Meyer v. Indus. Claim Appeals Office of Colo.

• Decision Date: 17 November 2016
• Docket Number: Court of Appeals No. 16CA0369
• Citation: 409 P.3d 624
• Parties: Lizabeth A. MEYER, Petitioner, v. INDUSTRIAL CLAIM APPEALS OFFICE of the State of Colorado and Division of Unemployment Insurance, Benefit Payment Control, Respondents.
• Court: Colorado Court of Appeals

409 P.3d 624

Lizabeth A. MEYER, Petitioner,

v.INDUSTRIAL CLAIM APPEALS OFFICE of the State of Colorado and Division of Unemployment Insurance, Benefit Payment Control, Respondents.

Court of Appeals No. 16CA0369

Colorado Court of Appeals, Div. I.

Announced November 17, 2016

Law Office of Warren Domangue, Warren Domangue, Lakewood, Colorado, for Petitioner

Cynthia H. Coffman, Attorney General, Evan Brennan, Assistant Attorney General, Denver, Colorado, for Respondent Industrial Claim Appeals Office

No Appearance for Respondent Division of Unemployment Insurance, Benefit Payment Control

Opinion by JUDGE DAILEY

¶ 1 In this unemployment compensation benefits case, petitioner, Lizabeth A. Meyer (claimant), seeks review of a final order of the Industrial Claim Appeals Office (Panel). The Panel upheld a hearing officer's decision that claimant had received an overpayment of unemployment compensation benefits because of unreported earnings from her employment. The Panel also upheld the imposition of monetary penalties against claimant. We affirm the Panel's order in part, reverse in part, and remand the case for entry of a new order.

I. Factual and Procedural Background

¶ 2 Claimant filed an unemployment compensation benefits claim with an effective date of March 11, 2012. Following that date, claimant worked part-time as a sales associate, and, in May 2012, she obtained full-time work as a controller for another company.

¶ 3 A deputy for the Division of Unemployment Insurance (Division) conducted an audit of claimant's file and determined that she had been overpaid unemployment compensation benefits in the amount of $1712 for the period from March 18, 2012, through May 19, 2012. The deputy found that claimant had underreported her hours and earnings for certain weeks during that period. The deputy also assessed a monetary penalty of $1112.80 against claimant.

¶ 4 Claimant appealed the deputy's determination and an evidentiary hearing was conducted. At the hearing, claimant conceded that the hours reported on her paystubs, rather than the ones she reported online to the Division, accurately reflected the hours she had worked. She asserted, however, that she was required only to report her taxable, rather than gross, earnings to the Division.

¶ 5 The hearing officer accepted, except for one week, claimant's concessions regarding the number of hours she had worked after applying for unemployment compensation benefits. The hearing officer concluded, however, that claimant had been instructed to report accurately her gross earnings and hours for each benefit week to the Division. Claimant had also been advised that giving false information in her request for payment constituted fraud.

¶ 6 The hearing officer found that claimant knowingly misreported her gross earnings and hours for certain weeks which resulted in her being overpaid $1890.64 in unemployment compensation benefits. The hearing officer also rejected claimant's explanations regarding the method she used to report her hours and earnings and found that her misreporting was willful. The hearing officer consequently assessed a monetary penalty of $1228.91.

¶ 7 Claimant appealed the hearing officer's decision to the Panel, which affirmed on review.

¶ 8 Claimant then brought this appeal. After the case was at issue, we requested that the parties address the following question:

Whether any payment made to or on behalf of an employee or his beneficiary under a cafeteria plan (within the meaning of 26 U.S.C. section 125 ), as specified under section 8-70-142(1)(c)(VIII), C.R.S. 2015, affects the amount of wages a claimant must report as his or her earnings when filing a claim for unemployment benefits?

II. Standard of Review

¶ 9 We may set aside the Panel's decision if the findings of fact do not support the decision or the decision is erroneous as a matter of law. See § 8-74-107(6), C.R.S. 2016; Colo. Div. of Emp't & Training v. Parkview Episcopal Hosp. , 725 P.2d 787, 790 (Colo. 1986).

III. Reportable Earnings; Wages

¶ 10 Claimant contends that the Panel erred in determining that she was required to report her gross earnings instead of her taxable earnings. Relying on section 8-70-142, C.R.S. 2016, claimant asserts that she was not required to report as earnings any contributions she made to her 26 U.S.C. section 125 (2012) cafeteria plan. We agree with claimant that the term "wages" excludes any contributions she made to a section 125 cafeteria plan.

A. Legal Framework

¶ 11 Section 8-70-142 identifies what types of remuneration are not included as "wages." As pertinent here, section 8-70-142(1)(c)(VIII) excludes "[a]ny payment made to or on behalf of an employee or his beneficiary ... [u]nder a cafeteria plan (within the meaning of 26 U.S.C. section 125 )."

