Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 83 C 3116 -- Frank H. Easterbrook, Judge.
Wood, Jr., Coffey, and Ripple, Circuit Judges.
WOOD, JR., Circuit Judge.
Plaintiffs are representatives of two classes of unemployment insurance claimants. They brought suit under 42 U.S.C. § 1983 against the Director of the Illinois Department of Employment Security (IDES), the United States Department of Labor (DOL), its Secretary, and the Assistant Secretary of Labor for Employment and Training, alleging that IDES's administration of two unemployment insurance programs violated federal law and the plaintiffs' due process rights under the United States Constitution. After the plaintiffs presented their evidence, the state defendants moved for an involuntary dismissal of the action under Federal Rule of Civil Procedure 41(b). The district court granted the motion and entered judgment against the plaintiffs who have appealed. We affirm on the statutory issues, reverse on the constitutional issues, and remand for further proceedings on the latter issues.
The district court adopted the parties' eighty-seven-page stipulation of facts. We will do the same, providing only a brief summary drawn from the stipulations and the district court's findings. See Cosby v. Ward, 625 F. Supp. 619 (N.D. Ill. 1985).
Unemployed people in Illinois who are eligible for unemployment insurance are entitled to the lesser of either twenty-six weeks of regular benefits payments, or the total insured wages for a base period. Illinois Unemployment Insurance Act (IUI Act), Ill. Stat. Ann. ch. 48, paras. 300-820. Alter these regular benefits are exhausted, the claimant may be eligible for payments under two other programs: the extended benefits (EB) program, or the federal supplemental compensation (FSC) program. The EB payments are made under the Federal-State Extended Unemployment Compensation Act of 1970 (EUC Act), 26 U.S.C. § 3304(a)(11), and IUI Act § 409, Ill. Stat. Ann. ch. 48, para. 409. Benefits under the program become available when unemployment in the state reaches a specified level. A claimant may receive up to thirteen weeks of EB payments.
After a claimant has exhausted both his regular benefits and EB, he may be eligible for payments under the FSC program. Federal Supplemental Compensation Act of 1982 (FSC Act), 26 U.S.C. § 3304(a)(11). The maximum period for a claimant to receive FSC payments is from ten to twenty-six weeks. There is no requirement of a "trigger level" of unemployment as there is under the EUC Act.
Regular benefits are paid by the state from taxes collected from employers. The state makes EB payments also, but the federal government reimburses the state for fifty percent of the program's cost under section 204 of the EUC Act. The federal government pays all FSC benefits under the FSC Act, and also compensates states for the costs of administering EB and FSC programs.
In order to receive federal money, the state must comply with federal statutes and interpretations thereof by the DOL and Illinois has entered into a contract with the DOL, agreeing to abide by the FSC program rules. The EUC Act and the FSC Act require people claiming EB to actively search for work. They must provide the state with evidence of their search efforts. There is no statutory provision explaining exactly how a claimant can demonstrate compliance with these requirements.
After a claimant has exhausted his regular benefits, a claims technician at the local IDES office explains to the claimant that he may be eligible for further benefits. The technician gives each claimant a written notice about the programs and explains the notice. Many technicians are multi-lingual, and each office has technicians who speak the language of the local population. Notices about the programs, however, are written in English. Claims technicians give claimants form questionnaires to return every two weeks. The questionnaires ask for information about the claimant's search for work, and include such questions as "what is the lowest starting wage you will accept?" and "how long (in time) are you willing to travel each way to work?" These questions and answers are used to identify restrictions that the claimant may be placing on his work search. Claims that are clearly acceptable are processed for payment. Claims that raise questions about the claimant's restrictions are sent on to an adjudicator. When this happens, an employee of the local office will send the claimant a notice that he is to appear in person at the local office. Although this notice is also intended to inform the claimant of the problem, the district court found that "frequently it is filled out in such a perfunctory fashion that the claimant could not know why he had been summoned." 625 F. Supp. at 625.
