COLORADO COURT OF APPEALS 2016COA172

Court of Appeals No. 16CA0369 

Industrial Claim Appeals Office of the State of Colorado 

DD No. 20749-2015 

Lizabeth A. Meyer, 

Petitioner, 

v. 

Industrial Claim Appeals Office of the State of Colorado and Division of 

Unemployment Insurance, Benefit Payment Control, 

Respondents. 

ORDER AFFIRMED IN PART, REVERSED IN PART, 

AND CASE REMANDED WITH DIRECTIONS 

Division I 

Opinion by JUDGE DAILEY 

Taubman and Freyre, JJ., concur 

Announced November 17, 2016 

Law Office of Warren Domangue, Warren Domangue, Lakewood, Colorado, for 

Petitioner 

Cynthia H. Coffman, Attorney General, Evan Brennan, Assistant Attorney 

General, Denver, Colorado, for Respondent Industrial Claim Appeals Office 

No Appearance for Respondent Division of Unemployment Insurance, Benefit 

Payment Control 
1 

¶ 1 In this unemployment compensation benefits case, petitioner, 

Lizabeth A. Meyer (claimant), seeks review of a final order of the 

Industrial Claim Appeals Office (Panel). The Panel upheld a hearing 

officer’s decision that claimant had received an overpayment of 

unemployment compensation benefits because of unreported 

earnings from her employment. The Panel also upheld the 

imposition of monetary penalties against claimant. We affirm the 

Panel’s order in part, reverse in part, and remand the case for entry 

of a new order. 

I. Factual and Procedural Background 

¶ 2 Claimant filed an unemployment compensation benefits claim 

with an effective date of March 11, 2012. Following that date, 

claimant worked part-time as a sales associate, and, in May 2012, 

she obtained full-time work as a controller for another company. 

¶ 3 A deputy for the Division of Unemployment Insurance 

(Division) conducted an audit of claimant’s file and determined that 

she had been overpaid unemployment compensation benefits in the 

amount of $1712 for the period from March 18, 2012, through May 

19, 2012. The deputy found that claimant had underreported her 

hours and earnings for certain weeks during that period. The 
2 

deputy also assessed a monetary penalty of $1112.80 against 

claimant. 

¶ 4 Claimant appealed the deputy’s determination and an 

evidentiary hearing was conducted. At the hearing, claimant 

conceded that the hours reported on her paystubs, rather than the 

ones she reported online to the Division, accurately reflected the 

hours she had worked. She asserted, however, that she was 

required only to report her taxable, rather than gross, earnings to 

the Division. 

¶ 5 The hearing officer accepted, except for one week, claimant’s 

concessions regarding the number of hours she had worked after 

applying for unemployment compensation benefits. The hearing 

officer concluded, however, that claimant had been instructed to 

report accurately her gross earnings and hours for each benefit 

week to the Division. Claimant had also been advised that giving 

false information in her request for payment constituted fraud. 

¶ 6 The hearing officer found that claimant knowingly misreported 

her gross earnings and hours for certain weeks which resulted in 

her being overpaid $1890.64 in unemployment compensation 

benefits. The hearing officer also rejected claimant’s explanations 
3 

regarding the method she used to report her hours and earnings 

and found that her misreporting was willful. The hearing officer 

consequently assessed a monetary penalty of $1228.91. 

¶ 7 Claimant appealed the hearing officer’s decision to the Panel, 

which affirmed on review. 

¶ 8 Claimant then brought this appeal. After the case was at 

issue, we requested that the parties address the following question: 

Whether any payment made to or on behalf of 

an employee or his beneficiary under a 

cafeteria plan (within the meaning of 26 U.S.C. 

section 125), as specified under section 

8-70-142(1)(c)(VIII), C.R.S. 2015, affects the 

amount of wages a claimant must report as his 

or her earnings when filing a claim for 

unemployment benefits? 

