Brown v. Cal. Unemployment Ins. Appeals Bd.
Brown v. Cal. Unemployment Ins. Appeals Bd.
Opinion of the Court
*712*1111The question in this case is a narrow one, involving the correct rate of interest to be applied after a court determines that unemployment benefits have been wrongfully withheld by the Employment Development Department (EDD) and the California Unemployment Insurance Appeals Board (Board). Appellant Mark Brown (Brown) argues that interest should be charged at the contract rate of 10 percent from the date that each benefit payment was due, in accordance with Civil Code section 3289, subdivision (b).
I. BACKGROUND
The underlying facts of this matter are largely undisputed.
When Brown applied for unemployment benefits, EDD initially determined that he was eligible, stating: "[Brown] just wore his own shirt by mistake. [BCP] should have given him warning instead of terminating him. [BCP] did not give opportunity to [Brown] to correct this mistake. [He] was even ready to go back home and change his shirt. Hence, [his action] does not constitute a willful misconduct." After BCP appealed, however, an administrative law judge concluded that Brown had "willfully breach[ed] his duty and obligation to the employer" by wearing the wrong shirt and thus reversed EDD's initial eligibility determination. Brown subsequently appealed this denial of benefits, but the Board affirmed it.
*713Thereafter, in September 2012, Brown filed a petition for writ of administrative mandate, seeking to set aside the Board's eligibility determination and arguing that his actions in wearing the wrong shirt were insufficient to constitute misconduct for purposes of denying him eligibility for unemployment benefits. The trial court agreed and, in May 2013, granted Brown's writ petition, concluding that Brown had not engaged in misconduct sufficient to disqualify him from unemployment benefits because he had offered to go home and change shirts and he was terminated on the first instance that he had violated his employer's new uniform policy. As a consequence of this determination, the trial court issued a peremptory writ of administrative mandate commanding EDD and the Board to "immediately" award Brown "the unemployment insurance benefits that were withheld in the administrative proceedings in this matter plus interest on those benefits" (Writ).
In August 2013, EDD filed a return to the Writ, stating that the Board had swiftly reversed its prior eligibility determination and that EDD had subsequently paid Brown "all the benefits for which he has been found eligible ...." EDD further noted, however, that it was requiring Brown to submit benefit certification forms for the weeks related to the past-due benefits and that an eligibility issue had arisen with respect to a particular three-week period that would need to be resolved before further benefits could be paid or certification forms sent for any additional weeks. It claimed that it would continue to pay Brown "for the weeks that [he] is eligible and for which he submits the required certification claim forms demonstrating his continued eligibility for unemployment benefits."
Over a year later, in October 2014, Brown filed a motion to enforce the Writ, claiming that EDD had unilaterally imposed improper conditions on the *1113payment of benefits pursuant to the Writ, had caused extended delays, and had continued to withhold benefits and interest without justification. For example, despite several requests from Brown's attorney that EDD meet and confer regarding the amount of unpaid benefits as required by the trial court, EDD did not respond. At one point, EDD bypassed Brown's attorney and contacted Brown directly regarding an eligibility dispute. Thereafter, it insisted that Brown attend a " 'mandatory reemployment assessment appointment' " or face indefinite disqualification for benefits and asked numerous questions about Brown's continuing efforts to obtain employment, despite the fact that Brown's current employability was irrelevant to the payment of the past-due benefits. And, at the time he filed his enforcement action-14 months after the issuance of the Writ-EDD had, by Brown's calculation, still failed to pay all amounts owed to Brown. In addition to full enforcement, Brown sought attorney's fees under Government Code section 800 as well as imposition of a fine and sanctions pursuant to Code of Civil Procedure sections 177.5 and 1097 based on EDD's continued unjustifiable conduct.
