Oklahoma Goodwill Industries, Inc. v. State ex rel. Oklahoma Employment Security Commission, 2008 OK 48 (Okla. 5/20/2008)

• Decision Date: 20 May 2008
• Docket Number: No. 102539,102539
• Citation: 2008 OK 48
• Parties: OKLAHOMA GOODWILL INDUSTRIES, INC., Plaintiff-Appellee v. STATE OF OKLAHOMA ex rel OKLAHOMA EMPLOYMENT SECURITY COMMISSION, Defendant-Appellant and ASSESSMENT BOARD OF THE OKLAHOMA EMPLOYMENT SECURITY COMMISSION; BOARD OF REVIEW OF THE OKLAHOMA EMPLOYMENT SECURITY COMMISSION; AND BEVERLY A. PETERS, Defendants
• Court: Oklahoma Supreme Court

Page 1

2008 OK 48

OKLAHOMA GOODWILL INDUSTRIES, INC., Plaintiff-Appellee v. STATE OF OKLAHOMA ex rel OKLAHOMA EMPLOYMENT SECURITY COMMISSION, Defendant-Appellant and ASSESSMENT BOARD OF THE OKLAHOMA EMPLOYMENT SECURITY COMMISSION; BOARD OF REVIEW OF THE OKLAHOMA EMPLOYMENT SECURITY COMMISSION; AND BEVERLY A. PETERS, Defendants

No. 102539

Supreme Court of Oklahoma

May 20, 2008

On Appeal from the District Court, Oklahoma County, Vicki Robertson, Trial Judge.

¶0 The Oklahoma Employment Security Commission (OESC) determined that the services provided by Beverly Peters — who, as a participant in Oklahoma Goodwill Industries' rehabilitation program, worked at Tinker Air Force Base pursuant to Goodwill's contract with the federal government (under the terms of 41 U.S.C. §46) — were not exempt from coverage by the provisions of 40 O.S.Supp.2002 §1-210(7)(d) of the Oklahoma Employment Security Act. The OESC Assessment Board affirmed the agency decision. The Board found that the employment of all similarly classified persons — i.e., those Goodwill consumers who perform services under the federal contracts as well as those who work at the State office buildings pursuant to Goodwill's contract with the state government (under the terms of 47 O.S.2001 §3001et seq) — is not exempt from coverage. The district court reversed the Board's order. OESC brings this appeal from the district court's judgment, which stands retained for this court's disposition.

THE TRIAL COURT'S JUDGMENT IS REVERSED AND THE CAUSE REMANDED TO THE OKLAHOMA EMPLOYMENT SECURITY COMMISSION WITH DIRECTIONS TO PROCEED IN A MANNER CONSISTENT WITH TODAY'S PRONOUNCEMENT.

John E. Miley, Deputy General Counsel, Oklahoma Employment Security Commission, Oklahoma City, Oklahoma, for Appellant.

Sarah J. Timberlake, William C. McAlister, Abowitz, Timberlake & Dahnke, P.C., Oklahoma City, Oklahoma, for Appellee.¹

OPALA, J.

¶1 The dispositive issue in this public-law controversy is whether the issues sought to be litigated are barred by the Oklahoma Employment Security Commission's (OESC or Commission) long-standing construction placed on the challenged tax exemption statute and the taxpayer's long-time acquiescence in the Commission's prior administrative practice. Because this theory was not clearly articulated until the last stage of the appellate proceeding, we reverse the trial court's judgment and remand the cause to the Commission to give the parties a full opportunity for resolution of that issue and development of the record for judicial review, if one be brought.

I THE ANATOMY OF LITIGATION

¶2 Oklahoma Goodwill Industries, Inc. (Goodwill) is a non-profit organization that provides rehabilitation and remunerative work for severely disabled persons. Individuals who participate in Goodwill's rehabilitation program are classified as consumers. Goodwill assigns consumers to work at its sheltered workshop and thrift shops as well as at Tinker and State offices. Some consumers are placed in private employment. This controversy concerns solely Goodwill's liability for unemployment taxes for those consumers who provide services at Tinker and the State offices pursuant to federal and state set-aside contracts² authorized by the so-called "Javits-Wagner-O'Day Act" (JWOD Act)³ and the "State Use Act."⁴ Goodwill's newly appointed president took the position in 2002 that Goodwill consumers working at Tinker and State office under these governmental contracts fall within the statutory exemption from unemployment coverage. Goodwill stopped reporting the wages of these workers on 1 January 2003.

