Bernard v. Unemployment Comp. Review Comm'n

• Decision Date: 25 July 2013
• Docket Number: No. 2012–0717.,2012–0717.
• Citation: 994 N.E.2d 437,136 Ohio St.3d 264
• Parties: BERNARD, Appellant, v. UNEMPLOYMENT COMPENSATION REVIEW COMMISSION; Barry and Patricia Wakeman Educational Foundation et al., Appellees.
• Court: Ohio Supreme Court

136 Ohio St.3d 264

994 N.E.2d 437

BERNARD, Appellant,

v.UNEMPLOYMENT COMPENSATION REVIEW COMMISSION; Barry and Patricia Wakeman Educational Foundation et al., Appellees.

No. 2012–0717.

Supreme Court of Ohio.

Submitted April 9, 2013.

Decided July 25, 2013.

Burton Law, L.L.C., Robert Guehl, Tony M. Alexander, and Brandon Cogswell, Dayton, for appellant.

Michael DeWine, Attorney General, Alexandra T. Schimmer, Solicitor General, Michael J. Hendershot, Chief Deputy Solicitor, and Rebecca L. Thomas and Robin A. Jarvis, Assistant Attorneys General, for appellee Ohio Department of Job and Family Services.

Rendigs, Fry, Kiely & Dennis, L.L.P., W. Roger Fry, and William H. Fry, Cincinnati, for appellee Wakeman Educational Foundation.

LANZINGER, J.

[Ohio St.3d 265]{¶ 1} In this case, we consider whether earnings deposited into a flexible-spending account for reimbursement of medical costs under an employer's cafeteria plan ¹ qualify as remuneration for purposes of determining an employee's unemployment-compensation eligibility. We hold that they do not.

I. Facts

{¶ 2} Until December 2009, appellant, Claudia Bernard, was employed as a property caretaker by appellee Wakeman Educational Foundation (“Wakeman”). Bernard acknowledges that in 2009, she authorized Wakeman to deposit $900 of her monthly earnings into a flexible-spending account so that she could use that money to obtain tax-free reimbursement of medical expenses. Accordingly, in 2009, Wakeman deposited $10,800 of Bernards $17,320 earnings into a flexible-spending account. After she was terminated from employment with Wakeman on December 31, 2009, Bernard applied for unemployment-compensation benefits with appellee Ohio Department of Jobs and Family Services (“ODJFS”).

{¶ 3} The ODJFS ruled that Bernard was required to have earned an average weekly wage of at least $213 for the relevant20 weeks to be eligible for unemployment compensation and that the amounts that went into the flexible-spending account were not “remuneration” as that term is used in R.C. 4141.01(R)(1). With the exclusion of those amounts, Bernard's average weekly wage was only $125, and so her claim was denied on the grounds of insufficient earnings to qualify for unemployment-compensation benefits.

{¶ 4} Bernard appealed the decision of the ODJFS to the Unemployment Compensation Review Commission, contending that the definition of “remuneration” under R.C. 4141.01(H)(1)(a) includes all annual earnings for purposes of determining unemployment-compensation eligibility.

{¶ 5} The commission affirmed the ODFJS decision that pursuant to R.C. 4141.01(R), Bernard did not qualify for unemployment-compensation benefits, [Ohio St.3d 266]because she did not earn an average weekly wage of at least $213 for the required 20 qualifying weeks. It found that Bernard's total wages for the base period of January 2009 through December 31, 2009, were only $6,520, because the $900 per month that had been deposited in a flexible-spending account were not considered wages.

{¶ 6} Bernard filed an appeal with the Court of Common Pleas of Miami County, asserting that the commission's decision should be overturned because it was unlawful, unreasonable, or against the manifest weight of the evidence. She claimed that R.C. 4141.46 entitles her to the benefit of the doubt on which benefits are included as wages because the statutes defining “wages” are ambiguous. The court of common pleas upheld the decision of the commission as reasonable and appropriate.

{¶ 7} By a vote of two to one, a panel of the Second District Court of Appeals affirmed the judgment of the trial court, deferring to the agency's interpretation of the state and federal statutes at issue. 2012-Ohio-958, 2012 WL 761996, ¶ 12. The dissenting judge would have accepted Bernard's definition of “wages” as controlling, applying R.C. 4141.46. Id. at ¶ 19.

II. Argument

{¶ 8} We accepted this discretionary appeal on a single proposition of law: “Courts must interpret statutes and regulations with deference to the affected party and against the state agency charged with enforcement of the statutory/regulatory scheme.”

