18. Restitution, Waiver, Fraud

Proulx v. Horiba Subsidiary, Inc. – 18.21

Proulx v. Horiba Subsidiary, Inc.
Digest No. 18.21

Sections 421.27, 421.33(1), 421.54(b), and 421.62(a)

Cite as: Proulx v Horiba Subsidiary, Inc, unpublished opinion of the Michigan Compensation Appellate Commission, issued October 1, 2014 (Docket No. 14-00680-241108).

Appeal pending: No
Claimant: Brian D. Proulx
Employer: Horiba Subsidiary, Inc.
Docket no.: 14-00680-241108
Date of decision: October 1, 2014

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HOLDING: Redetermination by the UIA requires fact finding in support of the agency’s decision. When the Agency merely makes a conclusory statement in support of its ruling, such a decision is procedurally deficient and will not be upheld on appeal. Secondly, when a claimant fails to appear at an appeal by the Agency, the ALJ has jurisdiction both to dismiss the proceedings and to “take other action considered advisable”. Thus, the ALJ has “broad discretion to address the matter.” Finally, the notice for the hearing, delivered to the claimant, was required to include ”the issues and penalties involved”. (This requirement has been altered by Michigan Administrative Code (MAC) Rule 792.11407. This rule requires a “short and plain statement of the issues involved”, while related rules require a 20 notice, compared to the usual 7, and a witness list and copy of all documentary evidence related to fraud.)

FACTS: After being discharged by Horiba Subsidiary, Claimant applied for and received benefits under Section 27. A rehearing, on March 28, 2014, by the Unemployment Insurance Agency accused Claimant of fraud or misrepresentation, found him ineligible for Section 27 benefits, and subject to restitution under Section 62(a). A separate rehearing on the same day assessed penalties under Section 54(b). Claimant then failed to appear at an ALJ hearing of this matter on July 10, 2014. The notice of this hearing provided to Claimant read “SECTION 27(c) & 48 – WHETHER OR NOT CLAIMANT IS ELIGIBLE FOR BENEFITS UNDER THE REMUNERATION, EARNINGS OFFSET PROVISION. CLAIMANT MUST PAY RESTITUTION/DAMAGES TO AGENCY UNDER SECTION 54(b)-INTENTIONAL MISREPRESENTATION. SECTIONS THAT MAY APPLY ARE: 62(a), 62(b), 20(a).” This notice did not include the penalties involved as required by the Michigan Administrative Code (MAC) Rule 421.1110(1). (Note that this rule has since been superseded and altered by Rule 792.11407.)

Because of Claimant’s failure to appear, the ALJ dismissed Claimant’s appeal of the Section 27, and Section 62(a) rehearings, but remanded the Section 54(b) rehearing to the Agency because their accusations in that rehearing were merely conclusory and didn’t provide supporting fact-finding. The Unemployment Insurance Agency appealed this remand decision to the Michigan Compensation Appellate Commission, and the Commission reviewed both of the orders of the ALJ.

DECISION: The ALJ’s dismissal of Claimant’s appeal is set aside and remanded for a full hearing. The ALJ’s remand of the Agency’s 54(b) ruling is affirmed.

RATIONALE: An ALJ does not lack jurisdiction over an appealed UIA hearing simply because the appellant failed to appear at the appeal. Section 33(1) provides that “If the appellant fails to appear or prosecute the appeal, the administrative law judge may dismiss the proceedings or take other action considered advisable.” Since the ALJ may “take other action considered advisable”, a dismissal based on the appellant’s failure to appear is an error of law. A second reason for setting aside the ALJ’s dismissal of the appeal is the insufficiency of the notice provided to Claimant. Michigan Administrative Code (MAC) Rule 431.1110(1) required the notice to include a description of the penalties involved. Since the notice form provided to Claimant lacked this information, it was not sufficient and his failure to appear can’t be held against him.

Secondly, and Agency determination of fraud or misrepresentation on the part of a claimant can’t be sustained without fact-finding on the record to back up that determination. Merely supplying conclusory statements as to Claimant’s alleged fraud does not meet this burden. Therefore, when the Agency fails to provide appropriate factual backing for its findings, it must reconsider its determination.

