Unemployment Insurance Agency v. Andrew Augustine ( 2019 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
DEPARTMENT OF TALENT AND ECONOMIC UNPUBLISHED
DEVELOPMENT/UNEMPLOYMENT November 19, 2019
INSURANCE AGENCY,
Appellant,
v No. 344074
Wayne Circuit Court
ANDREW M. AUGUSTINE, LC No. 18-000267-AE
Claimant-Appellee,
and
TAYLOR FORD, INC.,
Appellee.
Before: O’BRIEN, P.J., and GADOLA and REDFORD, JJ.
PER CURIAM.
Appellant, the Department of Talent and Economic Development/Unemployment
Insurance Agency (Agency), appeals by leave granted1 the circuit court’s order affirming the
decisions of the Michigan Compensation Appellate Commission (MCAC), which in turn
affirmed the decisions of the Administrative Law Judge (ALJ). Both the MCAC and the ALJ
held that the Agency’s “redetermination” of benefits was procedurally flawed, and thus could not
be enforced to compel the claimant, Andrew Augustine, to return the unemployment benefits he
had received or pay penalties under the Michigan Employment Security Act (MESA), MCL
421.1 et seq. We reverse and remand.
1
Dep’t of Talent and Economic Dev/Unemployment Ins Agency v Augustine, unpublished order
of the Court of Appeals, entered October 31, 2018 (Docket No. 344074).
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I. FACTS
This case arises from the Agency’s allegation that Augustine improperly obtained
unemployment benefits. Augustine first applied for and received unemployment benefits in
February 2012. In September 2012, Augustine began working for Fitness International, LLC
(LA Fitness), but was terminated in October 2012.2 In March 2013, while still receiving
unemployment benefits, Augustine began working as a sales consultant at Taylor Ford, Inc.
(Taylor Ford). Although Augustine allegedly earned income during his employment at Taylor
Ford from March 23, 2013 through June 8, 2013, Augustine allegedly did not report his earnings
to the Agency during that time period. Augustine terminated his employment with Taylor Ford
on June 5, 2013, and after June 8, 2013, no longer received unemployment benefits.
In 2016, the Agency inquired about Augustine’s receipt of unemployment benefits while
working at LA Fitness and Taylor Ford. On July 28, 2016, the Agency issued and mailed to
Augustine two notices entitled “Notice of Redetermination.” The first notice involved
Augustine’s eligibility for unemployment benefits (eligibility redetermination), and stated that
Augustine’s earnings while working at Taylor Ford from March 23, 2013 through June 8, 2013,
rendered him partially ineligible for benefits under the MESA. The second notice involved the
Agency’s finding that Augustine used fraud to improperly receive unemployment benefits (fraud
redetermination). The Agency also provided a third document entitled “Restitution (List of
Overpayments),” advising Augustine that the Agency was seeking restitution in the amount
$1,292, as well as fraud penalties in the amount of $5,168. The documents informed Augustine
of his right to appeal the Agency’s decision.
Augustine thereafter appealed the Agency’s determinations. The appeal was heard by an
ALJ who reversed the Agency’s eligibility and fraud determinations, holding that the eligibility
“redetermination” was invalid because the Agency had failed to first issue an eligibility
“determination.” With respect to the fraud redetermination, the ALJ held that the Agency was
required to issue a new determination once the Agency determined that Augustine committed
fraud in the application for benefits. Determining that both decisions from the Agency were
invalid, the ALJ held that Augustine was not obligated to repay the benefits nor to pay fraud
penalties.
The Agency appealed to the MCAC, which affirmed the decisions of the ALJ. The
MCAC determined that the Agency had no authority under MCL 421.32(f) to issue the eligibility
redetermination because that section of the MESA is not properly triggered without a protest
from a chargeable employer. The MCAC also held that the Agency had no authority to issue the
eligibility redetermination unless it did so within the 30-day time period under MCL 421.32a(1),
or within one year of the redetermination, upon a showing of good cause under MCL 421.32a(2),
and also that the Agency improperly issued a “redetermination” without first issuing a
2
Although a dispute arose between the Agency and Augustine regarding his receipt of
unemployment benefits while employed at LA Fitness, that dispute is not the subject of this
appeal.
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“determination.” The MCAC held that the Agency’s fraud “redetermination” was invalid
because it did not comply with the requirements of MCL 421.32a, stating in relevant part:
The Agency’s July 28, 2016 [fraud] redetermination was issued in
violation of several statutory provisions: (1) the Agency had no authority to act
under Section 32(f) of the Act without an employer protest; (2) the
redetermination covered a time period outside the time covered by the benefit
check; (3) the redetermination was untimely without good cause shown under
Section 32a(2) of the Act; and (4) the redetermination failed to conform to the
requirements of a redetermination under Section 32a(1) of the Act.
