Millar v. New Mexico Department of Workforce Solutions

Citations: 4 N.M. 31; 2013 NMCA 055Docket: No. 34,045; Docket No. 31,581

Court: New Mexico Supreme Court; April 3, 2013; New Mexico; State Supreme Court

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The New Mexico Department of Workforce Solutions (DWS) is appealing a district court ruling that reversed the DWS Appeals Tribunal's decision requiring claimant Frank Millar to repay $4,931 in unemployment benefits. The district court found that the Tribunal's hearing, which occurred five months after Millar began receiving benefits, did not comply with timeliness requirements under state and federal law. Additionally, the court ruled that the doctrine of equitable estoppel prevented DWS from recovering the overpayment from Millar.

Millar was terminated from Western Refining on November 20, 2009, and applied for unemployment benefits on December 6, 2009. The DWS claims examiner granted him benefits, which became final unless appealed within fifteen days. Western Refining appealed on January 21, 2010, but DWS failed to inform Millar of this appeal until June 4, 2010, when a hearing was scheduled for June 16, 2010. Despite the ongoing appeal, Millar continued receiving benefits until April 17, 2010. At the June hearing, the Tribunal disqualified Millar from benefits due to misconduct, leading to an overpayment notice for the benefits he received.

Millar appealed the overpayment determination, which was upheld by the Tribunal and the DWS cabinet secretary. After exhausting administrative remedies, Millar sought a writ of certiorari from the district court, which reversed the DWS's decision, citing non-compliance with appeal processing timeliness and inequity in pursuing overpayment claims. DWS's appeal raises two issues: the district court's authority regarding timeliness violations and the applicability of equitable estoppel.

The standard of review for administrative orders is aligned with that of the district court, focusing on whether the Department of Workforce Solutions (DWS) acted fraudulently, arbitrarily, or capriciously, and whether the decision is supported by substantial evidence. The review considers both favorable and unfavorable evidence regarding the agency's determination. Questions of statutory compliance are reviewed de novo.

Unemployment compensation in New Mexico serves as an insurance program for individuals unemployed through no fault of their own, aimed at alleviating the financial burden on unemployed workers and their families. Benefits are typically available for 26 weeks, extendable during periods of high unemployment. Eligibility excludes those who quit without good cause or were discharged for misconduct. 

A claims examiner initially determines eligibility by conducting preliminary fact-finding, including obtaining statements from both claimants and employers. A Notice of Claim Determination (NCD) is then issued, and a dissatisfied party can appeal. Payment of benefits initiated by an initial favorable determination requires prior notice and an opportunity for a hearing before any cessation. However, if an appeal results in a decision against the claimant, repayment of benefits received may be required.

Following a hearing before an Administrative Law Judge (ALJ), which allows representation and presentation of evidence, the ALJ issues a decision. This decision can be appealed to the secretary of DWS, who may take various actions, including referral to the board of review. If the secretary does not act within 15 days, the decision automatically goes to the board. Once a decision is made by the secretary or board of review, the administrative review process is considered exhausted, allowing for an appeal to the district court.

DWS's authority to recover unemployment benefits overpayments is defined by Section 51-1-8(J) and NMSA 1978, Section 51-1-38(F). In cases of "double affirmation," where a claimant's favorable decision is later reversed, the claimant is not liable for overpayments. However, this case involves "single affirmation," where the Tribunal and secretary disagreed with the claims examiner's decision, making the overpaid amounts non-compensatory and subject to recoupment. Section 51-1-38(F) states that claimants, whose benefits were later deemed ineligible, must either have future benefits deducted or repay the overpaid amounts, regardless of fault.

The district court's analysis focuses on whether DWS can fully recoup the amount of $4,931 paid to Millar, whose disqualification is not in dispute. The court determined that the Tribunal's hearing was untimely, violating state and federal laws regarding the timing of hearings. DWS argues that the district court overstepped its authority by reviewing federal timeliness standards and misapplied these laws. However, it is noted that the evidence concerning compliance with these standards was part of the administrative record and that Millar had preserved this issue for review. Millar had argued against the overpayment claim, citing violations of time-lapse standards and providing relevant documentation during the hearing, which the ALJ acknowledged. DWS does not contest that Millar presented this evidence at the administrative level.

