J.P. Fugh v. UCBR , 153 A.3d 1169 ( 2017 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Jessica P. Fugh, :
Petitioner :
:
v. : No. 129 C.D. 2016
: Argued: November 16, 2016
Unemployment Compensation Board :
of Review, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE JOSEPH M. COSGROVE, Judge
OPINION
BY PRESIDENT JUDGE LEAVITT FILED: January 18, 2017
Jessica Fugh (Claimant) petitions for review of an adjudication of the
Unemployment Compensation Board of Review (Board) that affirmed a Referee’s
decision that Claimant was ineligible for the unemployment compensation she had
collected in the amount of $738 and, thus, liable for its repayment.1 The Board
found, as fact, that Claimant made an honest mistake in filling out her online
application for unemployment compensation, but it nevertheless held Claimant
liable for a “fault” overpayment of benefits pursuant to Section 804(a) of the
Unemployment Compensation Law (Law).2 On appeal, Claimant challenges the
Board’s holding that she is liable for a fault overpayment. She contends that her
1
Claimant does not challenge the Board’s conclusion that she was ineligible for unemployment
compensation. She challenges only the Board’s conclusion that her conduct subjects her to a
fault overpayment. Accordingly, the Board’s holding on ineligibility is final.
2
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §874(a).
restitution obligation is governed by Section 804(b) of the Law, 43 P.S. §874(b),
which addresses non-fault overpayments. We agree and reverse the Board.
Claimant worked full-time at Community Chevrolet, Inc. (Employer)
as a customer care associate from October 22, 2013, to July 13, 2015. In July
2015, Employer reduced her hours to 25 hours per week and relieved her of some
of her job responsibilities. Claimant resigned and thereafter submitted an online
application for unemployment compensation. On her application, Claimant
identified the reason for her separation from Employer as “lack of work,” which
was one of the choices provided on the application form. The Scranton UC
Service Center granted Claimant benefits for the weeks ending July 25, 2015,
August 1, 2015, and August 8, 2015, for a total of $738.
Based on information subsequently provided by Employer, the
Service Center concluded that Claimant was ineligible for the benefits she had
received. The Service Center then issued three Notices of Determination. The first
notice advised Claimant that she was ineligible for benefits under Section 402(b)
of the Law, 43 P.S. §802(b),3 because she lacked a necessitous and compelling
reason for leaving her job. The second notice advised Claimant that because she
was at fault for the overpayment, she had to repay the entire amount of
compensation she received plus interest in accordance with Section 804(a) of the
Law, 43 P.S. §874(a). The third notice imposed a five-week penalty upon
Claimant under Section 801 of the Law, 43 P.S. §871, for the stated reason that
3
Section 402(b) of the Law provides, in relevant part, that “[a]n employe shall be ineligible for
compensation for any week … [i]n which his unemployment is due to voluntarily leaving work
without cause of a necessitous and compelling nature....” 43 P.S. §802(b).
2
Claimant had knowingly made a false statement or failed to disclose information in
her application for unemployment.
Claimant appealed, and a hearing was held before a Referee.
Claimant testified that in the course of her employment, she had undergone a high
risk pregnancy and suffered other ailments. Employer was fully aware of her
medical issues, which required doctor appointments on a weekly basis. Claimant
testified that in July 2015, Employer reduced her hours to 25 hours per week; took
away her desk; and assigned her work to other employees. The office manager
informed Claimant that Employer made these changes because she had too many
doctor’s appointments. Claimant resigned.
Claimant explained that when she applied for unemployment
compensation benefits, she used the Department of Labor’s website. Notes of
Testimony, 10/16/2015, at 9 (N.T. __). Claimant checked the box labelled “lack of
work” as her reason for her separation from Employer. She explained her choice
as follows:
[Referee]: … when you filed your claim for benefits, you gave
your reason for separation as lack of work, is that correct?
