Opinion
No. 2008-CA-000079-MR.
March 6, 2009.
Appeal From Franklin Circuit Court, Honorable Thomas D. Wingate, Judge, Action No. 07-Ci-00023.
Celia M. Dunlap, Frankfort, Kentucky, Brief for Appellant.
Paul F. Fauri, Frankfort, Kentucky, Brief for Appellee Jennifer Harrod.
Before: ACREE, CLAYTON, and KELLER, Judges.
OPINION
The Finance and Administration Cabinet, Department of Revenue (hereinafter collectively referred to as the Cabinet), appeals from the decision of the Franklin Circuit Court's order affirming a decision of the Kentucky Personnel Board to overturn the Cabinet's decision to deny Jennifer Harrod's application for the "sick leave sharing program" (SLSP). On appeal the Cabinet argues: (1) the Board erred when it did not dismiss the appeal when Harrod failed to appear at the hearing; (2) participation in the SLSP is discretionary, therefore its denial is not a penalization, and as a result, the Personnel Board (the Board) lacked jurisdiction to hear the appeal; (3) the Board in finding a violation of Section 2 of the Kentucky Constitution, reached beyond its authority; (4) the Board erred in concluding that the Cabinet had acted arbitrarily when denying Harrod's application for the SLSP; and (5) the circuit court failed to review the appeal de novo, as required by law. For the following reasons, we affirm.
FACTS
The Sick Leave Sharing Program (SLSP) enables state employees to donate leave time to sick or otherwise disabled employees, who are without sufficient sick leave balances to maintain their wages throughout their illnesses. Kentucky Revised Statute (KRS) 18A.197. The program requires documentation from a physician of the illness or other disability which prevents the employee from working and some identification of a specific period of time that the employee may not be able to work. Once the initial time period expires, an amended request of an extension of participation may be submitted for approval.
An immediate family member's illness will likewise qualify an employee for the SLSP with appropriate documentation.
The facts are not in dispute. Jennifer Harrod began employment with the Department of Revenue, Finance and Administration Cabinet as a Document Principal Specialist I in January of 2005. Eleven months later, in December 2005, Harrod submitted her first application to the SLSP along with the appropriate physician's statement. The request for donated sick leave advised that Harrod would be unable to work for approximately three weeks post-surgery. The request was approved by the Cabinet. Harrod experienced complications from the procedure and submitted two more requests extending her expected recovery time. These two were also approved by the Cabinet, by means of a "form letter" and without incident through March 10, 2006. This "form letter" stated in pertinent part, that the only reason to be disapproved for the SLSP is if the employee had received disciplinary action.
The Cabinet has a written procedure (procedure #2.2) regarding the SLSP. The procedure has four criteria which, if met, make an employee eligible: (1) the employee has full-time status; (2) the employee has exhausted all leave balances; (3) the employee suffers from or has a family member who suffers from a medically certified impairment likely to require leave for at least ten consecutive working days; and (4) the employee has certification from a licensed physician as to the medical need for the leave. It is undisputed that Harrod met all four criteria in procedure # 2.2.
On March 15, 2006, Harrod filed a request to continue her participation in the program because she was pregnant. The physician's report specified that Harrod might not be able to return to work for an indefinite period of time due to the combination of post-surgical complications and her pregnancy. This request was forwarded to her immediate supervisor, Elsie Gilbert, who did not approve it immediately. Gilbert testified that she was directed by her supervisors to reject Harrod's request. The record indicates that, but for the intervention of the supervisors, Gilbert would have approved Harrod's request immediately.
Following various meetings, emails, and other communications among the Director, the Administrative Branch manager, and various other levels of managers, the stated basis for the decision was determined to be poor attendance and productivity. Testimony was also given that Harrod's position with the Cabinet was "critical" and as such, her department would be woefully understaffed. Gilbert was ordered to reject the application and initially wrote a statement saying that Harrod's absence would burden her section of the Department of Revenue. However, Gilbert's manager rejected this statement, directing in an email attached to the Cabinet's final rationale "we do not support Jennifer Harrod's request for Sick Leave Sharing due to abuse of leave time and poor performance." The record shows the Cabinet has no written policies or procedures defining abuse of leave and poor performance. Furthermore, there is no evidence that Harrod was ever disciplined or made aware of any such problems prior to this rejection.
Thereafter, Harrod submitted an application to be placed on unpaid "Family Medical Leave" through July 2006. Pursuant to the Family Medical Leave Act of 1993, 29 U.S.C. § 2601, the Department was required to keep Harrod's position open to her for twelve weeks so she could return to work in that position.
Following a lengthy hearing, the hearing officer issued a recommended order awarding Harrod sick leave sharing, which was adopted by the Personnel Board in toto. The Cabinet then appealed to the Franklin Circuit Court which affirmed the Board's decision. This appeal followed. We will set forth additional facts as they become necessary for the analysis of each issue.
ANALYSIS
We have determined that the Cabinet has raised both procedural and substantive issues, which we set forth below with the appropriate standard of review noted therein.
