Court smacks state in Arizona unemployment benefits case

PHOENIX — The state Court of Appeals has slapped down the Department of Economic Security for taking an active role in arguing that a woman isn’t entitled to jobless benefits.

And the judges said the decision to intercede was so egregious that they not only overturned the decision by the DES tribunal board, saying she was ineligible but ordered it to pay the legal fees of the woman whose benefits the agency denied.

In a unanimous ruling, the three-judge panel said it is the legal role of the agency to review the facts and decide whether an employer had a legitimate reason to fire a worker. That question is crucial because benefits can be denied if the person was fired for cause.

But appellate Judge Michael Catlett, writing for the court, said that role ends when the fired worker appeals the agency’s decision.

More to the point, Catlett pointed out that the Lamont Mortuary, the underlying employer, never bothered to respond when Kayla Williams filed her appeal. And at that point, he said, DES had no right to go to court to fight her benefits on the mortuary’s behalf.

The ruling, unless overturned, sets a clear precedent. It tells DES to not defend employers when the agency’s decisions are challenged. Instead, the judges said, it should recognize its role is to be an impartial arbiter of these disputes.

An agency spokesman said it is “evaluating the decision but does not comment on ongoing litigation.’’

According to court records, Williams worked as an office manager for two years before she was fired. The reason had to do with the failure to process billings, though she said she made progress, as requested to come current.

A DES deputy determined that the mortuary had not discharged Williams for willful or negligent misconduct, concluding she was eligible for benefits. That decision, however, was overturned by a tribunal board.

Williams then sought relief from the Court of Appeals. While the mortuary did not enter a pleading, DES stepped in to defend the tribunal’s ruling.

Catlett said there’s a problem with that.

He said the only people who have legal standing to participate in the case are those who have “an interest in the outcome of the litigation.’’ Certainly, he said, the mortuary owners meet that test.

Catlett, however, said that DES, in defending the decision of the tribunal and asking the appellate court to uphold it, does not have such standing.

It is true, the appellate judge said, that Williams’ lawsuit does name DES as a defendant in the appeals because it was that agency that made the decision.

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But Catlett said this is no different than any other kind of appeal, where the person seeking to overturn the decision of the trial judge is required to name that judge as a defendant along with the other parties in the case.

“Judges generally hope their rulings are affirmed,’’ he acknowledged.

“Yet trial judges do not appear to defend their rulings,’’ Catlett continued. Nor, he said, do he nor any other judges on the Court of Appeals show up to urge the Supreme Court to uphold their decisions.

But that is pretty much, Catlett said, what DES is doing here: Becoming a party to the case to urge the appellate court to rule that the tribunal ruled correctly.

Nor were the appellate judge ready to set a precedent to allow DES to play an active role when a fired worker appeals a decision. Catlett said doing so would allow any other employer that prevails at the tribunal level to simply step aside and have the state carry the burden and expense of the appeal, “which is what the mortuary has done here.’’

“And it would also destroy the impartial character of the department as a tribunal where justice to employees and employers should be meted out on an even-handed basis,’’ he wrote.

The better option, Catlett said, would be to let whoever wins at the tribunal level defend the decision when it reaches the Court of Appeals, preserving the department’s impartiality in routine cases. He said only when the agency is defending a specific policy — and not the facts of an individual case — might it be appropriate for DES to play a role on appeal.

There’s also a more practical reason.

He said DES, in asking the Court of Appeals to uphold the denial of benefits, made arguments that went well beyond the specific grounds that the tribunal board used to make its ruling.

“The department accuses Williams of many other misdeeds,’’ Catlett said. “If we were to remand to the board for further proceedings, one could hardly blame Williams for doubting that she would get a fair shake on remand.’’

All that, the court said, entitles her to have DES pay her legal fees on her appeal.

“The department became an advocate actively defending against Williams’ eligibility for benefits, even when Williams’ former employer did not,’’ Catlett wrote. “The department’s active participation (in the appeal) went well beyond determining Williams’ eligibility and forced Williams to brief additional issues.’’