Court of Appeals Division III
State of Washington
Opinion Information Sheet
Docket Number: 18976-7-III
Title of Case: Mike M. Okamoto
v.
State of Washington Employment Security Department
File Date: 07/26/2001
SOURCE OF APPEAL
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Appeal from Superior Court of Spokane County
Docket No: 99-2-02331-0
Judgment or order under review
Date filed: 12/03/1999
Judge signing: Hon. Salvatore F. Cozza
JUDGES
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Authored by Frank L. Kurtz
Concurring: Stephen M. Brown
John A. Schultheis
COUNSEL OF RECORD
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Counsel for Appellant(s)
Mark E. Vovos
Attorney At Law
Ste 100
1309 W Dean Ave
Spokane, WA 99201-2014
Counsel for Respondent(s)
Daphne J. Huang
900 4th Ave #2000
Seattle, WA 98164
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
MIKE M. OKAMOTO, ) No. 18976-7-III
)
Appellant, )
) Division Three
v. ) Panel Five
)
STATE OF WASHINGTON EMPLOYMENT ) PUBLISHED OPINION
SECURITY DEPARTMENT, )
)
Respondent. )
) FILED
KURTZ, C.J. - Mike Okamoto's employment with Deaconess Medical Center
was terminated for violation of its drug policy. He was denied
unemployment benefits based on misconduct. He was told that to purge the
disqualification, he would need to earn five times his weekly unemployment
benefit through 'bona fide employment. ' After being self-employed for
several months, Mr. Okamoto again applied for unemployment benefits. He
was denied benefits because wages earned from self-employment do not
constitute wages under the Employment Security Act. Mr. Okamoto appeals
the superior court ruling that affirmed the Employment Security Department
commissioner's decision, contending that (1) the court erred in denying his
motion to supplement the record, (2) the wages earned through self-
employment purged his disqualification, and (3) the Department should be
equitably estopped from asserting noncompliance with the purging
requirements when Mr. Okamoto relied upon information he received from the
Department. We affirm.
FACTS
Mike Okamoto was employed by Empire Health Services/Deaconess Medical
Center as a grounds keeper specialist from September 1986 until December
1997. Mr. Okamoto violated his employer's drug policy and was discharged
for misconduct. He applied for unemployment benefits and was denied based
on his disqualifying conduct. He appealed and a hearing was held before an
Administrative Law Judge (ALJ) on March 16, 1998.
The ALJ found that Mr. Okamoto was separated from employment under
disqualifying conditions under the misconduct provision of the Employment
Security Act, former RCW 50.20.060 (1993), amended by Laws of 2000, ch. 2,
sec. 13. Accordingly, benefits were denied from 'December 21, 1997 and
thereafter for five calendar weeks, and until the claimant has earned wages
in bona fide employment equal to five times his or her weekly benefit
amount.' Clerk's Papers (Mar. 16, 1998 Hearing, at 63-64). The ALJ also
denied benefits based upon the finding that Mr. Okamoto was not able to,
available for, or actively seeking work during the weeks at issue.
In October 1998, Mr. Okamoto again applied for unemployment benefits
and was denied because he had not reestablished eligibility for benefits.
His prior disqualification under former RCW 50.20.060 could only be purged
if he earned wages in bona fide work equal to five times his weekly benefit
amount. Mr. Okamoto's denial notice explained that income he had earned in
self-employment did not constitute wages for purposes of the Employment
Security Act.
Mr. Okamoto appealed this decision in December 1998. The ALJ found
that Mr. Okamoto was engaged in self-employment because (1) all of Mr.
Okamoto's 1998 earnings were from self-employment, (2) Mr. Okamoto's
business was a sole proprietorship, and (3) he did not have any employees.
Thus, the ALJ concluded that Mr. Okamoto's wages earned from self-
employment did not purge his disqualification. Accordingly, the ALJ
affirmed the denial of benefits.
In February 1999, Mr. Okamoto appealed to the Commissioner of the
Employment Security Department regarding the March and December 1998
orders. The commissioner dismissed the petition for review of the March
decision as untimely filed without good cause, under RCW 50.32.070 and RCW
50.32.075. Regarding the petition for review of the December decision, the
commissioner found that self-employment is not 'employment' for purposes of
the Employment Security Act. Accordingly, the commissioner affirmed the
denial of benefits because Mr. Okamoto had not met the requirements for
purging disqualification imposed under former RCW 50.20.060.
Mr. Okamoto filed a petition for reconsideration of the commissioner's
decisions. On March 19, 1999, the commissioner denied the petition. The
Spokane County Superior Court affirmed the commissioner's decision.
Mr. Okamoto appeals.
ANALYSIS
Motion to Supplement the Record. Mr. Okamoto contends that the
court's denial of his motion to supplement the record with evidence from
March 4, 1999 and April 14, 1999 hearings was manifestly unreasonable. At
these two hearings, Mr. Okamoto presented evidence that the Employment
Security Department's own booklet regarding unemployment benefits did not
mention that wages earned from self-employment would not purge the
disqualification.
