In the Matter of DISTRICT OF COLUMBIA DEPARTMENT  of EMPLOYMENT SERVICES

Case No. 84-CCP-2

DECISION OF THE SECRETARY

    This is a conformity compliance proceeding under the Federal-State unemployment insurance system.  The sole issue is whether the District of Columbia has adopted rules governing the conduct of benefits appeals proceedings which fail to conform to the provisions specified in Section 303(a)(1) and (3) of the Social Security Act, 42 U.S.C. § 503(a)(1) and (3) (1982).

    This proceeding was intiated by letters f rom Secretary of Labor Raymond J. Donovan, dated April 13, 1984, to Mayor Marion S. Barry, Jr. of the District of Columbia and Matthew F. Shannon, Director of the District of Columbia Department of Employment Services (DCDES), notifying them that the United States Department of Labor (Department) was comencing conformity and substantial compliance proceedings under Section 303(b)(2) of the Social Security Act (SSA or the Act), 42 U.S.C. § 503(b)(2), and 20 C.F.R. § 601.5.  A notice of this proceeding was published in 49 Federal Register 33750 (August 24, 1984).

    A hearing was held before Administrative Law judge (ALJ) Robert S. Amery at Washington, D.C., on November 27, 1984.  Counsel for the plaintiff, the Department, and counsel for the respondent, DCDES, were present.^1/  The parties agreed on a stipulation of facts and on the admission into evidence of documentary evidence.  Oral arguments, briefs and reply briefs were submitted, also.  In a memorandum decision issued February 21, 1985, the ALJ determined that Respondent was not in conformity with Section 303(a)(1) and (3) of the Act.  Both sides filed exceptions.

    Section 303(a) of the Act provides that the Sefretary of Labor shall make no certification to the Secretary of the Treasury for payment of an administrative grant to any state ^2/ pursuant to Section 302(a), unless he finds that the law of such state, approved by the Secretary under the Federal Unemployment Tax Act (FUTA), 26 U.S.C. § 3304 (1982), includes provisions

(1)  Such methods of administration ... as are found by the Secretary of Labor to be resonably calculated to insure full payment of umemployment compensation when due; and *    *    * (3) opportunity for a fair hearing, before an impartial tribunal, for all individuals whose claims for unemployment compensation are denied.

    In this case, the Department contends that certain District of Columbia rules fail to conform to the Act.  These rules, promulgated pursuant to the District of Columbia Unemployment Compensation Act, as amended, 49 Stat. 946 (1935), D.C. Code Ann., § 46-114(b) (1981), provide:

4613.5  In an appeals hearing, no misconduct shall be presumed.  The absence of facts which affirmatively establish misconduct shall relieve a claimant from offering evidence on the issue of misconduct.

4613.6  In an appeals hearing, the persons who supplied the answers to questionnaires or issued other statements alleging misconduct shall be present and available for questioning by the adverse party.

4613.7  Prior statements or written documents in the absence of other reliable corroborating evidence, shall not constitute evidence sufficient to support a finding of misconduct by the Director.

    The plaintiff contends that these rules do not conform to the requirements of federal law because the procedure does not protect the integrity of the fund.  The plaintiff interprets SSA Section 303(a)(1) to require a state to administer the unemployment insurance program so that not only are unemployment compensation payments paid when due, but so that compensation is not paid when not due.  It is argued that paying benefits to ineligible claimants diminishes the value of the funds and does not meet the standard of proper administration set forth in Section 303(a)(1).

    By placing the burden of proving misconduct at the appeals hearing on the employer and incorporating a presumption against misconduct, the D.C. procedure, plaintiff contends, is overly technical.  Plaintiff asserts a long standing principle that informality is required in a fair hearing under Section 303(a)(3) and that the hearing officer should act more like a tribunal than a judge, inquiring into the case and eliciting evidence, untrammelled by presumption, to determine the issues and complete a record on which he can base a decision.  The D.C. process does not require the claimant to testify when he believes an affirmative case has not been made at the hearing.  The claimant is so instructed and the Judicator, in the absence of testimony at the hearing, cannot reach any result except to grant the claim.  Plantiff maintains that this rule awards unemployment benefits by default and imposes an improper financial penalty on the unemployment fund as a sanction for employer default

    The plantiff asserts that the requirement for an informal non-adversarial hearing is a longstanding one, citing as authority, the Department's A Guide to Umemployment Insurance Benefit Appeals/Principles and Procedures, Joint Exhibit 1, Attachment 19 (Guide).  The plaintiff asserts that even though the Guide never has been incorporated in a published or promulgated regulation, respondent had actual notice of the Department's position, and it, therefore, cannot complain that it lacked notice or opportunity to comment.  Respondent has been in possession of the Guide since 1981, Agreed Statement of Facts, ¶ 36, Joint Exhibit 1, but has steadfastly refused to change its rules.

