C.A. Allows Writ-Challenge to UI Benefits Determination

Tuesday, December 2, 2014

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C.A. Allows Writ-Challenge to UI Benefits Determination

Disagrees With Contrary Determination By Fourth District but Does Not Order Publication

By a MetNews Staff Writer

The Court of Appeal for this district has rejected the contention of the California Unemployment Insurance Appeals Board that an employer may not immediately seek writ review when the board has determined that a former employee is eligible for unemployment compensation.

The board asserted—and Ventura Superior Court Judge Frederick Bysshe agreed—that an employer, like a taxpayer, is subject to a “pay first, litigate later” rule. Bysshe found in favor of the board on the ground that the writ petition filed by Ventura Office Suites was premature because the company had not yet suffered any financial detriment.

Wednesday’s opinion, which was not certified for publication, remands the case to the trial court for a determination of the petition on the merits.

The board relied on Unemployment Insurance Code §1851, which provides:

“No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding, in any court against this State or against any officer thereof to prevent or enjoin the collection of any contribution sought to be collected under this division.”

Writing for Div. Six, Justice Steven Z. Perren pointed out:

“When the Board determines, as it did here, that a claimant is eligible for UI benefits, the employer does not pay those benefits. The benefits are paid from a pooled fund contributed to by all employers, and then ‘charged’ to the specific employer’s UI ‘reserve account’ for the sole purpose of calculating the employer’s future rate of contribution to the pooled fund.”

The jurist said that §1851 was inapplicable because “[t]here is no evidence that judicial review of the Board’s decision will prevent or enjoin the collection of a tax or UI contribution.”

He added:

“No such assessment is due, and it appears none will be forthcoming.”

Disapproves Earlier Decision

The opinion, if it were to be ordered published, would create a split of authority among the districts. In First Aid Services of San Diego, Inc. v. California Employment Development Dept. (2005) 133 Cal.App.4th 1470, Div. One of the Fourth District Court of Appeal affirmed the dismissal of an employer’s petition for a writ of mandate which challenged the determination by the board that a former employee was entitled to benefits.

In First Aid, as in last week’s case, the employer contended that benefits were not awardable because the applicant had been an independent contractor, not an employee, and the board found to the contrary.

The San Diego-based panel said that the employer could “seek judicial review” of the applicant’s “administratively determined employee status by paying assessed unemployment insurance contributions, claiming a refund, and, following the denial (if any) of that claim, filing an action for refund in the superior court.”

The Fourth District’s decision relied upon the California Supreme Court’s opinion in Modern Barber Colleges v. California Employment Stabilization Commission (1948) 31 Cal.2d 720. There, a writ of mandate was held to be an improper vehicle for challenging a determination that the owner of a barber college, its students, and its bookkeeper were employees of the college, and that the college was obliged to make contributions to the fund from which unemployment benefits were paid.

The court in First Aid quoted the 1948 high court opinion as saying that “[s]ince the net result of the relief prayed for herein would be to restrain the collection of the tax allegedly due, the action must be treated as one having that purpose,” and from that concluded “that section 1851 bars the mandamus proceeding at issue here.”

Draws Distinction

Perren differentiated the fact situation in Modern Barber Colleges from that in First Aid and in the case at bench.

In Modern Barber Colleges, he pointed out, the “Supreme Court held the employer’s petition was barred because it sought judicial review ‘prior to payment of the contributions which the board claims to be due,’ ” supplying the emphasis.

He also added emphasis to two words in the sentence the First Aid court quoted, saying that the Supreme Court “reasoned that ‘[s]ince the net result of the relief prayed for herein would be to restrain the collection of the tax allegedly due, the action must be treated as one having that purpose.’ ”

Perren continued:

“Here, the Board has not identified any tax or contribution that is ‘due’ and must be paid before VOS may seek a refund and presumably challenge the benefits charge to its reserve account.”

The opinion also asserted that First Aid contravenes a state Supreme Court decision, declaring:

“First Aid Services did not consider the impact of the Board’s benefits decision on the employer’s UI reserve account. In that respect, it appears to be at odds with the holding in Interstate Brands [v. Unemployment Ins. Appeals Bd. (1980) 26 Cal.3d 770] that an employer’s right to be free from erroneous charges to its reserve account entitles it to ‘independent judicial review of the evidence when a decision of the Board affects that right.’ It also is inconsistent with a long line of appellate decisions permitting an employer to obtain judicial review of the Board’s benefits decision by filing a petition for writ of mandate….”

The case is Ventura Office Suites v. CUIAB, 2 Civ. No. B248108.

Walnut Creek attorney William Hays Weissman, who represented Ventura Office Suites, commented:

“We do intend to seek publication of the opinion. It is an important decision for employers and is the first case to address the differences between Interstate Brands and Modern Barber and the first case since First Aid to clarify what First Aid made unclear—that status decisions and benefit charges are not taxes that prevent a writ.”

Walnut Creek attorney William Hays Weissman, who represented Ventura Office Suites, commented:

Deputy Attorneys General Phillip J. Matsumoto and Chara L. Crane argued for the appeals board.