IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 38331
LINCOLN F. MCNULTY, )
)
Claimant-Appellant, ) Boise, January 2012 Term
)
v. ) 2012 Opinion No. 45
)
SINCLAIR OIL CORPORATION, dba ) Filed: March 5, 2012
SUN VALLEY CO.; THE SAWTOOTH )
CLUB; Employers; and FIRST LIGHT ) Stephen W. Kenyon, Clerk
INDUSTRIES, INC., Major Base )
Employer; and IDAHO DEPARTMENT )
OF LABOR, )
)
Respondents-Respondents on Appeal. )
_____________________________________ )
Appeal from the Industrial Commission of the State of Idaho.
The decision of the Industrial Commission is affirmed. Costs on appeal
are awarded to respondent.
Cynthia J. Woolley, Ketchum, and John R. Kormanik, Meridian, for appellant.
John R. Kormanik argued.
Hon. Lawrence G. Wasden, Idaho Attorney General, for respondent. Tracey
K. Rolfsen argued.
___________________________
W. JONES, Justice
I. NATURE OF THE CASE
Appellant, Lincoln F. McNulty, worked as a ski patroller for Sinclair Services Company
as a member of the Sun Valley Resort from 2005 to 2010. Once the ski season ended in April of
2009, McNulty filed for unemployment benefits effective April 19, 2009, through November 28,
2009. During those off-season months, McNulty began working part-time at the Sawtooth Club
for some extra income. However, McNulty failed to report such employment or any earnings
from the Sawtooth Club to the Idaho Department of Labor when he filed for unemployment
benefits each week. The Idaho Department of Labor discovered the discrepancy and a claims
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investigator spoke with McNulty and ultimately issued an Eligibility Determination that
McNulty was ineligible for benefits because he willfully made false statements or failed to report
material facts in order to obtain benefits.
On July 21, 2010, Appeals Examiner Shelton conducted a telephone hearing and affirmed
the Eligibility Determination. McNulty appealed to the Idaho Industrial Commission. On
October 21, 2010, the Commission issued its Decision and Order concluding that McNulty
willfully failed to report material facts in order to obtain benefits. On December 2, 2010,
McNulty appealed to this Court, arguing that his failure to report was not willful, the facts were
not material, and that he should be eligible for a waiver of the requirement to repay the
unemployment benefits.
II. FACTUAL AND PROCEDURAL BACKGROUND
For approximately five years, McNulty worked for Sinclair Services Company as a
member of the Sun Valley Resort ski patrol. A typical ski season begins in late November and
ends in the middle of April. In the past, McNulty filed for unemployment benefits during the
off-season while he was not working as a ski patroller. When the ski season ended on April 18,
2009, McNulty again filed a claim for unemployment benefits effective April 19, 2009, through
November 28, 2009. During that same seven month time period, McNulty also began picking up
shifts at the Sawtooth Club for supplemental income. McNulty failed to report his employment,
or any wages earned from working at the Sawtooth Club, to the Idaho Department of Labor,
(“IDOL” or the “Department”), when he filed for unemployment benefits.
Each week that McNulty filed a claim report, the system (either online or over the
telephone) asked the claimant “[d]id you work for any employers during the week claimed,
including National Guard or Reserve?” Despite his part-time employment at the Sawtooth Club,
each week McNulty responded “No.” IDOL discovered the discrepancy based on what McNulty
reported and what his employers reported. A claims investigator for the Department, Carolynn
Peterson, contacted McNulty and asked him to explain the wage discrepancies between what he
and his employers reported as earnings. After speaking with McNulty over the phone, Peterson
issued an Eligibility Determination finding that McNulty was ineligible for benefits because he
willfully made false statements or failed to report material facts in order to obtain benefits. In
Peterson’s notes, she indicated that McNulty “did not report the work and earnings because he
thought he could earn so much and it wouldn’t matter. He wasn’t sure why he thought this or
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how much he thought he could earn before he didn’t have to report it.” Peterson also found that
McNulty failed to contact his local office to verify whether he was reporting accurately. IDOL
then issued a Determination of Overpayment and a Federal Additional Compensation
Determination of Overpayment on June 23, 2010. McNulty filed a request for an appeals
hearing, protesting the Department’s determination.
