Warren E. Burger: We'll hear arguments next in Number 507, California against Judith Java and others. Mr. Rubin, you may proceed whenever you're ready.
Asher Rubin: Mr. Chief Justice and may it please the Court. This case comes to this Court on a direct appeal from the decision of a three-judge federal court in the Northern district of California. The facts of the case are these. Judith Java was working for a small newspaper in the town of Pittsburg California in August of 1969. During this employment, she stepped out one day at about noon with another reporter, went to a bar next to the newspaper office, stayed there for a while and returned to the office. The managing editor of the newspaper observed that the reporter with Mrs. Java appeared to be drunk. There was some exchange, the reporter was fired on the spot and Mrs. Java was also fired on the spot. Later when Mrs. Java applied for unemployment insurance benefits, she claimed that when she was in the bar, she had some tomato juice and nothing more. The referee however found that she had alcoholic beverages, she smelled of alcohol, she was glassy eyed, she was staggered or speech was slurred and the referee in short believed the employer who maintained that that was the reason, he fired her for misconduct. After her employment was terminated, Mrs. Java applied for unemployment insurance benefits. She went to the unemployment insurance office, she had an interview. She was given some forms to fill out. She went home, came back some time later after the interviewer had a chance to verify whether she had sufficient wages in her base period. And a form was sent out to the employer for him to state his version of the facts and why she was terminated. It does not appear that this form was ever returned by the employer but when Mrs. Java returned for her eligibility interview, the interviewer listened to her and apparently contacted the employer and the interviewer believed Mrs. Java who was sitting right there. The interviewer believed she'd had tomato juice that there was not enough evidence otherwise and found in her favor.
Byron R. White: That is not an issue for as, is it?
Asher Rubin: No Your Honor. But the reason I outlined these facts is because I feel that the factual circumstances and cases like these maybe dispositive. When we get to the point later, when we discuss the Goldberg versus Kelly case, I believe the difference in factual approach, factual circumstances may be --
Speaker: How about being down to a meaning of the two words “when due?”
Asher Rubin: Your Honor, that issue goes to the conformity question as to whether the --
Speaker: Could that be the main issue?
Asher Rubin: I don't believe so Your Honor and I had intended to leave that question “when due,” in a context of the statute to the briefs. I believe that the Court as you know decided this case on two grounds, on a conformity question, whether we're paying “when due,” and secondly on a due process question. It went on from the statutory ground then decided it on due process. And I think that that is the more important issue here today. I think that the “when due” problem, while it bears on due process is essentially a statutory problem which has been covered in the briefs. In any event the employer --
Byron R. White: He must decide this was a meritorious discharge.
Asher Rubin: The interviewer did decide that she had been terminated and there was no misconduct on her part.
Speaker: You want us to reverse the interviewer?
Asher Rubin: Well Your Honor, the referee reversed the interviewer and basically, I'd like you to affirm what the referee found. Now, after the interviewer made this determination, he sent a notice of this ruling to the employer. The employer immediately appealed.
Speaker: My recollection is we usually dismiss petitions as in privately granted, when we discovered, there's nothing but a little tangle of the facts.
Asher Rubin: I'm sorry Your Honor. I didn't mean to give that impression. I believe that there are serious and constitutional problems here. The lower court found that this case was indistinguishable from Goldberg versus Kelly. And I'm about to get to what I consider to be a serious --
Speaker: The lady in the Goldberg versus Kelly ended up in a bar? I don't understand this saloon aspect of this case.
Asher Rubin: Well Your Honor, I didn't mean to --
Speaker: We're not a jury unless you --
Asher Rubin: No, I mentioned those preliminary facts only in the interest of completeness Your Honor. I'm not trying to prejudice those cases by bringing up those facts. The referee later accepted the version of the employer, there was disagreement. But this wasn't the referee's decision.
Warren E. Burger: Perhaps you should direct yourself now to legal question.
Asher Rubin: Well You Honor, the lower court found that the California procedure which suspends benefits to a claimant while the employer appeals was out of conformity with a provision of the Social Security Act. The Social Security Act says that the Secretary of Labor shall certify a state program for unemployment insurance only if it has methods of administration which are reasonably calculated to ensure full payments when due. And that's how we get to the “when due” problem. The lower court found that we were --
Speaker: That statutory question (Inaudible)
Asher Rubin: Well I believe that that would be right Your Honor because that would --
Speaker: Who all has to decide the constitutionality of the question?
Asher Rubin: Well Your Honor, I believe we have to proceed to the constitutional question because the concept of whether with paying “when due” does involve some constitutional problems of due process. If you find that the -- on the statutory ground, if you reverse on the statutory ground, then it may simply mean that the Secretary of Labor should have the initial power to examine the California procedure and I'm not sure that this would totally dispose the case. The lower court did go on to talk about the constitutional problem and we feel that it is presented here. We should discuss it. In any event Your Honor the question of whether we are inconformity with that with this Act and whether we make these payments “when due” is covered in our briefs. So, I think that here, we've got to look at Goldberg versus Kelly and determine whether this case is indistinguishable from that one or whether this one is different. Whether Goldberg compels the decision that the District Court made or whether it doesn't. If the Court please, I believe that this course is -- this case is very different from Goldberg versus Kelly. In the Goldberg situation firstly, you have only two parties. You have the state and you have the welfare claimant. In unemployment insurance, you have three parties. You have the state, you have the claimant and you have the employer who pays for this program. It's his contributions exclusively which pay the unemployment insurance benefits. We maintain --
Speaker: Is there federal grant at all?
