Dico, Inc. v. Iowa Employment Appeal Bd.

• Decision Date: 25 March 1998
• Docket Number: No. 96-1748,96-1748
• Citation: 576 N.W.2d 352
• Parties: DICO, INC., Appellant, v. IOWA EMPLOYMENT APPEAL BOARD, Mark S. Crook, Steven C. Davis, Darryl A. Dupree, Timothy J. Fowler, Raymond E. Smith, Terry M. Straker and Otis J. Alexander, et al., Appellees.
• Court: Iowa Supreme Court

Page 352

576 N.W.2d 352

DICO, INC., Appellant, v.IOWA EMPLOYMENT APPEAL BOARD, Mark S. Crook, Steven C. Davis, Darryl A. Dupree, Timothy J. Fowler, Raymond E. Smith, Terry M. Straker and Otis J. Alexander, et al., Appellees.

No. 96-1748.

Supreme Court of Iowa.

March 25, 1998.

Gene R. LaSuer and Scott M. Brennan of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, for appellant.

William C. Whitten, Des Moines, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, LAVORATO, NEUMAN, and TERNUS, JJ.

TERNUS, Justice.

Dico, Inc. appeals an award of unemployment benefits to its former employees.It claims these employees are disqualified for benefits because they failed to accept offers of employment made by Dico's parent company.The Iowa Employment Appeal Board rejected Dico's claim of disqualification because the job offers were made prior to Dico's termination of the claimants' employment.Finding no basis for reversal, we affirm.

I.Background Facts and Proceedings.

The individual appellees were employees of Dico in 1995.In March of that year, the company unveiled its plan to close its Des Moines manufacturing facility on July 25, 1995.Pursuant to a plant-closing agreement negotiated with the claimants' union, Dico announced that jobs would be made available for each Dico worker at Titan Tire.Titan Tire was owned by Dico's parent company and also had a plant located in Des Moines.

Dico posted various Titan positions at the Dico plant and gave Dico workers until July 25, 1995 to bid on a job.The Dico plant eventually closed on July 28, 1995, and the claimants' employment relationship with Dico ended on that date.Although many Dico employees accepted jobs with Titan, the claimants did not.Instead, the claimants filed for unemployment benefits in early August 1995.

Dico contested the unemployment claims, contending the claimants had refused suitable work and therefore were disqualified for benefits.The Iowa Employment Appeal Board rejected Dico's claim of disqualification, relying on Iowa Administrative Code rule 871-24.24(8)(1997), ¹ which requires that the offer of work and the claimant's refusal must occur after the claimant has applied for unemployment benefits in order to effect a disqualification.The agency's award of benefits was affirmed on judicial review to the district court.In addition, the district court rejected Dico's claim that a member of the Iowa Employment Appeal Board should have disqualified himself due to a conflict of interest.Dico filed this appeal.

II.Scope of Review.

Our review of unemployment benefit cases is governed by the Administrative Procedure Act,Iowa Code chapter 17A.SeeSuluki v. Employment Appeal Bd., 503 N.W.2d 402, 404(Iowa1993).We will grant relief where substantial rights of a party have been prejudiced because the agency action is in excess of the agency's statutory authority, is unsupported by substantial evidence, is unreasonable, arbitrary, or capricious, or is affected by other error of law.SeeIowa Code § 17A.19(8)(1995);Aluminum Co. of Am. v. Employment Appeal Bd., 449 N.W.2d 391, 393-94(Iowa1989).

We grant only limited deference to the agency on issues of law, including statutory interpretation.SeeNorland v. Iowa Dep't of Job Serv., 412 N.W.2d 904, 908(Iowa1987).Notwithstanding the court's ultimate responsibility to decide issues of law, when a case calls for the exercise of judgment on a matter within the expertise of the agency, we generally leave such decisions to the informed judgment of the agency.SeeBurns v. Board of Nursing, 495 N.W.2d 698, 699(Iowa1993).Agency findings of fact are binding on appeal unless those findings are not supported by substantial evidence.SeeNorland, 412 N.W.2d at 908.

III.Statutory Framework.

As noted above, the agency ruled that the claimants were not disqualified for benefits by refusing employment with Titan because the offers of employment preceded the termination of the claimants' jobs with Dico.The agency decision rested on Iowa Code section 96.5(3) and its implementing regulations.

