Johnson, Matter of, 13912

• Citation: 337 N.W.2d 442
• Decision Date: 16 February 1983
• Docket Number: No. 13912,13912
• Parties: In the Matter of the Appeal from the Final Decision of the South Dakota Department of Labor, Unemployment Insurance Division for La Monte JOHNSON. . Considered on Briefs
• Court: Supreme Court of South Dakota

Page 442

337 N.W.2d 442

In the Matter of the Appeal from the Final Decision of the

South Dakota Department of Labor, Unemployment

Insurance Division for La Monte

JOHNSON.

No. 13912.

Supreme Court of South Dakota.

Considered on Briefs Feb. 16, 1983.

Decided Aug. 10, 1983.

Joseph G. Rimlinger, East River Legal Services, Sioux Falls, for appellant.

Drew C. Johnson, South Dakota Dept. of Labor, Unemployment Ins. Div., Aberdeen, for appellee South Dakota Unemployment Ins. Div.

MORGAN, Justice.

This is an appeal from the trial court's affirmance of the Secretary of the Department of Labor's (Secretary) final decision denying unemployment benefits to Lamonte Johnson (Claimant), a former employee of Huron Dressed Beef (Employer), Huron, South Dakota. We reverse and remand.

Claimant had been in Employer's employ for about seven months prior to the date of termination. At the time in question, Claimant was on a work-release program from the Beadle County Jail. The record is not clear, but it appears that Claimant's job with Employer was part of the work-release program and that Claimant had never previously worked for Employer. The circumstances and events leading to the termination of the employment relationship will be discussed in detail as appropriate later.

After the termination, Claimant filed a claim for unemployment benefits which was denied by the benefit section of the Department of Labor (Department) on the grounds that his separation was a voluntary quit. This determination was appealed by Claimant, which appeal was heard by an appeal referee for Department. The decision of the appeal referee was to reverse the determination of the benefit section, holding that the separation from employment was a discharge by Employer for reasons other than work-connected misconduct. Employer, in turn, appealed to Secretary, who reviewed the record and reversed the appeal referee's decision, concluding that Claimant had voluntarily quit his employment without good cause, and from which decision the appeal to the trial court and ultimately to this court arose.

There are two issues framed by Claimant's brief. In essence, the first is whether the separation was a voluntary quit on the part of Claimant as found by Secretary or a discharge without good cause by Employer as found by the appeal referee. The second issue we will address is whether the court should consider a conflict in findings when an agency overrules its hearing examiner. Department protests that this issue was not raised in the trial court and thus was not preserved for appeal and, furthermore, that it is a constitutional attack on Department's appeal procedure. Because we do not consider it a constitutional attack, and because it goes to the very heart of this court's review of the first issue, we deem it both necessary and expedient at this time to elucidate on a distinction between departmental appeals and judicial appeals.

Basically, the unemployment insurance claims procedure is found in SDCL ch. 61-7 and Administrative Rules of South Dakota (ARSD) art. 47:06. Upon filing of an unemployment insurance claim, the benefit section of Department examines the claim and determines its validity and amounts payable, if any. The benefit section may refer it to an appeal referee or to Secretary. SDCL 61-7-2. The initial determination by the benefit section is final unless appealed. SDCL 61-7-5. If a claim is disputed, Department shall appoint one or more impartial appeal referees to hear and decide the claim. SDCL 61-7-6. Upon completion of the hearing, appeal referee shall within ten days announce findings of fact and the decision. ARSD 47:06:05:08. Any interested party or the benefit section, dissatisfied with the decision of the appeal referee, may appeal to Secretary in writing. ARSD 47:06:05:10.

On appeal, "The secretary may on his own motion affirm, modify, or set aside any decision of an appeal referee on the basis of the evidence previously submitted in such case, or direct the taking of additional evidence ...." SDCL 61-7-12. Within thirty days after hearing an appeal Secretary will announce the findings of fact and decision with respect thereto. ARSD 47:06:05:20

The final decision of Secretary is appealable as provided in SDCL ch. 1-26. SDCL 61-7-2. Upon application and satisfactory showing the trial court may order that the agency take additional evidence. SDCL 1-26-34. When reviewing the agency findings, SDCL 1-26-36 provides:

The court shall give great weight to the findings made and inferences drawn by an agency on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are:

....