Digest author: James Fahringer, Michigan Law, Class of 2018
Digest updated: 3/30/2016

18. Restitution, Waiver, Fraud

VanHusen v. Henry Ford Health System – 18.22

VanHusen v. Henry Ford Health System
Digest No. 18.22

Section 421.29(1)(b)

Cite as: VanHusen v Henry Ford Health System, unpublished opinion of the Oakland Circuit Court, issued April 11, 2012, (Docket No. 11-122549-AE).

Appeal pending: No
Claimant: Georgiana VanHusen
Employer: Henry Ford Health System
Docket no.: 11-122549-AE
Date of decision: April 11, 2012

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HOLDING: The claimant’s sleeping on the job and insubordination, by themselves, given the claimant’s position as a prison guard, are enough evidence to support a finding of misconduct disqualifying the claimant from benefits.

FACTS: Claimant worked as a registered nurse in the emergency department at Henry Ford West Bloomfield Hospital. Claimant was first disciplined in April 2009, when she received a written warning for unprofessional conduct and negative behavior towards patients and co-workers. Also, Claimant was placed on a Performance Improvement Plan, which she successfully completed. But Claimant received another disciplinary action, including an unpaid suspension, for negative and uncompassionate behavior towards patients and family members. She was advised of the possibility of termination at that time. Then, Claimant received three more complaints filed against her in February, March, and April of 2010. As a result of the complaints filed against Claimant in February, March, and April of 2010, Henry Ford decided to terminate her employment. In lieu of a discharge, Claimant resigned on April 18, 2010. MCAC affirmed the decision of the ALJ, determining Claimant disqualified for benefits.

DECISION: The circuit court affirmed MCAC’s decision, which found Claimant to be disqualified for benefits due to misconduct under section 29(1)(b) of the MES Act and Carter v MESC, 364 Mich 538 (1961).

RATIONALE: The court considered “all of the facts and particularly the degree of responsibility the claimant owes to the employer…” See Wickey v Employment Security Comm, 369 Mich 487, 503 (1963). And under “the last straw” doctrine, misconduct may consist of a series of incidents as well as a single incident. The court concluded Claimant exhibited a recurring pattern of behavior which the employer had previously warned her about and that Claimant failed to correct her behavior despite the warnings. Claimant admitted knowing the proper rules of conduct for nurses and that those rules were important to the hospital. The court concluded Claimant’s unprofessional conduct towards patients was undoubtedly harmful the the hospital’s reputation. Therefore, Claimant’s pattern of behavior amounted to misconduct under section 29(1)(b) of the MES Act.

Digest author: Adam Kleven, Michigan Law, Class of 2018
Digest updated: 3/1/2016

18. Restitution, Waiver, Fraud

Olivarez v Unemployment Insurance Agency – 18.16

Olivarez v Unemployment Insurance Agency
Digest No. 18.16

Section 62 & Section 54

Cite as: Olivarez v Unemployment Insurance Agency, unpublished opinion of the Saginaw County Circuit Court, issued November 17, 2008 (Docket No. 08-000366-AE-3).

Appeal pending: No
Claimant: William Olivarez
Employer: Michigan Unemployment Insurance Agency
Date of decision: November 17, 2008

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HOLDING: The court reversed the fraud decision because there was not competent, material, and substantial evidence to support it.

FACTS: Claimant  worked for the Agency and applied for benefits while on long term disability. The Agency ordered restitution and Claimant won at the ALJ hearing but lost at MCAC.

MCAC held that there was fraud because Claimant collected while on long term disability; he knew there was an issue about whether he could do so; an employee of the disability insurance company told him this was alright; and Claimant should have known to go to Agency with questions about eligibility.

DECISION: Claimant is ineligible for benefits. The Agency did not provide sufficient evidence for fraud.

RATIONALE: On eligibility, there was a doctor’s note that said Claimant could not do any work at all. This was competent, material, and substantial evidence and the court affirmed this decision.

Regarding fraud, there was not sufficient evidence to “support a finding of wrongful, quasi-criminal behavior.” The court went on to say: “Fraud, while easily claimed, is not lightly proven.” Citing Mallery v Van Hoeven, 332 Mich 561, 568; (1952). Fraud must be established by evidence. This was a “skimpy record” and does not “support a finding of serious wrongdoing, even under the relatively light standard of substantial evidence.”