The adjudicator discusses with the claimant his answers to the questionnaire, and decides whether the claimant has understood the questions and answers. If the adjudicator finds that the claimant misunderstood a question, the adjudicator may allow him to withdraw his original answer and supply a correct one. The claimant may even return home to retrieve additional documentation for his answers. The adjudicator will not, however, coach a claimant on acceptable answers, and once the adjudicator has determined that the claimant's restrictions are unreasonable, the claimant can no longer "correct" his answers. At the conclusion of the interview, the claims adjudicator will render a written decision on the claimant's eligibility for benefits. If the claimant is found to be ineligible, he will be denied benefits for the two-week period covered by the questionnaire. Once denied benefits, a claimant is not eligible for benefits again until he has worked for at least four weeks.
A claimant who is denied benefits by a claims adjudicator may appeal that denial to a referee. Referees are lawyers who are independent of the vagaries of the local offices. The claimant may file written reasons for his appeal, and, when he meets with the referee, he may present evidence. If the claimant does not speak English, and the referee does not speak the claimant's language, IDES will appoint an interpreter. The hearing is recorded. Alter reviewing with the claimant his questionnaire and the meaning of the claimant's answers, the referee will make a new determination of the claimant's eligibility. He is not bound by the adjudicator's findings. The referee will file a written decision, which is more formal than the adjudicator's decision. The claimant may appeal this decision, if it is unfavorable to him, to the Board of Review.
The Board of Review is an administrative court within IDES. As a party may do in other courts, a claimant may file written briefs, personally or by counsel, arguing legal and factual questions. Unlike the referee, the Board may not disregard the previous findings, but instead makes its decision based on the record established before the referee. Decisions are not routinely published, but IDES maintains a digest of the Board's decisions both for its own purposes and for the public. A manual of benefits decisions also provides the public with access to some of the Board's decisions.
The last avenue for appeal is to the state courts. Ill. Stat. Ann. ch. 48, para. 520; ch. 110, paras. 3-101 to -112. By the time this level of review is accomplished, however, many months will have passed.
Claims technicians, adjudicators, and referees all receive training from IDES on the nature of and criteria for the benefits programs. All of these people receive copies of the hundreds of bulletins that IDES sends out. Although they may not remember each specific bulletin, the district court found that "the technicians, adjudicators, and referees who testified were familiar with the general principles in the bulletins." 625 F. Supp. at 625.
In making their decisions on a claimant's eligibility for benefits, reviewers (claims technicians, adjudicators, referees, and the Board) have at their disposal two sources of information that they frequently do not use. One of these sources is a newsletter that IDES publishes through its Economic Information and Analysis Unit. This Unit collects information about Illinois labor markets and its newsletter contains data about the state as a whole, and in city and county segments. Information about smaller areas is contained in quarterly publications. The district court found that "the Unit does not determine whether there are openings in particular occupations, and none of the [reviewers] who testified made any use of the data disseminated by the Unit." 625 F. Supp. at 626.
Another potential source of information for the reviewers is the Job Service, the state agency that helps unemployed people find work. Registration with Job Service is a prerequisite to eligibility for any unemployment compensation. Claimants and Job Service counselors work together in devising for a claimant a plan to search for new work. Although the counselors presumably know where a claimant can look for work to suit his particular skills, they do not ensure that the claimant's plan complies with the work search rules used by the unemployment offices. Similarly, the approval by Job Service of a claimant's work search plan carries no weight with the administrators of the EB or FSC programs.
Benefits under the EB and FSC programs are restricted by federal law to people actively seeking work. To implement this law, IDES has issued to its staff several bulletins pertaining to the work search requirement. One such bulletin contains the following language:
Due to the EB claimant's prolonged period of unemployment, it is intended that he be required to make a more diligent effort to seek work than would normally be required of an individual receiving regular benefits. Accordingly, the weekly eligibility of each EB claimant must be monitored in light of the special requirements concerning search for work. . . .