[Claimant]: Yes .... I misunderstood it[.] I didn’t realize what
that really meant I guess.
….
[Counsel]: Did you, as part of your claim, did you mention
about these medical issues and getting less hours and anything
else?
[Claimant]: I believe so, that’s what I thought lack of hours, or
lack of work meant because [the officer manager] had cut my
hours so that’s what I assumed it meant, I didn’t realize it meant
like they didn’t have work for me. So I misunderstood that.
3
N.T. at 8-9. In short, Claimant construed “lack of work” to refer to a reduction in
work available to her, which described her situation.
The Referee affirmed the Service Center’s determination in part and
reversed in part. The Referee agreed that Claimant was ineligible for
unemployment compensation under Section 402(b) of the Law because she had
failed to establish a necessitous and compelling reason for leaving her
employment. The Referee also agreed that Claimant was at fault for the
overpayment of her unemployment compensation because she reported “lack of
work” as the reason for her separation from Employer, and this was not strictly
accurate. However, the Referee reversed the Service Center’s imposition of
penalties, explaining as follows:
[I]t appears [Claimant] made a mistake when she entered her
reason for separation from [Employer], and [] there is no
evidence [Claimant] intentionally failed to disclose information,
or that she made false statements[.]
Referee Decision at 3 (emphasis added). Claimant appealed to the Board.
On review, the Board adopted the Referee’s findings of fact and
conclusions of law and affirmed the Referee’s order. Claimant now petitions for
this Court’s review of the Board’s adjudication.4
On appeal, Claimant argues that the Board erred in finding that she
was at fault for the overpayment of benefits. She contends that her mistaken
understanding of “lack of work” on the Department’s application does not rise to
4
“Our scope of review is limited to determining whether constitutional rights were violated, an
error of law was committed or whether necessary findings of fact are supported by substantial
competent evidence.” Seton Company v. Unemployment Compensation Board of Review, 663
A.2d 296, 298 n.2 (Pa. Cmwlth. 1995).
4
the level of “fault.” Indeed, the Referee found “no evidence [Claimant]
intentionally failed to disclose information, or that she made false statements[.]”
Referee Decision at 3. The Board counters that Claimant was at fault because she
chose to describe her separation from employment as “lack of work,” and this was
not accurate.5
We begin with a review of Section 804 of the Law, which addresses
the Department’s recoupment of overpayments of unemployment compensation
benefits. Section 804 distinguishes between those claimants who receive an
overpayment through no fault of their own and those claimants whose “fault”
caused the overpayment.
Section 804(a) of the Law, which addresses fault overpayments,
states, in relevant part, as follows:
Any person who by reason of his fault has received any sum as
compensation under this act to which he was not entitled, shall
be liable to repay to the Unemployment Compensation Fund to
the credit of the Compensation Account a sum equal to the
amount so received by him and interest at the rate determined
by the Secretary of Revenue as provided by section 806 of the
act of April 9, 1929 (P.L. 343, No. 176), known as “The Fiscal
Code,” per month or fraction of a month from fifteen (15) days
after the Notice of Overpayment was issued until paid.
5
In its brief, the Board argues that a person who applies for benefits online is presented with a
drop-down menu containing the following descriptions of the reason for separation from
employment: “discharge,” “lack of work,” “quit-health or other,” and “quit-work conditions.”
Board Brief at 14. The Board argues that Claimant should have selected one of the “quit”
options. Id. The evidence of the choices in the drop-down menu, however, is not in the certified
record and thus cannot be considered by this Court on appeal. Pryor v. Workers’ Compensation
Appeal Board (Colin Service Systems), 923 A.2d 1197, 1201 (Pa. Cmwlth. 2006) (“It is a
fundamental rule of appellate review that the court is confined to the record before it, excluding
matters or facts asserted in briefs.”).
