#30041-r-MES

2023 S.D. 22

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

DARCY BRACKEN, Petitioner and Appellant,

v.

SOUTH DAKOTA DEPARTMENT OF

LABOR AND REGULATION,

REEMPLOYMENT ASSISTANCE DIVISION, Respondent and Appellee.

* * * *

APPEAL FROM THE CIRCUIT COURT OF

THE SEVENTH JUDICIAL CIRCUIT

CUSTER COUNTY, SOUTH DAKOTA

* * * *

THE HONORABLE JOSHUA K. HENDRICKSON

Judge

* * * *

ERIC C. SCHULTE of

Davenport, Evans, Hurwitz

 & Smith, LLP

Sioux Falls, South Dakota Attorneys for petitioner

and appellant.

SETH A. LOPOUR

COURTNEY S. CHAPMAN of

Woods, Fuller, Shultz & Smith, P.C.

Sioux Falls, South Dakota Attorneys for respondent

and appellee.

* * * *

ARGUED

MARCH 22, 2023

OPINION FILED 05/10/23
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SALTER, Justice

[¶1.] Darcy Bracken appeals administrative and circuit court decisions 

ordering her to repay $14,080 in Pandemic Unemployment Assistance (PUA) 

benefits that she had received under the Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act). We reverse. 

Factual and Procedural Background

[¶2.] Bracken and her husband owned and operated the White Tail Ridge 

Bed and Breakfast in Custer County. In January 2020, the U.S. Department of 

Health and Human Services declared a public health emergency relating to the 

COVID-19 pandemic. Starting in February 2020, Bracken claimed new bookings at 

the bed and breakfast ceased and many existing bookings were canceled. Bracken 

also reported that the business did not have any guests until the end of May 2020. 

The bed and breakfast remained open, but Bracken attributed the overall decline in 

guests to the pandemic.1 

[¶3.] In March 2020, Congress passed the CARES Act, which created a 

temporary, state-administered PUA benefits program for unemployed individuals, 

including self-employed workers. See 15 U.S.C. § 9021. In South Dakota, the 

Reemployment Assistance Division of the South Dakota Department of Labor and 

Regulation (the Department) administered the PUA benefits program. 

[¶4.] Bracken applied for PUA benefits, stating in her application that she 

was self-employed but became unemployed in March 2020 “as a result of COVID1. Bracken and her husband eventually closed the bed and breakfast, but after 

the time period relevant to this appeal. 
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19[.]” Responding to the application’s prompt to explain the circumstances of her 

unemployment claim, Bracken wrote, “I own a small bed and breakfast. The travel 

industry has been hit very hard by COVID19 so we have no business due to it.” The 

Department initially determined Bracken was eligible for PUA benefits and issued 

a series of payments totaling $14,080, which covered the period from March to 

Early-August 2020. 

[¶5.] However, the Department later determined that Bracken was not

eligible for PUA benefits following an internal review. In the Department’s stated 

reasoning, Bracken was ineligible for benefits because she was “not considered 

unemployed” under any of the bases listed in the CARES Act. Consequently, the 

Department viewed the entire sum of PUA benefits as an overpayment that 

Bracken was required to repay. 

[¶6.] Bracken, proceeding pro se, appealed the Department’s determination, 

and an Administrative Law Judge (ALJ) conducted a hearing at which Bracken 

testified. The record does not contain a transcript of the hearing, but it does include 

the ALJ’s written decision affirming the Department’s overpayment determination, 

along with findings of fact and conclusions of law. 

[¶7.] Several of the ALJ’s findings appear to support Bracken’s claim that 

she became unemployed because of the COVID-19 pandemic. For instance, the ALJ 

found:

1. Claimant was self-employed in the operation of a bed and 

breakfast[;] . . . 

2. Prior to COVID-19, Claimant’s business regularly had 

guests each month[;]
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3. In February 2020, Claimant’s business had no new 

reservations and many reservations from prior bookings 

were cancelled[;]

4. Claimant’s business has [sic] no guests until the end of 

May 2020. 

[¶8.] Notwithstanding these findings, the ALJ concluded that Bracken was 

not unemployed:

The evidence does not establish that Claimant meets any of the 

reasons for eligibility identified under the CARES Act. 

