MILLAR V. N.M. DEP'T. OF WORKFORCE SOLUTIONS, 2013-NMCA-055, 304 P.3d 427
FRANK MILLAR, Petitioner-Appellee,
v.
NEW MEXICO DEPARTMENT OF WORKFORCE SOLUTIONS and WESTERN
REFINING SOUTHWEST, INC., Respondents-Appellants.
COURT OF APPEALS OF NEW MEXICO
2013-NMCA-055, 304 P.3d 427
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY,
Barbara J. Vigil, District Judge.
Certiorari Denied, April 3, 2013, No.
34,045. Released for Publication May 21, 2013.
New Mexico Legal Aid, Inc., Timothy R.
Hasson, Santa Fe, NM, for Appellee.
New Mexico Department of Workforce
Solutions, Marshall J. Ray, Elizabeth A. Garcia, Albuquerque, NM, for
Appellant.
LINDA M. VANZI, Judge. WE CONCUR: RODERICK
T. KENNEDY, Chief Judge, J. MILES HANISEE, Judge.
{1} The New Mexico
Department of Workforce Solutions (DWS) appeals from a district court order
reversing a decision of the DWS’s Appeals Tribunal (Tribunal). The Tribunal
determined that claimant Frank Millar was required to repay an overpayment of
unemployment compensation benefits in the amount of $4,931. The district court
held that the Tribunal’s hearing, conducted five months after Millar started
receiving benefits, violated the timeliness requirements for processing appeal
claims under state and federal law. In the alternative, the district court
found that the doctrine of equitable estoppel barred DWS from claiming and
collecting an overpayment from Millar. We disagree with the district court’s
decision and reverse.
{2} Millar was
discharged from his employment with Western Refining Southwest, Inc. (Western
Refining) on November 20, 2009. He filed for unemployment benefits on December
6, 2009. After preliminary fact finding, the DWS claims examiner issued a
notice of claims determination (NCD) in favor of Millar granting him benefits
of $269 per week. The NCD stated that the determination was final “unless an
appeal is filed within fifteen calendar days from[] 01/07/2010.” In addition,
the NCD stated, “If your employer challenges a decision allowing benefits to
you and the appeal decision is against you, you will be required to repay those
benefits.” On January 21, 2010, Western Refining appealed the claims examiner’s
decision.
{3} It is undisputed
that DWS did not immediately inform Millar that it had received the January 21,
2010 notice of appeal from Western Refining. The parties further agree that
Millar did not learn of the appeal until the Tribunal sent out a notice of
hearing on June 4, 2010, setting the hearing for June 16, 2010. However, he
continued to receive benefits until April 17, 2010. At the June 16, 2010
hearing, the Tribunal found Millar to be disqualified from benefits due to
misconduct connected with his employment. Millar subsequently received an
overpayment notice for the unemployment payments that he had received from
December 19, 2009, until his benefits were exhausted at the end of April 2010.
{4} Although he did not
appeal the misconduct issue, Millar timely appealed the overpayment
determination through the DWS’s administrative process. The Tribunal affirmed
the claims examiner’s decision that Millar had been overpaid benefits in the
amount of $4,931 and that the benefits must be refunded to DWS. In turn, the
DWS’s cabinet secretary (secretary) upheld the January 7, 2011 determination of
the Tribunal. The secretary’s affirmation was the final administrative decision
in the matter. Having exhausted his administrative remedies, Millar appealed to
the district court under Rule
1-077 NMRA and NMSA 1978, Section
51-1-8(M), (N)
(2004). The district court granted Millar’s writ of certiorari and, after a
hearing, reversed the decision of the secretary, affirming the Tribunal.
Specifically, the court found that DWS was out of compliance with federal and
state timeliness standards for processing appeals and that the long delay in
scheduling an appeal hearing “unfairly resulted in an onerous overpayment
claim.” In the alternative, the district court ruled that DWS was equitably
estopped from pursuing overpayments against Millar. This appeal timely
followed.
