Dep't of Licensing & Regulatory Affairs/Unemployment Ins. Agency v. Lucente

• Decision Date: 15 October 2019
• Docket Number: No. 345074, No. 345943,No. 342080,342080
• Citation: 946 N.W.2d 836,330 Mich.App. 237
• Parties: DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS/UNEMPLOYMENT INSURANCE AGENCY, Appellant, v. Frank LUCENTE, Claimant-Appellee, and Dart Properties II, LLC, Appellee. Department of Talent and Economic Development/Unemployment Insurance Agency, Appellant, v. Michael Herzog, Claimant-Appellee and Custom Form, Inc., Appellee. Department of Talent and Economic Development/Unemployment Insurance Agency, Appellant, v. Wayne Carlisle, Claimant-Appellee, and Conti-HTE, LLC, and Rosendin Electric, Inc., Appellees.
• Court: Court of Appeal of Michigan — District of US

330 Mich.App. 237

946 N.W.2d 836

DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS/UNEMPLOYMENT INSURANCE AGENCY, Appellant,

v.Frank LUCENTE, Claimant-Appellee,andDart Properties II, LLC, Appellee.

Department of Talent and Economic Development/Unemployment Insurance Agency, Appellant,

v.Michael Herzog, Claimant-AppelleeandCustom Form, Inc., Appellee.

Department of Talent and Economic Development/Unemployment Insurance Agency, Appellant,

v.Wayne Carlisle, Claimant-Appellee,andConti-HTE, LLC, and Rosendin Electric, Inc., Appellees.

No. 342080

No. 345074

No. 345943

Court of Appeals of Michigan.

Submitted July 11, 2019, at Detroit.

Decided October 15, 2019, 9:15 a.m.

Dana Nessel, Attorney General, Fadwa A. Hammoud, Solicitor General, and Shannon W. Husband, Catherine A. Rudolph, and Kimberly K. Pendrick, Assistant Attorneys General, for the Michigan Unemployment Insurance Agency.

Gwinn Legal PLLC (by Daniel A. Gwinn, Troy, and Laura Bradshaw-Tucker) for Frank Lucente.

Marshall C. Disner, PLC (by Marshall C. Disner ) for Wayne Carlisle.

Before: Gadola, P.J., and Servitto and Redford, JJ.

Gadola, P.J.

In each of these consolidated cases, appellant, the Department of Licensing and Regulatory Affairs (now the Department of Talent and Economic Development)/Unemployment Insurance Agency (the Agency), appeals by leave granted¹ the circuit court's order affirming the decision of the Michigan Compensation Appellate Commission (MCAC). In each case, the MCAC held that the respective claimant was not required to pay restitution and fraud penalties under the Michigan Employment Security Act (MESA), MCL 421.1 et seq. We reverse and remand.

I. FACTS

A. LUCENTE

In 2008, appellee Frank Lucente lost his employment; he applied for and received unemployment benefits in 2008 and 2009 by certifying his unemployment status with the Agency. Lucente did not have a fixed address from 2008 through 2012, and he received his unemployment checks through his post office box.

On February 2, 2010, Lucente applied for extended unemployment benefits. On February 16, 2010, Lucente was hired as a full-time employee by appellee Dart Properties II LLC (Dart). Lucente did not notify the Agency of his full-time employment with Dart, and instead, from February 20, 2010, through June 19, 2010, Lucente falsely certified that he was unemployed. After June 19, 2010, Lucente stopped informing the Agency of his unemployment status and stopped receiving unemployment benefits. In July 2010, Lucente canceled his post office box and did not notify the Agency of a forwarding address.

Thereafter, the Agency learned that Lucente had been employed with Dart since February 16, 2010. On November 30, 2010, the Agency issued two documents captioned "Notice of Redetermination." The first redetermination (the eligibility redetermination) involved Lucente's eligibility for unemployment benefits from February 20, 2010, through June 19, 2010, and stated:

YOU WORKED FULL-TIME FOR DART PROPERTIES II LLC BEGINNING 2/16/10. AS SUCH, YOU ARE INELIGIBLE FOR BENEFITS UNDER SECTION 48 [ MCL 421.48 ] OF THE [MESA]. YOU WERE PAID, SO RESTITUTION IS REQUIRED, AS SHOWN, UNDER SECTION 62 [ MCL 421.62 ] OF THE ACT.

The second redetermination (the fraud redetermination) involved Lucente's use of fraud to improperly obtain unemployment benefits from February 20, 2010, through June 19, 2010, and stated:

YOUR ACTIONS ARE CONSIDERED TO HAVE BEEN INTENTIONAL BECAUSE YOU FAILED TO NOTIFY THIS AGENCY THAT YOU WERE WORKING FULL-TIME AND CONTINUED TO COLLECT BENEFITS FOR FOUR MORE MONTHS. YOU INTENTIONALLY WITHHELD INFORMATION TO OBTAIN BENEFITS. YOU ARE DISQUALIFIED UNDER SECTIONS 62(B) AND 54(B) [ MCL 421.54(b) ] OF THE [MESA].

