American Federation of Labor & Congress of Industrial Organizations v. Unemployment Insurance Appeals Board

KENNARD, J.

I dissent. The majority holds that the state need not pay interest on retroactive unemployment compensation when an erroneous determination of noneligibility is reversed on administrative appeal. To justify this holding, the majority has seized on a phrase from this court’s opinion in Tripp v. Swoap (1976) 17 Cal.3d 671 [131 Cal.Rptr. 789, 552 P.2d 749], invested it with a meaning the Tripp court never intended it to have, and by this means invented a new requirement for recovering interest under Civil Code section 3287, subdivision (a) (hereafter section 3287(a)). In the process, the majority decides an issue that was uncontested and unbriefed in this litigation.

*1047The right to receive unemployment compensation vests when the claimant proves facts establishing eligibility. (Aguilar v. Unemployment Ins. Appeals Bd. (1990) 223 Cal.App.3d 239, 245 [272 Cal.Rptr. 696].) If, despite the claimant’s proof of eligibility, the California Employment Development Department (EDD) erroneously denies the claim, the claimant may take an administrative appeal and, if unsuccessful there, obtain judicial review. Once the EDO’s error in denying eligibility has been acknowledged and corrected, either by administrative appeal or by judicial review, the claimant is entitled to receive the benefits retroactive to the date of vesting. To compensate for the delay in payment during the administrative appeal and judicial review, the claimant is entitled under section 3287(a) to interest on the retroactively awarded benefits from the date of vesting. (Aguilar v. Unemployment Ins. Appeals Bd., supra, 223 Cal.App.3d 239, 240, 245-246.)

The issue this court granted review to decide was whether, when an erroneous determination of noneligibility is reversed on administrative appeal, the Unemployment Insurance Appeals Board (the Board), or an administrative law judge acting on the Board’s behalf, may include the interest in an award of retroactive benefits. In both the trial court and the Court of Appeal, and in this court as well, the Board has conceded that section 3287(a) entitles the claimant to interest in this situation, but it has taken the position that only a court has the authority to make the interest award. (See Aguilar v. Unemployment Ins. Appeals Bd., supra, 223 Cal.App.3d 239, 246, fn. 4 [declining to address this issue].)1 Both the trial court and the Court of Appeal concluded, to the contrary, that the Board (and administrative law judges acting for the Board) have authority to make the interest award.

Reversing the Court of Appeal, the majority goes outside the issue as framed by the parties to hold that the claimant may not recover interest at all, *1048either from a court or from the Board, if the HDD’s erroneous determination of noneligibility is corrected, and the retroactive benefits awarded, on administrative appeal. The majority concludes that a claimant may recover interest only when an erroneous determination of noneligibility is corrected on judicial review.

As support for this holding, the majority offers this reasoning: (1) Interest may be awarded under section 3287(a) only when benefits are “wrongfully denied”; (2) benefits awarded retroactively by administrative appeal after an erroneous determination of noneligibility have not been “wrongfully denied”; and, therefore, (3) interest may not be awarded under section 3287(a) on retroactive benefits awarded by administrative appeal after an erroneous determination of noneligibility. The authorities that the majority cites provide no support for this reasoning.

The phrase “wrongfully denied” does not appear in section 3287(a). That provision reads: “Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any such debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state.”

As this court has explained, section 3287(a) imposes three requirements for an award of interest: (1) “an underlying monetary obligation,” (2) an amount due under that obligation that is “certain or capable of being made certain by calculation,” and (3) vesting of the right of recovery “on a particular day.” (Tripp v. Swoop, supra, 17 Cal.3d 671, 682.) Each of these requirements is satisfied when an erroneous determination of noneligibility prevents timely payment of unemployment compensation: (1) the state has a “monetary obligation” to pay unemployment compensation to all persons who demonstrate eligibility, (2) the amount of compensation due is certain or capable of being made certain by calculation, and (3) the right to receive unemployment compensation vests on a particular day (that is, upon proof of eligibility). (Aguilar v. Unemployment Ins. Appeals Bd., supra, 223 Cal.App.3d 239, 245.) These three requirements are satisfied irrespective of the means by which an erroneous determination of noneligibility is corrected—administrative appeal or judicial review.