¶3 The OESC's tax enforcement officer investigated several claims for unemployment benefits by Goodwill consumers who had been separated from employment under the state and federal contracts. In reviewing the claim of Beverly Peters, a Goodwill consumer who had been assigned to work at Tinker, OESC determined that the services performed at Tinker did not fall within the statutory exemption (40 O.S.Supp.2002 §1-210(7)(d))⁵ from unemployment taxes and awarded her unemployment benefits.⁶ Following the award and entry of an assessment, Goodwill brought a tax protest before the OESC Assessment Board (Board). The sole issue addressed by the Board was whether the provisions of §1-210(7)(d) exempt from coverage individuals performing service as part of a rehabilitation work program under the terms of the JWOD Act and the State Use Act.⁷ The Board affirmed the OESC determination.⁸ Goodwill brought an appeal from the Board's order to the district court. The trial court reversed the order.⁹ OESC brings this appeal, which stands retained for this court's disposition.

II THE CHALLENGED TAX EXEMPTION PROVISIONS OF THE EMPLOYMENT SECURITY ACT OF 1980

¶4 The purpose of the Employment Security Act of 1980¹⁰ is to promote employment security through the maintenance of a system of public employment offices and to provide for the payment of unemployment compensation. Section 1-210(7) of the Act provides for certain exemptions from covered employment. The parties disagree whether the terms of §40 O.S.Supp.2002 §1-210(7)(d)exclude from unemployment insurance coverage the services performed by the Goodwill consumers working at Tinker and the State offices. Its terms provide:

(7) For the purposes of paragraphs (3) and (4) of this section the term "employment" does not apply to service performed:

* * *

(d) by an individual receiving rehabilitation or remunerative work while participating or enrolled in a program in a facility that:

(i) conducts a program of rehabilitation for individuals whose earning capacity is impaired by age, physical or mental deficiency, or injury; or

(ii) conducts a program that provides remunerative work for individuals who, because of their impaired mental or physical capacity cannot be readily absorbed into the competitive labor market;¹¹

III THE CRITICAL DISPOSITIVE ARGUMENT RAISED FOR THE FIRST TIME IN THIS COURT ON APPEAL

¶5 OESC rested its position below solely on a construction of the challenged statute. On appeal it interposes an alternative basis for upholding the Assessment Board's order. OESC urges that deference should be given to itslong-standing administrative practice of treating as covered employment the services of Goodwill consumers who work at Tinker and State offices under state and federal contracts awarded to Goodwill pursuant to the JWOD Act and State Use Act.¹² OESC claims that Goodwill has agreed with this interpretation for over 30 years. According to OESC Goodwill has had an account with OESC since January of 1972 and has reported the wages of the consumers working under the federal and state contracts until 1 January 2003. OESC posits that because during this long period no controversy has arisen over the application of the exemption to the wages of similarly situated individuals, there was no need to make a formal determination with respect to this agency practice. It was not until Goodwill stopped reporting the wages of these consumers and claims were filed by several Goodwill consumers working at Tinker and State offices that an OESC determination and Assessment Board hearing became necessary.OESC notes that the Legislature has amended the statute several times without overriding this administrative construction.

¶6 Goodwill counters there is no record support for the contention that before 1 January 2003 OESC had consistently interpreted the tax exemption statute as not including the services of Goodwill consumers assigned to work at Tinker and the State office buildings. Goodwill claims OESC considered this issue for the first time in 2002. According to Goodwill, the fact that its management had not taken a position on §1-210(7)(d)'s applicability until a new Goodwill president was appointed in 2002 does not establish that prior to that time it had agreed with OESC's construction of the statute.

IV PUBLIC-LAW LITIGATION

¶7 This controversy raises a question of an employer's liability for unemployment insurance taxes. The legal question posed presents for our resolution an issue of public law.¹³ When confronting a matter of public law, this court may grant corrective relief on any applicable legal theory dispositive of the case and supported by the record.¹⁴

¶8 For the reasons to be explained in Parts V and VII(C) infra, the theory interposed by OESC, if resolved in the agency's favor, would be dispositive of this controversy. Because this theory was first asserted at the final appellate stage and it is not apparent from this record whether OESC's construction of the statutory exemption has been of a long and continued duration, we must remand this cause to the Commission¹⁵ to explore and decide this critical and dispositive issue before any other matter may be reached for resolution on appeal.¹⁶ Both parties are entitled to an opportunity to support or controvert that theory by proof and argument and to develop a record in support of their respective positions before the Commission.

V THE LONG-STANDING AND CONSISTENT CONSTRUCTION OF A TAX STATUTE BY AN AGENCY CHARGED WITH ITS ADMINISTRATION

¶9 An agency's long-standing construction of an ambiguous or uncertain statute will not be cast aside without cogent reason.¹⁷ A construction placed upon a tax statute by those charged with its administration and enforcement — especially one of a long and continued duration — must be given great weight.¹⁸ Where the Legislature has convened many times during the period of an agency's long-continued construction of a statute without expressing its disapproval, the lawmakers' silence may be regarded as acquiescence in or approval of the administrative construction.¹⁹ We are reluctant to disturb a long-standing and consistent practice by a taxing authority whose construction of a tax exemption has for decades been acquiesced in by the taxpayer.

¶10 Goodwill has cast an ambiguity upon the terms of §1-210(7)(d) by proposing a meaning different...