5
43 P.S. §874(a) (emphasis added). The statutory interest rate is 9%.6 Collection of
the overpayment with interest can be done by placing a lien on the personal and
real property of the claimant; by filing a civil action; by deducting the full amount
of the overpayment from future compensation benefits until fully paid; or all of the
above. 43 P.S. §874(a).7
Section 804(b) of the Law addresses non-fault overpayments. It
states, in relevant part, as follows:
Any person who other than by reason of his fault has received
with respect to a benefit year any sum as compensation under
this act to which he was not entitled shall not be liable to repay
such sum but shall be liable to have such sum deducted from
any future compensation payable to him with respect to such
benefit year, or the three-year period immediately following
such benefit year….
6
According to the Department’s website, the Section 804(a) interest rate is 9%. See
Overpayment FAQS, PENNSYLVANIA DEPARTMENT OF LABOR & INDUSTRY,
http://www.uc.pa.gov/faq/claimant/Pages/Overpayments-FAQS.aspx (last visited December 22,
2016). The Secretary of Revenue determines the rate of interest pursuant to Section 806 of the
Fiscal Code, Act of April 9, 1929, P.L. 343, as amended, 72 P.S. §806. The interest rate changes
annually.
7
Section 804(a) of the Law provides that overpayment of benefits caused by a claimant’s fault
“shall be collectible (1) in the manner provided in section 308.1 [added by the Act of April 23,
1942, Ex. Sess. P.L. 60] or section 309 of this act, for the collection of past due contributions, or
(2) by deduction from any future compensation payable to the claimant under this act….” 43
P.S. §874(a). Section 308.1 permits a lien to be attached to real or personal property to secure
the Department’s recovery of the overpayment. 43 P.S. §788.1 (“All contributions and the
interest and penalties thereon due and payable … under this act shall be a lien upon the …
property, both real and personal, including after-acquired property….”). Section 309 allows for
collection of an overpayment by filing a civil action. 43 P.S. §789 (“[A]fter notice by the
department … the amount due may be collected by civil action in the name of the
Commonwealth. Judgments obtained in such civil actions to collect any of the contributions
aforesaid shall include interest and penalties, as provided in this act.”).
6
43 P.S. §874(b) (emphasis added). Where the overpayment is not the fault of the
claimant, recoupment is made only by deductions from future compensation, if
any. There are other limits upon this kind of recovery. First, the claimant is not
liable for any interest. Second, the future deduction cannot “exceed one-third of
the maximum benefit amount … nor one-third of the weekly benefit amount … for
any particular week.” 43 P.S. §874(b)(1)(i).
In sum, the Department’s recovery of an at-fault overpayment of
unemployment compensation contains punitive elements that do not apply where
the overpayment is not the fault of the claimant. The meaning of “fault” in Section
804(a) of the Law lies at the heart of this appeal.
Claimant observes that the word “fault,” as it is used in Section 804(a)
of the Law, has been construed by this Court to mean “more than volition, more
than a voluntary act.” Daniels v. Unemployment Compensation Board of Review,
309 A.2d 738, 741 (Pa. Cmwlth. 1973). To find fault, the Board must make
findings regarding a claimant’s state of mind. Greenwalt v. Unemployment
Compensation Board of Review, 543 A.2d 209, 211 (Pa. Cmwlth. 1988). Fault
connotes “an act to which blame, censure, impropriety, shortcoming, or culpability
attaches.” Daniels, 309 A.2d at 742. An intentional misstatement on an
application for benefits, for example, can support a finding of fault. Matvey v.
Unemployment Compensation Board of Review, 531 A.2d 840, 844 (Pa. Cmwlth.
1987).
Claimant urges us to follow the principles set forth in Cruz v.
Unemployment Compensation Board of Review, 531 A.2d 1178 (Pa. Cmwlth.
