This opinion will be unpublished and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

A06-410

 

 

Stephen Kariniemi,

Relator,

 

vs.

 

R & H Painting, Inc.,

Respondent,

 

Department of Employment and Economic Development,

Respondent.

 

Filed ­­­April 17, 2007

Affirmed in part, reversed in part, and remanded

Dietzen, Judge

 

 

Department of Employment and Economic Development

Agency File Nos. 17504-05; 17195-05

 

Stephen Kariniemi, 503 3rd Street South, Buffalo, MN 55313 (pro se relator)

 

R & H Painting, Inc., 15725 US Highway 12 Southwest, Cokato, MN 55321 (respondent)

 

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.

U N P U B L I S H E D   O P I N I O N

 

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).

FACTS

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

I.

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.

 

Minn. Stat. § 268.105, subd. 7(d) (2006).  Factual findings of the ULJ must be viewed in the light most favorable to the decision and will not be disturbed if there is evidence reasonably tending to sustain them.  Schmidgall v. FilmTec Corp., 644 N.W.2d 801, 804 (Minn. 2002); White v. Metro. Med. Ctr., 332 N.W.2d 25, 26 (Minn. 1983). 

“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 (Minn. 1992).  “However, an agency’s interpretation of the statutes it administers is entitled to deference and should be upheld, absent a finding that it is in conflict with the express purpose of the Act and the intention of the legislature.”  Geo. A. Hormel & Co. v. Asper, 428 N.W.2d 47, 50 (Minn. 1988).

            An 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 earnings.”  Minn. Stat. § 268.085, subd. 2(5) (2004).[1] 

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 Minnesota law, “[a] report of any employee of the department, except a determination, made in the regular course of the employee’s duties, shall be competent evidence of the facts contained in it” for purposes of an evidentiary hearing by an unemployment law judge.  Minn. Stat. § 268.105, subd. 1(b) (2004). 

Relator argues 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.”  Minn. Stat. § 268.085, subd. 2(5).  Thus, attempting to secure business for his company constitutes work, even if it did not result in earnings.  As such, all of relator’s Colorpro activities, including those that were attempts to secure painting jobs, must be counted towards his time spent working.

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.

II.

Relator argues 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 obtained amount.   Id. 

“Whether a 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 (Minn. App. 2007).  But Minnesota law provides that “[w]hen the credibility of an involved party or witness testifying in an evidentiary hearing has a significant effect on the outcome of a decision, the unemployment law judge must set out the reason for crediting or discrediting that testimony.”  Minn. Stat. § 268.105, subd. 1(c); Ywswf, 726 N.W.2d at 531-32.  And failure of the ULJ to set forth the reasons for discrediting testimony as required by statute is basis for reversal.  Wichmann v. Travalia & U.S. Directives, Inc., ___ N.W.2d ___, ___, 2007 WL 968836, at *10 (Minn. App. Apr. 3, 2007). 

            The 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 representation.”  Minn. Stat. § 268.18, subd. 2(a). 

            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.