E-Alert Case Updates

Administrative Law Judge Without Authority to Reduce Repayment Amount of D.C. Unemployment Benefits

Department of Employment Services v. Cecelia Smallwood
Case No. 09-AA-719 (D.C. Court of Appeals, August 18, 2011)
by Eric M. Leppo, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this recently issued opinion, the Court of Appeals for the District of Columbia reversed the decision of the D.C. Office of Administrative Hearings (“OAH”). The Court determined that OAH had no statutory authority to reduce the repayment owed by a former employee who was overpaid in unemployment benefits.

This action essentially arose out of Cecelia Smallwood’s termination from her position as a teacher in the District of Columbia public school system. She filed a claim for unemployment benefits and initially a Department of Employment Services examiner determined she was eligible to receive benefits. The Public School system requested review of that determination arguing that Ms. Smallwood failed to perform required tasks as assigned and therefore was dismissed for gross misconduct.

A hearing in OAH was held in October 2008. In March 2009, OAH issued a decision finding that Ms. Smallwood had been dismissed for gross misconduct and therefore was improperly paid $13,767 in unemployment benefits. The Department of Employment Services issued notice to Ms. Smallwood that it sought repayment of those funds, and Ms. Smallwood appealed the Department’s overpayment determination. Therefore, the matter again came before an Administrative Law Judge (“ALJ”) at OAH.

The ALJ determined that Ms. Smallwood was indeed overpaid benefits, however, the ALJ held that the overpayment occurred through no fault of Ms. Smallwood. Further, the ALJ stated that the amount of overpayment was significantly higher than it might have been if a Final Order was issued sooner by OAH rather than months after the initial hearing. The amount Ms. Smallwood was required to repay was reduced to $3,590. The Department of Employment Services appealed the OAH decision contending that only the Department under the authority of the Director—not an ALJ or OAH—has authority to reduce or adjust the repayment amount.

The Court began its analysis by recognizing it has limited review of OAH decisions: “We must affirm unless the decision is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” Thomas v. Nat’l Children’s Ctr., Inc., 961 A.2d 1063, 1065 (D.C. 2008). The Court then cited the unemployment compensation statute codified at D.C. CODE § 51-119 (d)(1) (2001) which provides that the Director of the Department of Employment Services may waive or reduce repayment of overpaid benefits when the “sum is received by such person without fault on his part and such recoupment would defeat the purpose of this subchapter . . .” Id.

The key question for the Court was whether this statute also authorizes OAH to make a discretionary waiver decision (as the ALJ did in this case). The Court noted that the Office of Administrative Hearings Establishment Act of 2001 calls on OAH to perform administrative review of unemployment compensation decisions. The Court held that this administrative review function does not equate to giving OAH all the powers of the Department or its Director in other statutory or regulatory provisions.

The Act “does not make a general transfer of the [Department’s] Director’s authority to OAH” and “cannot logically be read to have conferred on the OAH all powers to make whatever decision it may wish with respect to unemployment compensation benefits.” Smallwood at *9.

As a result, the Court determined that the ALJ had no authority to revise the overpayment amount, and Ms. Smallwood was properly liable for the full value of the overpayment of benefits she received.