Documents were properly included in the Tribunal's record, and the district court's actions did not breach Rule 1-077(J). DWS contended the district court misapplied federal law by finding that an untimely appeal hearing violated time-lapse standards, thus exempting Millar from repaying benefits. New Mexico's unemployment program operates under state law but must comply with federal guidelines, including 42 U.S.C. 502(a) and 503(a)(1), (3), which mandate prompt administration and fair hearing opportunities for unemployment claims. The secretary of labor interprets these guidelines to require timely hearings and decisions, with 20 C.F.R. 650.4(b) establishing compliance benchmarks for first-level appeals. DWS argued that these standards are not strict deadlines. The court agreed, stating the regulations do not impose mandatory notification or hearing timelines for individual appeals. However, DWS's duty to recover overpayments remains, as outlined in Section 51-1-38(F), regardless of timeliness. DWS failed to inform Millar of the employer's appeal while continuing to pay benefits. Despite this, regulations do not allow claimants to contest repayment obligations due to processing delays. Millar's obligation to refund the overpaid benefits is affirmed, with no precedent found for challenging such obligations based on DWS's adherence to processing timelines.

In Dunn v. New York State Department of Labor, the plaintiffs asserted a violation of their Fourteenth Amendment due process rights due to delays in unemployment compensation hearings, seeking relief under 42 U.S.C. 1983. The court ruled in favor of the plaintiffs, emphasizing the necessity of prompt adjudication for timely benefits, and mandated the defendants to report on appeal promptness for one year. In contrast, the current case does not claim a constitutional violation but instead disputes a waiver of overpaid unemployment benefits, which the claimant was not entitled to. The court found that neither the relevant regulations nor Dunn supported the claimant’s position, as there is no vested right to the benefits in question. The court also noted that while promptness is important, so is notification regarding potential jeopardy of benefits. The district court’s interpretation of the applicable time-lapse standards was deemed incorrect, leading to the reversal of its decision that the Tribunal acted arbitrarily in ordering repayment.

Additionally, the district court's application of equitable estoppel to prevent the recovery of overpayments was found to be erroneous. The court clarified that estoppel cannot contravene statutory requirements and is only applicable against the state under exceptional circumstances involving significant misconduct. In New Mexico, estoppel can only bar actions within an agency’s discretionary authority and cannot be invoked if it contradicts statutory provisions. The claimant must also demonstrate that applying estoppel would align with statutory requirements and fulfill the six essential elements of estoppel.

Estoppel against the state is applicable only after determining its discretionary authority, the basic elements of estoppel being satisfied, and the demands of right and justice being met. A key issue is whether Section 51-1-38(F) is mandatory or discretionary. DWS has a statutory duty to recover benefits from claimants later found ineligible or disqualified. The language of Section 51-1-38(F), which uses "shall," indicates a mandatory obligation to repay overpaid benefits, regardless of the claimant's fault. Although DWS can choose to deduct overpayments from future benefits or seek repayment, it cannot waive overpayments altogether due to the mandatory nature of the statute.

Millar acknowledges that Section 51-1-38(F) appears mandatory but argues that DWS should have discretion over overpayments, referencing federal laws that allow for discretion regarding overpayment waivers. However, this argument is dismissed as irrelevant since Millar received state unemployment benefits, not federal ones. Unlike federal provisions, New Mexico law explicitly mandates DWS to pursue claims of overpayment without discretion to waive them.

Additionally, reliance on the Waters-Haskins case is deemed inapplicable because the court found that federal regulations allowed some discretion for waiving food stamp overpayments, which is not mirrored in the unemployment compensation laws under discussion. Millar's claim that DWS has broad discretion in certain circumstances does not support the application of equitable estoppel because the regulations do not authorize a complete waiver of overpayments and would conflict with the statutory duty to recover funds from ineligible claimants.

Regulations do not provide the Department of Workforce Solutions (DWS) with broad authority to establish and collect overpayments, as previously determined in Waters-Haskins. Consequently, DWS lacks discretionary authority to waive the collection of overpayments, rendering the doctrine of equitable estoppel inapplicable to Millar's claim to avoid repayment of improperly received unemployment benefits. Although the obligation for Millar to repay may cause hardship, the necessity of recoupment is essential for maintaining the integrity of the unemployment compensation system, as recognized by Section 51-1-38(F) of the Legislature. Therefore, DWS is mandated to recover the full amount of benefits from Millar, and the district court's decision is reversed. The judges concur with this ruling.