Holy Cross Hospital of Silver Spring, Inc. v. Maryland Employment Sec. Administration

• Decision Date: 06 November 1980
• Docket Number: No. 103,103
• Citation: 288 Md. 685,421 A.2d 944
• Parties: HOLY CROSS HOSPITAL OF SILVER SPRING, INC. v. MARYLAND EMPLOYMENT SECURITY ADMINISTRATION.
• Court: Maryland Court of Appeals

Page 685

288 Md. 685

421 A.2d 944

HOLY CROSS HOSPITAL OF SILVER SPRING, INC. v. MARYLAND EMPLOYMENT SECURITY ADMINISTRATION.

No. 103.

Court of Appeals of Maryland.

Nov. 6, 1980.

Paul Mannes, Rockville (Stanley J. Nadonley, Rockville, on the brief), for appellant.

Lois F. Lapidus, Asst. Atty. Gen., Baltimore (Stephen H. Sachs, Atty. Gen. and Joel J. Rabin, Asst. Atty. Gen., Baltimore, on the brief), for appellee.

Argued before MURPHY, C. J., and SMITH, DIGGES, ELDRIDGE, COLE, DAVIDSON and RODOWSKY, JJ.

SMITH, Judge.

In this case appellee Employment Security Administration (ESA) erroneously paid out a substantial sum in benefits to a former employee of appellant Holy Cross Hospital of Silver Spring, Inc. (the employer or Holy Cross). We are concerned with the question of whether that sum comes within the purview of Maryland Code (1957, 1979 Repl. Vol.) Art. 95A, § 8(d)(2) requiring a nonprofit organization electing pursuant to the statute in lieu of paying the regular tax "to pay to the Executive Director for the unemployment insurance fund an amount equal to the amount of regular benefits and one half of the extended benefits paid, that is attributable to service in the employ of such nonprofit organization" and thus whether Holy Cross is obliged to reimburse ESA for the sum erroneously so paid. ¹ We conclude that since the sum paid here was attributable solely to error of the agency there is no liability on the part of the employer. Hence, we shall reverse the holding of the Court of Special Appeals in Maryland Empl. Sec. v. Holy Cross Hosp., 43 Md.App. 406, 405 A.2d 766 (1979), and direct that it affirm the judgment of the Circuit Court for Montgomery County.

Prior to the enactment of Chapter 790 of the Acts of 1971 nonprofit employers were not subject to the provisions of the unemployment insurance law. Art. 95A, § 8(d)(2) as enacted by that chapter specified:

Any nonprofit organization which, pursuant to § 20(g)(7) of this article is or becomes subject to this article on or after January 1, 1972, shall pay contributions under the provisions of subsections (a), (b) and (c) hereof, unless it elects in accordance with this paragraph, to pay to the Executive Director for the unemployment insurance fund an amount equal to the amount of regular benefits and one half of the extended benefits paid, that is attributable to service in the employ of such nonprofit organization, to individuals for weeks of unemployment which begin during the effective period of that election.

Holy Cross made the election referred to in § 8(d)(2). The controversy here involves its former employee who filed a claim in December 1974 for unemployment insurance benefits. Holy Cross claimed that the employee here was discharged "for gross misconduct, specifically, taking a heavy object and lunging at his supervisor and chasing him down the hall with the intention, supposedly, of inflicting severe pain." Since Code (1957, 1969 Repl. Vol.) Art. 95A, § 6(b) specifies that an employee guilty of gross misconduct shall be disqualified from receiving unemployment compensation until he earns ten times his weekly benefit amount, the employer contended that no benefit should be paid. ESA initially found him guilty of misconduct, not gross misconduct. This had the effect of disqualifying the employee from benefits for a period of nine weeks. The employer appealed. ESA's referee found what took place to be gross misconduct, thus effectively denying benefits to the employee. Nevertheless, ESA continued to make payments to the disqualified employee. The amount paid to him after that decision was $2,269.50. ESA now seeks reimbursement from the employer for the sum erroneously paid. ²

When the employer was unsuccessful in convincing ESA that it had no liability for reimbursement for benefits paid as a result of agency error, it took the controversy to the Circuit Court for Montgomery County. There Judge Cahoon in a well-reasoned and comprehensive opinion reversed the decision of the Board of Appeals of ESA.