1987). There, the claimant voluntarily left her employment as a sewing machine
operator and moved to Puerto Rico to take care of her sick husband. She then filed
7
for unemployment compensation benefits and, in doing so, reported “lack of work”
on her claim form as the reason for her separation from employment. The claimant
reasoned that her separation was due to lack of work because she left during a
“slow season.” Discerning no culpable conduct on the part of the claimant, we
concluded that the overpayment was “non-fault” in nature. Cruz, 531 A.2d at
1180.
The Board acknowledges the holding in Cruz as well as the 40 years
of appellate precedent that culpable conduct is required before a claimant can be
held liable for a fault overpayment. The Board disagrees with this precedent and
requests this Court to abandon this construction of Section 804(a) of the Law.
The Board argues that “fault” as used in Section 804(a) does not
require a finding of either knowledge or intent, which can be inferred from the
legislative history. When originally drafted in 1936, Section 804 provided:
Any person who by reason of the nondisclosure or
misrepresentation by him or by another of a material fact
(irrespective of whether such nondisclosure or
misrepresentation was known or fraudulent) has received any
sum as compensation under this act … shall be liable to repay
to the Unemployment Compensation Fund to the credit of the
Employers’ Contribution Account a sum equal to the amount so
received by him….
Section 804 of the Act of December 5, 1936, P.L. 2897 (emphasis added). In
1942, the General Assembly amended Section 804 to read as follows:
Any person who by reason of his fraud has received any sum as
compensation under this act to which he was not entitled shall
be liable to repay to the Unemployment Compensation Fund to
the credit of the Employers’ Contribution Account a sum equal
to the amount so received by him.
8
Section 804 of the Act of April 23, 1942, P.L. 60, 93 (emphasis added). One year
later, the legislature again amended Section 804 by changing the term “fraud” to
“fault.” As amended, Section 804 stated:
Any person who by reason of his fault has received any sum as
compensation under this act to which he was not entitled shall
be liable to repay to the Unemployment Compensation Fund to
the credit of the Employers’ Contribution Account a sum equal
to the amount so received by him.
Section 804 of the Act of May 27, 1943, P.L. 717, 737-38 (emphasis added).
The Board argues that the 1943 amendment “lower[ed] the standard”
from ‘fraud’ to ‘fault.’” Board Brief at 10. In the Board’s view, “fraud” requires a
showing of intent to deceive, but “fault” does not.8 Where a claimant commits
fraud, she is liable for the civil penalties set forth in Section 801(a) of the Law, 43
8
The Board contends that this Court has erroneously conflated the standards in Sections 801 and
804 to include a mens rea element for a fault overpayment. Board Brief at 12 (citing, e.g., Ayres
v. Unemployment Compensation Board of Review, 598 A.2d 1083 (Pa. Cmwlth. 1991);
Greenawalt v. Unemployment Compensation Board of Review, 543 A.2d 209 (Pa. Cmwlth.
1988); Amspacher v. Unemployment Compensation Board of Review, 479 A.2d 688 (Pa.
Cmwlth. 1984); and Maiorana v. Unemployment Compensation Board of Review, 453 A.2d 747
(Pa. Cmwlth. 1982)). We disagree.
Section 804 of the Law makes the Department’s recovery of overpayments of
compensation mandatory. The manner of recovery is determined by the extent to which the
claimant’s conduct is responsible for the overpayment. The claimant who is at fault must
immediately make restitution with interest. The claimant who has made a mistake makes
gradual restitution out of future awards of unemployment compensation, if any. Where the fault
of the claimant reaches the level of fraud, the Department must recover the at-fault overpayment
pursuant to Section 804(a) of the Law. It may also pursue civil penalties under Section 801, but
this is discretionary with the Department. Indeed, the fraud may be such that the Department
will refer the matter for criminal prosecution.
Sections 801 and 804 of the Law serve different purposes and require different analyses by
the Department. “Fraud” by a claimant triggers liability under Section 804 of the Law, but it
also exposes that claimant to civil and potentially criminal penalties.
9
P.S. §871(a).9 The Board contends that a non-fault overpayment occurs when the
mistake is made by the employer or by the Department, not by the claimant.