On July 21, 2010, a telephone hearing was conducted by Appeals Examiner Joyce
Shelton. McNulty participated in the hearing, but was not represented by counsel. During the
hearing, McNulty testified that he had been filing for benefits while he was employed by the
Sawtooth Club, but that he did not report any of his earnings “[b]ecause they were an
insignificant amount of money and they weren’t affecting the benefit.” Appeals Examiner
Shelton affirmed the Eligibility Determination and denied McNulty’s request to waive the
overpayment requirement. On August 4, 2010, McNulty appealed to the Idaho Industrial
Commission (the “Commission”).
The Commission conducted a de novo review of the record, including the audio recording
of the telephone hearing and the briefs submitted by McNulty and IDOL. On October 21, 2010,
the Commission issued its Decision and Order affirming in part and reversing in part the decision
of the appeals examiner. The Commission found that McNulty willfully failed to report material
facts for the purpose of obtaining unemployment benefits. As a result, the Commission
concluded that McNulty was ineligible for benefits during the weeks effective April 26, 2009,
through May 16, 2009; May 31, 2009, through July 4, 2009; July 12, 2009, through October 17,
2009; October 25, 2009, through November 28, 2009; and April 25, 2010, through May 1, 2010.
However, the Commission reversed the appeals examiner’s decision regarding McNulty’s
ineligibility for benefits during the weeks ending October 24, 2009, and February 13, 2010,
because the record did not support a finding that he worked or had earnings during those two
weeks. On December 2, 2010, McNulty appealed to this Court to review the Commission’s
decision.
III. ISSUES ON APPEAL
1. Whether the Industrial Commission erred in determining that McNulty willfully failed to
report material facts for the purpose of obtaining unemployment benefits?
2. Whether the Industrial Commission erred in concluding that McNulty was not eligible for
a waiver from the requirement to repay benefits?
3. Whether McNulty is entitled to attorney’s fees on appeal?
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IV. STANDARD OF REVIEW
In reviewing decisions of the Industrial Commission on appeal to this Court, Idaho Code
section 72-732 sets forth the standard of review. This Court may affirm an order or award made
by the Commission, “or may set it aside only upon the following grounds: (1) the commission's
findings of fact are not based on any substantial competent evidence; (2) the commission has
acted without jurisdiction or in excess of its powers; (3) the findings of fact, order or award were
procured by fraud; (4) the findings of fact do not as a matter of law support the order or award.”
I.C. § 72-732; Ewins v. Allied Sec., 138 Idaho 343, 345–46, 63 P.3d 469, 471–72 (2003). This
Court will not disturb the Commission’s findings of fact unless they are clearly erroneous and
not supported by substantial and competent evidence. Ewins, 138 Idaho at 346, 63 P.3d at 472
(citing Dennis v. School Dist. No. 91, 135 Idaho 94, 96, 15 P.3d 329, 331 (2000)). “Substantial
and competent evidence is relevant evidence that a reasonable mind might accept to support a
conclusion.” Uhl v. Ballard Med. Prod., Inc., 138 Idaho 653, 657, 67 P.3d 1265, 1269 (2003)
(citing Hughen v. Highland Estates, 137 Idaho 349, 48 P.3d 1238 (2002)). Nevertheless, the
Court exercises free review over the Commission’s legal conclusions. Ewins, 138 Idaho at 346,
63 P.3d at 472 (citing Moore v. Melaleuca, 137 Idaho 23, 26, 43 P.3d 782, 785 (2002)).
V. ANALYSIS
A. The Commission Did Not Err in Determining that McNulty Willfully Failed to
Report Material Facts for the Purpose of Obtaining Unemployment Benefits
Idaho Code section 72-1366(12) provides that a “claimant shall not be entitled to
[unemployment] benefits for a period of fifty-two (52) weeks if it is determined that he has
willfully made a false statement or willfully failed to report a material fact in order to obtain
benefits.” The claimant bears the burden of proving statutory eligibility for unemployment
benefits. Steffen v. Davison, Copple, Copple, & Copple, 120 Idaho 129, 132, 814 P.2d 29, 32
(1991) (internal citations omitted). McNulty argues that the facts he failed to report are not
material, that his failure to report his employment was not willful, and that there is no substantial
and competent evidence to support the Commission’s findings.
