Carey R. Charles v. Mark Butler, Commissioner, Georgia Department of Labor

• Court: Court of Appeals of Georgia
• Decided: March 19, 2015
• Docket: A14A2095
• Status: Published

Opinion

SECOND DIVISION ANDREWS, P. J., MCFADDEN and RAY, JJ.

NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. http://www.gaappeals.us/rules/

March 19, 2015

In the Court of Appeals of Georgia A14A2095. CHARLES v. BUTLER et al.

ANDREWS, Presiding Judge.

In this discretionary appeal, Carey R. Charles appeals from an order entered by

the Superior Court of Fulton County affirming the final administrative decision of the

Board of Review (“Board”) of the Department of Labor (“Department”). The Board

affirmed an administrative hearing officer’s decision that, among other things, found

that Charles had underreported his income from a part-time job in 2009 while

receiving unemployment benefits and, except with respect to one week, allowed the

Department to continue to invoke fraud penalties against Charles upon remand to the

benefit control unit. Charles argues on appeal that the superior court erred in

affirming the Board’s decision because the Department failed to prove fraud at the

hearing before the hearing officer and the hearing officer relied on inadmissible hearsay. He further argues that the trial court erred in failing to strike the

supplemental record filed by the Department. We agree that the Department failed to

prove fraud within the meaning of OCGA § 34-8-255, and we therefore reverse and

remand.

Judicial review of an administrative decision requires the court to determine that the findings of fact are supported by ‘any evidence’ and to examine the soundness of the conclusions of law that are based upon the findings of fact. When this Court reviews a superior court’s order in an administrative proceeding, our duty is not to review whether the record supports the superior court’s decision but whether the record supports the final decision of the administrative agency.”

(Citation and punctuation omitted.) Robinson v. Thurmond, 309 Ga. App. 883, 884

(711 SE2d 430) (2011).

The record shows that Charles was receiving unemployment benefits when he

started working part-time for the YMCA of Metropolitan Atlanta (“YMCA”) in May

2009. In or around October 2010, the Department initiated an audit of Charles’s 2009

earnings by sending the YMCA a form that it was to complete showing Charles’s

weekly earnings from the week ending July 4, 2009 through the week ending

December 26, 2009. In April 2011, the Department sent Charles a request for

information about his reported income for the time period in question, and Charles

2 responded on April 7, 2011. On October 10, 2012, the Department sent Charles a

notice stating that he had “knowingly and willfully failed to report and/or incorrectly

reported [his] earnings” for 23 weeks from July through December 2009 and that the

“total amount overpaid is $7,062.00.” The next day, the Department sent two

additional notices to Charles stating that because of his “ineligibility” for

unemployment benefits described in the October 10, 2012 notice, he also must repay

the Federal Additional Compensation (“FAC”) he received for the relevant time

period.

Charles appealed from the Department’s three notices, and following a hearing

before an administrative hearing officer, the hearing officer issued a decision

affirming the overpayment set forth in the October 10, 2012 notice. Charles then

appealed the hearing officer’s decision to the Board. Finding merit in Charles’s

arguments that his due process rights were not properly observed in the hearing and

that the hearing officer erred in failing to address the October 11, 2012 notices and

did not state whether the fraud penalties were properly applied, the Board remanded

the case for a de novo hearing.

A de novo hearing took place before a new hearing officer on February 25,

2013. Although the YMCA received notice of the hearing, no representative from the

3 YMCA attended the hearing. A number of documents were entered into evidence at

the beginning of the hearing, including the wage audit completed by the YMCA,

which was allowed into evidence over the hearsay objection of Charles’s counsel for

the limited purpose of showing what the Department used to “build the

overpayment.”

Jermine Woolery, Supervisor, Benefit Payment Control for the Department,

testified that based on the audit completed by the YMCA, the Department determined

that Charles underreported his earnings from July 4, 2009 through December 26,

2009. She stated that the underreporting also created an overpayment with respect to

Charles’s FAC payments.1 The Department concluded that by underreporting his

earnings when he certified for benefits, Charles made misrepresentations of fact to

obtain higher benefit payments. Woolery testified that the handbook provided to

applicants for unemployment benefits states that claimants must report gross earnings

when they certify for benefits. She maintained that the handbook is given out to all

applicants and that applicants are required to sign a form acknowledging receipt.

Woolery admitted, however, that the Department did not have any proof that Charles

1 Woolery explained that FAC is a supplement of $25 per week the federal government provided from 2009 through 2011.

4 received the handbook. She tried to locate Charles’s acknowledgment of receiving a

handbook but was not able to do so. Woolery admitted that Charles’s online

certifications for benefits, which were admitted into evidence, showed that he had

reported some earnings for the weeks ending December 12, 19, and 26, 2009 but that

the Department’s database used to calculate overpayments did not reflect those

reported earnings. She further admitted that the Internet certifications showed that

Charles overreported his earnings for the week ending December 19, 2009. Woolery

testified that the Department makes a determination as to whether fraud is involved

in underreporting based on “how many weeks went by and this person did not go in

the office . . . to correct this situation.”