Although Claimant's business experienced a loss of guests 

during the COVID-19 pandemic, the evidence suggests that the 

reason for the loss of guests is because of indirect economic 

consequences from the COVID-19 public health emergency. 

Reductions in the number of guests or a decreased demand for 

bed and breakfast rooms is, without more, properly considered 

an indirect result of the COVID-19 public health emergency. 

Claimant's business was not closed by a state or local order. 

Claimant was neither required to self-quarantine nor was 

Claimant diagnosed with COVID-19. 

(Emphasis added.)

[¶9.] Bracken requested review of the ALJ’s decision from the Department. 

Still representing herself, she argued, in part, that “[under] the CARES Act, I am 

not required to provide evidence that I was directly affected by the pandemic, only 

that I met any [ ] criteria as stated in . . . . the CARES Act[.]” As to this latter point, 

Bracken quoted the text of an additional criterion for PUA benefits approved by the 

United States Secretary of Labor, as authorized by the CARES Act: 

Self-employed individuals (including independent contractors 

and gig workers) who experienced a significant diminution of 

their customary or usual services because of the COVID-19 

public health emergency, even absent a suspension of services[.]”

U.S. Dep't of Labor, Unemployment Insurance Program Letter No. 16-20, Change 4 

(January 8, 2021) (UIPL 16-20), at 8 (emphasis added). 
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[¶10.] The Department did not accept Bracken’s interpretation of what we 

will describe here as the Secretary of Labor’s “Self-Employment Rule.”2 Instead, 

the Department summarily adopted the ALJ’s whole decision and, as a 

consequence, identified the self-employed eligibility basis as the only reason for 

requiring Bracken to repay the PUA benefits. 

[¶11.] Bracken appealed to the circuit court and continued to press her claim 

that eligibility for PUA benefits did not require that the “significant diminution” of 

a self-employed person’s business be directly caused by the COVID-19 pandemic in 

the ways described by the ALJ—i.e., the business was ordered to be closed or 

Bracken contracted COVID-19 and had to quarantine. The Department countered 

with a much broader interpretation of the “because of” text in the Self-Employment 

Rule, and also asserted for the first time that the evidence was insufficient to 

support a determination that there had been a significant diminution in the usual 

business activity at Bracken’s bed and breakfast. 

[¶12.] Believing the question before it to be factual and entitled to deference, 

the circuit affirmed the ALJ’s decision, though somewhat reluctantly. The court 

explained the decision to affirm “leaves a bad taste in my mouth[,]” noting “I don't 

know how your business wouldn't be affected by Covid, but based on the record I've 

reviewed I can't make that a clearly erroneous finding.” (Emphasis added.)

2. Though we refer to it as a “rule,” we do so in a generic sense because it does 

not appear to have been promulgated under the provisions of the federal 

Administrative Procedures Act. 
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[¶13.] Now with the assistance of counsel, Bracken appeals to this Court 

claiming the ALJ erred when it determined that she was ineligible to receive PUA 

benefits because, in the ALJ’s view, her bed and breakfast suffered only indirect 

economic consequences of the COVID-19 pandemic.

Standard of Review

[¶14.] When reviewing an administrative agency’s decision, SDCL 1-26-36 

provides the appropriate standard of appellate review. Christenson v. Crowned 

Ridge Wind, LLC, 2022 S.D. 45, ¶ 20, 978 N.W.2d 756, 761 (citation omitted). As 

relevant here, the statute provides:

The court shall give great weight to the findings made and 

inferences drawn by an agency on questions of fact. The court 

may affirm the decision of the agency or remand the case for 

further proceedings. The court may reverse or modify the 

decision if substantial rights of the appellant have been 

prejudiced because the administrative findings, inferences, 

conclusions, or decisions are:

. . .

(4) Affected by other error of law;

(5) Clearly erroneous in light of the entire evidence in the record 

. . . .

SDCL 1-26-36.

[¶15.] Here, the circuit court’s restraint and fidelity to the clearly erroneous 

standard of review were commendable, but in our view the question of Bracken’s 

eligibility for PUA benefits is not a factual one. Instead, the eligibility issue 

implicates the provisions of the CARES Act and, in particular, the Self-Employment 

Rule—legal questions which we review de novo and without deference. See 

Ehlebracht v. Crowned Ridge Wind II, LLC, 2022 S.D. 19, ¶ 20, 972 N.W.2d 477, 
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485 (applying de novo standard of review to administrative tribunal’s application of 

law).