II. Standard of Review 

¶ 9 We may set aside the Panel’s decision if the findings of fact do 

not support the decision or the decision is erroneous as a matter of 

law. See § 8-74-107(6), C.R.S. 2016; Colo. Div. of Emp’t & Training 

v. Parkview Episcopal Hosp., 725 P.2d 787, 790 (Colo. 1986). 

III. Reportable Earnings; Wages 

¶ 10 Claimant contends that the Panel erred in determining that 

she was required to report her gross earnings instead of her taxable 
4 

earnings. Relying on section 8-70-142, C.R.S. 2016, claimant 

asserts that she was not required to report as earnings any 

contributions she made to her 26 U.S.C. section 125 (2012) 

cafeteria plan. We agree with claimant that the term “wages” 

excludes any contributions she made to a section 125 cafeteria 

plan. 

A. Legal Framework 

¶ 11 Section 8-70-142 identifies what types of remuneration are not 

included as “wages.” As pertinent here, section 8-70-142(1)(c)(VIII) 

excludes “[a]ny payment made to or on behalf of an employee or his 

beneficiary . . . [u]nder a cafeteria plan (within the meaning of 26 

U.S.C. section 125).” 

¶ 12 A cafeteria plan allows an employer to offer its employees a 

variety of benefits that may include tax advantages. See 26 U.S.C. 

§§ 3121(a)(5)(G), 3306(b)(5)(G) (2012); Lee v. Emp’t Dep’t, 190 P.3d 

453, 453 (Or. Ct. App. 2008). Contributions to a cafeteria plan by 

an employer can be made through a salary reduction agreement 

with an employee in which the employee agrees to contribute a 

portion of his or her salary on a pretax basis to pay for the benefits. 

Id. These contributions are not considered wages for federal income 
5 

tax purposes and are not subject to Social Security and federal 

unemployment taxes. Id.

B. The Division’s Arguments 

¶ 13 In its supplemental brief, the Division acknowledges that the 

term “wages,” as defined in section 8-70-142, excludes any 

contributions made to a section 125 plan. However, without 

specifically addressing the effect of this provision, the Division 

argues that claimant failed to present sufficient evidence that the 

cafeteria plan to which she contributed met the requirements for a 

section 125 plan. The Division also argues that it properly 

determined that clamant was responsible for the overpayment 

because she willfully misrepresented her earnings and the number 

of hours she worked for the nine-week period at issue. 

C. Division Instructions Regarding Reportable Wages 

¶ 14 During the hearing, the Division presented copies of online 

forms claimant filled out in order to receive unemployment 

compensation benefits. These forms requested claimant to list the 

number of hours she worked during the week and the amount that 

she was paid or would be paid. The forms also contained a 

“certification agreement,” which specified that claimant understood 
6 

that “[i]f I work during any week for which I am claiming UI 

benefits, I must report all gross earnings in the week earned 

regardless of whether or not I have been paid.” (Emphasis added.) 

¶ 15 The requirement to report “gross earnings” is repeated in an 

administrative regulation. See Dep’t of Labor & Emp’t Reg. 2.9.2, 7 

Code Colo. Regs. 1101-2:2.9. This regulation, which is entitled, 

“Disqualifying Payments,” provides as follows: 

For the purposes of determining weekly 

benefits, “wages/earnings” is defined as any 

income or remuneration received in exchange 

for services performed, including amounts that 

have been deducted under a plan for tax 

exemption or deferral. 

Id.

¶ 16 Thus, through this regulation, as well as the directions in the 

online forms, the Division has required that a claimant report his or 

her gross earnings for each week in which the claimant sought 

unemployment compensation benefits. However, this requirement 

is contrary to the plain language of the statute, which excludes 

from the definition of “wages” certain contributions to a section 125 

cafeteria plan. See also § 8-73-107(1)(f), C.R.S. 2016 (providing 

that a claimant is ineligible to receive unemployment compensation 
7 

benefits for any week unless the claimant’s “total wages earned” are 

less than the weekly benefit amount). 

