Hiatt v. Indiana Employment Security Division

• Decision Date: 27 October 1971
• Docket Number: Civ. No. 70 F 122.
• Parties: Ronald M. HIATT et al., Plaintiffs, v. INDIANA EMPLOYMENT SECURITY DIVISION et al., Defendants.
• Court: U.S. District Court — Northern District of Indiana

347 F. Supp. 218

Ronald M. HIATT et al., Plaintiffs, v. INDIANA EMPLOYMENT SECURITY DIVISION et al., Defendants.

Civ. No. 70 F 122.

United States District Court, N. D. Indiana, Fort Wayne Division.

October 27, 1971.

Ivan E. Bodensteiner, Max George Margulis, Ft. Wayne, Ind., for plaintiffs.

William S. McMaster, Darrel K. Diamond, Deputy Attys. Gen., Indianapolis, Ind., for defendants.

Before SWYGERT, Circuit Judge, and GRANT and ESCHBACH, District Judges.

MEMORANDUM OF DECISION AND ORDER

PER CURIAM.

This case is now before the court upon a motion for summary judgment filed on July 25, 1971 by plaintiff Ronald M. Hiatt on behalf of himself and a subclass consisting of all present and future unemployed workers who have registered for employment referral with the Indiana Employment Security Division and have been determined to be eligible for unemployment payments therefrom, and whose benefits have been or will be terminated, suspended, withheld, or reduced solely because of the provisions of Ind. Ann.Stat. § 52-1542a(e) (Burns 1970 Supp.), IC 1971, XX-X-XX-X. The court will also consider the supplemental motion for summary judgment filed September 22, 1971, which seeks summary judgment not only for the plaintiff Hiatt but also for the intervening plaintiff Burney. The original motion for summary judgment as supplemented by the motion of September 22, 1971 will be considered together in this memorandum of decision. Both plaintiff Hiatt and intervening plaintiff Burney seek summary judgment on their requests for injunctive and declaratory relief as set forth in Hiatt's amended complaint and Burney's intervening complaint. Defendants, the Indiana Employment Security Division and the director and members thereof and the manager of the Fort Wayne Branch of the Indiana Employment Security Division, have filed no response to the motion for summary judgment. The court will grant plaintiffs' motion for summary judgment in accordance with the provisions of this order.

Plaintiffs bring this action pursuant to 42 U.S.C. § 1983, and jurisdiction is founded upon 28 U.S.C. § 1343. On November 2, 1970, a three-judge United States District Court was convened to hear and determine the action pursuant to 28 U.S.C. § 2284. This is a class action challenging on constitutional and statutory grounds certain provisions of Ind.Ann.Stat. § 52-1542a (Burns 1970 Supp.) which is part of Indiana's Employment Security Act. Subsections 52-1542a(a) and (b) provide for a determination by the Indiana Security Employment Division of a claimant's status as an insured worker. Notice of the determination to both the claimant and the employer is provided for, and a hearing on such determination before a referee may be requested by either party. If no hearing is requested, the determination is final and benefits are paid or denied in accordance therewith. Ind.Ann.Stat. § 52-1542a(a), (b) (Burns 1970 Supp.). Under § 52-1542a(c), an employing unit, including an employer, having knowledge of facts which may affect an individual's eligibility or right to waiting period credits or benefits shall notify the division of such facts.

The Indiana unemployment compensation scheme provides for the weekly determination, throughout the benefit period, by the deputy of the Division of a claimant's eligibility, the validity of his claims, and the attributability to the employer of the cause for which a claimant left his work. Ind.Ann.Stat. § 52-1542a(d) (Burns 1970 Supp.). Under § 52-1542a(d), the deputy may refer the claim to a referee who makes the initial determination with respect to the aforementioned matters in accordance with hearing procedures set forth in Ind.Ann. Stat. § 52-1542b (Burns 1964 Repl.).

Ind.Ann.Stat. § 52-1542a(e) (Burns 1970 Supp.), provides in pertinent part as follows:

In cases where the claimant's benefit eligibility or disqualification is disputed, the division shall promptly notify the claimant and the employer or employers directly involved or connected with the issue raised as to the validity of such claim, the eligibility of the claimant for waiting period credit or benefits, or the imposition of a disqualification period or penalty, or the denial thereof, and of any nonattributability to the employer of the cause for which the claimant left his work, of such determination and the reasons thereof. * * * Unless the claimant or such employer * * * asks a hearing before a referee thereon, such decision shall be final and benefits shall be paid or denied in accordance therewith. * * * In the event that a hearing is requested, the payment of any disputed benefits with respect to the period prior to the final determination or decision shall be made only after such determination or decision. Benefits with respect to any week not in dispute shall be paid promptly regardless of any appeal. (Emphasis added).