Asher Rubin: Well, Your Honor, the Federal Government pays the cost of administering the program but it's all traceable back to the employer. He pays 90% of his contributions to the state and 10% go to the Federal Government. Out of that 10%, the Federal Government pays the cost of administration. So we have three parties here that we have to worry about. We have the state, we have the claimant and we have the employer. And the employer interest wasn't present in Goldberg. Now, second ground of distinction is that in the Goldberg case, this Court was concerned about termination of benefits which had already been deemed with -- been ruled eligible. That is that the claimant had already been ruled eligible. There was no question in Goldberg about the initial eligibility of the claimant. The claimant was ruled eligible; the claimant was receiving welfare for a period of time and then came the abrupt termination. In this case Your Honors, we maintain that the initial question of eligibility has not yet been made final. On the very form that a claimant receives, notifying him of his eligibility, the form says, this determination is final unless an appeal is filed. It's our contention Your Honor and that appeal must be filed within 10 days of the initial determination. It's our contention that all this is within the res gestae if you will, of the initial determination. The fact that the interviewer has found this claim ineligible has not completed the initial finding of eligibility in our view. And this is we think the critical distinction. The employer still has the right to request to be heard, to have an appeal, to have a hearing to present his views.
Byron R. White: At that point Mr. Rubin, what is the fact of the employer's right to appear or be present at the interviewer's interview?
Asher Rubin: Your Honor, technically he has the right. Practically, he almost never appears. The claimant comes back in all candor Your Honors in the manual that says that the interviewer may contact the employer and should contact the employer while the claimant is sitting there. And get the employer's point of view as urgent. Of course if the employer isn't at his office, the interviewer may speak to a foreman, may speak to someone else. Then the interviewer will hang-up and will tell the claimant what the employer says and a determination will be made right there. And as a practical matter, it doesn't pay for the employer to try to come down to this interview. 98% of the time, there'll be no problem. He's not going to appeal. The statistics which we have presented in the brief show that 98 cases out of a hundred, the employer will not appeal.
Byron R. White: Let me ask now the obvious. If the interviewer decides against the discharged employee and I take it the claimant then has a right to appeal.
Asher Rubin: That's correct Mr. Justice.
Byron R. White: And no payments are made during dependency of that appeal.
Asher Rubin: That's correct Your Honor.
Byron R. White: What if he prevails on the appeal, does he get a lump sum payment then?
Asher Rubin: Your Honor, if he prevails on the initial appeal, he gets payments which are retroactive and irrespective of any further appeals by the employer, he is paid. This is called the double affirmation. The interviewers found them eligible, the referee has found them eligible under Section 1335 (b) of the California Unemployment Insurance Code. The claimant has immediately paid. Now, Your Honors to further distinguish Goldberg and I think we're coming now to the most important grounds for distinguishing that case. In welfare by hypothesis, the claimant is destitute, has no assets. Mr. Justice Douglas found that the claimant suffers from brutal need, is in a situation where he is immediately desperate and he has to spend his day just finding the very means of subsistence. In unemployment insurance, need is not the basis for entitlement. Indeed, the needier the claimant, the less he gets. If he hasn't made out $720.00 during his past year, he gets nothing and he is obviously the neediest. If he makes more than that, he'll get the minimum payment. The person who makes the most receives the most. Need is not strictly relevant. Indeed, if you go back to the legislative history, unemployment insurance was meant to be paid with out a needs test, the means test. Just a few weeks ago, the New York three-judge District Court in the case of Torres versus New York, decided on January 7, rejected the lower court's decision in this case, Java. And found that this was a valid ground for distinguishing Goldberg. That in the welfare case, need is the engine that pulls Goldberg. We don't believe that that engine should be harness to unemployment insurance to pull it along the same track. And we recognize that in actuality --
Byron R. White: What do you think the case would be like, perhaps the referee decided in favor of the claimant, and there was a further appeal, the state terminated the payments?
Asher Rubin: Well Your Honor, once that referee decides once more in favor of the claimant, then as I stated in reply to Mr. Justice Harlan.
Byron R. White: Well I know, but what about Goldberg's payment, what about the constitutional right of the state to terminate payments after the referee has found them to be due and the employer appeals?
Asher Rubin: Your Honor, that case is presented when a claimant is initially ruled ineligible. Then appeals the referee finds them eligible and then the employer appeals. And that is the same situation. Payments are suspended.
Byron R. White: I know, but they are suspended?
Asher Rubin: They are suspended because the --
Byron R. White: After the referee has found him?
Asher Rubin: Your Honor, the referee has found him eligible but the interviewer found them ineligible.
Byron R. White: I think Mr. Justice Blackmun a while ago asked you about the question of whether when the referee finds him or when the interviewer him ineligible but the referee finds him eligible.
Asher Rubin: In that case Your Honor, the payments are suspended.
Byron R. White: If the employer appeals?
Asher Rubin: That's correct Your Honor.
Byron R. White: And you would make the same argument here that that suspension is constitutional.
Asher Rubin: I would Your Honor.
Byron R. White: Even though there has been an initial determination after a full hearing of eligibility.