1. McNulty Failed to Report a Material Fact
McNulty asserts that his failure to report his part-time employment was not material
because even if he had reported his earnings, they would not have affected the outcome of his
benefits. McNulty argues that his failure to report earnings is similar to the facts presented in
Artis v. Morrison-Knudson Company, where a claimant denied being unable to work at any time
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during the week, despite a week-long hospitalization. 107 Idaho 1109, 1110, 695 P.2d 1248,
1249 (1985). The Court reversed the Commission’s finding that Artis made a false statement of
material fact because even though Artis may have been unable to work during the
hospitalization, the statute provided that no claimant shall be ineligible for benefits due to an
illness or disability. Id. This Court reasoned that the misrepresentation was not material because
“the statute controlled the situation without the need for any exercise of discretion on the part of
the Department.” Id. In other words, Artis’ misrepresentation was irrelevant because his
hospitalization statutorily entitled him to receive benefits that week and the Department lacked
the authority to deny benefits under those circumstances. See id.
McNulty contends that his unreported employment and wages are irrelevant to the
determination of his eligibility for benefits because such a determination is similarly governed by
statute which precludes any exercise of discretion on the part of IDOL. This Court finds that
McNulty’s reasoning is misguided. Although it is true that Idaho Code section 72-1367 supplies
the Department’s “Benefit Formula,” which calculates the amount of earnings that will impact a
claimant’s benefits, a key element to the formula requires having accurately reported earnings.
The case at hand is distinguishable from Artis because the statutory benefit formula cannot be
applied unless McNulty accurately supplies his earnings. Unlike Artis, where the claimant’s
misrepresentation could not have impacted his benefits because the statute expressly precluded
such a result, here, McNulty’s misrepresentations about his employment could have affected his
benefits.
In Meyer, this Court declared that “a fact is material if it is relevant to the determination
of a claimant’s right to benefits; it need not actually affect the outcome of that determination.”
Meyer v. Skyline Mobile Homes, 99 Idaho 754, 760, 589 P.2d 89, 95 (1979). What could be
more material in seeking unemployment benefits than whether the claimant is employed? It
should not be forgotten that not reporting his earnings is only part of the problem, McNulty also
failed to report his employment. This Court rejected the proposition that a claimant may
misrepresent or withhold information if a full disclosure would not have affected his right to
benefits. Id. In Meyer, the Court went on to explain that “the legislature intended the
[Department]–not the claimant–to make the initial determination of eligibility and benefit levels.
. . . A complete and unqualified disclosure can best be promoted by defining materiality to
include any information that is relevant to the determination of a claimant's right to benefits.” Id.
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This Court finds that a claimant’s employment status is relevant to the determination of a
claimant’s right to unemployment benefits. Moreover, the status of employment is material to
the Department for several other reasons, including collecting information regarding the
availability of jobs and the suitability of work within a particular location.
Based on the record, and McNulty’s own admissions from the hearing, the Commission
found that McNulty failed to accurately report his employment and earnings for the weeks at
issue. This Court upholds the Commission’s finding that the facts McNulty failed to report (his
employment and subsequent earnings from working part-time at the Sawtooth Club) were
material because his earnings were relevant to the determination of McNulty’s right to benefits
and could have affected the amount of benefits McNulty was entitled to receive.
