Katzson v. ICAO

24CA1098 Katzson Brothers v ICAO 12-12-2024

COLORADO COURT OF APPEALS

Court of Appeals No. 24CA1098
Industrial Claim Appeals Office of the State of Colorado
DD No. 8050-2024

Katzson Brothers, Inc.,

Petitioner,

v.

Industrial Claim Appeals Office of the State of Colorado and Patrick McLachlan,

Respondents.

ORDER SET ASIDE

Division I
Opinion by JUDGE SULLIVAN
J. Jones and Lipinsky, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)
Announced December 12, 2024

Davis Graham & Stubbs LLP, Nathalie A. Bleuzé, Sterling LeBoeuf, Denver,
Colorado, for Petitioner

No Appearance for Respondents
¶1 In this unemployment benefits case, Katzson Brothers, Inc.

(Katzson) seeks review of a final order of the Industrial Claim

Appeals Office (the Panel). The Panel affirmed the hearing officer’s

decision that Katzson didn’t show good cause for failing to timely

respond to a request for information regarding a former employee’s

claim for benefits. We set aside the order and remand to the Panel

with instructions for further proceedings consistent with this

opinion.

I. Background

¶2 Katzson, a small cleaning equipment business, employed

Patrick McLachlan (McLachlan) as a controller. Katzson terminated

his employment on February 25, 2024, for alleged check fraud and

embezzlement.

¶3 McLachlan applied for unemployment benefits. The Division

of Unemployment Insurance (Division) sent Katzson a form

questionnaire (form) asking for information about McLachlan’s

employment. The record shows the form, along with an internal

Division note indicating that “standard fact finding correspondence”

was sent “electronically” on February 28 by some means. Nothing

on the form or on any other document in the record identifies the

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email address to which the Division sent the form. The form

showed a mailing address as follows:

KATZSON BROTHERS INC. Attn. RICH MERG CPA
960 VALLEJO ST.
DENVER, CO 80204-3883

¶4 No evidence in the record, however, indicates that the form

was ever physically mailed. The form provided a deadline of March

6 for Katzson to respond.

¶5 Katzson didn’t respond within the stated time frame. The

Division issued a decision on March 8, notifying Katzson that it had

lost its right to protest the award of unemployment benefits to

McLachlan under section 8-74-102, C.R.S. 2024, which provides

that an employer has seven days to present any information

pertinent to the claim. Katzson received that decision by physical

mail to the mailing address listed above on March 15, and filed an

appeal the same day, explaining that it never received the form,

electronically or otherwise, from the Division.

¶6 On April 16, a Division hearing officer held a hearing to

determine whether Katzson’s untimely response should be excused

for good cause under Department of Labor and Employment

Regulation 12.1.8, 7 Code Colo. Regs. 1101-2 (Regulation 12.1.8).

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Richard Right, Katzson’s president, testified that McLachlan was

the person responsible for receiving electronic communications on

Katzson’s behalf, and that any email from the Division sent on

February 28 would have gone to McLachlan’s email account. He

also testified that, because McLachlan didn’t immediately cooperate

with Right to provide access to McLachlan’s email account, Right

filed a police report on February 26 regarding McLachlan’s alleged

embezzlement. Right eventually gained access to McLachlan’s email

account, but found no email from the Division in that account.

¶7 The hearing officer then asked, “So what I’m understanding is

that [McLachlan] was the person who was responsible when he

worked there?” Right responded in the affirmative. The hearing

officer then asked, “And then he separated in mid-February and

immediately filed a claim. And we sent a request for information

electronically to you, but it was still going to his email address?”

Right responded, “We think so. I mean we’ve gone back and

checked what we could under his email, and we’ve been able to

locate nothing to indicate anything was sent. Now whether

something happened to it or someone changed it we can’t say.”

Katzson hired Ann Roybal as its new controller in mid-March and

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she became the new point of contact for the Division. During the

hearing, Right asked the hearing officer for the email address to

which the Division had sent its form. The hearing officer said that

the only email address on file was Roybal’s address, which was

added after Katzson hired Roybal in mid-March. The record

contains no evidence of the email address the Division used to

electronically notify Katzson on February 28. Right was the only

person who testified at the hearing, and McLachlan didn’t appear.

¶8 The hearing officer issued a decision finding that Katzson

failed to respond to the Division’s request “because it did not have

any employees assigned to the duty of monitoring communications

from the Division.” The hearing officer listed the factors that the

Division considers when determining whether Katzson had shown

good cause for its delay under Regulation 12.1.8. The hearing

officer applied two of those factors to conclude that Katzson hadn’t

shown good cause, saying (1) Katzson “did not act as a reasonably

prudent employer by failing to have backups or alternate employees

assigned to monitor and respond to correspondences from the

Division,” and (2) “granting good cause would lead to a result that

would be inconsistent with the law.”

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¶9 Katzson appealed the hearing officer’s determination to the

Panel, contending that the hearing officer made numerous errors,

including (1) assuming that Katzson received notice of the form; (2)

refusing to allow Right to present evidence supporting good cause;

and (3) misapplying the good cause factors.

¶ 10 The Panel affirmed the hearing officer’s decision, concluding

that Katzson’s nonreceipt of the form was due to the “employer’s

failure to provide a current address.” The Panel cited Regulation

12.1.8.7, which provides that good cause can’t be established to

permit an untimely action “that was caused by the party’s failure to

keep the division directly and promptly informed by a written,

signed statement of his or her current and correct mailing address.”

The Panel concluded that Katzson “failed to act in the manner that

a reasonably prudent employer would have acted in the same or

similar circumstances by not timely updating the Division with its

electronic address.” The Panel also cited Regulation 12.1.8.8,

which provides that a written decision concerning good cause need

not contain findings of fact on every relevant factor, but that the

basis for the hearing officer’s decision must be apparent from the

order.