Asher Rubin: Well, this is the reason Your Honor. You had one decision by the interviewer holding the claimant ineligible. You had one decision by the referee holding the claimant eligible. Now, --
Byron R. White: I thought the part of your case was that the decision at the interview stage is really not a very reliable determination because of the nature of the hearing of the unlikelihood that there would be evidence and that the employer would respond and things like that. Isn't it?
Asher Rubin: Yes it is Your Honor. That may be a more difficult case.
Byron R. White: Of course you don't have that.
Asher Rubin: That's not the case before us Your Honor. That may pose more difficult problems. I would --
Byron R. White: If it would, then it would also be more difficult if it appeared that the hearing and the procedures gone through before the interview really were intended to be a hearing and certain kind of a reliable determination of eligibility.
Asher Rubin: That's right Your Honor. That's right. In any event, I believe that we have valid grounds for distinguishing this case from the Goldberg versus Kelly situation. Now, I think we should take a look, focus if we might on the initial interview and see if we can arrive and use what Justice Cardozo called a robust common sense. The interview -- the claimant comes in for an interview. There's a large office, there are number of desks, the claimant sits down next to the desk of an interviewer. The interviewer looks over the forms, there are other people waiting to be interviewed. It's not setup to be an adversarial proceeding. Nobody has sworn. There is no testimony taken under oath. There are generally no witnesses. You're in a room where other people are being interviewed in the same fashion. These interviews generally take about 40 to 45 minutes including all the paper work. And the claimant is right there to talk about his case. It is true that the interviewer may have some information on a form from the employer, a brief statement of the employer's point of view. It is also true that the interviewer calls the employer or tries to reach him on the telephone and get his version. And then he hangs up.
Potter Stewart: That happens before the termination of the interview. Does it?
Asher Rubin: That's correct Your Honor. And then he hangs up and he comes back to the claimant and he says, the employer said this, what do you have to say about that? And Mrs. Java said “I drank tomato juice, this is my version.” And then the interviewer generally makes a determination. The employer is not there. The employer gets this determination and he files his appeal.
Byron R. White: He could be though.
Asher Rubin: Technically Your Honor he could be but I don't believe that --
Byron R. White: (Inaudible)
Asher Rubin: Pardon me?
Byron R. White: (Inaudible)
Asher Rubin: Yes is the answer to that. But Your Honor --
Byron R. White: The employer could precipitate a full hearing before the interviewer.
Asher Rubin: I don't believe so Your Honor because there's no testimony taken under oath and --
Byron R. White: Well, there is --
Asher Rubin: No Your Honor. It's not transcribed whereas the hearing before the referee is and it doesn't have any of the trappings --
Byron R. White: (Inaudible)
Asher Rubin: No Your Honor, it is totally informal and for this reason, the department processes thousands and thousands of claims and they just can't have the hearings where you will have adversaries and hear it from one and from the other and have it transcribed and have representatives and objections. It would be impossible. In 1968 there were 960,000 claims. They were close to half --
Warren E. Burger: In California?
Asher Rubin: In California alone. They were as close to half-a-million eligibility determinations where eligibility was involved. In 1971, the benchmark figures, we anticipate 1,230,000 claims. This is going to cost the state some -- we expect to pay out some $980,000,000.00 in 1971.
Warren E. Burger: Well, are you telling us that this first -- this initial interview is merely an informal process to flush out the obviously clear claims which are usually about 98%, did you say?
Asher Rubin: That's right Your Honor.
Warren E. Burger: And the real processing -- is this your argument? The real processing begins on the disputed claims which are 2% more or less.
Asher Rubin: That's correct Your Honor. Now in those 2%, that's a different ball game. The 2% where the employer appeals, we have statistics which show that he is generally successful, close to 50% at the time. Page 74 of the appendix, there is a table which shows out of the appeals filed, certain number are dismissed or withdrawn and generally the employer, he doesn't file a frivolous appeal. In these 2% of the cases, he prevails very often. If you take a look at the affidavits submitted in connection with the motion of Southern California Edison Company to intervene, you'll find that they've done very well in these appeals. So in this 2% of the cases, it's a little bit different. In other words, we're saying that this initial interview procedure -- let me make one more point while that occurs to me. Mrs. Java did after the interviewer, found her eligible. She did receive one payment before the employer appealed or shortly thereafter. She did receive a payment. I don't think that this should be misconstrued. The District Court found that our paying claimants “flies in the face of actual California practice that our claimant, she shouldn't be paid.” She was -- one payment was made and we made this payment because, as I have stated earlier, in 98% of the cases, there's going to be no problem. We don't feel we should penalize anybody. We don't feel that they should have to wait for 10 day appeals period before they are paid because the chances are 98%, there will never be an appeal. So let's pay him right away. This is an administrative practice and is very generous and it makes a good sense. In the District of Columbia, no payments are made while the appeals time is running. The appeal's time runs and the claimant is not paid.
Byron R. White: Is there anything unconstitutional with that kind of a program in your view?
Asher Rubin: I.e. --
Byron R. White: If that statute provided no payments during the 10 day period after the determination.
Asher Rubin: I do not believe so Your Honor, I believe that's alright. Your Honors, if the Court please, I'd like to reserve my remaining time for rebuttal.
Warren E. Burger: Mr. Berzon.