{5} DWS raises two
issues on appeal: (1) whether the district court exceeded its authority in
holding that the Tribunal violated the timeliness requirements of 20 C.F.R. §§
650.1 to 650.4 (2006, as amended through 2013) and Section 51-1-8(D); and (2)
whether the district court erred in ruling that the doctrine of equitable
estoppel barred DWS from recovering the overpayments to Millar. We begin with
the standard of review and an overview of the law relating to the payment of
unemployment benefits and the recovery of overpayments. We then turn to the
issues raised by DWS.
{6} Generally, we apply
the same standard of review as the district court, and we review an
administrative order to determine whether DWS acted fraudulently, arbitrarily,
or capriciously, or whether, based on the whole record, the decision is not
supported by substantial evidence.
See Rule 1-077(J);
San Pedro
Neighborhood Ass’n v. Bd. of Cnty. Comm’rs of Santa Fe Cnty.,
2009-NMCA-045, ¶¶ 10-11,
146 N.M. 106,
206 P.3d 1011. “This Court . . . will
conduct the same [standard of] review of an administrative order as the district
court sitting in its appellate capacity[.]”
Rio Grande Chapter of Sierra
Club v. N.M. Mining Comm’n,
2003-NMSC-005, ¶ 16,
133 N.M. 97,
61 P.3d 806.
Under the whole record standard of review, “we look not only at the evidence
that is favorable, but also evidence that is unfavorable to the agency’s
determination.”
Fitzhugh v. N.M. Dep’t of Labor,
1996-NMSC-044, ¶ 23,
122 N.M. 173,
922 P.2d 555. Questions of substantial compliance with a statute
depend on statutory construction, and we review those questions de novo.
See
Stennis v. City of Santa Fe,
2008-NMSC-008, ¶ 13,
143 N.M. 320,
176 P.3d
309 (“Interpretation of . . . statutes is a question of law that we review de
novo.”).
Administrative Procedures in the
Payment of Unemployment Benefits and the Recovery of Overpayments
{7} In order to frame
the factual setting and legal issues raised in this appeal, we summarize the
relevant statutes and administrative proceedings relating to the payment of
unemployment benefits in New Mexico and the recovery of over-payments.
Unemployment compensation is an insurance program “to be used for the benefit
of persons unemployed through no fault of their own” and is designed to
“lighten [the] burden which now so often falls with crushing force upon the
unemployed worker and his family.” NMSA 1978, §
51-1-3 (1953). Benefits run for
twenty-six weeks, NMSA 1978, §
51-1-4(E) (2011), but may be continued for an
additional twenty-six weeks during times of high employment. NMSA 1978, §
51-1-48(E) (2011). An unemployed worker is not eligible for benefits if he has
left work without good cause or has been discharged for misconduct connected
with the employment. NMSA 1978, §
51-1-7(A)(1), (2) (2011).
{8} The initial
determination of whether a claimant is eligible for unemployment benefits is
made by a claims examiner who conducts preliminary fact finding, including
obtaining statements from the claimant and employer.
See 11.3.300.308(A)
NMAC (11/15/2012). Once the claim has been evaluated, the claims examiner
issues a NCD.
11.3.300.308(C) NMAC. A party dissatisfied with the determination
of the claims examiner may appeal the initial determination. If an initial
determination is made in favor of the claimant and payment of benefits is
begun, payments shall not be stopped without prior notice and an opportunity to
be heard.
11.3.300.308(E) NMAC. This provision necessarily results in some
payments being made upon an initial determination of eligibility that are
subsequently overturned. As a result, the NCD advises the claimant that if the
appeal decision is against him, he will be required to repay the benefits
received. Following a hearing before an Administrative Law Judge (ALJ) within
DWS’s appeals tribunal at which parties may be represented by counsel and may
present testimonial and documentary evidence, the ALJ issues a decision of the
appeals tribunal.
See 11.3.500.10 NMAC (11/15/2012). The parties may
further appeal the decision of the ALJ first to the secretary, who may enter a
decision, refer the decision to the board of review directly, or if the
secretary does not take action within fifteen days, the decision will be
automatically scheduled to be heard before the board.
11.3.500.12(B), (C) NMAC
(11/15/2012). Once the secretary or board of review issues a decision, the
appellant has exhausted administrative review.
