Wages are flat because unemployment IS so low

The New York Times had a feature on February 2nd on why wages continue to lag despite the extremely low unemployment rates at the moment.

There is a basic presumption in this article that is no longer valid, however: namely that the unemployment rate today is the same kind of unemployment rate from 10 or 20 or even 30 years ago.

In Wisconsin, the news for some time has been how the state’s unemployment rate and benefit payments to claimants are at record lows. For instance, a January 2018 press release from the Department includes the following observations:

Other indicators of the state of Wisconsin’s economy include:

  • Initial UI claims ended 2017 at their lowest level in the last 30 years.
  • Continuing unemployment claims ended 2017 at their lowest level since 1973.

See also this October 2017 press release. What is notable here is that this decline is well known and part of an apparent plan.

As previously noted here, this decline is occurring because of Department efforts at making it harder for the unemployed to qualify for unemployment benefits and then disqualifying them for not jumping through some state requirement fast enough or alleging unemployment fraud for nothing more than simple claim-filing mistakes.

But, the data in Wisconsin does not explain what is happening nationally. The National Employment Law Project has already noted how unemployment has changed significantly across the nation the last few years. But, thanks to the efforts of some smart folks in Pennsylvania, national unemployment data is now available in a highly convenient format and which produces eye-catching charts.

NOTE: I cannot say enough good things about this unemployment data explorer. Pretty much any unemployment data currently being collected is now available for quick analysis in a chart. Moreover, you can easily see and download the data being used to create the charts. Excellent work.

This data provides some charts that can compare what is happening from state to state. For instance, separation data (how claims are denied because of a quit or a discharge for which misconduct/substantial fault is found) presents the following set of charts:

50-state denial rates from 2005 to 2017

The red line in these charts is the national rate. As obvious, this chart shows that there is a great deal of variation from state to state. And, because there have been big changes in the number of claims being filed, this data is somewhat incomplete. SeeEmployer UI taxes declining because more UI claims being denied” (24 August 2016) for an examination of how changes in the number of claims being filed affect Wisconsin’s claim-filing numbers.

But, the variation among the states also reveals some obvious increases in denial rates in Kansas, Maryland, New Mexico, South Carolina, and Wisconsin. On the other hand, Alabama, Colorado, Florida (a surprise), Mississippi, New Hampshire, New Jersey, and New York show significant drops in denial rates.

This 50-state data gets even more interesting when “other” reasons for denying unemployment benefits are examined:

50-state denial rates for other reasons from 2005 to 2017

NOTE: “Other” reasons include, for instance, a claimant not being able and available, not completing the required job search actions for that state, not attending call-in or meeting requirements a state has mandated, or not registering for various state-mandated services. Wisconsin specific data on these issues “other” denial reasons is available here from this prior post on the financial impact of Wisconsin’s substantial fault disqualification. Outside of able and available status, these “other” reasons generally encompass requirements an individual state creates as part of its claim-management bureaucracy for supervising the unemployed.

Again, the red line in this chart is a national average of cases being decided for “other” reasons. As evident here, there has been an increase (and even an explosion in some states) in “other” denial reasons the last few years in Florida, Louisiana, Massachusetts, Michigan, Mississippi, Montana, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, and Tennessee. Indeed, the national trend of these “other” cases increasing over time would probably be much more significant if the extremely large populations of Texas and California were removed from the analysis (Texas has been flat, and California has actually declined significantly). As such, national data is masking significant changes in the availability of unemployment benefits in numerous states.

Of course, this table is simply showing the number of cases being decided for “other” reasons. If all of these cases did NOT lead to a denial of an unemployment claim, then there is essentially no harm, no foul in these cases. But, the actual denial rates for “other” reasons reveal a not-so innocent story.

50-state denial proportion for other reasons from 2005 to 2017

Where California declined and Texas increased slightly and then plateaued, Delaware, Florida, Iowa, Illinois, Indiana, Louisiana, Massachusetts, Maryland, Michigan, Mississippi, Montana, North Carolina, North Dakota, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, South Carolina (showing shocking jumps from year to year), Tennessee, Utah, Wisconsin, and Wyoming have seen obvious increases in denial rates since 2005.

These other reasons for the most part did not exist until very recently and almost none go back a decade in significant numbers in any one state. The Wisconsin data on this issue, for instance, is telling: cases involving profiling registration requirements were in single or low double-digits until 2015 when they sky-rocketed to hundreds and then thousands. What this last chart reveals is that numerous states have essentially created numerous mechanisms for disqualifying claimants even when those claimants are initially eligible for unemployment benefits.

Given that we are all human and can only take so much abuse before moving on, it is extremely likely that most folks have simply stopped filing unemployment claims because of the obstacles states have placed on their eligibility and not because they have found the jobs they have wanted all along.

So, if states are making it much, much harder to receive unemployment benefits when filing a claim, then the low unemployment rates of today are NOT comparable to the low unemployment rates of yesteryear or even to unemployment rates of a decade or so ago. Instead of creating a question about how low wages and low unemployment rates can co-exist, the low unemployment rates of today may actually be placing a brake on wage growth: the state unemployment policies at issue here increase the supply of individuals looking for any work in place of their missing unemployment benefits. That increase in the labor supply, as a result, creates downward pressure on wages. At least, that is what I learned in labor economics 101.

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Tips for filing for unemployment benefits in Wisconsin

As noted here and here (and too many others to list), filing for unemployment benefits in Wisconsin is dangerous. Any mistake you make on a claim can lead to a concealment/fraud charge by the Department of Workforce Development against you.

So, if you must file for unemployment benefits, here are some key things to do when filing.

Read the Worker’s Guide

Download and read A Worker’s Guide to Unemployment Law. Most of the information presented here is from that guide.

Be self-reliant

Do not rely on the Department’s on-line system to explain or inform you about what is going on with your claim. The on-line system is intended to provide the Department with information about you and your claim and does not provide much, if any, information about why the Department is taking some action or how it will do so. To get actual information about what the Department is doing, you need to call or review decision documents that are mailed to you.

