Mandatory Dispute Resolution: New York’s Recall on Welfare Recipients’ Due Process Rights

By Rachael Dehner

Volume 3.1

I. Introduction

II. Mandatory Dispute Resolution: Implementation and Consequences

III. The Protected Interest

IV. The Process That is Due

A. Goldberg v. Kelly [9]

B.The Fair-Hearing Process Pre-MDR in New York City

V. MDR and Due Process [12]

VI. Alternative Dispute Resolution in The Welfare Context

VII. Conclusion

I. INTRODUCTION

The 1990’s were a decade of massive welfare reform[1] that greatly affected the manner in which states run public assistance programs.[2] In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (“PRWORA”),[3] which eliminated a federal spending program entitled Aid to Families with Dependant Children (“AFDC”),[4] a federal entitlement program, and replaced it with Temporary Aid to Needy Families (“TANF”), a block grant program.[5] Under the old federal system, states received federal funds[6] if they complied with extensive federal regulations.[7] Under the new system of block grants, strict compliance with federal regulation is no longer required; instead states have the leeway to test new welfare reform measures.[8] This leeway opened the doors for New York City to develop an alternative dispute resolution initiative in the welfare context called Mandatory Dispute Resolution (“MDR”).[9]

In May of 1999, New York City Human Resources Administration (“HRA”)[10] implemented MDR as a pilot program for dispute resolution at the Staten Island[11] local welfare center. The purpose of MDR was to create an alternative to a fair hearing[12] for welfare recipients[13] and to reduce the total number of fair hearings in New York City.[14] The initiative grew out of a concern that New York City HRA had historically been unsuccessful in the fair hearing process, which cost the New York State taxpayers $16,938,120 every six months.[15] This practice has spread throughout the five boroughs[16] of New York City.[17]

With the implementation of MDR, many welfare recipients have had benefits taken away, or have had them reduced or denied without a pre-evidentiary hearing that comports with due process.[18] In the 1969 case Goldberg v. Kelly,[19] the Supreme Court of the United States held that recipients of welfare held property rights that are protected by the Due Process clause of the 14th Amendment of the United States Constitution.[20] Furthermore, the Court stated that welfare benefits could not be terminated without a pre-termination hearing.[21] The Court set out a number of guidelines for pre-termination hearings in order for it to comport with due process. These requirements included the opportunity to appear personally before an impartial official, present evidence orally, confront or cross-examine adverse witnesses, and have an attorney present if the recipient desires.[22] Six years later, in Mathews v. Eldridge,[23] the Court developed a balancing test to determine if administrative procedures were constitutionally sufficient to comport with due process.[24] The Court balanced the private interest that will be affected by the public action, the risk of erroneous deprivation through the procedures used, and the government’s interest, including the fiscal and administrative cost that additional or substitute procedural requirements would require.[25] These cases, along with other cases[26] that have upheld their holdings, have set out the minimum procedural protections that should be afforded to welfare recipients by the state when depriving recipients of benefits. However, the protection afforded to welfare recipients by the Goldberg decision is lost due to the informal manner of an MDR interview. Similarly, when the Mathews balancing test is applied, the MDR procedures fail to meet the minimal constitutional due process standards as set out by the Supreme Court.

This Note will discuss the unconstitutionality of the MDR initiative. Part II will describe the implementation of MDR procedures currently in place. Part III will discuss the necessity of a protected interest in a due process analysis, how Goldberg defined the protected interest and how it has changed since the implementation of PRWORA. Part IV will explore due process and its relation to welfare benefits, focusing on Goldberg v. Kelly. It will also describe the fair hearing process and procedures. Part V will apply the due process analysis developed in Goldberg and Mathews to the MDR interview. Finally, Part VI will present the advantages of alternative dispute resolution in the welfare context and will offer possible modifications to the MDR initiative to comport with due process rights of welfare recipients.

II. MANDATORY DISPUTE RESOLUTION: IMPLEMENTATION AND CONSEQUENCES

MDR[27] began as a pilot program in the Staten Island HRA office as a means to resolve disputes and to prevent fair hearings.[28] The impetus for this initiative grew out of New York City’s “abysmal affirmance rate”[29] of adverse determinations. In 1997, New York City lost over 85% of the fair hearings that went forward.[30] The City’s low affirmance rate cost the state over $16 million every six months.[31] The MDR initiative was instituted to reduce the high loss rate by circumventing the fair hearing altogether.[32] Although the procedures for MDR appear simple and benign, MDR can have dire consequences for welfare recipients.

