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Rare reversals: Overturning unemployment rulings

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Unemployment compensation rulings by the Minnesota Court of Appeals abound. Last year, the tribunal passed upon 344 decisions from the Department of Employment & Economic Development, the agency that oversees unemployment compensation in Minnesota. These decisions constituted nearly 15 percent of the total of 2,324 cases decided by the appellate tribunal last year, and nearly a quarter, a whopping 22 percent of the 1,550 civil cases.

The appellate court generally affirms the overwhelming majority of these administrative rulings. Most of the few reversals consist of remands for further deliberations by an Unemployment Law Judge.

The typical features in these cases include: a ULJ decision against an employee; a pro se appeal by the employee; an affirmance by the appellate court.

But in rare instances, the appellate tribunal reverses the ULJ decisions against an employee, as occurred recently in four cases, including a pair in which claimants successfully raised constitutional issues.

Real rarity

A real rarity occurred in the appellate court’s ruling allowing a personal care attendant to receive unemployment benefits in Weir v. ACCRA Care, Inc., 828 N.W.2d 470 (Minn. App. 2013). The Court reversed a ruling of a ULJ in featuring three unusual characteristics: The case was successfully brought pro se by an employee, he asserted a constitutional law claim; and he managed to obtain a reversal of ineligibility for benefits.

The personal care attendant sought benefits after his mother, whom he had been caring for, died. The state had paid him under the medical-assistance program which allows payments to those who care for their family members. But a ULJ denied his claim due to a provision of the unemployment compensation law, Minn. Stat. sec. 268.035, subd. 20(20),which bars benefits for one who has provided care for any “immediate family member.”

The appellate court reversed, holding that the “immediate family” provision violates the Equal Protection clause of Article I, sec. 2 of the Minnesota State Constitution. The disparate treatment of an individual who cares for a family member with the “similarly situated” personal care attendants, who care for non-family members fails to satisfy the three prongs of Equal Protection under the State Constitution DEED’s rationale for the differential treatment, the prevention of fraud lacks any “evidence or legal authority” or other “factual” support.

Safety suit

A nurse in a psychiatric wing of a Federal prison was entitled to unemployment benefits after she quit due to safety concerns in Baerman v. U.S. Dept. of Justice, 2013 WL 1943025 (Minn. App. May 13, 2013)(unpublished). The nurse left her job after a turbulent five-month period in which she was sexually assaulted by an inmate; saw an assault against a co-worker; and heard about another similar incident.

Denied benefits by a ULJ on grounds that she voluntarily quit, the nurse prevailed on appeal. The Court of Appeals reasoned that her safety fears, which were elevated by respondent’s failure to provide safety training or more staffing, was “reasonable.”

A remark by her supervisor that “prison nursing isn’t for everyone” reflected “little compassion” and warranted reversal on grounds that the resignation was for “good cause” attributable to the employer, allowing benefits under Minn. Stat. sec. 268.095, subd. 1.

Credibility counts

A manager of a bar in the west-central Minnesota town of Elrosa, who was discharged for alleged theft, was awarded unemployment compensation benefits after her claim was first denied by a ULJ in Eystad v. RKT Food & Fun, LLC, 2013 WL 1188017 (Minn. App. March 25, 2013)(unpublished). The reversal was unexpected because the employee did not appear at the hearing and handled the successful appeal pro se.

The appellate court’s reversal held that the ULJ erred in failing to make express credibility determinations, even though there was an “obvious” credibility issue with respect to the hearsay testimony of the bar owner, based upon a hearsay report by a bar patron that the manager took a $20 bill from the cash register and put it in the employees’ tip jar.

Although theft “of even nominal amounts” constitutes disqualifying “misconduct,” the ULJ’s decision was erroneous because it credited the owner’s second-hand testimony without expressly stating “the reason for crediting” it, as required by Minn. Stat. sec. 268.105, subd. 1 (c) . This was improper because the bar owner’s testimony was “implausible” in several respects, and he was “vague and inconsistent regarding his reason for discharging” the manager. The hearsay report of theft was questionable and lacked “important, relevant details” about the incident.

In light of these defects, coupled with the manager’s denial of the accusation, the ULJ’s ruling erred in falling to make “an express, reasoned credibility determination.” Because the ULJ’s decision was not “supported by substantial evidence,” it was reversed and the employee granted unemployment benefits.

Overpayment onus

The onus was placed on DEED to make sure that an employee receives notice of claimed overpayment due to fraud in order to invoke the timely appeal provision in Godbout v. DEED, 827 N.W.2d 799 (Minn. App. 2013). DEED sent a notification to the employee of claimed overpayment of nearly $20,000 due to an anonymous tip that he failed to report income while receiving benefits. The notice was sent to the mailing address it had on record for him at the time he applied for benefits. But he thereafter was incarcerated, then homeless, and subsequently used a new address and did not receive the notification until sometime later. When he appealed, a ULJ ruled that his challenge was untimely because it did not occur within 20 days of the mailing of the notice, as statutorily-prescribed.

But the appellate court reversed, holding that the notice was defective as a matter of Due Process under Article I, sec. 7 of the Minnesota Constitution. A notification of overpayment due to fraud must be preceded by “clear notice” to the claimant of the potential consequence of the failure to maintain a current mailing address with DEED after receipt of benefits including the potential obligation of repayment. Because DEED did not furnish such notice to the claimant, the appeal to challenge DEED’s determination of overpayment does not begin to run until the employee receives “actual” notice of the determination.

In addition to DEED’s failure to give constitutionally-sufficient notice, DEED’s reliance on “nearly an anonymous tip” was “disturbing.” Because the ULJ’s decision was not “supported by substantial evidence,” it was reversed and the employee granted unemployment benefits.

As a result of the ruling, DEED is planning to change its procedures in order to notify claimants of the need to maintain a current mailing address at all times and the potential consequence of failure to do so in order to comport with the appellate court’s Due Process reasoning.

But another employee who was tagged for overpayment was unsuccessful in Misterek v. DEED, 2013 WL 1187998 (Minn. App. March 25, 2013)(unpublished). A ULJ determined that the claimant received nearly $2,500 in unemployment compensation to which he was not entitled while he was working and was required to repay the benefits, attributable to a clerical error for which the applicant was not blameworthy.

The appellate court affirmed, holding that the lack of fault on the employee’s part receiving benefits to which he was not entitled does not mitigate the obligation to repay benefits. Nor is the obligation reduced because the employee needed the funds and used them when he received them. The ULJ correctly determined that overpayment requires reimbursement, regardless of “blamelessness” of the recipient.

Unemployment decisions by ULJ’s are generally upheld when challenged on appeal. But these four cases show that employees challenging ULJ decisions have at least a glimmer of hope of achieving the rarity of reversal.

Originially published in the June 3, 2013 edition of Minnesota Lawyer.