Kitchen v. EMPLOYMENT SECURITY BOARD OF REVIEW

• Decision Date: 21 July 2000
• Docket Number: No. 83,860.,83,860.
• Citation: 9 P.3d 575,27 Kan. App.2d 775
• Parties: DAVID E. KITCHEN, et al., Appellants, v. EMPLOYMENT SECURITY BOARD OF REVIEW, Respondent, and GENERAL MOTORS CORPORATION, Appellee.
• Court: Kansas Court of Appeals

27 Kan. App.2d 775

9 P.3d 575

DAVID E. KITCHEN, et al., Appellants, v. EMPLOYMENT SECURITY BOARD OF REVIEW, Respondent, and GENERAL MOTORS CORPORATION, Appellee.

No. 83,860.

Court of Appeals of Kansas.

Opinion filed July 21, 2000.

Mark A. Kistler and Bruce C. Jackson, Jr., of Yonke, Arnold, Newbold, Winter & Jacoby, P.C., of Kansas City, Missouri, for the appellants.

Patrick M. Gavin and Rosalee M. McNamara, of Lathrop & Gage, L.C., of Kansas City, Missouri, for the appellee.

Before MARQUARDT, P.J., PIERRON, J., and ROGG, S.J.

PIERRON, J.:

David E. Kitchen, appellant, and approximately 3,500 hourly employees of the General Motors (GM) Fairfax plant in Kansas City, appeal the decision of the district court requiring them to refund the Kansas Department of Human Resources an overpayment of unemployment benefits based on a one-time special payment made by GM. Kitchen argues the district court erred in finding the one-time special payment was remuneration in the form of back pay or settlement because the payment was not made under any contractual, statutory, or remedial entitlement, and that the payment is not back pay as a matter of law.

The facts are not disputed. In early June 1998, members of the United Automobile Aerospace and Agricultural Implement Workers of America (UAW) went on strike at two of GM's plants in Flint, Michigan. These two plants produced parts necessary to GM's production nationwide. As a result, production at GM's Fairfax plant in Kansas City, Kansas, ceased. Kitchen was an hourly employee of GM's Fairfax plant. Between June 8, 1998, and August 3, 1998, Kitchen was laid off due to lack of available work. The Flint strikes concluded on July 27, 1998, after GM and the UAW reached an agreement.

The terms and conditions of employment for the Fairfax hourly employees are governed by a national collective bargaining agreement (national agreement) negotiated between GM and the UAW. Pursuant to the national agreement, the week in which Independence Day falls is designated as the Independence Week shutdown period. If an employee meets the specific criteria set forth in the national agreement, the employee will receive 32 hours of Independence Week shutdown pay and 8 hours of holiday pay for that week. As a general rule, no production is performed that week.

As part of resolution of the Flint strikes, on July 28, 1998, GM and the UAW entered into a "MEMORANDUM OF UNDERSTANDING ONE TIME SPECIAL PAYMENT," which provided:

"As a result of these negotiations and without prejudice to the position taken by either party, and without setting any precedent in the disposition of any other case involving similar circumstances, the parties agree to the following:

"Employees who were on strike or layoff status at General Motors locations due to the labor dispute at the Flint Metal Center and Delphi E Flint East and who did not receive Independence Week Shutdown and Holiday Pay as a result of being on said layoff or strike and were otherwise entitled to these pay provisions as stipulated in the GM-UAW National Agreement, shall receive a one time special payment in the amount they would have been entitled to had they not been on strike or layoff.

"This payment will be made in an expeditious manner and taxed as a regular wage payment in accordance with Document No. 81 of the GM-UAW National Agreement.

"This payment shall initially be made by General Motors. Thereafter, payments otherwise required by Paragraph III.A of the Memorandum of Understanding Joint Activities, 1996 GM-UAW National Agreement, shall be waived until General Motors is reimbursed for the total amount paid to employees as a result of this Memorandum.

"Further, the parties recognize that these payments may result in employees being ineligible for unemployment compensation already received. Employees impacted by such overpayment of unemployment compensation will be responsible to repay the State that provided the unemployment compensation."

As a result of the Memorandum of Understanding, Kitchen received a check dated August 9, 1998, for a total of 40 hours of pay at his regular rate. The check stub designated 32 hours as a miscellaneous payment and 8 hours as a miscellaneous payment. At the request of the UAW, union dues were withheld from the payment. Kitchen received vacation and wage progression credit as a result of the payment.

