Stock v. Unemployment Compensation Board of Review

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Barry M. Stock, :

Petitioner :

:

v. : No. 415 C.D. 2015

: Submitted: November 6, 2015

Unemployment Compensation :

Board of Review, :

Respondent :

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, Judge1

HONORABLE P. KEVIN BROBSON, Judge

HONORABLE ROCHELLE S. FRIEDMAN, Senior Judge

OPINION BY JUDGE BROBSON FILED: April 8, 2016

Petitioner Barry M. Stock (Claimant), acting pro se, petitions for

review of an order of the Unemployment Compensation Board of Review (Board),

which affirmed a decision of an unemployment compensation referee (Referee),

denying Claimant benefits pursuant to Sections 4(u), 401, 401(c), and 404(d) of the

Unemployment Compensation Law2 (Law). The Referee also assessed a non-fraud

overpayment of Emergency Unemployment Compensation (EUC) benefits in the

1

This case was assigned to the opinion writer on or before January 31, 2016, when Judge

Leadbetter assumed the status of senior judge.

2

Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S.

§§ 753(u), 801, 801(c) and 804(d). Section 401 of the Law provides, in part, that

“compensation” shall be payable to an employee who is or becomes unemployed.

Section 4(u) of the Law defines the term “unemployed.” Section 404(d) of the Law provides, in

part, that an eligible employee who is unemployed shall be paid compensation in an amount

equal to his weekly benefit rate less any remuneration “paid or payable to him with respect to

such week for services performed which is in excess of his partial benefit credit.”

amount of $9,163 and Federal Additional Compensation (FAC) benefits in the

amount of $300 under Section 4005 of the Emergency Unemployment

Compensation Act of 2008 (EUC Act).3 The Board did not impose any penalty

weeks or financial penalties pursuant to Sections 801(b) or 801(c) of the Law4 and

Section 4005(a)(1) of the EUC Act. For the reasons set forth below, we now

vacate the Board’s order and remand the matter to the Board.

On September 23, 2014, the Scranton UC Service Center (Service

Center) issued several notices of determination to Claimant relating to a fraud

overpayment of benefits. (Certified Record (C.R.), Item No. 6) A notice of

determination of earnings showed that Claimant’s weekly benefit rate was $539,

3

Title IV of the Supplemental Appropriation Act of 2008, Public Law 110-252,

122 Stat. 2323. The provisions of the EUC Act are found in the Note to 26 U.S.C. § 3304. EUC

benefits are federally funded and were created by Congress pursuant to the EUC Act. McKenna

v. Unemployment Comp. Bd. of Review, 981 A.2d 415, 417 (Pa. Cmwlth. 2009). The EUC

benefits programs are administered by the states. Id. In Pennsylvania, unemployed claimants

who are not eligible for regular unemployment compensation (UC) benefits from Pennsylvania,

another state, the federal government, or Canada may be eligible for EUC benefits. Id.

Eligibility requirements for receipt of regular UC benefits are also applicable to EUC benefits,

along with additional requirements imposed by the EUC Act. Id. Section 4001(d)(2) of the EUC

Act provides that the terms and conditions of the state law which apply to claims for regular UC

benefits apply to claims for EUC benefits.

Section 2002(f) of the American Recovery and Reinvestment Act of 2009 (ARRA), P.L.

No. 111-5, 123 Stat. 115 (2009), provides for FAC benefits in the amount of $25 per week to

individuals otherwise entitled to compensation under state law. The provisions of the ARRA are

found in the Note to 26 U.S.C. § 3304. ARRA also provides that overpayments of FAC benefits

shall be recovered in the same manner as EUC overpayments. Note to 26 U.S.C. § 3304. Thus,

for purposes of our review, it is irrelevant whether the overpayments were of EUC benefits or

FAC benefits.

4

Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S.

§§ 871(b) and (c). Section 801(b) of the Law relates to the assessment of penalty weeks, and

Section 801(c) of the Law relates to the assessment of financial penalties.

