Colorado Div. of Employment and Training, Dept. of Labor and Employment v. Parkview Episcopal Hosp.

• Decision Date: 29 September 1986
• Docket Number: No. 84SC473,84SC473
• Citation: 725 P.2d 787
• Parties: COLORADO DIVISION OF EMPLOYMENT AND TRAINING, DEPARTMENT OF LABOR AND EMPLOYMENT, Petitioner, v. PARKVIEW EPISCOPAL HOSPITAL and the Industrial Commission of the State of Colorado, Respondents.
• Court: Colorado Supreme Court

Page 787

725 P.2d 787

COLORADO DIVISION OF EMPLOYMENT AND TRAINING, DEPARTMENT OF

LABOR AND EMPLOYMENT, Petitioner, v. PARKVIEW EPISCOPAL HOSPITAL and the Industrial Commission of

the State of Colorado, Respondents.

No. 84SC473.

Supreme Court of Colorado,

En Banc.

Sept. 29, 1986.

Duane Woodard, Atty. Gen., Charles B. Howe, Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Mary Karen Maldonado, Asst. Atty. Gen., Denver, for petitioner.

Peterson & Fonda, P.C., Thomas T. Farley, Pueblo, for respondent Parkview Episcopal Hosp.

No Appearance for respondent The Industrial Commission of the State of Colo.

ERICKSON, Justice.

We granted certiorari to review the decision of the court of appeals in Colorado Division of Employment and Training v. Parkview Episcopal Hospital, 701 P.2d 76 (Colo.App.1984), to consider whether a nonprofit corporation that paid unemployment taxes before January 1, 1969, and elects to become a reimbursable employer after January 31, 1972, may do so without filing a surety bond. The court of appeals answered the question in the affirmative. We reverse.

I.

Nonprofit Employer Contributions Under The Colorado

Employment Security Act

Article 76 of Title 8 of the Colorado Revised Statutes, (1973 & 1984 Supp.) ¹ is the portion of the Colorado Employment Security Act (CESA) which governs employer contribution to Colorado's unemployment fund. Prior to 1971, nonprofit organizations did not have to contribute to the fund. In 1970, Congress amended the Federal Unemployment Tax Act, I.R.C. §§ 3301-3311 (1982), (FUTA), to require states to include nonprofit employers in their unemployment schemes. See Employment Security Amendments of 1970, Pub.L. 91-373, § 104(b)(1), 84 Stat. 695, 697-98 (1970). Colorado complied with the 1970 FUTA amendments and, in 1971, CESA was amended to require nonprofit employers to contribute to Colorado's unemployment fund. Ch. 228, sec. 2, § 82-1-3(7)(e), 1971 Colo.Sess.Laws 924, 926 (amending section 82-1-3(7)(e), 4 C.R.S. (1963), the predecessor of section 8-70-103(10)(e), 3 C.R.S. (1973), which defines "employment" as including services performed for I.R.C. § 501(c)(3) (1982) organizations).

As a general rule, private employers are "taxable employers," i.e., they must pay unemployment taxes regardless of whether their employees ever receive benefits. §§ 8-76-101 to -103, 3 C.R.S. (1973 & 1984 Supp.). Nonprofit employers, however, are entitled to elect a taxable or "reimbursable" method of contribution to the fund. § 8-76-110(2), 3 C.R.S. (1984 Supp.). A reimbursable employer differs from a taxable employer in that the former only makes payments to the Colorado Division of Employment and Training (Division) if its employees actually receive benefits. Payments are made in lieu of taxes to the Division at the end of each calendar quarter for benefits paid during that quarter. § 8-76-110(3), 3 C.R.S. (1984 Supp.).

A nonprofit organization which elects the reimbursable method of contribution is generally required to post a surety bond with the Division to cover benefits expected to be claimed. Section 8-76-110(4), 3 C.R.S. (1984 Supp.). Some reimbursable employers are exempt from the bond requirement, however. "Any organization which, under the provision of ... [section 8-76-110(2)(i) ], is not required to make payments in lieu of taxes will not be required to file a surety bond ... until such time as said organization is required to make payments in lieu of taxes." Section 8-76-110(4)(b), 3 C.R.S. (1984 Supp.).

Section 8-76-110(2)(i), 3 C.R.S. (1984 Supp.), permits certain nonprofit employers who elect reimbursable coverage to use their "account excess" prior to making payments. ² "Account excess" is the amount by which the employer's contributions prior to the date of its election exceeds the amount of benefits paid to its employees. See § 8-76-110(2)(i), 3 C.R.S. (1984 Supp.). Subsection (2)(i) permits designated employers to consume this excess or surplus before having to make quarterly payments or, by virtue of subsection 4(b), having to post the bond. §§ 8-76-110(2)(i), (4)(b), 3 C.R.S. (1984 Supp.). The Colorado statutory scheme provides several methods for electing reimbursable coverage, ³ but only those employers that elect reimbursable coverage, in our view prior to January 31, 1972, under subsection (2)(d) of section 8-76-110 are entitled to use account excess and are exempt from the bond requirement until the excess is depleted.