Stephen P. Berzon: Mr. Chief Justice and may it please the Court. Throughout this case, it has been our position that the reason that thousands of working people in California are denied unemployment benefits each year during the time in which they most need them is because they have been found eligible for unemployment benefits after a thorough investigation in which both sides have had a chance to participate. We believe that this denial of benefits after such a determination frustrates the fundamental purposes of the unemployment section of the Social Security Act. Therefore we believe that this case can be decided on Federal Statutory grounds. And that it is unnecessary to reach the constitutional issue. However -- Do you have any figures in this record on the mean time of waiting?
Stephen P. Berzon: Yes we do.
Warren E. Burger: What's that figure again?
Stephen P. Berzon: Well, first it takes three-and-a-half to three to -- three to four-and-a-half weeks for an initial eligibility determination to be made. Then if an employer files an appeal, it takes in a median period of seven more weeks until that appeal is decided. So that in a case where claimant has been found eligible and an appeal is filed by an employer and benefits are cut off, usually after two payments, no further benefits are paid until -- over ten weeks after the claimant first walks in to the unemployment office.
Warren E. Burger: Now this delay is limited to this margin of 2% of the cases, is that, is that correct?
Stephen P. Berzon: This delay is limited at present. This delay based on employer appeals to 2% of the all the people who come into an office for unemployment insurance. However, involved over 8,000 people in 1969.
Byron R. White: But the other 98% involves many more hundreds of thousand maybe.
Stephen P. Berzon: That's correct.
Byron R. White: Let me ask the same question, I asked your opponent. Suppose that the statute said no payments at all until 10 days after a favorable determination, would that be unconstitutional?
Stephen P. Berzon: That of course is not this case where payments are commenced.
Byron R. White: I'm asking you the question however.
Stephen P. Berzon: I believe that would be unconstitutional in California. It may not be unconstitutional under a different kind of procedure that is where a different kind of initial eligibility investigation is made -- a little bit further. If a state like California has a thorough initial eligibility determination and makes its decision on information provided by all sides, I'd like to go into that a little --
Byron R. White: You disagree with your opponent, when you say this is a thorough investigation, he says it's an interview in an office desk.
Stephen P. Berzon: Yeah, I disagree completely and the District Court made a finding of fact that it was indeed a thorough investigation. There are 139,000 claimants every year who are found ineligible because they left their last job for the wrong reason. Over a 136,000 of these claimants are found ineligible at the initial eligibility determination. Only 2,000 some odd are found ineligible upon an employers appeal. That means that the initial eligibility determination, there are 500,000 and some odd determinations, 400,000 pardon me, some odd determinations made each year. A 136,000 claimants are found ineligible at the initial level because they left their last job for improper reasons, we consider that. 99% of the cases are located there. We consider that to be a thorough and reliable investigation.
Byron R. White: (Inaudible)
Stephen P. Berzon: Well, the statistics seem to indicate that it's done as a --
Byron R. White: (Inaudible)
Stephen P. Berzon: No, not at all. Those determinations are based on information that's been supplied by the employer. And the decision is made against the claimant. And in those cases that are impelled by employers, claimants usually prevail. The two thirds in 1969.
Byron R. White: Well, so how thorough is that investigation, that the employer lost most of their appeals?
Stephen P. Berzon: The fact that employers lose most of their appeals Mr. Justice White, means that the investigation is very thorough. The investigation decides that the employee is properly entitled to benefits. Upon an appeal, the investigator is upheld. Now I think it would be helpful before going --
Byron R. White: When you use the term “most” you say, what does it amount in fact, two-thirds?
Stephen P. Berzon: In 1969, 64% of employer appeals were denied.
Byron R. White: Well, it's a majority but it isn't 98%, is it?
Stephen P. Berzon: No it's not but -- that means that those 5,900 claimants in 1969 who were found ineligible at the initial determination and then were found eligible again upon the referee's appeal, received no benefits during the time they were entitled to receive them.
Byron R. White: Well you‘re using big figures here because California is a big state. If this were in Nevada, your figures would be much smaller, would I --
Stephen P. Berzon: That's correct. But what I would like to show is that the harm that would be caused by paying employees who are found eligible after this initial investigation pending an employer's appeal is really a rather minimal amount of harm even for a large state like California, the figures are very low as we point out in our brief.
Speaker: You started to argue this on statutory grounds, as I understood you.
Stephen P. Berzon: That's correct Mr. Justice Harlan.
Speaker: Let me put this question to you. Supposing California said all of these claim when filed noticeably have to be given to the employer, there would be a hearing before a referee and no compensation of any kind would be paid and after it is determined, would that violate the statute?
Stephen P. Berzon: Yes it would.
Speaker: Why?
Stephen P. Berzon: The statute requires that the state procedure must be reasonably calculated to pay benefits when due, to ensure the payment of benefits when due. And we believe --
Speaker: The figure that I'm suggesting would be a full Goldberg, ultra Goldberg- Kelly type hearing prosecution.
Stephen P. Berzon: I may have misunderstood your question. Did you -- under your hypothetical?
Speaker: My hypothetical was that if California instead of processing these claims in this way in its doing, it said we will process the claims properly but will do it on a full addressed hearing before referee where both sides can be heard.