Both redeterminations notified Lucente of his right to appeal the Agency's decisions, stating that "[i]f a protest or appeal is not received within 30 days, a decision will become final and restitution may be due and owing." The documents also stated:

If it is determined that you intentionally made a false statement, misrepresented the facts or concealed material information to obtain benefits, then the penalty provisions of Sections 54 and 62(b) of [the MESA] will be applied and you will be subject to any or all of the following: You would have to repay money received and pay a penalty of two times (if less than $500 of improper payments) or four times (if $500 or more of improper payments) the amount of benefits fraudulently received.

The Agency mailed the redeterminations to Lucente's post office box on December 1, 2010. The Agency later mailed Lucente a document titled "Non-Protestable Summary of Previously (Re) Determined Restitution," on December 1, 2010, which stated that Lucente owed the Agency $4,794 in restitution and $18,276 in fraud penalties, totaling $23,070, for improperly receiving unemployment benefits from February 20, 2010, through June 19, 2010. The Agency sent additional notices to Lucente on February 24, 2012; March 27, 2012; April 24, 2012; and May 24, 2012. Lucente asserts that he did not receive the notices.

On October 29, 2013, the Agency mailed Lucente a "Notice of Garnishment," indicating that 25% of his wages would be garnished to repay the amount he owed to the Agency. The Agency began garnishing his wages on or about April 3, 2014. Lucente did not object to the garnishment and later asserted that he wanted to "do the right thing" and repay the improperly received unemployment benefits. According to Lucente, however, he was not aware of the fraud penalties also assessed against him.

Eventually, Lucente called the Agency to inquire about the amount he owed in restitution and learned that he had been assessed fraud penalties. On January 11, 2016, Lucente appealed the redeterminations. On January 19, 2016, the Agency denied Lucente's appeal because it had not been filed within the period required by MCL 421.32a(2).

Lucente appealed the Agency's January 19, 2016 orders. He conceded that he had not been eligible for unemployment benefits from February 20, 2010 (the date he began working full-time for Dart), through June 19, 2010, but challenged the Agency's fraud redetermination. The administrative law judge (ALJ) affirmed the Agency's orders. The ALJ determined that Lucente established good cause under MCL 421.32a(2) to belatedly appeal the Agency's redeterminations; however, given that Lucente had conceded that he was ineligible for unemployment benefits beginning February 16, 2010, the ALJ concluded that Lucente was required to pay fraud penalties because he had obtained the benefits by certifying falsely that he was unemployed.

Lucente appealed the orders of the ALJ to the MCAC, challenging the determination that he was subject to fraud penalties. The MCAC issued two decisions: one affirming the portion of the ALJ's decisions finding that Lucente established good cause for his late appeal under MCL 421.32a(2), and the other reversing the ALJ's conclusion that because Lucente had been ineligible for unemployment benefits under MCL 421.48, he was subject to the fraud provisions of MCL 421.54(b) and MCL 421.62(b). The MCAC held that the Agency's November 30, 2010 eligibility redetermination had not been issued timely, explaining, in relevant part:

[Under MCL 421.32(f),] a benefit check is considered a determination that the claimant was eligible and qualified during the period covered by the check. Upon a protest by an employer, the Agency may only issue "a redetermination of the claimant's eligibility or qualification as to that period ." If the Agency wants to issue an adjudication involving later weeks, the Agency may issue a separate determination as to those weeks.

The November 30, 2010 redetermination indicates that, starting February 16, 2010[,] the claimant is "ineligible for benefits under Section 48 of the [Act]." The only way that the Agency's November 30, 2010 redetermination is valid under Section 32(f) is if the determination in this case is the benefits check covering the period including February 16, 2010. The benefit check covering that period was issued in late March 2010 at the latest.

* * *

The Agency's November 30, 2010 redetermination was not issued by the Agency within 30 days of the March 2010 benefit check determination, and the Agency did not present any indication of good cause for the reconsideration. Thus, the March 2010 determination that the claimant was eligible and qualified for those weeks became final. (Second alteration in original.)

The MCAC also cited the "many legal and procedural irregularities" in the case because the Agency's November 30, 2010 eligibility redetermination failed to adhere to the statutory requirements of MCL 421.32a (alternatively referred to as § 32a of the MESA). The MCAC stated, in relevant part:

The November 30, 2010 redetermination does not "state the reasons for the redetermination" nor is it a document "affirming, modifying, or reversing the prior determination." In fact, the November 30, 2010 redetermination does not include any reference whatsoever to any prior determination. Thus, in addition to not being a timely redetermination under Section 32a(2) of the Act, the November 30, 2010 redetermination failed to include the information required by Section 32a(1) of the Act.

Without an employer protest of the March 2010 benefit check determination, the Agency was without authority to issue a redetermination of the benefit check determination. Even if the Agency followed proper procedure, which it clearly did not, under Section 32(f), the Agency's redetermination of a benefit check determination may only cover the period of time covered by the benefit check determination. Under Section 32(f), if the Agency would like to issue an adjudication as to later weeks, the Agency must issue a determination. In this case, the Agency's redetermination covered the time from February 16, 2010 through present despite the fact that the March 2010 benefit check determination only covered two weeks.

The Agency's November 30, 2010

...