Case Number: 19STCP00634 Hearing Date: December 17, 2019 Dept: 85

Kathy A. McAnany v. California Unemployment Insurance Appeals Board, 19STCP00634

Tentative decision on petition for writ of mandate: denied

Petitioner Kathy A. McAnany (“McAnany”) seeks a writ of mandate vacating the decision of the California Unemployment Insurance Appeals Board (“CUIAB”) ordering her to repay unemployment benefits.

The court has read and considered the moving papers, opposition, and reply,[1] and renders the following tentative decision.

A. Statement of the Case

Petitioner McAnany, acting pro per, commenced this proceeding on March 4, 2019. The Petition alleges in pertinent part as follows.

CUIAB falsely claims that McAnany was fully employed during the benefit year of June 18, 2017 through June 18, 2018 (“Benefit Year”) and was overpaid benefits in the amount of $5,854, which must now be repaid. McAnany was not fully employed during the Benefit Year and copies of all her paycheck stubs for the Benefit Year establish this fact.

McAnany worked less than 20 hours per week for most of the Benefit Year and as little as 5-10 hours some weeks. McAnany’s weekly benefit amount for the Benefit Year was $294. McAnany’s pay stubs clearly show that her gross weekly pay was less than $294. Even in weeks where her wages slightly exceeded the weekly benefit amount, very modest amounts were paid that barely met monthly expenses. McAnany received $0 for the weeks ending May 26, 2018 and June 16, 2018.

Meals were also included in McAnany’s wages and then deducted from gross pay. Meals come to a total of $439.13. McAnany ended the meal plan as of the October 11, 2017 pay date.

McAnany is unable to repay any amount of the $5,854, as it would cause severe financial hardship. McAnany’s current income barely meets her basic expenses and repayment of unemployment benefits would cause her to be unable to meet basic needs such as housing and food. McAnany does not have any savings or any other kind of financial resources.

B. Standard of Review

CCP section 1094.5 is the administrative mandamus provision which structures the procedure for judicial review of adjudicatory decisions rendered by administrative agencies. Topanga Ass’n for a Scenic Community v. County of Los Angeles, (“Topanga”) (1974) 11 Cal.3d 506, 514-15.

CCP section 1094.5 does not in its face specify which cases are subject to independent review, leaving that issue to the courts. Fukuda v. City of Angels, (1999)20 Cal.4th 805, 811. In cases reviewing decisions which affect a vested, fundamental right the trial court exercises independent judgment on the evidence. Bixby v. Pierno, (1971) 4 Cal.3d 130, 143. See CCP §1094.5(c). Independent judgement is the appropriate standard for review of a decision by the CUIAB. Interstate Brands v. Unemployment Ins. Appeals Bd., (1980) 26 Cal.3d 770, 774-782.

Under the independent judgment test, “the trial court not only examines the administrative record for errors of law but also exercises its independent judgment upon the evidence disclosed in a limited trial de novo.” Bixby, supra, 4 Cal.3d at 143. The court must draw its own reasonable inferences from the evidence and make its own credibility determinations. Morrison v. Housing Authority of the City of Los Angeles Board of Commissioners, (2003) 107 Cal.App.4th 860, 868. In short, the court substitutes its judgment for the agency’s regarding the basic facts of what happened, when, why, and the credibility of witnesses. Guymon v. Board of Accountancy, (1976) 55 Cal.App.3d 1010, 1013-16.

“In exercising its independent judgment, a trial court must afford a strong presumption of correctness concerning the administrative findings, and the party challenging the administrative decision bears the burden of convincing the court that the administrative findings are contrary to the weight of the evidence.” Fukuda, supra, 20 Cal.4th at 817. Unless it can be demonstrated by petitioner that the agency’s actions are not grounded upon any reasonable basis in law or any substantial basis in fact, the courts should not interfere with the agency’s discretion or substitute their wisdom for that of the agency. Bixby, supra, 4 Cal.3d 130, 150-51; Bank of America v. State Water Resources Control Board, (1974) 42 Cal.App.3d 198, 208.

The agency’s decision must be based on a preponderance of the evidence presented at the hearing. Board of Medical Quality Assurance v. Superior Court, (1977) 73 Cal.App.3d 860, 862. The hearing officer is only required to issue findings that give enough explanation so that parties may determine whether, and upon what basis, to review the decision. Topanga, supra, 11 Cal.3d 506, 514-15. Implicit in section 1094.5 is a requirement that the agency set forth findings to bridge the analytic gap between the raw evidence and ultimate decision or order. Id. at 115.