Stephen P. Berzon: Whether that would violate the statute or not, would depend in operation upon how long it took for those decisions to be made. That is if it took months and months for decisions of that kind to be made, then under our theory of the federal unemployment statute, the statute would be violated. However if California hired many referees, hearing examiners and conducted these examinations within a reasonable amount of time and paid benefits during the period of eligibility when claimants are entitled to unemployment insurance when they're out of work that it wouldn't violate the statute. But, right now, over a 130,000 claimants are found ineligible at the initial level. Now, for all of those claims to go to a referee would require the state to make an enormous expenditure of funds for referees. Now that is totally unnecessary because the number of cases that we are asking that benefits be paid pending in employers appeal is a very small number of cases relatively at some 8,000 odd cases, only less than 3,000 of those claimants would be found not to have been entitled to benefits. 2/3 of all over payments are recouped by the State of California under their own statistics so that we're talking about a figure that's rather minimal compared to the nature of the unemployment fund. To hire a lot more referees would be totally cost ineffective. And I would be very surprised if California would do that. It has not done that since the case --
Warren E. Burger: What you mean by recouping, do you mean in the cases where there was an erroneous payment, a payment later discovered to be erroneous, they recoup two third?
Stephen P. Berzon: Two third under the 64%.
Warren E. Burger: Dollars or people, is that?
Stephen P. Berzon: Dollars, two thirds. And it's right -- and it's logical that they would because unlike the Goldberg case where this Court found that claimants or judgment prove, we're dealing with working people here. And it's very likely that they'll go back to work and not be judgment proof, or that they'll apply for unemployment insurance sometime in the future, they'll be out of work again. And if that were to occur, the state would just offset the over payments against future benefits.
Potter Stewart: For how many weeks does the California system pay?
Stephen P. Berzon: Maximum amount, the California system can pay is 26 weeks but the average claimant in California gets benefits for a median period of seven weeks. Now claimant who's found eligible and whose employer appeals, gets no benefits until some 10 weeks after he first walks in to the office. Some 7 weeks after the appeal is filed.
Potter Stewart: But then he does get benefits retroactively?
Stephen P. Berzon: Right, but at the time when he was never -- when he was no -- when he's no longer really entitled to receive benefits, clearly at that time the Congress did no intend them to be getting unemployment compensation. He maybe back at work but meanwhile when he is out of work, he has no money at all, he may have no money at all.
Potter Stewart: He says the maximum 26 weeks.
Stephen P. Berzon: Maximum 26 weeks. Now this case we believe can be decided on federal statutory grounds and the constitution need not be reached. However if the Court were to choose to reach the constitutional question, it is our contention that the California procedure violates due process as well as the federal statute. Well, I like to it very briefly because -- as to review the state procedure because I really think that it's critical to an understanding of this case. Now the procedure is found in great detail on pages 27 to 32 of our brief. That to summarize the procedure very briefly, an unemployed worker who believes he is eligible for benefits, applies at a state office. He fills out a series of forms including a form revealing why he left his last job. That form is sent to his employer who is required within 10 days to provide any information he has concerning the claimants eligibility. He is required to do that by Section 1327 of the California Code Bylaw. And any statement made by an employer at any time or any statement made by an employee at any time is made under penalty of perjury. So it's not true that they're not made under oath. In addition, the employer not only can supply information. Nor he's required to supply information in writing but he has every opportunity to communicate with the examiner who is charged with making the decision, either in person or by phone with or without witnesses. After the form is returned, the examiner interviews the claimant an interview at which the employer is free to appear. If the claimant presents any information inconsistent with the facts given by the employer or any party, the examiner must telephone the employer for further discussion. This is assuming the employer doesn't come in, in appear with witnesses which he can do. And if the employer can't be reached, the examiner postpones the decision for 10 days. That's in the state regulations. Then once the examiner has gotten all the information, he makes a decision. He reports all facts and he gives written reasons for his decision. If he decides the claimant is eligible for benefits, payments commence and in this cases, it's my understanding that each of the two claimants receive two payments.
Potter Stewart: They are weekly in every case?
Stephen P. Berzon: Yes they are. And it's the purpose of the Act is to provide weekly payments so that claimants have money in their pocket, each week so they can buy the necessities of life and keep purchasing power in the community. This decision takes three to four and a half weeks. This takes quite a while. It's not a one or two day decision as is true for example, in the District of Columbia which is a totally different kind of procedure that's not before us in this case where a claimant comes into an unemployment office. The examiner looks at its papers and decides if he's eligible for unemployment insurance on its face. If he is, the employer is notified that a claim has been made. And that the employer then has time to file an appeal. If the employer files an appeal, the decision is made upon an appeal. That's the first time the employer is heard. The whole process works much more quickly. To stay there pending an appeal is a state to give the employer chance to be heard not after there has been an investigation. California's own regulations on page 116 of the appendix state very, very clear language. The initial determination resolves all issues involving initial eligibility. The District Court found as a matter of fact that the eligibility determination was very thorough. And payments commenced at the initial eligibility investigation, after the initial eligibility investigation, the worker begins receiving benefits. If an employer then files an appeal at any time, even long after the ten days that he has to file an appeal has expired, benefits are cut off and it doesn't matter why he files an appeal. He can dislike the employee. Any reason he files an appeal and until a hearing is heard which is -- over 50% of the cases is more than 10 weeks. 10 weeks is just the median. No benefits are paid from 10 weeks -- till 10 weeks after the time the claimant first walks into the office. And the claimant gets no funds. The employer has nothing at all to lose in filing this appeal. His unemployment, he has everything to gain. His unemployment taxes are based according to his record as an employer. That is that he pays taxes based on how many of his former employees get benefits. Therefore, he does have an interest in preventing his former employees from receiving benefits. However, he loses nothing, absolutely nothing, the individual employer if payments are made pending appeal. Because if the employer wins his appeal, at any level including judicial review in the State of California, his account is credited as if his employee has never received any benefits. Therefore, he gains nothing by the suspension but he has every reason to appeal and cut off his employee's funds to protect his record. Therefore the procedure we are dealing with cuts off vitally needed benefits on the basis of a unilateral fortuitous act by one with an adverse private interest. And it does so; despite carefully made and fully informed decision to the contrary by a neutral state agency. The state determines them eligible.