    In reply the respondent asserts that the Secretary of Labor has no authority to require a State to adopt a particular system for adjudicating claims.  More specifically, DCDES contends that the procedural requirements urged on it by the plaintiff "...would appear to demand that the State agency [i.e. respondent] violate procedural safeguards, particularly protection of the right to confront and cross-examine witnesses.  Respondent's Pre-hearing Brief at 5 & 6.  In addition respondent asserts that the District of Columbia Administrative Procedure Act (DCAPA), D.C. Code Ann. §§ 1-1501-1510 (1981), requires the application of all of the disputed rules.  T at 28.^3/  Respondent contends that the challenged rules are not inconsistent with the  requirements of the SSA, that it has not adopted rules governing the conduct of benefit appeals which fail to confom to Section 301(a)(1) and (3) of the SSA, and that it has not failed to comply substantially with such provisions.  Respondent concedes that it knew of plaintiff's position but argues that it was not required to abandon its procedural safeguards to comply with a provision which had never been adopted as a rule or regulation.

Discussion

    Basically the Department of Labor asserts that paragraphs (1) and (3) of section 303(a) of the Act require a hearing examiner to inquire into the issues, elicit relevant facts and compile a record on which to base a decision.  DCDES procedures do not provide such an arrangement when an employer fails to appear at a misconduct appeal, but DCDES asserts that its rules are necessary to assure due process and a fair hearing and that to permit the claimant to be deprived of a property right by unsupported hearsay evidence is unjust.  DCDES asserts that the appeals examiner must conduct the proceeding like a judge rather than a tribunal to avoid becoming both prosecutor and judge.  T at 30.

    Were I to agree that an examiner cannot remain impartial while actively making inquiries designed to elicit the truth concerning the question of misconduct, these contentions would pose serious issues.  However, I agree with the ALJ that the SSA is correctly interpreted by the plaintff to require informal hearings.  Indeed respondent concedes as much.  T at 21, 27.  I also agree that paragraphs (1) and (3) of section 303(a) of the Act may be interpreted to require positive steps to inquire into matters otherwise not fully presented at a hearing.  However, this does not conclude the matter.  Both the legalistic and the informal, inquiring approach have merit, and each has its role in an administrative proceeding.  The Secretary is required to approve federal funds only for programs with procedures reasonably calculated to ensure full payment of unemployment compensation when due.  He has plenary rule making power and is the official mandated to interpret the Act's requirements. Wilkinson v. Abrams, 627 F.2d 650, 660 (3rd Cir. 1980).  While no regulation on this subject has been promulgated, the Guide, prepared in 1970, sets forth.the positions which the Department has maintained since that date and DCDES has been aware of the contents since 1981.  Such a ruling by..an administrator is entitled to weight even if not known to respondent.  See Saavedra v. Donovan, 700 F.2d 496 (9th Cir. 1983) , cert. denied, 104 S. Ct. 236 (1983).

    The Guide addresses the appeal hearing and the burden of proof issues, in part, as follows:

V.  Hearings and Decisions

*    *    *

C. Nonappearance of Parties

Appeals should not be dismissed automatically because one or both of the parties fail to appear at the hearing.  The appeal tribunal would award or deny benefits only if the ascertainable facts justify it.

If one or both parties fail to appear, the appeal tribunal should proceed with the hearing and obtain the testimony of those present.  On the basis of the testimony and the record, the appeal tribunal may decide the case.  ... However, if the appeal tribunal finds that additional evidence is needed for the proper adjudication of the claim, it is the obligation of the appeal tribunal to postpone the hearing in order to secure the testimony of the parties or witnesses or the documentary evidence which is needed.  [Guide at 25.]

*    *    *

VII. Burden of Proof

The concept of burden of proof connotes not only a risk of nonpersuasion but also a duty of persuasion, that is, an active duty or function of adducing a quantum of evidence sufficient to meet the risk.  While rules as to burden of proof may be useful in judicial and quasi-judicial proceedings in which there are adverse parties, there is serious doubt that the introduction of such rules in unemployment insurance cases is conducive to justice or the attainment of the purposes of the unemployment insurance program.

Rules as to the burden of proof, while partaking of substance, are yet so closely related to presumptions and other procedural considerations that their introduction in unemployment insurance hearings tends to impair the nontechnical character of such proceedings and divert attention from the merits of a claim to technical niceties.  [Guide at 36.]