¶ 17 We therefore conclude that the Division erred in requiring 

claimant to report her “gross earnings” rather than her “wages” as 

defined by section 8-70-142 when reporting her “earnings” to the 

Division during a benefit week. 

D. Evidence Regarding Section 125 Contributions 

¶ 18 We also conclude that there was sufficient evidence to show 

that claimant contributed to a section 125 cafeteria plan for 

unemployment purposes. 

¶ 19 The administrative record included copies of claimant’s 

paystubs during the relevant nine-week period. Claimant’s 

paystubs from Coach, from the period from March 11, 2012, 

through May 17, 2012, showed that she paid medical, dental, 

vision, and FSA benefits using pretax earnings. These paystubs 

also showed “FIT Taxable Wages,” which equaled claimant’s gross 

earnings minus her pretax contributions. A paystub from 

claimant’s other employer during this period (Sutrak), from May 6, 

2012, through May 21, 2012, did not show any pretax deductions. 
8 

¶ 20 In addressing whether claimant’s paystubs showed any 

section 125 deductions, the Panel stated that they had not been 

admitted as exhibits. However, that determination is incorrect. The 

record shows that the hearing officer accepted the Division’s 

submission of the paystubs into evidence and that claimant 

testified about them extensively. Consequently, we also disagree 

with the Panel’s statements that claimant only generally testified 

about the deductions on her paystubs and that it was not clear 

from her testimony whether the deductions met the requirements of 

“26 U.S.C. 3306(b)(5)(G) and 26 U.S.C. § 125.” However, claimant’s 

paystubs from Coach show that her federal taxable earnings were 

reduced by the amount of her pretax contributions for medical, 

dental, vision, and FSA benefits. Such deductions are 

characteristic of section 125 cafeteria plans. See Lee, 190 P.3d at 

453; see also Denver Post, Inc. v. Dep’t of Labor & Emp’t, 199 Colo. 

466, 469, 610 P.2d 1075, 1077 (1980) (employee benefits in the 

form of medical, life, sickness, accident insurance, and pension 

contributions did not constitute wages for unemployment 

purposes); City & Cty. of Denver v. Indus. Comm’n, 707 P.2d 1008, 

1010 (Colo. App. 1985) (payments made to police officers on 
9 

account of accident disability were not counted as wages for 

determining monetary eligibility for unemployment compensation 

benefits). 

¶ 21 Therefore, based on the foregoing and the fact that 

unemployment compensation benefit hearings are to be expedited 

proceedings, we conclude that claimant met her burden to establish 

that the amounts she paid for these benefits while working for 

Coach were excludable from her “wages” under section 

8-70-142(1)(c)(VIII). See Campbell v. Indus. Claim Appeals Office, 97 

P.3d 204, 210-11 (Colo. App. 2003) (recognizing that unemployment 

compensation hearings are intended to be informal and expeditious, 

and it would impose an onerous burden on an employee to present 

evidence that is not directly relevant to the circumstances of his or 

her separation from employment); Ward v. Indus. Claim Appeals 

Office, 916 P.2d 605, 607 (Colo. App. 1995) (in an unemployment 

compensation proceeding, the initial burden is on the claimant to 

establish a prima facie case of entitlement). 

IV. Eligibility; Overpayment; Penalty 

¶ 22 Claimant next contends that the Panel erred in upholding the 

hearing officer’s determination that she knowingly failed to report 
10 

her earnings accurately and that both the hearing officer and Panel 

erred in determining that she had received an overpayment and in 

imposing a monetary penalty. We agree in part. 

A. Legal Framework 

¶ 23 Section 8-73-107(1)(f) provides that a claimant is ineligible to 

receive unemployment compensation benefits for any week in which 

the “total wages earned” for the week exceed the weekly benefit 

amount. In addition, if the claimant’s earnings are less than the 

weekly benefit amount, section 8-73-102(4), C.R.S. 2016, requires 

that a claimant’s weekly benefit amount be reduced by the amount 

by which the “wages payable” to the claimant for a particular week 

exceed twenty-five percent of the weekly benefit amount. Further, a 

claimant is not entitled to unemployment compensation benefits if 

fully employed, which equates to thirty-two or more hours per week. 

