Wisconsin Labor and Industry Review Commission --
Summary of Wisconsin Court Decision relating to Unemployment Insurance

Subject: Department of Industry, Labor and Human Relations  v. Jennifer Panzigrau and LIRC, Case No. 88 CV 4739 (Wis. Cir. Ct., Dane Co., July 27, 1989)     

Digest Codes: PC 770  PC 749 LIRC

The claimant was an employee of DILHR.  Thinking herself to have been partially laid off, she sought UI benefits.  In claiming benefits, she failed to report having received certain vacation pay. The department (in its role of administering the UI program) issued a determination that she concealed a material fact from the department when claiming benefits.   The claimant appealed, and an ALJ's decision reversed the determination and held that the claimant had not concealed a material fact from the department when claiming benefits.  This ALJ's decision was not appealed and became final.

In its role as her employer, the department had imposed a disciplinary suspension on the claimant. After the first ALJ's decision, the department  (in its role of administering the UI program) issued a determination that the claimant's suspension had been for misconduct or other good cause. The claimant appealed.  Another ALJ, after considering argument from the parties, held that the doctrine of collateral estoppel precluded the department from relitigating the concealment issue, and when that issue was thus taken as having been resolved in the claimant's favor, there could be no finding of misconduct or other good cause for suspension.  He thus reversed the determination and allowed benefits, without conducting a hearing.  LIRC's decision affirmed the ALJ.  The department appealed.

Held: LIRC's decision is affirmed.  The circuit court's decision stated, in part:

Here there is no dispute that the parties are the same as those involved in the prior proceeding and that the findings made in that proceeding were part of a valid final judgement. The Department also does not argue that a finding of "no intent" is not dispositive of the misconduct issue. The threshold issue is whether the previous finding was an "ultimate fact" in that prior proceeding.

As noted above, the prior proceeding rested on the application of Sec. 108.04(11)(c), Wis. Stats., which provides:

If a claimant, in filing his or her claim for any week, conceals any part of his or her wages earned in or paid or payable for that week ... or any other material fact relating to ...eligibility for benefits, so much of any benefit payment as was paid because of such concealment shall be recovered by the department as an overpayment.

The key language is the word "conceals". The Department argues that there is no ambiguity in this statutory language and that any failure to disclose "wages ... or any other material fact" is concealment,. The Commission urges the imposition of a scienter element as a part of the statute’s meaning. Neither of these constructions is wholly unreasonable and thus ambiguity is present, and resort to extrinsic aids to ascertain the legislative’s intent is permitted.

The title of this subsection is "Fraudulent Claims". Such titles may be used to resolve doubts as to a statute’s meaning. ... The use of the word "fraudulent" clearly suggests that the legislature was addressing culpable conduct by applicants and was not creating a system of strict liability where even honest mistakes would lead to forfeitures.  This is confirmed by the use of the word "conceals".  While it is not modified by any words such as "intentionally" or "knowingly", the dictionary definition for conceal itself is " [t]o hide or keep from observation, discovery, or understanding; keep secret."  ...The element of conscious, affirmative action in the act of concealing is undeniable.  If the legislature intended there to be strict liability for any missing information, alternative wording was readily available.

Furthermore, this statutory section describes the circumstances under which a claimant may have a forfeiture imposed. Such laws, if their meaning is at all uncertain, should be strictly construed to narrow the range of acts that will lead to the harsh result of a forfeiture. ..To construe "conceals" to include the necessity for a knowing or intentional failure to disclose material information is consistent with this directive. It is also consistent with the public policy concerns expressed by the legislature in the preamble to the Unemployment Compensation law. sec. 180.01, Wis. Stats.

Thus I conclude that the finding that Panzigrau did not intentionally conceal a material fact on her claim card was an "ultimate fact’ in the sec. 108.04(11) proceeding for collateral estoppel purposes. This does not, however, fully resolve the collateral estoppel issue;  ... even if the technical requirements for its application are present, public policy concerns may dictate that a court decline to do so. The central focus is on considerations of fairness, that is, that the party against whom the doctrine is sought to be applied have had a "fair chance procedurally, substantively, or evidentially to pursue the claim,." ...These concerns are measured against the doctrine’s purposes of conserving judicial resources and encouraging reliance on adjudications by preventing inconsistent decisions.

The Commission concluded that collateral estoppel was properly applied because:

"the employer has conceded that it appeared as a party at [the initial] hearing .... Second, the employer had a full and fair opportunity to present its case at the concealment hearing. It was represented by an attorney and had the opportunity to present and cross-examine witnesses. Third, the employer had the ultimate burden of proof at the concealment hearing and has the ultimate burden of proof on the disciplinary suspension issues. Fourth, the concealment decision was issued after a full hearing and said decision is now final. Fifth, all issues arose from the same set of facts because the prior hearing involved the same allegation of the employe’s failure to disclose vacation pay as is alleged in the disciplinary-suspension issues (Commission Decision, 7/29/88, p. 3.).

The Department argues from 2 prior Commission decisions that because "intent" had not previously been considered a component of concealment, it did not litigate the issue as fully as it would have had if known that "intent" was necessary to determine the issue. However, its cross-examination at the hearing belies its current position. ...the prior cases the Department now claims to have relied upon in choosing not to fully litigate the necessity of a finding on intent were not cited to either of the administrative law judges charged with the responsibility for determining the matters or to the Commission. It is disingenuous to argue that it was the Commission that changed the legal rules in the middle of the game. The Department asked the law judge to find that Panzigrau’s actions were intentional and the law judge responded directly. The Department cannot now find law it was unaware of then or uninclined to cite and say "we take it back." There is nothing unfair about giving the Department its day in court under rules it perceives to be operative (and which this court now concludes was a correct perception) and to deny it a second day in court to litigate over the same facts using the same rule.

The Department also maintains it would be unfair to apply collateral estoppel here because it had other evidence to present on the misconduct issue that it did not present at the hearing on concealment. In reviewing its Offer of Proof in this regard, this court agrees with the Commission’s conclusion that "it appears that the employer is attempting to obtain a second chance to resolve findings already made, rather than a chance to resolve new and necessary matters." ...The "fair chance" to pursue a claim ...does not require that the party presented their best evidence or legal arguments in the prior proceeding but only that they had the chance to do so. All of the items on the Department’s Offer of Proof were in existence at the time of the first hearing. All of them that were relevant to whether Panzigrau knowingly or intentionally failed to disclose a material fact could have been introduced then. It is also of interest that Panzigrau had already been suspended before that first hearing, and the Department had cited as their reasons in its Notice of Disciplinary Suspension her "withholding a material fact," her "knowledge" of the rules, and that she was "aware of the requirements." They had every reason to anticipate a further application for benefits in which misconduct would be at issue and thus every incentive to litigate the "intentional concealment" issue which, as noted above, they did. Their recourse if they did not agree with the administrative law judge’s finding on this issue was to seek review by the Commission, which they did not pursue; not to have another hearing on the same incident.

Please note that this is a summary prepared by staff of the commission, not a verbatim reproduction of the entire court decision.

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