Subsequent to the decision in California Dep't of Human Resources Dev. v. Java, 402 U.S. 121, 91 S.Ct. 1347, 28 L. Ed.2d 666 (1971), the court requested a stipulation of facts as to the plaintiff Hiatt which the parties filed on July 13, 1971. The facts of this case, insofar as they relate to plaintiff Hiatt, can be summarized as follows. Plaintiff Ronald M. Hiatt is an adult citizen of the United States and the State of Indiana and resides in New Haven, Indiana. On July 13, 1970, Hiatt applied and was declared eligible for unemployment compensation benefits by the Fort Wayne Branch of the Indiana Employment Security Division. Hiatt's first unemployment compensation benefits were received on July 29, 1970, and subsequent to the declaration of eligibility, he received four checks, each in the amount of $49.00.

On August 21, 1970, Hiatt accepted part-time employment with the Indiana Janitor Service Company, Inc., as a result of which his weekly benefits for the week ending August 22, 1970 were reduced to $43.00. Prior to the filing of the complaint in this action, Hiatt received his last check in the amount of $43.00 for the week ending August 22, 1970. Hiatt was fired on September 1, 1970 from his job with the Indiana Janitor Service Company, Inc. for alleged misconduct on the job. The Fort Wayne Branch of the Indiana Employment Security Division was advised of the firing on September 2, 1970, and on September 3, 1970 Mr. O. W. Brown, a deputy of the Fort Wayne Branch, determined that Hiatt had been discharged not for misconduct but for dissatisfaction of the employer with the quality of Hiatt's work. Plaintiff thus continued to be eligible for benefits in the amount of $49.00 per week, subject to the employer's right of appeal under § 52-1542a and affirmance on appeal.

The Indiana Janitor Service Co., Inc. appealed the determination of Deputy Brown; consequently, Hiatt's weekly benefit check in the amount of $38.00 for the week ending August 29, 1970 was withheld by defendants. The parties further stipulated that Hiatt's benefits were suspended or withheld pursuant to Ind.Ann.Stat. § 52-1542a(e) (Burns 1970 Supp.) and that § 52-1542a(e) does not provide for a hearing prior to suspension or termination of benefits, nor was plaintiff Hiatt afforded a hearing.

On October 29, 1970, a hearing was conducted pursuant to the employer's appeal, and on November 4, 1970, a referee reversed Deputy Brown's determination. Plaintiff then appealed the referee's reversal, and after a hearing on December 3, 1970, the Review Board entered an order reversing the referee's decision. Hiatt was therefore eligible for all benefits withheld.

The parties further stipulated that defendants are required under § 52-1542a to withhold benefits immediately upon timely request by the employer challenging the defendants' determination of eligibility. Finally, the parties agree that there is a class of people in the State of Indiana who, like Hiatt, have had or will have their unemployment compensation benefits terminated, suspended, withheld, and reduced without a hearing solely because of the requirements of § 52-1542a(e).

The identical issue arises in this action with regard to plaintiff Hiatt which the Supreme Court recently confronted in Java, supra: whether a state may, consistent with § 303(a) (1) of the Social Security Act, 42 U.S.C. § 503(a) (1), suspend or withhold unemployment compensation benefits from a claimant when an employer takes an appeal from an initial determination of eligibility. Java, supra at 1349. Following the decision in Java, the court concludes that Ind.Ann. Stat. § 52-1542a(e) (Burns 1970 Supp.) conflicts with the requirements of § 303 (a) (1) of the Social Security Act which provides in part as follows:

The Secretary of Labor shall make no certification for payment to any State unless he finds that the law of such State, approved by the Secretary of Labor under the Federal Unemployment Tax Act, includes provision for —

(1) Such methods of administration * * * as are found by the Secretary of Labor to be reasonably calculated to insure full payment of unemployment compensation when due * * *. Emphasis added.

The California Unemployment Insurance Code, which was the subject of attack in Java, provided, after an eligibility interview and initial determination of eligibility, for automatic suspension of benefits upon an employer's appeal. Java, supra at 1352. Indiana's statute similarly suspends payment of benefits after a determination of eligibility upon an employer's appeal, and such a program is not "reasonably calculated to insure full payment of unemployment compensation when due." Java, supra. "When due," as used in § 303(a) (1) of the Social Security Act, was intended to mean "at the earliest stage of unemployment that such payments were administratively feasible after giving both the worker and the employer an opportunity to be heard." Java, supra at 1354.

The word "due" in § 303(a) (1), when construed in light of the purposes of the Act, means the time when payments are first administratively allowed as a result of

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