IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
DWAYNE D. LENCA, No. 36939-7-II
Appellant,
v.
EMPLOYMENT SECURITY PUBLISHED OPINION
DEPARTMENT OF THE STATE OF
WASHINGTON,
Respondent.
Hunt, J. - Dwayne D. Lenca appeals the Employment Security Department
Commissioner's denial of unemployment benefits when the Commissioner affirmed the
Administrative Law Judge's (ALJ's) denial without allowing additional evidence. Lenca argues
that (1) the ALJ denied him a fair hearing in failing to continue the telephonic hearing sua sponte
when pro se Lenca announced that he had a job interview scheduled for the same time; (2) the
Commissioner erred in refusing to accept additional evidence from Lenca tending to show that the
ALJ had based her decision on incomplete information and inaccurate facts from Lenca's
employer in Lenca's absence; and (3) sufficient evidence does not support the Commissioner's
Finding of Fact 9. Lenca also requests attorney fees on appeal.
Holding that the Commissioner should have ordered the ALJ to accept additional
evidence, we vacate the Commissioner's decision denying Lenca unemployment benefits and
remand with instructions for the Commissioner to remand to the ALJ to take additional evidence,
36939-7-II
to reconsider her findings of fact and conclusions of law, and to issue a new decision setting aside
or modifying the previous decision. We grant Lenca attorney fees and costs on appeal under
RCW 50.32.160.
FACTS
I. Termination of Employment
Dwayne Lenca began his job as a customer service route manager for Schwan's Home
Service (Schwan) on April 10, 2006. Schwan originally paid Lenca a guaranteed, set salary of
$600 per week.
After five weeks on the job, Schwan "step[ped]-down" Lenca's guaranteed salary and
started paying him on a commission basis. Consequently, instead of paying Lenca a guaranteed
$120 per day ($600 per week), Schwan began paying him an 11 percent commission plus a
guaranteed $30 per day ($150 per week). On August 15, Lenca quit his job because the change
in payment method had "drastically reduced" his pay.
II. Procedure
Lenca applied for unemployment benefits. On September 27, the State of Washington
Employment Security Department (Department) found that he "ha[d] . . . established" good cause
to quit his job "because [he] separated due to a decrease of 25 percent or more to [his] pay
compensation[,]" Commissioner's Record (CR) at 36, which entitled him to unemployment
benefits under RCW 50.20.050(2)(b)(v). The Department approved Lenca's application for
unemployment benefits and sent him a "determination letter" to this effect.
A. Schwan's Appeal to ALJ
Schwan appealed the Department's decision. Schwan argued that Lenca was not eligible
for unemployment benefits because (1) he had quit voluntarily; (2) at the time of hire, he had
known about the change from a set salary to commission-based pay; and (3) Schwan was not at
fault. Schwan submitted several documents with its appeal, including: (1) a new employee form,
part of which Lenca had filled out and signed and part of which a manager had completed and
signed; (2) two "pay status" forms indicating that Schwan had been paying Lenca $30 per day
plus full commission; and (3) an "earnings worksheet" tracking the step-down schedule for
Lenca's pay. Schwan did not submit any payroll records showing how much it had actually paid
Lenca each pay period, including the period during which Lenca had quit.
Some time before November 1, Lenca made arrangements for several out-of-state job
interviews, including one on November 16. On November 1, the Office of Administrative
Hearings mailed a notice to Schwan and Lenca, informing them that a telephonic hearing was
scheduled before an administrative law judge (ALJ) to determine whether Lenca was entitled to
unemployment benefits. This hearing was set for November 16 at 7:45 am.
The notice included a booklet titled "How to Prepare and Present Your Case"2 and the
address of a website3 where the parties could obtain more information about the hearing process.
The notice also contained several exhibits, including: (1) a copy of the Department's
determination letter stating that Lenca was entitled to unemployment benefits; (2) the notice that
Schwan had filed an appeal; (3) Schwan's request for an appeal and the documents Schwan had
submitted with that request; and (4) the form that the Department had sent to Schwan, which
Schwan had filled out and returned. The determination letter stated, "Good cause for quitting
[his] job ha[d] been established because [he] separated due to a decrease of 25 percent or more to
[his] pay compensation." CR at 36.