Digest author: Benjamin Tigay, Michigan Law, Class of 2018
Digest updated: December 1, 2017

03. Benefit Computation Factors 18. Restitution, Waiver, Fraud

Elliott’s Amusements, LLC v. Garrison – 17.23

Elliott’s Amusements, LLC v. Garrison
Digest No. 17.23

Section 421.44

Cite as: Elliott’s Amusements, LLC v Garrison, unpublished opinion of the Ingham County Circuit Court, issued October 1, 2007 (Docket No. 07-251-AE).

Appeal pending: No
Claimant: Ronald L. Garrison
Employer: Elliott’s Amusements, LLC
Date of decision: October 1, 2007

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HOLDING: Certain per diem payments made by the employer to the claimant were remuneration when not for the “convenience of the employer” and the claimant had the ability to choose how to spend the money.

FACTS: The ALJ decided that per diem amounts the employer paid to the claimant were remuneration under Section 44(1). The Board of Review affirmed and incorporated the ALJ’s decision. As the Board explained, the claimant worked six months per year for the employer, while also living in the employer’s trailer and paying rent and food money. The claimant received a per diem payment from the employer, plus reimbursements for some expenses. Citing Seligman v MESC, 164 Mich App 507 (1988) as controlling, the Board endorsed the ALJ’s view that the per diem payments amounted to wages because the employer did not require the claimant to live at the work site, the lodging was not free, and the claimant’s use of the per diem payments were not controlled by the employer.  The claimant choice to use the employer-provided lodging was based on his own convenience, distinguishing his situation from the mandatory on-site lodging provided for the “convenience of the employer” in Seligman.

DECISION: The court upheld the determination that certain per diem payments made by the employer to the claimant were remuneration.

RATIONALE: Per diem payments for on-site lodging and food are considered remuneration if the employer did not control the claimant’s use of the per diem monies and the claimant could have spent the money in other ways.

Digest author: Austin L. Webbert, Michigan Law, Class of 2017
Digest updated: 10/25/2017

18. Restitution, Waiver, Fraud

DLEG Unemployment Insurance Agency v Darden – 18.15

DLEG Unemployment Insurance Agency v Darden
Digest no. 18.15

Section 62(a)

Cite as: DLEG Unemployment Ins Agency v Darden, unpublished opinion of the Oakland County Court, issued October 22, 2004 (Docket No. 04-059568-AE).

Appeal pending: No
Claimant: Yvonne Darden
Employer: Mastanuono & Assoc., Inc.
Docket no.: FSC2004-00036-173164W
Date of decision: October 22, 2004

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CIRCUIT COURT HOLDING: When adjudicating whether the Agency has jurisdiction to issue a determination or redetermination requiring restitution, the 3-year limitation provision of Section 62(a) is applicable, not the 1-year period contained in Section 32a(2).

FACTS: The Agency issued a redetermination November 25, 2003 requiring restitution for benefits improperly paid for 5 weeks ending in November 2002. The Board of Review held that under Section 32a(2) the Agency did not have jurisdiction to issue the redetermination on November 25, 2003 because more than one year had passed since the unemployment checks had been issued and there was no finding of fraud on claimant’s part.

DECISION: The Agency may pursue the recovery of restitution.

RATIONALE: When two statutes cover the same general subject matter, the more specific statute must prevail over the more general statute. MESC v Westphal, 214 Mich App 261 (1995). The 3-year provision of Section 62(a) takes precedence over the 1-year provision of Section 32a(2) because Section 62(a) is more specific.

Digest Author: Board of Review (original digest here)
Digest Updated: 11/04

18. Restitution, Waiver, Fraud

Miltgen v DSC Marywood Co – 18.14

Miltgen v DSC Marywood Co
Digest no. 18.14

Section 54(b)

Cite as: Miltgen v DSC Marywood Co, unpublished opinion of the Kent Circuit Court, issued March 23, 2001 (Docket No. 00-06060-AE).

Appeal pending: No
Claimant: Georgia Miltgen
Employer: DSC Marywood Company
Docket no.: B95-06582-RRR-145902W/FSC95-00107-RRR-145903W
Date of decision: March 23, 2001

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CIRCUIT COURT HOLDING: Being told by an Agency representative that monies received as “gifts” do not have to be reported as income is not a defense to fraud when claimant failed to disclose “significant particulars” as to the receipt of that money.

