Dawn Campbell, Relator v. MVP Realty Advisors, LLC, Department of Employment and Economic Development
A16-493
| Minn. Ct. App. | Dec 5, 2016Background
- Dawn Campbell worked for MVP Realty Advisors until March 31, 2015, and thereafter collected unemployment benefits ($640/week).
- On April 29, 2015, Campbell and MVP entered a confidential settlement agreement under which MVP paid Campbell $20,000.
- The Department of Employment and Economic Development determined Campbell was temporarily ineligible for certain weeks of benefits because the settlement payment constituted a severance payment subject to FICA.
- At the ULJ hearing the settlement’s non‑financial terms remained confidential; MVP’s office manager testified MVP had withheld income and FICA taxes from the payment as a standard practice.
- The ULJ found the payment was subject to FICA, applied it as lump‑sum severance covering eight weeks beginning April 1, 2015, and calculated an overpayment; the ULJ’s decision was affirmed on reconsideration and appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the settlement payment makes Campbell temporarily ineligible for unemployment under Minn. Stat. § 268.085, subd. 3(b) | Campbell: Payment is not subject to FICA / not "wages," so subdivision 3(b) does not apply | Department/MVP: Payment is related to employment and is subject to FICA; withholding supports that | Held: Payment is subject to FICA; subdivision 3(b) applies; Campbell temporarily ineligible for eight weeks |
| Whether employer withholding of FICA is determinative | Campbell: Employer’s blanket withholding practice is not dispositive | Department: Withholding is admissible evidence that payment was FICA‑taxable | Held: Withholding evidence is admissible and probative though not dispositive; here it supports the ULJ’s finding |
| Whether the agency record must show the payment is "considered wages" under state statute before applying subdivision 3(b) | Campbell: ULJ erred by relying on FICA without finding state "wages" status | Department: Subdivision 3(b) applies if payment is either state‑defined wages or subject to FICA | Held: Court need not decide state "wages" question because FICA finding alone suffices |
| Whether lack of settlement details defeats FICA characterization | Campbell: Confidential nature prevents showing payment related to employment | Department: Record shows sufficient connection to employment; federal definitions are broad | Held: Inference that payment related to employment is sufficient under federal FICA law; confidentiality does not defeat finding |
Key Cases Cited
- Menyweather v. Fedtech, Inc., 872 N.W.2d 543 (Minn. App. 2015) (standard of review and application of severance‑pay reduction rules)
- Mayberry v. United States, 151 F.3d 855 (8th Cir. 1998) (settlement payment to former employee held subject to FICA; broad coverage of "employment")
- Social Sec. Bd. v. Nierotko, 327 U.S. 358 (U.S. 1946) (employer‑employee relationship encompasses entire relationship for compensation purposes)
- Commissioner v. Schleier, 515 U.S. 323 (U.S. 1995) (taxability of settlement payments and applicability of gross‑income exclusions)