Palmer v. S. Dakota Dep't of Labor & Regulation

1

2024 S.D. 31

MELISSA K. PALMER, Appellant, v. SOUTH DAKOTA DEPARTMENT OF LABOR AND REGULATION, REEMPLOYMENT ASSISTANCE DIVISION, Appellee.

No. 30306-r-PJD

Supreme Court of South Dakota

June 5, 2024

CONSIDERED ON BRIEFS NOVEMBER 7, 2023

APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA THE HONORABLE ROBIN J. HOUWMAN Judge

ERIC C. SCHULTE of

Davenport, Evans, Hurwitz

&amp Smith, LLP

Sioux Falls, South Dakota

Attorneys for appellant.

SETH A. LOPOUR

COURTNEY S. CHAPMAN of

Woods, Fuller, Schultz

& Smith, P.C.

Sioux Falls, South Dakota

Attorneys for appellee

DEVANEY, Justice

[¶1.] An administrative law judge (ALJ) determined that Melissa Palmer willfully misrepresented facts to receive pandemic unemployment assistance benefits and ordered that she repay the benefits and be assessed a mandatory penalty under SDCL 61-6-39. The circuit court affirmed the ALJ's decision, and on appeal to this Court, Palmer asserts that the ALJ erred in finding that she willfully misrepresented facts to obtain those benefits and in concluding that she was therefore subject to a penalty. We reverse and remand.

Factual and Procedural Background

[¶2.] When the COVID-19 pandemic began, Palmer was working two jobs- one as a self-employed sign-language interpreter and another as a retail salesperson at Woofs and Waves. Although the pandemic did not affect Palmer's employment or hours of work at Woofs and Waves, it caused her income as a sign-language interpreter to disappear completely. On April 17, 2020, she completed an online application for Pandemic Unemployment Assistance (PUA) through the South Dakota Department of Labor and Regulation, Reemployment Assistance Division (Department). Under the section prompting her to include "Employer Information," she listed Woofs and Waves as an employer. She answered, "Yes," to the question, "Still Working for This Employer?" and listed her hourly wage and the hours she worked the previous week. Palmer also listed her self-employment as a sign-language interpreter under "Employer Information" and disclosed that she is no longer receiving income from that employment because the education settings where she had been providing those services closed.

[¶3.] Under the "Eligibility" section, Palmer answered "On Call" in response to a question asking how much she worked in the last 18 months. Under the "Availability" section, she answered "Yes," to the question whether she is self-employed. Thereafter, the application asked her multiple questions related to her self-employment, including questions about how many hours she worked and how many hours she would be willing to work each week. Within this same section, she answered, "Yes," to the question, "Do you understand you need to report hours and any earnings each week that you apply for unemployment benefits the week in which the work was done regardless of when (if any) payment was received?"

[¶4.] In a separate section, Palmer reported her wages for 2019 as $5,800 from being self-employed and $19,000 from Woofs and Waves. The application also contained a section specific to her eligibility for PUA and asked her to select the type of employment she lost, to which she responded that she "was a contract worker." It then asked her to "[c]heck the COVID-19 reason(s) as listed . . . that best describes your situation." Palmer selected the reason indicating a significant reduction in her customary and usual services related to her self-employment. She answered, "Yes," in response to a question whether "[i]f not for the COVID 19 pandemic, are you otherwise able to work and available for work?" Following this question, the application included the following statement:

Intentional misrepresentation is FRAUD. Attempting to claim or collect payments by entering false information could mean a loss of benefits, fines, imprisonment and the inability to receive future benefits. Please note the information you provide will be verified through matching programs and will be further investigated.

Palmer then affirmatively acknowledged the following statement:

I acknowledge I have read and understand the questions asked above. I certify that I am otherwise able and available to work, except I am unemployed, partially unemployed, or unable or unavailable to work because of the listed COVID-19 reason(s) I choose above. I understand that I am subject to administrative penalties, including penalties for perjury, or legal action if it is determined that I withheld or provided false information to obtain assistance payments to which I am not entitled.