2. McNulty’s Failure to Report Constituted Willful Conduct
Every week for approximately twenty-seven (27) weeks, McNulty filed a claim for
benefits. He filed his original claim online and then used the Department’s Tele-claim system
for the remainder of the weeks at issue. Every time McNulty filed a claim report, the system
asked the claimant “[d]id you work for any employers during the week claimed, including
National Guard or Reserve?” At the hearing, McNulty acknowledged that he read and or heard
the instructions to report all employment and earnings. 1 (Emphasis added). When Appeals
Examiner Shelton asked McNulty why he did not report any of his earnings from working at the
Sawtooth Club, McNulty replied “[b]ecause they were an insignificant amount of money and
they weren’t affecting the benefit.” Throughout the entire investigation, McNulty repeatedly
made contradictory claims that the Department led him to believe that he did not have to report
earnings that were of an insignificant amount. During an initial interview by the Department,
McNulty was asked “why [he] fail[ed] to report earnings during the weeks in question” and he
replied “I thought I didn’t have to report anything as long as I had not earned over $120.” When
the IDOL interviewer asked him to identify who told him that information, McNulty explained
that he read it on the internet, but could not recall when or where. Then, at the hearing, McNulty
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McNulty ignored the fact that the Department’s question asked him to report any employment, separate to the
question of earnings. Appeals Examiner Shelton asked McNulty the following questions at the hearing:
Question: “When you file for benefits are you asked a series of questions?”
McNulty’s Answer: “Yes, you are.”
Question: “Okay, are you asked if you worked?”
McNulty’s Answer: “You are.”
Question: “And what was your response?”
McNulty’s Answer: “My response was that I was not working.”
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testified that he failed to report his employment because an IDOL representative told him that he
could earn up to $284.00 per week without affecting his benefit amount.
On appeal, McNulty argues that even if his failure to report his employment and earnings
was material, his failure to report was not willful because he “was not trying to obtain benefits to
which he was not entitled” and he did not intend to “do anything consciously wrong.” In his brief
to the Court, McNulty asserts that he misunderstood the Department’s question asking “did you
work for any employers” to mean did he work enough that he earned an amount large enough to
affect his benefit.
In Meyer, this Court explained that it construes the term “willful” as follows:
“(Willfully) implies simply a purpose or willingness to commit the act or make
the omission referred to. It does not require any intent to violate law, in the sense
of having an evil or corrupt motive or intent. It does imply a conscious wrong,
and may be distinguished from an act maliciously or corruptly done, in that it
does not necessarily imply an evil mind, but is more nearly synonymous with
‘intentionally,’ ‘designedly,’ ‘without lawful excuse,’ and therefore not
accidental.”
Meyer, 99 Idaho at 761, 589 P.2d at 96 (quoting Archbold v. Huntington, 34 Idaho 558, 565, 201
P. 1041, 1043 (1921)). The Court further reiterated that the legislature intended to disqualify
claimants who knowingly or consciously fail to report material facts, but not to punish accidental
omissions due to negligence or misunderstanding. Id.
This Court upholds the Commission’s finding that McNulty’s failure to report his
employment was willful. The question posed by the Department was clear and unambiguous–
“did you work for any employers?” Although McNulty claims that he was informed by an IDOL
representative that he could earn up to $284.00 without affecting his benefits, he did not assert
that he was told he did not have to report his employment. Moreover, the Department clearly
communicated that all earnings, regardless of whether they impact one’s benefits, must be
reported when filing a claim. Each time McNulty filed a claim for unemployment benefits, the
Department’s system asked him to report any employment and earnings and warned him that if
he failed to report all employment and earnings it could be considered fraud and his benefits
could be denied. McNulty also acknowledged receiving the Department’s Unemployment
Insurance Claimant’s Benefit Rights, Responsibilities, and Filing Instructions booklet (the
“Booklet”) and reading the pages which instructed him to “report all work and all earnings.”
The Booklet also explained that claimants can work part-time and still receive benefits, but that
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benefits may be reduced depending upon the claimant’s earnings. Specifically, the Booklet
stated: “You can earn up to one-half of your weekly benefit amount and still receive the full
weekly benefit amount for the week. However, you must still report all amounts earned each
week, even if gross earnings are less than half your weekly benefit amount.”
Based on the information provided and the clarity of the question, McNulty was properly
informed of his obligation to report any employment and all earnings, regardless of their amount
or impact on his benefits. Moreover, McNulty had filed for unemployment benefits in the past
and was aware of the process. Nevertheless, he knowingly failed to report his employment and
his wages because he “believed” they would not impact his benefits. McNulty fails to
understand that whether his earnings impact his benefits is not a determination for him to make.