2

his partial benefit credit was $216, and he “worked but knowingly failed to report

all earnings and therefore, failed to file a valid claim for compensation” as a result

of work performed for North Central Highway Safety Network (Employer). (C.R.,

Item No. 6 at Form UC-44(1).) The notice relating to EUC benefits indicated that

Claimant reported no earnings over a period of 17 weeks from January through

May 2009, although he actually received gross earnings for each of those weeks in

the amount of $360 per week, with the exception of three weeks during which he

earned $357, $432, and $450. (Id.) Notices of determination of overpayment of

benefits (EUC and FAC) informed Claimant that the Service Center had

determined that Claimant received a total of $9,163 in EUC benefits and $300 in

FAC benefits to which he was not entitled as a result of his knowingly failing to

report gross earnings from Employer. (C.R., Item No. 6 at Form UC-44(12) EUC

REV 7-08 and Form UC-44(12) FAC 4-10.) Because the Service Center

determined that the overpayment constituted a “fraud overpayment,” Claimant was

“subject to the penalty, repayment, and recovery provisions of Sections 4005(a),

4005(b), and 4005(c) of the EUC Act” of 2008. (Id.) As a result of these

determinations, the Service Center imposed a 15% penalty. (C.R., Item No. 6 at

Form UC-44(PS) 05-14.)

Claimant appealed, asserting that all wages were reported because

Employer reports them and that he had contacted unemployment compensation

authorities when he began working part-time and was told to continue filing

weekly claims “as is.” (C.R., Item No. 6 at Pet. for Appeal.) He further explained

that he was told that he would be contacted later to adjust any overpayment, but he

had not been contacted until the notices of determination were issued.

3

A Referee conducted an evidentiary hearing to consider: (1) whether

Claimant “received benefits to which he was not entitled” and “whether fault or

nonfault provisions should govern the recoupment of compensation;” (2) whether

Claimant is entitled to EUC benefits; and (3) whether Claimant “knowingly made a

false statement or knowingly failed to disclose a material fact in order to obtain or

increase benefits and is thereby subject to an additional period of disqualification.”

(C.R., Item Nos. 10, 13.) During the hearing, the Referee received testimony from

Claimant, Employer’s executive director, and an unemployment compensation

claims adjuster.

By decision and order dated December 24, 2014, the Referee affirmed

in part, affirmed as modified, and reversed in part, the Service Center’s

determinations. The Referee concluded that Claimant was disqualified from

receiving EUC and FAC benefits with respect to the 17 weeks at issue and that

Claimant had a non-fraud overpayment of EUC and FAC benefits in the amounts

of $9,163 and $300, respectively. The Referee concluded that no penalty weeks or

amounts should be assessed against Claimant in the context of EUC benefits.

In support of those conclusions, the Referee made the following

findings of fact:

1. With respect to the period at issue the claimant’s

weekly benefit rate for EUC benefits was $593 and

his partial benefit credit was $215.[5]

2. With respect to each of the weeks at issue the

claimant was working part time as an accountant

for employer, North Central Highway Safety

Network.

5

In actuality, it appears that Claimant’s partial benefit credit was $216. (C.R., Item No. 6

at Form UC-44(1).)

4

3. As agreed by the claimant, the employer and the

department had part-time earnings as indicated in

the determinations of the UC Service Center.

4. When filing his claims for benefits, mostly on line

the time it was first done, the claimant filed for

partial benefits he reported that he was partially

unemployed and he honestly believed that this was

all that he had to do and essentially that the matter

would be adjusted by the UC Service Center.

5. The claimant with respect to all the weeks at issue

and with respect to both EUC and FAC benefits

did not file claims for benefits in a proper manner.

6. As a result of the foregoing, the claimant received

an overpayment of EUC benefits in a total amount

of $9,163 and of FAC benefits in a total amount of

$300.

7. The claimant did not knowingly or intentionally

give false information or withhold information in

order to obtain the benefits nor did the claimant in

any way fraudulently obtain EUC or FAC benefits.

