This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
STATE OF MINNESOTA
IN COURT OF APPEALS
R & H Painting, Inc.,
Department of Employment and Economic Development,
Filed April 17, 2007
Affirmed in part, reversed in part, and remanded
Department of Employment and Economic Development
Agency File Nos. 17504-05; 17195-05
R & H Painting, Inc., 15725 US Highway 12 Southwest,
Lee B. Nelson, Linda A. Holmes, Department of Employment and Economic Development, 332 Minnesota Street, Suite E200, St. Paul, MN 55101-1351 (for respondent Department of Employment and Economic Development)
Considered and decided by Randall, Presiding Judge; Hudson, Judge; and Dietzen, Judge.
By writ of certiorari, relator challenges the decision of the unemployment law judge (ULJ) that relator was ineligible for unemployment benefits and had been overpaid through fraud, arguing that his attempts to secure painting jobs for his business did not constitute “working” and that his conduct did not constitute fraud. Because the ULJ’s determination that relator’s attempts to secure painting jobs constitute “work” and, therefore, that he was ineligible for unemployment benefits is supported by substantial evidence in the record as a whole, we affirm in part. But we reverse and remand the ULJ’s determination that relator was overpaid through fraud because the reasons for finding that relator’s testimony was not credible are not identified, as required by Minn. Stat. § 268.105, subd. 1(c).
In October 2004, relator Stephen D. Kariniemi was employed by R & H Painting, which is engaged in the painting business, as a project manager. Relator was separated from employment with R & H Painting and applied for benefits with the Department of Employment and Economic Development (DEED). Relator was required to report any work that he did and was ineligible for benefits if he worked more than 32 hours “for an employer or in self-employment.”
From October 2004 to April 2005, relator received weekly benefits. Every week, relator called an automated phone system to confirm his continued eligibility for benefits and answered “no” to the question “did you work?” and “yes” to the question “did you look for work?”
Relator is also president of Colorpro Painting Co., a painting contractor started by one of his sons. During the time he was receiving benefits, relator attempted to obtain contracts for Colorpro. He also attempted to obtain other work.
In November 2005, relator was investigated by DEED. Following an in-person interview, the investigator wrote a detailed summary of the meeting with relator. The investigator concluded that relator was ineligible for benefits because he exceeded 32 hours per week working in self-employment, but that “[t]his investigator concludes no fraud occurred during the course of this overpayment of benefits.” DEED then issued separate determinations that relator was ineligible for benefits and that he had been overpaid through fraud.
Relator appealed both decisions, and a telephone hearing was held before the unemployment law judge (ULJ). Relator testified that his time for Colorpro was spent looking for painting contracts and bidding jobs and that he spent no hours “actually working in self-employment performing a task” such as “painting or bookkeeping or anything.” In response to the question of why he indicated that he did not work, relator stated that he did not understand that “work” included his attempts to secure painting jobs for Colorpro.
The ULJ independently reviewed the record and concluded that relator was ineligible for benefits and that he had been overpaid through fraud. The ULJ rejected relator’s testimony that he worked less than the 50 hours per week, which is the number of hours per week that he estimated in his statement. The ULJ found that “he did not keep records on the time spent performing services for Colorpro [and] also stated that [he] spent ‘a lot of time’ on the business beginning in March or April 2005. Under the circumstances, [relator’s] original estimate of 50 hours [or] more per week is more believable.” On the issue of overpayment and fraud, the ULJ found that
[t]he question “Did you work?” is straightforward and unambiguous. [Relator’s] testimony that he thought that he didn’t have to report this employment because he wasn’t receiving any earning is not persuasive. [Relator] knowingly misrepresented, misstated, or failed to disclose material facts to obtain benefits that he was not entitled to receive.
Relator sought reconsideration, and the ULJ affirmed both decisions. Relator subsequently filed a petition for writ of certiorari with this court, under Minn. Stat. § 268.105, subd. 7 (Supp. 2005). In January 2007, we issued an order construing his appeal as taken from both the eligibility and overpayment-through-fraud determinations.
