Serrant v. VI Employ Sec Agency

• Court: Court of Appeals for the Third Circuit
• Decided: June 13, 1995
• Docket: 94-7639
• Status: Unknown

Opinion

Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit

6-13-1995

Serrant v VI Employ Sec Agency Precedential or Non-Precedential:

Docket 94-7639

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Recommended Citation "Serrant v VI Employ Sec Agency" (1995). 1995 Decisions. Paper 166. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/166

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

___________

No. 94-7639 ___________

CHERYL SERRANT, Appellant

v.

VIRGIN ISLANDS EMPLOYMENT SECURITY AGENCY, Unemployment Insurance Service, Appellee

_____________________________________________

Appeal from the District Court of the Virgin Islands Division of St. Thomas and St. John D.C. Civil Action No. 91-cv-00068 _____________________________________________

Argued: April 20, 1995

Before: BECKER, NYGAARD and ROTH, Circuit Judges.

(Filed June 13, 1995)

RICHARD AUSTIN, ESQUIRE (ARGUED) Legal Services of the Virgin Islands, Inc. 3017 Orange Grove Christiansted, St. Croix U.S. Virgin Islands 00820-4375

Attorney for Appellant

ALVA A. SWAN, ACTING ATTORNEY GENERAL PAUL L. GIMENEZ, SOLICITOR GENERAL ELLIOTT M. DAVIS (ARGUED) ASSISTANT ATTORNEY GENERAL

Virgin Islands Department of Justice 48B-50 Kronprindsens Gade St. Thomas, Virgin Islands 00802

Attorneys for Appellee ___________________________

OPINION OF THE COURT ___________________________

BECKER, Circuit Judge. This is an appeal from a final order of a United States

Magistrate, 28 U.S.C. § 636(c)(1). That order affirmed a

decision of a hearing examiner for the appellee Virgin Islands

Employment Security Agency, Unemployment Insurance Service

(within the Virgin Islands Department of Labor) (“Agency”), which

in turn had reversed an initial determination awarding

unemployment benefits to appellant Cheryl Serrant. The hearing

examiner also authorized the Agency to recoup previously paid

benefits from Serrant. It is the latter decision, also affirmed

by the Magistrate Judge, that is challenged on this appeal. For

the reasons that follow, we reverse.

I

On April 24, 1990, Serrant was employed at Point

Pleasant Beach Resort as a reservations clerk. According to the

hotel management, Serrant was discharged because she refused to

prepare an “advance occupancy report.” According to the hearing

examiner, acting on the appeal of the hotel from the initial

award of benefits, Serrant’s actions leading to her dismissal

constituted misconduct within the meaning of 21 V.I.C. §

304(b)(3), thereby resulting in her disqualification for unemployment insurance benefits under that section.1 While

Serrant maintains that her actions did not constitute wilful

misconduct within the meaning of the statute, a position that may

have merit, the facet of the hearing examiner’s decision dealing

with denial of benefits is not challenged on this appeal.

Rather, we consider only the portion of the hearing examiner’s

decision dealing with recoupment.

The recoupment holding was predicated on 24 V.I.C. §

305(j)(2), which provides: If the Commissioner of Labor finds, within the two-year period following payment to any individual of any amount as benefits under this chapter, that such individual is not entitled, by reason other than that specified in subsection (h)(2) or subsection (j)(1) above, to such amount, he shall repay such amount to the Commissioner of Labor for the Unemployment Fund or in the absence of such repayment such amount shall be deducted from any future benefits payable to him under this chapter, within the two-year period following the date of notice of the final determination or decision; Provided, That no repayment or deduction from benefits shall be required under this paragraph if the amount overpaid was received by the individual without fault on his part, and such recoupment would be against equity and good conscience.

(emphasis added).

1 . 24 V.I.C. § 304(b)(3) provides in pertinent part:

(b) An insured worker shall not be disqualified for writing week credits or benefits for any week of his unemployment unless with respect to such week the Director finds that:

(3) he was discharged for misconduct connected with his most recent work . . . . The hearing examiner’s rationale for authorizing

recoupment is contained in the following paragraph of his

opinion: It is clear that recoupment or denial of future benefits is warranted in the instant case. This Claimant was awarded benefits where she was at fault. She was terminated because of her own misconduct. Section 305(j)(2) allows the Agency to elect to recover the benefits paid to a claimant or to deny future benefits. This case provides an instance where that election must be made. The Commissioner must determine which is appropriate. The Act offers no guidance on this point. It allows the Commissioner to do either as a matter of discretion.