(C.R., Item No. 14 (emphasis added).)

The Referee reasoned, in part:

In the instant case it is clear from the testimony

and evidence of all parties that the claimant did not file

claims for benefits in a proper manner with regard to

reporting earning[s] with respect to the weeks at issue so

that the claimant is properly disqualified from receiving

EUC and FAC benefits in accordance with the foregoing

provisions of the Pennsylvania Unemployment

Compensation Law.

The Referee is persuaded that the claimant made

an hones[t] mistake with regard to the reporting in the

instant case and that there should be no fraud

overpayment but rather a non-fraud overpayment in the

amount of $9,163 with regard to EUC benefits and in the

amount of $300 with regard to FAC benefits in

accordance with Section 4005 of the EUC Act.

5

The Referee is not persuaded that in an EUC

context with Sections 801(b) and 801(c) of the

Pennsylvania Unemployment Compensation Law that

any penalty weeks or financial penalty weeks should be

assessed to the claimant.

(Id. (emphasis added).)

Claimant appealed to the Board, essentially arguing that the Referee

erred in disqualifying him from receiving all of the 2009 EUC and FAC benefits

that he had received. Claimant contended that, instead of being disqualified from

receipt of all benefits for that 17-week period, which resulted in a non-fraud

overpayment amount of $9,163, he should be permitted to settle the overpayment

by reimbursing the difference between the amount that he received and the amount

that he should have received had his part-time wages been properly reported, for a

difference of $2,607. By decision and order dated February 18, 2015, the Board

affirmed the Referee’s determination and adopted the Referee’s findings and

conclusions. Claimant then petitioned this Court for review.6

On appeal,7 Claimant again argues that the Board erred in

disqualifying him as to all EUC and FAC benefits that he received while employed

part-time during 2009, and he requests that he be permitted to reimburse the

overpayment of wages in excess of the partial benefit.8 (Claimant’s Pet. for

6

The Board denied Claimant’s request for reconsideration. (C.R., Item No. 19.)

7

This Court’s standard of review is limited to determining whether constitutional rights

were violated, whether an error of law was committed, or whether necessary findings of fact are

supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa. C.S.

§ 704.

8

The Board argues that Claimant failed to preserve this issue because the only issue he

raised before the Referee was that the Service Center erred in determining that the overpayments

constituted fraud overpayments rather than non-fraud overpayments. We disagree. Claimant

(Footnote continued on next page…)

6

Review at 4.) The Board counters that Claimant’s failure to report his part-time

earnings when filing and collecting benefits for 17 weeks renders him completely

ineligible for benefits under Section 401(c) of the Law and Section 4005(a) of the

EUC Act.9 The Board cites this Court’s decision in Smith v. Unemployment

Compensation Board of Review, 500 A.2d 186 (Pa. Cmwlth. 1985), in support of

its position.

Section 401(c) of the Law provides, in part:

Compensation shall be payable to any employe who is or

becomes unemployed, and who . . . [h]as made a valid

application for benefits with respect to the benefit year

for which compensation is claimed and has made a claim

for compensation in the proper manner and on the form

prescribed by the department.

(Emphasis added.) Section 4005 of the EUC Act governs repayment and recovery

of EUC benefits and provides, in part:

(continued…)

admitted to receiving overpayments and, in addition to arguing that the Service Center erred in

concluding that the overpayments constituted fraud overpayments, he also contended that he

should be permitted to pay back the overpayments that he tried to pay back starting in

January 2009—meaning pay back the difference between the amount that he received and the

amount that he should have received had his part-time wages been properly reported. (See C.R.,

Item No. 13 at 11.) Claimant calculates the amount of overpayment to be $2,607, which results

from the part-time wages of $6,279 less the partial weekly benefit allowed of $3,672. (See

Pet’r’s Br. at 9.)

9

Although the Board cites Section 4005(a) of the EUC Act, that section relates to

ineligibility for EUC benefits when an “individual knowingly has made . . . a false statement.”