(5) Clearly erroneous in light of the entire evidence in the record; or

(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

Either the agency or an aggrieved party may obtain review of the circuit court's judgment by appealing to the Supreme Court. SDCL 1-26-37.

There appears to be a striking contrast between our standard of reviewing an agency decision and Secretary's standard for reviewing an appeal referee's decision. The court must give "great weight" to an agency's findings, SDCL 1-26-36, while Secretary may "on his own motion affirm modify, or set aside any decision of an appeal referee ...." SDCL 61-7-12. Secretary, however, does not have unbridled discretion. Appeal referee's decision is part of the record and the record must be considered as a whole to see whether the result comports with the judicial standard of review upon appeal.

In accord, the Administrative Procedure Act as enacted by Congress provides at 5 U.S.C. Sec. 557(c)(3)(A): "All decisions, including initial, recommended, and tentative decisions, are a part of the record ...." (Emphasis added.) That section continues by requiring that all decisions "include a statement of---(A) findings and conclusions, and the reasons or basis therefor, on all the material issues of fact, law, or discretion presented on the record ...." Id. In discussing this provision, in People of State of Illinois v. United States, 371 F.Supp. 1136 (N.D.Ill.1973), the court stated:

The Congressional policy in setting forth the requirements of 5 U.S.C. Sec. 557(c)(3)(A) that findings be set forth would seem at least fourfold: (1) to prevent arbitrary and capricious decisions in a manner violative of due process, (2) as an explanation to the parties involved as to the basis for the decision, (3) to give guidance to parties similarly situated, and (4) to provide a basis for judicial review by the courts.

371 F.Supp. at 1138. Department's rules similarly require Secretary to set forth the findings and the decision with "the reasons therefor." ARSD 47:06:05:20 (emphasis supplied). ¹

A mere conclusory statement without any justification will not satisfy the Administrative Procedure Act (APA) requirement. As stated by one court, the justification for a decision is necessary since

[t]o permit the [agency] to announce its decisions without setting forth the justifications in the findings and conclusions would be tantamount to vesting in it absolute discretion by removing from the courts the only tools they possess which enable them to exercise their limited function of review.

International U., United Auto., & A.I. Wkrs. v. N.L.R.B., 455 F.2d 1357, 1369-70 (D.C.Cir.1971). Since Department's own rules require Secretary to state the reason for a decision and since Secretary must consider appeal referee's decision as part of the record, Secretary's departures from the appeal referee's findings are vulnerable if they fail to reflect attentive consideration to the examiner's decision. See Greater Boston Television Corporation v. F.C.C., 444 F.2d 841 (D.C.Cir.1970).

We now examine the propriety of the trial court's judgment affirming Secretary on the issue of whether or not Claimant had voluntarily quit his employment. In reviewing the trial court's judgment under the Administrative Procedure Act, SDCL ch. 1-26, the reviewing court must make the same review of the administrative tribunal's action as does the trial court. Further, we make our decision as to whether the administrative decision can be sustained, unaided by a presumption that the trial court's decision is correct. ² Weltz v. Bd. of Educ. of Scotland Sch. Dist., 329 N.W.2d 131 (S.D.1983). As previously indicated, our standard of review is whether the decision of Secretary was clearly erroneous in light of the entire evidence in the record, or whether the action of Secretary was arbitrary or capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion. SDCL 1-26-36(5), (6). As this court said in Estate of Hobelsberger, 85 S.D. 282, 289, 181 N.W.2d 455, 459 (1970) In applying the clearly erroneous standard we must bear in mind that our function is not to decide factual issues de novo. The question for the appellate court is not whether it would have made the same findings the trial court did, but whether on the entire evidence it is left with a definite and firm conviction that a mistake has been committed.

We are also mindful that in an unemployment compensation case the employer has the burden of proving that an employee is not eligible. 81 C.J.S. Social Security Sec. 275 (1977); Lopez v. Owatonna Mfg. Co., 304 N.W.2d 647 (Minn.1981); Marz v. Department of Employment Services, 256 N.W.2d 287 (Minn.1977). Unemployment compensation statutes should be liberally construed in favor of the claimant. Red Bird v. Meierhenry, 314 N.W.2d 95 (S.D.1982).

At the time the present action arose, SDCL 61-6-13 provided, in pertinent part, that: "An unemployed individual who has left his most recent employment ... voluntarily without good...