PIERRE, S.D. (KELO) — An owner of a bed and breakfast won’t have to re-pay the $14,080 of pandemic unemployment assistance she received, the South Dakota Supreme Court has decided.
The state’s highest court in a decision publicly released Thursday said the South Dakota Department of Labor and Regulation erred in seeking repayment from Darcy Bracken.
She and her husband owned White Tail Ridge Bed and Breakfast in Custer County. Bracken said bookings that had previously been made were canceled starting in February 2020 and there were no guests until the end of May 2020.
In March 2020, Congress responded to the COVID-19 pandemic and passed the CARES Act that created a temporary, state-administered pandemic unemployment assistance program for individuals. Bracken applied for benefits, and the state department initially determined she was eligible, paying her $14,080 for the period of March through early August 2020.
Later the department decided Bracken had to repay the money. An administrative law judge ruled in favor of the department. Circuit Judge Joshua Hendrickson affirmed that decision but also said that it “leaves a bad taste in my mouth[,]” adding “I don’t know how your business wouldn’t be affected by Covid, but based on the record I’ve reviewed I can’t make that a clearly erroneous finding.”
Justice Mark Salter wrote the Supreme Court’s unanimous opinion that the department erred and there shouldn’t be repayment. The justice said the state department’s decision to seek repayment from Bracken relied on an incorrect interpretation of a federal definition.
Congress had given authority to the U.S. Secretary of Labor to set regulations for pandemic unemployment assistance benefits. “Acting pursuant to this authority, the (federal) Secretary of Labor has issued the Self-Employment Rule, set out above, that allows self-employed people to be considered ‘covered individual[s]’ if they ‘experienced a significant diminution of their customary or usual services because of the COVID-19 public health emergency, even absent a suspension of services[.]’,” Justice Salter wrote.
The justice said the phrase “because of” was significant. He said the state’s administrative law judge who reviewed Bracken’s case had incorrectly used a different standard for workers who are not self-employed.
“Under the circumstances, we conclude that the ALJ (administrative law judge) erroneously
applied the causation standard in the Self-Employment Rule and should not have concluded Bracken was ineligible for PUA benefits. By reading a ‘direct result’ provision into the Self-Employment Rule, the ALJ overlooked key textual distinctions and effectively amended the rule, creating an artificially heightened causation standard for self-employed individuals. But in addition to this error, the ALJ’s determination is at odds with other aspects of the Self-Employment Rule’s text,” Justice Salter wrote.
“For instance,” he continued, “the ALJ’s suggestion that Bracken’s bed and breakfast had to be closed in order for her to qualify for PUA benefits overlooks the plain language of the Self-Employment Rule, which requires no such thing. In fact, the Self-Employment Rule expressly states that self-employed individuals can qualify for PUA benefits ‘even in the absence of a suspension of services.’
“Beyond this,” he wrote, “the Self-Employment Rule also extends eligibility to self employed individuals ‘who experienced a significant diminution of their customary or usual services . . . .’ Here, the ALJ specifically found that Bracken’s bed and breakfast had guests before the COVID-19 pandemic began but had no guests as of May 2020. It is difficult to conceive how this would not constitute a ‘significant diminution’ of the business’s ‘customary or usual services.'”