A. PROCEDURAL ISSUES 1. FAILURE TO APPEAR
In its initial protest, the Cabinet decries the hearing officer's excusal of Harrod, due to her frail health, from attending the hearing. The hearing officer allowed her representative along with her mother to stand in her stead. KRS 13B.080(6) addresses the situation above and leaves the decision to the discretion of the hearing officer, "having due regard for the interests of justice and the orderly and prompt conduct of the proceedings." The test for abuse of discretion is whether or not the decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles. McKinney v. McKinney, 257 S.W.3d 130, 133 (Ky.App. 2008). We hold that the hearing officer's ruling was not an abuse of discretion. Furthermore, to follow the logic of the Cabinet would mean that only able-bodied sick or disabled people could seek to redress a wrong committed by the state when administering sick leave provisions. That would be a preposterous result.
2. DE NOVO REVIEW
Next, the Cabinet asserts that the Franklin Circuit Court did not review, de novo, the Board's actions when interpreting and applying KRS 18A.197. The Cabinet complains "[t]he Circuit Court erred when it concluded that the Personnel Board's decision was supported by substantial evidence." The Cabinet claims the issue was whether the language in KRS 18A.197 allowed the Cabinet to deny Harrod her request to participate in the program.
When addressing an appeal from an administrative decision, the standard of review regarding factual issues "is limited to determining whether the decision was erroneous as a matter of law." McNutt Construction First General Services v. Scott, 40 S.W.3d 854, 860 (Ky. 2001). "[J]udicial review of administrative action is concerned with the question of arbitrariness . . . Unless action taken by an administrative agency is supported by substantial evidence it is arbitrary." American Beauty Homes Corp. v. Louisville and Jefferson County Planning and Zoning Commission, 379 S.W.2d 450, 456 (Ky. 1964) (emphasis in original). "Substantial evidence is defined as `evidence of substance and relative consequence having the fitness to induce conviction in the minds of reasonable [persons].'" Kentucky Unemployment Ins. Com'n v. Landmark Community Newspapers of Kentucky, Inc., 91 S.W.3d 575, 579 (Ky. 2002).
As to the weight of the evidence, "the trier of facts is afforded great latitude in its evaluation of the evidence heard and the credibility of witnesses appearing before it." Bowling v. Natural Resources and Environmental Protection Cabinet, 891 S.W.2d 406, 409-10 (Ky.App. 1994). A reviewing court may not substitute its own judgment on a factual issue "unless the agency's decision is arbitrary and capricious." McManus v. Kentucky Retirement Systems, 124 S.W.3d 454, 458 (Ky.App. 2003). "[T]hree grounds of judicial review, (1) action in excess of granted powers, (2) lack of procedural due process, and (3) lack of substantial evidentiary support, effectually delineate [the] necessary and permissible scope of review." American Beauty Homes Corp. v. Louisville and Jefferson County Planning and Zoning Commission, 379 S.W.2d 450, 456 (Ky. 1964).
The Cabinet is correct in its assertion that matters of statutory construction are subject to de novo review. "Statutory interpretation is a matter of law reserved for the courts, and this Court is not bound by the [Circuit Court's] interpretation. . ." Halls Hardwood Floor Co. v. Stapleton, 16 S.W.3d 327, 330 (Ky.App. 2000).
Under de novo review, a reviewing court affords no deference to the trial court's application of the law to the established facts. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky.App. 1998). Should an administrative body misuse the legal effect of the facts, courts are not bound to accept the legal conclusions of the administrative body. Epsilon Trading Co. v. Revenue Cabinet, 775 S.W.2d 937, 940 (Ky.App. 1989).
We hold that the hearing officer, Personnel Board, and the circuit court applied the appropriate statutory interpretation to KRS 18A.197. The SLSP statute states that an employee is eligible to participate in the program if the employee has complied with administrative regulations governing the use of sick leave. The SLSP regulation states that an employee shall not qualify if placed on "unpaid leave status" by personnel action. It is uncontroverted that Harrod was never placed on unpaid leave status by personnel action. Therefore, Harrod complied with the regulation and was eligible to participate in the SLSP. The circuit court's order to that end is affirmed.
B. SUBSTANTIVE ISSUE: AUTHORITY VIS Á VIS THE CONSTITUTION
The Cabinet argues next that the board went beyond its authority when determining the Cabinet's actions violated the Kentucky Constitution. This contention is wholly without merit. While the board may not declare a statute or regulation unconstitutional on its face, it may condemn an unconstitutional application of a statute or regulation. Commonwealth v. DLX, Inc., 42 S.W.3d 624, 626 (Ky. 2001). The 14th Amendment to the United States Constitution prohibits any state from depriving a person of his property without "due process of law." Section 2 of the Kentucky Constitution provides, "Absolute and arbitrary power over the lives, liberty and property of freemen exists nowhere in a republic, not even in the largest majority." The Supreme Court of Kentucky stated:
Section 2 of our Constitution provides that the Commonwealth shall be free of arbitrary state action. With respect to adjudications, whether judicial or administrative, this guarantee is generally understood as a due process provision whereby Kentucky citizens may be assured of fundamentally fair and unbiased procedures.