That section does not appear to be applicable to the matter now before the Court, because, here,

the Referee found that Claimant “made an honest mistake” and “did not knowingly or

intentionally give false information or withhold information.” (C.R., Item No. 14.) We will

analyze the arguments under Section 4005 generally.

7

(a) IN GENERAL.—If an individual knowingly has

made . . . a false statement or representation of a

material fact, . . . and as a result of such false statement

or representation or of such nondisclosure such

individual has received an amount of emergency

unemployment compensation under this title to which

such individual was not entitled, such individual—

(1) Shall be ineligible for further emergency

unemployment compensation under this title in

accordance with the provisions of the applicable

State unemployment compensation law relating to

fraud in connection with a claim for

unemployment compensation;

...

(b) REPAYMENT.—In the case of individuals who

have received amounts of emergency unemployment

compensation under this title to which they were not

entitled, the State shall require such individuals to repay

the amounts of such emergency unemployment

compensation to the State agency, except that the State

agency may waive such repayment if it determines that—

(1) The payment of such emergency

unemployment compensation was without fault on

the part of any such individual; and

(2) Such repayment would be contrary to

equity and good conscience.

(c) RECOVERY BY STATE AGENCY.—

(1) IN GENERAL.—The State agency may

recover the amount to be repaid, or any part

thereof, by deductions from any emergency

unemployment compensation payable to such

individual under this title or from any

unemployment compensation payable to such

individual under any State or Federal

unemployment compensation law administered by

the State agency or under any other State or

Federal law administered by the State agency

which provides for the payment of any assistance

or allowance with respect to any week of

unemployment, during the 3-year period after the

8

date such individuals received the payment of the

emergency unemployment compensation to which

they were not entitled . . . .

Section 4005 of the EUC Act, which applies to EUC benefits, is

similar to Section 804 of the Law,10 which applies to unemployment compensation

benefits. Both sections provide that if there is a fault overpayment, the claimant

must repay the amount to which he was “not entitled,” but that a claimant is not

liable to repay a non-fault overpayment. Instead, non-fault overpayments shall be

recouped from future benefits payable to the claimant, provided that the amount is

recouped within the three-year period following the benefit year at issue. Id.

As the Board properly observes, this Court has applied Section 401(c)

of the Law’s requirement that a claimant make a “claim for compensation in the

proper manner” to render a claimant totally ineligible for unemployment

compensation benefits. See Smith, 500 A.2d at 189-90 (explaining that

“concealment of earnings from employment results in loss of eligibility because

the claim has not been made ‘in the proper manner’” and that ineligibility under

10

Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S.

§ 874. Section 804(a) of the Law provides, in part, that “[a]ny person who by reason of his fault

has received any sum as compensation under [the Law] to which he was not entitled, shall be

liable to repay . . . a sum equal to the amount so received by him and interest.” Pursuant to

Section 804(b)(1) of the Law, however, if a person has received compensation to which he was

not entitled “other than by reason of his fault,” he “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.” “The

word ‘fault’ within the meaning of Section 804(a) connotes an act to which blame, censure,

impropriety, shortcoming or culpability attaches. To find ‘fault’ under Section 804(a), there

must be some finding by the referee or the Board concerning the claimant’s state of mind.”

Amspacher v. Unemployment Comp. Bd. of Review, 479 A.2d 688, 691 (Pa. Cmwlth. 1984)

(citations omitted).

9

Section 401(c) “is total, rather than dependent upon the relationship between the

unreported amount and the partial benefit credit” (emphasis added)). Specifically,

our Court has applied this concept of “total ineligibility” when a claimant has been

found to have knowingly withheld information regarding part-time earnings and,

therefore, received a fault overpayment of unemployment compensation benefits

under Section 804(a) of the Law. See Smith, 500 A.2d at 189; see also Amspacher

v. Unemployment Comp. Bd. of Review, 479 A.2d 688, 690-91 (Pa. Cmwlth. 1984)

(holding that claimant who withheld information regarding part-time employment

was ineligible for unemployment compensation benefits because claimant did not

make claim in proper manner as required by Section 401(c) and was, therefore,

ineligible for benefits for weeks in which he withheld this information);11

Rohrbach v. Unemployment Comp. Bd. of Review, 450 A.2d 323, 325 (Pa. Cmwlth.

