American Federation of Labor v. Unemployment Ins. Appeals Bd.

• Decision Date: 29 August 1996
• Docket Number: No. S049642,S049642
• Citation: 56 Cal.Rptr.2d 109,920 P.2d 1314,13 Cal.4th 1017
• Court: California Supreme Court
• Parties: , 920 P.2d 1314, 96 Cal. Daily Op. Serv. 6499 AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, Plaintiff and Respondent, v. UNEMPLOYMENT INSURANCE APPEALS BOARD, Defendant and Appellant.

Page 109

56 Cal.Rptr.2d 109

13 Cal.4th 1017, 920 P.2d 1314, 96 Cal. Daily Op. Serv. 6499

AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, Plaintiff and Respondent, v. UNEMPLOYMENT INSURANCE APPEALS BOARD, Defendant and Appellant.

No. S049642.

Supreme Court of California.

Aug. 29, 1996.

Rehearing Denied Nov. 13, 1996. ^*

[13 Cal.4th 1021] [920 P.2d 1315] Daniel E. Lungren, Attorney General, and Asher Rubin, Deputy Attorney General, for Defendant and Appellant.

Altshuler, Berzon, Nussbaum, Berzon & Rubin, Stephen P. Berzon and Scott A. Kronland, San Francisco, for Plaintiff and Respondent.

Grant R. Specht, Robert K. Miller, Barbara Macri-Ortiz, Andrew Koenig, Ventura, M. Carmen Ramirez, Esta Mott and Cynthia L. Rice, Salinas, as Amici Curiae on behalf of Plaintiff and Respondent.

CHIN, Justice.

We granted review to decide a narrow question of first impression: whether an administrative law judge may award interest on a payment of retroactive unemployment insurance benefits. Administrative law judges, acting on behalf of the Unemployment Insurance Appeals Board (the Board), sit by authority granted under Unemployment Insurance Code section 100 et [13 Cal.4th 1022] seq. The code limits these judges to reviewing the action of the Employment Development Department (EDD) in its ministerial determination of unemployment benefit eligibility. (Unemp.Ins.Code, § 1334.) Nowhere does the Unemployment Insurance Code grant the administrative law judges, or the Board, the [920 P.2d 1316] express authority to award interest on an administrative benefit award.

By contrast, pursuant to Civil Code section 3287, subdivision (a) (§ 3287(a)), courts have awarded prejudgment interest on a trial court judgment following a successful administrative mandamus action to recover wrongfully withheld benefits. (Aguilar v. Unemployment Ins. Appeals Bd. (1990) 223 Cal.App.3d 239, 246, 272 Cal.Rptr. 696 (Aguilar ) [trial court properly ordered EDD to pay interest on unemployment benefits wrongfully withheld]; see Tripp v. Swoap (1976) 17 Cal.3d 671, 681-682, 131 Cal.Rptr. 789, 552 P.2d 749 (Tripp ), overruled on other grounds in Frink v. Prod (1982) 31 Cal.3d 166, 180, 181 Cal.Rptr. 893, 643 P.2d 476.) Interest may be awarded in the mandamus action because the requirements for the additional award of interest are met once the court determines the Board wrongfully denied benefits. In order to recover section 3287(a) interest in the mandamus action, the claimant must show: (1) an underlying monetary obligation, (2) damages which are certain or capable of being made certain by calculation, and (3) a right to recovery that vests on a particular day. (Aguilar, supra, 223 Cal.App.3d at pp. 242-243, 272 Cal.Rptr. 696.) The rationale for the mandamus interest award is that a claimant who is wrongfully denied unemployment insurance benefits by the Board must receive compensation for the egregious delay in receiving benefits caused by the necessity of filing a mandamus action challenging the Board's denial. (Cf. Tripp, supra, 17 Cal.3d at p. 683, 131 Cal.Rptr. 789, 552 P.2d 749; see 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 1397, pp. 868-869 [prejudgment interest compensates plaintiffs for delay in recovery of damages].)

Notwithstanding the Board's restricted powers, the Court of Appeal held that a claimant's successful attempt to "backdate" unemployment insurance benefits she was already receiving could entitle her to recover section 3287(a) prejudgment interest after the Board determined that she was eligible for the additional benefits. Relying on Knight v. McMahon (1994) 26 Cal.App.4th 747, 31 Cal.Rptr.2d 832 (Knight ), the Court of Appeal awarded the interest as an additional benefit even though the Board had never wrongfully withheld benefits, the claimant had not met the requirements of section 3287(a), and the Board itself concluded it lacked the power to award interest as part of its benefit award.

We conclude the Court of Appeal erred. Neither the Unemployment Insurance Code nor section 3287(a) authorizes the Board, or administrative [13 Cal.4th 1023] law judges acting on behalf of the EDD, to award interest, either on the Board's administrative eligibility determination that retroactive unemployment insurance benefits are due, as in this case, or in any administrative proceeding where the enabling statute does not authorize an award of interest.