In April 2015, the trial court issued its order granting in part and denying in part Brown's motion to enforce the Writ (Enforcement *714Order). Specifically, the court concluded that EDD did not "reasonably compl[y]" with the Writ both by unilaterally demanding that Brown "retroactively fill out bi-weekly certifications for the entire period" before paying him the past-due benefits and by refusing to meet and confer with Brown's attorney as ordered. Moreover, because EDD's failure to comply was "without good cause or substantial justification," the court levied a $1,000 fine against EDD under Code of Civil Procedure section 1097 and awarded reasonable attorney fees to Brown up to the $7,500 maximum authorized by Government Code section 800.
In contrast, the court determined that the correct rate of interest for wrongfully withheld unemployment benefits was not the 10-percent contract rate, as Brown argued, but was instead 7 percent, the "generic interest rate on judgments" suggested by EDD. Prior to the instant enforcement action, however, EDD had conceded that the appropriate rate of interest was the 10-percent contract rate, and had paid interest to Brown based on that rate.
Brown's timely notice of appeal from the Enforcement Order now brings the matter before this court.
II. DISCUSSION
A. Standard of Review
We recently described the correct standard of review with respect to an order enforcing a writ of mandate as follows: In such proceedings, the validity of the underlying writ is not before us. ( Robles v. Employment Development Dept. (2015)
In addition, when analyzing the issues before us, we are cognizant of the fact that " '[t]he fundamental purpose of California's Unemployment Insurance Code is to reduce the hardship of unemployment ....' " ( Robles II , supra , 236 Cal.App.4th at p. 545,
B. Interest Payable on Wrongly Denied Unemployment Benefits
We begin by delineating the aspects of this dispute to which clear rules apply. First, it is beyond dispute that EDD was required to pay *1115prejudgment interest on the unemployment benefits that it erroneously refused to pay to Brown, pursuant to section 3287, subdivision (a). (See Aguilar v. Unemployment Ins. Appeals Bd. (1990)
When calculating such prejudgment interest, " 'each payment of benefits ... should be viewed as vesting on the date it becomes due.' " ( Aguilar , supra , 223 Cal.App.3d at pp. 245-246,
*716McConnell v. Pacific Mutual Life Ins. Co. (1962)
Finally, "[a]bsent a statutory provision specifically governing the type of claim at issue, the prejudgment interest rate is 7 percent under article XV, section 1 of the California Constitution." ( Bullock v. Philip Morris USA, Inc. (2011)
We conclude that a former employee's right to unemployment benefits is sufficiently tied to his or her employment contract to justify imposition of prejudgment interest at the contractual rate of 10 percent. " 'To finance *1117state unemployment and disability benefits, California requires contributions from both employers and employees. Generally, employers must annually contribute to the unemployment fund based on wages paid to their employees.' " ( *717West Hollywood Community Health & Fitness Center v. California Unemployment Ins. Appeals Bd. (2014)
Although not directly on point, we believe that Bell , supra ,
Bell is also useful for its conclusion that section 218.6 of the Labor Code was declarative of existing law-specifically, section 3289. ( Bell , supra , 135 Cal.App.4th at pp. 1145-1150,
Finally, given that the prompt payment of benefits is crucial to the unemployment compensation insurance system, we believe our construction of section 3289 to include actions for the payment of wrongfully withheld unemployment benefits is consistent with the legislative objective of the Unemployment Insurance Act (Act)-reducing the hardship of unemployment. ( Robles II , supra , 236 Cal.App.4th at p. 546,
In reaching this conclusion, we acknowledge that in Rivera , supra ,
Whether we agree or disagree with the federal court's analysis and conclusions in Rivera , we see it as answering a different question than the one before us. We are not here concerned with whether the entire unemployment insurance system established by the state creates contract rights which are constitutionally protected from impairment, such that the legislation could not be changed to the overall detriment of vested claimants. That is a much different and broader inquiry. We hold only that once a court has determined that such a claimant was wrongfully denied unemployment insurance benefits in a liquidated amount under existing law, that *719claimant's right to those benefits is sufficiently tied to his or her contract of employment to support a grant of prejudgment interest at the contractual rate of 10 percent. As one court succinctly put it when discussing the fundamental and vested nature of such a right: "Once a claimant meets the requirements of the act, he [or she] is entitled to a certain sum of money." ( Cooperman , supra , 49 Cal.App.3d at p. 7,
