Schoeffel v. Idaho Dept. of Labor

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 47101
CONNIE L. SCHOEFFEL, )
)
Claimant-Appellant, )
)
v. )
)
Boise, June 2020 Term
THORNE RESEARCH, INC., )
)
Opinion Filed: October 16, 2020
Employer-Appellant, )
)
Melanie Gagnepain, Clerk
and )
)
IDAHO DEPARTMENT OF LABOR, )
)
Respondent. )
_______________________________________ )
Appeal from the Idaho Industrial Commission.
The Commission’s decision is reversed.
Parsons Behle & Latimer, Boise, for appellants. Amy Lombardo argued.
Lawrence G. Wasden, Idaho Attorney General, Boise, for respondent. Douglas
Werth argued.
_____________________
BRODY, Justice.
This appeal arises from a former employee’s challenge to an unemployment benefits
overpayment determination by the Idaho Department of Labor (“the Department”). Connie
Schoeffel worked for Thorne Research, Inc. (“Thorne”) as a kitchen manager. In 2016, Thorne
announced that it would be moving its operations from Idaho to South Carolina. For those
employees who would not be relocating to South Carolina, Thorne offered an employee retention
program to encourage them to continue working at the Idaho facility until the South Carolina
facility was ready. As part of this program, Thorne prepared a “Release of Claims Agreement”
(“the Agreement”) providing that Thorne would pay participating employees “bargained-for
compensation” in exchange for giving up certain rights, including the right to quit before their
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positions were eliminated. Schoeffel signed this Agreement approximately six weeks before her
last day of work. After her separation, Schoeffel filed for unemployment benefits without
reporting the retention payments as income. Around the time Schoeffel received her fourth
benefit payment, the Department learned of the payments that Thorne owed Schoeffel under the
Agreement. The Department determined that those payments constituted reportable “severance
pay” under Idaho Code section 72-1367(4). Consequently, the Department determined that
Schoeffel was receiving severance pay and was required to repay the unemployment benefits she
had received. Schoeffel appealed to the Department’s Appeals Bureau, which initially ruled in
her favor but affirmed the Department’s decision on reconsideration. Schoeffel then appealed to
the Industrial Commission (“the Commission”), which affirmed the Appeals Bureau’s decision.
Schoeffel timely appealed to this Court from the Commission’s Decision and Order. We reverse
the decision of the Commission.
I. FACTUAL AND PROCEDURAL BACKGROUND
The key facts in this case are undisputed. Connie Schoeffel worked for Thorne as a
kitchen manager in the cafeteria that Thorne provided for its employees. In December 2016,
Thorne announced that it would be moving its headquarters and operations from Idaho to South
Carolina. For those employees who would not be relocating to South Carolina, Thorne offered an
Employee Retention Program to encourage them to keep working at the Idaho facility until the
South Carolina facility was ready. Shortly after making its announcement, Thorne gave its
employees a written Employee Retention Program Summary (“Program Summary”) in order to
explain the purpose, eligibility requirements, and elements of the Employee Retention Program.
As part of the employee retention program, Thorne’s general counsel, relying on Parker
v. Underwriters Labs., Inc., 140 Idaho 517, 96 P.3d 618 (2004), prepared a “Release of Claims
Agreement” (the “Agreement”). At the telephonic hearing before the appeals examiner, Thorne’s
general counsel testified that the intent in drafting the Agreement “was to follow as closely as
[he] could what [he] believed to be [the] underlying law of [Parker]”—that bargained-for
compensation, unlike compensation made in consideration of prior services rendered to an
employer, is not reportable severance pay. The Agreement provided that Thorne would pay
participating employees “bargained-for compensation” in exchange for giving up certain rights.
Most importantly, the employees agreed to give up their right to quit before the end of their
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“transition periods,” when their positions at the Idaho facility would be eliminated. The
Agreement also required employees to release any claims they might have against Thorne.
Under her Agreement, Schoeffel was to receive retention payments of $5,265.00 per
month beginning on November 15, 2018, for a total of $31,590.00 over six months. Schoeffel
signed the Release of Claims Agreement on August 2, 2018. Schoeffel’s last day of work was
September 13, 2018, and her last day of employment was September 28, 2018, due to her use of
remaining paid leave. On October 1, Schoeffel filed for unemployment benefits. She earned
waiting week credit during the week ending October 6, 2018 and received weekly unemployment
benefits of $414.00 per week over the next four weeks.