An agency is presumed to have regularly performed its official duties (Ev. Code §664), and the petitioner therefore has the burden of proof. Steele v. Los Angeles County Civil Service Commission, (1958) 166 Cal.App.2d 129, 137. “[T]he burden of proof falls upon the party attacking the administrative decision to demonstrate wherein the proceedings were unfair, in excess of jurisdiction or showed prejudicial abuse of discretion. Afford v. Pierno, (1972) 27 Cal.App.3d 682, 691.

C. Governing Law

An individual is unemployed in any week during which the individual performs no services and with respect to which no wages are payable, or in any week of less than full-time work, if the wages when reduced by 25% or $25, whichever is greater, do not equal or exceed his or her weekly benefit amount. Unemployment Insurance Code[2] §1252. “Wages” includes any and all compensation for personal services whether performed as an employee or as an independent contractor or as a juror or as a witness. §§ 1252, 1279. An unemployed person who works part-time in a week shall be paid unemployment benefits equal to the weekly benefit amount less the smaller of the amount of wages in excess of $25 or 75% of the wages during that week. §1279.

Unemployment compensation benefit award computations shall be based on wages paid in the base period. “Base period” means: for benefit years beginning in October, November, or December, the four calendar quarters ended in the next preceding month of June; for benefit years beginning in January, February, or March, the four calendar quarters ended in the next preceding month of September; for benefit years beginning in April, May, or June, the four calendar quarters ended in the next preceding month of December; for benefit years beginning in July, August, or September, the four calendar quarters ended with the next preceding month of March. Wages used in the determination of benefits payable to an individual during any benefit year may not be used in determining that individual’s benefits in any subsequent benefit year. §1275(a).

Any person who is overpaid unemployment insurance benefits is liable for repayment unless the overpayment was not due to fraud, misrepresentation, or willful nondisclosure and was received without fault on the part of the recipient, and its recovery would be against equity and good conscience. §1375(a).

If the director finds that an individual has been overpaid unemployment benefits because he or she willfully, for the purpose of obtaining unemployment compensation benefits, either made a false statement or representation, with actual knowledge of the falsity thereof, or withheld a material fact, the director shall assess against the individual an amount equal to 30 percent of the overpayment amount. §1375.1.

D. Statement of Facts

1. Unemployment Claim

McAnany applied for partial unemployment benefits beginning June 18, 2017 and collected unemployment benefits in the amount of $294 per week. AR 83-84.

On July 23, 2018, the Employment Development Department (“EDD”) interviewed McAnany regarding her reported wages and misinformation or withholding information regarding her claim. AR 90. McAnany’s explanation was that she thought she was only required to report wages connected to hours of work and not her tips. AR 90, 92. The interviewer found McAnany’s explanation was not credible because she had been in food service long enough and the claim form asks for tips to be reported. AR 90. The interviewer concluded that McAnany reported one-half to less than one-half of what she earned for 48 weeks by not reporting her tips. AR 91. The interviewer concluded McAnany did so with intent to defraud and imposed a 15-week false statement penalty. AR 91.

EDD issued a Notice of Overpayment and a Notice of Determination to McAnany on August 16, 2018. AR 94, 97. The Notice of Determination stated that, after considering available information, EDD found that McAnany did not meet the legal requirements for payment of benefits. AR 98.

EDD found that McAnany was earning in each base period: $363 for the 13 weeks ending September 30, 2017 (AR 97), $341 per week for the 13 weeks ending December 30, 2017 (AR 97), $429 per week for the 13 weeks ending March 31, 2018 (AR 97), $424 per week for the seven weeks ending May 19, 2018, and $424 per week for the three weeks ending June 16, 2018. AR 98. The Notice of Overpayment stated that McAnany was overpaid benefits in the amount of $5,854 and was now liable to repay this amount, along with a penalty of $1,756.20, for a total repayment of $7610.20. AR 94.

McAnany appealed EDD’s determination to the CUIAB, which set a hearing for November 6, 2018. AR 28.

2. The Hearing

The hearing was held before ALJ Michael Kurz on November 6, 2018. AR 39. McAnany appeared and testified on her own behalf. AR 39. She testified in pertinent part as follows.

McAnany has worked about a year and a half as a server at Canters, making $13.25 an hour, plus tips. AR 48. Her employer provided EDD with a calculation of McAnany’s average earnings by taking the total and dividing by the number of weeks. AR 49. McAnany disputed the earnings her employer reported because she worked varying hours during the relevant weeks. AR 48-49. Because she worked fewer hours and days on certain weeks, McAnany applied for unemployment. AR 52. (The ALJ explained that the issue was earnings, not the number of hours worked. AR 52.)