The claimant was materially prejudiced by the inherent confusion created
by the Agency’s actions and the Agency’s deprivation of the claimant’s
procedural rights under the Act. Thus, we set aside the redetermination. As a
result, there exists no valid Agency adjudication regarding misrepresentation
under Section 54(b) and 62(b) of the Act. Therefore, we affirm the ALJ’s
September 28, 2016 decision invalidating [the] July 28, 2016 [fraud]
redetermination adding that since the redetermination is invalid, the Claimant is
not subject to disqualification for fraud or misrepresentation under 54(b) nor is the
claimant subject to restitution or penalties under Section 62(a) or 62(b) of the Act.
The Agency appealed the MCAC’s decisions to the circuit court, which affirmed the
MCAC’s decisions. The circuit court reasoned in part that the Agency’s decisions did not
comply with §32 of the MESA and that the Agency had no statutory authority to investigate
Augustine for fraud absent an employer protest. This Court thereafter granted the Agency’s
application for leave to appeal. Mich Unemployment Ins Agency v Augustine, unpublished order
of the Court of Appeals, entered October 31, 2018 (Docket No. 344074).
II. DISCUSSION
The Agency contends that the circuit court erred in affirming the decisions of the MCAC,
which held that Augustine was not obligated to pay restitution or fraud penalties because the
Agency actions to recoup allegedly fraudulently-obtained benefits did not comply with the
procedures articulated by the MESA. We agree.
The MESA provides for judicial review of unemployment benefits claims. See MCL
421.38(1). In so doing, the circuit court must affirm a decision of the MCAC if it conforms to
the law, and is supported by competent, material, and substantial evidence on the entire record.
Hodge v US Security Ass’n, Inc, 497 Mich. 189, 193; 859 NW2d 683 (2015). This Court, when
reviewing a circuit court’s review of agency action, must determine whether the circuit court
“applied correct legal principles and whether it misapprehended or grossly misapplied the
substantial evidence test to the agency’s factual findings, which is essentially a clear-error
standard of review.” Lawrence v Mich Unemployment Ins Agency, 320 Mich. App. 422, 431; 906
NW2d 482 (2017) (quotation marks and citation omitted). This Court reviews the circuit court’s
legal conclusions de novo, Braska v Challenge Mfg Co, 307 Mich. App. 340, 352; 861 NW2d 289
(2014), which includes the interpretation of a statute. Muci v State Farm Mut Auto Ins Co, 478
Mich. 178, 187; 732 NW2d 88 (2007). “A decision of the MCAC is subject to reversal if it is
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based on erroneous legal reasoning or the wrong legal framework.” Lawrence, 320 Mich. App. at
432 (quotation marks, brackets, and citation omitted).
At the time the Agency issued its “redeterminations” to Augustine on July 28, 2016,
MCL 421.32, as amended by 2013 PA 144,3 provided in relevant part:
(f) The issuance of each benefit check shall be considered a determination by the
unemployment agency that the claimant receiving the check was covered during
the compensable period, and eligible and qualified for benefits. A chargeable
employer, upon receipt of a listing of the check as provided in section 21(a), may
protest by requesting a redetermination of the claimant’s eligibility or
qualification as to that period and a determination as to later weeks and benefits
still unpaid that are affected by the protest. Upon receipt of the protest or request,
the unemployment agency shall investigate and redetermine whether the claimant
is eligible and qualified as to that period. If, upon the redetermination, the
claimant is found ineligible or not qualified, the unemployment agency shall
proceed as described in section 62. . . .
At that time, MCL 421.32a, as amended by 2011 PA 269,4 provided, in relevant part:
(1) Upon application by an interested party for review of a determination, upon
request for transfer to an administrative law judge for a hearing filed with the
unemployment agency within 30 days after the mailing or personal service of a
notice of determination, or upon the unemployment agency’s own motion within
that 30-day period, the unemployment agency shall review any determination.
After review, the unemployment agency shall issue a redetermination affirming,
modifying, or reversing the prior determination and stating the reasons for the
redetermination, or may in its discretion transfer the matter to an administrative
law judge for a hearing. If a redetermination is issued, the unemployment agency
shall promptly notify the interested parties of the redetermination, the
redetermination is final unless within 30 days after the mailing or personal service
of a notice of the redetermination an appeal is filed with the unemployment
agency for a hearing on the redetermination before an administrative law judge in
accordance with section 33.
(2) The unemployment agency may, for good cause, including any administrative
clerical error, reconsider a prior determination or redetermination after the 30-day
period has expired and after reconsideration issue a redetermination affirming,
modifying, or reversing the prior determination or redetermination, or transfer the
matter to an administrative law judge for a hearing. A reconsideration shall not
be made unless the request is filed with the unemployment agency, or
3
MCL 421.32 has since been amended. See 2016 PA 522, effective April 9, 2017.