However, in early November, the Department learned of the retention payments that
Schoeffel was to receive beginning on November 15. The Department determined that those
payments constituted “severance pay” under Idaho Code section 72-1367(4). Consequently, the
Department determined that Schoeffel had been overpaid by $1,656.00—the total amount of
unemployment benefits she had received up until that point—and that she was required to repay
this amount to the Department.
Schoeffel appealed to the Department’s Appeals Bureau, arguing that under the reasoning
set out in Parker, the payments were bargained-for compensation, not severance pay. Following
a telephonic hearing, the appeals examiner reversed the Department’s decision. The appeals
examiner determined that the retention payments were not reportable income, and as a result,
Schoeffel was not required to repay the unemployment benefits she received. However,
following the Department’s request for reconsideration, the appeals examiner reversed the
previous decision and affirmed the Department’s overpayment determination.
Schoeffel, together with Thorne, filed a notice of appeal to the Commission from the
appeals examiner’s decision. The Commission entered a Decision and Order affirming the
appeals examiner’s decision. The Commission concluded that, as a matter of law, Schoeffel’s
retention payments were reportable income under Idaho Code sections 72-1312 and 72-1367.
Consequently, Schoeffel’s weekly benefit amount was properly reduced and Schoeffel was
required to repay the unemployment benefits she received. Schoeffel, again jointly with Thorne,
filed a timely notice of appeal from the Commission’s Decision and Order.
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II. STANDARD OF REVIEW
When reviewing a decision of the Industrial Commission, this Court freely reviews
questions of law. Nelson v. Franklin Grp., Inc., 166 Idaho 702, ___, 462 P.3d 1166, 1169 (2020).
III. ANALYSIS
The Commission erred by determining the payments were reportable severance pay. In its
Decision and Order, the Commission affirmed the appeals examiner’s determination that the
payments Schoeffel would receive under the Agreement were reportable severance pay. It
rejected Schoeffel’s argument that our decision in Parker v. Underwriters Labs., Inc., 140 Idaho
517, 96 P.3d 618 (2004) was controlling. It reasoned that because the legislature had not yet
enacted a statutory definition of severance pay when Parker was issued, Parker no longer has a
bearing on the determination of whether a payment constitutes severance pay. Schoeffel argues
that the Commission erred in its refusal to apply Parker. We agree.
In Parker, we considered a claim very similar to the one advanced by Schoeffel, made in
a very similar factual context. After Parker was terminated due to corporate restructuring, she
was informed that she could receive a “severance package” if she agreed to sign a release of
claims agreement. Parker, 140 Idaho at 518, 96 P.3d at 619. Parker signed this release of claims
agreement and subsequently applied for unemployment benefits without reporting the payments
she received through the “severance package.” Id. The Department eventually learned of these
payments and determined that they rendered her ineligible for the unemployment benefits she
had received and that she was required to repay those benefits. Id. at 519, 96 P.3d at 620. The
appeals examiner upheld this determination, and the Commission affirmed. Id. at 520, 96 P.3d at
621.
Parker appealed to this Court, arguing that the Commission erred because the payments
did not fall within the definition of “severance pay,” given that the primary purpose of the
agreement with her employer was to obtain her release of claims. Id. We agreed, and reversed
the Commission’s decision on that ground. Id. at 522, 96 P.3d at 623. We first noted that the
phrase “severance pay” was not defined in the section of the Idaho Administrative Code
requiring severance pay to be reported to the Department. Id. at 520, 96 P.3d at 621.
Consequently, we employed relevant rules of statutory construction by looking to dictionary
definitions of “severance pay” and persuasive authority from other jurisdictions. Id. at 520-21, 96
P.3d at 621-22. We concluded that severance pay is compensation given in recognition of past
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service, and in order to decide if a payment was made in recognition of past service, it is
necessary to determine the primary purpose of the employer-employee agreement giving rise to
the payment. Id. The primary purpose of the agreement is determined by the consideration the
employer receives in exchange for its payments. Id. at 521, 96 P.3d at 622. In Parker’s case, it
was clear from the plain language of her agreement that the payments were made in
consideration of her release of claims—not her past services. Id. Therefore, we concluded, the
payments that Parker received did not constitute reportable severance pay. Id. at 522, 96 P.3d at
623.