The ALJ hearing notice did not inform Lenca that he would have to prove again that his
pay had been reduced by 25 percent. Nor did the hearing notice inform Lenca that at the hearing
he would otherwise have to substantiate the Department's previous determination letter entitling
him to unemployment benefits.
Lenca participated in the telephonic hearing pro se. George Parlee, a local general
manager for Schwan, also appeared by telephone, without counsel, on Schwan's behalf. At the
beginning of the hearing, Lenca informed the ALJ that (1) he was on his way to a job interview
that was to begin in about 20 minutes; (2) he had earlier spoken with someone in the ALJ's office
and explained that he was on his way to a job interview; but (3) he did not know whether his
message had been forwarded to the ALJ. The ALJ responded, "[W]e'll proceed as quickly as
possible. And then when you're ready to go I'll let you make that decision." CR at 7.
After swearing in Lenca and Parlee telephonically, the ALJ identified the exhibits included
in the notice of the appeal and asked Lenca and Parlee if they had any objections. Lenca objected
to the new employee form because Schwan had not completed the employer portion of that form
when he signed it. Parlee did not object to any of the exhibits. Noting Lenca's objection, the ALJ
admitted all the exhibits.
Lenca testified that he had quit his job because his "income was drastically reduced" when
Schwan stopped paying him a guaranteed $600 per week and started paying him partially on a
commission basis. At the end of his testimony, Lenca informed the ALJ that it was time for him
to leave for his job interview. The ALJ replied that the hearing would continue in Lenca's
absence and that, if Lenca left, he would forgo the opportunity to question Parlee. Lenca asked if
he would be able to respond in writing or by email; but the ALJ told him that he would not.
Lenca then left the telephonic hearing for his job interview.
The ALJ then allowed Parlee to testify in Lenca's absence. Parlee testified that under the
"step down method," Schwan had paid Lenca $30 per day plus 11 percent commission "so that
[Lenca] wouldn't go backwards in pay." CR at 21. Parlee then stated:
I don't have any pay stubs or anything that I can bring up. But I did bring up
different reports showing he did not go backwards in his pay. The pay issue, what
he told me was he had two or three -- well, one or two people garnishing his
wages. And that was why he wasn't making enough money. But he was making
the [$]600 all the way through.
CR at 21. Contrary to Parlee's testimony that he had brought with him "different reports showing
[Lenca] did not go backwards in his pay," none of the exhibit documents show how much Schwan
had actually paid Lenca each week. CR at 21. Nor did Parlee explain why Schwan was unable to
produce its payroll records, copies of Lenca's pay stubs, or other documentary evidence showing
how much it had actually paid Lenca. Similarly, the record does not substantiate Parlee's
speculation that if Lenca had not been receiving $600 per week, it was because his wages were
being garnished: Nothing in the record before us shows that Lenca's wages were being
garnished.
Later in the hearing, the ALJ questioned Parlee specifically to be sure that Schwan had
still been paying Lenca $600 per week at the time he quit:
Q. At the time Mr. Lenca quit is it your testimony that he was receiving $600
a week?
A. Yes.
Q. Between his step down and between his commission he was still taking
home $600 a week.
A. Yes.
. . . .
Q. . . . If at the end of the week he hadn't earned enough commission to total
the $600, would that step down of $30 have been increased to offset so
however it falls at the end of the week he's still taking home $600 whether
it's in commission or an increase in the step down?
A. Yeah.
CR at 29-31.6
On November 17, the ALJ issued an initial order setting aside the Department's decision
granting Lenca unemployment benefits. The ALJ found:
Mr. Parlee . . . established that at the time [Lenca] left his job, he was still making
$600.00 a week. Mr. Parlee admits that part of that was a guarantee and other
part was commission, but at a minimum, [Lenca] was taking home $600 a week.
CR at 50, Finding of Fact 9 (emphasis added). Based on her findings of fact, the ALJ concluded:
[W]hile claimant's pay was subject to change, the changes did not result in a 25
[percent] decrease and had not taken effect to total any decrease in income at the
time claimant quit his job. . . . At the time of job separation, [Lenca's] base
guaranteed rate of $600.00 a week had not changed.