¶ 12 A cafeteria plan allows an employer to offer its employees a variety of benefits that may include tax advantages. See 26 U.S.C. §§ 3121(a)(5)(G), 3306(b)(5)(G) (2012) ; Lee v. Emp't Dep't , 221 Or.App. 449, 190 P.3d 453, 453 (Or. Ct. App. 2008). Contributions to a cafeteria plan by an employer can be made through a salary reduction agreement with an employee in which the employee agrees to contribute a portion of his or her salary on a pretax basis to pay for the benefits. Id. These contributions are not considered wages for federal income tax purposes and are not subject to Social Security and federal unemployment taxes. Id.

B. The Division's Arguments

¶ 13 In its supplemental brief, the Division acknowledges that the term "wages," as defined in section 8-70-142, excludes any contributions made to a section 125 plan. However, without specifically addressing the effect of this provision, the Division argues that claimant failed to present sufficient evidence that the cafeteria plan to which she contributed met the requirements for a section 125 plan. The Division also argues that it properly determined that claimant was responsible for the overpayment because she willfully misrepresented her earnings and the number of hours she worked for the nine-week period at issue.

C. Division Instructions Regarding Reportable Wages

¶ 14 During the hearing, the Division presented copies of online forms claimant filled out in order to receive unemployment compensation benefits. These forms requested claimant to list the number of hours she worked during the week and the amount that she was paid or would be paid. The forms also contained a "certification agreement," which specified that claimant understood that "[i]f I work during any week for which I am claiming UI benefits, I must report all gross earnings in the week earned regardless of whether or not I have been paid." (Emphasis added.)

¶ 15 The requirement to report "gross earnings" is repeated in an administrative regulation. See Dep't of Labor & Emp't Reg. 2.9.2, 7 Code Colo. Regs. 1101-2:2.9. This regulation, which is entitled, "Disqualifying Payments," provides as follows:

For the purposes of determining weekly benefits, "wages/earnings" is defined as any income or remuneration received in exchange for services performed, including amounts that have been deducted under a plan for tax exemption or deferral.

Id.

¶ 16 Thus, through this regulation, as well as the directions in the online forms, the Division has required that a claimant report his or her gross earnings for each week in which the claimant sought unemployment compensation benefits. However, this requirement is contrary to the plain language of the statute, which excludes from the definition of "wages" certain contributions to a section 125 cafeteria plan. See also § 8-73-107(1)(f), C.R.S. 2016 (providing that a claimant is ineligible to receive unemployment compensation benefits for any week unless the claimant's "total wages earned" are less than the weekly benefit amount).

¶ 17 We therefore conclude that the Division erred in requiring claimant to report her "gross earnings" rather than her "wages" as defined by section 8-70-142 when reporting her "earnings" to the Division during a benefit week.

D. Evidence Regarding Section 125 Contributions

¶ 18 We also conclude that there was sufficient evidence to show that claimant contributed to a section 125 cafeteria plan for unemployment purposes.

¶ 19 The administrative record included copies of claimant's paystubs during the relevant nine-week period. Claimant's paystubs from Coach, from the period from March 11, 2012, through May 17, 2012, showed that she paid medical, dental, vision, and FSA benefits using pretax earnings. These paystubs also showed "FIT Taxable Wages," which equaled claimant's gross earnings minus her pretax contributions. A paystub from claimant's other employer during this period (Sutrak), from May 6, 2012, through May 21, 2012, did not show any pretax deductions.

¶ 20 In addressing whether claimant's paystubs showed any section 125 deductions, the Panel stated that they had not been admitted as exhibits. However, that determination is incorrect. The record shows that the hearing officer accepted the Division's submission of the paystubs into evidence and that claimant testified about them extensively. Consequently, we also disagree with the Panel's statements that claimant only generally testified about the deductions on her paystubs and that it was not clear from her testimony whether the deductions met the requirements of " 26 U.S.C. 3306(b)(5)(G) and 26 U.S.C. § 125." However, claimant's paystubs from Coach show that her federal taxable earnings were reduced by the amount of her pretax contributions for medical, dental, vision, and FSA benefits. Such deductions are characteristic of section 125 cafeteria plans. See Lee , 190 P.3d at 453 ; see also Denver Post, Inc. v. Dep't of Labor & Emp't , 199 Colo. 466, 469, 610 P.2d 1075, 1077 (1980) (employee benefits in the form of medical, life, sickness, accident insurance, and pension contributions did not constitute wages for unemployment purposes); City & Cty. of Denver v. Indus. Comm'n , 707 P.2d 1008, 1010 (...