In Daniels, we explained that “fault” is a term that “connotes an act to
which blame, censure, impropriety, shortcoming, or culpability attaches.” Daniels,
309 A.2d at 741-42. The Board argues that none of those words imply intentional
wrongdoing and, thus, Daniels means that the Department need not demonstrate
any level of mens rea by the claimant to establish a fault overpayment. The Board
asserts that, over the past 40 years, this Court has erroneously expanded Daniels.
The Board requests this Court to eliminate the state of mind requirement and return
to the “earlier, appropriate standard” articulated in Daniels for a finding of fault.
Board Brief at 12. We are not persuaded by the Board’s arguments.
The term “fault” is not defined in the Law; therefore, it is construed in
accordance with its common and ordinary meaning, which may be ascertained
from a dictionary definition. 1 Pa. C.S. §1903; Chamberlain v. Unemployment
Compensation Board of Review, 114 A.3d 385, 394 (Pa. 2015). Black’s Law
Dictionary provides two definitions of “fault”:
1. An error or defect of judgment or of conduct; any deviation
from prudence or duty resulting from inattention, incapacity,
perversity, bad faith, or mismanagement. See NEGLIGENCE.
Cf. LIABILITY.
2. Civil Law. The intentional or negligent failure to maintain
some standard of conduct when that failure results in harm to
another person.
9
Section 801(a) of the Law provides, in relevant part: “Whoever makes a false statement or
representation knowing it to be false, or knowingly fails to disclose a material fact to obtain or
increase any compensation or other payment under this act … either for himself or for any other
person, shall … be sentenced to pay a fine….” 43 P.S. §871(a).
10
BLACK’S LAW DICTIONARY 641 (8th ed. 2004). These definitions suggest that
“fault” refers to a blameworthy act, such as a deviation from prudence. The
Daniels decision comports with this understanding. Daniels held that “fault” is
“more than a voluntary act;” it “connotes an act to which blame, censure,
impropriety, shortcoming, or culpability attaches.” Daniels, 309 A.2d at 741-42.
A blameworthy act requires a showing of the actor’s state of mind, or mens rea.
By using the term “fault” in Section 804(a) of the Law, the General
Assembly expanded the blameworthy conduct beyond the strictures of “fraud.”
“Fault” embodies, for example, knowing recklessness or gross negligence. The
Board’s proffered construction of “fault” to include reasonable, albeit mistaken,
acts overlooks the fact that the General Assembly has been silent and inactive in
the 40 years since Daniels and 30 years since Maiorana v. Unemployment
Compensation Board of Review, 453 A.2d 747 (Pa. Cmwlth. 1982) (holding that
claimant’s state of mind is central to examination of fault). Indeed, the General
Assembly amended Section 804 of the Law as recently as 2012 but did so without
touching the meaning of “fault.”
A statute should be construed, if possible, to give effect to all its
provisions. 1 Pa. C.S. §1921(a). “[S]tatutory language must be read in context,
that is, in ascertaining legislative intent, every portion of statutory language is to be
read ‘together and in conjunction’ with the remaining statutory language, ‘and
construed with reference to the entire statute’ as a whole.” Pennsylvania Gaming
Control Board v. Office of Open Records, 103 A.3d 1276, 1285 (Pa. 2014)
(citation omitted). “Fault” is a persistent theme throughout the Unemployment
Compensation Law.
11
For example, the Law states that it protects workers who have
suffered a loss of income due to separation from employment “through no fault of
their own.” Section 3 of the Law, 43 P.S. §752; Preservation Pennsylvania v.
Unemployment Compensation Board of Review, 673 A.2d 1044, 1046 (Pa.
Cmwlth. 1996). Where a claimant is “at fault” for his loss of employment by
reason of his willful misconduct, he is ineligible for unemployment compensation.
