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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – GETTING A SECOND BITE AT THE APPLE – WHY ADMINISTRATIVE REHEARINGS ARE HARD TO GET

By Robert S. Schriebman
2020

Introduction

Sometimes in life we wish we had a second chance to explain ourselves. At one time or another I am confident that each person reading this article wishes he/she had a second chance or a second bite at the apple. Speaking for myself, I recall during my early years in practice when I walked out of a courtroom or an administrative hearing wishing I should have presented my case differently.

Informal and Formal EDD Hearings

Administrative hearings in EDD matters usually involve informal conferences with EDD auditors and their management, and more formal hearings before the CUIAB. If you have an appointment with your assigned auditor, but your accountant or attorney fails to show up at the conference, you will be allowed to reschedule the conference. But what happens at a formal CUIAB hearing if your representative doesn’t show? Are you entitled to an automatic rehearing before an administrative law judge (ALJ)?

Omer Katzir’s CPA failed to show up at a hearing before the Office of Tax Appeals (OTA). Nevertheless, Omer elected to proceed with the hearing on his own; he lost. Omer asked for a rehearing and did not get it. What went wrong? What should Omer have done that he failed to do?

The Case of Katzir’s Floor & Home Design, Inc.

Omer Katzir had a hearing scheduled before the OTA. On the night before the hearing, his long-time CPA advised him that he was ill and unable to attend the hearing. Omer decided to go it alone. He lost, and petitioned for a rehearing on the grounds that he was “mismatched and overwhelmed” because the State was represented by an attorney and two hearing representatives. Omer never requested a continuance due to the illness of his CPA. Omer requested a re-hearing, but he was turned down. (Katzir’s Floor and Home Design, Inc., OTA Case No. 18083591, March 4, 2020)

Five Ways to Get a Re-Hearing

Whether we are talking about the OTA or the CUIAB, the administrative codes set forth the same rules that provide for the granting of a re-hearing.

A rehearing may be granted where one of the following grounds is met and materially affects the substantial rights of the party seeking a re-hearing:

  1. An irregularity in the proceedings that prevented the fair consideration of the appeal;
  2. An accident or surprise that occurred, which ordinary caution could not have prevented;
  3. Newly discovered, relevant evidence, which the filing party could not have reasonably discovered and provided prior to issuance of the written opinion;
  4. Insufficient evidence to justify the written opinion or the opinion is contrary to law; or
  5. An error in law that occurred during the proceedings.

Under the rules for OTA tax appeals, a litigant has the right to choose a representative who is authorized to practice before the OTA (for EDD matters the rule applies to the CUIAB). Neither a litigant’s choice of representative nor that representative’s sudden absence constitutes an irregularity in the proceedings. The CUIAB equivalent regulations are stated at Title 22, Reg. §§ 5067 and 5068

Omer Katzir was notified of the hearing date and chose to represent his corporation in the proceedings. He presented evidence and made his argument, but he lost. He should have asked for a continuance, but elected not to do so. In fact, Omer Katzir never informed the OTA that his representative was not available and he did not request a continuance based upon the unavailability of his representative. The OTA ruled that Omer Katzir failed to exercise ordinary caution. His CPA should have advised him to request a continuance. The fact that your representative is unavailable due to illness, constitutes a valid reason for a postponement or a continuance.

Conclusion

I have great respect for the accounting profession. I have given many lectures before CPAs and as group I have found them to be well suited for what they do. Having said this, I feel compelled to also say that CPAs are accountants; they are not attorneys. Most attorneys I know would have advised their client(s) to immediately request a postponement or continuance of the hearing under these circumstances. Unfortunately, there are CPAs who take the position, in administrative hearing practice, that they can effectively represent a client to the same standards as a competent attorney. The Katzir’s case is a clear example of the fallacy of this type of reasoning. CPAs do what CPAs do, and attorneys do what attorneys do.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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