4
MCL 421.32a has since been amended. See 2017 PA 232, effective July 1, 2018.
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reconsideration is initiated by the unemployment agency with notice to the
interested parties, within 1 year from the date of mailing or personal service of the
original determination on the disputed issue.
At the time the redeterminations were issued, MCL 421.62, as amended by 2013 PA 147,5 stated,
in relevant part:
(a) If the unemployment agency determines that a person has obtained benefits to
which that person is not entitled, . . . the agency may recover a sum equal to the
amount received plus interest . . . . The unemployment agency shall issue a
determination requiring restitution within 3 years after the date of finality of a
determination, redetermination, or decision reversing a previous finding of benefit
entitlement. The unemployment agency shall not initiate administrative or court
action to recover improperly paid benefits from an individual more than 3 years
after the date that the last determination, redetermination, or decision establishing
restitution is final. The unemployment agency shall issue a determination on an
issue within 3 years from the date the claimant first received benefits in the
benefit year in which the issue arose, or in the case of an issue of intentional false
statement, misrepresentation, or concealment of material information in violation
of section 54(a) or (b) or sections 54a to 54c, within 6 years after the receipt of the
improperly paid benefits unless the unemployment agency filed a civil action in a
court within the 3-year or 6-year period; the individual made an intentional false
statement, misrepresentation, or concealment of material information to obtain the
benefits; or the unemployment agency issued a determination requiring restitution
within the 3-year or 6-year period. . . .
* * *
(d) The unemployment agency shall take the action necessary to recover all
benefits improperly obtained or paid under this act . . . .
In this case, the MCAC determined that the Agency’s fraud determination was invalid
because the Agency had no authority to act under §32(f) without an employer protest, and
further, that the determination was untimely under §32a(2) and failed to conform to the
requirements of §32a(1). The circuit court affirmed the decision of the MCAC. We conclude
that in so doing, the circuit court did not apply correct legal principles. See Lawrence, 320 Mich
App at 431.
This Court recently held in Dep’t of Licensing & Regulatory Affairs v Lucente, ___ Mich
App ___, ___; ___ NW2d ___ (2019) (Docket No. 342080); slip op at 11, that §62 permitted the
Agency in those consolidated cases to seek to recoup benefits that had been improperly obtained,
5
MCL 421.62 has since been amended. See 2016 PA 522, effective April 9, 2017, and 2017 PA
231, effective March 21, 2018.
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and in so doing, the Agency was not required to comply with the requirements of §32a. This
Court reasoned that:
Quite simply, §32a is designed to give both claimants and employers a right to a
redetermination of the Agency’s eligibility determination. Section 62, in contrast,
gives the Agency the ability to recoup fraudulently-obtained benefits. Under §62,
the agency was authorized, and indeed compelled, to take the action necessary to
recoup the benefits improperly obtained by Lucente, along with any applicable
penalties. See former MCL 421.62(d) (the Agency “shall take the action
necessary to recover all benefits improperly obtained or paid under this act”)
(emphasis added). To impose upon the Agency, when proceeding under §62, the
additional procedural and time requirements of §32a is to create requirements not
imposed by the Legislature. We therefore hold that because the Agency in this
case was proceeding under §62, the Agency did not err in failing to comply with
§32a. [Lucente, ___ Mich App at ___, slip op. at 9.]
Similarly, in this case the Agency had the authority to investigate and seek recoupment of
improperly paid benefits on its own initiative. MCL 421.62(d). The circuit court therefore erred
in affirming the decisions of the MCAC and holding that the Agency had no statutory authority
to investigate claimants for fraud without the request of an employer, and further erred in holding
that the Agency was required to comply with the requirements of § 32a when seeking to recover
fraudulently paid benefits and penalties under §62.
In addition, although the Agency labeled its July 28, 2016 decisions as
“redeterminations” rather than “determinations,” that label was not determinative of the
Agency’s ability to seek to recoup improperly obtained benefits. Lucente, ___ Mich App at ___,
slip op at 9. Further, the Agency’s decisions adequately informed Augustine of the Agency’s
recovery action against him, advising him of the relevant time period, the basis for the
determination of ineligibility, the amount owed in restitution and fraud penalties, and the right to
appeal the Agency’s decision. The redeterminations thus had all the components identified in
MCL 421.32a to protect Augustine from the dangers underlying inadequate notice.
Reversed and remanded to the Administrative Law Judge for a determination regarding
whether Augustine improperly obtained unemployment benefits through the use of fraud. We do
not retain jurisdiction.
/s/ Colleen A. O’Brien
/s/ Michael F. Gadola
/s/ James Robert Redford
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