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Court of Appeal, Third District, California.

Frank H. SILVER, Plaintiff and Appellant, v. CALIFORNIA UNEMPLOYMENT INSURANCE APPEALS BOARD, Defendant and Respondent; KELBRO CORPORATION, Real Party in Interest.

Civ. 14547.

Decided: April 26, 1976

Roger K. Warren, Legal Aid Society of Sacramento County, Sacramento, for plaintiff-appellant. Evelle J. Younger, Atty. Gen., by William Power and Steve Egan, Deputy Attys. Gen., Sacramento, for defendant-respondent.

Appeal from a judgment of the superior court denying a petition for writ of mandate. Plaintiff, Frank H. Silver, was employed by the real party in interest, Kelbro Corporation (‘employer’), at the employer's lumber mill. He was discharged by employer on the ground that, without excuse, he had been repeatedly absent from and tardy in reporting to work. Pursuant to California Unemployment Insurance Code section 1326,1 plaintiff applied to the Department of Human Resources Development (‘Department’)2 for unemployment insurance benefits. The Department made a determination that plaintiff had been discharged for willful misconduct, and was therefore ineligible for benefits (§ 1256). Plaintiff's appeal therefrom resulted in an evidentiary hearing before a referee (§ 1328; Gilles v. Department of Human Resources Development (1974) 11 Cal.3d 313, 317, 113 Cal.Rptr. 374, 521 P.2d 110). The referee affirmed the Department's determination of ineligibility (§ 1334) after which plaintiff appealed to the Unemployment Insurance Appeals Board (‘Board’), the respondent herein. On the basis of the evidence received by the referee, the Board affirmed the denial of benefits (§ 1336), adopting as its own the referee's findings and decision.

Plaintiff next sought judicial review through administrative mandamus (Code Civ.Proc., § 1094.5), seeking to compel the Board to vacate its decision and to grant him benefits. The superior court rendered its own findings and conclusions, affirming the decision of the Board and denying the petition.

In this appeal we must decide whether uncorroborated hearsay produced at an evidentiary hearing before a referee provides sufficient basis to deny unemployment insurance benefits. We hold that where such hearsay is contradicted, it does not.

In reviewing a decision of the Board, the superior court must exercise its independent judgment on the evidence to determine if the findings of the Board are supported by the weight of the evidence. (Agnone v. Hansen (1974) 41 Cal.App.3d 524, 527, 116 Cal.Rptr. 122.) Stated otherwise, the litigants are entitled to a limited trial de novo in the superior court (Borror v. Department of Investment (1971) 15 Cal.App.3d 531, 92 Cal.Rptr. 525).

Here the superior court reviewed the evidence presented to the referee. At that hearing, plaintiff's sworn testimony, elicited by the referee,3 in substance constituted a denial that he had been either absent from or tardy in reporting to his job except for good cause. His testimony in itself was inconsistent with a finding of willful misconduct.

The employer, though notified of the time and place of the hearing, did not appear. Several documents were marked as exhibits and received in evidence by the referee without evidentiary foundation or objection thereto. Three of these were departmental forms purporting to contain the employer's version of the controversy. One such document, the employer's written response to a departmental ‘Notice of Unemployment Insurance Claim,’ contained the following explanation for plaintiff's dismissal: ‘Mr. Silver was fired for not reporting to work. This has happened several times. You may check this with Harold Ayers, representative with Teamsters Union, Local 150.’ The document contains the signature of one ‘P. Keller’ who apparently prepared it on behalf of the employer. Further identification of ‘P. Keller’ does not appear in the record nor does the source of his or her knowledge of the matters asserted in the document. Another document, designated ‘Record of Claims Status Interview,’ contains a Department interviewer's handwritten notes of a telephone conversation with a secretary of the employer. The notes recite that ‘Secretary states [plaintiff] has drinking problem and asked to be put on night shift—States he was to work daily at 4 P.M. and clean up each night and knew just when he was to work each day and he just didn't come in. At one time missed a whole week due to drinking—[plaintiff] admits drinking says he was entitled to vacation and told them so. There is a timeclock and records show absences.’ The third document, also designated ‘Record of Claims Status Interview,’ contains the handwritten notes of a second department interviewer detailing information received in a telephone ‘call to . . . Pat Kaplan, office manager’ for the employer. These notes recite that before his discharge, plaintiff had been given two written warnings by the employer after numerous absences; that copies of these warnings are in the possession of the union; that plaintiff on one occasion called to say he would be one-half hour late because his wife was ‘stuck at the snow line’ but in the event, plaintiff was four hours late. The sources of the information disclosed to Department interviewers by the employer's secretary and office manager do not appear in the record.