The majority concedes that the three statutory requirements are satisfied, and interest must be awarded, when a claimant obtains retroactive unemployment compensation benefits by judicial review, but it asserts that the *1049EDD need not pay any interest when retroactive benefits are awarded on administrative appeal. To justify this result, the majority adds a fourth, nonstatutory requirement, that the benefits be “wrongfully denied” or “wrongfully withheld.” The majority asserts that unemployment compensation has not been “wrongfully denied” or “wrongfully withheld” unless and until the unemployment compensation claim has been denied by the Board itself. The majority attributes this nonstatutory requirement to this court’s opinion in Tripp v. Swoap, supra, 17 Cal.3d 671.

The phrases “wrongfully withheld” and “wrongfully denied” do appear in this court’s opinion in Tripp, but not as an additional nonstatutory requirement for an interest award under section 3287(a). Tripp was an action in administrative mandamus (Code Civ. Proc., § 1094.5) to review a decision by the Director of the State Department of Social Welfare denying an application for welfare benefits under the aid to the needy disabled (ATD) program based on a determination that the applicant had not proved she was permanently disabled. The trial court ruled that this determination was not supported by substantial evidence, and it directed that the applicant receive the benefits retroactively with attorney fees and interest. (Tripp v. Swoap, supra, 17 Cal.3d 671, 675-676.)

On appeal, this court agreed that “the recipient of wrongfully withheld welfare benefits” (Tripp v. Swoap, supra, 17 Cal.3d 671, 678, italics added) was entitled to interest under section 3287(a). Examination of this court’s use of the terms “wrongfully denied” and “wrongfully withheld” in Tripp v. Swoap, supra, 17 Cal.3d 671, demonstrates that they were not given any special meaning, intended to be an additional nonstatutory requirement for recovery of interest under section 3287(a), or intended to describe only the situation in which benefits were denied after exhaustion of administrative appeal. For example, explaining why the trial court had authority to direct retroactive payment of the ATD welfare benefits, this court said: “[Hjaving determined that plaintiff had been wrongfully denied ATD benefits as a matter of law, the trial court merely rendered a judgment ordering defendant to discharge his legal obligation. Inasmuch as an ATD applicant is entitled by statute to benefits as of a particular date once eligibility is established ([Welf. & Inst. Code,] § 11056), there was no issue remaining on which the trial court could invade the director’s discretion.” (Tripp v. Swoap, supra, 17 Cal.3d 671, 677, italics added.) Thus, the benefits were “wrongfully denied” because the agency, without legal justification, had not paid them when due. A denial is no less wrongful, and no less a denial, when it is corrected by administrative appeal rather than judicial review.

The majority asserts that “Tripp emphasized that the recovery of prejudgment interest under section 3287(a) required an action for damages, which *1050included wrongfully denied benefits.” (Maj. opn., ante, at p. 1031, italics added.) The majority cites footnote 12 of this court’s opinion in Tripp, but that footnote says only that the operation of section 3287(a) is “predicated on the existence of damages” and that “wrongfully withheld welfare benefits” are damages for purposes of section 3287(a). (Tripp v. Swoap, supra, 17 Cal.3d 671, 682, fn. 12, italics added.) In response to the argument that granting section 3287(a) interest after judicial review would discriminate against those who obtain benefits by administrative appeal, this court, in another footnote, expressly declined to address that issue, stating: “We are not presented with the question whether the latter class of recipients is similarly entitled to interest and do not now decide that question which in our view defendant lacks standing to raise.” (Tripp v. Swoap, supra, at p. 685, in. 14.)