The fundamental question in this case is whether Parker’s reasoning is still viable despite
the legislature’s enactment of a statutory definition of severance pay. For the following reasons,
we hold that it is.
As the Commission noted, the legislature added a statutory definition of severance pay to
Idaho Code section 72-1367(4) after Parker was issued. That statute, found within the
Employment Security Law in Title 72, Chapter 13 of the Idaho Code, provides:
If the total wages payable to an individual for less than full-time work performed
in a week claimed exceed one-half (1/2) of his weekly benefit amount, the amount
of wages that exceed one-half (1/2) of the weekly benefit amount shall be
deducted from the benefits payable to the claimant. For purposes of this
subsection, severance pay shall be deemed wages, even if the claimant was
required to sign a release of claims as a condition of receiving the pay from the
employer. “Severance pay” means a payment or payments made to a claimant by
an employer as a result of the severance of the employment relationship.
I.C. § 72-1367(4) (emphasis added). The emphasized sentences were added to the statute in
2005, one year after our decision in Parker was issued. 2005 Idaho Session Laws, ch. 5, § 14, p.
27. As a result of this addition, “severance pay” is now defined as “a payment or payments made
to a claimant by an employer as a result of the severance of the employment relationship.” I.C. §
72-1367(4). The 2005 amendment also made it clear that severance pay is considered to be
“wages,” and therefore deductible from unemployment benefits according to the formula in
Idaho Code section 72-1367(4). Id.
The Commission erred by failing to scrutinize the statutory definition of severance pay. It
determined that the addition of a statutory definition must have made Parker’s reasoning
obsolete, without engaging with Schoeffel’s argument that Parker could still be useful in
interpreting and applying the statutory definition. The Commission also distinguished Parker
based on distinctions that do not actually made a difference. For example, it focused on the fact
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that the Agreement required participating employees to release any claims they might have
against Thorne. Because the statutory definition of severance pay explicitly provides that a
release of claims requirement has no bearing on whether a payment is severance pay, the
Commission reasoned, Schoeffel’s retention payments constituted severance pay in spite of the
Agreement’s release of claims requirement. For the following reasons, we disagree with the
Commission’s analysis.
The addition of a statutory definition of severance pay did not affect Parker’s viability
because the “as a result of” language in the statutory definition is ambiguous. A statute is
ambiguous “where reasonable minds might differ or be uncertain as to its meaning.” State v.
Lantis, 165 Idaho 427, 429, 447 P.3d 875, 877 (2019). Here, reasonable minds might differ or be
uncertain about the meaning of severance pay, as defined by Idaho Code section 72-1367(4). The
statute states, almost tautologically, that severance pay is payment made as a result of
severance—but tells us nothing about how to determine whether a payment was made “as a
result of” severance. Relatedly, reasonable minds might differ as to the meaning of “as a result
of.” There are several different kinds of causation, so there are several different ways that this
phrase could be interpreted. See, e.g., Husted v. A. Philip Randolph Inst., 138 S. Ct. 1833 (2018)
(“[T]he law recognizes several types of causation. When a statutory provision includes an
undefined causation requirement, we look to context to decide whether the statute demands only
but-for cause as opposed to proximate cause or sole cause.”). The dissent assumes that the statute
requires but-for causation, but the plain language of the statute could just as easily be interpreted
as requiring severance to be the sole or primary cause of the payment.
Because of this ambiguity, we must look outside of the statutory definition to determine
how to decide whether a payment was made “as a result of” severance. State v. Osborn, 165
Idaho 627, 635, 449 P.3d 419, 427 (2019) (“[T]he rules for interpreting an ambiguous statute go
beyond strict textualism.”). In this case, we do not have to start from scratch. We already
determined, in Parker, that a payment is made “as a result of” severance if the primary purpose
of the employer-employee agreement—as determined by the consideration the employer
received—is to compensate the employee for past services. Parker, 140 Idaho at 520–21, 96 P.3d
at 621–22. If the payment was made in consideration of something else, it is not severance pay.
Id. In this way, Parker resolves the ambiguity in the statutory definition of severance pay by
providing a way to determine whether a payment was made “as a result of” severance. This
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means Parker is still good law and must be applied in determining whether a payment is
reportable severance pay.