Standard of Review

{¶ 9} Because the proposition of law involves a question of law, we review the court of appeals' judgment de novo. Univ. Hosp., Univ. of Cincinnati College of Medicine v. State Emp. Relations Bd., 63 Ohio St.3d 339, 587 N.E.2d 835 (1992), paragraph one of the syllabus. Specifically, with respect to review of an administrative ruling, “[i]f the court finds that the decision of the commission was unlawful, unreasonable, or against the manifest weight of the evidence, it shall reverse, vacate, or modify the decision, or remand the matter to the commission. Otherwise, the court shall affirm the decision of the commission.” R.C. 4141.282(H). This standard of review applies to all appellate courts. Irvine v. Unemp. Comp. Bd. of Rev., 19 Ohio St.3d 15, 18, 482 N.E.2d 587 (1985).

{¶ 10} Basically, Bernard argues that deference is not owed to the agency in its interpretation of law. She argues that there is ambiguity in R.C. 4141.01(H)(1), which defines “remuneration,” a word that appears in R.C. 4141.01(R)(1), which sets forth when an application for unemployment-compensation benefits is valid. She contends that the decision denying her benefits was “unlawful, unreasonable, or against the manifest weight of the evidence” because R.C. 4141.46 “requires [Ohio St.3d 267]that the Unemployment Compensation Act be liberally construed in favor of awarding benefits.” (Emphasis sic.)

{¶ 11} Bernard misstates the statute by adding the words “in favor of awarding benefits.” R.C. 4141.46 merely states that “Sections 4141.01 to 4141.46, inclusive, of the Revised Code shall be liberally construed.” In Bernard's view, under a liberal construction of R.C. 4141.01(H)(1)(a), she earned remuneration in excess of the statutorily required average weekly wage for the qualifying period, even though a portion was placed into a medical flexible-spending account. She asks us to defer to her interpretation of the statutory language.

{¶ 12} But we have never read R.C. 4141.46 to say that courts must interpret statutes and regulations with deference to the interpretation of the affected party and against the interpretation of the state agency charged with enforcement of the statutory/regulatory scheme. Instead, we have explained that “courts * * * must give due deference to an administrative interpretation formulated by an agency that has accumulated substantial expertise, and to which the General Assembly has delegated the responsibility of implementing the legislative command.” Swallow v. Indus. Comm., 36 Ohio St.3d 55, 57, 521 N.E.2d 778 (1988). Accepting Bernard's proposition would lead to an outcome-determinative approach: the agency's position would be entitled to be upheld only in cases in which the ruling favored the employee. Yet we have held that deference is owed no matter which way the agency rules. We must accordingly defer to the commission's interpretation, so long as the interpretation is reasonable. See State ex rel. McLean v. Indus. Comm., 25 Ohio St.3d 90, 92–93, 495 N.E.2d 370 (1986).

Statutory Language in Dispute: 26 U.S.C. 3306(b)(5)(G)

{¶ 13} Whether the amounts deposited into Bernard's flexible-spending account should be included as remuneration in determining whether she is eligible for unemployment compensation is not a question with a simple, plain, or clear answer; the statutes do contain ambiguity. A statute is ambiguous when its language is subject to more than one reasonable interpretation. Clark v. Scarpelli, 91 Ohio St.3d 271, 274, 744 N.E.2d 719 (2001).

{¶ 14} Bernard's application for unemployment-compensation benefits was valid if (1) she was unemployed, (2) she had been employed for at least 20 qualifying weeks during her base period, and (3) she had earned or been paid remuneration at an average weekly remuneration of not less than 27.5 percent of the statewide average weekly wage for those weeks. R.C. 4141.01(R)(1).

{¶ 15} “Remuneration” means “all compensation for personal services, including commissions and bonuses and the cash value of all compensation in any medium other than cash.” R.C. 4141.01(H)(1). But the statutory definition of “remuneration” excludes 15 specified payments listed in R.C. 4141.01(H)(1)(a). [Ohio St.3d 268]These exclusions are defined further by the federal-unemployment-tax portion of the Internal Revenue Code at 26 U.S.C. 3306(b)(2) through (b)(16). R.C. 4141.01(H)(1)(a). One of those exclusions relates to cafeteria plans. The relevant subsection of 26 U.S.C. 3306 provides:

(b) Wages.—For purposes of this chapter, the term “wages” means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include —

* * *

(5)any payment made to, or on behalf of, an employee or his beneficiary—

* * *

(G) under a cafeteria plan (within the meaning of section 125) if such payment would not be treated as wages without regard to such plan and it is reasonable to believe that (if section 125 applied for purposes of this section) section 125 would not treat any wages as constructively received * * *.

(Emphasis added.) Thus, the term “wages” excludes payments made to an employee “under” a cafeteria plan (1) “if such payment would not be treated as wages without regard to such plan” and (2) “section 125 would not treat any wages as constructively received.”

{¶ 16} The portion of 26 U.S.C. 3306(b)(5)(G) emphasized above is subject to more than one interpretation, for even the ODJFS and the majority of the judges on the court of appeals' panel in this case interpret the statutory language differently. They do agree on one point—that both conditions mentioned in 26 U.S.C. 3306(b)(5)(G) are fulfilled and that the amount that was placed into the tax-free flexible-spending account was not “remuneration” as that...