State ex rel. Wolgast v. Schurle

• Decision Date: 24 July 1986
• Docket Number: No. 58456,58456
• Citation: 11 Kan.App.2d 390,722 P.2d 585
• Parties: STATE of Kansas, ex rel. Larry E. WOLGAST, Secretary of Human Resources, Appellee, v. Richard L. SCHURLE, d/b/a Schurle Sign Service, Appellant.
• Court: Kansas Court of Appeals

Page 585

722 P.2d 585

11 Kan.App.2d 390

STATE of Kansas, ex rel. Larry E. WOLGAST, Secretary of

Human Resources, Appellee, v. Richard L. SCHURLE, d/b/a Schurle Sign Service, Appellant.

No. 58456.

Court of Appeals of Kansas.

July 24, 1986.

Syllabus by the Court

1. The Kansas Employment Security Law is an act complete within itself, providing its own procedure. K.S.A. 44-701 et seq.

2. Once an "employment unit" becomes an "employer" under the Employment Security Law it will continue to be an employer until it makes application for termination of coverage by the Act as provided in K.S.A. 1985 Supp. 44-711(b).

3. The stringent relevancy requirements of subpoenas in aid of civil or criminal litigation do not apply to administrative agency subpoenas. Following Yellow Freight System, Inc., v. Kansas Commission on Civil Rights, 214 Kan. 120, 519 P.2d 1092 (1974).

4. The test of relevancy for subpoenas issued by the Secretary of Human Resources under the Employment Security Law requires that the inquiry be one which the Secretary is authorized to make; that the demand not be too indefinite; and that the information sought be reasonably relevant.

5. The trial court did not abuse its discretion in refusing to quash the subpoena issued by the Secretary of Human Resources under the Employment Security Law.

Richard L. Schurle, pro se.

H. Dean Cotton, Office of Chief Counsel, Dept. of Human Resources, Topeka, for appellee.

Before BRISCOE, P.J., RICHARD W. WAHL, District Judge, assigned, and CORWIN C. SPENCER, J. Retired, assigned.

WAHL, Judge:

This case arises in conjunction with an investigation into whether liability exists for unemployment taxes. In an action by appellee Secretary of Human Resources for an order to enforce a subpoena duces tecum issued upon appellant Richard L. Schurle, d/b/a Schurle Sign Service, appellant appeals an order overruling his motion to quash.

Richard L. Schurle operates a sign business in Riley, Kansas. He first became an employer for purposes of paying unemployment taxes under the Employment Security Law, K.S.A. 44-701 et seq., on January 1, 1978, by employing one or more people during twenty different calendar weeks. Schurle filed the required quarterly reports and paid the appropriate taxes through the first quarter of 1982. Thereafter, he filed wage reports showing no payment of wages for eight consecutive quarters. The Department of Human Resources marked Schurle's file "inactive" on March 31, 1984.

On October 19, 1984, Schurle again began paying wages and filed an appropriate report. Thereafter, the Department of Human Resources, Division of Employment, assigned a field representative, Herbert L. Huerter, to "investigate for liability" for employment taxes due from Schurle's sign business.

The investigator testified that he had no evidence to believe Schurle had paid wages to employees from April 1982 through October 1984, but he suspected an unemployment tax violation during that period because he had seen Schurle's truck around town twice. Schurle admitted continuous operation of his business but contended he had employed no one. On December 11, 1984, Huerter caused a subpoena to issue from the Human Resources Department upon Schurle commanding him to produce "check stubs from all checking accounts, check register, general ledger, disbursements journal, Federal Forms 940, 941 and 1099, time and payroll records and all other records of expenditures by or for the business entity indicated above, so that the status of workers and the wages paid from January 1, 1982, to the current date can be verified."

Schurle refused to obey the command of the subpoena.

On January 29, 1985, the Secretary of Human Resources filed this action in the district court seeking an order enforcing the subpoena. The court issued the requested order on February 4, 1985. Two days later, with aid of counsel, Schurle filed a motion to quash the subpoena contending, among other things, that the Department lacked jurisdiction for failure to show that he was an "employer," and that the Department lacked authority under case law to embark on a "fishing expedition."

The case was heard on March 21, 1985. On July 2, 1985, the court issued an order overruling Schurle's motion to quash. The court found that Schurle had remained an employing unit subject to Department supervision because he had never requested termination of his status as an "employer." The court also found that fishing expeditions are a legitimate administrative investigatory tool and that the subpoena here was authorized, definite, and reasonably relevant to the Department's inquiry. Schurle filed a pro se notice of appeal.

On appeal, Schurle argues that because the Secretary has not shown him to be an employer subject to the Employment Security Law, K.S.A. 44-701 et seq., the Secretary has no authority to issue a subpoena upon him. We disagree.

The Kansas Employment Security Law is an act complete within itself, providing its own procedure. City of Hutchinson v. Hutchinson, Office of State Employment Service, 213 Kan. 399, 517 P.2d 117 (1973). In recognition of the legislative determination that economic insecurity due to unemployment is a "serious menace to [the] health, morals, and welfare of the people of this state," it is the Act's policy that the compulsory setting aside of unemployment reserves for the benefit of persons unemployed be accomplished under the police powers of the state. K.S.A. 44-702.

The Act requires all employers to pay contributions to the employment security fund at a rate established by the Secretary. K.S.A. 1985 Supp. 44-710(a). "Employer" is broadly defined, but in pertinent part is:

"Any employing unit which ... (ii) for some portion of a day in each of 20 different calendar weeks ... had in employment at least one individual...." K.S.A. 1985 Supp. 44-703(h)(2)(A).

Once an "employing unit" becomes an "employer," it will continue to be an employer under K.S.A. 1985 Supp. 44-703(h)(6) which defines employer as:

"Any employing unit which having become an employer under this subsection (h) has not, under subsection (b) of K.S.A. 44-711 and amendments thereto, ceased to be an employer subject to this act."

The Secretary of Human Resources is granted the authority and duty to administer the Act, K.S.A. 1985 Supp. 44-714(a); K.S.A. 1985 Supp. 44-703(e), and to that end the Secretary is accorded the power and authority "to adopt, amend, or revoke such rules and regulations ... require such reports, make such investigations, and take such other action as [he] deems necessary or suitable." (Emphasis added.) K.S.A. 1985 Supp. 44-714(a). In the discharge of the duties imposed by the Employment Security Law, the Secretary, or any duly authorized representative, has explicit power "to administer oaths and affirmations, take depositions, certify to official acts, and issue subpoenas to compel the attendance of witnesses and the production of books, papers, correspondence, memoranda and other records deemed necessary as evidence in connection with ... the administration of the employment security law." (Emphasis added.) K.S.A. 1985 Supp. 44-714(g). The Act further bestows jurisdiction upon any court of this state to hear an application of the Secretary for enforcement of any subpoena which has been disobeyed. K.S.A. 1985 Supp. 44-714(i).

In this case, Schurle argues that the Secretary's subpoena power does not extend to him because he is not an "employer" or "employing unit." Contrary to Schurle's argument, nothing in the statute that grants the Secretary subpoena and other broad, investigatory powers limits the use of those powers to investigations of "employers" o...