It is the duty of the Department of Labor to make benefit determinations. Furthermore, although
McNulty testified that he failed to report his employment due to the insignificant amount of his
earnings, he had no justification for his failure to report his earnings during the weeks that he
earned over $284.00. At the hearing, McNulty acknowledged that there were four weeks in
which his earnings amounted to more than $284.00, which is what he considered the threshold
amount necessary to obligate reporting, yet still reported that he had not worked that week
(effectively reporting $0 as his earnings). Specifically, the record shows that McNulty earned
$360.25 for the week ending May 2, 2009; $409.50 for the week ending May 9, 2009; $381.25
for the week ending October 10, 2009; and $330.78 for the week ending October 31, 2009. Yet,
when Appeals Examiner Shelton asked him why he did not report his earnings during those
weeks, McNulty replied “I don’t have a good reason. Maybe I just didn’t keep track of the
money that I earned.” McNulty’s claimed misunderstanding lacks credibility because McNulty
did not even follow his own rules. Even when he earned more than $284.00, he still reported no
employment and no earnings. Even at oral argument, McNulty’s counsel conceded that he could
not think of any reason why a claimant would not report his employment earnings if he truly
believed that they would not impact his benefits, other than to avoid inquiry by the Department.
Therefore, the Court finds that there is substantial and competent evidence in the record to
support the Commission’s finding that McNulty’s failure to report was willful and not because of
a genuine misunderstanding of his obligation to report all employment and earnings.
3. The Commission’s Findings Are Supported by Substantial and Competent Evidence
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McNulty argues that the evidence contained in the record does not support the
Commission’s findings that McNulty’s failure to report was willful or that his withholding was
done “in order to obtain benefits.” This Court finds that a review of the record, including the
transcript of the telephone hearing, supports the Commission’s findings that McNulty’s failure to
report his employment was willful and done in furtherance of obtaining unemployment benefits.
McNulty acknowledged that he heard the instruction to report any employment and earnings, and
admitted that he did not report his employment or earnings from the Sawtooth Club. McNulty
attempted to justify his failure to report on a misunderstanding that he was not required to report
wages less than $284.00 because such earnings would not affect his benefit. However, McNulty
also admitted that he did not keep track of the amount he earned and failed to report his earnings
during the four weeks where his wages amounted to more than $284.00. McNulty acknowledged
receiving the Handbook and did not object to its admission into evidence. He also acknowledged
the Department’s record of earnings from the Sawtooth Club as accurate and made no objections
to the accuracy of the figures at the hearing. McNulty’s failure to report his employment was
committed each week that he filed a claim for unemployment benefits. It is important to note
that it only takes one reporting violation for the Department to determine that a claimant has
willfully failed to disclose a material fact which can make that individual ineligible for
unemployment benefits for the following fifty-two (52) week benefits period. See I.C. § 72-
1366(12). McNulty misrepresented being unemployed every week for several months. This
Court holds that the record supports the Commission’s findings with substantial and competent
evidence.
B. The Commission Did Not Err in Concluding that McNulty was Ineligible for a
Waiver of the Requirement to Repay Benefits
Idaho Code section 72-1369(1) provides that any person who received benefits for which
he was not entitled shall be liable to repay the benefits, and the benefits shall be considered
overpayments. The Department determined, and the Commission upheld, that McNulty was not
eligible to receive unemployment benefits because he willfully failed to report material facts in
order to obtain benefits. Further, monetary civil penalties shall be assessed for each
determination that claimant made a false statement, misrepresentation, or failed to report a
material fact to the Department as follows: “(a) Twenty-five percent (25%) of any resulting
overpayment for the first determination; (b) Fifty percent (50%) of any resulting overpayment
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for the second determination; and (c) One hundred percent (100%) of any resulting overpayment
for the third and any subsequent determination.” I.C. § 72-1369(2).
On June 23, 2010, the Department issued a Determination of Overpayment of
unemployment insurance benefits in the amount of $10,498.00. McNulty was also receiving an
additional $25.00 per week in federal compensation. The Department issued another
Determination of Overpayment of federal additional compensation in the amount of $725.00.
Combining both overpayment figures amounted to $11,223.00 and the Department also imposed
a civil penalty of $2,534.00 for a total sum of $13,757.00 due. McNulty argues that the
Commission erred in failing to grant him a waiver of the requirement to repay the overpayment.
