Slippery Rock Area v. Unemployment Comp.

• Decision Date: 30 November 2009
• Docket Number: No. 14 WAP 2009.,14 WAP 2009.
• Citation: 983 A.2d 1231
• Parties: SLIPPERY ROCK AREA SCHOOL DISTRICT v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW Appeal of Commonwealth of Pennsylvania, Department of Labor and Industry.
• Court: Pennsylvania Supreme Court

983 A.2d 1231

SLIPPERY ROCK AREA SCHOOL DISTRICT v. UNEMPLOYMENT COMPENSATION BOARD OF REVIEW Appeal of Commonwealth of Pennsylvania, Department of Labor and Industry.

No. 14 WAP 2009.

Supreme Court of Pennsylvania.

Argued September 15, 2009.

Decided November 30, 2009.

Christopher George Giovanis, Sean F. Creegan, PA Department of Labor & Industry, for Commonwealth of Pennsylvania Department of Labor and Industry

Michael David Hnath, Dillon McCandless King Coulter & Graham L.L.P., for Slippery Rock Area School District.

Gerard Matthew Mackarevich, Maribeth Wilt-Seibert, PA Unemployment Compensation Board of Review, for Unemployment Compensation Board of Review.

Paul N. Lalley, Levin Legal Group, P.C., for Pennsylvania School Boards Association Insurance Trust, amicus curiae.

BEFORE: CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.

OPINION

Justice GREENSPAN.

This appeal presents the question of whether a substitute school teacher was entitled to receive unemployment benefits for the summer vacation period between the 2006-07 and 2007-08 academic years under Section 402.1(1) of the Unemployment Compensation Act (the Act).¹ In an en banc opinion, the Commonwealth Court held that as a long-term substitute returning in the second academic year as a day-to-day substitute, the school teacher would not be eligible to receive unemployment benefits. For the following reasons, we reverse.

I. Background

During the 2006-07 school year, Heather J. LiVorio worked as a long-term substitute teacher in the Slippery Rock Area School District (School District). In that capacity, she earned $23,500 for the academic year (equivalent to $126.34 per day for 180 days) and received ten sick days. N.T. 08/08/2007, at 6-8. In June 2007, the School District notified Ms. LiVorio that she would not be retained as a long-term substitute and offered to place her on a list of day-to-day substitutes (paid per diem) for the 2007-08 school year. Letter of Reasonable Assurance, dated June 11, 2007. The School District offered Ms. LiVorio a rate of $80.00 for each day worked and no paid sick day allowance. N.T. 08/08/2007, at 6-8. It did not guarantee that Ms. LiVorio would receive a certain number of or even any substitute teacher assignments. N.T. 08/08/2007, at 10.² Ms. LiVorio nonetheless accepted the School District's offer.

Subsequently, Ms. LiVorio filed an application for unemployment compensation, seeking benefits beginning after her last day as a long-term substitute teacher. On June 27, 2007, the Department of Labor and Industry (Department) notified Ms. LiVorio that she was eligible for unemployment benefits starting June 16, 2007. The School District appealed and after a hearing, the unemployment compensation referee denied Ms. LiVorio benefits. Citing Section 402.1(1) of the Act, the referee concluded that Ms. LiVorio was not entitled to unemployment benefits because she had "reasonable assurance" of returning to work for the School District during the 2007-08 academic year.³

Ms. LiVorio appealed to the Unemployment Compensation Board of Review (UCBR). The UCBR reversed the referee's decision in October 2007. The UCBR relied on the Department's regulation 34 Pa.Code § 65.161 (Regulation) to hold that Ms. LiVorio did not have "reasonable assurance" of returning to work for the School District as required by. Section 402.1(1), because the terms and conditions of her employment as a day-to-day substitute teacher were substantially less favorable than those of her employment as a long-term substitute.⁴ The UCBR reinstated Ms. LiVorio's unemployment benefits.

The School District appealed the UCBR's decision to the Commonwealth Court. The Department sought and obtained permission to intervene in the appeal. In May 2008, all the parties argued the case before a three-judge panel. Subsequently, the Commonwealth Court ordered the matter submitted on briefs to the court sitting en banc. In December 2008, the en banc Commonwealth Court reversed the decision of the UCBR and held that the Department's Regulation was invalid and unenforceable. See Slippery Rock Area Sch. Dist. v. Unemployment Comp. Bd. of Review, 962 A.2d 1266, 1273 (Pa.Commw.2008). According to the Commonwealth Court, the Regulation was invalid because the Department did not have the authority to "formulate criteria for the grant or denial of [unemployment] benefits" under the "detailed statutory scheme" of the Act. Id. (emphasis in the original). The Commonwealth Court concluded that the Regulation was merely interpretive, not a binding legislative regulation, and in fact inconsistent with Section 402.1(1) of the Act as interpreted in the Commonwealth Court's pre-Regulation decisions. Id. at 1273.