Warren E. Burger: Well that often happens in the field of insurance, does it not? The lawsuit is tried on an ordinary insurance claim or life insurance policy that the decision goes against the life insurance company let us say on a death claim, appeal is taken. That is inconvenient and may impose hardships but it's a fact of life, is it not?
Stephen P. Berzon: That is true but that's distinguishable in two respects. First of all, there is no federal statutory question. But under the constitutional question that a tort action or contract action against an insurance company is totally different Mr. Chief Justice from an action --
Warren E. Burger: It was to be a contract action.
Stephen P. Berzon: Okay.
Warren E. Burger: On an insurance claim. This is an insurance claim, is it not?
Stephen P. Berzon: This is not an insurance claim in the sense of private insurance. This is a claim against the state for benefits which the state is paying under a statute designed to meet a particular kind of problem.
Warren E. Burger: Well, when I said it was using the term insurance claim and putting it in quotation marks, it's a statutory scheme but it is analogous to that respect, is it not on the economics of it?
Stephen P. Berzon: Yes, it has a relationship. The difference is that it's in the nature of a contract action in a court of law that benefits are not necessarily paid at a particular period of time. Lawsuits are by nature time consuming, payments are always made retroactively. That is Your Honor, that if the claimant is determined eligible and the insurance – the court says, the insurance company has to pay, payments are always retroactive. That's the nature of the game. But in this case, in the case of unemployment insurance, benefits are supposed to be paid in a weekly manner. Time is very critical. The Congress intended these benefits to be made at a particular point in time while the worker is out of work before he finds a new job. That is not true with respect to insurance claims.
Warren E. Burger: Isn't that your strongest point really in terms of how this statute should be viewed and construed. The purpose was to fill in a gap and income and anything which delays that payment is to that extent negative with respect to the statutory purpose.
Stephen P. Berzon: That is a very strong point Your Honor. I would just add one point to that, that a corollary to that was filling in a gap for those claimants who are not eligible to receive welfare and what I mean by that is that the 1935 Congress faced with a desperate economic situation, saw two distinct groups of people who were without wages and without liquid assets. They saw people who realty couldn't work, old people, blind people, young people, disabled people and they also saw workers who couldn't find a job who may have been in an identical economic position and in fact this Court held and explained in Stewart and justifying the unemployment compensation law, the federal act that the Congress passed the Act because workers were starving. The Congress did not want to lump welfare recipients or lump non workers and workers into one program. They did not want workers to go on a dole for many reasons. And therefore what the Congress did was it set up a separate program for unemployed workers, that would pay them benefits at a particular point in time, they would work for these benefits, they would be there. Hopefully they would find a new job rather quickly and then they would be off benefits. In fact they have to be off benefits rather quickly. And since the Congress didn't provide welfare for these people, they may be absolutely penny less and not be able to get on welfare. And therefore there is a gap and this is different from an insurance company for both kind of situation for those two reasons.
Warren E. Burger: If you gave the figure, state to me now of the total number of people who applied for benefits, what is the percentage approximately of those who have their claim approved on the initial interview?
Stephen P. Berzon: 900,000 people applied the initial level. There are roughly 500,000 to 600,000 determinations made initially and some 350,000 to 400,000 are considered eligible. So it would be 400,000 out of 900,000. Now the reason for the gap between determinations and between people who come in to the office is that many people who come in to the office aren't eligible because they haven't worked enough weeks or made enough money. So that they are -- they are just eliminated immediately, then in other cases, employers provide no information and it's clear that a claimant has a valid claim, so no determination is made. But in 600,000 cases I believe where determinations are made, some 400,000 are determined eligible, some 200,000 are determined ineligible.
Warren E. Burger: You don't have to break down on the 200,000, do you?
Stephen P. Berzon: Yeah.
Warren E. Burger: Do you indicate that most of them are turned down simply because of basic ineligibility that is -- they haven't worked?
Stephen P. Berzon: Now these are the -- these are the first 200,000 from 900,000 to 600,000?
Warren E. Burger: Yes.
Stephen P. Berzon: Yeah. Most of them because they haven't earned enough money, they are just immediately eliminated.
Warren E. Burger: Do you have a chart that shows this?
Stephen P. Berzon: No. Those statistics aren't in the record. We only know the number of initial determinations in 1968, 960,000 --
Warren E. Burger: Now, if it's not in the record; I don't want in any length.