All EB claimants must be advised of the work search requirements that they must meet each week. . . . It is expected that the EB claimant's efforts to find work should increase because of the duration of his unemployment.
If there are no or few openings in the claimant's customary occupation, he must broaden the types of work sought to meet the active search for work requirement. Claimants who restrict their job search to their customary occupation, or who have other restrictions (i.e., wages, hours, travel, etc.) not based upon physical or mental capability, and by these restrictions fail to maintain an active systematic search for work, may be ineligible for extended benefits.
In determining whether the individual has met the active search for work requirement, where openings in the individual's customary occupation are few or nonexistent, the following areas shall be considered:
a. Available Jobs--Hiring pattern
b. Economic Activity--Labor market
c. Claimant's physical and mental ability
The level of economic activity in the labor market area and the kinds of work available are important factors in determining whether a systematic and sustained work seeking effort is being made. Eligibility Review Program and Job Service information and any job counseling interviews as well as the results of aptitude testing would be pertinent.
IDES Bulletin No. 1467, Supp. 1 (Aug. 20, 1981). The form that the claims technicians give to claimants includes the following information:
You are expected to relax your restrictions with respect to the type of work you will accept, hours, rate of pay, travel time, etc. (for example: A senior accountant would be required to accept work as a junior accountant or bookkeeper, etc.) . . . If there are no or few openings in your regular occupation, you are expected to seek any work within your physical and mental capabilities for which you have the background to perform. . . .
You may use your usual methods of contacting potential employers (in-person contacts, registration with private employment agencies, reporting to your union as required, answering or placing want ads, resumes, telephone calls, etc.,) [sic]. However, your work search must include some independent work search efforts each week.
If you are not able to conduct an active search for work during a week due to compelling circumstances, you will be held ineligible only if you claim the week.
It is your responsibility to inform the local office that you are not claiming a week for this reason. . . .
If you fail to conduct an active search for work or you refuse to apply for or to accept suitable work . . . you will be held ineligible for Extended Benefits for the week in which such failure occurred and for each week thereafter until you have worked in at least 4 weeks with earning in each week, which when totaled, equals at least 4 times your weekly benefit amount.
Benefit Rights Information for Extended Benefits Claimants form.
When a claimant is ineligible for EB, either because the program is not in effect in Illinois or because he has exhausted his benefits, he may be eligible for FSC. The IDES issued bulletins with instructions for implementing the FSC program. The bulletins do not interpret the program's requirement that a claimant seek work actively, but there is no suggestion that the requirement has a different meaning than it does under the EB program.
Claimants seeking FSC benefits were given the following instructions for seeking work:
(1) On each normal working day you must do something positive to find work.
(2) . . . You must make work contacts on at least 3 days per week, resulting in at least 5 employer contacts per week. This may mean looking for work beyond your normal commuting distance as well as increasing one-way travel time. You are expected to lower your salary demands, even to the minimum wage, if there are no prospects of finding work in your customary occupation.
(3) If there is any day in which you made no employer contacts, you must indicate on the form what positive effort you made that day to find work, for example, preparing a resume, contacting a union or a professional organization, attending an employment seminar, etc.
(4) If prospects for obtaining work in your usual occupation are poor (that is, if you do not have a definite offer to begin work within four weeks . . . ), you will be expected to accept any offer of suitable work that is listed with the State Job Service or offered in writing. Any work will be considered suitable if you are reasonably fitted by training and experience to perform the work or if the necessary training is provided when you lack the required skills.
To be suitable, the gross pay of any work offered must exceed your weekly benefit amount plus any Supplemental Unemployment Benefits (SUB) you receive from your former employer, or the State or Federal minimum wage, whichever is greater.
The law provides for denial of FSC to anyone who does not observe the above requirements. The disqualification will continue until the person has worked in at least four weeks and earned not less than four times his or her weekly benefit amount.
Important Notice for Federal Supplemental Compensation (FSC) Claimants form.