1. McNulty Is Not Entitled to a Waiver of the Requirement to Repay State Benefits
The statute allows a waiver to be granted under limited circumstances. Idaho Code
section 72-1369(5) states:
The director may waive the requirement to repay an overpayment, other than one
resulting from a false statement, misrepresentation, or failure to report a material
fact by the claimant, and interest thereon, if:
(a) The benefit payments were made solely as a result of department error or
inadvertence and made to a claimant who could not reasonably have been
expected to recognize the error; or
(b) Such payments were made solely as a result of an employer misreporting
wages earned in a claimant's base period and made to a claimant who could not
reasonably have been expected to recognize an error in the wages reported.
This Court affirms the Commission’s conclusion that McNulty was ineligible for waiver
because McNulty’s requirement to repay was due to his failure to report a material fact to the
Department. McNulty’s requirement to repay is not because of the Department’s error and it was
not because of an employer’s misreporting. Here, the requirement to repay was triggered by
McNulty’s failure to report. The Court finds that the Commission did not err because under the
circumstances, the Department has no discretion to grant McNulty a waiver.
2. McNulty Is Not Entitled to a Waiver of the Requirement to Repay Federal Benefits
The repayment of federal benefits is governed by federal law. If a state agency has
determined that a person received payments to which he or she was not entitled, the person shall
be liable to repay such overpayment amount to the state agency. 19 U.S.C. § 2315(a)(1). The
requirement to repay federal benefits may be waived if both of the following criteria are met:
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(A) the payment was made without fault on the part of such individual, and
(B) requiring such repayment would cause a financial hardship for the individual
(or the individual's household, if applicable) when taking into consideration
the income and resources reasonably available to the individual (or
household) and other ordinary living expenses of the individual (or
household).
Id. § 2315(a)(1)(A)(B).
McNulty argues that he was not at fault because he did not disclose a fact that he knew or
should have known was material. In light of the fact that McNulty claimed he thought he only
needed to report earnings that could impact his benefits, (earnings above $284.00), and still
failed to report his earnings during the weeks that he actually earned more than $284.00. Federal
regulations outline how to determine whether fault exists. The regulations instruct
administrative agencies that an affirmative finding that a person made a material
misrepresentation that he or she knew or should have known was inaccurate or failed to disclose
a material fact which resulted in the overpayment precludes granting a waiver. 20 C.F.R. §
617.55(a)(2)(i)(A).
Here, the Department determined that McNulty received benefits to which he was not
entitled because of his failure to disclose material facts. McNulty’s failure to report his
employment and subsequent earnings from the Sawtooth Club is what triggered his ineligibility.
This Court upholds the Commission’s conclusion that McNulty is ineligible for a waiver of the
requirement to repay benefits.
C. McNulty Is Not Entitled to Attorney’s Fees
McNulty requests attorney’s fees and costs on appeal under Idaho Code section 12-117.
However, I.C. § 12–117(1) does not allow a court to award attorney fees in a review of an
administrative decision. Smith v. Washington Cnty., 150 Idaho 388, 391, 247 P.3d 615, 618
(2010). Even if the Court had the power to award attorney’s fees in this case, McNulty is not the
prevailing party, and thus, would not be entitled to attorney’s fees.
VI. CONCLUSION
This Court affirms the Industrial Commission’s conclusion that McNulty willfully failed
to disclose material facts in order to obtain unemployment benefits. As such, McNulty is
ineligible for the benefits he received April 26, 2009, through May 16, 2009; May 31, 2009,
through July 4, 2009; July 12, 2009, through October 17, 2009; October 25, 2009, through
November 28, 2009; April 25, 2010, through May 1, 2010; and the fifty-two (52) week period
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effective June 20, 2010, through June 18, 2011. The Court also affirms the Commission’s
finding that McNulty was ineligible for a waiver and must repay the overpayment of both state
and federal benefits as well as any applicable interest and penalties. Costs are awarded to the
Department.
Chief Justice BURDICK, Justices EISMANN, J. JONES and HORTON CONCUR.
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