Byron R. White: Mr. Berzon what severe view of the District of Columbia situation, if after the initial filing an interview, the district started to pay unemployment compensation and that terminated it, the employer appealed.
Warren E. Burger: That would present a much more difficult question than this case. I don't think there would be any statutory problem.
Byron R. White: No statutory but how about --
Stephen P. Berzon: But under the constitution, that's a very -- that would be a very close case. The individual builds up a great reliance interest, once payments do begin and the spectrum of interest does change. He gets payments for one or for two weeks and habits are formed. On the other hand, there hasn't been a thorough investigation as there has been in this case.
Byron R. White: There just hasn't been a determination --
Stephen P. Berzon: There hasn't really been the same kind of determination that is not so arbitrary a process. I would imagine that the fact that payments are made alone is not totally -- it's totally determined.
Byron R. White: Do you think this case really turns on an assessment of the content subsequent to this initial determination insofar as the constitutional issue is concerned?
Stephen P. Berzon: To a great -- it depends on that, plus the fact that the state has begun making the payments in this case. The state has chosen to make the payments, it begins on both. It hinges on both.
Byron R. White: No. But you would say that would be a statutory bar in this event that California did not begin making payments as soon as the initial interview --
Stephen P. Berzon: That's because both sides have been heard and that's because the initial determination is so thorough. Yes, the initial determination is critical to this case.
Byron R. White: Mr. Berzon, you said earlier I think that the employer's experience waiting a count is not charged even if this could happen that the applicant has paid benefits pending appeal, the employer then prevails on the appeal. The employee – he keeps and the employer is not charged, experience within count is not charged.
Stephen P. Berzon: That is correct. The employer is not charged. The only part he charged in that case is the state which must pay, which must recoup benefits and does recoup 2/3. Now, employers do have an interest in the sense that while the reserved account is not charged. All over payments come out of a general state fund and that it's conceivable that as a tax payer group, their general taxes could go up but --
Byron R. White: The rate for everybody.
Stephen P. Berzon: For everybody, 300,000 employees. Not --
Byron R. White: If there were enough additional charges on this fund as a result of this action it might get the rates into a higher level, into a higher bracket. Well, what I'm trying to get at is, does the employer have a property interest to state then?
Stephen P. Berzon: No, the employer has no property interest.
Byron R. White: Even though that you suggested the overall rate for everybody may go up?
Stephen P. Berzon: The only property interest that employer has, is the property interest, let's say of a property tax payer, it's school expenditures are made, or the property interest of someone who uses roads, if highway expenditures are made. The employer -- the 300,000 employers are interested in the fund in the sense that they don't want it to plead and their tax could conceivably go up. But as we have indicated in our brief, the possible amount of over payments due to the recoupment rate and the limited nature of this case and that it's the employees have been found eligible. And it's employers, not employees who are appealing, the limited nature of this case that the maximum amount of over payments to the state of California in 1969 would have been some $335,000.00. The reserve fund presently has 1 billion for -- some $304,000,000.00 and since this case is --
Byron R. White: Well if the employer has no property at stake here, then what's the basis of the constitutional claim at least as it relates to the employer?
Stephen P. Berzon: Employer has absolutely no doubt a constitutional claim. He is given a full hearing before his account is charged. And as far as his interest in the property that is his interest in the general tax fund, his ability to participate in the initial determination certainly needs any objection he might have as a tax payer. In the Kanes (ph) case back in the mid 40's, this Court held that an employer in a similar position with respect to Workmen's Compensation did not have a sufficient due process interest to have standing to bring a lawsuit based on depletion of the fund.
Warren E. Burger: But these funds wouldn't affect California's right?
Stephen P. Berzon: Oh, yes they would Your Honor. In California, the employer has --
Warren E. Burger: California, the state of California's right as distinguished from the private employer.
Stephen P. Berzon: That's correct except --
Warren E. Burger: Those are quite a different basis, aren't they?
Stephen P. Berzon: They are, except we've got to analyze why California is withholding benefits pending this appeal and when we break this --
Byron R. White: Well, on the constitutional question if there are only California and the claimant involved because there is no property interest to the employer at stake, then why isn't this in the context to Goldberg and Kelly?
Stephen P. Berzon: This is identical to Goldberg and Kelly Your Honor, except it is a stronger case. It is squarely controlled by Goldberg and Kelly. In this case, just like in Goldberg and Kelly, benefits, this rigorous initial eligibility determination has begun, benefits have been commenced and benefits have then been cut off. And the difference between this case in Goldberg and Kelly makes this case even stronger. The individual interest in this case is much like the individual interest in Goldberg. The benefit serve the same purpose as welfare benefits. The median income, unemployment compensation recipients is some $3,900.00 a year. And for family of four, there are no liquid assets with the median income of that kind. The situation is the same except for this fact. In Goldberg, the situation involved poor people and in this case, the situation involved working poor people who've actually been at work and who've been promised these benefits in the event that they would be suddenly out of work.
Byron R. White: Why do you draw the conclusion that they are working poor people, it might not be.
Stephen P. Berzon: It is true that some may not be but the Congress --
Byron R. White: Not in California now anyway?
Stephen P. Berzon: Well in California right now, that's true that there is a high aerospace unemployment rate but the median unemployment -- the median income figure for unemployment recipients that I gave is in California Your Honor, $3,900.00 for a family of four. That's --
Warren E. Burger: It differs on whether they're poor in vernacular sense or whether they're not quite so poor wouldn't really reach the congressional purpose of this scheme to supply some income during the unemployed period, would it?