1982) (holding that “a claimant is disqualified from receiving unemployment

compensation benefits for those weeks in which she fails to report earnings” and

subject to recoupment of fault overpayment under Section 804(a) of Law). We

have similarly extended the concept of “total ineligibility” to situations involving

11

In Amspacher, we explained:

A claimant seeking unemployment compensation benefits is required to

divulge to the [Office of Employment Security (OES)] all pertinent information

regarding the claimant’s employment status. This information is required so that

the OES may make an intelligent and informed determination as to the claimant’s

eligibility for benefits and computation of a weekly benefit rate and partial benefit

credit. This requirement which is imposed upon claimants recognizes the

Commonwealth’s interest in unemployment compensation and assists in fulfilling

the Commonwealth’s duty to protect the unemployment compensation fund

against dissipation by those not entitled to benefits under the law.

Amspacher, 479 A.2d at 690-91.

10

EUC benefits where a claimant has been found to have knowingly made a false

statement or representation of a material fact regarding part time earnings and,

therefore, received a fraud overpayment of EUC benefits under Section 4005 of the

EUC Act. See Hanna v. Unemployment Comp. Bd. of Review (Pa. Cmwlth.,

Nos. 1677, 1678, 1679, 1680, 1681, 1682, and 1683 C.D. 2014, filed July 8, 2015);

Riebling v. Unemployment Comp. Bd. of Review (Pa. Cmwlth., No. 1751

C.D. 2010, filed July 26, 2011). We have not, however, considered whether the

concept of “total ineligibility,” as described in Smith, is equally applicable to

situations where a claimant receives EUC benefits to which he was “not entitled”

due to an “honest mistake” on his part and not due to fraud or fault.

When interpreting a statute, this Court is guided by the Statutory

Construction Act of 1972, 1 Pa. C.S. §§ 1501-1991, which provides that “the

object of all interpretation and construction of all statutes is to ascertain and

effectuate the intention of the General Assembly.” 1 Pa. C.S. § 1921(a). “The

clearest indication of legislative intent is generally the plain language of a statute.”

Walker v. Eleby, 842 A.2d 389, 400 (Pa. 2004). “When the words of a statute are

clear and free from all ambiguity, the letter of it is not to be disregarded under the

pretext of pursuing its spirit.” 1 Pa. C.S. § 1921(b). Only “[w]hen the words of

the statute are not explicit” may this Court resort to statutory construction. 1 Pa.

C.S. § 1921(c). “A statute is ambiguous or unclear if its language is subject to two

or more reasonable interpretations.” Bethenergy Mines, Inc. v. Dep’t of Envtl.

Prot., 676 A.2d 711, 715 (Pa. Cmwlth.), appeal denied, 685 A.2d 547 (Pa. 1996).

Moreover, “[e]very statute shall be construed, if possible, to give effect to all its

provisions.” 1 Pa. C.S. § 1921(a). It is presumed “[t]hat the General Assembly

intends the entire statute to be effective and certain.” 1 Pa. C.S. § 1922(2). Thus,

11

no provision of a statute shall be “reduced to mere surplusage.” Walker, 842 A.2d

at 400. Finally, it is presumed “[t]hat the General Assembly does not intend a

result that is absurd, impossible of execution or unreasonable.” 1 Pa. C.S.

§ 1922(1).