*    *    *

The hearing is not a contest between two opposite parties, with the appeal tribunal sitting on the sidelines.   The appeal tribunal is in effect a board of inquiry, responsible for getting complete and accurate facts.  It is that responsibility of appeal tribunals which appropriately substitutes for a burden of proof on the parties in unemployment insurance hearings.  [Guide at 37; emphasis in Guide as reproduced in Joint Exhibit 1, Attachment 19.]

    However, inasmuch as the Guide has never been issued as a rule or regulation, its meaning has never been spelled out precisely, with opportunity to comment by interested parties, and formal administrative consideration as to the binding effect of the forty pages of Guide provisions.  There is, therefore, considerable room for disagreement concerning the actual requirements for fair hearings under Section 303(a)(1) and (3).  Indeed the very first paragraph of the Guide states:

I. Introduction

This guide for appeals and hearings sets forth procedures synthesized from the experience of the.several States and the principles on which such procedures are based.  The procedures are sound and practical, as well as fair to claimants and to other interested parties.  However, it should be understood that while the procedures expressed here are appropriate for most cases, other procedures are equally effective for some cases.  [Guide at 1; emphasis supplied.]

Whether or not a hearing is a "fair hearing" depends on what is done, in the recognition of, and giving effect to, some right of a party.  It is f rom this effect standpoint that this statement undertakes to emphasize various methods and procedures by which the goals of a "fair hearing" may be reached.  The statement, however does not purport to express requirements of Sections 303(a)(3) and 303(a)(1)(3), although it is consistent therewith.  [Guide at 4; emphasis supplied.]

With respect to disqualification provisions, the risk of nonpersuasion should generally be borne, not by the claimant, but by the State agency or the employer, as the case may be.  That is to say, unless, upon the evidence, the appeal tribunal is affirmatively satisfied of the existence of facts calling for the imposition of a disqualification, claimant will be entitled to benefits if he has complied with the conditions precedent to eligibility.

In every case, the parties should cooperate fully and reveal pertinent facts that are peculiary within their own knowledge.  In the case of the State agency, such cooperation should be deemed a public duty.  The fact that the risk of nonpersuasion on an issue may be on one of the parties does not relieve other parties of their duty to cooperate.  [Guide at 38.]

    The District of Columbia, under its APA, has determined that a right to remain silent exists; it is not clear that the Guide alone has sufficient weight to create a conflict with that law, and override it when "other procedures are equally effective in some cases ." Id.

    DCDES Rule 4613.6 requires that the persons who supplied the answers or made statements alleging misconduct be present at the hearing, and be available for cross-examination.  The Guide, itself, notes that "[t]he essential requisites of fairness ... include the following element[]: ... 'to cross-examine witnesses.'"  Id. at 2.

    As to Rule 4613.7, the plaintiff maintains that the referee should weigh the written documents previously introduced and determine whether a case of misconduct was made.  Respondent insists that this is in fact done but that such evidence, unsworn and often hearsay, is insufficient standing alone to show misconduct.  The Guide in listing the essential requisites of fairness, addresses this point, and includes among the requisites:

"that the decision of the Board shall be governed by and based uloon the evidence produced at the hearing"

"that the decision shall not be without substantive evidence taken at the hearing to support it."

The Guide in discussing Evidence, pages 29-35, notes that "...a scintilla of evidence is not sufficent to meet either test [quality or quantity], nor is mere uncorroborated hearsay or rumor."  Id. at 30.  As to documentary evidence (the records previously submitted would be included here) "[s]uch (documentary) evidence should be properly authenticated or verified under oath or affirmation."  Id. at 31.  And as to hearsay (the telephone conversations with the employer would fall here), the Guide, while recognizing such evidence may warrant some consideration.  Id. at 31, nonetheless, warns:

Another point to be kept in mind is that reception of hearsay evidence may necessitate bringing in the person who is reputed to have said or done something, or the author of the report, for original testimony (i.e. the best evidence) and cross-examination.  Therefore, it is ordinarily better to obtain the best evidence in the first instance, whenever it is possible.