Judge McGinley filed a dissenting opinion in which Judges Pellegrini and Friedman joined. According to the dissent, the Regulation was a valid and binding legislative regulation promulgated as a proper exercise of the Department's rulemaking authority and is consistent with Section 402.1(1).

In January 2009, the Department filed a petition for allowance of appeal in which the UCBR joined. We granted permission to appeal on the following issues:

1) Whether the Commonwealth Court erred in holding that [the Regulation] is an interpretive regulation rather than an amendment or a binding legislative regulation with respect to Section 402.1 of the Act, 43 P.S. § 802.1(1)?

2) Whether the Commonwealth Court applied the appropriate test in holding that [the Regulation] is invalid?

As both issues present us with pure questions of law, our standard of review on appeal from the Commonwealth Court is de novo and the scope of review is plenary. St. Elizabeth's Child Care Ctr. v. Dep't of Pub. Welfare, 600 Pa. 131, 963 A.2d 1274, 1276 (2009).

The Department and the UCBR, appellants, argue that the Commonwealth Court erred in holding the Regulation invalid and reversing the UCBR's adjudication. According to the appellants, the Regulation possesses all the characteristics of a valid and binding legislative regulation. The School District, as appellee, denies any error by the Commonwealth Court. According to the School District, the Regulation improperly amended Section 402.1 of the Act and is thus invalid. The School District also argues that the Regulation was adopted outside the scope of the Department's authority, which renders it a mere interpretive rule inconsistent with the settled meaning of Section 402.1(1).

Pennsylvania courts have developed a two-step process for determining whether an administrative regulation is mandatory and binding. First, a court must determine what type of regulation it is examining (legislative or interpretive) and second, whether the regulation is valid. See Pa. Human Rel. Comm'n v. Uniontown Area Sch. Dist., 455 Pa. 52, 313 A.2d 156, 169 (1973) (Opinion Announcing the Judgment of the Court) (Uniontown).⁵ Depending on what type it is, the regulation may be either binding (legislative) or merely entitled to deference (interpretive). Id. Generally, a legislative regulation establishes "a substantive rule creating a controlling standard of conduct." Borough of Pottstown v. Pa. Mun. Ret. Bd., 551 Pa. 605, 712 A.2d 741, 743 (1998) (Pottstown). A legislative regulation is valid if adopted pursuant to delegated legislative power, in accordance with the appropriate administrative procedure, and is reasonable. See id.; see Uniontown, 313 A.2d at 169. By comparison, ah interpretive regulation merely construes and does not expand upon the terms of a statute. See Pottstown, 712 A.2d at 743. An interpretive regulation is valid if it "genuinely track[s] the meaning of the underlying statute." Id. If the interpretive regulation "is unwise or violative of legislative intent, courts disregard [it]." Uniontown, 313 A.2d at 169.

The test for determining the validity of an interpretive regulation is also applied to a regulation that establishes a substantive rule in two other circumstances: if the regulation was adopted by a Commonwealth agency without lawmaking power or if it was adopted without meeting the appropriate procedural requirements. See Bailey v. Zoning Bd. of Adjustment of City of Philadelphia, 569 Pa. 147, 801 A.2d 492, 501 (2002) (holding that "where a statute does not explicitly provide an agency with rule-making powers, if the agency is directed to operate under the statute," it may adopt interpretive rules; also holding that regulation adopted without meeting procedural requirements was merely interpretive and not legislative).

The Regulation subject to this appeal states in relevant part:

(a) For purposes of section 402.1 of the law (43 P.S. § 802.1), a contract or reasonable assurance that an individual will perform services in the second academic period exists only if both of the following conditions are met:

(1) The educational institution or educational service agency provides a bona fide offer of employment for the second academic period to the individual.

(2) The economic terms and conditions of the employment offered to the individual for the second academic period are not substantially less than the terms and conditions of the individual's employment in the first academic period.

34 Pa.Code § 65.161(a) (emphasis added). "For the purposes of subsection (a), economic terms and conditions of employment include wages, benefits and hours of work." 34 Pa.Code § 65.161(c). The element of "reasonable assurance" addressed by the Regulation is known as economic equivalency. See, e.g., Slippery Rock, 962 A.2d at 1268.

Section 402.1(1) of the Act states in relevant part:

With respect to service performed after December 31, 1977, in an instructional, research, or principal administrative capacity for an educational institution, benefits shall not be paid based on such services for any week of unemployment commencing during the period between two successive academic years . . . to any individual if such individual performs...