Recovery of Benefits - Sections 8-809 - Maryland Unemployment Decisions Digest - Appeals

Introduction

The provisions dealing with recovery of benefits were previously located in Article 95A, Sections 17(d) and 17(f) of the Annotated Code of Maryland. After the law was revised in 1991, these provisions were recodified as Section 8-809 of the Labor and Employment Article of the Annotated Code.

Section 8-809 provides that the agency may recover benefits paid to a claimant if the claimant was not entitled to the benefits because: (1) the claimant was not unemployed; (2) the claimant received or was retroactively awarded wages; or (3) the claimant was disqualified or otherwise ineligible for benefits due to a redetermination of an original claim.

An overpayment is defined by COMAR 09.32.07.03B(4) as any amount of unemployment insurance received by an individual which is in excess of that which he is entitled to receive under the law. There are several ways in which a claimant can receive an overpayment. Overpayment can result if the claims examiner initially determines that the claimant is eligible for benefits, but this determination is later reversed on appeal or due to a redetermination by the Secretary under Section 8-806(f)(1). An overpayment can also result from agency error such as if the agency erroneously credits a claimant with covered employment. A claimant who intentionally makes a false statement to obtain or increase benefits can cause an overpayment. Finally, an overpayment can be created when a claimant is reinstated to his job and receives retroactive or back pay covering the period of time during which he collected unemployment insurance benefits. Section 8-809(e)(2) states that the agency may not make a determination to recover benefits later than three years after the date that the benefits were paid to the claimant.

In the case of Katsianos v. Maryland Employment Security Administration, 42 Md. App. 688, 402 A.2d 144 (1979), the Court of Special Appeals ruled that it was the legislature's intention to provide for the recoupment of benefits where a claimant has been awarded back pay. In this case, the claimant was awarded back pay by the National Labor Relations Board (NLRB). In determining that the award of back pay constituted a retroactive award of wages within the meaning of Section 8-809, the Court considered the following factors: (1) the amount of the award was identical to the wages the claimant would have received had she not been terminated; (2) both the claimant and the NLRB referred to the award as back pay; and (3) the employer, in payment of the award, deducted federal and state withholding taxes and F.I.C.A. taxes.

If the agency decides to recover an overpayment from a claimant, the claimant must be notified of the amount to be recovered, the weeks for which benefits were paid and the provision of the law under which the agency determined that the claimant was ineligible for benefits. The claimant may then repay the overpayment in full or arrange for a repayment schedule. If the claimant fails to do either of these, the agency has the option of filing a civil suit and having the overpayment reduced to a judgment. The agency also has the option of deducting the overpayment from future benefits payable to the claimant.

According to Section 8-809(e)(1), the Secretary may reconsider a decision to recover an overpayment within one year after the date that the decision to recover the overpayment was made. The Secretary is required to notify the claimant of the right to seek a waiver of the overpayment. COMAR 09.32.07.07F requires that the claimant must request the waiver within 30 days of receiving the notice, unless the claimant can show good cause for not meeting the 30-day requirement.

Recovery of Benefits - Sections 8-809

I. In General

A. Time Limits on Recovery
Under Section 8-809(e)(2) and (3), a determination under Section 8-809(a) to recover benefits may not be made later than three years from the date that benefits were paid to the claimant. Therefore, an agency determination in November of 1981 to recover benefits paid to the claimant in May and June of 1980 was proper within the meaning of Section 8-809. Cuervo v. Safeway Stores, Inc., 1353-BH-82.

In Thomas McDonough, III, 1838-BR-00, the Board applied Section 8-809(a) which provided "that a determination...to recover benefits may not be made later than three years from the date that benefits were paid to the claimant." In McDonough, the agency was barred from recovering any benefits paid prior to December 27, 1996. Recovery of benefits paid prior to this date was more than three years from the date that benefits had been paid to the claimant.