Plaintiff was the only witness at the hearing. Other than the documentary evidence described above, no other evidence was received on behalf of the employer.

The superior court found from the weight of the evidence that plaintiff had a record of absences and tardiness in his job concerning which he had been warned in writing and by reason of which he had been discharged. The court concluded that plaintiff's repeated absences and tardiness constituted misconduct within section 1256 and that plaintiff was accordingly disqualified from receiving unemployment compensation benefits.

Plaintiff contends that uncorroborated hearsay alone is insufficient to support a decision of the Board. It has been held that, absent a statute authorizing reliance on hearsay alone, an administrative decision based solely upon uncorroborated hearsay cannot stand. ‘The 'assurance of a desirable flexibility in administrative procedure does not go so far as to justify orders without a basis in evidence having rational probative force. Mere uncorroborated hearsay or rumor does not constitute substantial evidence.’ There must be substantial evidence to support such a board's ruling, and hearsay, unless specially permitted by statute, is not competent evidence to that end.' (Walker v. City of San Gabriel (1942) 20 Cal.2d 879, 881, 129 P.2d 349, 351, quoting from Consolidated Edison Co. v. National Labor Relations Board, 305 U.S. 197, 230, 59 S.Ct. 206, 83 L.Ed. 126; Kinney v. Sac. etc. Retirement System (1947) 77 Cal.App.2d 779, 782, 176 P.2d 775; Armistead v. City of Los Angeles(1957) 152 Cal.App.2d 319, 324, 313 P.2d 127.)

To our knowledge, Stout v. Dept. of Employment (1959) 172 Cal.App.2d 666, 342 P.2d 918, is the only case involving a decision of the Unemployment Insurance Appeals Board in which the rule of Walker v. City of San Gabriel, supra, has been considered. But in the Stout decision, Walker received only passing mention because substantial competent evidence corroborative of the hearsay rendered its holding inapplicable.

In this case, the trial court opined that the Walker rule rejecting uncorroborated hearsay as a competent basis for decision does not apply to proceedings before the respondent Board, because sections 1327 and 1328 authorize resort to uncorroborated hearsay. Section 1327 requires that the employer be notified when a claim for benefits is filed and permits the employer within 10 days thereafter to furnish to the Department any facts affecting the employee's eligibility for benefits. Section 1328 provides that the employer's submission shall be considered in determining the employee's eligibility for benefits. (See Perales v. Department of Human Resources Dev. (1973) 32 Cal.App.3d 332, 337–341, 108 Cal.Rptr. 167.) It is clear, and plaintiff does not dispute, that sections 1327 and 1328 authorize the initial determination of eligibility to be made by an official of the Department based on documents submitted by the employer and the employee and an informal conference with the employee in a nonadversarial setting. (See Gilles v. Department of Human Resources Development, supra, 11 Cal.3d at pp. 316–317, 113 Cal.Rptr. 374, 521 P.2d 110.) This procedure has the salutary objective of achieving efficient administration of the program and expeditious disposition of substantially undisputed claims.

In the event of an appeal to a referee from the initial determination of eligibility or ineligibility, the statute provides for an adversary-type hearing. (§§ 1951–1957; and see Gilles v. Department of Human Resources Development, supra, at p. 317, 113 Cal.Rptr. 374, 521 P.2d 110.) Section 1952 provides the Board and its representatives and referees ‘are not bound by common law or statutory rules of evidence or by technical or formal rules of procedure but may conduct the hearings and appeals in such manner as to ascertain the substantial rights of the parties.’ It is implicit therein that hearsay submitted under section 1327, otherwise inadmissible in a judicial proceeding, may be received and considered in proceedings before the Board and its referees. This interpretation has received judicial sanction in Stout v. Dept. of Employment, supra, 172 Cal.App.2d 666, 342 P.2d 918.