Although these notices to claimants did not elucidate bright-line rules for the conduct of their work search other than the requirements that a claimant must make five contacts with potential employers over at least three days of every week and that a claimant must accept any wage over the stated minimum, the plaintiffs claimed, and the district court found, that IDES used objective rules of thumb to determine claimants' eligibility for benefits. 625 F. Supp. at 629. These rules of thumb developed to help the reviewers evaluate claimants' questionnaires. Claims routinely would be denied if the claimant did not state that he would travel at least one hour each way for work. Similarly, a claimant must have said that he was willing to work on different shifts for at or near the minimum wage. A claimant also was required to visit employers in person. When claimants were questioned about their answers on the questionnaire, they had the opportunity to revise these answers. However, they did not know about the rules of thumb, and inadequate answers to the questions were used to demonstrate that they were not engaged in an active search for work.
Although adjudicators and referees testified at trial that the rules of thumb were not necessary to evaluations of claims, the district court found that the rules were rarely relaxed. Id. The court also found that the reviewers would not "test" claimants' answers to items on the questionnaire, or use collateral methods to determine, for example, the distance claimants were actually traveling to search for work, or the wage claimants were requesting on job applications. The reviewers simply let the claimants disqualify themselves by accepting their answers at face value.
The district court found that IDES decisionmakers, despite the requirements in their own bulletins, did not use information about the labor market or job openings in evaluating claims from people whose job prospects were "not good." "They do not know which occupations have 'few or no openings'; they do not know anything systematic about levels of economic activity." 625 F. Supp. at 629. The district court went on, however, to find that the IDES decisionmakers were adequately apprised of employment conditions in claimants' occupations from information gleaned from the claimants themselves. They could detect patterns of unemployment from the claimants' occupations, and from the length of time they had been unemployed. This sort of empirical knowledge gave the reviewers the ability to make "astute inferences" about the labor market. Id.
The DOL administers the EUC Act and the FSC Act federally. This amounts to assessing the states' compliance with the federal regulations in their programs to determine whether to reimburse the states. Pursuant to the EUC Act, Illinois enacted section 409 of the IUI Act, which reproduces the federal rules. Pursuant to the FSC Act, Illinois and the DOL in September 1982 entered into a contract under which the state promised to "'perform all of the functions and duties . . . in accordance with the [FSC] Act as interpreted by the Secretary or the Department of Labor.'" 625 F. Supp. at 630.
The district court found that although the DOL has not promulgated any regulations concerning the administration of the EUC Act or the FSC Act, it has circulated to state employment security agencies "general administration letters" (GALs) and "unemployment insurance program letters" (UIPLs). Id. These letters are sometimes published in the Federal Register; the district court, however, found that they were not regulations because they were not circulated for notice and comment before the DOL adopted them. Id. Advance copies of GALs were sometimes available to state agencies, but, according to the court, this was for the purpose of supplying extra notice, not an opportunity to comment. Id. The court found that "the addressees of the GALs did not have the sort of personal service that would permit the documents to be treated as regulations in the absence of published notice and opportunity for comment." Id. (citing 5 U.S.C. § 553(b)).
The court found that, at the time of trial, the definitive GAL was 2-83, in which the DOL stated that the requirements for seeking work under the FSC Act were the same as those under the EUC Act. Id. at 631; GAL 2-83, 47 Fed. Reg. 54706 (1982); see also UIPL 7-84, 49 Fed. Reg. 4271 (1984). The EUC Act requirements are described in GAL 21-81, an unpublished letter. See Appendix. The EUC Act generally requires a claimant to make a more active, "systematic and sustained," search for work than a recipient of regular benefits. He must broaden the types of work he seeks, and lower his wage expectations. If a claimant fails to accept a job offer which pays at least the minimum wage and not less than his benefit payments, he will be disqualified from receiving further EB payments. The EUC Act generally requires the state to evaluate the claimant's job search in light of the claimant's physical and mental ability, job openings, and the labor market conditions. The state classifies each EB claimant's job prospects as "good" or "not good" and monitors each claimant's eligibility by requiring "tangible evidence" of an ...