NOTE: At some point, the Department should make decision documents available to you via its on-line system. Until then, the on-line system is limited in providing actual information about your unemployment claim. And, keep in mind that when on-line notices arrive, there will also be significant consequences to you. The story in Michigan about on-line only claims notice indicates dire problems with missed appeal deadlines for claimants in Wisconsin when that kind of notice arrives here.

Obviously, you also need to be your own record-keeper. For every conversation you have with a Department staffer, take detailed notes of what you say and what is told to you. If you have trouble with taking notes, record those conversations.

The unemployment system right now is geared to punish you for any mistakes you make. The Department, on the other hand, has limited its liability for those mistakes and will certainly deny any responsibility for its own mistakes. The best way you can hold the Department accountable is if you have your own records to back up your claims about mistaken advice you may have received.

Register at https://jobcenterofwisconsin.com/

Create a user-id and password and upload a resume to this website as soon as you file an unemployment claim. As Laura Hoffman, UI Hearing No.17002961MW (16 Nov. 2017) indicates, benefits will not be paid until this step is completed. The quality of the resume is unimportant, so do not delay in order to get the resume done right. You can always revise the resume later.

Be able and available for work

To receive benefits, you must be available for full-time work, and usually you must be available during daytime or first-shift hours or the hours in which your type of work is typically performed. For example, a bartender might be disqualified for restricting availability to first-shift work rather than nights and weekends, while a bank teller might be disqualified for restricting availability to nights and weekends.

There are some factors to watch out for when filing an unemployment claim:

  • Education: Students almost never qualify for benefits if their classes are during daytime hours or occurring during the hours in which their type of work is usually performed. Even if the student promises to drop out if he or she gets a job, he or she will likely be found to be unavailable. Only if the student is taking classes that will not lead to a degree and is not a full-time student can a person still be considered able and available for work.
  • Disabilities: Disabilities that restrict your hours of work or the kind of work you do are NOT disqualifying. See Eaton v. R & D Drywall, Inc., UI Hearing No. 08004119MD (27 July 2009), Wright v. Independence First Inc., UI Hearing No. 09607759MW (8 March 2010), and Dugenske v. New Haven of Oshkosh, UI Hearing No. 12403278AP (12 Feb. 2013) (claimant with a physical and/or psychological restriction is only required to be able to work on a part-time basis and does not need to work full-time in order to qualify for unemployment benefits). But, if you receive SSDI benefits because of that disability you are completely barred from receiving unemployment benefits, even if laid off from full-time jobs.
  • Transportation: You cannot overly restrict the geographic areas in which you are willing to work. Depending on your labor market and the type of work involved, most people are expected to travel anywhere from 15 to 25 miles each way. Certain jobs, such as construction work, may require up to a 50-mile commute. So, expect that daily driving by car or use of public transportation as part of being able and available for work. If your car breaks down, there is no public transportation, and you do not have access to other cars, the Department will consider you to NOT be able and available for work.

Do four job searches a week and expect an audit

You need to do four job searches each week and report those searches on every weekly claim certification. Use the UCB-12 form for tracking each week’s job searches. And, keep copies of these forms for 52 weeks (because the Department will audit you at some point).

Per Bodo Viliunas, UI Hearing No. 15607525MW (4 March 2016), the following actions count as one of those four job searches:

  • Applying for work with employers who have available openings (a second application to the same employer within four weeks is not allowed, unless the application is to a new, different job, the employer’s customary practices allow for multiple applications to the same job opening, or the employer is a temporary help employer).
  • Taking examinations for suitable work, such as civil service or a similar kind of test, such as a WorkKeys exam.
  • Registering for suitable work with a public or private placement facility, including a union.
  • Mandatory Job Center of Wisconsin registration.
  • Posting a resume on an employment website (only one posting per website is normally allowed).
  • Following the recommendations of a public employment office or similar re-employment services, including participation in reemployment services.
  • Attending non-mandatory re-employment services operated by DWD.
  • Registering with placement facility or head hunter.
  • Meeting with a career counselor.
  • Participating in a job interview.
  • Participating in weekly professional networking group connected to your profession.

Again, expect that your job search efforts will be audited. Insiders at the Department inform me that, besides dedicated audit teams, all claims workers at the Department need to review a specific number of claims each week as part of their regular job duties. In other words, the Department has made finding claimant “mistakes” a priority for everyone working there.

When audited, you (not the employer) will need to supply some kind of confirmation from the employer about your job application. That confirmation is best handled by keeping the e-mail message you receive from the employer or website and submitting that e-mail message to the Department as proof of your job application.

Of course, the Department will probably not allow you to forward that e-mail message to the Department staffer auditing your job search records. Rather, you will likely need to print the e-mail confirmation and fax or mail that message to the Department staffer. As one insider explained this auditing procedure to me: It is annoying for everyone, and there is no reason for this no e-mail policy other than claimant inconvenience.

Take advantage of your canvassing period

You may have up to six weeks from when you became unemployed in which you can turn down work which is a lower grade of skill or at a significantly lower rate of pay than you had on one or more recent jobs without losing your eligibility for benefits. During your canvassing period you will be able to turn down jobs that do not pay as well as your old job (less than 80% of your old wage) or require less skill but you may be found ineligible if you turn down a job offer for a position similar to your old job.

After the canvassing period ends, however, you need to accept reasonable job offers. Benninger v. Spherion Atlantic Resources LLC, UI Hearing No. 04004083MD (17 December 2004) (“a sliding scale approach has been applied to determine whether an employee had good cause to refuse an offer of work after the six-week canvassing period”). What is reasonable is in the eye of the beholder, however, so generally plan on accepting any job offers you receive after your canvassing period is over.

Temp agency assignments trigger numerous disqualification opportunities

Not only do you need to contact your temp agency for a new assignment whenever your current assignment ends, but you also need to contact your temp agency each week you claim unemployment benefits if that temporary job agency is your last employer. That is, once employed at a temp agency, you have an on-going requirement on each week of your unemployment claim to continue to contact that temp agency for new assignments. See this post for the details.