Analysis and Decision

[¶16.] Under the CARES Act, PUA benefits are paid to “any covered 

individual . . . while such individual is unemployed, partially unemployed, or unable 

to work . . . .” 15 U.S.C. § 9021(b). Subject to certain requirements that are not 

implicated here, the statutorily defined term “covered individual” includes those 

that meet any of the criteria set forth in 15 U.S.C. § 9021(a)(3)(A)(ii)(I)(aa-kk). 

[¶17.] Particularly relevant to our discussion is 15 U.S.C. § 

9021(a)(3)(A)(ii)(I)(kk), which enables the United States Secretary of Labor to 

establish additional criteria for PUA benefits eligibility. Acting pursuant to this 

authority, the Secretary of Labor has issued the Self-Employment Rule, set out 

above, that allows self-employed people to be considered “covered individual[s]” if 

they “experienced a significant diminution of their customary or usual services 

because of the COVID-19 public health emergency, even absent a suspension of 

services[.]” U.S. Dep't of Labor, Unemployment Insurance Program Letter No. 16-

20, Change 4 (January 8, 2021) (UIPL 16-20), at 8 (emphasis added).3

[¶18.] As a matter of textual interpretation, the phrase—“because of”—is 

generally described in essential terms as but-for causation:

In everyday usage, the phrase “because of” indicates a but-for 

causal link between the action that comes before it and the 

circumstance that comes afterwards. John carried an umbrella 

because of the rain. Jane stayed home from school because of 

3. The excerpt of the Self-Employment Rule set out in the ALJ’s decision did not 

include the “even absent a suspension of services” clause. 
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her fever. Dictionary definitions of the phrase reflect this 

common-sense understanding: “Because of” means “by reason of” 

or “on account of” the explanation that follows. 

United States v. Miller, 767 F.3d 585, 591 (6th Cir. 2014) (quoting Webster's Second 

New International Dictionary 242 (1950); see also Cause, Black's Law Dictionary

(11th ed. 2019) (“The cause without which the event could not have occurred.”).4

[¶19.] Under any reading of the Self-Employment Rule, the direct vs. indirect 

dichotomy suggested by the ALJ simply does not exist. Nothing in the text used by 

the Secretary of Labor indicates that considering the indirect effects of COVID-19 is 

categorically foreclosed, and the ALJ cited no authority to support this narrow 

interpretation. 

[¶20.] Notably, the “because of” standard in the Self-Employment Rule is 

different than some of the statutory criteria used to determine PUA eligibility for 

workers who are not self-employed. These individuals can receive benefits if they 

“ha[d] to quit his or her job as a direct result of COVID-19 . . . [or] . . . the 

individual's place of employment is closed as a direct result of the COVID-19 public 

health emergency[.]” 15 U.S.C. § 9021(a)(3)(A)(ii)(I) (ii)—(jj). The use of different 

text to describe PUA eligibility among different types of claimants supports the 

view that the causation standard is not universal among them. 

4. Even if we determined that “because of” was essentially a legal or proximate 

cause standard, the ALJ’s view that Bracken’s diminished work had to be 

directly caused by the COVID-19 pandemic is still not supportable. See Est. 

of Gaspar v. Vogt, Brown & Merry, 2003 S.D. 126, ¶ 6, 670 N.W.2d 918, 921

(“A proximate or legal cause is a cause that produces a result in a natural 

and probable sequence and without which the result would not have 

occurred. Such cause need not be the only cause of a result. It may act in 

combination with other causes to produce a result.” (citing SDCL 21–3–1)).
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[¶21.] On appeal, the Department cites other federal regulations—not part of 

the CARES Act—to support its direct result argument. Specifically, the 

Department points to separate regulations governing Disaster Unemployment 

Assistance (DUA) which state the “direct result” standard as a requirement for a 

self-employed individual’s request for unemployment assistance following a natural 

disaster. See 20 C.F.R. Part 625. The Department seeks to import these DUA 

regulations via a CARES Act provision that allows their use when the CARES Act is 

silent or conflicts with DUA regulations. See 15 U.S.C. § 9021(h) (“Except as 

otherwise provided in this section or to the extent there is a conflict between this 

section and [the DUA regulations], such [DUA regulations] shall apply to this 

section . . . .”) However, here there is neither silence nor conflict.