The tips are reported as a percentage of sales; Cantors wants employees to report 12%. AR 58. McAnany did not report her tips because she believed they were already deducted from her pay stubs along with taxes and the cost of meals. AR 57-58. She believed she only had to report her regular wages. AR 59.

McAnany’s monthly expenses are approximately $1,450. AR 66. McAnany earned an average of approximately $1,600 a month.

3. The ALJ’s Decision

On November 28, 2018, ALJ Kurz issued two separate decisions: one regarding McAnany’s eligibility for benefits during the Benefit Year and another regarding whether she willfully made a false statement or representation, or willfully withheld a material fact, when claiming benefits. AR 136, 141. The ALJ found in pertinent part as follows.

Decision on Eligibility

McAnany opened a claim with a Benefit Year beginning June 18, 2017, in order to apply for partial benefits. AR 136. Tips are earnings to be reported to EDD when filing for unemployment benefits. AR 136.

The employer calculated McAnany’s tips based on a percentage of sales and then showed that calculation on her pay stub as additional pay. AR 136. The employer backed that amount out of the pay stub because McAnany received the tips at the time of tipping, leaving just the net pay on her stubs. McAnany was aware that she was being paid tips in addition to her hourly wages, and her employer reported the tips to her and to the government. AR 136. During the 49 weeks ending June 16, 2018, McAnany only reported the hours and wages she worked and did not report her tips. AR 136.

Based on the employer’s quarterly report of earnings, which included the tips, EDD estimated that McAnany was earning on average $363 for the 13 weeks ending September 30, 2017, $341 per week for the 13 weeks ending December 30, 2017, $429 per week for the 13 weeks ending March 31, 2018, $424 per week for the seven weeks ending May 19, 2018, and $424 per week for the three weeks ending June 16, 2018. AR 136. During that same period, McAnany only reported her hourly wages, or amounts close to her hourly wages, but never reporting her full earnings as reflected on her paystubs. AR 136. McAnany’s weekly benefit was $297. AR 136.[3]

McAnany did not provide the ALJ with an accounting of her earning for the 49 weeks at issue, instead only providing two pay stubs. The first was from the week ending May 12, 2018, showing gross earnings of $484.92, with $202.92 hourly wages and tips of $282. AR 137. McAnany reported $138 for the week ending May 12, 2018 and her net check was $131.19. AR 137. She underreported her earnings by $346.92. AR 137.

The second pay stub was for the week ending December 23, 2017. McAnany’s gross earnings was $508, with $243 in wages and $265 in tips. AR 137. She reported $318 for that week and her net check was $157.92. AR 137. She underreported her earnings by $190. AR 137.

As a result of McAnany’s underreporting, EDD calculated she had been overpaid benefits for the 49 weeks at issue in the total amount of $5,854. AR 137. The preponderance of the evidence establishes that McAnany was more fully employed and had higher earnings than she reported for the 49 weeks at issue. AR 138. EDD’s estimation of earnings for each of those weeks is adopted as accurate as McAnany failed to provide any documentation that rebutted its calculation of earnings. AR 138. The two paystubs provided by McAnany tended to support EDD’s calculations and disprove McAnany’s contentions that she did not know to report her tips. AR 138.

The ALJ affirmed EDD’s determination and finding that McAnany was ineligible for benefits during the Benefit Year. AR 136, 138. McAnany was ineligible for benefits for the 26 weeks ending December 30, 2017 under section 1279 and was ineligible for benefits for the 23 weeks ending June 16, 2018 under section 1252, as she was fully employed those weeks and not entitled to receive any benefits. AR 138.

Decision on Willful False Statement

In the second decision, the ALJ concluded that McAnany knew she was underreporting because her paystubs calculated her tips and wages and she could see how much she earned each week on her paystub. AR 141. Instead of reporting that number, McAnany only reported approximately one-half of her earnings during the period at issue. AR 141. As a result of her failure to report earnings for the 49 weeks ending June 16, 2018, McAnany was overpaid benefits in the total of $5,854. AR 141.

McAnany’s testimony that she was confused by the employer’s payroll system is disbelieved. AR 142. The employer shows the tips that McAnany earned on her paystubs and this was the earnings to be reported to EDD each week. AR 142. McAnany was not just reporting her hourly wages, but some extra amount which showed intent to deceive by underreporting her earnings. AR 142. McAnany made a willful false statement that resulted in an overpayment of benefits. AR 142. Because this was McAnany’s first transgression, she is given the benefit of the doubt and the false statement penalty is reduced from 15 weeks to five weeks. AR 142.

The ALJ modified EDD’s determination that McAnany made a willful false statement and reduced the false statement penalty from 15 weeks to five weeks. AR 142.