After a welfare recipient requests a fair hearing, she should receive notice informing her of the fair hearing [33] and the MDR interview.[34] Both the recipient and the caseworker’s supervisor attend the MDR interview.[35] MDR interviews are compulsory and the welfare recipient must attend the MDR conference before a fair hearing.[36] At the MDR conference, the welfare recipient must produce all evidence that she intends to use at the fair hearing.[37] While the evidence produced by the welfare recipient at the interview is the only evidence admissible at the fair hearing,[38] the local center does not have to provide a copy of the evidence or introduce witnesses that it intends to present at the fair hearing.[39] The MDR interview takes place behind closed doors and no formal report is generated.[40] The purpose of the MDR interview is to discuss the adverse action taken by the center and to arrive at a resolution without the necessity of a fair hearing.[41]

At the conclusion of the MDR interview, there are essentially three possible outcomes. In some cases, the supervisor reviews the caseworker’s action and finds that the caseworker has made a mistake, at which point the caseworker must reverse the adverse action and the recipient eventually receives her full benefits.[42] In other cases, the supervisor explains to the recipient the reasons for the adverse action and the chances of success at a fair hearing. In those cases, the supervisor attempts to influence the recipient to withdraw her request for a fair hearing.[43] If the recipient does not sign the withdrawal form, then the fair hearing will be held as scheduled.[44] If the recipient does sign the withdrawal form, the fair hearing is canceled and the adverse action commences.[45]

Recipients who fail to appear at the MDR interview without good cause can be penalized later at the fair hearings.[46] When a recipient does not appear at the MDR interview, the supervisor will review the case in the recipient’s absence.[47] If the supervisor determines that the caseworker’s actions were improper, then the caseworker will be ordered to restore and/or replace the lost benefits.[48] If the supervisor determines that the caseworker’s actions were proper, then the supervisor will prepare a summary indicating the recipient’s failure to keep the appointment.[49] This summary is included in the evidence kept by the Office of Temporary and Disability Assistance (“OTDA”) for the fair hearing.[50] Recipients who fail to appear at the MDR without good cause can have their cases closed by the supervisor and can lose benefits prior to any hearing.[51] Similarly, a recipient who fails to keep the MDR appointment can be penalized by the fair hearing officer, who can summarily close her case, even if her underlying claim is meritorious.[52] Furthermore, since a recipient can only admit evidence that was presented at the MDR interview,[53] her failure to attend the MDR interview precludes her from admitting evidence at the fair hearing.[54] Hypothetically, a recipient who disputes the amount of benefits she is receiving, could lose all of her benefits if she fails to appear at the MDR interview.[55]

Since the implementation of the MDR initiative, only 15% of the fair hearing requests go forward.[56] The City has actually reversed its fair hearing loss rate. Where the City once lost about 87% of the fair hearings, it has now prevented about 85% from moving forward. Despite MDR’s success in achieving the City’s goal, it has literally stripped welfare recipients of the due process procedural protections afforded to them under the fair hearing process. A due process analysis of the MDR initiative is two-step. First, it is necessary to determine whether the welfare recipient has been deprived of a property interest.[57] Once it is determined that there is a property interest, then the second step is to examine the adequacy of the State’s or the City’s procedure to ascertain whether it violates that protected interest.[58]

III. THE PROTECTED INTEREST

Prior to 1970, the receipt of public benefits was not a protected right.[59] There was a legal distinction between the loss of rights and the loss of privileges @ welfare benefits being considered privileges.[60] Progressives argued that “the treatment of welfare benefits should be used as a form of redistribution of wealth” and others argued for “procedural reforms…as a means of protecting the recipients of those entitlements.”[61] In 1970, the Supreme Court rejected the distinction between rights and privileges in the case of Goldberg v. Kelly, and held that welfare recipients, who were statutorily entitled to benefits, had a protected property right invested in the receipt of those welfare benefits.[62] The Court explained:

Such benefits are a matter of statutory entitlement for persons qualified to receive them. Their termination involves state action that adjudicates important rights. The constitutional challenge cannot be answered by an argument that public assistance benefits are a @privilege’ and not a @right.'[63]

The enactment of PRWORA changed the federal entitlement status of welfare benefits.[64] Whereas in Goldberg, welfare recipients had a property interest in federal statutorily entitled welfare benefits,[65] the PRWORA eliminated such federal entitlement. With the enactment of PRWORA, the due process analysis stops at the first step because it does away with any statutory federal entitlement to those benefits. Although PRWORA may have eliminated the federal entitlement, it did not necessarily eliminate a state entitlement.