Before we leave our interest rate discussion, however, we must further determine if and when Brown's right to prejudgment interest was superseded by a judgment and therefore converted to a right to receive postjudgment interest. (See § 3289, subd. (a) ["[a]ny legal rate of interest stipulated by a contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation"]; Howard v. American National Fire Ins. Co. (2010)
Pursuant to subdivisions (a) and (c) of section 965.5 of the Government Code, interest on a "judgment for the payment of money against the state or a state agency" commences to accrue "180 days from the date of the final judgment or settlement." The rate is the constitutional rate of 7 percent. (See Cal. Const., art. XV, § 1 ["[i]n the absence of the setting of such rate by the Legislature, the rate of interest on any judgment rendered in any court of the state shall be 7 percent per annum"]; see also California Fed. Savings & Loan Assn. v. City of Los Angeles (1995)
We conclude that, for purposes of determining when Brown's right to prejudgment interest must give way to his entitlement to postjudgment interest, the trial court's Writ and related order, issued on May 23, 2013, are the relevant judgment in these proceedings. Pursuant to subdivision (f) of Code of Civil Procedure section 1094.5, a court in an administrative mandamus proceeding "shall enter judgment either commanding respondent to set aside the order or decision, or denying the writ" (italics added). Moreover, Code of Civil Procedure section 1095 provides that "[i]f judgment be given for the applicant, the applicant may recover the damages which ...may be enforced in the manner provided for money judgments generally." Thus, although further efforts at enforcement may subsequently have been required in this case, the Writ and related order were "the final determination of the rights of the parties" and therefore a judgment. ( Code Civ. Proc., § 577.) Indeed, and his assertion to the contrary notwithstanding, the very fact that *1121Brown's damages were, at that point, "capable of being made certain by calculation" is precisely why he was entitled to prejudgment interest pursuant to section 3287, subdivision (a).
It is clear that the trial court below did not consider the many different ways in which various rates of interest must be applied in this case in order to determine whether Brown has been properly awarded the "unemployment insurance benefits that were withheld in the administrative proceedings in this matter plus interest on those benefits" as mandated by the Writ. We therefore reverse the Enforcement Order solely with regards to its discussion of the interest payable on the benefits at issue and remand the matter so that further enforcement of the Writ can occur if, and only if, additional amounts are due to Brown which remain unpaid under our analysis. Should EDD at this point finally agree to meet and confer regarding any amounts due, the matter may perhaps be able to be resolved without further court order.
C. Due Process
As a final matter, Brown urges us to conclude that EDD's conduct in requiring retroactive certification of complicated work search requirements as a precondition to payment of the wrongfully withheld benefits at issue violated due process. Although the trial court did not reach this constitutional claim, Brown asks us to declare a due process violation based on his assumption that-without our intervention-EDD will routinely continue to impose these invalid conditions on others who successfully obtain writs of mandate. EDD, in contrast, argues that no live controversy exists here implicating due process, as Brown complied with EDD's certification requirements and was paid with interest.
It is true that this situation is somewhat distinguishable from that presented in Robles II in that EDD did ultimately pay the bulk of the benefits and interest due to Brown prior to the court's Enforcement *721Order. Further-and importantly from a due process standpoint-EDD appears in this case to have accepted as sufficient retroactive certifications in which Brown indicated that he did not recall the specifics of his work search efforts.
