Employment Security Commission v. Peace

ORR, Justice.

The Employment Security Commission (hereinafter “ESC”) plays two roles in this case. First, ESC is the employer (“ESC-employer”), as defined by N.C.G.S. § 96-8(5)(p), that discharged respondent William H. Peace. Second, ESC is the agency (“ESC-agency”) that determined whether Peace was eligible for unemployment insurance (“UI”) benefits.

On 7 June 1991, ESC-employer discharged one of its employees, Peace, an equal opportunity officer. Peace subsequently filed a claim for UI benefits with ESC-agency. In the initial administrative determination rendered pursuant to N.C.G.S. § 96-15(b)(2), Peace’s claim for UI benefits was denied by a decision of the designated adjudicator, John Lynch, pursuant to N.C.G.S. § 96-14(2) (misconduct in connection with work).

Peace appealed the adjudicator’s decision pursuant to N.C.G.S. § 96-15(b)(2) (“The conclusion of the adjudicator shall be deemed the final decision of the Commission unless within 10 working days after the date of notification or mailing of the conclusion, whichever is earlier, a written appeal is filed pursuant to such regulations as the Commission may adopt”). Thereafter, the matter was set for an evidentiary appeals hearing pursuant to N.C.G.S. § 96-15(c) (Appeals), and ESC Regulations 14 (Appeals Procedures) and 21.18 (Adjudication and Appeals for Former Commission Employees). ESC-agency retained an independent hearing officer designated as a Deputy Commissioner to hear the appeal pursuant to ESC Regulation 21.18(C). The independent hearing officer, Jo Ann Weaver Hull, awarded Peace benefits. ESC-employer then appealed to Superior Court pursuant to ESC Regulation 21.18(D).

N.C.G.S. § 96-15 outlines the standard procedure for claims for UI benefits, appeals within ESC-agency, and appeals from the ESC-agency final decision to Superior Court. N.C.G.S. § 96-15(f) (Procedure) requires that hearings and appeals be conducted in accordance with regulations prescribed by the Commission. ESC Regulation 21.18 outlines a special procedure for adjudication and appeals for former ESC employees.

N.C.G.S. § 96-15 provides that (1) a decision will be made by an adjudicator, N.C.G.S. § 96-15(b)(2) (1993); (2) the adjudicator’s decision may be appealed to an appeals referee, N.C.G.S. § 96-15(c); (3) on ESC-agency’s own motion, the Commission or a Deputy Commissioner may affirm, modify, or set aside the decision of the appeals referee, N.C.G.S. § 96-15(e); and (4) an appeal to the Superior Court is available after exhaustion of the remedies set out above, N.C.G.S. § 96-15(h).

To protect against the appearance of impropriety, ESC Regulation 21.18 limits review by ESC-agency where ESC-agency has a vested interest in the outcome as the employer in the case. The regulation in effect at the time of Peace’s discharge provided that (1) a decision will be made by an adjudicator, ESC Reg. 21.18(A); (2) the adjudicator’s decision may be appealed to a Deputy Commissioner, ESC Reg. 21.18(C); (3) a direct appeal to the Superior Court from the Deputy Commissioner’s decision is available, ESC Reg. 21.18(D).

Thus, N.C.G.S. § 96-15 allows one appeal within the agency, an optional review by the agency, and an appeal from the agency decision to Superior Court; whereas ESC Regulation 21.18 allows one appeal within the agency, followed directly by an appeal from the agency decision to Superior Court. The procedure prescribed by ESC Regulation 21.18 bypasses the optional review by the agency in those situations where the agency is the employer.

As previously noted, ESC-employer appealed the adverse decision of the Deputy Commissioner to Superior Court pursuant to Regulation 21.18(D). On 18 February 1993, Judge Gregory A. Weeks, pursuant to chapter 96 of the N.C. General Statutes, affirmed the decision of the Deputy Commissioner awarding UI benefits to Peace and also ordered ESC to pay Peace’s attorney’s fees. Judge Weeks’ order gives no indication of the authority for the award of attorney’s fees to Peace.

ESC-employer then appealed Judge Weeks’ order awarding attorney’s fees to the Court of Appeals, the sole assignment of error being that the award of attorney’s fees was improper under N.C.G.S. § 96-17(bl). N.C.G.S. § 96-17(bl) states that each party shall bear its own costs and attorney’s fees in any court proceeding under chapter 96 (Employment Security).

The Court of Appeals held that ESC had no authority to appeal, and thus the action was not a chapter 96 action. The Court of Appeals further held that N.C.G.S. § 96-17(bl) did not apply but that N.C.G.S. § 6-19.1 did apply. The Court of Appeals then remanded for findings that would allow an award of attorney’s fees pursuant to N.C.G.S. § 6-19.1 (“that the agency acted without substantial justification in pressing its claim against the party”).

We conclude that the Court of Appeals erred in holding that the appeal to Superior Court by ESC-employer was not a court proceeding under chapter 96. The Court of Appeals apparently based its reasoning on ESC Regulation 21.18(D), which stated at the time of Peace’s discharge that

[t]he decision of the Deputy Commissioner shall be considered the decision of the Commission. Any decision of the Commission shall become final in the absence of a timely appeal therefrom by an aggrieved party to Superior Court within thirty (30) days from the date of mailing of the decision to the parties.

The Court of Appeals reasoned that “[s]ince the Commission itself considers a decision of one of its deputy commissioners to be a decision of the Commission,... it defies logic to allow the Commission to appeal its own decision.” Employment Security Comm. v. Peace, 115 N.C. App. 486, 488, 445 S.E.2d 84, 85 (1994).

The reasoning of the Court of Appeals erroneously treats ESC as an agency appealing its own agency decision rather than as an “aggrieved party.” In this case, ESC appealed to Superior Court not as an agency decision-maker, but as an employer aggrieved by the agency action. ESC-employer is liable to pay for UI benefits the same as any other employer and has the same rights of appeal as any other employer. Thus ESC-employer had the status of “aggrieved party” under ESC Regulation 21.18(D) and had appeal rights as such.

Therefore, the appeal to Superior Court by ESC-employer was a proper proceeding under chapter 96, and N.C.G.S. § 96-17(bl) applies. Therefore, N.C.G.S. § 96-17(bl) prohibits the Superior Court award of attorney’s fees in this case.

For the foregoing reasons, we reverse the order of the Court of Appeals and remand to that court for further remand to the Superior Court, Wake County, for further proceedings not inconsistent with this opinion.

REVERSED AND REMANDED.