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Franklin County Employment and Training Administration v. Donovan

April 28, 1983

FRANKLIN COUNTY EMPLOYMENT AND TRAINING ADMINISTRATION, PETITIONER,
v.
JAMAES DONOVAN, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, RESPONDENT.



Petition for review of a final decision and order of the Secretary of Labor directing Franklin County Employment and Training Administration to refund from non-CETA funds $38,132.55 in overpayments of workers' compensation premiums made during 1976 and 1977 on behalf of participants in the county's program under the Comprehensive Employment and Training Act of 1973, 29 U.S.C. §§ 801-992 (1976). We affirm.

Author: Winter

Before OAKES and WINTER, Circuit Judges, and MACMAHON, District Judge.*fn*

WINTER, Circuit Judge:

Franklin County Employment and Training Administration ("Franklin County") petitions for a review of a decision by the Secretary of Labor that excessive workers' compensation premiums were paid to the county's Self Insurance Plan ("SIP") from funds provided under the Comprehensive Employment and Training Act of 1973 ("CETA"), 29 U.S.C. §§ 801-992 (1976). The Secretary ordered Franklin County to refund from non-CETA funds $38,132.55.

Franklin County contends that (i) the Secretary exceeded his authority and acted in breach of contractual principles by seeking recoupment of wrongly spent CETA monies from non-CETA funds; (ii) the decision was not supported by substantial evidence in the record before the Administrative Law Judge ("ALJ") and (iii) the decision wrongly placed the burden of proof upon Franklin County rather than upon the Secretary. Franklin County is supported by amici curiae including the National Association of Counties, the National League of Cities, the United States Conference of Mayors, as well as several state, county, and city governments and associations of public welfare administrators. They argue that the Secretary exceeded his authority under the 1973 Act in attempting to seek recoupment from non-CETA funds, that the 1978 Act cannot be retroactively applied and that neither the Secretary's own regulations nor the common law of contracts permit a repayment sanction from non-CETA funds. Because Franklin County never raised in any form the issues regarding the Secretary's authority to impose recoupment sanctions during the course of administrative proceedings, those questions are not properly before us and we decline to consider them. Franklin County's other claims are either waived or meritless.

BACKGROUND

CETA was designed to provide job training and employment opportunities for economically disadvantaged, unemployed, and underemployed persons within decentralized federal, state, and local job programs. 29 U.S.C. § 801. During the years in question, Franklin County was a subgrantee of a CETA prime sponsor, the New York State Department of Labor ("NYSDOL").

In accord with the New York State Workman's Compensation Law, N.Y. Work. Comp. Law § 50(4) (McKinney 1976), Franklin County had previously elected to establish a Self Insurance Plan to insure itself against workers' compensation liability. The County charged its 1976 and 1977 CETA subgrants $35,000 each toward an estimatead annual SIP contribution of $134,665 and $135,534 in 1976 and 1977 respectively. In each year $5,000 was set aside for the SIP reserve fund, $90,000 for awards and benefits, and roughly $40,000 for administrative expenses. During the two years, the SIP reserve fund rose from $4,868.94 to $58,376.12, apparently reflecting an overfunding of the plan.

The $35,000 charged to the CETA program represented approximately 1% of the CETA staff payroll and 3% of the participant payroll,*fn1 while the amount paid into the SIP for coverage of non-CETA workers constituted 1.556% of their payroll. The County relied upon several factors in arriving at this disparate premium rate, including its experience under previous employment and training programs, the age and job descriptions of most CETA workers, and the possible demise of the CETA program which might leave the SIP without ongoing contributions toward long-term liabilities arising from injuries to CETA participants. However, the county reached the 3% figure without resort to actuarial tables, basing it only on a general sense of the risk involved.

Since the SIP covers CETA and non-CETA workers, an overfunding from CETA funds would ultimately allow the County to reduce the payments made on behalf of non-CETA workers or perhaps even to reduce the size of the SIP reserve funds by transferring funds to Franklin County's general revenues. After an audit in 1978, NYSDOL disallowed a portion of the amounts expended from the 1976 and 1977 grants for workers' compensation coverage. NYSDOL noted that accident experience, exposure to risk, and similar factors were not taken into account in fixing SIP premiums for non-CETA employees while they predominated, albeit imprecisely, in the CETA participant assessments. The NYSDOL audit also revealed that although the CETA payroll constituted 14.1% of the total payroll covered by the SIP, it accounted for roughly 25% of the total yearly contributions to the SIP while CETA participants were responsible for only about 12.5% of the total awards and benefits paid out by the plan.Hence, NYSDOL informed the county that experience dictated, if anything, that CETA employees be assessed at a lower premium rate than other employees and that it was certainly inequitable to assess them higher premiums. NYSDOL then recalculated the premiums using the 1.556% flat rate applied by the county to non-CETA workers and disallowed the excess charges, some $38,132.55.Franklin County appealed the decision of NYSDOL in a letter dated January 18, 1979.

On February 1, 1982, the ALJ issued his decision and order, essentially ratifying the decision and findings of NYSDOL. He noted, however, that the higher premium rates were not only inequitable but were contrary to 41 C.F.R. §§ 1-15.711-10, 1-15.711-13 (1982) of the Federal Procurement Regulations,*fn2 which mandate consistent compensation for CETA and non-CETA workers performing similar work. According to the ALJ, Franklin County offered no evidence that the degree of risk from long-term or re-opened awards justified either higher premiums or the creation of a special reserve fund and did not furnish any data to justify the 3% figure itself. He ordered the county to refund the misspent monies to the Department of Labor from non-CETA funds. The county did not seek review of the ALJ's decision within 30 days and it therefore became the final decision of the Secretary of Labor pursuant to 20 C.F.R. § 676.91(f). It is from this decision that Franklin County petitions for review.

THE SECRETARY'S AUTHORITY TO ORDER RECOUPMENT

The question of the Secretary's authority to order recoupment of misspent monies from non-CETA funds reaches us in a most undesirable procedural posture. Franklin County, the party in interest, has submitted a perfunctory brief containing a scant 3 1/2 pages of legal argument, only one of which deals with the issue of the Secretary's authority and which nowhere addresses the issue of waiver before the ALJ, an argument strenuously urged upon us by the Secretary. Moreover, Franklin County's counsel declined the opportunity to appear before us for oral argument.

Amici, in contrast, have submitted a brief containing 30 pages of able and complex legal argument regarding the general issue of the Secretary's authority or lack thereof to order recoupment under either the 1973 or the 1978 Acts. ...


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