Applying Parker to this case, we agree with Schoeffel that the payments she was to
receive under the Agreement were not made in consideration of her years of service, but rather in
consideration of giving up her right to quit before her position was eliminated. The plain
language of the Agreement makes this clear. Additionally, the Program Summary is consistent
with this conclusion. It was provided to Schoeffel in December 2016, twenty-two months before
her job ended. The Program Summary states that the purpose of the Employee Retention
Program was to compensate employees like Schoeffel for agreeing to continue working for
Thorne:
The Employee Retention Program is being offered to provide compensation to
those employees who, on the one hand, have chosen not to relocate to the new
Thorne facility in South Carolina, but who, on the other hand, have chosen to
continue their employment at Thorne Research through the end of the “Transition
Period” for their respective position.
The fact that the Agreement was not signed until shortly before Schoeffel’s separation is
irrelevant. It does not change the substance of the Agreement: an exchange of payments for
relinquishment of the right to quit. Therefore, the retention payments were not made “as a result
of” the severance of Schoeffel’s employment relationship, and consequently did not constitute
reportable severance pay under Idaho Code 72-1367(4).
The Commission correctly noted that the 2005 amendment to Idaho Code section 72-
1367(4) provided that payments made as a result of severance constitute severance pay, even if
the payments were conditioned on a release of claims agreement. I.C. § 72-1367(4). As a result,
payments made now—unlike those made at the time Parker was issued—can be severance pay
even if the only consideration received in exchange for the payments is the employee’s release of
claims. However, the Commission erred in determining that this change makes Parker
distinguishable. It is true that Schoeffel’s payments would be severance pay if they were made as
a result of severance and were made in exchange for her release of claims only. However,
although a release of claims was one of the conditions of receiving retention payments under the
Agreement (and the Agreement’s full title was “Release of Claims Agreement”), it was not the
only condition. The key condition was Schoeffel’s agreement to give up her right to quit.
Therefore, the 2005 amendment’s addition to Idaho Code section 72-1367(4) regarding release
of claims agreements does not make Parker inapplicable or foreclose the possibility that
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Schoeffel’s retention payments were not severance pay. Again, because the primary purpose of
the Agreement was to secure the relinquishment of Schoeffel’s right to quit, rather than to
compensate her for her past service to Thorne, they were not made “as a result of” severance
under Idaho Code section 72-1367(4). Therefore, the retention payments do not constitute
reportable severance pay. In light of our decision, we do not need to address Schoeffel’s
argument that the Commission failed to consider relevant evidence.
IV. CONCLUSION
The Commission’s decision is reversed.
Chief Justice BURDICK, and Justice BEVAN, CONCUR.
STEGNER, J., dissenting.
I dissent from the majority’s opinion. Because Schoeffel’s payments would not have been
made but for her separation from Thorne, they constitute “severance pay” under Idaho Code
section 72-1367(4).
The statutory definition of “severance pay” is sweeping given its “as a result of”
language. This language requires a much different inquiry than the one used in Parker. We now
ask only whether severance was a but-for cause of the payment. In other words, would the
payment have been made absent severance of the employment relationship? If not, the payment
is severance pay. Consequently, Parker now has limited value—its purpose-focused test has
been displaced by the but-for test inherent in the statutory definition of severance pay.
It was not error for the Commission to conclude that the approximately $31,000 that
Schoeffel was to receive through the Agreement was paid as a result of the termination of her
employment. The Agreement was entered into about six weeks before her last day of
employment. The Agreement provided that Schoeffel would begin receiving payments only after
her separation: Schoeffel would receive the retention payments if, among other things, she
agreed to remain a full-time employee “until September 27, 2018.” In other words, Schoeffel
would not be entitled to the payments unless and until she was discharged on her transition date.
This clearly shows that the payments were made “as a result of” her separation from Thorne.
This conclusion is further supported by the fact that, according to the Program Summary,
workers who remained employed were excluded from participation in the Employee Retention
Program:
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Exclusions
 Employees who remain employed with Thorne after their Transition
Period has concluded, by transferring to South Carolina, continuing as a
“remote worker,” or as a non-employee, independent contractor.
....
The fact that the Agreement was meant to induce Schoeffel to stay does not take this case
outside of the “as a result of” language. Neither does the label that Thorne gave to the payments
or the conditions Thorne attached to those payments. Thorne would not have made the payments
to Schoeffel but for the severance of her employment relationship. Under the statutory definition
of severance pay, that is the end of our inquiry. The payments made under the Agreement were
reportable severance pay. Therefore, I would affirm the Commission’s decision.
Justice MOELLER concurs.
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