Charles testified that he applied for unemployment benefits online at one of the

Department’s career centers. He could not recall what information he received or if

he received a handbook. Charles testified that he certified for his benefits online and

that the program did not state whether earnings should be reported as net or gross. He

was simply required to enter a number in a box. Charles stated that he was paid every

other week, and on the off weeks, he estimated his earnings based on hours worked.

On the weeks he was paid, he used his paycheck to make the certification. Charles

stated that he usually used the net amount for the certification because he would look

5 at the amount he received in his bank account by direct deposit. Charles was aware

that his employer reported income to the Department on a quarterly basis. He testified

that he did not really pay attention to the deposits of benefits he received from the

Department but usually just looked at his bank account to see if he had enough money

to cover his bills.

Following the hearing, the hearing officer issued a somewhat confusing

decision in which he found that an overpayment of benefits occurred but set aside and

remanded the October 10, 2012 notice to be corrected because of errors with respect

to overpayments in the weeks ending December 12, 19, and 26, 2009. The hearing

officer ordered that the overpayment for the week ending December 19, 2009 be

developed as a non-fraudulent overpayment. He further ruled that “[t]he fraud

provision [of the October 10, 2012 notice] shall be set aside. Benefit Payment Control

may re-institute the Fraud provision if appropriate . . . once a correct overpayment of

benefits is released.” The decision affirmed one of the October 11, 2012 notices (for

$275) but remanded the other (for $357).

Charles appealed to the Board, arguing that the evidence failed to establish that

he knowingly and intentionally failed to properly report his earned income to obtain

more benefits than he was allowed. He requested that the Board reverse the hearing

6 officer’s decision and remand the case to compute any overpayment based only on his

actual overpayments, without penalties. The Board affirmed the hearing officer’s

decision. Charles filed a petition for judicial review in the superior court,2 arguing

that the Board’s decision must be reversed and that any overpayment should be

considered without fraud penalties. The superior court issued an order in which it

summarily concluded that the evidence supported the Board’s decision and that there

was no legal error.

1. We note as an initial matter that neither the Department nor the YMCA filed

an appellee’s brief in this Court. “As a result, we accept [Charles’s] statement of facts

as prima facie true and decide the case on the basis of this statement and the evidence

cited and quoted in support thereof.” (Citation and punctuation omitted.) Thomas v.

Butler, 2015 WL 543050, at *2 (Ga. App. Feb. 11, 2015).

2 OCGA § 34-8-223 states: “Judicial review shall be permitted only after any party claiming to be aggrieved thereby has exhausted his or her administrative remedies.” Even if Charles might have had further appeal rights within the Department following the determination of the benefit control unit on remand from the hearing officer, an exhaustion requirement may be excused when, as here, it “would result in a decision on the same issue by the same body.” WMM Properties v. Cobb County, 255 Ga. 436, 440 (3) (339 SE2d 252) (1986).

7 2. Charles argues that the superior court erred in failing to conclude that the

Department failed to prove that Charles knowingly underreported his income in order

to obtain benefits to which he was not entitled. We agree.

We first set forth the relevant statutory framework. Earnings of a claimant for

unemployment benefits are taken into account in determining the amount of a benefit

payment as follows: “For claims filed on or after July 1, 2002, an otherwise eligible

individual shall be paid the weekly benefit amount, less gross earnings in excess of

$50.00, payable to the individual applicable to the week for which benefits are

claimed.” OCGA § 34-8-193 (e) (2). OCGA § 34-8-254 (a) governs the liability of

unemployment benefit claimants to repay overpayments from the Department, stating,

in relevant part:

Any person who has received any sum as benefits under this chapter while any conditions for the receipt of benefits imposed by this chapter were not fulfilled or while the person was disqualified from receiving benefits shall, in the discretion of the Commissioner [of Labor]: (1) Be liable to have such sums deducted from any future benefits payable to such person under this chapter, . . .; and (2) Be liable to repay the

8 Commissioner for the Unemployment Compensation Fund a sum equal to the amount so received by such person.3

Most pertinent here, OCGA § 34-8-255 states:

Any person who knowingly makes a false statement or misrepresentation as to a material fact or who knowingly fails to disclose a material fact to obtain or increase benefits under this chapter, either for himself or herself or for any other person, . . . shall, upon an appropriate finding by the Commissioner, cease to be eligible for such benefits and an overpayment of benefits shall be computed without the application of deductible earnings as otherwise provided in Code Section 34-8-193.

A statutory penalty4 is added to the overpayment and interest accrues at a rate of one

percent per month.5 Id.