If you fail to contact that temp agency about available assignments each subsequent week you claim unemployment benefits, the temp agency can inform DWD of your lack of contact. You will then have to prove that: (a) either you actually did contact the temp agency by having phone logs or copies of e-mail messages and letters showing that contact, or (b) the temp agency failed to inform you of this requirement when you last worked for it.

Speak with a DWD staffer always

The claimants’ handbook in Wisconsin is a confusing document to read — full of legalese and jargon — about a claim-filing process that should be simple and easy but is hardly that. Cf. the Wisconsin claimants’ guide to Iowa, Minnesota, or Massachusetts, for example.

So, the only way to make sure you are not making a mistake on your weekly claims certification is to ask a Department staffer about all the questions you are answering each week (the weekly claim certification now involves 20-40 questions and should usually take at least half an hour to complete). As noted below, the information needed to file an unemployment claim can be incredibly complex. For those who are not lawyers or accountants, you probably do not have the same understanding of what you need to report as the Department does. And so, you need to ask questions or simply talk to someone about your claim-filing, simply because you may not have any idea that you are doing anything wrong.

The Department, however, presumes that you know everything to file a proper unemployment claim. Do not play this game with the Department and demand to speak with someone about what information you need to file and how you should be filing that information.

Track and report (a) any and all work you do and and (b) any and all income you receive in a week

The formula for determining a person’s unemployment benefit encourages folks to work on a part-time basis when collecting unemployment benefits. Part-time work, however, opens up opportunities for weekly claim-filing mistakes that the Department will pounce on and allege fraud.

Each weekly certification requires you to report your part-time work and income as earned in a given week even though you may not be paid until a following week or even several months later. So, you need to track your hours of work and your earnings independent of your employer, because you need to report this information to the Department before your employer actually pays you.

NOTE: For unemployment purposes, part-time work and wages are when you work less than 32 hours in a week or earn less than $500 that week. As an independent contractor (difficult to qualify for under Wisconsin unemployment law), you must report your independent contractor status and are ineligible for all unemployment benefits when doing more than 15 hours of independent contractor work in a given week. Independent contractor earnings, however, do not count at all against your unemployment benefits.

But, Wisconsin makes the claim-filing process even more complicated because the state requires you to report your part-time income and hours of work according to various kinds of categories of which you may have no knowledge or even lack any awareness.

The Department does not track paid-time off or PTO pay, for instance. But, the Department does want you to report that PTO pay and hours. And, you need to report sick time and pay, vacation time and pay, holiday time and pay, performance bonuses, disability and insurance benefit payments and the work-time included in such payments, and termination or dismissal pay of any kind. So, you need to make legal determinations just like an attorney about how something like PTO pay in your case translates to what the Department wants reported. And, you need to report this hourly information even if you are paid on a part-time salary basis or a part-time commission of some kind.

NOTE: You also need to report any missed hours of work, see Kunze v. City of Stevens Point Transportation, UI Hearing No. 13003015MD, 13003016MD, 13003017MD, and 13003018MD (29 November 2013) (any missed shift for which due notice by the employer was provided constitutes work and wages that need to be reported on each weekly claim certification), which could include missed hours or pay because of illness, missed holiday hours and pay, and even missed vacation hours and pay as well as other kinds of possible pay and work hours. Missing a shift to take a child to a doctor’s appointment constitutes missed work that needs to be reported as if you did not miss that shift.

In other words, there are many, many ways for you to make a mistake on your weekly claim certification. And, as noted ad nauseam here, the Department will consider any mistake you make as equivalent to unemployment fraud and charge you for that alleged fraud. The only way to get any protection from that mistake is get some advice from a Department staffer about how to file a correct claim. Even if that advice is wrong (which it probably will be), you can point out how your mistake was based on that bad advice and so avoid a charge of fraud down the road.

NOTE: In its push to go on-line, the Department has scaled back phone help by limiting access to staffers to only a few days a week and eliminating use of a toll-free number (except when reporting claimant fraud) in lieu of 414-435-7069. Indeed, the Department is making the phone system so difficult to use that you now have to call just to learn when you can call on your designated day.

Of course, the Department will deny ever giving out bad advice. So, having a record of that bad advice will be essential to your defense against the fraud charge that the Department will lodge against you for your claim-filing mistakes.

Oral arguments over agency deference

On December 1st, the Wisconsin Supreme Court heard oral arguments in TetraTech v. DOR, Appeal No. 2015AP2019, DWD v. LIRC (Beres), Appeal No. 2016AP1365, and Wisconsin Bell, Inc. v. LIRC, Appeal No. 2016AP355.

Here is a rundown of what happened.

Tetratech

For a description of the issues in this case, see TetraTech: Agency discretion and “process”.

The company began with agency deference, taking advantage of the Revenue Department’s concession that great weigh deference was no longer valid and that even due weight deference was not provided for under ch.227 except when the agency’s technical expertise was in play.

There was some general discussion of the facts in the case: which company did what task as part of the clean-up. TetraTech’s main point here was that in practical terms there was no real consumer good being sold, and so the sales tax in question lacked the basic requirement of a consumer good to be valid. Likewise, the cleanup of the polluted river silt did not lead to any new product that could be sold on a market of some kind.

The solicitor general disputed these points, claiming that the tax in question was valid because of: (1) the company’s role in processing the polluted silt or (2) its role as a consumer of the silt and water after cleaning by a sub-contractor.

The justices’ main concern was with how broadly the Revenue Department was interpreting the “processing” at issue in this case. Several justices indicated that the statutory term in this case — “processing” — was incredibly broad and could be applied to almost anything a company did. Accordingly, on several occasions they asked for guidance from counsel on how to narrow a reading of the term in some structured way. The Revenue Department advocated for a broad reading of “processing” based on the dictionary definition. TetraTech, on the other hand, sought to limit “processing” to a physical change in the raw materials rather than just the separation of materials into distinct parts or the enhancement of personal property in a way that creates commercial value.