Section 96.5(3) contains legislative authorization for the disqualification of any claimant who "has failed, without good cause, ... to accept suitable work when offered."The agency has adopted a rule further defining the parameters of this disqualification: "Both the offer of work ... and the claimant's accompanying refusal must occur within the individual's benefit year, as defined in subrule 24.1(21), before the Iowa Code subsection 96.5(3) disqualification can be imposed."Iowa Admin. Code r. 871-24.24(8).The individual's "benefit year" is defined as a period of 365 days beginning with "the Sunday of the current week in which the claimant first files a valid claim."Id.r. 871-24.1(21);see alsoid.r. 871-24.1(135)(stating a week begins on Sunday and ends on Saturday).To be valid, a claim for benefits must be made in accordance with the regulations adopted by the agency.SeeIowa Code § 96.6(1).The agency has adopted a rule allowing an individual to file a claim for benefits "[f]ollowing separation from work."Iowa Admin. Code r. 871-24.2(1)(a).Thus, a valid claim for benefits cannot be filed until a claimant becomes unemployed.Under the agency's rules, only then is the refusal-to-work disqualification applicable.

The claimants here filed their claims for unemployment benefits in early August, after Dico's termination of their employment.Their benefit year began that week.Therefore, Titan's offer of employment, which expired in late July, was not within the claimants' benefit year.Consequently, under rule 871-24.24(8), the claimants' refusal of Titan's offer did not disqualify them for benefits.

IV.Was the Agency's Decision Supported by Substantial Evidence?

Dico complains that the agency's decision is unsupported by substantial evidence.We reject this contention.There is substantial evidence in the record to support the agency's finding that the factual prerequisites for the refusal-to-work disqualification were not met.Consequently, the remainder of our discussion will focus on the validity of rule 871-24.24(8).

V.Is Rule 871-24.24(8) Within the Agency's Statutory Authority?

We presume agency rules are valid, so Dico must "demonstrate that a 'rational agency' could not conclude the rule was within the agency's delegated authority."Teleconnect Co. v. Iowa State Commerce Comm'n, 404 N.W.2d 158, 162(Iowa1987).Here the legislature granted the agency the authority to determine a claimant's eligibility for benefits.SeeIowa Code §§ 96.4, .6(1).Thus, the agency had the general authority to address by rule the issue of disqualification.SeeYoung Plumbing & Heating Co. v. Iowa Natural Resources Council, 276 N.W.2d 377, 382(Iowa1979)(stating agency has discretion to develop policy by rule or on a case-by-case basis).

VI.Is Rule 871-24.24(8) Unreasonable, Arbitrary or Capricious?

Because chapter 96 does not address the circumstances under which the refusal of an offer of work is disqualifying, the agency was delegated the task of determining the parameters of the refusal-to-work disqualification.We now decide whether that delegated authority was exercised in an unreasonable, arbitrary, or capricious manner, as claimed by Dico.

Iowa Code section 17A.19(8)(g) authorizes relief from agency action that is "[u]nreasonable, arbitrary or capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion."These terms have established meanings: "An agency's action is 'arbitrary' or 'capricious' when it is taken without regard to the law or facts of the case....Agency action is 'unreasonable' when it is 'clearly against reason and evidence.' "Soo Line R.R. v. Iowa Dep't of Transp., 521 N.W.2d 685, 688-89(Iowa1994).An abuse of discretion occurs when the agency action "rests on grounds or reasons clearly untenable or unreasonable."Schoenfeld v. FDL Foods, Inc., 560 N.W.2d 595, 598(Iowa1997).We have said an " 'abuse of discretion is synonymous with unreasonableness, and involves lack of rationality, focusing on whether the agency has made a decision clearly against reason and evidence.' "Id.(quotingStephenson v. Furnas Elec. Co., 522 N.W.2d 828, 831(Iowa1994)).Thus, in evaluating Dico's challenge to rule 871-24.24(8), we consider whether there is a basis in law and fact for the agency's rule and whether it lacks rationality.

Dico argues rule 871-24.24(8) conflicts with the public policy underlying chapter 96, namely, to assist unemployed individuals in finding suitable employment and to pay benefits to those individuals during the period when suitable work is not available.The agency's rule defeats this purpose, argues Dico, because it directs resources to individuals such as the claimants who have actively chosen not to work.Dico contends "[a]n individual should be required to accept a suitable offer of employment when they know with certainty that they will be unemployed in the near future."The agency responds that only one who is actually unemployed and seeking benefits should be required to look for and accept suitable work.

As noted above, the agency has been delegated broad authority by the legislature to determine the circumstances under which an individual's refusal of work should be disqualifying.This task may be accomplished through the development of policy on a case-by-case basis or by adoption of a rule.SeeYoung Plumbing & Heating Co., 276 N.W.2d at 382.Here, the agency chose to adopt a bright line rule: only offers of employment made during the claimant's benefit year trigger the refusal-of-work disqualification.In considering the reasonableness of this rule, we keep in mind that a fundamental tenet of administrative law "is that administrative decisions are to be made by the agencies, not the courts."Leonard v. Iowa State Bd. of Educ., 471 N.W.2d 815, 815(Iowa1991).

Administrative...