In the circuit court, the Court of Special Appeals and here the employer has pointed to the definition of "benefits" appearing in Art. 95A, § 20(b) in support of its position that it has no liability for this overpayment. There the term is defined as "money payments payable to an individual, as provided in this article ...." (Emphasis added by the employer.) Its argument is that the overpayment simply is not a benefit provided by Art. 95A. The Court of Special Appeals rejected this argument, saying:

The lower court, in reaching its conclusion that a reimburser employer was not liable for benefits erroneously paid, relied heavily on the definition of "benefits" contained in § 20(b), which is "money payments payable to an individual, as provided in this article...." The court reasoned that "(i)f what was paid to the claimant was not payable under the Act, it was not a benefit paid...." We consider this conclusion a dubious one in light of the language of § 8(d), which deals specifically with reimburser employers and states in, pertinent part:

"Benefits paid to employees of nonprofit organizations shall be financed in accordance with the provisions of this subsection." (Emphasis added.)

It is therefore apparent that under § 8(d) the critical reference is to benefits "paid" rather than benefits "payable." (Id. 43 Md.App. at 409, 405 A.2d 766.)

This argument of the employer has much to be said for it. However, we need not base our decision upon that specific point.

We have found but five states in which appellate courts have considered an issue analogous to the case at bar, California, Delaware, Florida, Idaho, and Oregon. The relevant cases we have located are Carleson v. Cal. Unemployment, 64 Cal.App.3d 145, 134 Cal.Rptr. 278 (1976); Unemp. Ins. Appeal Bd. v. Wilm. Medical Center, 373 A.2d 204 (Del.1977); Baptist Hospital, Inc. v. White, 313 So.2d 106 (Fla.App.1975), and the somewhat analogous case of City of Stuart v. McMullian, 340 So.2d 1209 (Fla.App.1976), relying on Baptist Hospital; Department of Employment v. St. Alphonsus Hospital, 98 Idaho 283, 561 P.2d 1316 (1977), and Mann Home v. Morgan, 19 Or.App. 853, 529 P.2d 964 (1974). Only Mann can be said to give any support to the position espoused by ESA. In that case benefits had legitimately and legally been paid to certain employees who had left their employment voluntarily and without good cause. For this they were disqualified from receiving benefits for a specified period. The court said it "infer(red) that the three employees in question had served out their respective periods of disqualification as provided in ORS 657.176, and had duly requalified themselves for benefits." Id. 19 Or.App. at 855, 529 P.2d 964. A statute provided that "(b)enefits paid to an individual for unemployment immediately after the expiration of a period of disqualification for having left work of an employer voluntarily without good cause shall not be charged to that employer." ORS 657.471(3). At issue was whether this provision was applicable only to the experience rating of taxpaying employers or whether it was also applicable to reimbursing employers. The court pointed to the fact that adopting the construction urged by the employer "would result in the payment of benefits from the Fund without a corresponding payment of taxes or reimbursement of the Fund by the employer with respect to these former employees," and said it "w(ould) not give an interpretation to a statute which produces an inconsistent or unreasonable result." Id. 19 Or.App. at 857, 529 P.2d 964. Prior to the court's decision in that case a change was made in the statute specifying that the provision was not applicable to reimbursing employers. Thus, the court also said:

On February 16, 1973, when the above amendment was before the House Committee on Labor and Industrial Relations, the committee minutes show that a spokesman for the Employment Division, which was the proponent of the amendment, appeared before the committee and testified as follows:

"Federal law requires that reimbursing nonprofit employers reimburse the Fund for all of regular benefits and one-half of extended benefits applicable to wages paid by such nonprofit unit. While this fact is stated in present (ORS) 657.505(7)(a), a new section, Section 4 of this 1973 Act, is being added to insure that all are aware that reimbursing employers cannot be relieved of benefit charges regardless of the circumstances involved." Minutes, House Committee on Labor and Industrial Relations, February 16, 1973. (Id. at 858, 529 P.2d 964.)

In some situations, as in this case, the amendment may be a declaration of the meaning of the statute. Layman v. State Unemp. Comp. Com., 167 Or. 379, 117 P.2d 974, 136 A.L.R. 1468 (1941); Kaiser Cement v. Tax Com., (250 Or. 374, 443 P.2d 233 (1968)).

From our examination of the legislative history of ORS 657.504, which expressly excludes reimbursing employers from the provisions of ORS 657.471, it is evident that the legislature was merely declaring existing law, and explicitly telling all nonprofit organizations that reimbursing employers are not relieved of benefit charges. (Id. at 858-59, 529 P.2d 964.)

In Carleson the cash amount involved was but $72.00. Obviously, the parties were litigating over principle. The California statute is very similar to ours. The court there pointed out:

In its decision ... the (State Unemployment Insurance) Board stated as follows: "We adopt the referee's statement of facts and reasons for decision. We agree with his conclusion that amounts erroneously paid to the benefit claimant in excess of his potential maximum award are not 'benefits ... paid based on base period wages with respect to employment for the entity.' Such amounts are beyond the statutorily defined limit for which additional cost reimbursement can be charged under the provisions of Unemployment Insurance Code section 803(b)(1). (P) If ...