The meaning of “wrongfully denied” is perhaps best understood by examining this court’s discussion of the policy basis for awarding interest on retroactive benefits: “The same public policy that favors the award of retroactive benefits would appear to favor the award of prejudgment interest on such benefits. Indeed, we have recognized in the context of an interest award on retroactive salary payments that ‘[i]f plaintiff had not been wrongfully suspended, he would have obtained the benefit of the moneys paid as of those dates; he has thus lost the natural growth and productivity of the withheld salary in the form of interest.’ (Mass v. Board of Education [(1964)] 61 Cal.2d [612,] 625 [39 Cal.Rptr. 739, 394 P.2d 579].) The policy rationale behind awarding prejudgment interest articulated in Mass takes on particular significance in the context of wrongfully withheld welfare benefits. In some instances, it may take long periods of time for an applicant to vindicate his [or her] entitlement to aid and in the interval the delay inevitably exacts its toll from that portion of our society least able to bear the deprivation.” (Tripp v. Swoap, supra, 17 Cal.3d 671, 683.)

This policy rationale applies fully to unemployment compensation that is awarded retroactively on administrative appeal. During the period of the delay occasioned by the erroneous initial determination of noneligibility, the unemployment compensation claimant is denied the use of the funds at a time of particular economic hardship. The toll exacted by delay in payment is no easier to bear when the delay is attributable to administrative rather than judicial proceedings.

To escape the force of this logic, the majority, without benefit of supporting data, characterizes as “inconsequential” (maj. opn., ante, at p. 1039) the *1051delay in payment occasioned by an erroneous initial determination of non-eligibility that is corrected by administrative appeal. This dismissive characterization cannot be squared with the United States Supreme Court’s decision in California Human Resources Dept. v. Java (1971) 402 U.S. 121 [28 L.Ed.2d 666, 91 S.Ct. 1347].

At issue in Java was the validity of a California statute (former Unemployment Insurance Code section 1335) under which the EDD automatically suspended payment of unemployment compensation whenever the claimant’s most recent employer filed an administrative appeal from an initial determination of eligibility. (California Human Resources Dept. v. Java, supra, 402 U.S. 121, 128 [28 L.Ed.2d 666, 671-672].) Noting that the processing of the appeal took “between six and seven weeks” (ibid.), the court concluded that suspension of payments for this period of time frustrated one of the basic purposes of the Social Security Act (42 U.S.C. §§ 501-503), which was “to provide a substitute for wages lost during a period of unemployment not the fault of the employee” (California Human Resources Dept. v. Java, supra, 402 U.S. 121, 130 [28 L.Ed.2d 666, 673]), and to make this substitute available “at the earliest stage of unemployment that such payments were administratively feasible after giving both the worker and the employer an opportunity to be heard” (id. at p. 131 [28 L.Ed.2d at p. 674]). Observing that “delaying compensation until months have elapsed defeats these purposes,” the court concluded that “the California procedure, which suspends payments for a median period of seven weeks pending [administrative] appeal, after an initial determination of eligibility has been made, is not ‘reasonably calculated to insure full payment of unemployment compensation when due.’ ” (Id. at p. 133 [28 L.Ed.2d at p. 675], fn. omitted.) The court enjoined enforcement of the California statute. (Id. at p. 135 [28 L.Ed.2d at pp. 675-676].)

There is no evidence in the record before this court that the time required to process an administrative appeal has diminished in the years since the United States Supreme Court’s decision in California Human Resources Dept. v. Java, supra, 402 U.S. 121. Indeed, the delay at issue in this very case was 10 weeks. (Maj. opn., ante, at p. 1028.) I fail to see how this court can characterize a delay of seven weeks (the median time required to process an administrative appeal) or ten weeks (the delay at issue in this case), during which an unemployed worker is deprived of the wages substitute for which he or she has demonstrated eligibility, as “inconsequential.” In light of Java, the majority is simply wrong when it asserts that until the Board has acted, “no wrongful withholding of benefits or delay attributable to the administrative process occurs.” (Maj. opn., ante, at p. 1037.)