3 The Commissioner is authorized to waive repayment of overpayment of benefits except if a person receives the overpayment “because of false representations or willful failure to disclose a material fact.” OCGA § 34-8-254 (c). 4 The statutory penalty was 10 percent at the time of the fraud determination at issue here, but OCGA § 34-8-255 was amended in 2014 to provide for a 15 percent penalty. Ga. L. 2014, p. 739-740, § 9. 5 Further, a person who commits fraud within the meaning of OCGA § 34-8-255 is rendered ineligible to receive unemployment benefits for the “next four complete calendar quarters immediately following the date of [the fraud] determination.” Id.

9 The Department’s evidence that Charles acted with the requisite scienter, i.e.,

that he knowingly misrepresented his income in order to obtain higher benefit

payments, was circumstantial. The Department’s witness testified that benefit

applicants generally receive a handbook that would instruct them regarding their

obligation to report gross as opposed to net earnings when certifying for benefits. She

could not provide any direct proof, however, that Charles received the handbook or

that he received any specific instruction regarding reporting gross earning, and she

did not attempt to show that Charles would have been advised at some stage during

the online certification process that gross earnings must be reported. The

Department’s witness admitted that the Department’s fraud determination was based

on its assumption that Charles had engaged in fraud within the meaning of OCGA §

34-8-255 because of the number of weeks over which the underreporting occurred.

Charles, on the other hand, did not recall what information he received during

training and testified that when he certified for his benefits online, he received no

notice that gross earnings should be entered into the box where he input his earnings

information. He usually reported his net income based on the payments his employer

deposited into his checking account. Charles knew that his employer was also

reporting his income to the Department.

10 Our Supreme Court has explained:

When the party upon whom the burden of an issue rests seeks to carry it, not by direct proof, but by inferences, he has not, in this reasonable sense, submitted any evidence for a [trier of fact’s] decision, until the circumstances he places in proof tend in some proximate degree to establish the conclusion he claims; and for this, the facts shown must not only reasonably support that conclusion, but also render less probable all inconsistent conclusions.

Allen Kane’s Major Dodge v. Barnes, 243 Ga. 776, 780-781 (257 SE2d 186) (1979);

see also ReMax North Atlanta v. Clark, 244 Ga. App. 890, 895 (537 SE2d 138)

(2000) (proof of fraud “must amount to more than mere speculation.”) (citation and

punctuation omitted).

Assuming that the facts proved by the Department warrant an inference that

Charles knew he was required to report gross income but deliberately underreported

it to obtain higher benefit payments, the Department’s evidence fails to render less

probable the contrary conclusions suggested by Charles’s testimony: that Charles

failed to ascertain and understand that he was to report his gross rather than net

income and that he did not intend to obtain benefits to which he was not entitled.

While the evidence may establish that Charles was less than diligent in ascertaining

his income from his employer, monitoring deposits in his bank account, and certifying

11 for his benefits, such conduct is an insufficient basis for imposing fraud penalties

pursuant to OCGA § 34-8-255. See Hicks v. McLain’s Bldg. Materials, 209 Ga. App.

191, 193 (433 SE2d 114) (1993) (“While appellant may have shown sloppy business

practices on the part of appellee, she has not presented evidence from which either

knowledge of falsity at the time of the alleged misrepresentation or intent to deceive

may reasonably be inferred.”).

Based on the foregoing, we conclude that the superior court erred in concluding

that the facts supported the Board’s order affirming the decision of the hearing

officer. Because the Department did not establish that Charles knowingly made a

false statement or misrepresentation as to a material fact in order to obtain benefits

to which he was not entitled, the Board erred in refusing to grant Charles’s request

that the case be remanded for a determination of the actual amount of overpayment

of benefit or FAC payments for which he may be liable pursuant to OCGA §

34-8-254, without application of any of the penalties or consequences resulting from

a determination of fraud pursuant under OCGA § 34-8-255. Accordingly, we reverse

the superior court’s order affirming the Board’s final decision and remand this case

to the superior court with direction that it remand to the Department for further

proceedings consistent with this opinion.

12 3. To the extent that Charles argues on appeal that he should not be liable for

any actual overpayments of benefits under OCGA § 34-8-254 due to the

Department’s alleged reliance on hearsay and failure to adequately prove the

existence and amount of overpayment before the hearing officer, we conclude that he

waived his claim of error by failing to assert it before the Board. See Sparks v.

Caldwell, 244 Ga. 530 (261 SE2d 590) (1979); Moore v. Tanner, 172 Ga. App. 792,

793 (2) (324 SE2d 772) (1984). Charles stated before the Board that he “specifically

dispute[d] any finding of fraud,” as opposed to his liability for an actual overpayment.

We also note that at the hearing before the hearing officer, Charles’s counsel arguably

conceded the existence of an overpayment, stating that she had calculated an actual

overpayment of $1,889.09. Charles’s brief before the Board repeated this calculation

of the actual overpayment.

4. In view of our disposition in Division 2, we need not address whether the

trial court erred in denying the motion to strike the supplemental record.

Judgment reversed and case remanded with direction. McFadden and Ray, JJ.,

concur.