Smith v. O'Dea, 939 S.W.2d 353, 357 (Ky.App. 1997) (internal citations omitted) (emphasis added).
The record is replete with the evidence that the Cabinet's actions in applying KRS 18A.197 to Harrod were arbitrary. The evidence showed that despite the fact Harrod qualified for participation in the SLSP, she was denied for both written (time and attendance) and unwritten reasons (hers was a critical position). "When an administrative agency applies a statute unconstitutionally, it acts beyond the bounds of the constitution, rather than passing on a constitutional question." Commonwealth v. DLX, Inc., 42 S.W.3d 624, 626 (Ky. 2001). The hearing officer addressed each of those reasons noting that Harrod had never been disciplined for attendance and performance failings, nor had she been placed on notice of any kind that there were problems. The hearing officer found that the Cabinet had not attempted, in any way whatsoever, to obtain a temporary employee or request an exemption to any cap limitation for this "critical" position. The written procedures lacked any standard, criteria, or definition with which to compare employees. The unwritten procedures, testified to by the Cabinet, were likewise inconsistently and capriciously applied to Harrod versus other similarly situated employees.
We cannot help but note the irony of the Cabinet's assertion that the circuit court acted "arbitrarily" when it affirmed the Board's "arbitrary" finding that the Cabinet acted "arbitrarily". To quote Queen Gertrude, "The lady doth protest too much, methinks." The Cabinet is correct that KRS 18A.197 is discretionary, or permissive, in that the appointing authority "may permit" an employee of the agency to receive leave. However, the statute does not contain language that would entitle the Cabinet to arbitrarily and unconstitutionally deny sick leave to one of its employees. In our system of government there could not be any such language. The Cabinet may not act at its whim, without concern for the principles of fundamental fairness guaranteed by our law. This is true whether or not the principles are actually written into the statute because the constitution mandates application of those principles. As an agency of the Commonwealth, the Cabinet must act in accordance with the constitution, wherein lies the right which constitutes the penalization complained of by Harrod.
William Shakespeare, Hamlet Act 3, scene 2, 222-30.
As noted in Pritchett v. Marshall, 375 S.W.2d 253 (Ky. 1963), the state is enjoined against arbitrariness by Section 2 of the Kentucky Constitution which, we have held, is `a concept we consider broad enough to embrace both due process and equal protection of the laws, both fundamental fairness and impartiality.'
Commonwealth Natural Resources and Environmental Protection Cabinet v. Kentec Coal Co., Inc., 177 S.W.3d 718 (Ky. 2005). "It is an established rule that an enactment accords due process of law, if it affords a method of procedure, with notice, and operates on all alike." Milner v. Gibson, 249 Ky. 594, 61 S.W. 2d 273 (1933) citing to Pacific Live Stock Co. v. Lewis, 241 U.S. 440, 36 S. Ct. 637, 60 L.Ed. 1084 (1916) (emphasis added).
The facts demonstrate the basis for this conclusion. For example, would any time and attendance issue constitute the basis for a denial of an application and what exactly is a critical position to the Cabinet? The principles articulated above were clearly violated by the Cabinet when it failed to follow its own written and unwritten policies which being undefined and unspecified, make it impossible for a reviewing body to determine consistency in application. These difficulties demonstrate the arbitrary nature of applying unwritten criteria in any situation. Furthermore, it is apparent that the Cabinet failed to apply its own stated and unstated criteria consistently in this matter. As such the Cabinet's action in denying the application penalized Harrod and violated the Kentucky Constitution.
For the foregoing reasons we affirm the Franklin Circuit Court.
CLAYTON, JUDGE, CONCURS IN RESULT ONLY.
ACREE, JUDGE, CONCURS AND FILES SEPARATELY.
I believe the result reached in the majority opinion is a correct one and I concur in that result. However, I write separately and respectfully to emphasize that a hearing, such as the one in this case, conducted in accordance with the Albert Jones Act of 1994, codified as KRS Chapter 13B, is the exercise of an agency's adjudicative function. Appellate review of administrative adjudications not exempted by KRS 13B.020 is governed by the statutory standard of review set forth in KRS 13B.150. When, as a reviewing court, we turn reflexively to American Beauty Homes as the standard of review, we tempt our own ignoring of the important distinction between an agency's exercise of adjudicative authority and its exercise of legislative authority. The inquisitive reader may consider the discussion of this distinction in Baker v. Com., Kentucky Retirement Systems, 2007 WL 3037718, pp. 11-17, No. 2005-CA-001588-MR (Oct. 19, 2007, Ky. App. 2007) (analyzing American Beauty Homes in the context of Hilltop Basic Resources, Inc. v. County of Boone, 180 S.W.3d 464, 469 (Ky. 2005)).