Los Angeles Unified School District v. Livingston

ing to grant a preliminary injunction. (Code Civ. Proc., § 904.1, subd. (f).)

On January 31, 1980, an administrative law judge of the Employment Development Department of the State of California found that a number of employees of the school district, primarily substitute teachers, were eligible for unemployment compensation benefits for which they had applied during the summer of 1979, because appellant failed to prove that these employees had a “reasonable assurance” of employment for the next academic term. (Unemp. Ins. Code, § 1253.3, subds. (b), (c), (d), (f).)^[1] On February 1, 1980, the school district appealed that decision to the California Unemployment Insurance Appeals Board (CUIAB). On February 4, 1980, appellant requested the superior court to issue a temporary restraining order and preliminary injunction to prevent the Acting Director of the Employment Development Department and the State Treasurer from paying out the benefits to the employees pending the district’s appeal to the CUIAB. The complaint for an injunction alleged that the administrative law judge erred in finding the employees eligible for benefits and that appellant’s remedy at law was inadequate because if the benefits were paid out pending the appeal, appellant would be unable to recover the costs charged to appellant on account of such benefit payments. After issuing a temporary restraining order, the trial court held a hearing on the preliminary injunction. On March 7, 1980, the court dissolved the temporary restraining order and refused to grant the preliminary injunction. Appellant appealed the trial court’s order, and this court refused appellant’s petition for a writ of supersedeas and application for stay. While the appeal to this court of the trial court’s order refusing a preliminary injunction was pending, the CUIAB affirmed the determination of the administrative law judge that the employees were eligible for benefits. Appellant thereafter filed a petition in superior court for administrative writ of mandate (Code Civ. Proc., § 1094.5) to review the determination by the CUIAB.

The only order before us on this appeal is the order denying a preliminary injunction. Such an order does not adjudicate the ultimate rights in controversy and we express no opinion on the merits of the eligibility issue. (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512 ,

528 [ 67 Cal.Rptr. 761 , 439 P.2d 889 ].) Appellant argues that if benefits are paid out while appellant pursues its legal remedies in court, appellant will be irreparably injured because appellant’s account will suffer a charge based on the benefits paid, which cannot be recovered even if appellant eventually vindicates its interpretation of the eligibility requirements. Appellant argues that therefore the payments should be enjoined pending the ultimate determination of the merits. We conclude, however, that this argument is contrary to the express requirements of the Legislature and to the fundamental purposes of unemployment compensation. The trial court did not err in denying the preliminary injunction.

Following an initial departmental denial of benefits, a full hearing was held before an administrative law judge who determined the employees were eligible for unemployment benefits. That determination had been appealed to the CUIAB. In such a situation, section 1335, subdivision (c), states that “such benefits shall be promptly paid regardless of any appeal.” With respect to the present posture of the case, where the CUIAB has affirmed the referee’s determination of eligibility, section 1338 is even more explicit. It states: “If the Appeals Board issues a decision allowing benefits the benefits shall be paid regardless of any further action taken by the director, the Appeals Board, or any other administrative agency, and regardless of any appeal or mandamus or other proceeding in the courts... . ” These requirements for the prompt payment of benefits after a determination of eligibility by a referee are necessary to achieve the purposes of unemployment compensation and to conform the state legislation to federal requirements. (California Human Resources Dept. v. Java (1971) 402 U.S. 121 , 129-135 [ 28 L.Ed.2d 666 , 672-676, 91 S.Ct. 1347 ]; Gilles v. Department of Human Resources Development (1974) 11 Cal.3d 313 , 318-319 [ 113 Cal.Rptr. 374 , 521 P.2d 110 , 90 A.L.R.3d 970 ].)^[2]

The purposes of the unemployment compensation insurance program, enacted by Congress, include enabling unemployed workers to tide themselves over while finding other employment, without resort to welfare or private charity, and preventing a decline in the purchasing power of the unemployed, which would adversely affect other industries. (California Human Resources Dept. v. Java, supra, 402 U.S. at pp. 131-133 [28 L.Ed.2d at pp. 673-675]; Gilles v. Department of Human Resources Development, supra, 11 Cal.3d at p. 325.) To withhold these payments while the employer engages in the processes of appeal to the CUIAB and eventually to the courts would defeat the fundamental purposes of the act. (California Human Resources Dept. v. Java, supra, 402 U.S. at p. 133 [28 L.Ed.2d at pp. 674-675]; Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280 , 290 [ 109 P.2d 942 , 132 A.L.R. 715 ].)^[3]