Generally, judicial review of an agency action is confined to the
agency record. RCW 34.05.558. The court may receive evidence which was
not contained in the agency record only if it relates to the validity of
the agency action at the time and is necessary in deciding issues regarding
(1) the possibility of disqualifying those who took the agency action; (2)
unlawfulness of the procedure; or (3) material facts in rule making, brief
adjudication, or other proceedings not required to be decided on the agency
record.
RCW 34.05.562(1).
'The admission or refusal of evidence is largely within the discretion
of the trial court and will not be reversed on appeal absent a showing of a
manifest abuse of discretion.' Lund v. Dep't of Ecology, 93 Wn. App. 329,
334, 969 P.2d 1072 (1998) (citing Riss v. Angel, 80 Wn. App. 553, 562, 912
P.2d 1028 (1996), aff'd, 131 Wn.2d 612, 934 P.2d 669 (1997)). 'A trial
court abuses its discretion when its exercise of discretion is manifestly
unreasonable or based upon untenable grounds or reasons.' Davis v. Globe
Mach. Mfg. Co., 102 Wn.2d 68, 77, 684 P.2d 692 (1984).
Mr. Okamoto has not established that any of the RCW 34.05.562(1)
grounds exist for the admission of new evidence by the superior court. The
evidence that he sought to admit were the transcripts of two hearings
regarding claims for benefits that are entirely separate from those at
issue in this appeal. The March 4, 1999 hearing addressed Mr. Okamoto's
benefits for the period from April 26, 1998, to October 21, 1998, and dealt
with the issue of whether there was good cause for late-filed claims. The
April 14, 1999 hearing addressed Mr. Okamoto's benefits from January 10,
1999, to April 1999, and dealt with whether he was actively seeking work.
The commissioner's decisions appealed in this case concerned the denial of
prior benefits. Thus, the decisions pursuant to the two 1999 hearings
simply do not relate to the validity of the commissioner's decisions
appealed in this case because the hearings were conducted after the
commissioner rendered his decision in this case. Accordingly, the superior
court did not abuse its discretion in declining to supplement the record
because the transcripts in question were not before the commissioner.
Therefore, they could not have formed the basis of any error of law on
which the court could have reversed.
Disqualification for Unemployment Benefits. Mr. Okamoto contends he
purged his disqualification for unemployment benefits by earning wages
through his self-employment. He argues that his self-employment was not a
sham.
Our review is governed by chapter 34.05 RCW, the Administrative
Procedure Act (APA). We review the findings and decision of the
commissioner, not the underlying ALJ order. RCW 34.05.464(4); Tapper v.
Employment Sec. Dep't, 122 Wn.2d 397, 405-06, 858 P.2d 494 (1993). The
commissioner's decision is a conclusion of law reviewed de novo. Safeco
Ins. Co. v. Meyering, 102 Wn.2d 385, 390, 687 P.2d 195 (1984). While we
give deference to the agency's interpretation of its own regulations, this
court has the ultimate responsibility to see the rules are applied
consistently with the policy underlying the statute. Id. at 392.
Relief from an agency order will be granted only when an agency
erroneously interpreted the law or the decision is not supported by
substantial evidence.
RCW 34.05.570(3). ''Substantial evidence is 'evidence in sufficient
quantum to persuade a fair-minded person of the truth of the declared
premise.''' Heinmiller v. Dep't of Health, 127 Wn.2d 595, 607, 903 P.2d
433 (1995) (quoting Nghiem v. State, 73 Wn. App. 405, 412, 869 P.2d 1086
(1994)). The burden of proving that an agency
action was invalid lies with the party challenging the action. RCW
50.32.150;
RCW 34.05.570(1)(a).
The Employment Security Act was enacted to provide compensation to
individuals who are involuntarily unemployed 'through no fault of their
own.' RCW 50.01.010. In keeping with this policy, the statute provides
that '{a}n individual shall be disqualified from benefits . . . {when} he
or she has been discharged or suspended for misconduct connected with his
or her work . . . .' Former RCW 50.20.060. Disqualification for
misconduct lasts for at least five weeks after discharge and until the
disqualification is purged by engaging in work and earning wages in the
amount required by statute. Former RCW 50.20.060.
To requalify for benefits following disqualification, the claimant
must satisfy two prerequisites. First, the individual must obtain work and
earn wages 'equal to five times his or her benefit amount.' Former RCW
50.20.060. Second, the individual must
again show he or she has been separated from work involuntarily and through
no fault of his own, and that he or she is able to, available for, and
actively seeking work.
RCW 50.01.010; RCW 50.20.010(3).
Mr. Okamoto misinterprets the law in arguing that he 'obtained work'
and 'earned wages' equal to five times his benefit amount, as required by
the former Employment Security Act. Former RCW 50.20.060; WAC 192-16-
017(1)(b).
