Opinion
No. 76-275
Decided November 18, 1976. Rehearing denied December 30, 1976.
In unemployment compensation proceeding by resigned federal employee, the Industrial Commission considered itself bound by law to base its decision on a federal finding as to the reason for separation from work, which finding consisted of a statement supplied by claimant. From Commission's denial of benefits on this basis, claimant sought review.
Order Set Aside
1. UNEMPLOYMENT COMPENSATION — Federal Civilian Employee — Must Be Provided — Opportunity for Hearing. Federal regulation stating that a determination or redetermination by a State agency as to a Federal civilian employee's entitlement to compensation is subject to review "except for Federal findings" does not mean that such Federal findings can be validly established and maintained without affording the employee an opportunity for hearing, it having been expressly mandated to the State agencies that they provide "opportunity for a fair hearing" for all individuals whose claims are denied; consequently, Federal law does not preclude a hearing on the question of why such an employee terminated his job even though there exists a Federal finding on that issue.
2. Federal Civilian Employee — Challenging Federal Findings — Regarding Termination of Employment — Entitled to Hearing. Where a resigned federal civilian employee claiming unemployment compensation benefits questioned the validity of certain Federal findings on the question of why he terminated his job, even though the findings consisted of the employee's own explanation, a hearing to explain such findings is mandated both by the relevant Federal regulation as well as the Federal commitment to a fair hearing on the issue of unemployment compensation; thus, the finding of the Federal agency is not conclusive against the claimant unless and until he is afforded an opportunity for a fair hearing.
3. Remedy and Regulations — Regarding Federal Findings — Unclear — Opportunity for Hearing — Required — Federal Hearing Precluded — State Hearing Mandated. Where both the remedy and the regulations regarding hearings as to the findings of a Federal agency on the question of why an unemployment compensation claimant terminated his employment are unclear, justice requires giving the claimant a reasonable opportunity to be heard; and where a one-year statute of limitations may well preclude a hearing before a Federal agency, there is no alternative but to remand the cause for a hearing by the state division of employment, as would be available to any non-Federal employee.
Review of Order from the Industrial Commission of the State of Colorado
Barton S. Balis, for petitioner-claimant.
J. D. MacFarlane, Attorney General, Jean E. Dubofsky, Deputy Attorney General, Edward G. Donovan, Assistant Attorney General, Louis L. Kelley, Assistant Attorney General, for respondent.
No appearance for respondent-employer.
Petitioner, Elliott Schulman, seeks review of an adverse redetermination denying him unemployment compensation benefits. We set aside the order.
In November of 1973, Schulman resigned his position with the Navy (Office of Naval Research) as an oceanographer. On Federal Form SF-50, Notification of Personnel Action, which Schulman was required to fill out, he stated his reasons for resignation as follows:
"Although my personal knowledge of bureaucracy and administration was negligible when I accepted this position over one year ago, I felt the opportunities offered were most promising. After three months of employment, however, I have discovered that my preferred style of life and work are incompatible with employment in the Navy and residing in the Washington area. I'm still ineffective and out of place at ONR, and believe that since this situation has no future, resignation is my only alternative."
While Schulman was unaware that this would be the case, this statement became the "Federal finding" of the reason for separation, and at no stage of later proceedings was he given an opportunity to explain that the statement was misleading.
Schulman subsequently filed a claim for benefits under the Colorado Employment Security Act. His claim was approved and he started to receive benefits. Thereafter, however, he was notified of an overpayment of benefits. This redetermination was premised on the Federal finding which merely repeated Schulman's reasons for resignation. The Division of Employment considered itself bound by law to base its decision on the Federal finding as to the reason for separation from work. Consequently, it concluded that Schulman was disqualified from the receipt of further benefits pursuant to what is now § 8-73-108, C.R.S. 1973.
Schulman challenged that disqualification, and at a Division of Employment hearing, he gave what he termed the "real" reasons for his resignation: i.e., contrary to his understanding when he took the job, he was not allowed sufficient time for independent research. Schulman contends that he did not state this reason for resigning on the Federal form for fear of insulting his superiors which would have been self-defeating since he needed letters of recommendation from them. The referee affirmed the decision of the Division of Employment, concluding that the Division was bound by law to base its decision on the Federal finding as to the reason for separation, and the Commission in turn affirmed the referee's decision.
Schulman later sought to modify his Federal Form SF-50 statement, but the U.S. Department of Labor denied him such opportunity. The Industrial Commission thereafter made its final decision, affirming its previous decisions and denying Schulman's claim for benefits.
Schulman contends that because the State and Federal procedures followed here have operated to deny him an adequate hearing before disqualification from unemployment compensation benefits, those procedures are violative of constitutional due process. We agree that a hearing unfettered by a mandatory acceptance of the Federal finding is required.
