California Department of Human Resources Development v. Java

• Decision Date: 26 April 1971
• Docket Number: No. 507,507
• Citation: 28 L.Ed.2d 666,91 S.Ct. 1347,402 U.S. 121
• Parties: CALIFORNIA DEPARTMENT OF HUMAN RESOURCES DEVELOPMENT et al., Appellants, v. Judith JAVA et al
• Court: U.S. Supreme Court

402 U.S. 121

91 S.Ct. 1347

28 L.Ed.2d 666

CALIFORNIA DEPARTMENT OF HUMAN RESOURCES DEVELOPMENT et al., Appellants,

v Judith JAVA et al.

No. 507.

Argued Feb. 24, 1971.

Decided April 26, 1971.

Syllabus

Section 303(a)(1) of the Social Security Act requires a method of administration 'reasonably calculated to insure full payment of unemployment compensation when due.' In light of the intent of Congress to make payments available at the earliest stage of unemployment as is administratively feasible, in order to provide a substitute for wages, the language 'when due' must be construed to mean when benefits are allowed as a result of a hearing of which both parties have notice and are permitted to present their respective positions. Since California's initial interview provides such a hearing, enforcement of § 1335 of the California Unemployment Insurance Code, providing for the withholding of insurance benefits upon an employer's appeal from the initial eligibility determination, must be enjoined because it conflicts with the requirement of § 303(a)(1) of the Social Security Act.

D.C., 317 F.Supp. 875, affirmed.

Asher Rubin, San Francisco, Cal., for appellants.

Stephen P. Berzon, Berkeley, Cal., for appellees, pro hac vice, by special leave of Court.

[Amicus Curiae Information from pages 121-122 intentionally omitted] Mr. Chief Justice BURGER delivered the opinion of the Court.

This case raises the issue of whether a State may, consistent with § 303(a)(1) of the Social Security Act, suspend or withhold unemployment compensation benefits from a claimant, when an employer takes an appeal from an initial determination of eligibility. Section 303(a)(1) of the Social Security Act, 49 Stat. 626, as amended, 42 U.S.C. § 503(a)(1), provides that benefits must be paid 'when due.'

In late summer 1969, appellees Judith Java and Carroll Hudson, having been discharged from employment, applied for unemployment insurance benefits under the California Unemployment Insurance Program. Appellees were given an eligibility interview at which the employer did not appear, although such an appearance was permitted. As a result of that interview both employees were ruled eligible for benefits. Payments began immediately. In each case the former employer filed an appeal after learning of the grant of benefits, contending that benefits should be denied because the claimants were discharged for cause. In accordance with the practice of the agency and pursuant to § 1335 of the California Unemployment Insurance Code¹ payments automatically stopped. At the subsequent hearings before an Appeals Board Referee, which stage is essentially an appeal from the preliminary determination under California Unemployment Insurance Code §§ 1328, 1334, appellee Hudson's eligibility was affirmed, but appellee Java was ruled ineligible and the initial determination was reversed.

Prior to the hearings before the Referee, appellees commenced a class action in the United States District Court on behalf of themselves and other claimants similarly situated. They sought a declaration that § 1335 of the California Unemployment Insurance Code is unconstitutional and inconsistent with the requirements of § 303(a)(1) of the Social Security Act, and an order enjoining the operation of § 1335.

A three-judge court was convened, and it concluded that § 1335 is defective on both constitutional and statutory grounds. The District Court held that by not providing for a pretermination hearing, the California procedure constitutes a denial of procedural due process, relying on Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). It further held that the application of § 1335, so as to result in a median seven-week delay in payments to claimants who have been found eligible for benefits, constituted a failure to pay unemployment compensation 'when due' within the meaning of § 303(a)(1) of the Social Security Act. The court granted appellees' motion for a preliminary injunction, ordering the State of California not to suspend unemployment benefits pursuant to § 1335 because an eligibility determination has been appealed.

(1)

We agree with the conclusion of the District Court that § 1335 of the California Unemployment Insurance Code conflicts with the requirements of § 303(a)(1) of the Social Security Act. This holding makes it unnecessary to reach the constitutional issue involved in Goldberg v. Kelly, supra, on which the District Court relied.

(2)

The importance of this case to workers is obvious. Because an understanding and the resolution of the basic issue depends on familiarity with a series of detailed procedures, we set out fully the administrative scheme.