*1052The majority appears to hint that allowing an administrative agency to award interest under section 3287(a) would somehow violate the constitutional doctrine of separation of powers. Yet, as the majority itself acknowledges (maj. opn., ante, at p. 1034), the Legislature has authorized administrative agencies to award interest in other contexts, and such administrative interest awards have never been found invalid as violating the doctrine of separation of powers. Because their determinations are subject to judicial review on administrative mandamus using the independent judgment standard of review, the EDD and the Board may adjudicate unemployment compensation claims without violating the doctrine of separation of powers.2 (See Pacific Legal Foundation v. Unemployment Ins. Appeals Bd. (1981) 29 Cal.3d 101, 108 [172 Cal.Rptr. 194, 624 P.2d 244]; Interstate Brands v. Unemployment Ins. Appeals Bd. (1980) 26 Cal.3d 770, 775-781 [163 Cal.Rptr. 619, 608 P.2d 707]; Tex-Cal Land Management, Inc. v. Agricultural Labor Relations Bd. (1979) 24 Cal.3d 335, 343-346 [156 Cal.Rptr. 1, 595 P.2d 579].) Because an administrative interest award under section 3287(a) would be subject to the same judicial review, I fail to see how such an administrative interest award could be deemed an improper delegation or improper exercise of judicial authority.

In support of its holding, the majority also relies on this court’s decisions in Peralta Community College Dist. v. Fair Employment & Housing Com. (1990) 52 Cal.3d 40 [276 Cal.Rptr. 114, 801 P.2d 357] and Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379 [241 Cal.Rptr. 67, 743 P.2d 1323], holding that the Fair Employment and Housing Commission (FEHC) lacks implied authority to award compensatory and punitive damages for employment discrimination. But those decisions are distinguishable.

In Peralta, this court noted that in the Fair Employment and Housing Act (FEHA) the Legislature had established “alternative systems of redress for employment discrimination” (Peralta Community College Dist. v. Fair Employment & Housing Com., supra, 52 Cal.3d 40, 55), with the administrative system to handle “claims that are amenable to conciliation or to corrective *1053equitable remedies” and the judicial system to handle “those statutory claims that seek significant nonquantifiable monetary recompense or that the complainant wishes to join with nonstatutory causes of action” (ibid.). To effectuate this implied legislative partition of authority, this court determined that the FEHC did not have implied authority to award compensatory damages for emotional distress caused by employment discrimination. (Id. at p. 56.) This court stressed that it was unlikely the Legislature had intended a “grant by implication of unbridled power to an administrative agency to make monetary awards without guidelines or limitations.” (Id. at p. 60.)

The statutory scheme for unemployment compensation, unlike the FEHA, does not establish alternative administrative and judicial systems for obtaining redress. Administration of unemployment compensation is vested exclusively in the EDD and the Board, subject to judicial review; therefore, resort to the administrative process is the only means by which those who lose their jobs through no fault of their own may obtain unemployment compensation. Moreover, interest, unlike emotional distress, is quantifiable and readily calculated without additional determinations of fact. Once the administrative law judge or the Board has decided that the previous determination of noneligibility was erroneous and has made the factual determinations necessary to award retroactive benefits—that is, the amount of compensation due and the date of vesting—calculating interest under section 3287(a) is a purely mathematical process, requiring no additional factual findings and no exercise of discretion. Because determining and awarding interest under section 3287(a) is not an exercise of “unbridled power . . . without guidelines or limitations” (Peralta Community College Dist. v. Fair Employment & Housing Com., supra, 52 Cal.3d at p. 60), there is no reason to believe that the Legislature intended to withhold from the Board the authority to perform this simple mathematical calculation.