The case then came on Writ of Review, 5 V.I.C. § 1421

and 5 V.I.C. app. V Rule 11(a), before the Magistrate Judge. His

resolution of the issue was equally terse. After quoting §

305(j)(2) he stated: The hearing examiner’s rationale was that it was because of Petitioner’s misconduct, which is an intentional act, that she was dismissed and that, therefore, since it was ultimately determined that the benefits were received through Petitioner’s fault, she must repay the Agency.

In reviewing, this determination by the hearing examiner, this court finds that the decision is supported by a rational basis, and, therefore, cannot be disturbed.

The Magistrate Judge therefore affirmed the hearing examiner’s

decision. Because our own holding turns on questions of the

interpretation and application of law, our review of the

Magistrate Judge’s conclusion is plenary.

II The key terms in § 305(j)(2) (for purposes of this

appeal) are “without fault,” and “equity and good conscience.”

Unfortunately, neither the hearing examiner nor the Magistrate

Judge devoted much attention to the meaning of these terms, or to

the record as it might bear on them. That may well be due to the

fact that the parties directed the attention of these

administrative and judicial officers primarily to the misconduct

issue, and there was little, if anything, placed in the record

relative to fault and “equity and good conscience.”

A

Turning first to the meaning of the phrase “without

fault,” the threshold question is the extent to which it is

informed by the terms of § 305(j)(1). That section provides: (j)(1) Any person who makes, or causes to be made by another, a false statement or representation of a material fact, knowing it to be false or knowingly fails, or causes another to fail, to disclose a material fact, and as a result thereof has received any amount as benefits under this chapter to which he was not entitled shall, in the discretion of the Commissioner of Labor, be liable to repay such amount to the Commissioner of Labor for the Unemployment Fund or to have such amount deducted from any future benefits payable to him under this chapter within the two-year period following the date of notice of the final determination, redetermination or decision.

Serrant argues that the fault necessary to subject one to

recoupment is that specified in § 305(j)(1), that is, making

misrepresentations to receive benefits. This approach makes

eminent sense. It is also consistent with the most similar

provision we have found, a Wyoming regulation set forth in the margin,2 which also defines fault principally in terms of

considerations that bear on fault in making the application for

benefits.

If § 305(j)(1) were controlling, Serrant’s position

would be strong because there is no administrative or judicial

finding that she made any kind of misrepresentation to obtain

benefits. However, § 305(j)(2) by its terms appears not to apply

where the person received benefits to which he or she was not

entitled by reasons specified in (j)(1). Section 305(j)(2)

therefore seems to contemplate a situation where a claimant

receives benefits through his or her own fault but not by means

2 . Fault Criteria. In determining whether a claimant is without fault for purposes of deciding whether to waive recovery of overpaid benefits under [Wyo. Stat.] § 27-3-409, the Division shall consider the following criteria: (a) Whether the claimant made an incorrect statement of facts of a material nature in order to collect benefits; or (b) Whether the claimant knew or should have known that the statement he gave the Division was incorrect; or (c) Whether the claimant failed to disclose or caused another person to fail to disclose a material fact in connection with a claim for benefits; or (d) Whether the claimant knew or should have known the fact not disclosed was material; or (e) Whether the claimant knew or should have known he was not entitled to benefits; or (f) Whether the overpayment resulted directly or indirectly, in whole or part, from some other erroneous act or omission of the claimant, which he knew or should have known was wrong; or (g) Any other relevant factor.

Div. of Unemployment Ins., Dep’t of Employment, Rules and Regulations, ch. XXXII, § 1 (1990). of what are essentially misrepresentations as described in

(j)(1).

But this conclusion is quite problematic, for it is

difficult to identify such a scenario. Indeed, if the (lamented)

construction is correct, hearing examiners would, as Serrant

contends, and as the hearing examiner and Magistrate Judge did

here, be likely to conflate the facts to be considered in

connection with the unemployment benefit application process

under § 305(j) (i.e., the putative misconduct) with the work-

related conduct relevant to the determination of disqualification

for benefits under 24 V.I.C. § 304(b)(3). This seems dubious

inasmuch as these are discrete statutory provisions and appear to

serve different purposes. For example, if there is no

misconduct, there is no overpayment. However, if there is

misconduct, and that automatically was deemed fault in receipt of

benefits, a recipient who was denied benefits for misconduct

would, in view of the conjunctive wording of the recoupment

provision,3 always be subject to recoupment regardless of the

background circumstances and the dictates of equity and good

conscience. We doubt that the legislature intended such an

untoward result.

