Court of Appeals Addresses Issues of Rate, Penalty and Costs
In Vitzthum v. KLM Acquisition Corp., No. 13-1441 (Iowa App. Oct. 1, 2014), the court of appeals addressed questions related to the correct rate, the imposition of penalties and costs. The court affirms the rate questions, finds that there was substantial evidence to support the denial of penalties and affirms the costs findings of the commissioner.
At the appeal level, the commissioner found that the higher rate urged by claimant ($305.29) was correct, but refused to impose penalties for the underpayment of rate on the employer. The district court affirmed this amount, but remanded for further fact-finding on the issue of penalty benefits based on the underpayment of the correct weekly rate after July 1, 2009, the date the new penalty statute (section 86.13(4)) went into effect.
The court concludes that the rate was correctly determined, finding that the usual calculation method in section 85.36(6) controlled. The employer had argued that its payment of wages was so unique that it "eluded sensible outcomes under the typical statutory calculations." The court found that the deputy's conclusions of law gave a sound reason for reaching the calculated amount, and appropriately excluded weeks where claimant had taken time off. Substantial evidence supported the agency's findings.
On the penalty question, claimant argued that there was no showing of a reasonable excuse for the delay or underpayment of benefits. The employer argued that penalties after the revised penalty statute should be reversed. In addressing this question, the court of appeals addresses the question not only on the basis of a reasonable basis for denial of the claim, but on whether the actions of the employer were fairly debatable. The court cites a number of penalty cases decided prior to the amendments to section 86.13. The court finds that the penalty statute is prospective in operation. Claimant argued that the employer owed penalty on virtually all benefits because every payment since the second payment has been delayed. Claimant had presented a table to express her opinion about the due date of each payment. The court concluded that payments were made when they are mailed to claimant. The court concludes that "because Vitzthum has failed to support her unilaterally declared due dates with any particularized legal citation or factual assertion, we find that Aluma's payment scheme comports with Robbenolt [v. Snap-On Tools Corp., 555 N.W.2d 229, 237 (Iowa 1996)]. The court also criticizes claimant's argument with respect to a rolling delay of payment of benefits, stating:
There is no indication Vitzthum believed this rolling late payment scheme was in effect as she received the payments. On the facts of this case, Vitzthum's rolling delay concept casts the impression of a litigation strategy designed to maximize potential penalty benefits. But we find no support for such a concept in our law, and indeed, Vitzthum has not cited any.
The court finds that claimant failed to meet her burden to demonstrate a delay or denial of benefits. The court also concludes that the employer had a fairly debatable basis for its rate of benefits payments made before July 1, 2009, but remands because the agency did not analyze the alleged underpayment under the revised version of section 86.13.
On the issue of costs, the court concludes that the agency's assessment of costs equally to the parties was not an abuse of discretion. Similarly, costs were appropriately divided at the district court level because of the claimant's partial success at that level.
It is difficult to say with any certainty whether Vitzthum will have much of an impact on future penalty claims. The claims made were largely very narrow and decided by the agency and court on factual grounds. The COA seems to rely on the "fairly debatable" language of bad faith cases despite the fact that this language is not contained in the revised statute. Nonetheless, the COA also clearly notes that the agency must analyze penalty cases based on the words of the statute and the failure to do so will lead to a remand.
At the appeal level, the commissioner found that the higher rate urged by claimant ($305.29) was correct, but refused to impose penalties for the underpayment of rate on the employer. The district court affirmed this amount, but remanded for further fact-finding on the issue of penalty benefits based on the underpayment of the correct weekly rate after July 1, 2009, the date the new penalty statute (section 86.13(4)) went into effect.
The court concludes that the rate was correctly determined, finding that the usual calculation method in section 85.36(6) controlled. The employer had argued that its payment of wages was so unique that it "eluded sensible outcomes under the typical statutory calculations." The court found that the deputy's conclusions of law gave a sound reason for reaching the calculated amount, and appropriately excluded weeks where claimant had taken time off. Substantial evidence supported the agency's findings.
On the penalty question, claimant argued that there was no showing of a reasonable excuse for the delay or underpayment of benefits. The employer argued that penalties after the revised penalty statute should be reversed. In addressing this question, the court of appeals addresses the question not only on the basis of a reasonable basis for denial of the claim, but on whether the actions of the employer were fairly debatable. The court cites a number of penalty cases decided prior to the amendments to section 86.13. The court finds that the penalty statute is prospective in operation. Claimant argued that the employer owed penalty on virtually all benefits because every payment since the second payment has been delayed. Claimant had presented a table to express her opinion about the due date of each payment. The court concluded that payments were made when they are mailed to claimant. The court concludes that "because Vitzthum has failed to support her unilaterally declared due dates with any particularized legal citation or factual assertion, we find that Aluma's payment scheme comports with Robbenolt [v. Snap-On Tools Corp., 555 N.W.2d 229, 237 (Iowa 1996)]. The court also criticizes claimant's argument with respect to a rolling delay of payment of benefits, stating:
There is no indication Vitzthum believed this rolling late payment scheme was in effect as she received the payments. On the facts of this case, Vitzthum's rolling delay concept casts the impression of a litigation strategy designed to maximize potential penalty benefits. But we find no support for such a concept in our law, and indeed, Vitzthum has not cited any.
The court finds that claimant failed to meet her burden to demonstrate a delay or denial of benefits. The court also concludes that the employer had a fairly debatable basis for its rate of benefits payments made before July 1, 2009, but remands because the agency did not analyze the alleged underpayment under the revised version of section 86.13.
On the issue of costs, the court concludes that the agency's assessment of costs equally to the parties was not an abuse of discretion. Similarly, costs were appropriately divided at the district court level because of the claimant's partial success at that level.
It is difficult to say with any certainty whether Vitzthum will have much of an impact on future penalty claims. The claims made were largely very narrow and decided by the agency and court on factual grounds. The COA seems to rely on the "fairly debatable" language of bad faith cases despite the fact that this language is not contained in the revised statute. Nonetheless, the COA also clearly notes that the agency must analyze penalty cases based on the words of the statute and the failure to do so will lead to a remand.
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