The term “willful misconduct” is not defined by the Law, but our appellate courts
have defined the term as “(a) wanton or willful disregard for an employer’s
interests; (b) deliberate violation of an employer’s rule; (c) disregard for standards
of behavior which an employer can rightfully expect of an employee; or (d)
negligence indicating an intentional disregard of the employer’s interest or an
employee’s duties or obligations.” Reading Area Water Authority v.
Unemployment Compensation Board of Review, 137 A.3d 658, 662 (Pa. Cmwlth.
2016). A “fault” separation requires conduct “of such a degree or recurrence as to
manifest culpability, wrongful intent, or evil design, or show an intentional and
substantial disregard of the employer’s interest or of the employee’s duties and
obligations to the employer.” Id. (quotation marks omitted). A negligent act
alone does not constitute willful misconduct; rather, the conduct must be of “an
intentional and deliberate nature.” Grieb v. Unemployment Compensation Board
of Review, 827 A.2d 422, 426 (Pa. 2003) (citation omitted).10
10
The state of mind required for “willful misconduct” could also support a finding of fault under
Section 804(a) of the Law. Stated otherwise, a claimant who acts consciously in wanton or
willful disregard of the truth or falsity of the information submitted in applying for
unemployment compensation benefits will also be found “at fault” for any resulting overpayment
of benefits.
12
The Referee found that Claimant “made a mistake” when reporting
“lack of work” as the reason for her separation from Employer. Referee Decision
at 3. The Referee found no evidence that Claimant had wantonly disregarded the
truth of the information she provided in her application. Nor was her conduct
found grossly negligent. The commission of a mere voluntary act does not
establish fault. Daniels, 309 A.2d at 741. The Board cannot hold a claimant liable
for a fault overpayment for a mere mistake or confusion. Cruz, 531 A.2d at 1180.
The Board erred in holding that Claimant’s mistake made her liable for a fault
overpayment of benefits under Section 804(a) of the Law, 43 P.S. §874(a).
The Board asks this Court to abandon the principle of stare decisis
and “correct [our] prior statement of the standard required to establish a fault
overpayment,” i.e., the state of mind standard set forth in Daniels and its progeny.
Board Brief at 19. Stare decisis is “the preferred course because it promotes the
evenhanded, predictable, and consistent development of legal principles, fosters
reliance on judicial decisions, and contributes to the actual and perceived integrity
of the judicial process.” Payne v. Tennessee, 501 U.S. 808, 827 (1991). Indeed,
our Supreme Court has explained that “stare decisis has ‘special force’ in matters
of statutory, as opposed to constitutional, construction, because in the statutory
arena the legislative body is free to correct any errant interpretation of its
intentions.” Hunt v. Pennsylvania State Police, 983 A.2d 627, 637 (Pa. 2009)
(quoting Shambach v. Bickhart, 845 A.2d 793, 807 (Pa. 2004)).
We decline the Board’s invitation. Apart from the restraints of stare
decisis, we conclude that our long held construction of “fault” is not in need of
“correction.” It is as sound today as it was 40 years ago. The revision to the
Section 804 paradigm proposed by the Board is one for the General Assembly to
13
make. Accordingly, we reverse the Board’s adjudication, in part, and remand the
matter for revision of Claimant’s restitution obligation to reflect her liability for a
non-fault overpayment under Section 804(b) of the Law, 43 P.S. §874(b).
_____________________________________
MARY HANNAH LEAVITT, President Judge
14
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Jessica P. Fugh, :
Petitioner :
:
v. : No. 129 C.D. 2016
:
Unemployment Compensation Board :
of Review, :
Respondent :
ORDER
AND NOW, this 18th day of January, 2017, the order of the
Unemployment Compensation Board of Review dated December 28, 2015, in the
above-captioned matter is hereby REVERSED, in part, and the matter is
REMANDED for further proceedings, in accordance with the attached opinion.
Jurisdiction relinquished.
______________________________________
MARY HANNAH LEAVITT, President Judge