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July 13, 1979

Freddie Dunn et al., Plaintiffs,
New York State Department of Labor et al., Defendants.

The opinion of the court was delivered by: DUFFY

This is an action brought pursuant to 42 U.S.C. § 1983 seeking declaratory and injunctive relief against the State Department of Labor and its Industrial Commissioner. Plaintiffs, on behalf of themselves and all persons similarly situated, *fn1" argue that defendants' failure to provide prompt administrative hearings of appeals from denials of unemployment insurance benefits amounts to a violation of rights secured to them by the due process and equal protection clauses of the United States Constitution, by the Social Security Act, 42 U.S.C. § 503(a)(1) and (3), and by the Federal Standards for Appeals Promptness, 20 C.F.R. § 650 Et seq. *fn2"

The unemployment compensation program is jointly operated by the federal and state governments. States administer the program pursuant to their own unemployment compensation laws but must adhere to federal guidelines in so doing. The federal government provides no substantive benefits but does pay the entire cost of administering the program provided that the state conforms to the federal requirements. 42 U.S.C. § 1101(c)(1); 42 U.S.C. § 503(a); 26 U.S.C. § 3304.

 The federal requirements at issue in this case provide that state laws regarding unemployment compensation must include provision for methods of administration "reasonably calculated to insure full payment of unemployment compensation when due." 42 U.S.C. § 503(a)(1). Furthermore, the state must insure "Opportunity for a fair hearing, before an impartial tribunal, for all individuals whose claims for unemployment compensation are denied." 42 U.S.C. § 503(a)(3).

 The Secretary of Labor has interpreted the above statutes to require that hearings be commenced and appeals decided with "the greatest promptness administratively feasible." 20 C.F.R. § 650.1. Regulations were developed which direct states to (1) provide first level appeals with maximum promptness; (2) adopt methods of administration reasonably designed to assure such promptness; and (3) include provision in state law for (1) and (2). 20 C.F.R. § 650.1(c) and .3(a)(1), (2). The guidelines also specify that a certain percentage of all cases must be decided within 30, 45, and 75 days of the date the appeal is filed in order to comply with federal law. 20 C.F.R. § 650.4, 650.5.

 In 1972 the Department of Labor provided that any state which had not decided 50% Of all first level appeals in 30 days, 75% In 45 days and 90% In 75 days, submit an immediate plan of action outlining how it would come into compliance with the federal regulations. 20 C.F.R. § 650.5; 37 Fed.Reg. 16173 (August 7, 1972). New York State was required to submit such a plan. The regulations also established a 1975 goal of 75% Of all first level appeals decisions in 30 days and 85% In 45 days. Id. § 650.4(b); 650.5(b). 37 Fed.Reg. 16174 (August 7, 1972).

 In 1976 the regulations were amended to establish the following appeals standards: 60 percent of all first level appeals decisions must be rendered within 30 days of the date of appeal; 80 percent of all first level appeals decisions must be rendered within 45 days of the appeal. 20 C.F.R. § 650.4(b).

 There is no dispute that between January 1972 and March 1977 defendants had not provided hearings of appeals within the time period established by the Federal Standards for Appeals Promptness. *fn3" At a pretrial conference held in 1978, however, defendants argued that the case was moot since in 1977 and 1978 they had shown compliance with the Federal Standards. Plaintiffs agreed that defendants' compliance vitiated the need for a trial. Thereafter, they submitted an application for attorneys fees.

 At the hearing on the amount of the award held in November 1978, defendants suddenly announced that their appeals performance had dropped below Federal Standards. In fact, statistics revealed that their performance had declined since June 1978. This was so despite defendants' representations during the pendency of the motion concerning attorneys fees that the guidelines of 20 C.F.R. § 650.4(b) continued to be met. See Affidavit of Irving Trow, September 12, 1978; defendants' Brief, September 25, 1978.

 In view of defendants' admitted non-compliance with Federal Appeals Promptness requirements, plaintiffs have moved, pursuant to Fed.R.Civ.P. 56 for summary judgment. They contend that no issue of material fact exists since defendants have in the past complied with the Federal Standards thus demonstrating their ability to do so. According to plaintiffs, the failure to consistently adhere to these Standards has deprived them of the right to receive prompt payment of unemployment compensation.

 In California Department of Human Resources v. Java, 402 U.S. 121, 91 S. Ct. 1347, 28 L. Ed. 2d 666 (1971), the United States Supreme Court recognized the importance of promptly providing unemployment insurance benefits to eligible claimants. Examining the requirement of the Social Security Act that State unemployment compensation programs "be reasonably calculated to insure full payment of unemployment compensation when due", 42 U.S.C. § 503(a)(1), the Court concluded that

"when due" was intended to mean at the earliest stage of unemployment that such payments were administratively feasible after giving both the worker and the employer an opportunity to be heard. The purpose of the Act was to give prompt if only partial replacement of wages to the unemployed, to enable workers "to tide themselves over, until they get back to their old work or find other employment, without having to resort to relief." Unemployment benefits provide cash to a newly unemployed worker "at a time when otherwise he would have nothing to spend," serving to maintain the recipient at subsistence levels without the necessity of his turning to welfare or private charity.

 402 U.S. at 131-32, 91 S. Ct. at 1354. (Footnotes omitted). Additionally, the Court has recognized that promptness in the adjudicatory process is essential to prompt payment. Fusari v. Steinberg, 419 U.S. 379, 95 S. Ct. 533, 42 L. Ed. 2d 521 (1974). The Court there noted that

(p)rompt and adequate administrative review provides an opportunity for consideration and correction of errors made in initial eligibility determinations. Thus, the rapidity of administrative review is a significant factor in assessing the sufficiency of the entire process.

 Based upon the Court's analysis in Java, supra, the federal regulations were formulated to reflect the necessity for timeliness in all phases of the administrative process. Noncompliance with these Promptness Standards clearly indicates that defendants are not providing methods of administration calculated to insure full payment when due in violation of both the federal regulations and the ...

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