II. Facts

The parties stipulated to the facts in this case. Parkview is a nonprofit organization as defined in I.R.C. § 501(c)(3) (1982), and is therefore exempt from federal income taxes. I.R.C. § 501(a) (1982). Parkview was not required to participate in CESA prior to January 1, 1972. However, Parkview opted to become a covered employer in 1959. See §§ 82-1-3(7)(e)(vii), 82-6-7, 4 C.R.S. (1953). Parkview contributed to the fund by the taxable method until October, 1982, when Parkview made its election to change to the reimbursable status. The election was to be effective January 1, 1983.

The Division advised Parkview that it would have to post a bond in the amount of $84,202. Parkview took the position that it did not have to post a bond until its account excess of $200,000 was exhausted. The Division disagreed, asserting that Parkview did not qualify for the bond exemption under section 8-76-110(4)(b) because Parkview did not make a timely election under subsection (2)(d) of section 8-76-110.

The parties agree that, in order to use account excess and qualify for the bond exemption, an employer must make a timely election under subsection (2)(d) of section 8-76-110, 3 C.R.S. (1984 Supp.). The dispute arose because subsection (2)(d) is unclear as to when a timely election occurs:

Any [I.R.C. § 501(c)(3) nonprofit organization] ... which was liable under the provisions of the "Colorado Employment Security Act" ... prior to January 1, 1972, ... may elect to become liable for payments in lieu of taxes for a period of not less than one calendar year beginning on or after January 1, 1972, if written notice of such election is filed with the division within thirty days after January 1 of such year.

Section 8-76-110(2)(d), 3 C.R.S. (1984 Supp.) (emphasis added).

The disputed term is "such year." The Division argues that "such year" refers to 1972. Consequently, Parkview is not entitled to use account excess because it did not give notice of an election of the reimbursable status by January 31, 1972. Parkview contends the term "such year" refers to the phrase "one calendar year beginning on or after January 1, 1972." Thus, Parkview asserts it is entitled to use account excess in lieu of a bond because it filed written notice within thirty days of January 1, 1983, and the year 1983 is a calendar year beginning on or after January 1, 1972.

A hearing was conducted and the referee held that Parkview was not entitled to utilize its account excess in lieu of the bond requirement. Parkview appealed to the Industrial Commission (Commission) which reversed the referee's order. The Commission concluded that subsection (2)(d) covered Parkview's election and that Parkview was entitled to exhaust its account excess before being required to post a bond. The court of appeals unanimously affirmed the Commission's final order. We granted certiorari and reverse the court of appeals.

III. Analysis

A. Judicial Review of Decisions of the Colorado Industrial Commission.

Appeals from the Commission in this context are governed by Article 74 of Title 8 of the Colorado Revised Statutes. Section 8-76-113, 3 C.R.S. (1984 Supp.). Section 8-74-107(6), 3 C.R.S. (1984 Supp.), sets forth the scope of judicial review applicable to orders of the Commission:

A commission decision may be set aside only upon the following grounds:

(a) That the commission acted without or in excess of its powers;

(b) That the decision was procured by fraud;

(c) That the findings of fact do not support the decision;

(d) That the decision is erroneous as a matter of law.

(Emphasis added.)

Courts are not bound by a Commission decision that misconstrues or misapplies the law. Industrial Commission v. Bysom, 166 Colo. 502, 444 P.2d 627 (1968); Industrial Commission v. Rowe, 162 Colo. 248, 425 P.2d 274 (1967). The construction of a statute is a question of law. Knoll v. Trans World Airlines, Inc., 610 F.Supp. 844 (D.Colo.1985). While we recognize that construction of a statute by an administrative agency charged with its enforcement should be given great deference by the courts, City & County of Denver v. Industrial Commission, 690 P.2d 199 (Colo.1984), we are not absolutely bound by the construction of the agency. Cf. Travelers Indemnity Co. v. Barnes, 191 Colo. 278, 552 P.2d 300 (1976) (courts have a duty to invalidate administrative regulations which contradict statute). Administrative construction of a statute should not be adopted where a different construction is plainly required, or where the result reached by the agency is clearly inconsistent with legislative intent. Nevada Power Co. v. Watt, 711 F.2d 913 (10th Cir.1983); Watts v. Hadden, 686 F.2d 841 (10th Cir.1981). The interrelationship of CESA and FUTA, and the legislative history of FUTA convince us that the Commission's order is contrary to the intent of the General Assembly.

B. The History of CESA and FUTA

The Colorado Employment Security Act is essentially a companion act to FUTA. The interrelationship of the federal act and the various state unemployment acts is well-known. See, e.g., Lutheran Church-Missouri Synod v. Bowling, 89 Ill.App.3d 100, 44 Ill.Dec. 404, 411 N.E.2d 526 (1980). The original predecessor of CESA was enacted in 1936, during an extraordinary session of the General Assembly which was called "principally by reason of the passage by Congress of the United States of the comprehensive Social Security Act...." Proclamation of Governor Johnson, 1936 Colo.Sess.Laws, 3d Ex. Session 9. The close...