In regards to agency deference, the Department of Revenue contended that agency deference only meant that a court could take account of the agency viewpoint and be persuaded by that viewpoint. In light of the amicus brief from the Wisconsin Utilities Association, the solicitor general indicated that courts could acknowledge the technical expertise of utilities when reviewing the rates set by those utilities.

Justice Gableman, however, apparently would go further in limiting court deference to state agencies. He asked specifically whether less deference was due to a state agency that was a party to the case than a neutral party that produces learned treatises (and most likely amicus briefs as well). This concern mirrored what Wisconsin Manufacturers & Commerce raised in its amicus brief in this case.

Beres

For the legislative history, see Beres/absenteeism at the Wisconsin Supreme Court, Part 1. For the facts and legal issues, see Beres: Agency discretion to undo a statutory scheme.

Counsel for the Department of Workforce Development began by proclaiming that great weight deference was invalid and even due weight deference was problematic. Prior to the current deference scheme, the solicitor general remarked, early court decisions had usually questioned and doubted the views of administrative agencies. In the current deference scheme, on the other hand, courts had ceded this caution and instead uncritically accepted the viewpoints of state agencies as valid simply because a state agency was behind that viewpoint. By failing to come up with its own interpretation and accepting the proffered rationale of an administrative agency, the Department explained, courts had improperly ceded their own authority and responsibility to determine for themselves what a law should mean.

NOTE: The solicitor general cited Boynton Cab v. Neubeck, 237 Wis. 249 (1941) as an example of the hard work of interpretation a court should always be doing. The problem with this claim is that the court in Boynton Cab relied heavily on and followed numerous reports and decisions of British and federal administrative agencies to determine what the term “misconduct” should mean for unemployment purposes.

As in TetraTech, the solicitor general would only concede that the limited deference due a state agency was the deference due a party for its persuasiveness (similar to the deference a higher court gives to a lower court that provides a persuasive analysis of an issue).

Furthermore, Borgnis was NOT on point, the Department responded when pushed, because the court review then was extremely limited to a jurisdictional question and did not inquire into whether an administrative agency had improperly usurped court authority.

As for the absenteeism provision itself, the Department argued that a plain reading of this statute allowed the employer to set its own misconduct disqualification, and the Commission’s arguments to the contrary were neither grammatically sound or in sync with the unemployment statute as a whole.

The Commission’s oral argument started with the strange question from Justice Abrahamson about why the Commission could not get along with the Department and somehow resolve these disputes prior to court action. Given that the Commission has statutory responsibility to decide how unemployment law should be interpreted and that the Commissioners themselves are independent of the governor (they have set terms and can only be removed for cause), this question made no sense. If the Department has a valid and strongly held dispute with the Commission over a Commission decision, then the only way to get that dispute resolved is through litigation. In no way should the Commission ever be responsible for getting disputes with the Department resolved through some kind of backroom deal. Such action would call into question the very independence that is condicio sine qua non to the Commission.

To keep matters off kilter, Justice Gableman repeated his concern from TetraTech about a state agency being a party to a dispute and so possibly biased in some improper way whereas a neutral law firm could provide unbiased guidance regarding the legal questions at issue. The response from the Commission about the legislature designating that administrative agency as having shared authority with courts for reviewing administrative law decisions did not seem to convince the justice that his concern over alleged agency bias was statutorily suspect.

Justice Gableman also pushed the Commission to explain what was wrong with the kind of persuasive deference lower courts could have on appellate courts under de novo review. The Commission’s response: the Commission is statutorily charged with deciding the legal disputes that come its way and by far most of those decisions are never appealed to court. See, for instance, the Commission’s statistics page. To do otherwise would scuttle the precedent Commission decisions provide employees and employers.

For the Commission, the holding in Borgnis was directly on point and reflected the simply reasonable notion that a court defer to a state agency when offering up a reasonable interpretation of the law. Some justices seemed to accept this point, others in addition to Justice Gableman seemed to reject it, and some (notably Chief Justice Roggansack) seemed to be on the fence.

The justices also seemed split on the absenteeism provision and whether the more than two absences in 120 days provision in the first part was a floor that no employer could lower or a default for when the employer lacked its own absenteeism policy. The Commission posited that this provision was a floor, and so the employee in Beres was not disqualified because her absence was not her fault and only a single absence. If this provision was just an option for an employer, then an employer would be free to set its own disqualification standard no matter how severe to its employees.

Wisconsin Bell

For a summary of this case, see Making factual findings subject to never-ending review: Wisconsin Bell.

The focus on agency deference in the first two cases allowed the oral argument here to focus almost entirely on the substance of discrimination law. The ensuring discussion, however, was hardly about the intersection of discrimination and disability law. Rather, the questions and answers almost entirely concerned the factual record in this case. As one of the attorneys observed after oral argument was over, it seemed like a motion for summary judgment was being heard. At one point, Justice Abrahamson even asked rhetorically where the discussion of the inference method had gone.

So, the factual record was immediately in play in this matter. Justice Gableman and Chief Justice Roggansack wanted to know what evidence the employer had to support its claims that the employee’s disability was illegitimate and nothing more than the shirking of job duties. The employer’s theory of the case, however, did not turn on the court re-assessing the credibility of the evidence presented. As a result, Wisconsin Bell could not point to evidence in the record to counter the employee’s claims in large part because the employer had never presented such counter evidence at the administrative hearing. Indeed, Chief Justice Roggansack along with Justice Bradley challenged the employer about whether specific findings of fact in the record were clearly erroneous, and Wisconsin Bell had to admit that there WAS evidence in the record to support those findings.

NOTE: Only Justice Kelly seemed ready to agree that court review of the factual record was needed anew when reviewing the case. For him, a new look at the factual record could verify the employer’s concerns about the employee’s alleged shirking. Justice Gableman also seemed ready for some additional court review of the facts if a reason for such review was presented to him. At several points, he voiced concerns about the employee working disability law to his advantage. In other words, Justice Gableman thought it improper in some way for an employee to exercise his rights in an astute manner.