4. The Appeal

McAnany appealed to the CUIAB on December 3, 2018. AR 156. McAnany argued that she was not fully employed for the Benefit Year and that she is unable to repay the $5,854 due to financial hardship. AR 158-59.

CUIAB issued a consolidated decision on January 14, 2019, finding no material errors in the ALJ’s decision. AR 196. CUIAB adopted the ALJ’s issue statements, except that the Notice of Overpayment did not include the weeks ending May 26, 2018, June 16, 2018, and the two-week period ending June 30, 2018. AR 201.

The CUIAB modified the state of facts such that McAnany believed that the employer deducted the amount of her tips from the wages the employer owed her and paid her. AR 201. CUIAB found that McAnany credibly testified that she believed the employer deducted the estimated amount of her tips from the wages and was required only to report the amount of wages paid by the employer. AR 202. McAnany is entitled to a presumption of innocence and there is insufficient evidence that she intentionally failed to report her wages. AR 202.

CUIAB affirmed in part and reversed in part the ALJ’s decision, finding that McAnany is not disqualified for benefits under section 1257(a) but is liable for repayment of the overpayment under section 1375. AR 202. CUIAB also canceled the penalty assessment. AR 202.

E. Analysis

Petitioner McAnany challenges CUIAB’s decision that she is liable for a $5,854 overpayment.

1. Procedural Defect

CUIAB asserts that the Petition should be dismissed for McAnany’s failure to meet her burden of proof by failing to cite to the administrative record. Opp. at 4.

A petitioner bears the burden of proof to demonstrate, by citation to the administrative record, the existence of substantial evidence in support of petitioner’s position. South Orange County Wastewater Authority v. City of Dana Point, (2011) 196 Cal.App.4th 1604, 1612. In addition, a petitioner bears the burden to demonstrate that the administrative record does not contain sufficient evidence to support the agency’s decision. State Water Resources Control Board Cases, (2006) 136 Cal.App.4th 674, 749. A recitation of only part of the evidence that supports the petitioner’s position is not the demonstration contemplated by this rule. Accordingly, if a petitioner contends that some issue of fact is not sustained, they are required to set forth in their brief all material evidence on the point and not merely their own evidence. Unless this is done, the error is deemed to be waived. Foreman & Clark Corp. v. Fallon, (1971) 3 Cal.3d 875, 881.

As CUIAB notes, McAnany’s opening brief fails to cite to the Administrative Record and instead attaches an extra-record exhibit.[4] CUIAB asserts that McAnany’s failure to cite to the Administrative Record has resulted in prejudice because it is unaware what evidence McAnany relies upon in support of her Petition. Opp. at 4-5.

Although McAnany is appearing pro per, she is not exempt from procedural requirements and the court must treat her just as it would a lawyer. Bistawros v. Greenberg, (1987) 189 Cal.App.3d 189, 193. Local Rule 3.231(i)(2) requires citations to the record. More important, the court explained to McAnany at the trial setting conference – as it does in all cases – how to cite to the record. Still, McAnany failed to cite the record. McAnany does provide citations to the record in reply, but this does not cure her error. CUIAB still was deprived of an opportunity to respond to these citations.

The Petition is denied for McAnany’s procedural error which waives any error in CUIAB’s decision.

2. Merits

If arguendo the court should address the merits, any person who is overpaid unemployment insurance benefits is liable for repayment unless the overpayment was not due to fraud, misrepresentation, or willful nondisclosure and was received without fault on the part of the recipient, and its recovery would be against equity and good conscience. §1375(a).

McAnany asserts that she was not fully employed during the Benefit Year and was not overpaid benefits. Pet. Op. Br. at 3. McAnany’s argument is based on her contention that CUIAB lacked accurate information regarding her wages due to her variable weekly schedule and therefore incorrectly prorated earnings based on the wages shown in the relevant period. Pet. Op. Br. at 3; Reply at 3-4. McAnany argues that CUIAB cannot reasonably determine if she underreported her wages due to the lack of accurate wage information. Reply at 3.[5]

McAnany’s argument is unavailing. As CUIAB correctly notes, unemployment benefits are not calculated on a weekly basis, but are based on the average wages paid during the base period under section 1275(a), which essentially is a 13-week quarterly period. Opp. at 7. The evidence demonstrates that the reported earnings at issue were based on earnings information reported by McAnany’s employer. AR 97-98. This information calculated McAnany’s hourly wages plus a percentage of tips based on the amount of sales. AR 58. Based on this information, EDD, the ALJ, and CUIAB correctly calculated that McAnany was ineligible for benefits for the 26 weeks ending December 30, 2017 pursuant to section 1279 because her earnings, when reduced by 25%, exceeded her benefits of $294. AR 97, 138. McAnany was also ineligible for benefits for the 23 weeks ending June 13, 2018 pursuant to section 1252 because she was fully employed for that period. AR 98, 138. As a result, McAnany was overpaid $5854. AR 94.