11.3.500.13 NMAC (11/15/2012).
Finally, an aggrieved party may appeal that decision as of right to the
district court. Rule 1-077(A).
{9} DWS’s authority to
recover overpayments of unemployment benefits is governed by Section 51-1-8(J)
and NMSA 1978, Section
51-1-38(F) (1993). In “double affirmation” cases—those
in which a decision in favor of the claimant is then affirmed by either the
tribunal, board of review, or judicial action only to be ultimately
reversed—Section 51-1-8(J) provides that the claimant is not liable for
overpayments. This case, however, involves “single affirmation” in which the
Tribunal and secretary disagreed with the decision of the claims examiner. In
such cases, the overpayments are not “unemployment compensation,” and the
monies are not being used for the administration of unemployment compensation
laws and must be recouped. Section 51-1-38(F) states that a claimant
who has received benefits as a
result of a determination or decision of the department . . . that he was
eligible and not disqualified for such benefits and such determination or
decision is subsequently modified or reversed by a final decision . . .
irrespective of whether such overpayment of benefits was due to any fault of
the person claiming benefits, shall, as determined by the secretary or
his authorized delegate, either be liable to have such sum deducted from any
future benefits payable to him . . . or be liable to repay to the department .
. . a sum equal to the amount of benefits received by him for which he was not
eligible or for which he was disqualified or that was otherwise overpaid to
him[.]
(Emphasis added.) Thus, DWS is required by law to issue a
demand for a refund of improperly paid benefits whenever a determination of
overpayment is made. It is against this backdrop that we proceed to analyze the
decision of the district court.
The Regulation’s Timeliness
Guidelines
{10} As we have said,
Millar’s disqualification for receipt of unemployment compensation benefits in
the amount of $4,931 is not at issue in this case. We address only whether DWS
may seek recoupment of those benefits in full. In its order, the district court
held that the “Tribunal hearing conducted more than five months after [Millar]
was awarded benefits was untimely, in that it violated the requirements of
state and federal law, found at [Section] 51-1-8[(D)] and 20 C.F.R. [§] 650.1
[to] 20 C.F.R. [§] 650.4.” DWS first contends that the district court exceeded
the scope of its authority in reviewing the federal time-lapse standards,
including a timeliness quality report showing New Mexico’s thirty-day and
forty-day compliance rates at 2.8% and 5%, respectively, because such evidence
was not properly presented in the administrative hearing. DWS then argues that
the district court misapplied federal law in holding that the Tribunal violated
state and federal regulations.
{11} We disagree with DWS
that evidence regarding compliance with the federal time-lapse standards was
not part of the administrative record and that, therefore, Millar failed to
properly preserve the issue for review by the district court. Rule 1-077(J)
states that the “district court shall determine the appeal upon the evidence
introduced at the hearing before the board of review or secretary of the
[DWS].” Although preservation of an issue is a prerequisite to its review on
appeal, “the preservation requirement should be applied with its purposes in
mind, and not in an unduly technical manner.”
Gracia v. Bittner,
120 N.M.
191, 195,
900 P.2d 351, 355 (Ct. App. 1995).
{12} As an initial
matter, the Codes of Federal Regulation are federal law and, if relevant, may
properly be considered by the district court. More importantly, in his motion
for relief from claim of overpayment filed in the Tribunal, Millar specifically
argued that the overpayment claim against him was unlawful because the hearing
violated the time-lapse standards of state and federal law. In support of his
argument, Millar attached copies of the relevant state and federal law, as well
as a timeliness and quality report, to his motion. Further, during the hearing,
counsel for Millar directed the ALJ to the exhibits, and the ALJ acknowledged
that he was looking at them. In its reply brief, DWS does not dispute Millar’s
assertion that he presented the evidence in his motion and at the
administrative hearing. We conclude that the documents were sufficiently made
part of the record before the Tribunal and that, therefore, the district court
did not violate Rule 1-077(J). We now turn to DWS’s contention that the
district court misapplied federal law in holding that the untimely appeal
hearing before the Tribunal violated state and federal time-lapse standards and
that, therefore, Millar did not have to repay the overpayment.