Rather, the conceit of the employer’s case turned on a change in discrimination law that would make the employer’s decisions unassailable unless there was a some kind of admission by it of an illicit intent. It did not seem that the justices were ready to adopt that legal position, however (it barely came up at all). Only Justice R. Bradley indicated that she was willing to alter the law in a substantial way when she cited a statutory exception to Wisconsin’s discrimination law — Wis. Stat. § 111.34(2)(a) — as allowing any employer to discharge its employees who fail to do their assigned job duties regardless of their disabilities. This provision, however, is simply an affirmative defense available to employers to allow them to discharge permanently disabled employees who can no longer perform necessary job duties — like firefighters having their employment terminated should they become blind — and has nothing to do with employees who have temporary disabilities or illnesses that occasionally limit how they perform their jobs. So, it is unclear how this provision could be transformed in the way J. Bradley indicated.

All the posts in this series

A quick note on the agency deference briefs

TetraTech v. DOR, Appeal No. 2015AP2019, DWD v. LIRC (Beres), Appeal No. 2016AP1365, and Wisconsin Bell, Inc. v. LIRC, Appeal No. 2016AP355, have attracted numerous briefs, including several amicus briefs (somewhat unusual for the Wisconsin Supreme Court). Some of the briefs are excellent; others contain outright laughers. Given the importance of these cases, some comment on the briefing on which Wisconsin administrative law may be revolutionized is vital.

TetraTech

The Department of Justice’s newly-created solicitor general’s office represents both the Department of Revenue and the Department of Workforce Development in these cases. For both clients, the solicitor general’s briefing is little more than a big, sloppy kiss to the three-justice concurrence in Operton that first challenged the status of agency-deference. Indeed, the Department of Revenue brief in TetraTech does little more than shadow-dance with the arguments and claims made in the Operton concurrence. In this brief, “great weight” deference is statutorily and constitutionally suspect, and only consideration of an agency’s technical, long-standing decisions that do not carry political or economic import is allowable. At one point, this brief even cites a federal court dissent to the denial of en banc review as support for claims that courts cannot defer at all to administrative agencies over economic or politically significant questions. See TetraTech’s Respondent’s Brief at 38-9. There is hardly any detailed discussion by the solicitor general of how the administrative deference case law has developed in Wisconsin or how these new claims against deference recall attacks against state agencies from a century before that were rejected at the time.

Instead, the solicitor general makes the unhistorical and inaccurate argument that court review was much broader and less deferential in bygone days and urges the court to return to this less deferential review.

NOTE: This argument is true to the extent that “review” of a century ago led judges to apply their own economic and policy preferences under Lochnerism, but the solicitor general leaves this legal history completely out of its briefing.

This argument runs counter to the conclusion of Kenneth K. Luce, “The Wisconsin Idea in Administrative Law,” 34 Marq. L. Rev. 1 (1950) about how Wisconsin’s then new administrative review law considerably expanded judicial review of administrative agencies:

The Administrative Procedure Act has broadened the scope of review beyond certiorari and other forms formerly available, and the Court has stated that “few if any statutes have come under our observation which prescribe broader or even as broad a scope of review as that prescribed by Ch. 227, Stats.” Clearly the circuit courts today have broader review powers in most cases than under previous statutes and decisions.

Luce, “The Wisconsin Idea in Administrative Law,” 34 Marq. L. Rev. at 14-15 (footnotes omitted). Where Luce is discussing much broader judicial review being put into place, the Department of Justice is positing that same review becoming narrow and more limited under ch.227 or ch.102/108. The hundreds of cases and issues in Luce’s short law review article simply do NOT appear with any detail in the Department of Justice briefs advocating that deference to state agencies statutorily and constitutionally runs afoul of independent court review.

NOTE: Also at issue in Luce’s law review examination is the replacement of limited certiorari review and mandamus actions with ch.227 review. Hence, there have been both major procedural as well as substantive expansions in court review of state agencies that appear haphazardly at best in the solicitor general’s briefing in these cases.

Beres

The Department of Justice repeats these claims in Beres, but the Justice Department also has to contend with some excellent points by the Commission in its brief about how many of the same questions over agency deference were previously argued and decided by the Wisconsin Supreme Court. For instance, the Commission explains that the constitutional questions of agency deference raised in Beres were previously decided in Borgnis v. Falk Co., 147 Wis. 327, 358-61, 133 N.W. 209, 219 (1911):

There are many such administrative bodies or commissions, and with the increasing complexity of modern government they seem likely to increase rather than diminish. Examples may be easily thought of. Town boards, boards of health, boards of review, boards of equalization, railroad rate commissions, and public utility commissions all come within this class. They perform very important duties in our scheme of government, but they are not Legislatures or courts. The legislative branch of the government by statute determines the rights, duties, and liabilities of persons and corporations under certain conditions of fact, and varying as the facts and conditions change. Manifestly the Legislature cannot remain in session and pass a new act upon every change of conditions; but it may and does commit to an administrative board the duty of ascertaining when the facts exist which call into activity certain provisions of the law, and when conditions have changed so as to call into activity other provisions. The law is made by the Legislature; the facts upon which its operation is dependent are ascertained by the administrative board. While acting within the scope of its duty, or its jurisdiction, as it is sometimes called, such a board may lawfully be endowed with very broad powers, and its conclusions may be given great dignity and force, so that courts may not reverse them unless the proof be clear and satisfactory that they are wrong.

Borgnis, 147 Wis. at 359, 133 N.W. at 219.

NOTE: Despite being squarely on point about the constitutionality of agency deference, Borgnis only appears in the solicitor general’s opening brief as a passing reference. According to the Justice Department, Borgnis concerns the limited court review of agency actions to determine whether the agency has acted in “excess of its powers.” Respondent’s Brief at 22-3 in Beres. Only in its reply brief does the solicitor general begin to deal with the central holding in Borgnis.