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II. Analysis

¶ 11 On appeal to this court, Katzson contends that that hearing

officer’s decision and Panel’s order are erroneous because they

“assume, without substantial evidence,” that the Division sent its

form to Katzson, and that Katzson’s “failure to receive the notice

was due to [Katzson’s] failure to monitor its email or to update its

contact information with the Division.” Katzson argues that no

evidence in the record supports the finding that the Division sent

notice to Katzson, because no evidence identifies the email address

to which the Division allegedly sent the notice and the Division

never provided that information. Finally, Katzson asserts that, even

if the Division did send notice, the hearing officer erred by not

permitting Right to present evidence regarding good cause. Katzson

argues that the hearing officer erred by not allowing any evidence

regarding the “turmoil” in which Katzson’s systems were left after

Katzson terminated McLachlan’s employment. Katzson asserts

that, as a result of these cumulative errors, the hearing officer and

the Panel denied it due process of law.

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A. Standard of Review

¶ 12 We review de novo the Panel’s legal conclusions. See Cath.

Health Initiatives Colo. v. Indus. Claim Appeals Off., 2021 COA 48,

¶ 14. As relevant here, we may set aside the Panel’s decision if the

findings of fact don’t support the decision or the decision is

erroneous as a matter of law. See § 8-74-107(6)(c)-(d), C.R.S. 2024.

B. Discussion

¶ 13 Upon receipt of a claim for unemployment, the Division must

notify other interested parties of the claim by mail or electronic

means. § 8-74-102(1). An interested party must be afforded at

least seven calendar days after the date of the notice to present

information pertinent to the claim. Id. An interested party may

present information out of time only if it shows good cause. Id.

¶ 14 Under the statute, then, the Division must first send the

request for information to the interested party before the burden

can shift to that party to show good cause for its failure to respond.

See id.; see also Allred v. Squirrell, 543 P.2d 110, 112 (Colo. App.

1975) (existence of form without evidence of mailing didn’t establish

that notice was mailed to employer where employer’s evidence

showed that notice wasn’t received).

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¶ 15 This interpretation is confirmed by a related provision in the

statute that makes advance notice to the employer a prerequisite to

the hearing officer’s issuance of a decision. The statute provides

that “[t]he deputy shall issue a decision in all cases, even if the

claimant has insufficient qualifying wages, unless the interested

employer did not receive notice of the claim, except when the

separation from employment is due to a lack of work and no alleged

disqualifying circumstances are indicated, or unless the claimant

did not file a continued claim.” § 8-74-102(1) (emphasis added).

¶ 16 In this case, the hearing officer and the Panel summarily

concluded that Katzson received notice of the claim. But the record

doesn’t include a “sent” email, and the Division didn’t identify the

email address to which it allegedly sent the notice. Although there

is “a presumption that officials faithfully perform their statutory

duties, . . . [w]here evidence is introduced in rebuttal of a

presumption, then the case must be decided on the evidence

presented.” Allred, 543 P.2d at 111-12.

¶ 17 Given this lack of substantial evidence, the hearing officer’s

finding that the Division sent Katzson a request for information was

error. See id. (holding that hearing officer’s finding that notice was

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mailed to the employer, basing his decision on the presence in the

Division’s file of the Notice to Employer of Determination of Benefits

Rights, was error in light of evidence that form was never mailed).

While a notation in the Division’s internal record indicates that “fact

finding” was completed by “electronic means” on February 28,

insufficient evidence establishes that the Division emailed the

request for information to Katzson. Thus, the present situation

doesn’t involve a conflict in the evidence but rather a lack of

substantial evidence supporting the threshold factual issue of

whether the Division sent notice to Katzson. See Allen v. Indus.

Comm’n, 540 P.2d 358, 361 (Colo. App. 1975) (“[W]here there is no

substantial supportive evidence, . . . the Commission’s

determination must be set aside.”).

¶ 18 As Katzson observes, it argued to the Panel that “no notice was

sent, that it would have received such notice if it had been sent,

and that an inquiry into good cause was unnecessary absent a

threshold showing that the request was in fact sent.” But the Panel

rejected that argument, holding that Katzson “did not respond to

the Division’s request because it did not have any employees

assigned to the duty of monitoring communications from the

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Division.” This conclusion also isn’t supported by substantial

evidence. Although Katzson didn’t change the name of its contact

person until mid-March, Right’s uncontested testimony established

that Katzson eventually gained access to McLachlan’s email account

(where a notice from the Division would have been found if the

Division had sent the notice to that email address), but that

Katzson received no notice from the Division at that account or

elsewhere. Therefore, Katzson’s monitoring was immaterial and

didn’t cause it to fail to respond within the seven-day time frame.

¶ 19 Because we hold that no substantial evidence in the record

shows that the Division provided notice to Katzson, we need not

consider Katzson’s arguments concerning the application of the

good cause factors. We agree with Katzson that, in these unique

circumstances, Katzson wasn’t provided proper notice of the claim.

See Bartenders & More v. Colo. Dep’t of Lab. & Emp., 2023 COA 123,

¶ 39 (“[A]s a matter of fundamental fairness, a party aggrieved by

the decision of an administrative agency must be provided with

notice of the deadline for its appeal.”).

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III. Disposition

¶ 20 The Panel’s order is set aside, and the case is remanded to the

Panel to instruct the Division to provide notice to Katzson that

complies in all respects with the statute and the applicable

regulations and to schedule a hearing to address the merits of

McLachlan’s unemployment benefits claim. We make no

determination on the merits of the claim.

JUDGE J. JONES and JUDGE LIPINSKY concur.

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