{13} New Mexico’s
unemployment compensation program is jointly operated by the federal and state
governments. While New Mexico administers the program pursuant to its own laws,
it must nevertheless adhere to federal guidelines in doing so.
See 42
U.S.C. § 502(a) (2004) (requiring that all federal monies received are used for
the proper and efficient administration of unemployment compensation laws).
Further, 42 U.S.C. § 503(a)(1), (3) (2012) provides that state laws regarding
unemployment compensation must include provisions for methods of administration
that are “reasonably calculated to insure full payment of unemployment
compensation when due” and an opportunity for a fair hearing for all
individuals whose claims for unemployment compensation have been denied. The
secretary of labor has interpreted the above to require that hearings be
commenced and appeals decided “with the greatest promptness that is
administratively feasible.” 20 C.F.R. § 650.3(a)(2). Further, the secretary of
labor has construed 42 U.S.C. § 503(b)(2) as requiring states to substantially
comply with the required provisions of state law. 20 C.F.R. § 650.3(b).
Accordingly, 20 C.F.R. § 650.4(b) states:
A State will be deemed to comply
substantially with the State law requirements set forth in § 650.3(a) with
respect to first level appeals, the State has issued at least 60 percent of all
first level benefit appeal decisions within 30 days of the date of appeal, and
at least 80 percent of all first level benefit appeal decisions within 45 days.
Section 51-1-8(D) incorporates 20 C.F.R. §§ 650.1 through
650.4 by reference.
{14} DWS argues that the
standards set forth in 20 C.F.R. § 650.4(b) only offer guidelines in processing
unemployment appeals and do not set absolute deadlines for processing an
individual first level appeal. We agree and see nothing in the broad language
of the regulation requiring otherwise. We conclude that the plain language of
20 C.F.R. § 650.4(b) does not establish any mandatory statutory time limit that
would require Millar to be notified of the pending appeal or within which the
hearing had to be held. More compelling, however, is DWS’s assertion that the
timeliness rules set forth above do not eliminate a disqualified claimant’s
liability for overpayments.
{15} As we have stated
and discuss in further detail below, the timeliness regulations are primarily
concerned with ensuring that unemployment benefits are promptly provided to
eligible claimants. There is no dispute that Millar began receiving benefits as
soon as the claims examiner issued the NCD in his favor, and he continued to
receive those benefits for the full twenty-six weeks. On the other hand,
Section 51-1-38(F) unequivocally imposes a statutory duty upon DWS to recover
funds issued to claimants who are later found to be ineligible or disqualified
from receiving benefits. We are concerned that DWS did not notify Millar that
Western Refining had filed an appeal yet continued to pay him benefits for
several months after the appeal was filed. There is nothing humane about a
delay of some months in not informing an unemployed person that his employer is
contesting the award of benefits and that he may lose them. Nevertheless,
nothing in the above regulations allows a claimant who is subsequently disqualified
from receiving benefits to challenge the DWS’s mandatory obligation to recover
overpayments. The refund demand was timely, and Millar is liable to repay the
unemployment benefits he collected.
{16} Millar does not
point to any case in which a claimant has challenged—let alone successfully—an
overpayment obligation based on DWS’s failure to adhere to the suggested
timelines for processing unemployment appeal decisions, and we have found none.
He does, however, cite to
Dunn v. New York State Department of Labor,
474 F. Supp. 269 (S.D.N.Y. 1979), in support of his assertion that an
individual claimant may bring a cause of action based on the same time-lapse
standards at issue in this case. In
Dunn, the plaintiffs, on behalf of
themselves and a class of similarly situated claimants, brought an action
pursuant to 42 U.S.C. § 1983 (1996) seeking declaratory and injunctive relief
against the state department of labor and its industrial commissioner.
Dunn,
474 F. Supp. at 271-72. The plaintiffs alleged that New York’s failure to
provide prompt hearings of unemployment compensation appeals deprived them of
their Fourteenth Amendment due process rights to receive prompt payment of
unemployment compensation under the “when due” provision of 20 C.F.R. § 503(a)(1).