McAnany’s reply brief raises, for the first time, the issue of whether requiring repayment would be against equity and good conscience. Reply at 3-4. New issues raised for the first time in a reply brief are not properly presented to a trial court and may be disregarded. Regency Outdoor Advertising v. Carolina Lances, Inc., (1995) 31 Cal.App.4th 1323, 1333. Because McAnany improperly raised this issue for the first time in reply, she deprived CUIAB an opportunity to respond, and the issue is waived.

CUIAB did not lack accurate wage information for McAnany for the relevant period and McAnany received an overpayment of benefits totaling $5854.

3. Whether Recovery Is Against Equity and Good Conscience

If arguendo the court should consider McAnany’s reply argument that recovery of the overpayment would be against equity and good conscience, the following analysis applies.

McAnany alleges that requiring her to repay the overpayment is against equity and good conscience because CUIAB’s final decision determined that there was insufficient evidence that she intentionally underreported her wages and it would result in severe financial hardship for her. Reply at 4-5. McAnany claims that she is unable to pay the benefits and would not have been able to survive had she not initially been awarded the benefits. AR 158-60.

CUIAB’s finding that she did not intentionally underreport her wages is not determinative because there are two elements to repayment under section 1375(a): (a) willfulness and (b) equity/good conscience. CUIAB reversed the penalty for intentionally making a false statement, but it affirmed the decision that McAnany should repay the overpayment. CUIAB implicitly found, therefore, that equity and good conscience did not relieve McAnany from repaying her overpayment.

McAnany fails to support her claim with a financial statement and relies solely on her Notice of Appeal and supporting list of monthly expenses. AR 158-60. Even if her claim of financial hardship is true, that would be true for most unemployment benefit recipients. Most people who receive unemployment benefits are impoverished or border on poverty and a greater showing is required. McAnany fails to cite any authority that financial hardship alone is sufficient to show that requiring repayment would be against equity/good conscience.

McAnany cites a federal regulation providing that recovery of an overpayment is against equity and good conscience if an individual changed his or her position for the worse or relinquished a valuable right because of reliance upon a notice that a payment would be made or because of the overpayment itself. 20 CFR §404.509(a). This federal provision, which is not controlling, supports CUIAB’s position. McAnany has not shown that she changed her position for the worse or relinquished a valuable right in reliance on the overpayment.

Turning to the circumstances of McAnanay’s receipt of unemployment benefits, she fails to show that the circumstances, although not willful, were so innocent as to justify non-repayment. Indeed, the ALJ pointed out that McAnany did not simply report her hourly wages from her employer’s wage statement. On at least one occasion, she reported greater earnings. For the week ending December 23, 2017 McAnany had $243 in wages and she reported the greater amount of $318. AR 137. The ALJ concluded that this fact suggests willfulness because she knew to report tips and reported an amount which included some, but not most, of her tips. While CUIAB rejected the finding of willfulness, the fact remains that there was no innocent explanation for this partial reporting of tips.

McAnany has not shown that requiring repayment of the overpayment is against equity and good conscience.

F. Conclusion

The petition for writ of mandate is denied. CUIAB’s counsel is ordered to prepare a proposed judgment, serve it on McAnany for approval as to form, wait ten days after service for any objections, meet and confer if there are objections, and then submit the proposed judgment along with a declaration stating the existence/non-existence of any unresolved objections. An OSC re: judgment is set for January 30, 2020 at 9:30 a.m.

[1] McAnany’s reply brief does not include page numbers. The court will cite to the reply based on the page numbers in the brief’s table of contents.

[2] All further statutory references are to the Unemployment Insurance Code unless otherwise stated.

[3] The matter is complicated by the fact that the employer’s work week is Monday through Sunday. AR 137. No testimony was given on how that affected the calculations of earnings and benefits on a week by week basis. AR 137. Accordingly, EDD’s estimated weekly earnings was accepted. AR 137.

[4] CUIAB correctly states (Opp. at 4) that the court cannot consider this evidence, as McAnany was required to make a motion to augment the record for such evidence. See Local Rule 2.3213.231(g)(3).

[5] McAnany also contends that a $439.13 cost for her meals was deducted from her wages by her employer. Pet. Op. Br. at 3. She provides no explanation why this would matter for a determination of earnings for purposes of unemployment benefits.