CR 52-53, Conclusion of Law 5 (emphasis added). She further concluded that, because Lenca's
pay had not been reduced at all and, thus, not reduced by more than the 25 percent required for
"good cause" to quit under RCW 50.20.050(2)(b)(v), he was not entitled to unemployment
benefits.
B. Lenca's Appeal to the Commissioner
Still proceeding pro se, on December 5, Lenca appealed the ALJ's initial order to the
Commissioner of the Employment Security Department (Commissioner). With his appeal, Lenca
submitted additional evidence, including pay stubs that the ALJ had not previously seen.7 These
pay stubs showed that Lenca's gross pay for the week ending August 12, 2006, the last full week
he had worked before he quit, was $432.79 before any deductions, which demonstrated a
reduction in pay greater than 25 percent.8 The Commissioner refused to consider these pay stubs
or Lenca's other evidence,9 adopted the ALJ's findings of fact and conclusions of law, and
affirmed the ALJ's initial order denying Lenca unemployment benefits.
C. Lenca's Appeals to Superior Court and to Court of Appeals
Lenca appealed to the Superior Court, which affirmed the Commissioner's Decision.
Lenca now appeals to the Court of Appeals.
ANALYSIS
Lenca argues that the Commissioner erred by failing to exercise his discretion to order the
ALJ to take additional evidence under RCW 50.32.080.10 We agree.
I. Standard of Review
We review the decision of the Commissioner of the Employment Security Department,
rather than the administrative law judge's initial decision. Graves v. Dep't of Employment Sec.,
144 Wn. App. 302, 308, 182 P.3d 1004 (2008) (citing Tapper v. Dep't of Employment Sec., 122
Wn.2d 397, 404-06, 858 P.2d 494 (1993)). When reviewing the Commissioner's final
administrative decision, we sit in the same position as the trial court and apply the Washington
Administrative Procedure Act11 (APA) standards to the agency's entire record. Tapper, 122
Wn.2d at 402; Macey v. Dep't of Employment Sec., 110 Wn.2d 308, 312, 752 P.2d 372 (1988).
We review questions of law de novo; but we accord substantial weight to the agency's view of the
law if the law is within the agency's expertise. Id. at 313. We review questions of fact under the
clearly erroneous test. Id. at 312.
When we review matters of discretion, our role is limited to ensuring that the agency has
exercised its discretion in accordance with the law and has not abused its discretion. RCW
34.05.574(1); see also Conway v. Dep't of Soc. & Health Servs., 131 Wn. App. 406, 419, 120
P.3d 130 (2005). An agency abuses its discretion when it exercises its discretion in an arbitrary
and capricious manner. Id. An agency acts in an arbitrary and capricious manner if its actions are
willful, unreasoning and in disregard of facts and circumstances. Wash. Waste Sys., Inc. v. Clark
County, 115 Wn.2d 74, 81, 794 P.2d 508 (1990).
We may grant relief from an agency action only in nine enumerated circumstances,
including if the order is arbitrary and capricious, the circumstance at issue here. RCW
34.05.570(3). In granting relief under the APA, we may (1) affirm the agency action; (2) set
aside, enjoin or stay the agency action; (3) order the agency to take an action required by law; or
(4) order the agency to exercise discretion required by law. RCW 34.05.574; Densley v. Dep't of
Retirement Sys., 162 Wn.2d 210, 226, 173 P.3d 885 (2007).
II. Commissioner's Rejection of Additional Highly Probative Evidence
RCW 50.32.080 governs the procedure for the Commissioner's review of the ALJ's
decision. Under this statute, the Commissioner may (1) order the ALJ to take additional
evidence; (2) render a decision in writing affirming, modifying, or setting aside the decision of the
appeal tribunal; or (3) order further proceedings to be held before the ALJ. RCW 50.32.080.12
The Commissioner abused his discretion by disregarding pivotal facts and circumstances when he
refused to order the ALJ to take into evidence Lenca's pay stubs. Directly controverting his
employer's key testimony to the ALJ, these pay stubs showed that Lenca was receiving at least 25
percent less than $600 per week, consistent with the Department's original determination that he
was entitled to unemployment benefits under RCW 50.20.050(2)(b)(v).