It follows that the documentary hearsay through which the employer here made its only showing was properly received and considered in the administrative proceedings. It is an entirely different question, however, whether that evidence will support a decision. The statute does not provide a ready answer because it contains no express authorization to base a finding or decision wholly on uncorroborated hearsay (cf. Lab.Code §§ 5708, 5709, governing hearings before the Workmen's Compensation Appeals Board; and see discussion in Davis, Administrative Law (1958) § 14.12, p. 319).

At this point we are confronted with the task of placing a construction upon the statute that is in harmony with its evident objects and purposes. (H. S. Mann Corp. v. Moody (1956) 144 Cal.App.2d 310, 320, 301 P.2d 28.) Statutes are to be construed so as to effect the intent of the Legislature (Code Civ.Proc., § 1859; Select Base Materials v. Board of Equal. (1959) 51 Cal.2d 640, 645, 335 P.2d 672). To ascertain legislative intent, the court should construe a statute with reference to the whole system of law of which it is a part (Select Base Materials v. Board of Equal., supra, 51 Cal.2d 640, 335 P.2d 672).

A prompt determination of eligible status and payment of benefits to those entitled to them is one of the purposes underlying the statute (§ 1326). Further, the relaxation of rigid and technical rules of evidence and procedure in the hearing proceedings (§ 1952) bespeaks a legislative intent that the statute be administered with a minimum of inconvenience and disruption to the affected principles, claimants and employers alike.

The use of hearsay in the initial determination by the Department to process undisputed claims serves both of the above mentioned statutory objects as does its use in the adversary hearing procedure to resolve disputed claims. And in the latter instance, it is consistent with and moreover advances both objects of the statute to permit uncorroborated hearsay to supply the sole support for an administrative finding and decision where the hearsay is uncontroverted. The absence of contradictory evidence justifies the hearsay proponent in relying upon the statutory policy of relative informality and minimal dislocation of the parties to relieve him of any further obligation to produce evidence. Moreover, the failure of the opposing party to utilize the opportunity to present evidence contradictory to unfavorable hearsay invests the latter evidence with a rational probative force sufficient to support a finding or decision. (See Richardson v. Perales (1971) 402 U.S. 389, 410, 91 S.Ct. 1420, 1431, 28 L.Ed.2d 842, 857.)

Neither of the perceived statutory purposes, however, is of such overriding urgency or significance as to manifest a legislative intent to eliminate wholly the necessity for dependable, trustworthy evidence, to counter an adverse showing through evidence of equal dignity. Therefore, uncorroborated hearsay which is contradicted is not of sufficient substantiality in itself to support a finding. (See Walker v. City of San Gabriel, supra, 20 Cal.2d 879, 129 P.2d 349.) As we have pointed out, however, such hearsay is entitled to consideration in adversary proceedings before the Board, and the proponent is entitled to assume that he has thereby met his burden in such proceedings unless and until contradictory evidence is produced.

It would defeat the policy of the statute to require an appearance by the hearsay proponent at all adversary hearings in anticipation that his hearsay showing might be rebutted. Therefore, where the showing of a party to an adversary hearing is limited to hearsay evidence, the referee or other presiding officer should recess the hearing after evidence contradictory thereto is received and afford the hearsay proponent a reasonable opportunity competently to rebut the evidence of his adversary.

In the instant case, at the hearing before the referee, the plaintiff made out a prima facie case of eligibility for benefits, contradicting the evidence on behalf of the employer which consisted entirely of hearsay tending to show that plaintiff had been discharged for misconduct. Substantial evidence is not just any evidence. It must be of ponderable, legal significance, reasonable in nature, credible and of solid value; it must actually be substantial proof of the essentials which the law requires in a particular case. (Estate of Teed (1952) 112 Cal.App.2d 638, 644, 247 P.2d 54.) There was not substantial evidence to support a finding in favor of the employer and against the plaintiff. Nonetheless, the employer was entitled to a reasonable opportunity to produce such competent evidence as it may have, and the referee was obligated to recess the hearing to afford the employer that chance.

The judgment is reversed and the cause remanded to the trial court with directions to issue a writ of mandate ordering the respondent Board to reconsider the case in the light of this opinion.


1.  All section references unless otherwise indicated are to the Unemployment Insurance Code.

2.  Now the Department of Employment Development (§§ 133, 301).

3.  Plaintiff was unrepresented by counsel.

PUGLIA, Presiding Justice.

FRIEDMAN, J., concurs.