3 . The language reads (with emphasis supplied):

. . . provided, that no repayment or deduction from benefits shall be required under this paragraph if the amount overpaid was received by the individual without fault on his part, and such recoupment would be against equity and good conscience. But then what does § 305(j)(2) mean? What additional

or different conduct (other than misrepresentation to obtain

benefits) transforms being disqualified for benefits due to work-

related misconduct into receiving overpayment through fault of

one’s own? That is far from clear. Moreover, § 305(j)(2)

exempts from recoupment not individuals who applied for benefits

through no fault of their own, but those who received them

without fault. This distinction seems opaque, and leads us to

doubt that these provisions really fit together.4 Taking the

statute at its most literal meaning, however, Serrant was not at

fault in receiving the benefits. She received them as the result

of an order of the (appellee) Agency, and there is no finding

that, at the time she received them, she had done anything

blameworthy in connection with their receipt. Even the work-

related misconduct finding came months later, at the time of the

hearing examiner’s decision. In short, Serrant’s failing to

complete the occupancy report for the hotel does not render her

later receipt of benefits due to Agency order to be through fault

of her own.

B

The meaning of “equity and good conscience” probably

favors Serrant's position even more strongly. The terms are not

defined in any Virgin Islands Regulation, but similar provisions

in other jurisdictions make clear that equity and good conscience

4 . We leave clarification to the Virgin Islands legislature, which might be well advised to look at the problems we have identified. relate to the ability of the recipient to repay the debt without

experiencing hardship. See 20 C.F.R. § 10-323: (a) Recovery of an overpayment is considered to be “against equity and good conscience” when an individual presently or formerly entitled to benefits would experience severe financial hardship in attempting to repay the debt . . . .

See also International Union, UAW v. Dole, 919 F.2d 753, (D.C.

Cir. 1990) (financial hardship is key factor in interpretation

and consideration of “equity and good conscience” as used in 20

C.F.R. § 617.55(a)(2)(ii)(A), concerning recoupment of Trade

Adjustment Assistance benefits); Giles v. Director of Labor, 621

S.W.2d 10, 11 (Ark. App. 1981) (Corbin, J., concurring) (“[O]ne

factor in determining equity and good conscience is the financial

condition of the claimant.”); Gilles v. Department of Human

Resources Development, 521 P.2d 110, 117 (Cal. 1974) (considering

“whether recovery of the overpayment, by imposing extraordinary

hardship on the claimant, would tend to defeat the objectives of

the Unemployment Insurance Code.”); Section 2 of the Wyoming

Regulations cited above.5 We believe that the Virgin Islands

5 . Section 2. Equity and Good Conscience and Defeats the Purpose of the Act Criteria. In determining whether recovery of an overpayment defeats the purpose of the Employment Security Law or is against equity and good conscience for the purpose of deciding whether the overpayment of benefits shall be waived, the Division shall consider the following criteria: (a) The extent to which recovery of the overpayment would create an extreme financial hardship on the claimant. Extreme financial hardship as used herein means the claimant would be unable to provide himself or his immediate family with minimal necessities of food, clothing, medicine, and shelter as a result of the Division recovering the overpayment. Extreme and lasting financial hardship may be expected to endure for more than 120 days. statute carries with it a similar meaning. There is no

indication in the record, that Serrant, who has been granted

leave to proceed in this case in forma pauperis, has an ability

to repay the sums she has received. There is not only no fact

finding contra but nothing in the record from which any such

finding could be inferred. And while we acknowledge that there

may be “other relevant factors,” see supra note 4, none have been

suggested as being applicable here.

III

In view of the foregoing, it appears from the record

that, had the hearing examiner and Magistrate Judge focused on

the pertinent issue, they would have determined that any

overpayment received by Serrant was received without fault on her

part, and further, that any recoupment would have to be deemed

against equity and good conscience. Repayment of benefits is

therefore not required. The fact that Serrant was found to have

been guilty of wilful misconduct in terms of the benefit

entitlement ruling does not affect this result.6 (..continued) (b) The extent to which an agent of the Division made an error which contributed to causing the overpayment of benefits. However, such an error shall not include making a decision to pay benefits which was reversed through the appeals process. (c) Any other relevant factor, provided the claimant is without fault. 6 . In light of our disposition, we do not address Serrant’s contention that the doctrine of equitable estoppel would prohibit the Agency from recouping the overpayment of benefits due to the Agency’s seven-month delay in issuing a final decision reversing her award of benefits. The order of the district court, therefore, will be

reversed, and the case remanded with the directions to vacate the

order for recoupment.