See § 8-70-103(12.5), C.R.S. 2016 (definition of “fully employed”); 

see also § 8-70-103(19) (definition of “partially employed”).

¶ 24 The Division is required to recover any unemployment 

compensation benefits a claimant receives due to fraud. See

§ 8-74-109(2), C.R.S. 2016; see also Dep’t of Labor & Emp’t Regs. 

15.1.3, 15.2, 7 Code Colo. Regs. 1101-2:15 (allowing for the write 
11 

off or waiver of overpaid benefits in certain circumstances). 

Colorado regulations consider it a “false representation” when an 

individual makes a report “that he or she knew to be false or any 

representation made by an individual with an awareness that he or 

she did not know whether the representation was true or false.” 

See Dep’t of Labor & Emp’t Reg. 15.2.5, 7 Code Colo. Regs. 

1101-2:15.2.5. 

¶ 25 Section 8-81-101(4)(a)(II), C.R.S. 2016, imposes a monetary 

penalty of sixty-five percent of the overpayment amount if the 

overpayment resulted from the claimant’s “false representation” or 

“willful failure to disclose a material fact.” See Woollems v. Indus. 

Claim Appeals Office, 43 P.3d 725, 726 (Colo. App. 2001). This 

statutory standard does not require an intent to defraud, but rather 

is met when the false representation is made or the failure to 

disclose is done “knowingly.” See Div. of Emp’t & Training v. Indus. 

Comm’n, 706 P.2d 433, 435 (Colo. App. 1985). In addition, 

Regulation 15.2.6 defines a “willful failure to disclose a material 

fact” as “knowingly withholding material information from the 

division.” Dep’t of Labor & Emp’t Reg. 15.2.6, 7 Code Colo. Regs. 

1101-2:15.2.6. A claimant’s mental state may be inferred from 
12 

circumstantial evidence. See Div. of Emp’t & Training, 706 P.2d at 

435. 

B. Application to This Case 

1. Sutrak Earnings 

¶ 26 Initially, we need not consider whether the earnings claimant 

reported for Sutrak were considered “taxable wages” or “gross 

earnings” because claimant was not otherwise eligible for 

unemployment compensation benefits for the period she worked for 

Sutrak. 

¶ 27 The hearing officer found, and the record supports, that 

claimant worked over thirty-two hours per week for Sutrak during 

the period from May 6, 2012, through May 21, 2012. In addition, 

claimant’s income during those weeks exceeded the amount that 

claimant received in unemployment compensation benefits. Thus, 

although claimant received unemployment compensation benefits of 

$500 a week for the two weeks she worked for Sutrak, she was 

ineligible to receive these benefits based on her weekly earnings, 

which exceeded $1000 per week, for which no pretax deductions 

were taken, and because she worked full-time during this period. 

See §§ 8-70-103(12.5), (19); 8-73-107(1)(f). 
13 

¶ 28 Therefore, we conclude that the Division properly determined 

claimant was overpaid $1000 in unemployment compensation 

benefits for the two-week period from May 6, 2012, through May 21, 

2012. We also conclude that the Division did not err in upholding 

the imposition of a sixty-five percent penalty ($650) for this period. 

As the hearing officer determined, with record support, claimant 

knowingly underreported her hours and earnings for this period. 

2. Coach Earnings 

¶ 29 In contrast, claimant’s paystubs from Coach showed that she 

did not work more than thirty-two hours in any week. In addition, 

the amounts she reported as “wages” for those weeks were less than 

her benefit amount. Thus, we conclude that claimant was not 

automatically ineligible from receiving unemployment compensation 

benefits for the weeks she worked exclusively for Coach and 

therefore we need to consider what her “taxable wages” were for this 

period. 