Moreover, contrary to the assertion of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), we find no implied power allowing the Board to award interest at any time during the administrative review process. Under the administrative scheme of the Unemployment Insurance Code, the EDD has no underlying monetary obligation to the claimant until it determines the claimant is eligible for the benefits. (See Unemp. Ins.Code, §§ 100 et seq., 1251 [benefits are payable to eligible unemployed individuals].) Once eligibility has been determined, the right to receive benefits vests on the first day of the claimant's entitlement, and the EDD must promptly pay benefits due, regardless of any

appeal taken. (Unemp.Ins.Code, §§ 1335, subd. (b), 1326.) Hence, a "wrongful withholding" of benefits, and the corresponding delay in receiving benefits, cannot have legal significance entitling the claimant to prejudgment interest until the Board makes its final decision that the claimant is not entitled to the benefits. Because there is no potential "wrongful withholding" of benefits if the Board determines the claimant is eligible for unemployment insurance benefits, there can be no grounds for filing a mandamus action under Code of Civil Procedure section 1094.5 challenging the Board's favorable decision, and no damages "capable of being made certain" that would give rise to even an implied obligation to award interest on [920 P.2d 1317] the benefits recovered during the administrative process. Accordingly, only a court may award section 3287(a) prejudgment interest on its judgment following a claimant's successful mandamus action challenging the Board's wrongful withholding of benefits. (Cf. Tripp, supra, 17 Cal.3d at p. 683, 131 Cal.Rptr. 789, 552 P.2d 749.)

In so holding, we abide by the settled principle that administrative law judges, like the agencies authorized to appoint them, may not act as superior court judges, and in excess of their statutory powers, to award interest in administrative eligibility and benefit matters. (See Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1389, 241 Cal.Rptr. 67, 743 P.2d 1323 (Dyna-Med ) [administrative agency may not create remedy Legislature has withheld].) We therefore reverse the Court of Appeal judgment and disapprove Knight, supra, 26 Cal.App.4th 747, 31 Cal.Rptr.2d 832, to the extent it conflicts with our decision.

[13 Cal.4th 1024]

BACKGROUND

1. Unemployment Insurance Program

California's unemployment insurance program, as promulgated by the Unemployment Insurance Code, is part of a national system of reserves designed to provide insurance for workers "unemployed through no fault of their own, and to reduce involuntary unemployment and the suffering caused thereby to a minimum." (Unemp.Ins.Code, § 100.) Under the Unemployment Insurance Code, the state participates in a cooperative unemployment insurance program with the federal government, codified as the Federal Unemployment Tax Act. (26 U.S.C. § 3301 et seq.; see Unemp. Ins.Code, § 101 [integration of state and national plans].) Although the federal government has in the past assisted the states in setting up their programs, it recognizes that " '[t]he plan for unemployment compensation that [it] suggest[s] contemplates that the States shall have broad freedom to set up the type of unemployment compensation they wish ..., [including the ability to determine] [p] ... their own waiting periods, benefit rates, maximum-benefit periods, etc.' " (Ohio Bureau of Employment Services v. Hodory (1977) 431 U.S. 471, 483, 97 S.Ct. 1898, 1905-06, 52 L.Ed.2d 513, quoting Rep. of the Com. on Economic Security, as reprinted in Hearings Before the Sen. Com. on Finance on Sen. No. 1130, 74th Cong., 1st Sess., at pp. 1311, 1328 (1935).) The states must, however, administer their unemployment compensation programs in a manner that reasonably ensures full payment of benefits once the administrative agency determines those benefits are due. (42 U.S.C. § 503(a).)

In order to receive benefits, an unemployment insurance claimant applies to the EDD, a branch of the Health and Welfare Agency, which investigates the claim and makes an initial eligibility determination in a nonadversarial setting. (Unemp. Ins.Code, §§ 301, 1326 et seq.) The applicant for unemployment insurance benefits has the burden of establishing eligibility and, as a practical matter, the EDD's initial inquiry "is limited by the necessity for routine, ex parte determinations based upon such information as is reasonably available." (Jacobs v. California Unemployment Ins. Appeals Bd. (1972) 25 Cal.App.3d 1035, 1040, fn. 7, 102 Cal.Rptr. 364.) Unemployment Insurance Code section 1326 provides: "Claims for unemployment compensation benefits shall be made in accordance with authorized regulations of the director. Except as otherwise provided in this article, the department shall promptly pay benefits if it finds the claimant is eligible or shall promptly deny benefits if it finds the claimant is ineligible."

If the EDD denies an application for benefits, a claimant may file an administrative appeal, which is heard by an administrative law judge. (Unemp.Ins.Code, §§ 1334, 1335, subd. (c); Cal.Code Regs., tit. 22, § 5100 et [13 Cal.4th 1025] seq.) Section 1334 states that "[a]n administrative law judge after affording a reasonable opportunity for fair hearing, shall, unless such appeal is withdrawn, affirm, reverse, modify, or set aside any determination" of eligibility. If...