FACTS: While receiving unemployment benefits, claimant performed services and was being compensated. Claimant knew she was obligated to report income from work to the Agency, but failed to do so. Claimant spoke to a representative of the Agency about whether she had to report the monies. She asked whether personal monies from a friend had to be reported; she did not report the reasons for receiving the monies or why she received the monies. Claimant claimed the monies she received were “gifts,” although she acknowledged the payments were at an hourly rate for the service she performed.

DECISION: Claimant knowingly and willfully failed to report the income and is subject to the fraud provision.

RATIONALE: Even if the payor told claimant that the monies were gifts, it was unreasonable for her to believe that she was receiving gifts, and not being paid for services rendered. “A purely subjective belief is not legally significant; the belief must also be objectively reasonable. A gift which happens to be in an amount which is a certain rate for actual hours of effort performed for the payor is compensation for work, not a gift . . .. [L]abels are of ‘little importance.’” See Allied Market v Grocer’s Dairy, 391 Mich 729, 735 (1974)Abbey Homes v Wilcox, 89 Mich App 574, 581 (1979), lv app den 407 Mich 875 (1979). Had claimant disclosed the nature of the particulars of the monies, being told that the monies did not need to be reported would probably have entitled her to act as she did, Woods v State Employees Retirement System, 440 Mich 77, 81-82 (1992). Since claimant admitted she did not provide those particulars, the answer she said she got does not provide her with a defense. United States v King, 560 F2d 122 (1977), and United States v Smith, 523 F2d 771 (1975).

Digest Author: Board of Review (original digest here)
Digest Updated:

18. Restitution, Waiver, Fraud

Stein v MESC – 18.11

Stein v MESC
Digest no. 18.11

Section 9

Cite as: Stein v MESC, 219 Mich App 118 (1996).

Appeal pending: No
Claimant: N/A
Employer: Melvin Stein (Modern Roofing, Inc.)
Docket no.: N/A
Date of decision: September 24, 1996

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COURT OF APPEALS HOLDING: Employees of the Michigan Unemployment Agency may seek and execute search warrants when investigating fraud claims arising out of the Michigan Employment Security Act. That there is statutory authorization for the issuance of subpoenas does not bar the use of a search warrant in appropriate circumstances (e.g., fraud).

FACTS: An employee of the MESC obtained and executed a search warrant to secure employer business records to aid in an investigation of fraudulently obtained unemployment benefits by present and former employees. In response, the owners brought an action against the MESC in the Court of Claims. The employer argued the MESC employee acted outside the scope of her authority in obtaining a search warrant as the MES Act does not expressly authorize the use of search warrants. The employer asserted the MESC employee was limited to the subpoena process as provided in Section 9 as that is the only means of gathering information specifically set forth in the Act.

DECISION: Challenge to search warrant dismissed.

RATIONALE: The use of a subpoena is one way for the MESC to obtain the employer’s records. The statutory provision for a subpoena does not foreclose the option of seeking a search warrant. Relying on Richter v Dep’t of Natural Resources, 172 Mich App 658 (1988), the Court of Appeals observed: “One of the investigative duties contemplated by the act is the duty to investigate fraud.” The court went on to say:

“We believe that encompassed within this authority to conduct fraud investigations, which can lead, as in the instant case, to criminal prosecutions, is the ability to utilize the tools necessary to carry out such investigations, including search warrants. Accordingly, we hold that agents of the MESC are entitled to obtain and execute search warrants when investigating fraud claims arising pursuant to the MESA.”

Digest Author: Board of Review (original digest here)
Digest Updated:

18. Restitution, Waiver, Fraud

MESC v Westphal – 18.13

MESC v Westphal
Digest no. 18.13

Section 62(a)

Cite as: MESC v Westphal, 214 Mich App 261 (1995).

Appeal pending: No
Claimants: Larry A. Westphal & Steve G. Bussell
Employer: Mueller Brass Co.
Docket no.: B92-21862-122898W
Date of decision: November 14, 1995

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HOLDING: Where the Agency has issued a determination requiring restitution within three years of the date of a claimant’s receipt of improperly paid benefits, the Agency must file a civil suit to recover those benefits within three years of the date of the determination requiring restitution.

FACTS: Claimant Westphal received benefits through April 27, 1985. On January 29, 1986, the Agency determined those benefits were improperly paid. The claimant did not protest. The Agency filed its civil action for restitution on May 9, 1991. Because the Agency filed its claim more than three years after the date of the determination requiring restitution, the circuit court granted Westphal’s motion for summary disposition. Claimant Bussell’s experience was similar.