[¶22.] As to the former, 15 U.S.C. § 9021(a)(3)(A)(ii)(I)(kk) expressly 

authorizes the Secretary of Labor to issue the Self-Employment Rule which both 

parties agree applies here. There is no silence.

[¶23.] And there is no conflict. The most the Department offers in this regard 

is the contrasting standards of the DUA regulation’s direct result language and the 

“because of” test set out in the Self-Employment Rule. But this establishes only 

that the rules are different, as evidenced by the use of divergent text—not that they 

are in conflict.5

5. The Department notes that the Court of Appeals for Utah applied this direct 

cause analysis in Martin v. Dep't of Workforce Servs., 507 P.3d 847 (Utah Ct. 

App. 2022). But we think the Martin decision is not helpful because it does 

not appear the court was confronted with the same textual interpretation 

issue we face here. Without any apparent argument to the contrary, the 

court simply accepted the preeminence of administrative guidance from the 

(continued . . .)
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[¶24.] Under the circumstances, we conclude that the ALJ erroneously 

applied the causation standard in the Self-Employment Rule and should not have 

concluded Bracken was ineligible for PUA benefits. By reading a “direct result” 

provision into the Self-Employment Rule, the ALJ overlooked key textual 

distinctions and effectively amended the rule, creating an artificially heightened 

causation standard for self-employed individuals. But in addition to this error, the 

ALJ’s determination is at odds with other aspects of the Self-Employment Rule’s 

text.

[¶25.] For instance, the ALJ’s suggestion that Bracken’s bed and breakfast 

had to be closed in order for her to qualify for PUA benefits overlooks the plain 

language of the Self-Employment Rule, which requires no such thing. In fact, the 

Self-Employment Rule expressly states that self-employed individuals can qualify 

for PUA benefits “even in the absence of a suspension of services.” 

U.S. Dep't of Labor, Unemployment Insurance Program Letter No. 16-20, Change 4 

(January 8, 2021) (UIPL 16-20), at 8 (emphasis added). 

[¶26.] Beyond this, the Self-Employment Rule also extends eligibility to selfemployed individuals “who experienced a significant diminution of their customary 

________________________

(. . . continued)

United States Department of Labor about how to read the Self-Employment 

Rule to include a “direct result” causation standard. See Martin, 507 P.3d at 

851. But here the correct interpretation of the Self-Employment Rule is 

squarely presented, and we can interpret the unremarkable “because of” text 

using traditional methods of interpretation and without the need for 

administrative guidance. And in any event, the result in Martin did not turn 

on a direct/indirect distinction, but rather a failure of proof by the claimant 

who confessed uncertainty as to what had diminished the need for his 

services. Id.
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or usual services . . . .” Id. (emphasis added). Here, the ALJ specifically found that 

Bracken’s bed and breakfast had guests before the COVID-19 pandemic began but 

had no guests as of May 2020. It is difficult to conceive how this would not 

constitute a “significant diminution” of the business’s “customary or usual services.”

[¶27.] Finally, we address the Department’s alternative argument that “even 

if this Court refused to apply the direct/indirect analysis[,] . . . there is simply a 

complete failure of evidence to support a causal finding under [the Self-Employment 

Rule] that Bracken's reduction in business was ‘because of’ COVID-19.” We view 

the record differently and so did the ALJ whose findings make clear that the 

COVID-19 Public Health Emergency had a significant adverse impact upon 

Bracken’s business to the point she had no customers by May 2020. 

[¶28.] The Department has not challenged these findings, and, consequently, 

we do not believe the Department’s alternative sufficiency of the evidence argument 

is properly before us. Indeed, the only basis identified by the ALJ for Bracken’s 

PUA ineligibility was what we have concluded to be an erroneous interpretation 

and application of the Self-Employment Rule. 

[¶29.] We reverse.

[¶30.] JENSEN, Chief Justice, and KERN, DEVANEY, and MYREN, 

Justices, concur.