The solicitor general’s response is simply to exclaim that Borgnis only concerned the ability of a state agency to find facts and apply established law to those facts and did not deal in the least with the ability of an administrative agency to render its own legal interpretations. The above quotation belies that argument, however. The application of law to facts in Borgnis is framed in the same way that a court might apply the law to facts. Indeed, the solicitor general’s quotation from Borgnis in support of this claim for limited agency discretion is woefully incomplete.

The next important contention is that the law is unconstitutional because it vests judicial power in a body which is not a court and is not composed of men elected by the people, in violation of those clauses of the state Constitution which vest the judicial power in certain courts and provide for the election of judges by the people, as well as in violation of the constitutional guaranties of due process of law.

* * *

It is an administrative body or arm of the government, which in the course of its administration of a law is empowered to ascertain some questions of fact and apply the existing law thereto, and in so doing acts quasi judicially[.]

Borgnis, 133 N.W. at 218-19 (emphasis indicates the quoted language in the Solicitor General’s Reply Brief at 4 for Beres).

NOTE: The Commission’s brief is also worth reading for pointing out how the solicitor general’s crabbed view of executive, legislative, and judicial functions having to be isolated and distinct from each other does not match what the founding fathers believed, what federal courts historically have held, and what Wisconsin courts have maintained.

And, in regards to the substance of the absenteeism provision at issue in Beres, the Commission explains (1) the risk the Department’s position has for employers should the U.S. Department of Labor conclude that the state is no longer in compliance with federal requirements for how unemployment disqualifications should function and (2) how employers could use this expanded disqualification to not only cut off unemployment benefits to claimants but also deny employees their workers’ compensation benefits. The response of the solicitor general to these points, respectively: (1) No response; and (2) Agreed, because such harsh results on the unemployed and in favor of employers are what was intended by the new absenteeism disqualification.

Amicus briefs in TetraTech and Beres

Wisconsin Manufacturers & Commerce along with other industry groups has an amicus brief in TetraTech that presents some whoppers of legal argument. For instance:

When the government as a party is systematically given predisposed deference, the other litigants are systematically disadvantaged. It is invariably a zero-sum game to the detriment of Wisconsin Employers.

TetraTech WMC amicus Brief at 7. There is also:

If there has been an interpretation of a statute by the agency, any respectful consideration of such interpretation should consider both the agency bias and limited qualifications for agencies to interpret the law. Notably, and we are in complete agreement, the Solicitor General concludes “in every case, the court must ultimately interpret the law for itself.” Id. at 31 (Emphasis theirs).

TetraTech WMC amicus Brief at 13.

WMC has drawn nationwide attention for its cozy relationship with and support of some of the Wisconsin Supreme Court’s current justices. So, these claims about being discriminated against by state agencies is akin to a deer hunter bemoaning an unsuccessful hunt because the deer did not cooperate and demanding that the deer be rounded up and caged so as to make all future hunts “fair.”

This WMC brief also indicates some of the ideological goals of this attack on agency deference:

Even so, subject matter expertise is frequently not relevant when the court is charged, and is seeking assistance, with reading the law. Judges have relevant education, training, and most importantly, the experience to discern what the law is (underscoring their unique constitutional duty), whereas agency bureaucrats generally have no training on or knowledge of the legal methods of statutory interpretation.

TetraTech WMC amicus Brief at 10. In this framework, judicial reasoning bests the scientific or professional expertise of the administrative agency. Indeed, the more professional or technically competent the administrative agency, the more doubt a court should have for the agency’s proffered legal reasoning. Id. at 8-9 (citing Gorsuch concurrence in Guitierrez-Brizuela, 834 F.3d at 1158).

The Wisconsin Institute for Law & Liberty filed amicus briefs in both TetraTech and Beres. Both briefs emphasize the importance of judicial authority over the executive authority of administrative agencies and how the separation of powers preserves and protects the liberty interests of Wisconsin citizens. As such, these briefs demonstrate the connection this attack on agency deference has to the liberty interests that fueled the Lochnerism of old.

Finally, the Wisconsin Utilities Association has an amicus brief in TetraTech in favor of agency deference. The utilities association explains:

when a plaintiff challenges a utility rate as “unreasonable,” this implicates “statutory interpretation” by the agency only in the loosest sense of the term. What is really at issue is reasonableness, and courts understand the Commission is best able to balance the multitude of technical, equitable and policy considerations that underlie a “reasonable” rate.

Moreover, WUA’s members have come to rely on this level of deference to the Commission’s rate-setting decisions. It deters what would otherwise be prolonged legal challenges to new rates, terms and conditions of public utility service, while at the same time guaranteeing any challenges that do arise do not devolve into judicial scrutiny of highly technical policy choices by an expert agency. In a world without great weight deference, it is difficult to see what would prevent a reviewing court from substituting its own view of how utility costs should be apportioned among various customer classes or what level of carrying costs should be authorized on a particular escrow account-all because, on some level, these issues go to the Commission’s “interpretation” of the statutory directive to set “reasonable” rates.

WUA amicus Brief at 10 in TetraTech (emphasis in original). This brief states exactly what is at stake in these cases: whether judges will substitute their preferences about the scope and impact of regulations for the judgments of the state agency by subjecting the decisions of those agencies to heightened scrutiny.

Wisconsin Bell

The briefing in this case was done on a tight time frame, as the court granted the petition for review on Sept. 12th and then set oral argument for December 1st.

Like the solicitor general, Wisconsin Bell contends that the viewpoint of an agency be simply a factor for consideration by a reviewing court and that any weight given to that factor depends on the agency’s specifically demonstrated expertise, technical competence, and specialized knowledge. Wisconsin Bell Brief at 21.

As to the substance of the alleged discrimination, Wisconsin Bell contends that the Commission is essentially making itself into the personnel office of the employer. This usurping of the employer’s own prerogatives over its employees, according to Wisconsin Bell, is legally suspect.

The Commission’s and the employee’s briefs dispute these claims, showing how the employer’s arguments do not apply to the facts of this case and why prior court and Commission precedent support the employee’s claim of discrimination.

