Holton v. Department of Employment & Training, 03-535.

• Decision Date: 01 April 2005
• Docket Number: No. 03-535.,03-535.
• Parties: Steven HOLTON v. DEPARTMENT OF EMPLOYMENT AND TRAINING (Town of Vernon, Appellant).
• Court: Vermont Supreme Court

878 A.2d 1051

Steven HOLTON v. DEPARTMENT OF EMPLOYMENT AND TRAINING (Town of Vernon, Appellant).

No. 03-535.

Supreme Court of Vermont.

April 1, 2005.

Richard C. Carroll and Jonathan D. Secrest of Kristensen, Cummings, Phillips, & Carroll, P.C., Brattleboro, for Defendant-Appellant.

William H. Sorrell, Attorney General, and Bridget C. Asay, Assistant Attorney General, Montpelier, for Defendant-Appellee.

Present: DOOLEY, JOHNSON, SKOGLUND and REIBER, JJ., and ALLEN, C.J. (Ret.), Specially Assigned.

¶ 1. JOHNSON, J.

Employer, Town of Vernon, appeals from the Employment Security Board's decision to award unemployment benefits to a former town employee that the town claims was ineligible to receive benefits. The Department of Employment and Training (Department) has already paid all the disputed benefits to the former employee pursuant to the Board's decision and related state and federal law requiring prompt payment of benefits to a claimant after the first adversarial administrative determination that the claimant is eligible. The Department therefore moves to dismiss the appeal as moot because, as a result of Vernon's special self-selected status as a noncontributing employer under the unemployment statute, Vernon must reimburse the Department for all benefits paid to former town employees, including, but not limited to, those benefits "paid but denied on appeal" and "benefits paid in error." 21 V.S.A. § 1321(f). Thus, the Department asserts that Vernon no longer has a legally cognizable stake in the outcome of the case because it will have to pay the Department regardless of whether it wins or loses on appeal. Vernon concedes that the appeal is moot; however, it claims that the appeal fits within the exception to the mootness doctrine for cases that are capable of repetition yet evade review, and also raises a number of statutory and constitutional objections to the Department's decision to pay the disputed benefits prior to Vernon's appeal to this Court. We reject Vernon's arguments and dismiss the appeal as moot.

¶ 2. Vernon's former employee, Steven Holton, filed for unemployment compensation benefits on May 17, 2003. In June 2003, the claims adjudicator determined that Holton voluntarily ended his employment as a Vernon police officer without good cause attributable to the town. As a result, Holton was disqualified for benefits. See 21 V.S.A. § 1344(a)(2)(A) (disqualifying employee for benefits upon finding that employee left last employing unit voluntarily without good cause attributable to employer).

¶ 3. In July, Holton appealed to the chief appeals referee. The referee held a telephone hearing on the claim, taking testimony from Holton, his former supervisor, and the chairperson of the Vernon selectboard. A couple of weeks after the hearing, the referee sustained the claims adjudicator's decision. Six days later, claimant appealed that decision to the Employment Security Board.

¶ 4. Vernon chose not to participate in the Board's hearing. Pursuant to its rules, the Board took no new evidence, but did hear argument from Holton. The Board reversed the appeals referee's decision, and decreed that Holton's "[c]laims are allowed for and subsequent to the week ending May 17, 2003." The notice of entry that accompanied the Board's decision stated that it "would become final unless an interested party appeals the Decision to the Vermont Supreme Court by filing a Notice of Appeal . . . within 30 days of the date of entry of the Board's decision."

¶ 5. The Department began paying the disputed funds to Holton soon after the Board's October 21, 2003 decision. The Department made the payments over a six-week period from October 25, 2003 through November 29, 2003. Vernon timely filed its notice of appeal on November 18, 2003, shortly before the Department made the last payments to Holton. The Department argues, and Vernon concedes, that Vernon's appeal became moot as soon as the last payment was made to Holton.

¶ 6. Though Vernon concedes that its case is now moot, Vernon claims that its case fits within the exception to the mootness doctrine for cases that are capable of repetition yet evade review. Vernon further asserts that the Department acted improperly and without statutory authority when it disbursed benefits to Holton during the pendency of Vernon's appeal, thereby precluding appellate review of the Board's decision. Vernon also presents an alternative claim that assumes the unemployment statutes do authorize the Department's benefits payout, but argues that the effect of such a statutory scheme in rendering Vernon's appeal moot results in a deprivation of its constitutional rights to due process and equal protection of the law. A review of the federal-state cooperative unemployment insurance system will illustrate how Vernon's claim became moot, and why none of its statutory or constitutional claims entitle it to relief.