B. Sufficiency of Notice
The claimant received a nonmonetary determination imposing the maximum penalty on the grounds that the claimant voluntarily quit her job without good cause under Section 8-1001. The same determination contained a separate paragraph which stated: "CLAIMANT NOTE: One of the results of the determination is an overpayment of benefits in the amount of $407.00 for six weeks: 8-6-77, 8-13-77, 8-20-77, 8-27-77, 9-3-77, 9-10-77." The claimant did not file a timely appeal of the determination, but sought to file an appeal more than five years later. The agency made a timely decision to recover benefits and the claimant did not have good cause for a late appeal on the grounds that the notice itself was insufficient. The Board found that the determination provided sufficient notice of the overpayment because it was unambiguous, legally sufficient, and "presented in such a manner so as to 'enable a person of ordinary perception to understand the nature and purpose of the notice.' " Ottenheimer Publishers, Inc. v. Employment Security Administration, 275 Md. 514, 340 A.2d 701, 704 (1975). Wright v. Uptown Club, 1082-BH-83.

C. Overpayment Where Fraud is Not Found
An overpayment caused by the claimant's errors in reporting her wages to the agency may be recouped under Section 8-809 even though a finding of fraud under Section 8-809(b) is not supported by the record. Jones v. Y.M.C.A. Camp Tochwogh, 903-BH-83.

II. Retroactive Wages

A. Back Pay
Where the claimant was awarded back pay by an arbitrator for the NLRB, but the claimant actually received less than fifty percent of the amount of wages she would have earned had she not been terminated, the payment is not an award of back wages within the meaning of Section 8-809 as interpreted by the Court in the Katsianos case, supra. Wilburn v. Tressler - Lutheran Service, Inc., 190-BR-84.

The claimant was suspended from his job as a correctional officer and applied for unemployment benefits. He received a weekly benefit amount of $195 from the week ending August 16, 1986 through November 22, 1986. Subsequently, the claimant was reinstated with the employer and awarded full back wages. There was no deduction made in the award of back pay for the amount of unemployment insurance received by the claimant. The claimant received benefits to which he was not entitled because he was retroactively awarded wages within the meaning of Section 8-809. English v. Maryland Reception Center, 273-BH-89.

B. Damages As Opposed to Back Pay
The claimant instituted a breach of contract action in District Court after his position was abolished in breach of his employment contract. The Court awarded damages in an amount equal to the wages the claimant would have received had there not been a breach of the employment contract, and the employer paid the damage amount in full without deductions. This case is distinguished from Katsianos, supra, in which back pay was awarded by the NLRB, and federal and state withholding taxes and F.I.C.A. taxes were deducted therefrom. In this case, the payment was not "back pay," but was rather the satisfaction of a judgment debt created by a court order for breach of contract. A cause of action seeking "back pay" is not a justiciable cause of action in Maryland's District Courts. Therefore, the back pay provision of Section 8-809 does not apply. Cohen v. Emergency Physician Associates, P.A., 283-BH-83.

C. Relation to Section 8-801
The claimant was performing services for which wages are payable under Section 8-801. A draw against commission qualifies as "wages" under Section 8-201, especially when the draw is not later recovered by the employer. Since the claimant was receiving a draw which was greater than his unemployment amount for each of the weeks in question, he was clearly not "unemployed" during those weeks. Even if the claimant had not received the draw, he would not have been unemployed during the weeks in question. This is so because where a claimant performs services in each of several weeks with the expectation of receiving a commission, and where the commission is eventually paid, it is appropriate to attribute the commission to those weeks in which the claimant actually performed services. The claimant was overpaid for six weeks totalling $1,050. This amount is recoverable and must be repaid within the meaning of Section 8-809. Pontius v. A R C Technology, 250-BR-87.

The claimant worked on boats but became unemployed. He began receiving unemployment benefits in April, 1986. About this same time, he began working on a lobster boat and understood that he would be paid for this work when the boat began bringing in the lobsters. He worked on the boat almost two months while filing for unemployment insurance. On June 17, 1986, he notified the agency that he had been working on the boat and would not need his unemployment benefits in the near future because he would soon be paid. From April 20 to June 14, 1986, the claimant was working and performing services for which wages were payable. He was therefore not unemployed as that term is used in Section 8-801. Benefits paid to the claimant are recoverable under Section 8-809. Layton, 469-SE-87.