An argument like the one made by appellant was rejected long ago by our Supreme Court in Abelleira v. District Court of Appeal, supra, 17 Cal.2d 280 . In that case a referee had determined that the employees were eligible for benefits, and the employers, contending the employees were actually on strike and ineligible, had obtained a temporary restraining order from the Court of Appeal, withholding payment of the benefits. The Supreme Court issued a writ of prohibition against the Court of Appeal. Rejecting the employer’s claim of irreparable injury, the Supreme Court cited the predecessor of section 1335 and concluded, “The very essence of the act is its provision for the prompt payment of benefits to those unemployed. Any substantial delay would defeat this purpose and would bring back the very evil sought to be avoided.... [1Í] .... The legislature has concluded that it is wiser to have a system of unemployment compensation operating with a possible small percentage of error, than to have a system not operating at all.” (Id., 17 Cal.2d at pp. 298, 300; citation omitted; see also American Federation of Labor v. Employment Dev. Dept. (1979) 88 Cal.App.3d 811 , 821 [ 152 Cal.Rptr. 193 ].)

A third method of financing is available to public school employers such as appellant. (§ 821 et seq.) According to the declaration of George Wolverton, chief of the school and government employees bureau of the Employment Development Department, public school employers may elect either this method (the School Employees’ Fund), or tax rate contributions or direct reimbursement. The provisions for public school employers (§§ 821-832) are in part similar to the reimbursement method. Section 821, subdivision (a), parallels section 803, subdivision (b)(1), and, most importantly, section 821, subdivision (b), parallels section 803, subdivision (c), by stating expressly that no provision for the noncharging of benefits to the account of an employer shall apply.^[4] The same language in section 803, subdivision (c), was interpreted in Carleson to mean that the reimbursement employer bears the risk of what the court termed “anticipated overpayments” including erroneous eligibility determinations. (Id., 64 Cal.App.3d at p. 153.) Subsequently the Legislature amended sections 803 and 821 in a manner which strengthens that interpretation.^[5] We conclude that under Carleson and subdivision (b) of section 821, school employers must also bear that risk.

Thus although appellant will suffer a charge if the benefit payments are not enjoined pending judicial review of the determination of eligibility, this is actually one of the risks which appellant is required to

assume as clearly spelled out by the Legislature as a condition of this alternative, method of financing. The Legislature presumably has concluded that the costs to the employer of occasional errors may be outweighed in the long run by the advantages of alternative financing methods. The Legislature left the option to public school employers to weigh the risks and elect the system they prefer. If appellant concludes its present method is too risky, appellant may choose the contribution system or urge the Legislature to amend the provisions relating to school employers. The clear policy of the statute and well-established case law require that in order to achieve the fundamental purposes of unemployment compensation, the balance of equities pending judicial review of the merits must be weighted in favor of the unemployed worker. It is not a permissible solution to withhold the payment of benefits by injunction pending such review.

There is no merit to appellant’s argument that this financing system authorizes a gift of public funds in violation of article XVI, section 6 of the California Constitution. The second paragraph of that section specifically recognizes that certain forms of self-insurance involve risk taking,^[6] and that a public entity can be unlucky in its insurance claims without being held to have made a gift of public funds.^[7] As stated in Abelleira v. District Court of Appeal, supra, 17 Cal. 2d at page 300, the Legislature determined that it is better to have a system of unemployment compensation operating with a possible small percentage of error than to have a system not operating at all. This important public purpose of the requirements for prompt payment renders inapplicable the constitutional provision on gifts of public funds. (See Schettler v. County of Santa Clara (1977) 74 Cal.App.3d 990 , 1003-1005 [ 141 Cal.Rptr. 731 ].) The school employer method has other advantages which give the employer consideration for taking the risk