In amending the Social Security Act, 5 U.S.C. § 8506, Congress revised the government's compensation program so as to qualify virtually all Federal civilian employees for unemployment compensation. 5 U.S.C. § 8501, et. seq. (1954). Also, pursuant to 5 U.S.C. § 8502, the Administration of Unemployment Compensation of Federal Employees is governed by agreement between the Secretary of Labor and the particular state. The Secretary of Labor has entered into such an agreement with the Colorado Division of Employment and thus § 8502 of the Federal Act is controlling. See § 8-72-110, C.R.S. 1973.
Section 8502(b) provides:
"Compensation will be paid by the State to a Federal employee in the same amount, on the same terms, and subject to the same conditions as the compensation which would be payable to him under the unemployment compensation law of the State . . . ."
Section 8502(d) states:
"A determination by a State Agency with respect to entitlement to compensation under an agreement is subject to review in the same manner and to the same extent as determinations under the State unemployment compensation law . . . ."
Therefore, pursuant to § 8-74-109, C.R.S. 1973, this court has jurisdiction to hear this appeal.
Especially important in the instant case is 5 U.S.C. § 8506(a), which requires that the Federal employing agency furnish the State agency information including, inter alia, "the reasons for termination of Federal service." That statute also states:
"The employing agency shall make the findings in the form and manner prescribed by regulations of the Secretary. The regulations shall include provision for correction by the employing agency of errors and omissions. Findings made in accordance with the regulations are final and conclusive for the purposes of sections 8502(d) and 8503(c) . . . ."
Such regulations have been adopted by the Secretary and they appear at 20 C.F.R. § 609. Section 609.25 thereof provides:
"A determination or redetermination by a State agency as to a Federal civilian employee's entitlement to compensation is subject to review, except for Federal findings . . . in the same manner and to the same extent as other determinations under the State unemployment compensation law." (emphasis supplied)
[1] To interpret this regulation as precluding a hearing relative to a Federal finding as to the reason for terminations of employment makes the regulation constitutionally suspect. See Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Greene v. McElroy, 360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959). However, such interpretation is not mandated. In referring to § 609.25, the Court of Appeals of the District of Columbia stated:
"Section 609.25] does not mean that the findings of the Federal employing agency, made conclusive on the State agency, can be validly established and maintained without opportunity for hearing." Smith v. District Unemployment Compensation Board, 435 F.2d 433 (D.C. Cir. 1970).
In Smith, the court reasoned:
"The opportunity for hearing was considered by Congress to be so fundamental that it was expressly mandated on the State agencies that they provide 'opportunity for a fair hearing, before an impartial tribunal' for all individuals whose claims are denied. See 42 U.S.C. § 503(a)(3)."
42 U.S.C. § 503(a) provides: "The Secretary of Labor shall make no certification for payment to any State unless he finds that the law of such State . . . includes provision for. . . . . . . "(3) Opportunity for a fair hearing, before an impartial tribunal, for all individuals whose claims for unemployment compensation are denied. . . ."
Consequently, in light of this Federal commitment to a fair hearing, we hold that Federal law does not preclude a hearing on the question of why the employee terminated his job.
[2] The Industrial Commission argues, however, that since there is no "contradiction" between the Federal finding and those reasons given by Schulman for the resignation, a hearing is not required. This contention is based on 20 C.F.R. 609.18 which provides:
"Federal findings . . . shall be final and conclusive except that Federal findings which contradict the reasons given by a Federal civilian employee for his resignation or which relate to the validity of such reasons shall not be final and conclusive unless such employee has been afforded an opportunity for a fair hearing on any issue involved in the alleged reasons for resignation." (emphasis supplied)
However, where, as here, Schulman questions the validity of the findings, even though they be in his own words, a hearing to explain such findings is mandated both by the wording of § 609.18 as well as by our analysis above.
We conclude therefore that the finding of the Federal agency is not conclusive against Schulman unless and until he is afforded an opportunity for a fair hearing. The State hearing at which the referee accepted only the "Federal finding" (which itself was made without a hearing) was tantamount to no hearing at all on the issue of why Schulman resigned. Smith v. District Unemployment Compensation Board, supra. See also Goldberg v. Kelly, supra; and Greene v. McElroy, supra.
[3] The question of remedy remains. Schulman encountered extreme difficulty in attempting to ascertain how and where he could obtain a hearing before an appropriate Federal agency. He corresponded with the Department of the Navy, the Department of Labor, and the U.S. Civil Service Commission — all to no avail. Now the one year statute of limitations provided in 20 C.F.R. § 609.7 may well preclude a hearing before a Federal agency. Where both the remedy and the regulations are unclear, justice requires giving Schulman a reasonable opportunity to be heard. Smith v. District Unemployment Compensation Board, supra. See also Lodge 1858, American Federation of Government Employees v. Paine, 436 F.2d 882 (D.C. Cir. 1970). Since Schulman was denied the right to a hearing before the Federal agencies, we have no alternative but to hold that the Industrial Commission is not bound by the Federal finding.
Therefore, the order of the Industrial Commission is set aside and the cause remanded for hearing by the Colorado Division of Employment, as would be available to any non-Federal employee. See Smith v. District Unemployment Compensation Board, supra.
JUDGE ENOCH concurs.
JUDGE COYTE dissents.