Unemployment audit- reporting part-time wages

Posted by: Dec 01, 2016By Brian Stutheit

The Colorado Court of Appeals issued its opinion in Meyer v. Industrial Claim Appeals Office on November 17, 2016.

Lizabeth Meyer (Claimant) received unemployment compensation benefits, effective March 11, 2012, and continuing until May 19, 2012, when she obtained full-time employment. During the majority of that period, she worked part-time at Coach, and for the last two weeks she worked full-time at Sutrak. A deputy for the Division of Unemployment Insurance conducted an audit of Claimant’s file and determined that she had been overpaid unemployment compensation benefits in the amount of $1,712 for the period from March 18, 2012, through May 19, 2012. The deputy found that claimant had under reported her hours and earnings for certain weeks during that period, and assessed a monetary penalty of $1,112.80 against her.

Claimant appealed the deputy’s determination and a hearing was held, at which Claimant conceded that the hours reported on her paystubs, rather than those she reported online, accurately reflected the hours she worked. However, she asserted that she was only required to report her taxable earnings, not her gross earnings. The Division’s hearing officer accepted Claimant’s concessions about the hours worked but held that she was required to report her gross earnings. The hearing officer found that because Claimant knowingly misrepresented her gross earnings, she was overpaid $1,890.64 in unemployment compensation, and assessed a monetary penalty of $1,228.91. Claimant appealed to the Industrial Claim Appeals Office, and the Panel affirmed. Claimant then appealed to the Colorado Court of Appeals.

Claimant contended the Panel erred in determining she was required to report her gross earnings rather than her taxable earnings, arguing she was not required to report any contributions to her cafeteria plan. A Cafeteria Plan allows employees to pay certain  expenses (such as health insurance premiums) on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income. Funds set aside in Flexible Spending Accounts are not subject to federal, state, or Social Security taxes. The court of appeals agreed. The court found that the Division required Claimant to report her gross earnings, but that was contrary to the definition of “wages” in the unemployment statute, C.R.S. § 8-70-142. The court held the Division erred in requiring Claimant to report her gross wages without deducting contributions to her cafeteria plan.