Dunn, 474 F. Supp. at 272. The federal district court agreed, noting the
United States Supreme Court’s recognition of the importance of promptly
providing unemployment insurance benefits to eligible claimants.
Id. at
273 (citing
Cal. Dep’t of Human Res. v. Java, 402 U.S. 121 (1971)).
Moreover, the court said, “promptness in the adjudicatory process is essential
to prompt payment.”
Dunn, 474 F. Supp. at 273. It entered judgment for
the plaintiffs and required the defendants to submit copies of their monthly
appeals promptness reports to the court for a period of one year.
Dunn,
474 F. Supp. at 276. Unlike
Dunn, this case does not involve a claim of
a constitutional deprivation but instead seeks a waiver of money owed for
benefits to which a claimant was disqualified and to which he has no vested
right. We conclude that neither the regulations nor
Dunn support
Millar’s position that he has a right to unemployment compensation benefits to
which he was not entitled and which DWS has a statutory obligation to recover.
{17} Although prompt
payment is not the only consideration of procedural fairness to a claimant,
prompt notice of benefits being in jeopardy must be as well. However, the
district court’s interpretation of 20 C.F.R. § 650.4(b) cannot be reconciled with
DWS’s statutory obligation to recover overpayments from an initial favorable
eligibility ruling that is subsequently overturned on appeal. We conclude that
the district court misapplied the federal and state time-lapse standards to the
facts of this case. Accordingly, we reverse its decision that the Tribunal
acted arbitrarily and capriciously in ordering Millar to repay the overpayment.
The Application of Equitable
Estoppel
{18} As an alternative
ruling, the district court found that the doctrine of equitable estoppel barred
DWS from claiming and collecting the overpayment from Millar. Specifically, the
district court relied on the New Mexico Supreme Court’s decision in
Waters-Haskins
v. New Mexico Human Services Department,
2009-NMSC-031,
146 N.M. 391,
210
P.3d 817, in reaching its decision. For the reasons that follow, we conclude
that the district court erred in applying the doctrine of equitable estoppel to
the facts of this case.
{19} The parties agree
that estoppel cannot be applied contrary to statutory requirements and can only
be applied against the state in exceptional circumstances where there is a
shocking degree of aggravated and overreaching conduct or where right and
justice demand it.
Envtl. Control, Inc. v. City of Santa Fe,
2002-NMCA-003,
¶ 22,
131 N.M. 450,
38 P.3d 891. “With respect to New Mexico state agencies in
particular, the doctrine only is available to bar those rights or actions over
which an agency has discretionary authority.”
Waters-Haskins,
2009-NMSC-031, ¶ 17. Thus, “[e]quitable relief is not available when the grant
thereof would violate the express provision of a statute.”
Coppler &
Mannick, P.C. v. Wakeland,
2005-NMSC-022, ¶ 8,
138 N.M. 108,
117 P.3d 914
(internal quotation marks and citation omitted). Even in those circumstances,
the party raising estoppel must show the result of estoppel would not be
contrary to statutory requirements and must establish the six essential
elements of estoppel.
Waters-Haskins,
2009-NMSC-031, ¶¶ 16-17 (estopping
the state only after first determining whether the state was acting in its
discretionary authority, the basic elements of estoppel were met, and right and
justice demanded it). We begin by first deciding whether the provisions of
Section 51-1-38(F) are mandatory or discretionary.
{20} As we have set forth
above, DWS has a statutory duty to recover benefits paid to claimants later
found to be ineligible or disqualified. Section 51-1-38(F) states that any
overpayment of benefits, regardless of the fault of the person claiming the benefits,
“shall” be repaid either from any future benefits payable to him or in “a sum
equal to the amount of benefits received by him for which he was not eligible
or for which he was disqualified or that was otherwise overpaid to him[.]” The
use of the word “shall” imposes a mandatory, not discretionary, requirement.
See
NMSA 1978, §
12-2A-4(A) (1997) (explaining that “ ‘[s]hall’ and ‘must’
express a duty, obligation, requirement or condition precedent”). Accordingly,
although DWS has the discretion to deduct overpayments from a claimant’s future
benefits or seek repayment, given the mandatory language of Section 51-1-38(F),
it does not have any discretion to forego overpayments altogether.