As these briefs demonstrate, the dispute with Wisconsin Bell essentially turns on whether the employer had a reasonable basis for concluding the employee’s disability claims were illegitimate in some way.

Three amicus briefs were filed in this matter. The WMC amicus brief presents additional argument for why the employer’s decision to discharge the employee should be considered to be non-discriminatory. Amicus briefs from the Wisconsin Employment Lawyers Association and from Disability Rights Wisconsin and Survival Coalition Wisconsin, on the other hand, aver that: (1) the current system of agency deference is constitutional and promotes efficiency and predictability in the judicial system, (2) the legal issues in this case involve long-accepted methods of establishing disability discrimination, and (3) there is little to anything that is controversial in the Commission’s reasoning and conclusions that Wisconsin Bell had discriminated against one of its employees because of his disability.

NOTE: I drafted an amicus brief for the Wisconsin Employment Lawyers Association in the unemployment case, Operton v. LIRC.

The briefing in this case describes exclusive world views of the law. The briefs in support of the employer contend that the Commission’s legal reasoning is highly suspect and lacking factual support. For such a misapplication of the law, these parties argue that no deference is due the Commission. In contrast, the parties supporting the Commission and the employee find nothing unusual or suspect in the Commission’s legal reasoning, question mightily leaps in logic in the opposing briefs, and point to copious examples in the record that support the Commission’s contentions and findings.

Given these differences, one side of this dispute is far afield in its claims, and the employer side seems to be the one that lacks a solid foundation. Wisconsin Bell is basically asserting that it should be believed even though it never presented much evidence to substantiate its alleged doubts about the employee’s disability claims. For the employer, its decision to discharge an employee should be presumed correct unless the employee can reveal an admission of some kind by the employer revealing its illicit motive. Such a requirement upends discrimination law in this state and allow all but the most obvious and crude discrimination to go unchecked. At a time when the nation is finally waking up to the widespread nature of sexual harassment, no court should pretend that workplace discrimination is no longer a problem and assert that employers are as innocent as new-born babes.

All the posts in this series

Making factual findings subject to never-ending review: Wisconsin Bell

In Wisconsin Bell, an employee with bi-polar disorder asked to be off work temporarily because his anxiety was triggering a mental breakdown. The employer did not believe the request was legitimate, however, and dismissed the employee for shirking.

The employee presented copious evidence about his disability, while the employer simply asserted it did not believe him. Unfortunately for the employer, an administrative law judge and the Commission found that the employee’s disability and mental breakdown to be credible, and so the employer’s dismissal for that disability constituted a discriminatory discharge.

The original petition for review from Wisconsin Bell concerned a legal question over the status and proper use of a legal theory for determining an intent to discriminate called the “inference” method. But, baked into any examination of the inference method is most likely an examination of the the evidence in the record, and in this case that examination will almost certainly include the credibility of witness testimony.

Here, the employer is claiming that it discharged an employee because it did not believe the disability claims of its employee and instead concluded he was shirking. The administrative law judge and the Commission, on the other hand, found that employee to be quite credible in contrast to the rather in-credible employer claims.

So, this legal dispute over the “inference” method when coupled to the question of agency deference that the Wisconsin Supreme Court added to this case essentially opens up findings of fact to constant review up the appellate ladder. In other words, the deference at issue in this case is to the factual findings and credibility determinations of the agency.

This factual review by courts — even a supreme court — is explicitly included in the attack on agency deference. Philip Hamburger’s, Is Administrative Law Unlawful? specifically concludes that a proper and constitutional separation of powers requires courts to do their own fact-finding regardless of any fact-finding by a state agency. He writes:

Whereas judges once heard independent actions against executive officers, they now are the final participants in an appeals process that oversees administrative agencies. The result is that administrators feel liberated from the constraints of law, and judges feel bound to make the administrative system work.

Hamburger, Is Administrative Law Unlawful? at 304. For Hamburger, the deferral to administrative agencies contrasts mightily with rights to constitutional due process and an independent judiciary obligated to follow the law and not the whims of the executive branch. Whatever technical matters are at stake in an administrative proceeding, Hamburger reasons, those technical matters also involve political questions that are appropriately decided legislatively and judicially rather than through an executive. Id. at 314. As a result, trial court judges who defer to administrative fact-finding, according to Hamburger, abandon their constitutional obligations and prejudice the judicial review in favor of the administrative agency. Id. at 317-18.

So, Wisconsin Bell presents the Wisconsin Supreme Court with the opportunity to make judicial fact-finding part-and-parcel of the judicial review process at every step of the appellate process.

All the posts in this series

UPDATE (12 Dec. 2017): Added links for all the posts in this series.

Beres: Agency discretion to undo a statutory scheme

In Beres, the case turns on a dispute between the Department and the Commission over whose interpretation of the absenteeism disqualification is most reasonable. In its quest to get its interpretation adopted, the Department is willing to subject all agency decision-making to heightened scrutiny.

Taking effect in January 2014, Wis. Stat. § 108.04(5)(e) provides that a claimant will be disqualified for misconduct when an employee is absent “on more than 2 occasions within the 120 day period before the date of the employee’s termination, unless otherwise specified by his or her employer.”

The employer nursing home in Beres apparently took advantage of the “unless otherwise specified by his or her employer” provision and had an attendance policy which indicated that employees would be terminated for a single absence during their 90-day probationary period if they were a no call, no show. The claimant in this case, Ms. Beres, was extremely ill and did not report to work or call in her absence. The employer called her home, and her spouse indicated that she was too sick to work. The employer then terminated her employment, and the Department denied her claim for unemployment benefits as misconduct because of absenteeism.

So, unlike the long-standing statute being applied in a new situation at issue in TetraTech, the statute in question in Beres is brand new, poorly drafted, and in conflict with what was originally proposed. See Beres, part 1. The language in question literally makes no sense for purposes of unemployment law. Cf. Wis. Stat. § 108.01.

