Maryland Employment Sec. Administration v. Holy Cross Hospital of Silver Spring, Inc., 1403

• Decision Date: 11 September 1979
• Docket Number: No. 1403,1403
• Citation: 405 A.2d 766,43 Md.App. 406
• Parties: MARYLAND EMPLOYMENT SECURITY ADMINISTRATION v. HOLY CROSS HOSPITAL OF SILVER SPRING, INCORPORATED.
• Court: Court of Special Appeals of Maryland

Page 406

43 Md.App. 406

405 A.2d 766

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

No. 1403.

Court of Special Appeals of Maryland.

Sept. 11, 1979.

Carolyn I. Polowy, Asst. Atty. Gen. with whom were Stephen H. Sachs, Atty. Gen., Joel J. Rabin and Lois F. Lapidus, Asst. Attys. Gen. on the brief, for appellant.

Stanley J. Nadonley, Rockville, for appellee.

Argued before MORTON and MELVIN, JJ., and SAMUEL W. BARRICK, Specially Assigned Judge.

MORTON, Judge.

This appeal is taken by the Board of Appeals (Board) of the Maryland Employment Security Administration (ESA) from an order of the Circuit Court for Montgomery County (Cahoon, J.), reversing a previous decision of the Board. The Board had concluded that employers who elect to be "reimbursers" under art. 95A, § 8(d), Md.Code, are liable for reimbursement to the ESA of all benefits paid, including overpayments made as a result of agency error. The circuit court reversed, holding that a "reimburser" employer is not liable for the repayment of monies erroneously paid out by the ESA.

Holy Cross Hospital of Silver Spring, Inc., the appellee, operates a nonprofit community hospital in Silver Spring, Maryland. It appears that in December, 1974, a former Holy Cross employee, James C. Grissom, applied to the ESA for unemployment benefits. Grissom had been fired for assaulting his supervisor and the hospital disputed his claim on the ground that he had engaged in "gross misconduct." On February 14, 1975, an ESA claims examiner found that Grissom was guilty of "misconduct," as distinguished from "gross misconduct," and under art. 95A, § 6(c), disqualified Grissom from receiving benefits for a nine week period. The hospital appealed this decision to an appeal referee, who concluded on April 8, 1975, that Grissom had in fact committed "gross misconduct" within the meaning of art. 95A, § 6(b). The effect of this decision was to increase Grissom's penalty to the extent that he would be disqualified from receiving benefits until he earned ten times his weekly benefit amount.

Prior to the referee's decision, Grissom had been paid benefits totaling $623.00. Holy Cross does not claim that it should receive credit for these payments. Because of "agency error," however, admitted by the ESA, Grissom continued to receive payments after April 8, 1975, when his benefits should have ceased in accordance with the referee's decision. A total of $2,269.50 was erroneously paid by the ESA and it is this sum which is the subject of the instant case.

On May 10, 1976, Holy Cross first requested that it receive credit for the funds erroneously paid to Grissom. The ESA refused to grant such credit and Holy Cross subsequently made at least two other similar requests. By letter dated June 11, 1976, the executive director of the ESA informed Holy Cross that its request for an adjustment was denied, stating, in pertinent part:

"Under the Unemployment Insurance Law, when a non-profit organization elects, as your client did, to be a reimbursing employer rather than a tax paying one, it becomes a self-insurer, and as such, is not entitled to credits of any kind when overpayments are involved until such time as Full recovery is effected. In this case there will be no recovery . . .

The provision in the statute relating to crediting the accounts of employers by removing charges when an overpayment occurs, applies only to tax paying and not to self-insurers, since then the latter would not in any way be contributing to the fund which, if a payment is made to reimburse the employer, would bear the cost of the improper payment at no cost to the self-insurer."

Holy Cross appealed the executive director's decision to the Board of Appeals of the ESA. After a hearing, the Board upheld the previous administrative action in which Holy Cross had been "required to reimburse the Unemployment Insurance Trust Fund for benefits paid to former employees due to an error on the part of the agency." Holy Cross appealed the Board's decision to the Circuit Court for Montgomery County. The court reversed the Board, stating, in pertinent part:

"In the critical phrases the statute authorizes the Hospital '. . . 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 non-credit organization, . . .' (emphasis added) Article 95A, Sec. 8(d)(2), An.Code Md., 1978 Cum.Supp. The legislature in the same statute explicitly defines the word 'Benefits' as '. . . the money payments Payable to an individual, as provided in this Article, with respect to his unemployment. (emphasis added) Art. 95A, Sec. 20(b), An.Code Md., 1969 Rep.Vol.

Courts are to follow legislative definitions and apply the meanings expressed by the legislature's use of the defined words. Here, as expressed, 'benefits paid' are '. . . money payments payable to an individual, as provided in this Article . . .' If what was paid to the claimant was not payable under the act, it was not a benefit paid and is not an amount to be paid by the Hospital."

As a nonprofit organization, Holy Cross was entitled under the provisions of art. 95A, § 8(d) to elect either to make tax contributions (in the manner of a regular profit-making organization) or to reimburse the Insurance Fund dollar for dollar for benefits paid to its employees. Holy Cross elected the latter procedure, that is, in the words of the statute, to make "payments in lieu of contributions." As Judge Cahoon correctly pointed out in his opinion, the effect of such an election is to make the employer, in essence, a "self-insurer."

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 "p...