An examination of the statutory language reveals that neither

Section 401(c) of the Law nor Section 4005 of the EUC Act speak in terms of

“total ineligibility” or describe the manner in which the amount of the

overpayment shall be calculated. Pertinent to our analysis, Section 401(c) of the

Law merely provides that a claimant must file a “claim for compensation in the

proper manner,” and Section 4005 of the EUC Act provides for the repayment and

recovery of the amount of “compensation to which [claimants] were not entitled”

without defining that phrase. Thus, in order to determine the amount of EUC

benefits that may be recovered from Claimant, we must engage in statutory

construction.

By applying the reasoning set forth in Smith, this Court has essentially

interpreted Section 4005(b) of the EUC Act’s phrase “compensation . . . to which

[a claimant was] not entitled” in the context of fault overpayments to include all

EUC benefits that a claimant received during any week in which the claimant

failed to make a “claim for compensation in the proper manner” as required by

Section 401(c) of the Law. See Hanna; Riebling. Thus, if a claimant acted in a

culpable manner and knowingly withheld earnings information that the claimant

was required to provide, thereby receiving a fraud overpayment, the claimant is

deemed ineligible for any compensation during those weeks. In such an instance,

the repercussion for the culpable conduct is greater than merely being required to

pay back any amounts that the claimant would not have received if the claimant

12

had properly reported his earnings. The concept of total ineligibility, therefore,

allows for the recovery of compensation by unemployment authorities and also

serves as a punishment for and deterrent to the culpable withholding of earnings

information. In the context of fraud overpayments, such an interpretation of the

phrase “compensation . . . to which [a claimant was] not entitled” is reasonable.

As this Court in Smith observed, we are mindful that we “should preserve every

incentive which the Law contains to encourage full and open disclosure by a

claimant.” Smith, 500 A.2d at 190-91.

The concept of “total ineligibility” in the context of non-fraud

overpayments, however, would not serve the same purposes as it does in a fraud

overpayment situation. In a non-fraud overpayment situation, there is no deterrent

purpose to be served, because the underlying conduct (failure to report earnings)

was done without any fraud or fault, meaning that the claimant did not knowingly

or intentionally withhold information that he was required to provide. Similarly, it

would not be reasonable to apply the “total ineligibility” concept as a punishment,

because, again, the underlying conduct was not done knowingly or intentionally.

Instead, in these situations, it is more reasonable to require a claimant to be subject

to recoupment for the amount he would not have received if he had properly

reported his earnings. Such an interpretation allows for monies to be recouped by

unemployment authorities while being mindful of the well-recognized notion that

the “Law is remedial legislation whose benefit provisions are to be construed

liberally in the claimant’s favor.” Amspacher, 479 A.2d at 690 (citing Micciche v.

Unemployment Comp. Bd. of Review, 461 A.2d 914 (Pa. Cmwlth. 1983)). This

notion is particularly applicable where the claimant has not engaged in any

culpable conduct. To interpret the phrase “compensation to which [claimants]

13

were not entitled” in a manner which serves to punish a claimant for non-culpable

conduct would lead to an absurd and unreasonable result, clearly not intended by

the General Assembly.

For the reasons set forth above, we agree with Claimant that the Board

erred in disqualifying him as to all benefits that he received while employed

part-time during 2009. Instead, the Board should have calculated the non-fraud

overpayment by first determining the amount of EUC and FAC benefits that

Claimant would have received had he properly reported his part time earnings and

then subtracting that amount from the amount Claimant actually received. The

difference between these sums would equal the amount of the non-fraud

overpayment.

Accordingly, the order of the Board is vacated and the matter is

remanded to the Board for a recalculation of the amount of Claimant’s non-fraud

overpayment.

P. KEVIN BROBSON, Judge

14

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Barry M. Stock, :

Petitioner :

:

v. : No. 415 C.D. 2015

:

Unemployment Compensation :

Board of Review, :

Respondent :

ORDER

AND NOW, this 8th day of April, 2016, the order of the

Unemployment Compensation Board (Board) of Review is hereby VACATED and

the matter remanded to the Board for a recalculation of the amount of Petitioner’s

non-fraud overpayment consistent with the attached Opinion.

Jurisdiction relinquished.

P. KEVIN BROBSON, Judge