The record shows that the ALJ meticulously and repeatedly questioned Parlee about his
assertion that Schwan was paying Lenca $600 per week at the time he quit. Only after becoming
fully convinced that Lenca's pay had not been reduced at all, let alone by at least 25 percent, did
the ALJ enter her findings of fact and conclusions of law and decision that Lenca was not entitled
to unemployment benefits under RCW 50.20.050(2)(b)(v). The ALJ reached this conclusion
based solely on Parlee's testimony, which unsupported by physical exhibits13 and not subject to
questioning by Lenca.14 And because Lenca had not heard this testimony and reasonably could
have expected his employer to testify accurately about his rate of pay, Lenca had not previously
presented to the ALJ his pay stubs, which showed that, in fact, Schwan had paid Lenca less than
$450 per week when he quit, not $600 as Parlee testified.15
Lenca submitted his pay stubs to the Commissioner to demonstrate that the ALJ had based
her findings of fact and conclusions of law on incorrect facts that his employer had submitted at
the hearing in Lenca's absence. Lenca's pay stubs show that (1) Schwan's representative, Parlee,
was incorrect when he repeatedly testified that Lenca was still earning $600 per week when he
quit his job; (2) contrary to Parlee's testimony, Schwan had reduced Lenca's pay by more than 25
percent;16 and (3) this reduction was not due to garnishment, as Parlee had erroneously asserted
to the ALJ.17 Thus, Lenca's pay stubs were highly probative and critically necessary to resolve
the central questions of (1) whether a 25 percent, or greater, reduction in pay was good cause for
Lenca to quit his employment with Schwan under RCW 50.20.050(2)(b)(v); and (2) therefore,
whether he was entitled to unemployment benefits. But the Commissioner apparently refused to
consider ordering the ALJ to take this additional evidence.
Lenca's pay stubs substantially called into question the accuracy of Parlee's testimony, on
which the ALJ had based her findings. Thus, the pay stubs also undermined the ALJ's
fundamental findings that Lenca was still making $600 per week and had not suffered a 25 percent
reduction in pay when he quit. Accordingly, the Commissioner acted arbitrarily and capriciously
by disregarding these facts and circumstances when he refused to order the ALJ to admit Lenca's
pay stubs as evidence and to reconsider her decision. We hold, therefore, that the Commissioner
abused his discretion in refusing to remand the case to the ALJ to take additional evidence under
RCW 50.32.080.18
III. Attorney Fees
Lenca requests attorney fees and costs under RCW 50.32.160, which provides:
It shall be unlawful for any attorney engaged in any appeal to the courts on behalf
of an individual involving the individual's application for initial determination, or
claim for waiting period credit, or claim for benefits to charge or receive any fee
therein in excess of a reasonable fee to be fixed by the superior court in respect to
the services performed in connection with the appeal taken thereto and to be fixed
by the supreme court or the court of appeals in the event of appellate review, and
if the decision of the commissioner shall be reversed or modified, such fee and the
costs shall be payable out of the unemployment compensation administration
fund. In the allowance of fees the court shall give consideration to the provisions
of this title in respect to fees pertaining to proceedings involving an individual's
application for initial determination, claim for waiting period credit, or claim for
benefits. In other respects the practice in civil cases shall apply.
Because we reverse the Commissioner's Decision, Lenca is entitled to
attorney fees and costs under this statute.
CONCLUSION
We vacate the Commissioner's decision denying Lenca unemployment benefits. We order
the Commissioner to remand to the ALJ under RCW 50.32.080 with directions to accept Lenca's
pay stubs into evidence, to consider whether Lenca's letters should be taken into evidence, to
reconsider her findings of fact and conclusions of law in light of this additional evidence, to
reconsider her findings about the true amount of Lenca's pay when he quit, and to reconsider her
decision about whether Lenca is entitled to unemployment benefits. We also grant Lenca his
attorney fees and costs on appeal under RCW 50.32.160.
Hunt, J.
We concur:
Quinn-Brintnall, J.
Van Deren, C.J.