On the other hand, it is beyond dispute that the process chosen by EDD in this case did not lead to "immediate" payment of the improperly withheld benefits, a fact recognized by the trial court when it fined the agency for failure to reasonably comply with the Writ. Most troubling, in our view, were EDD's repeated refusal to meet and confer, its attempt to contact Brown directly rather than through his attorney, and its focus on irrelevant information related to Brown's current employment situation. Nevertheless, while we certainly do not condone the process here employed by EDD, the agency has since had the benefit of our decision in Robles II and has been subject to fines both in that case and in the present matter based on its utter failure to effect the immediate payment of the wrongfully withheld benefits at issue. (See Robles II , supra , 236 Cal.App.4th at p. 545,
III. DISPOSITION
The Enforcement Order is affirmed other than with respect to the calculation of interest, and the matter is remanded to the trial court for further enforcement of the Writ as may be necessary, consistent with the terms of this opinion. Brown is entitled to his costs on appeal.
We concur:
RUVOLO, P.J.
STREETER, J.
All further statutory references are to the Civil Code unless otherwise specified.
Although not part of our record of appeal, we take judicial notice of the administrative record in these proceedings. (Evid. Code, §§ 452, 459.)
Government Code section 800 allows a litigant who successfully challenges a public agency's determination to recover attorney fees up to $7,500 "if the litigant demonstrates that the agency acted in an arbitrary or capricious manner." (Zuehlsdorf v. Simi Valley Unified School Dist. (2007)
Specifically, EDD had instructed its staff: "Please issue interest on unpaid benefits for the claimant (Mark A. Brown) from the time benefits were due (week ending date) until paid in 2013. Interest is payable at the statutory rate of 10% (Civil Code Sections 3287 and 3289 )."
This is not-as EDD now incorrectly asserts on appeal-an improper compounding of interest. Rather, it is simply a rule acknowledging that interest is owed with respect to any additional principal still outstanding after payments are received and correctly applied. It is thus not a claim that interest should be paid on interest.
EDD argues that this interest rate dispute is moot because it has already paid Brown the maximum allowable unemployment insurance benefit to which he is entitled, as well as 10 percent interest on that benefit, and the trial court held that EDD could not recoup any overpayment. Brown, however, does not concede that all required amounts have been paid. In particular, as discussed above, he argues that the payments made by EDD have not been properly applied first to accrued interest as required, thereby leaving a balance due. Under these circumstances-where further relief can potentially be granted and where the interest issues raised are likely to recur-we believe a continuing controversy exists sufficient to support reaching the merits of Brown's claim. (See Cucamongans United for Reasonable Expansion v. City of Rancho Cucamonga (2000)
Since we have concluded that Brown is entitled to prejudgment interest at the rate of 10 percent pursuant to section 3289, we need not reach Brown's additional claim that he is also entitled to prejudgment interest at the rate of 10 percent under Labor Code section 218.6.
While, as asserted by EDD, recent amendments to section 3287 and Government Code section 965.5 -establishing an interest rate potentially significantly lower than the generic 7-percent postjudgment rate for "interest on a tax or fee judgment for the payment of moneys against the state"-may very well evince a trend towards lower interest rates where the State is a litigant, they are completely irrelevant here, as these proceedings do not involve payment of either a "tax" or a "fee." (See § 3287, subd. (c) [setting interest "at a rate equal to the weekly average one year constant maturity United States Treasury yield," but not to exceed 7 percent per annum]; Gov. Code, § 965.5, subd. (d) [same]; see generally City of Clovis, supra,
Given our resolution of this appeal, we deny EDD's request for judicial notice, filed on May 18, 2016, as the materials proffered are irrelevant to our decision.
Brown's attorney declared below that, during the certification process, Brown informed him "that he had made numerous applications, but he had not previously been notified regarding the new instructions and did not keep records or recall the information that EDD was requiring." On his attorney's advice, Brown "therefore wrote 'I do not recall' on the certified claim forms where he truthfully did not recall." EDD eventually paid all of the claims related to these certifications.
Reference
- Full Case Name
- Mark A. BROWN, and v. CALIFORNIA UNEMPLOYMENT INSURANCE APPEALS BOARD, and
- Cited By
- 14 cases
- Status
- Published