Dyna-Med, in which this court held that the FEHC lacks implied authority under the FEHA to award punitive damages for job discrimination, is distinguishable for essentially the same reasons. Our decision was grounded on the availability of an alternative method of obtaining punitive damages for employment discrimination “by filing an independent civil action alleging tort causes of action either with or without an FEHA count” (Dyna-Med, Inc. v. Fair Employment & Housing Com., supra, 43 Cal.3d 1379, 1403) and on “the extraordinary nature of punitive damages” (id. at p. 1389). Interest is not “extraordinary,” and an unemployment compensation claimant has no independent judicial remedy.

Although the Legislature has not expressly authorized the Board to award section 3287(a) interest on retroactive unemployment compensation, the *1054Board has implied authority to do so. “It is well settled in this state that governmental officials may exercise such additional powers as are necessary for the due and efficient administration of powers expressly granted by statute, or as may fairly be implied from the statute granting the powers.” (Dickey v. Raisin Proration Zone No. 1 (1944) 24 Cal.2d 796, 810 [151 P.2d 505, 157 A.L.R. 324], original italics; accord, Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 824 [258 Cal.Rptr. 161, 771 P.2d 1247].) As this court explained in Tripp v. Swoap, supra, 17 Cal.3d 671, 683, the power to award section 3287(a) interest is the equitable and logical complement of the power to award retroactive benefits, a power that the Board unquestionably possesses and routinely exercises.

When employees lose their jobs through no fault of their own, every day of delay in obtaining the unemployment compensation to which they are legally entitled, and which may be their only source of income until they obtain new employment, is significant. I would not characterize delays of seven or ten weeks in the payment of unemployment compensation as “inconsequential,” and I would recognize the Board’s implied authority to add interest to unemployment compensation retroactively awarded after correction of administrative error. Accordingly, I would affirm the judgment of the Court of Appeal.

Werdegar, J., concurred.

Respondent’s petition for a rehearing was denied November 13, 1996. Mosk, J., Kennard, J., and Werdegar, J., were of the opinion that the petition should be granted.

The majority cites Aguilar v. Unemployment Ins. Appeals Bd., supra, 223 Cal.App.3d 239, for the proposition that “section 3287(a) interest may only be awarded in a mandamus action following the Board’s wrongful withholding of benefits.” (Maj. opn., ante, at p. 1029.) In fact, Aguilar contains no such holding.

In that case, after the Board had denied benefits to a group of farm workers, administrative mandamus proceedings resulted in a remand to the Board for further proceedings, after which the Board awarded benefits to some of the claimants but refused to award interest. The claimants sought judicial review of the Board’s decision awarding benefits but declining to award interest. The trial court issued a writ of mandate directing the Board to pay interest; the Board appealed. (Aguilar v. Unemployment Ins. Appeals Bd., supra, 223 Cal.App.3d 239, 240-241.)

With the case in this posture, the Court of Appeal concluded that the trial court, in the administrative mandamus proceeding, had properly awarded interest. Replying to the Board’s assertion that it lacked authority to award interest, the court said only this: “Although we do not necessarily accept the limitation [the Board] proposes, we note the [Board]’s appeal is from a superior court judgment directing the payment of interest. Plainly, under Tripp v. Swoap the superior court was empowered to order the agency to pay interest.” (Aguilar v. Unemployment Ins. Appeals Bd., supra, 223 Cal.App.3d 239, 246, fn. 4, italics added.)

The majority cites this court’s decision in Laisne v. Cal. St. Bd. of Optometry (1942) 19 Cal.2d 831 [123 P.2d 457] for the proposition that if the Board denies eligibility and the claimant seeks judicial review by administrative mandamus, the claimant is entitled to a “limited trial de novo” in which “the trial court exercises its independent judgment on all the facts material to the claim, regardless of the record of proceedings before the Board." (Maj. opn., ante, at p. 1026, italics added.) In fact, a court applying the independent judgment standard may consider evidence outside the administrative record only when the evidence was improperly excluded or the evidence could not have been produced with reasonable diligence at the time of the administrative hearing. (Code Civ. Proc., § 1094.5, subd. (e); 8 Witkin, Cal. Procedure (3d ed. 1985) Extraordinary Writs, § 291, p. 915.)