DECISION: The Agency could not recover restitution.

RATIONALE: The statute unambiguously states that the limitation period for the recovery of improperly paid unemployment benefits is three years from the date of receipt of benefits unless one of three exceptions exists. See Section 62(a). The third enumerated exception applied here since in each instance the MESC made formal determinations requiring restitution within three years of the claimant’s receipt of benefits. In Section 62(a), the “last antecedent” before the three qualifying exceptions is the date of accrual of the cause of action. Accordingly, the qualifying exceptions refer solely to the date of accrual and leave the three year limitations period intact.

Digest Author: Board of Review (original digest here)
Digest Updated:

18. Restitution, Waiver, Fraud

Burch v Chapel Hill Cemetery Development – 18.08

Burch v Chapel Hill Cemetery Development
Digest no. 18.08

Section 62

Authors Note: The holding in this case relies heavily on the discretionary nature of waivers in place at the time of the decision. The legislature made waivers mandatory in October of 2013.  This case should not apply to waivers adjudicated after October 26, 2013.

Cite as: Burch v Chapel Hill Cemetery Dev, unpublished opinion of the Ingham Circuit Court, issued November 26, 1990 (Docket No. 88-61881-AE).

Appeal pending: No
Claimant: Ronald Burch
Employer: Chapel Hill Cemetery Development
Docket no.: B87 10225 106685W
Date of decision: November 26, 1990

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CIRCUIT COURT HOLDING: When a claimant knew or should have known he was not entitled to the benefits he was receiving the claimant cannot claim administrative clerical error as a basis for restitution waiver.

FACTS: The claimant had been issued a determination which indicated he was entitled to 26 weeks of unemployment benefits. Because of a computer error, the claimant received 45 weeks of benefits. When the Commission discovered claimant had received an additional 19 weeks worth of benefits it sought restitution. The claimant asserted he should be exempt from the restitution requirement because he had received the additional benefits as the result of an administrative clerical error.

DECISION: The claimant was required to make restitution.

RATIONALE: Section 62(a) of the MES Act provides that the Commission may waive restitution. As one of its internal guidelines the Commission provides that it will waive restitution for payment resulting from an administrative clerical error.

While in the instant matter a clerical error had been made it was found that the claimant had actual knowledge he was only supposed to receive 26 weeks of benefits and therefore could not claim to be exempt from the restitution requirement for the remaining 19 weeks.

Digest Author: Board of Review (original digest here)
Digest Updated:

18. Restitution, Waiver, Fraud

Sallmen v Danti Tool & Die, Inc – 18.10

Sallmen v Danti Tool & Die, Inc
Digest no. 18.10

Section 62(b)

Cite as: Sallmen v Danti Tool & Die, Inc, unpublished opinion of the Saginaw Circuit Court, issued September 8, 1986 (Docket No. 86-23988-AR-3).

Appeal pending: No
Claimant: Ermin Sallmen
Employer: Danti Tool & Die, Inc.
Docket no.: B85 09103 100921W
Date of decision: September 8, 1996

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CIRCUIT COURT HOLDING: Any and all earnings regardless of how small must be reported to the Commission when certifying for benefits.

FACTS: After becoming unemployed the claimant began to perform part time services for another employer. The services consisted of the claimant’s participating in a sales training program. During this program the claimant received $90.00 per week against future commissions.

Although earning $90.00 per week, the claimant failed to disclose these earnings to the Commission when he certified for his weekly benefits. The claimant indicated he failed to do so because a Commission clerk had advised him that if he earned less than half of his weekly benefit rate he would still be entitled to his full weekly benefits. Therefore, he did not think it necessary to disclose he was working and earning $90.00 per week since that was less than half of his benefit rate.

DECISION: Board decision modified. Claimant must pay restitution, but intentional misrepresentation not established. No fraud penalty.

RATIONALE: It was clear that the claimant had accepted and performed services for the new employer for remuneration and therefore had earnings within the meaning of Section 48(1) of the MES Act.

The claimant had a legal duty to disclose to the Commission that he was working and receiving pay from another employer regardless of the impact on his benefit rate.

Digest Author: Board of Review (original digest here)
Digest Updated: