“Bye” now—pay later

Windham County Sheriff’s Dept. v. Dept. of Labor, 2013 VT 88

By Andrew Delaney

Roll up your sleeves, folks.  Today’s case is a technical morass of terminology and Department of Labor-speak.  It gets going quick.

Let’s start with the logistics.  Plaintiff Employer is a “reimbursable employer,” which means that instead of paying an unemployment tax, it pays into the unemployment trust fund for payments that are chargeable to it.  Generally, this means payments to former employees receiving unemployment benefits from the fund will be reimbursed by the responsible employer. 

In this case, employee was fired for “theft of department equipment.”  (We speculate that involved more than taking home some paperclips and pens, though the SCOV doesn’t specify.)  After he was fired, employee applied for unemployment benefits.  The Department of Labor (DOL) found that employee had been terminated for gross misconduct and disqualified him for benefits until he earned an additional six times his weekly benefit amount.  The DOL noted, however, that the Employer would still have to pay any chargeable benefits.

Employee went to work for someone else, earned his required six multiples, reapplied and qualified for unemployment.  Because part of employee’s base period came from Employer, the DOL assigned some of the benefits from the fund and assessed reimbursement charges against Employer.    

In the meantime, however, the legislature had amended the applicable statutory provision on base periods.  Whereas the base period provision effective at the time of employee’s termination (and the DOL’s initial determination) included wages earned in a job one was fired from for gross misconduct, at the time employee started receiving benefits, the base-period definition did not include wages earned in a fired-for-gross-misconduct situation. 

Got it?

Employer requested a hearing, and argued that the amendment absolved Employer of any responsibility for the reimbursement payments.  Nevertheless, an administrative law judge upheld the DOL’s assessment.  The Employment Security Board also upheld the decision and the Employer appealed.   

While the SCOV’s standard of review is generally deferential to the administrative agency’s expertise in these matters, because this is solely a retroactivity-and-statutory-interpretation case, the SCOV takes it and goes de novo.  (This is also the title of a mediocre Lorenzo Lamas movie).

The SCOV doesn’t buy the Employer’s argument that the statute at the time of reapplication controls, because there’s a legislative-amendment-doesn’t-take-an-accrued-benefit-away provision in the Vermont statutes.  The issue as the SCOV frames it, therefore, is what statute applied when the Employer’s liability accrued.

By the way the SCOV frames the issue, you can guess where it is going with this. 

The SCOV begins by addressing the requirement of a “valid claim” and when a valid claim accrues.  According to statutory definitions, a valid claim accrues upon the initial determination.  Here, the SCOV reasons that employee’s initial application established a “valid claim” regardless of the period of disqualification following. 

There’s a de rigueur discussion of previous decisions and statutory provisions, leading to the conclusion that the initial establishment of a valid claim—even with a subsequent period of disqualification while other requirements are met—triggers liability.  The SCOV opines that Employer’s “obligation to pay is governed by the law in force at the time of the initial claim.”

Employer’s alternative argument is that the solely-procedural-or-remedial exception to the non-retroactivity of statutory amendments applies—it argues that unemployment is remedial and thus the legislative amendment must be applied retroactively.  The SCOV does not give much love to this argument, reasoning that the statute “is not procedural, and while the unemployment compensation law may be labeled as remedial overall, it is remedial for the benefit of employees only.  It is not remedial for the benefit of employers who want to reduce benefits to employees in order to reduce their contribution liability.”

This has to be a maddening case for the Employer.  After all, it fired the employee for stealing from it, and then it ends up on the hook for a portion of the employee’s unemployment compensation benefits.  How does that work?  On the other hand, thanks to the legislative amendment, this isn’t a situation that’s likely to recur beyond the near future.