During Kitchen's layoff period, he applied for and received unemployment compensation from the Kansas Department of Human Resources (KDHR). As a result of the one-time special payment, the KDHR found Kitchen was disqualified for unemployment benefits for the week of June 28, 1998, through July 4, 1998, covering the shutdown period. The KDHR found the one-time special payment was a back pay award or settlement and Kitchen was required to refund the KDHR the $281 he received in unemployment benefits for that week.

Kitchen appealed the notice of determination to a KDHR Referee. The Referee found the one-time special payment was a wage payment pursuant to Kansas Employment Security statutes. The Referee then concluded the wage payment was attributable to the period from June 8, 1998, to July 4, 1998. Kitchen appealed the Referee's decision to the Kansas Employment Security Board of Review (Board). The Board affirmed the Referee's decision that the one-time special payment was back pay. There was a dissent.

Kitchen appealed the Board's decision in district court. The court found there was insufficient evidence to support a finding that the one-time special payment was something other than wages paid to Kitchen as compensation for services. The court found Kitchen received the payment because he was an employee of GM, that any other reason for the payment was immaterial, and that the source of the funds for the payment was agreed upon by GM and the UAW. The court concluded the payment did not fall within any of the statutory exceptions to the definition of wages. The court affirmed the previous decisions which held Kitchen received an overpayment of benefits for the applicable week. Kitchen appeals.

In this case we are called upon to construe several provisions of the Kansas Employment Security Law, K.S.A. 44-701 et seq., following review by the Board. The burden of proving the invalidity of the Board's order is on Kitchen. K.S.A. 77-621(a)(1).

Interpretation of a statute is a question of law, and our review is unlimited. In re Tax Appeal of Boeing Co., 261 Kan. 508, Syl. ¶ 1, 1, 930 P.2d 1366 (1997). Usually, interpretation of a statute by an administrative agency charged with the responsibility of enforcing that statute is entitled to great judicial deference. Deference to an agency's interpretation is particularly appropriate when the agency is one of special competence and expertise. The agency's interpretation of a challenged statute may be entitled to controlling significance in judicial proceedings. Further, if there is a rational basis for the agency's interpretation, it should be upheld on judicial review. Kansas Univ. Police Officers Ass'n v. Public Employee Relations Bd., 16 Kan. App.2d 438, 440, 828 P.2d 369 (1991). Although an appellate court gives deference to the agency's interpretation of a statute, the final construction of a statute lies with the appellate court, and the agency's interpretation, while persuasive, is not binding on the court. The courts are the final arbiters in interpreting statutes and will take corrective action if an administrative body's interpretation is erroneous as a matter of law. In re Tax Appeal of Univ. of Kan. School of Medicine, 266 Kan. 737, 749, 973 P.2d 176 (1999).

Persons claiming unemployment benefits are entitled to a liberal interpretation of the employment security statutes and the right to receive such benefits is determined by the provisions of the statutes. Southwestern Bell Telephone Co. v. Employment Security Board of Review, 189 Kan. 600, 604, 371 P.2d 134 (1962); Farmers Co-op Elevator v. Kansas Employment Security Bd. of Review, 25 Kan. App.2d 567, 572, 966 P.2d 699, rev. denied 266 Kan. 1108 (1998).

The Kansas Employment Security Law is designed to prevent the spread of involuntary unemployment and to "lighten its burden which now so often falls with crushing force upon the unemployed worker and his [or her] family." K.S.A. 44-702. Generally, an individual shall be deemed unemployed and entitled to unemployment benefits "with respect to any week during which such individual performs no services and with respect to which no wages are payable to such individual." K.S.A. 1999 Supp. 44-703(m).

The term "wages" is defined in K.S.A. 1999 Supp. 44-703(o) in general, all encompassing terms as

"all compensation for services, including commissions, bonuses, back pay and the cash value of all remuneration, including benefits, paid in any medium other than cash. The reasonable cash value of remuneration in any medium other than cash, shall be estimated and determined in accordance with rules and regulations prescribed by the secretary."

The object of Kitchen's arguments on appeal is for the most part limited to proving the one-time special payment is not "back pay" as a matter of law. However, it is not readily apparent what classification of compensation Kitchen would give the one-time special payment. Kitchen attempts to argue this is strictly a "back pay" issue and there were no other findings concerning wages. To the contrary, the Referee's decision, which was essentially approved by the Board, stated: "In this particular case there is no doubt that the payment made in August 1998, received by the claimant, was a wage payment. The statutory scheme above would clearly define it as a wage payment and the parties both treated it as a wage payment."

The provisions for the Independence Week shutdown period are provided in the "Vacation Entitlement" section of the GM/UAW National Agreement. In order to qualify for shutdown pay, the employee must...