All federal-state cooperative unemployment insurance programs are financed in part by grants from the United States pursuant to the Social Security Act, 42 U.S.C. §§ 501—503. No grant may be made to a State for a fiscal year unless the Secretary of Labor certifies the amount to be paid, 42 U.S.C. § 502(a). The Secretary of Labor may not certify payment of federal funds unless he first finds that the State's program conforms to federal requirements. In particular, § 303(a)(1) of the Act requires that state methods of administration be found 'to be reasonably calculated to insure full payment of unemployment compensation when due.'²

The California Unemployment Insurance Compensation Program, certified by the Secretary of Labor under § 303 of the Act, provides for payment of insurance benefits, over an extended period of time, to persons who find themselves unemployed through no fault of their own. Cal.Unemp.Ins.Code § 1251 et seq. In order to be eligible for benefits a claimant is required to have earned a specified amount of wages during his base period. Id., § 1281. Benefits are paid from the State Unemployment Fund, which consists of funds collected from private employers, id., § 976 et seq., and money credited to the State's account in the federal Unemployment Trust Fund pursuant to 42 U.S.C. §§ 501—503, 1101—1105. The amount of money an employer is required to pay into the State Fund is based on benefits paid to terminated employees which are charged to its reserve account and disbursements from the State Unemployment Fund.Cal.Unemp.Ins.Code §§ 1025—1032, 976—978.

A claimant, appearing at an unemployment insurance office to assert a claim initially is asked to fill out forms which, taken together, indicate the basis of the claim, the name of the claimant's previous employer, the reason for his unemployment, his work experience, etc. The claimant is asked to return to the office three weeks later for the purpose of receiving an Eligibility Benefits Rights Interview. The issue most frequently disputed, the claimant's reason for termination of employment, is answered on Form DE 1101, and the Department immediately sends copies of this form to the affected employer for verification. Meanwhile the employer is asked to furnish, within 10 days, 'any facts then known which may affect the claimant's eligibility for benefits.' Cal.Unemp.Ins.Code §§ 1327, 1030. If the employer challenges eligibility, the claimant may then be asked to complete Form DE 4935, which asks for detailed information about the termination of claimant's previous job. The interviewer has, according to the Local Office Manual (L.O.M.) used in California, the 'responsibility to seek from any source the facts required to make a prompt and proper determination of eligibility.' L.O.M s 1400.3(2). 'Whenever information submitted is not clearly adequate to substantiate a decision, the Department has an obligation to seek the necessary information.' L.O.M. § 1400.5(1)(a). This clearly contemplates inquiry to the latest employer, among others.

The claimant then appears for his interview. At the interview, the eligibility interviewer reviews available documents, makes certain that required forms have been completed, and clarifies or verifies any questionable statements. If there are inconsistent facts or questions as to eligibility, the claimant is asked to explain and offer his version of the facts. The interviewer is instructed to make telephone contact with other parties, including the latest employer, at the time of the interview, if possible. L.O.M. § 1404.4(20). Interested persons, including the employer, are allowed to confirm, contradict, explain, or present any relevant evidence. L.O.M. § 1404.4(21).

The eligibility interviewer must then consider all the evidence and make a determination as to eligibility. Normally, the determination is made at the conclusion of the interview. L.O.M. § 1404.6(2). However, if necessary to obtain information by mail from any source, the determination may be placed in suspense for 10 days after the date of interview, or, if no response is received, no later than claimant's next report day. L.O.M. § 1400.3(2)(a).

From the foregoing it can be seen that the interview for the determination of eligibility is the critical point in the California procedure.³ In the Department's own terms, it is 'the point at which any issue affecting the claimant's eligibility is decided and fulfills the Department's legal obligation to insure that * ** (b)enefits are paid promptly if claimant is eligible.' L.O.M. § 1400.1(1) (emphasis added). If the initial determination is favorable to the claimant,⁴ payments begin immediately, and for 95—98% of the claims, former employers do not appear or seek a hearing;⁵ no further problem arises as to initial eligibility. The Department sends out a notice to the employer informing him that the claimant has been found eligible, and that the employer may appeal within 10 days. Cal.Unemp.Ins.Code § 1328. The 10-day period may be extended for 'good cause.' Ibid.

If the employer appeals, payment of the claimant's benefits is stopped pending determination on appeal before an Appeals Board Referee. Id., § 1335; see L.O.M. § 1474. The automatic suspension of benefits upon the...