Stephen P. Berzon: Yes, it would Your Honor.
Warren E. Burger: I see.
Stephen P. Berzon: It would reach it, because the reason that Congress -- the reason that Congress setup this scheme --
Warren E. Burger: I don't think you understood my question. I said that Congress wasn't concerned about whether they were poor or not poor but only whether they were unemployed.
Stephen P. Berzon: That's correct, for the each individual case. However, the reason the 1935 Congress setup this scheme Your Honor was precisely because it believed that people in this position were in desperate need of funds. Now in each individual case it's true that it's not critical. This case Your Honor is much stronger than Goldberg and Kelly for two additional reasons. First of all, the interest of the state are far less as I have mentioned before. Recoupment is available in this kind of a case and secondly, more so that the interest of the employers are not very great.
Byron R. White: (Inaudible)
Stephen P. Berzon: Mainly because workers on unemployment compensation tend to be out of work again. They are the working poor, the marginally unemployed. And the state can offset payments -- over payments against future benefits. But the state's figures tell us that at 64%.
Byron R. White: (Inaudible)
Stephen P. Berzon: There are exceptions in every case, there are obviously some over payments that aren't recouped, some one-third are not recouped.
Warren E. Burger: Very well. You have five minutes Mr. Rubin.
Asher Rubin: Thank you Your Honor. If the Court please, I'd like to just come back if I might to what we consider the central issue in the case. And that is the due process question as to whether it violates due process when the state suspends payments while the employer appeals.
Hugo L. Black: When the state does what?
Asher Rubin: When the state suspends payments to the claimants after the initial interview once the employer appeals.
Hugo L. Black: (Inaudible)
Asher Rubin: Your Honor, you asked that question of Mr. Berzon, the answer is that the employer is definitely affected. His reserve account is not charged, that's true but the balancing account to which he also contributes is affected and in any year or years, this is another unemployment insurance fund when the reserve accounts are depleted to a certain level, then the balancing account maybe affected and the rate will go up. Your Honor this is --
Byron R. White: This is true for every individual employee--
Asher Rubin: Just for the -- for all the employers, not his individual account.
Byron R. White: (Inaudible)
Asher Rubin: That's correct our Honor but let me just refer you to a, the appendix 50 to 52, and the appendix 75 to 76. I believe on those pages, it's demonstrated what the effect is on the employer and one more reference. There was an amicus brief filed by a group of employers and I believe that brief together with the affidavits demonstrates very graphically how actual employers are affected. Now, we feel that in answer to the central issue as to whether due process is violated, we feel of course that the answer is no. It is not --
Warren E. Burger: Well, if we assume that that's the central issue, Mr. Berzon doesn't reach that statute on the statutory scheme before it's a basis for disposing the case, of course, we're going to dispose it on that basis.
Asher Rubin: Yes Your Honor, and Mr. Justice Harlan opposed that early in my argument and I've been considering that. The question as to whether we make the payments when due, is a statutory question but I believe that it's also inextricably bound up with due process considerations. And I believe that if you find that we are making the payments when due, then this will implicitly validate it on due process grounds. Now perhaps, I'm wrong but we fee that this are bound up together.
Hugo L. Black: Do you mean that it violates the due process when the person against whom a the judgment is rendered and paid off that second?
Asher Rubin: Well Your Honor, no. As a matter of fact, we are contending precisely the opposite. We are saying --
Hugo L. Black: You are just talking about due process so that was what you are arguing.
Asher Rubin: Well, Your Honor we are saying that when a person wins at a Trial Court let's say and gets a judgment, he's not entitled to be paid right then in a tort judgment let's say. The defendant has a right to appeal and that the payment is stayed pending the appeal. The prevailing party does not get payment right away.
Hugo L. Black: I can understand your argument now, that -- I didn't understand what you said --
Asher Rubin: I'm sorry Your Honor. I hope that makes it a little more clear. Let me add this Your Honors. We also put into our brief a statement that perhaps a lesser delay, a lesser number of weeks, might satisfy due process considerations. There is a delay of some six or seven weeks during this appeals period. Right now, the backlog is being reduced and we believe that we can have that delayed down to between three and four weeks. And a lesser delay we think would help a claimant. He wouldn't be as prejudiced and we believe this would fall well within due process considerations. There's one more point that was made by --
Potter Stewart: What is the subject matter at most, what is the claim of most of these employer appeals, does it have to do with the circumstances under which the employment was terminated?
Asher Rubin: That's correct Your Honor.
Warren E. Burger: Employer claims he was discharged for cause --
Asher Rubin: Correct.
Warren E. Burger: The employee claims that he was justified in his conduct as here.
Asher Rubin: Exactly Your Honor.
Warren E. Burger: Wouldn't it?
Asher Rubin: That's exactly. And let me just reiterate that this is a viable system. 98% of the time, this system works with extreme expediency and dispatch. And it's only in this 2%, where we feel, we have to give the employer a chance to have a full hearing and to have his views aired and get his decision. We believe we can pull a delay down to three to four weeks, many claimants as you well know have severance pay and other assets available. We believe they could whither this delay. Thank you Your Honor.
Warren E. Burger: Thank you gentleman. The case is submitted.