¶ 30 The hearing officer prepared a table which showed the 

difference between what claimant reported in earnings and the 

amount of “taxable wages” that was shown on her paystubs. Based 

on that table, we may calculate the amount claimant was overpaid 
14 

by using the formula set forth in section 8-73-102(4). This formula 

requires a deduction from the weekly benefit amount of any wages 

that are in excess of twenty-five percent of the weekly benefit 

amount. 

¶ 31 The Division calculated claimant’s weekly benefit amount as 

$500. Thus, the maximum wages claimant could earn in any week 

without a deduction was $125. Using this information, the 

following chart shows claimant’s “taxable earnings,” her reported 

earnings, unemployment compensation benefits paid, and any 

overpayment for each week she worked exclusively for Coach. 

Week Taxable Reported Benefits Overpayment 

Ending Wages Wages Paid Amount 

3/24/12 $165.00 $75.87 $500.00 $40.00 

3/31/12 $160.69 $160.69 $464.00 $0.00 

4/7/12 $165.71 $160.69 $464.00 $5.00 

4/14/12 $95.49 $165.71 $459.00 ($41.00) 

4/21/12 $161.32 $95.49 $500.00 $37.00 

4/28/12 $158.56 $165.00 $460.00 ($6.00) 

5/5/12 $165.46 $125.00 $500.00 $41.00 

 Total $76.00 

¶ 32 The hearing officer, in determining that claimant had been 

overpaid benefits, did not calculate the overpayment based on 

claimant’s “taxable wages,” but rather on her gross earnings. As is 
15 

apparent, if “taxable wages” are used, the amount that claimant 

was overpaid is substantially less than the amount calculated by 

the hearing officer, only $76 versus $890.64. 

¶ 33 Nevertheless, in imposing a monetary penalty, the hearing 

officer found that claimant knowingly misreported her earnings and 

hours for these weeks. Although the hearing officer found that 

claimant misreported her earnings based on the difference between 

her gross earnings and the “taxable wages” she reported to the 

Division, the hearing officer also found that claimant reported 

working only 84 hours when she actually worked 153 hours during 

that period. The hearing officer further found that claimant was 

aware of her obligation to report her earnings and hours accurately 

and deliberately failed to do so. Moreover, the hearing officer noted 

that even if the hearing officer accepted claimant’s argument that 

she was to report only her “taxable earning,” she failed to do that. 

¶ 34 Accordingly, in light of the foregoing, we conclude that the 

hearing officer did not err in concluding that a monetary penalty 

was appropriate. However, because claimant was overpaid only $76 

in unemployment compensation benefits for this period, the sixtyfive percent monetary penalty is only $49.40, for a total of $125.40. 
16 

V. Continuance of Hearing

¶ 35 Claimant further contends that her due process rights were 

violated because the hearing officer erred in not continuing the 

hearing so that she could submit a document showing that 

cafeteria plan deductions were not considered wages for purposes of 

unemployment. However, we conclude that this contention is moot, 

and we need not address it, based on our determination that the 

hearing officer erred in not using claimant’s “taxable wages” in 

determining whether she had been overpaid unemployment 

compensation benefits during the period she exclusively worked for 

Coach. 

VI. Conclusion 

¶ 36 We affirm that part of the Panel’s order holding that claimant 

was overpaid $1000 in unemployment compensation benefits for 

the two-week period she worked for Sutrak. We also affirm the 

imposition of a sixty-five percent monetary penalty, in the amount 

of $650, for this period. We reverse that part of the Panel’s order 

holding that claimant was overpaid $890.64 in benefits for the 

period she worked exclusively for Coach, as well as the imposition 

of a sixty-five percent monetary penalty on this amount, and 
17 

remand this issue to the Panel with directions to enter a new order 

holding that claimant was overpaid $76 in benefits for this period 

and imposing a sixty-five percent penalty of $49.40, for a total 

payment of $125.40. 

JUDGE TAUBMAN and JUDGE FREYRE concur.