submission.- Therefore, we must decide whether any benefits were paid the claimant after the employer's late submis­sion had been received by the commission.

The employer's late submission was received by the comm~ss~on at 11:30 a .m. on June 9, 1977. Therefore, it is obvious that no restitution can be required for the check issued to the claimant on May 26, 1977 . Nor do we think that restitution can be ordered for the check issued to the claimant on June 9, 1977. Without proof that the check was tendered to the claimant after the commission's 11:30 a.m. receipt of the employer's submission, we conclude that the claimant received the check before 11:30 a.m. on June 9, 1977 . Our con­clusion is based on a presumption of normal business activity and on consider­ations of equity.

For the above reasons, the claimant is not required to make restitution under Sections 29(10) and 62(a) of theMES Act and commission Regulations 205(1) and ( 6) .

III

For the purpose of rounding out the complex law of restitution under the MES Act, we wish to explain why we . think that Sections 20(a), 32(b), and 32(d) do not apply to the restitution issue in this case .

7/ -We note that there was no showing in this case of an administrative clerical error by the commission in failing to promptly mark as received the employer's late submission .

B77-14530-56917 Page 9

Section 20(a) states:

"Benefits paid to an individual as a result of an employ­er's failure to provide the commission with separation, employment, and wage data as required by sect ion 32 shal l be considered as benefits properly paid to the extent that the benefits are chargeable to the noncomplying employer." [Emphasis added.]

In turn, Section 32(b) states:

"If any emplo yer or employing unit fails to respond, within 7 days after mailing of a request for informa­tion, the commission shall make a determination upon the available information. In the absence of a showing by the employer satisfying the commission that he could not reasonably comply with the foregoing requirements, such determination shall be final as to the noncomplying employer, as to any benefits paid prior to the week following the receipt of his reply and chargeable against his rating account as a result of his late reply." [Emphasis added.]

We believe that these two sections as quoted have no application to restitu­tion but deal rather with whether the employer is entitled to a credit to its rating account where benefits were paid as a result of its untimely submission of required information. Our reasoning is that both are expressly limited to "the noncomplying employer" whereas Sections 29(10), 32(d), 32a(3), and 62(a), as well as Regulation 205(6) are not so limited . The legislature must have had a reason for inserting the "noncomplying employer" limitation in these two sections only. We think the reason was to limit their app l ication to rating account credits. Further, we confess that if the quoted sections were to apply to restitution, our effort to square them with the law's other resti­tution sections would tease us out of thought.

Section 32(d), on the other hand, does apply to restitution but only where an employer has made a protest of a benefit check determination.

Section 32(d) states:

"The issuance of each benefit check shall be considered a determination by the commission that the claimant receiv­ing the check was, during the compensable period, covered thereby, eligible and qualified for· benefits, and any employer upon· receipt of a copy of the check as provided in subsection 2l(a) may protest by requesting a redetermi­nation as to such eligibility or qualification as to such

B77-14530-56917 Page 10

period and a determination as to later weeks and benefits still unpaid as are affected by such protest. Upon receipt of such protest or request, the commission shall investigate and redetermine whether the claimant 1s eligible and qualified as to such period. If, upon such redetermination, the claimant is found ineligible or not qualified, the commission shall investigate and determine whether the claimant obtained benefits (for 1 or more preceding weeks within the series of consecutive weeks which includes the week covered by such redetermination) improperly as the result of administrative error, false statement , misrepresentation, or non-disclosure of a material fact. If the commission finds that the claimarlt has obtained such benefits t hrough administrative error, false statement, misrepresentation, or non-disclosure of a material fact, the commission shall proceed under the appropriate provisions of section 62."

In the present case, the employer never protested the benefit checks paid the claimant. Rather, it merely filed late the information requested by the commis sion. Therefore, Sect ion 32(d) does not apply to our case , no81i th-standing the fact that it contains similar administrative error languag~ and the same fraud language as found in Regulation 205(6) and Section 32a(3).

CREDITING THE EMPLOYER'S RATING ACCOUNT

In the board of rev1ew decision in this case, dated July 19, 1979, the board held that the employer was entitled to no credit for the four weeks of bene­fits paid the claimant. For the following reasons, this part of the board 's decision is vacated.

The commission's redetermination 1n this case held 1n pertinent part :

"Ford Motor Co. is en.titled to credit in the amount of $194.00 (for weeks 21/22) under Section 20(a) of the Act. Ford Motor is not entitled to credit in the amount of $194.00 (for weeks 19/20) under the same Act."

§_I It is noted that Section 32(d) omits "clerical" from its. ''administra­tive error" references. This would appear to be a legislative oversight rather than a conscious effort to provide a different standard for deciding when restitution is to be avoided.

.B77-14530-56917 Page 11

The employer did not appeal the redetermination. Only the cla imant appealed the redetermination. The claimant did not (and could not have) appealed this part of the redetermination because she had no legal standing to challenge it . Whether or not the employer received a credit had no bearing on her rights. As a result, this part of the redetermination has become final and not subject to belated amelioration. We note, however, our sympathy with the employer in the present case. On its face, the request for informa t ion served on t he employer contained representations of fact made by the commission on which a prudent individual readily might conclude that the claimant could not esta8-lish entitlement to benefits.

DECISION

For the above reasons, the board decides that the claimant is not required to make restitution of the four weeks of unemployment benefits which she received. The board also decides that the commission's redetermination tha t the employer is entitled to a credit to its rating account for two of t he four weeks only is final.

Thomas L. Gravelle, Member

s Viventi , Member

MAILED AT DETROIT, MICHIGAN May 6, 1980 ------~--~--------------

This decision will become final unless an appeal to the appropriate circuit court is RECEIVED on or before

May 27, 1980

TO PROTECT YOUR RIGHTS YOU MUST BE ON TIME.