I.

¶ 7. The Legislature enacted Vermont's unemployment statutes in correlation with the federal social security and unemployment tax acts. 21 V.S.A. § 1384. Vermont's unemployment compensation program is, therefore, part of the federal-state cooperative unemployment insurance program that is funded in part by grants to Vermont from the United States. See 42 U.S.C. § 1101(c)(1)(A) (providing for payments to states for assistance in administering their unemployment compensation programs). To qualify for this federal aid, Vermont must receive annual certification from the U.S. Secretary of Labor indicating that, among other things, Vermont's methods of administering its unemployment program are "reasonably calculated to insure full payment of unemployment compensation when due." 42 U.S.C. § 503(a)(1). ¶ 8. The U.S. Supreme Court has interpreted the "when due" language of § 503 to mean "the time when payments are first administratively allowed as a result of a hearing of which both parties have notice and are permitted to present their respective positions." Cal. Dep't of Human Res. Dev. v. Java, 402 U.S. 121, 133, 91 S.Ct. 1347, 28 L.Ed.2d 666 (1971); accord Fusari v. Steinberg, 419 U.S. 379, 387-88, 95 S.Ct. 533, 42 L.Ed.2d 521 (1975) ("The basic thrust of the statutory `when due' requirement is timeliness." (footnote omitted)). In so holding, the Court struck down a California procedure that suspended payments during the pendency of an employer's appeal. Java, 402 U.S. at 133,91 S.Ct. 1347.¹ The U.S. Court of Appeals for the Third Circuit interpreted the "when due" statutory language in light of Java and Fusari, and concluded that "[t]he critical factor is timely payment to all eligible persons, whether their eligibility is upheld initially or only after one or more appeals." Wilkinson v. Abrams, 627 F.2d 650, 661 n. 14 (3d Cir.1980). (Emphasis in original.)

¶ 9. The Department points out that Vermont law is entirely consistent with federal law on this point. Vermont's statute provides that an authorized representative of the Commissioner of Labor shall (1) "pass upon each claim for benefits as provided in this chapter" and (2) "promptly award such benefits as shall be found to be payable under the provisions of this chapter." 21 V.S.A. § 1348(a). The "provisions" of Title 21, chapter 17 include appeals to the referee and the Board. Id. §§ 1348(a), 1349. Accordingly, the statutory requirement that the Department promptly award benefits applies equally to benefits found payable at all levels of the administrative process.

¶ 10. The grants provided by the federal government make up only a part of the overall unemployment compensation fund from which the Department draws to pay benefits to qualified workers who become unemployed. The remainder of the money used to pay unemployment benefits comes from public and private employers in the state.

¶ 11. Municipalities like Vernon are provided with two options for meeting their obligations under Vermont's unemployment compensation law. The first option is to be treated as a contributing employer. See id. § 1321(e) (outlining computation of employer's experience rating). Contributing employers are required to pay regular contributions to the unemployment compensation fund administered by the Department. Id. § 1321(a). These contributions, also commonly referred to as unemployment taxes, are calculated using a complex formula based on the amount of wages the employer pays out and the employer's experience rating record of claims against the employer by former employees. Id. §§ 1324, 1325(a). Claims awarded to former employees of a contributing employer are paid directly by the fund with no further reimbursement from the employer, although the claim is counted against the employer for purposes of its experience rating record. 21 V.S.A. § 1325.

¶ 12. The second option, open only to governmental employers and nonprofit corporations, is to be a noncontributing employer. Id. § 1321(e). These employers do not pay regular unemployment taxes into the fund, but the fund pays for claims by their former employees. Id. Accordingly, noncontributing employers must reimburse the fund for every dollar in benefits paid to their former employees. Id.

¶ 13. Municipalities that elect to be noncontributing employers enjoy an advantage over contributing employers because, unlike contributing employers who must pay the fund even during periods when none of their former employees make claims against them, noncontributing employers pay only when the fund pays benefits to one of their former employees. This self-selected status is not, however, without some drawbacks because the statute requires noncontributing employers to reimburse the fund for "such amounts as the commissioner finds to be due under this chapter, including but not limited to benefits paid but denied on appeal or benefits paid in error." Id. § 1321(f) (emphasis added).

II.

¶ 14. The requirement that the Department promptly pay Holton after the Board's decision, in conjunction with...