[¶5.] On April 30, 2020, the Department issued Palmer written notice that she is "monetarily eligible for a weekly benefit of $172" effective March 8, 2020. The Department also sent Palmer a handbook detailing information about her "rights and responsibilities while filing a claim for reemployment assistance benefits." The information in the handbook included a statement that Palmer was required to "report all hours worked (to the nearest tenth of an hour) regardless of your employer's work week or pay period, including self-employment (after expenses), even if you have not been paid." (Bold in original.) In a section on a deduction of benefits when one works part of the week, the handbook contained two subsections: "Can I work part of the week and still be eligible for benefits?"; and "What if I am self-employed or working on a commission basis?" (Bold omitted; italics in original.) Under the first subsection, the handbook provided:

You may be eligible for benefits if you continue to work. In order to be eligible for partial benefits you must report your hours and earnings for the calendar week which you are filing for and make an active search for work. Earnings will reduce your benefits. Seventy-five percent of earnings over $25 will be deducted from your weekly amount.

• You will not be eligible for benefits if your gross earnings are equal to or more than your weekly benefit amount.

• You will not be eligible for benefits if you worked 40 hours or more, regardless of the amount of earnings.

(Bold in original.) The second subsection regarding those that are self-employed provided, in part, that: "You must accurately report any hours and earnings (after reasonable expenses) from self-employment."

[¶6.] The handbook further provided: "Failure to correctly report your hours and earnings may result in an overpayment and a penalty. Your reported work and earnings are verified with your employer." (Bold and italics in original.) It also contained a section titled, "PENALTIES FOR MISREPRESENTATION (Fraud)" and stated that "[i]f you committed fraud to secure or increase benefits, a penalty of 50 percent of the amount of benefits obtained by fraud is applied for the first offense and a 100 percent penalty is applied for each subsequent offense. A four week administrative penalty shall be imposed for each week that an individual willfully or fraudulently misrepresents a fact to secure or increase benefits."

[¶7.] In early May, the Department received Woofs and Waves' completed "EMPLOYER'S NOTICE OF BENEFIT CLAIM." In the box requesting that the employer circle one of three reasons the employee is no longer working (laid off, quit, fired), a representative from Woofs and Waves handwrote "still working." Also, in the section asking the employer to explain the reason the employee is no longer working, Woofs and Waves wrote that "Melissa is still working for us." Woofs and Waves identified that Palmer earns $11.20 per hour and worked 27 hours the previous week.

[¶8.] For Palmer to continue to receive PUA benefits, she was required to submit weekly requests and meet all eligibility requirements. From May 9, 2020 to August 15, 2020, Palmer completed online, weekly requests for PUA benefits. In these online submissions, she answered "No," to the question, "Did you work during [the] week?" She also reported zero hours worked and zero earnings in all but three weeks. During the weeks ending May 30, August 8, and August 15, 2020, Palmer reported earnings over her $172 benefit amount and did not, therefore, receive PUA benefits for those weeks. In regard to all other weekly requests, Palmer received $172 in PUA benefits and, for some weeks, an additional $600 in federal pandemic unemployment compensation. According to the Department, Palmer received the $600 supplemental payment based on her eligibility for PUA benefits.

[¶9.] It is undisputed that during each of the weeks Palmer requested PUA benefits, she had worked at Woofs and Waves and was paid her hourly rate. It is also undisputed that her earnings at Woofs and Waves during each of the reporting weeks exceeded her $172 benefit amount and thus made her ineligible for PUA benefits. After obtaining information from Woofs and Waves documenting Palmer's hours worked and earnings, the Department spoke with Palmer about her nondisclosure of her hours worked and earnings received. On May 27, 2021, the Department issued Palmer a written notice of overpayment, indicating that she must repay $8,664 in benefits. The notice identified that Palmer "failed to report [her] work/earnings" and was "not without fault[.]"

[¶10.] Palmer appealed the Department's decision by submitting a letter to the Appeal Section of the Reemployment Assistance Division. In her letter, she stated that "[w]hen she filled out [her] application, [she] was completely transparent with [her] income." She indicated that in her application she had listed what she was making from Woofs and Waves and was nevertheless "accepted to receive unemployment." She explained that she reported zero income in her weekly requests for assistance because she "assumed [she] didn't...