    I recognize that the DCAPA applies to the D.C. Department of Employment Services, Woodbridge Nursery School v. Jessup, 269 A.2d 199 (D.C. 1970), and that it places the burden of showing misconduct on the employer.  Hawkins v. D.C. Unemployment Compensation Board, 381 A.2d 619 (D.C. 1977).  The court in Hawkins summarized the application well:

Unemployment benefits "'are a matter of statutory entitlement for persons qualified to receive them,' and, therefore, are interests, like welfare benefits and wages, which are protected by the procedural due process requirements of the Fourteenth Amendment."  Graves v. Meystrik, 425 F.Supp. 40, 47 (E.D.Mo.1977), citing Goldberg v. Kelly, 397 U.S. 254, 262, 90 S.Ct. 1011, 25 L.Ed. 2d 287 (1970).  It is well established that an adversary hearing is required for District Unemployment Compensation Board cases.  D.C. Code 1973, § 1-1509; Woodbridge Nursery School v. Jessup, D.C.App., 269 A.2d 199, 201 (1970).  The statute provides that each party shall have the right to present evidence, to explain or rebut the evidence against him, and to confront and cross-examine his opponent.  D.C.Code 1973, § 1-1509(b).  See Woodward & Lothrop, Inc. v. District Unemployment Compensation Board, 129 U.S.App.D.C. 155, 159, 392 F.2d 479, 483 (1968 ).  See also Dietrich v. District of Columbia Board of Zoning Adjustment, D.C.App., 293 A.2d 470, 474 (1972).  Here, the appeals examiner gave full consideration to the employer's unsworn comments and thereby deprived the petitioner of the right to cross-examine on the issues of company rules and misconduct.

It is well settled that unless the persons supply the answers to questionnaires are available for cross-examination by the adverse party, such documents do not meet the requirements of 'reliable, probative, and substantial evidence' in a proceeding where impeaching evidence has has been introduced.

    Plaintiff says that if District of Columbia law conflicts with the federal requirements, the District must change its law.  Indeed, this is ordinarily the case when a state law conflicts with the federal law.  In this instance, the decision is not so certain.  The statute in question, D.C. Code Ann. §§ 1-1501-1510 (1981), was passed by the United States Congress as Pub. L. No. 90-614, 82 Stat. 1204 (1968).  If the DCAPA conflicts with the earlier Social Security Act it may be argued that it amends or repeals such requirements to the extent necessary, and that the more specific requirements of the DCAPA should be followed where applicable over the general clauses of the Social Security Act.  Fortunately, I need not go that far.  The conflict plaintiff posits with the DCDES rules is only with the informal interpretation of the Guide, and not with Section 303(a)(1) and (3) or with any rule or regulation.  Moreover, the Guide itself permits other methods of procedure than those the plaintiff contends are necessary, and, as the forgoing discussion reveals, there are many supports in the Guide for the very type of provisions DCDES has adopted.

    Thus, based on a review of the full record and giving consideration to the wide range of guidance set forth in the Guide.  I find that DCDES Rules 4613.5, 4613.6 and 4613.7 are not in conflict with Section 303(a)(1) and (3) of the Social Security Act.  Accordingly, I do not adopt the recommended decision of the ALJ.  I find that the District of Columbia unemployment compensation law conforms to Section 303(a)(1) and (3) of the Social Security Act and that its rules which were challenged in this proceeding are conforming.  The District of Columbia will be included in the next listing of States and territories with respect to which certifications are made under the Social Security Act, 42 U.S.C. 503(a) (1982), and the Federal Unemployment Tax Act, 26 U.S.C. § 3304(c) (1982).

_______________________________

2/  The District of Columbia is considered a State for this purpose.  42 U.S.C. §  503(a) (1982); 26 U.S.C. §  3306(j)(1) (1982).

3/  T for Hearing transcript.

4/  The ALJ noted that the D.C. Notice of Hearing does not expressly inform employers that their previous submissions will not be considered at the appeal unless the employer or its representative appear and supplement the record.  Recommended Decision at 4, footnote 3.  There was no showing in the record of this case, however, that employers had been misled by the Notice.

Case Name:  District of Columbia Department of Employment Services

Case No. :  84-CCP-2

Document:  Decision of the Secretary

A copy of the above referenced document was mailed to the following

CERTIFIED MAIL

Mr. William H. DuRoss, III
Associate Solicitor for Employment and Training
200 Constitution Ave., N.W.
Washington, D.C. 20210

Mr. William H. Walker, Esq.
Office of the Solicitor
U.S. Department of Labor
200 Constitution Ave., N.W.
Room N-2101
Washington, D.C. 20210

Mr. Jordan Rossen
General Counsel
Richard W. McHugh
Assistant General Counsel
UAW Legal Department
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Detroit, Michigan 48214

Ms. Wendy Kahn
Zwerdling, Schlossberg, Leibig & Kahn
1730 K Street, N.W., Suite 713
Washington, D.C. 20006

Ms. Grace Lockett Rosner
General Counsel
District of Columbia Department
of Employment Services
Room 601
500 C St., N.W.
Washington, D.C. 20001