RCW 50.04.320(2) states that '{f}or the purpose of payment of benefits,
'wages' means the remuneration paid by one or more employers to an
individual for employment . . . .' As the superior court found, this
definition contemplates a relationship between the parties where one pays
remuneration to the other. It does not state that self-employment
constitutes work for purposes of the Employment Security Act. Self-
employment is not ''employment' under the Act and no benefits will arise
due to work performed while self-employed.' Fisher v. Employment Sec.
Dep't, 63 Wn. App. 770, 775, 822 P.2d 791, 45 A.L.R.5th 907 (1992).
In Fisher, Division One held that a person who quits work to enter
self-employment is not eligible to receive unemployment benefits. Id. at
771. In Fisher, the court affirmed a judgment denying unemployment
compensation benefits to a claimant who quit his job to be self-employed in
the fishing business, but who, at the end of the fishing season, sought
unemployment benefits. The court held that the claimant left work without
good cause within the meaning of the statute (RCW 50.20.050), and that he
did not leave work to 'accept a bona fide offer of bona fide work' within
the statute's exception. Id. at 776. The claimant contended that he was
covered by the exception because 'work' includes self-employment, and
therefore quitting to pursue self-employment was not quitting without good
cause. The court, however, reasoned that the phrase 'to accept a bona fide
offer of bona fide work' implies the existence of an employment
relationship between two persons. Id. at 776. Although Fisher arises in a
different context, its interpretation of the Employment Security Act
supports the commissioner's decision that self-employment does not purge
the disqualification imposed under former RCW 50.20.060.
The State also cites two commissioners' decisions that interpret the
Employment Security Act. Although they are not binding on this court, they
are valuable as persuasive authority. Martini v. Employment Sec. Dep't, 98
Wn. App. 791, 795, 990 P.2d 981 (2000). In In re Davis, No. 9-01915, at 2
(Comm'rs Decision, Nov. 28, 1979), a commissioner for the Employment
Security Department concluded that '{t}he word 'work' in the statute has
never been interpreted to include 'self-employment.'' The commissioner
notes that work 'contemplates only an employer-employee relationship and
does not include self-employment.' Id. In In re Lewis, No. 8-14018, at 4
(Comm'rs Decision, Oct. 12, 1979), the commissioner held that 'work,' as
referenced in the provision disqualifying a claimant from benefits until
she 'has obtained work and earned wages of a certain amount,' has never
included self-employment.
Mr. Okamoto's income earned from self-employment did not constitute
wages under the Employment Security Act. Therefore, he did not purge his
disqualification and is not entitled to unemployment benefits.
Equitable Estoppel. Mr. Okamoto contends the Employment Security
Department should be equitably estopped from asserting noncompliance with
the purging requirements because the information he received from the
Department never told him that self-employment would not purge his
disqualification from benefits. He alleges that he was not informed of the
need for an employer-employee relationship until more than a year after he
first applied for benefits.
'Equitable estoppel is based on the principle that: 'a party should be
held to a representation made or position assumed where inequitable
consequences would otherwise result to another party who has justifiably
and in good faith relied thereon.'' Kramarevcky v. Dep't of Soc. & Health
Servs., 122 Wn.2d 738, 743, 863 P.2d 535 (1993) (quoting Wilson v.
Westinghouse Elec. Corp., 85 Wn.2d 78, 81, 530 P.2d 298 (1975)).
To establish equitable estoppel, a party must prove (1) an admission,
statement, or act inconsistent with a later claim; (2) reasonable reliance
on the admission, statement, or act; and (3) injury to the relying party if
the first party is allowed to contradict or repudiate the admission,
statement, or act. Dep't of Ecology v. Theodoratus, 135 Wn.2d 582, 599,
957 P.2d 1241 (1998). 'Each element must be proved by clear, cogent, and
convincing evidence.' Id. Because the equitable estoppel against the
government is not favored, the asserting party must also show that the
doctrine is necessary to prevent a manifest injustice and that the exercise
of government functions will not be impaired. Id.; Kramarevcky, 122 Wn.2d
at 743.
When Mr. Okamoto was initially denied unemployment benefits due to his
misconduct, he was told that benefits were denied for at least five weeks
and until he obtained bona fide work and earned wages of not less than five
times his suspended weekly benefit amount. He argues that he should have
been told 'earn wages' meant an employer-employee relationship. He claims
that this lack of information qualifies as an inconsistent statement by the
Department fulfilling the first element of equitable estoppel.
A review of the record shows that the Department never made a
representation to Mr. Okamoto that self-employment income would purge his
disqualification from benefits. It was Mr. Okamoto's misunderstanding of
unemployment law which led him to believe he could collect unemployment
after being self-employed. The Department did not make inconsistent
statements. The first element of equitable estoppel is not met so we need
not reach the other elements.
Affirm.
Kurtz, C.J.
WE CONCUR:
Schultheis, J.
Brown, J.