Confronted with this nonsensical provision, the Commission reasonably concluded that the “unless otherwise” provision for an employer absenteeism policy cannot set a threshold lower than the statutory “more than two absences in 120 days.” Because the claimant in Beres was not responsible for her illness and a single illness did not meet the threshold disqualification of more than two absences within 120 days, the Commission explained, she was NOT disqualified. See Absenteeism decision excludes zero-tolerance policy as misconduct (8 Match 2017) for discussion of the court of appeals decision.

The Wisconsin Supreme Court is now considering this case alongside the question of what level of deference is constitutionally and statutorily due. At the court of appeals (which sided with the Commission 2-1), due weight deference was given the Commission’s position. Under this standard, the court would only affirm the Commission if there was NO other reasonable interpretation proffered.

So, there is no reason per se in this case to create a new deference standard. The justices will find either the Commission or the Department interpretation of the absenteeism to be the reasonable one.

But, there is a long-game for what the Department is doing in this case. If there is no more “great weight” deference given to long-standing Commission interpretations, then the Department (along with all employers and employees) can challenge any and all of the Commission’s prior precedents. The Commission will need to defend its prior decisions as the most reasonable interpretation available rather than relying on their previously established reasonableness to stop the challenge in its tracks.

And, the first target of this attack will certainly be on the Commission’s unemployment concealment decisions that mandate the alleged unemployment fraud in question be intentional rather than accidental. As noted numerous times here, the Department and the Commission have been at odds on this issue since 2014, and the dispute led in 2017 to the Department pushing for the elimination of the Commission in the state budget.

Finally, if the court should agree with the Department and find that an employer gets to set an absenteeism disqualification based on a single absence regardless of reason, then the court will essentially be creating a disqualification that swallows all of unemployment law. Under the Department’s interpretation, any employer can replicate this “single absence provides the basis for a discharge” provision and then apply this disqualification whenever an employee is absent in order to keep an employee from receiving any unemployment benefits connected to that employer. The limited misconduct disqualification that should never apply when employees lose work through no fault of their own essentially becomes a no-fault disqualification for absenteeism.

And, an employer has much to gain from this board disqualification. Whenever there is a finding of misconduct in Wisconsin unemployment law, the employee guilty of that misconduct loses all of his or her income from the employer for determining both current and future benefit year eligibility for unemployment benefits. Hence, this broad reading of the absenteeism provision enables an employer to discharge employees for misconduct purposes for any of their absences and thereby insulate itself from ever having its experience rating increased.

All the posts in this series

UPDATE (12 Dec. 2017): Added links for all the posts in this series.

TetraTech: Agency discretion and “process”

The alleged problems with regulation and administrative agencies is exemplified in the TetraTech case. In this tax matter, the dispute concerns how expansive for tax purposes a statutory reference to “process” should be read. A company, TetraTech, was responsible for “processing” contaminated water as part of an effort to clean the Fox River of pollutants. Wis. Stat. § 77.52(2)(a)11 (emphasis supplied) provides that “[t]he producing, fabricating, processing, printing, or imprinting of tangible personal property or items, property, or goods” for materials either directly or indirectly provided to consumers shall be taxed.

As obvious, “processing” is an incredibly broad term. Writing a brief can be considered a process that transforms the paper on which the brief is printed, for instance. So, the main question presented in this case is how broadly or narrowly the court should understand “processing.” Since the revenue statutes in question do not define “processing” and the term itself is extremely broad, this kind of case calls for the kind of court intervention to clarify exactly how “processing” should be understood.

That is, this kind of case contains a bread-and-butter question courts typically address whenever reviewing how a statute should be understood. There is nothing here that indicates that a substantial change in agency deference is needed in order to resolve this dispute. The Wisconsin Supreme Court could hold that the Department of Revenue has the correct, broad interpretation of “processing” and decide to defer to it or even not defer to it but support it in any case. Or, the court could conclude that the current agency interpretation is NOT a reasonable application of the law and overturn that finding. Or, the court could do any number of things in between these two outcomes. A company like TetraTech certainly would want the interpretation of “processing” adopted by the Department of Revenue to get no deference. But, whether there is deference or not does not automatically lead to TetraTech getting the outcome it desires, especially when this case presents a very typical scenario of an extremely broad statutory term that requires clarification. Only if there already had been a similar case with similar facts to this one would the court even consider deferring to the administrative agency. But, the briefs indicate that this case presents a unique situation — processing of river silt to remove the contaminants as part of an environmental clean-up effort — that does not appear to have ever been contemplated by the agency of the legislature.

So, the question of agency deference does not really add anything to this case other than to provide an opportunity to expound on the separation of powers between administrative agencies and courts. The interpretation of the statutory term itself presents the kind of statutory construction work courts have to confront day-in and day-out. While the court of appeals decision granted great weight deference to the Department of Revenue, the appeals court still conducted a full analysis of the statutory terms and arguments to determine that the agency’s proffered interpretation was reasonable. The Wisconsin Supreme Court could easily disagree with any of the conclusions reach by the court of appeals and consequently issue a decision in favor of TetraTech.

But, this kind of point-by-point review is exactly what is at stake here. The attack on agency deference is about a court coming up with its OWN interpretation of the law without first considering whatsoever the interpretation of the state agency. Only after the court has its own interpretation is the court supposed to examine the agency’s proffered interpretation.

In this light, a non-deference court is subjecting state agencies to heightened scrutiny of some kind, as the court gets to decide what the statute means and the agency’s interpretation must then match up with what the court considers correct more so than what the opposing side posits. The court is no longer just deciding a legal dispute between parties. Instead, the court is exercising policy-making discretion to determine how administrative agencies should develop their administrative rules and decisions.

And, as noted already, the justices pushing this agenda are adding an additional concern for “liberty interests” that are NOT part of the statutory language but which were part and parcel of the court attack against regulation under modern Lochnerism. Under this modern version of Lochnerism, any regulation of commercial activity is automatically suspect because of how it infringes on the liberty interests of commercial enterprise.

All the posts in this series

UPDATE (12 Dec. 2017): Added links for all the posts in this series.