D E C I S I O N
Relator challenges the ULJ’s conclusion that he was ineligible for unemployment benefits. On review, we may reverse or remand a ULJ’s decision “if the substantial rights of the petitioner may have been prejudiced” because the ULJ’s findings, inferences, conclusion, or decision are:
(1) in violation of constitutional provisions;
(2) in excess of the statutory authority or jurisdiction of the department;
(3) made upon unlawful procedure;
(4) affected by other error of law;
(5) unsupported by substantial evidence in view of the entire record as submitted; or
(6) arbitrary or capricious.
“When reviewing questions of
law, this court is not bound by the [ULJ’s] conclusions of law, but is free to
exercise its independent judgment.” Markel v. City of Circle Pines, 479
N.W.2d 382, 384 (
applicant is not eligible for benefits for any week “that the applicant is
performing services 32 hours or more, in employment, covered employment,
noncovered employment, or self-employment regardless of the amount of any
Based on relator’s
statements to a DEED investigator that he worked 50-60 hours per week for
Colorpro attempting to find new painting jobs for his company during the last
three months of 2004, and approximately 50 hours thereafter, DEED found relator
ineligible for benefits. Under
that his statement that he was working 50 to 60 hours per week was
misinterpreted. He argues the time spent
“working” on his business was more akin to “looking for work” because his
activities consisted of bidding painting jobs and attempting to find painting
jobs for Colorpro. But the statute
covers “self-employment regardless of the amount of any earnings.”
The ULJ’s finding that all of relator’s activities for Colorpro constitute work and that he performed work for Colorpro more than 32 hours per week is supported by substantial evidence in the record as a whole. Therefore, we affirm the ULJ’s conclusion that relator was ineligible for unemployment benefits.
that his failure to report hours spent seeking new painting jobs was not
fraudulent. Under the statute, “[a]ny applicant who
receives unemployment benefits by knowingly misrepresenting, misstating, or
failing to disclose any material fact, or who makes a false
statement or representation without a good faith belief as to the correctness
of the statement or representation, has committed fraud.” Minn. Stat. § 268.18, subd. 2(a) (2004). After a determination that benefits
were obtained by fraud, the claimant must promptly repay the benefits, and the
commissioner “shall” assess a penalty of 25 percent of the fraudulently
claimant knowingly and willfully misrepresented or misstated material facts to
obtain benefits involves the credibility of the claimant’s testimony.” Burnevik
v. Dep’t of Econ. Sec., 367 N.W. 2d
681, 683 (Minn. App. 1985) (addressing overpayment-through-fraud decision
under previous version of the statute).
We generally defer to the decision by the ULJ on credibility issues. Ywswf v.
Teleplan Wireless Servs., Inc., 726 N.W.2d 525, 529 (
ULJ found that relator knowingly misrepresented, misstated, or failed to
disclose material facts to obtain benefits that he was not entitled to
receive.” Relator has consistently
maintained that he did not report that he was working because his efforts were
unsuccessful and, therefore, did not constitute work. Although he is incorrect in this
understanding, the limited record before us on this issue gives us no reason to
believe that he did not have a good faith belief that what he was doing was not
work. And in order to constitute fraud,
the misrepresentation, misstatement, or failure to disclose a material fact
must be “knowing” or “without a good faith belief as to the correctness of the statement or
This is not a case where a witness’s testimony is inconsistent or demonstrates “selective recall.” See Ywswf,726 N.W.2d at 532 (identifying factors for ULJ to weigh in credibility decision). Nor is it a case where another witness’s testimony more logically explains the facts. See id. at 533 (discrediting witness where another witness’s explanation was more reasonable). Rather, relator offered the same explanation to the DEED investigator in November 2005, who apparently found relator’s testimony credible and concluded that “no fraud occurred.” But the ULJ has not identified the reasons for discrediting relator’s testimony that he did not know his attempts to obtain painting contracts constituted work.
Therefore, the order does not comply with Minn. Stat. § 268.105, subd. 1(c), and we reverse and remand for further proceedings consistent with this opinion. See Minn. Stat. § 268.105, subd. 7(d)(4), (5) (permitting Court of Appeals to reverse or modify where petitioner’s rights “may have been prejudiced” by findings “affected by . . . error of law” or “unsupported by substantial evidence in view of the entire record as submitted.”).
Affirmed in part, reversed in part, and remanded.
The statute was amended in 2005, following relator’s reception of
benefits. See 2005