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.

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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 broard 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.

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

Beres, agency deference, and Lochnerism, Part 2

In three cases set for oral argument on December 1st — TetraTech v. DOR, Appeal No. 2015AP2019, DWD v. LIRC (Beres), Appeal No. 2016AP1365, and Wisconsin Bell, Inc. v. LIRC, Appeal No. 2016AP355 — the Wisconsin Supreme Court is re-considering the whole field of agency deference in what could be a legal revolution that up-ends modern governance.

In a previous post, I described the statutory text at issue in Beres, the unemployment case among the three. Here, I want to deal directly with why the Wisconsin Supreme Court might scuttle agency deference and what is at stake in such an event.

Why agency decision-making is being questioned

The decisions of administrative agencies are the building block for modern government. In 19th-century America, there was no government bureaucracy available for enforcing much of anything. There were no requirements for food to be safe to eat, for instance, or for protecting worker safety. Cities had water and sewer services that in some instances were collectively run or in other instances were operated by private companies. But, outside of police, there were little to any regulations for: (1) how public services were to be provided or (2) how private companies and individuals could interact with each other. Hence, snake oil salesmen abounded, and companies and individuals could do what they want with the land they owned and the people they hired.

The modern world we know today is built on the idea that there needs to be some organization to how businesses and people interact. Health and building codes are needed to prevent cows from starting fires that burn entire cities to the ground or to stop epidemics and food poisoning from becoming rampant. And, safety and health and other regulations are needed to make sure people get paid the wages promised them, that companies sell the products they proffer, and that products and workplaces are generally safe for workers and the public in general.

As modern living has grown more complex, so has the scope and complexity of the administrative agencies needed to regulate the interactions among people and among people and companies. The legislatures in the late 19th and early 20th centuries that created these administrative agencies recognized this complexity of modern life. The administrative agencies that were created were not only literally drafted into existence by these laws, but these agencies also were given the responsibility and power to manage these laws through the regulations the agencies issued. As such, these agencies took on this combination of responsibilities and authority that joined legislative, executive, and even judicial functions together because the complicated reasoning and scope of their actions (like setting safety standards or usage rates that would apply across thousands of different companies and types of businesses) needed this combination of actions simply in order to function.

NOTE: Courts were initially reluctant to follow along with these legislative endeavors and struck many of them down as violations of individual liberty to contract (what become known as Lochnerism, after a famous case with that name). Eventually, judges realized that modern living required legislative regulation to some extent of that ‘liberty.’ More on *Lochnerism below.*

Unemployment was one such effort to overcome the problem of individual companies laying people off. Layoffs could easily accelerate a decline in economic growth when the laid-off workers lacked monies for rent and groceries and thus turned an economic decline into a recession or even a depression.

Today, to accomplish this legislative goal in unemployment matters, the Department of Workforce Development drafts and publishes regulations that fill in the details of the unemployment laws passed by the state legislature and Congress. The Department is also charged with handling investigations into unemployment claims, managing the unemployment taxes paid by employers, and “helping” claimants understand the unemployment system and apply for unemployment benefits. Finally, the Department also has the judicial responsibility for running hearing offices that adjudicates employee and employer disputes over unemployment claims. In this way, the Department — an executive agency that exists as an arm of the governor — has legislative, executive, and judicial responsibilities.

Because the Department has so many responsibilities in the field of unemployment benefits, the Labor and Industry Commission is a second administrative agency that has judicial oversight of the Department: decisions by administrative law judges can be appealed to the Commission. Moreover, the Commission’s decisions in unemployment cases should provide guidance to the Department about how to manage the unemployment law and the Department’s regulations. Naturally, the Commission also has to create its own regulations to indicate how its judicial-like decision-making is administered. So, the Commission — an executive agency that is independent of the governor as the Commissioners serve set terms and cannot be removed from office except in limited circumstances — has judicial and legislative functions.

Keep in mind that all of this bureaucracy is intended to provide guidance and transparency into what these administrative agencies do and offer reasonably clear expectations into how unemployment benefits operate (at least, these are the goals).

But, the past forty or so years have seen a growing push against all of this bureaucracy connected to the “administrative state.” Rather than making the modern world easier to manage, the argument goes, bureaucracy has become over-grown and has started to strangle innovation and economic growth. In the last decade, these attacks exploded to become a diatribe against all regulation rather than targeted attacks against specific instances of over-regulation.