{21} Millar concedes that
Section 51-1-38(F) “appears to be mandatory and without exception.”
Nevertheless, he argues that DWS in fact has discretion regarding overpayments.
We are not persuaded. First, Millar contends that because the Federal Emergency
Unemployment Compensation Act, Pub. L. 110-252, § 4005(b), 122 Stat. 2323
(2008), and the Trade Act of 1974, 19 U.S.C. § 2315(a)(1) (2011), provide some
discretion to waive overpayments, at least with respect to federal extended
unemployment benefits, DWS must have such discretion as well. However, the
federal discretionary authority has no bearing in this case, particularly where
Millar was paid state unemployment insurance benefits, not federal extended
benefits. Further, we reiterate that unlike the federal discretionary authority
over repayment of extended benefits, the New Mexico Legislature has
unambiguously mandated that DWS shall not have any discretion to waive claims
of overpayment.
See § 51-1-38(F).
{22} We also reject the
district court’s and Millar’s reliance on
Waters-Haskins as inapplicable
to the facts of this case. In
Waters-Haskins, the New Mexico Human
Services Department (HSD) sought repayment of food stamps erroneously issued to
the appellant for just under the period of a year.
2009-NMSC-031, ¶ 1. HSD
argued that federal regulations mandated that it pursue collection of
overpayment of food stamps and, as a result, HSD had no discretion in its
policies for establishing overpayment claims.
Id. ¶ 18. Our Supreme
Court disagreed and found that the food stamp regulations expressly allowed the
HSD to compromise or waive overpayment claims.
Id. ¶ 20 (noting that the
United States Department of Agriculture, when creating the food stamps program,
gave state agencies “broad authority to establish and collect overpayments
claims, and the creation of the policies to meet those ends are a discretionary
exercise within the scope of that authority”). In contrast to the food stamp
regulatory scheme discussed in
Waters-Haskins, the unemployment
compensation laws at issue here do not permit DWS to “compromise or waive” overpayment
liability.
{23} We are also not
persuaded by Millar’s argument that because DWS “elsewhere lays claim to broad
discretion in the collection of overpayments of state unemployment benefits,”
equitable estoppel is a valid option for the district court to apply here.
Specifically, Millar points to regulations that permit DWS, at its discretion,
not to pursue collection of overpayments which are more than ten years old or
less than $50 and more than seven years old, or are otherwise uncollectible.
See
11.3.300.324 NMAC (01/01/2003) (amended 11/15/2012). We note that nowhere do
these regulations authorize DWS discretion for a complete waiver of
overpayments, and doing so would necessarily conflict with the statutory
obligation imposed upon DWS by Section 51-1-38(F), thus thwarting the
legislative objectives of recovering taxpayer funds to which an ineligible
claimant is not entitled. At the very least, the regulations do not grant the
type of “broad authority to establish and collect overpayment[s]” that our
Supreme Court found existed in
Waters-Haskins.
2009-NMSC-031, ¶ 20.
Because DWS has no discretionary authority in pursuing collection of any
overpayment, the doctrine of equitable estoppel is not a valid defense to
Millar’s claim that he should be excused from repaying the unemployment
benefits to which he was not entitled to receive.
{24} Having concluded
that DWS has no discretion to forego recovery of overpayments, we need not
conduct any further analysis regarding the doctrine of equitable estoppel based
on the facts of this case. We acknowledge that any resulting hardship to Millar
to repay the benefits is unfortunate, but recoupment is crucial to the
preservation of the ongoing integrity of the unemployment compensation system,
and our Legislature recognized as much when it enacted Section 51-1-38(F). The
affirmative obligation imposed on DWS to recover full repayment of benefits
from Millar forecloses the application of equitable estoppel against it. The
decision of the district court is reversed.
{25} For the reasons set
forth above, we reverse the decision of the district court.
RODERICK T. KENNEDY, Chief Judge
Topic Index for Millar v. N.M. Dep't of Workforce
Solutions, No. 31,581
Workers’ Compensation Regulations
Workers’ Compensation, General