Moreover, in legal circles connected to the Federalist Society there has been a push to re-visit the earlier court decisions that accepted the existence and need for administrative agencies. The center-piece of this attack has been on the deference courts give to administrative agencies.

In Wisconsin, courts have generally granted administrative agencies “great weight” deference when the agency decision or action turns on a long-standing legal issue that the agency has addressed numerous times before. Under this standard, the court will affirm the agency interpretation if the court finds that interpretation reasonable or rationale. State agencies get “due weight” deference when the issue has previously been addressed by the administrative agency. Under this standard of deference, a court will affirm an agency interpretation if the court determines that there is no more reasonable interpretation available to the court. Finally, when the issue is a matter of first impression, the court will NOT defer to the agency at all.

The three justice concurrence in Operton called into question this deference standard. For them, great weight and even due weight deference could no longer be followed because:

  • courts are constitutionally and statutorily obligated to interpret statutes independent of any administrative agency,
  • the prevailing scheme of great weight and due weight deference hamstrings courts and thereby thwarts the constitutionally-mandated separation of powers,
  • the accumulation of legislative, executive, and judicial powers within a single administrative agency runs counter to the constitutional framework of dispersing governing power among the three separate branches of government, and
  • a judicial check is needed against executive interpretations that harm citizens’ liberty interests.

Operton (J. R.Bradley, concurring); see also Gillian E. Metzger, “Forward: 1930s Redux: The Administrative State Under Siege,” 131 Harv. L. Rev. 1 (Nov. 2017), for a detailed discussion of the history and current forms of this attack on the administrative state.

As these points from Operton demonstrate, this criticism of administrative agencies is built on a didactic view of the law: each branch has their own distinct set of prerogatives that cannot be mixed and that courts alone have the predominate and sole responsibility for judicial interpretation.

Operton, however, did not lead to a fundamental re-working of agency deference. While three justices supported this change, four justices either rejected this change outright or held that the time was not yet ripe for such a fundamental change in the law.

In TetraTech, Beres, and Wisconsin Bell, however, it appears that the time is now ripe for a fundamental change in agency deference. In each of these cases, the Wisconsin Supreme Court has added a question about agency deference.

Does the practice of deferring to agency interpretations of statutes comport with Article VII, Section 2 of the Wisconsin Constitution, which vests the judicial power in the unified court system?

Whether the administrative decision in each case represents some kind of administrative abuse that the court needs to correct, however, remains to be seen.

What is central to this push for a new standard of deference is the empowerment of courts and judges to decide on their own how state agencies should decide legal disputes. Before most of the modern administrative agencies existed, judges following Lochnerism claimed that economic qua constitutional rights based on “substantive due process” or “liberty of contract” overrode legislation that sought to regulate the conduct of corporations. For judges of this era, government could not show any favoritism or hostility to any class or special interest.

Over time, there was a recognition that this Lochnerism was allowing judges essentially to legislate economic outcomes from the bench, and even Conservative jurists lambasted these decisions as judicial gerrymandering of the law. The “neutrality” of Lochner judges was simply a mask to hide real intentions of judges to write their own policy preferences into the law.

The new assault of administrative law seen in Operton decries any connection to the Lochnerism of old. But, the emphasis on contractual liberty and the preeminence of judicial acumen over the reasonable discretion of administrative agencies belies any substantive distinction from Lochnerism of old. The attack on agency discretion at issue in these cases is little more than old wine in a new bottle. Certainly, some of the tenets of legal interpretation have changed (substantive due process is probably NOT going to be revived any time soon), but the basic objectives and tactics — economic and contractual liberty alongside basic doubts about any and all economic regulation — remain the foundation for empowering judges to insert their own policy preferences into the law.

TetraTech, Beres, and Wisconsin Bell are simply the front line of a revolution that could return governance to the days of 1890 when judges reigned supreme over legislators and the executive branch. The judges on the Wisconsin Supreme Court essentially want to return court jurisprudence to the time when judges got to determine economic winners and losers. As described in other posts, each of these cases has some clear winners and losers to pick from.

All the posts in this series

UPDATE (12 Dec. 2017): Added links for all the posts in this series and updated title of post.