First, the statute does not explicitly prohibit states from creating entitlement through state law.[66] Second, in order for the states to receive federal money they must create a state plan that “shall set forth objective criteria for the delivery of benefits and the determination of eligibility and for fair and equitable treatment, including an explanation of how the state will provide opportunities for recipients who have been adversely affected to be heard in a state administrative or appeal process.”[67] Because PRWORA requires states to set eligibility requirements, it seems that the states are mandated to create entitlements.[68] That is, the state cannot arbitrarily deny an applicant that fits the criteria set forth in its eligibility requirements.[69] Furthermore, it implicitly recognizes a property interest by requiring due process protections through a sort of administrative process to hear disputes for welfare recipients that may be adversely affected by the state. In the case of New York, the New York Social Services Laws contain no explicit provision that eliminates entitlement. In fact, the New York Social Service Laws contain entitlement and eligibility language throughout.[70] Similarly, the language of the PRWORA requires states to afford due process for welfare recipients in their state plan,[71] regardless of whether a state entitlement to the benefits exists. Even though PRWORA eliminates federal entitlement to welfare benefits, thus making a due process claim under the 14th Amendment impossible, New York residents have recourse under the New York State Constitution Due Process Clause,[72] which mimics the language of the due process clause of the 14th Amendment. Assuming that PRWORA has not eliminated a state entitlement to welfare benefits, the second step of the due process analysis requires an examination of state procedures.

IV. THE PROCESS THAT IS DUE

A. Goldberg v. Kelly

The Goldberg suit was brought on behalf of twenty New York City residents[73] receiving Home Relief Aid [74] to Families with Dependant Children.[75] The complaint alleged that the New York State and City officials were going to terminate the relief distributed to the class under these programs without notice and without a pre-termination hearing, thereby violating their due process rights.[76] The complaint further challenged the constitutional adequacy of the notice and hearing procedure that was implemented by the State and City in response to the suit.[77]

Prior to the Goldberg decision, if a recipient received notice of termination, the recipient had a right to have a higher official review the determination.[78] However, the appellants challenged the procedure because it did not afford them an opportunity to personally appear before the reviewing official, present evidence orally or cross-examine adverse witnesses.[79] The recipients were only afforded a post-termination hearing after they had already lost their benefits. Even where they could prove that the state erred in its findings, the recipients’ only recourse was to receive benefits in arrears.[80]

The Court, in an opinion written by Justice Brennan, held that “due process requires an adequate hearing before termination of welfare benefits, and the fact that there is a later constitutionally fair proceeding does not alter the result.”[81] A major consideration that the Court weighed, in determining when procedural due process must be afforded to an individual, was the “extent to which he may be condemned to suffer grievous loss.”[82] The Court weighed the individual’s interest that would be affected by the state action, the risk of an erroneous deprivation that was posed by the procedures used and the government’s interests, including the method and the cost to replace or provide additional procedures.[83]

In Goldberg, the government argued that given that most terminations are not challenged, resulting in fiscal savings, there was a significant interest in using the procedure presently in place.[84] The Court found that since welfare benefits are essential to feed, clothe, shelter and medically provide for the recipients, the loss of these benefits are so grievous that it outweighed the government’s economic interest.[85] Although the Court did not specify what “hearing” meant,[86] it stated that “[t]he fundamental requisite of due process of law is the opportunity to be heard. The hearing must be at a meaningful time and in a meaningful manner.”[87] In addition, it elucidated other procedural requirements that the government must provide recipients including the opportunities to appear in front of the reviewing official with or without counsel, to present evidence orally, and to cross-examine adverse witnesses.[88]

The underlying theme that ran through the opinion was participation. There is a measure of fairness and equality when an individual can participate in an action by the government that threatens their life, liberty, or property. Prior to the implementation of MDR, New York welfare recipients who disputed an adverse action could proceed to a fair hearing without an intervening mandatory interview. The fair hearing procedures, prior to the implementation of MDR, provided the requisite due process protections elucidated in Goldberg.

B. The Fair-Hearing Process Pre-MDR in New York City

Before the implementation of MDR, the numerous welfare recipients each year with disputes surrounding their welfare benefits[89] were limited to two options: an informal conference with their caseworker[90] or a fair hearing. A recipient has the right to a fair hearing in a number of different circumstances, including a denial of an application for benefits, a failure to act promptly within regulation time limits on an application, an inadequacy in the amount or manner of payment, or a termination of part or the whole of the benefits.[91]

The fair hearing process is overseen by the OTDA’s[92] Office of Administrative Hearings.[93] It is presided over by an impartial hearing officer,[94] who must be an attorney.[95] The recipient has the right to have counsel present at the fair hearing.[96] However, less than 10% of indigent fair hearing appellants have representation.[97]

During the fair hearing, the recipient must show that the agency’s denial of benefits was incorrect or that she[98] is entitled to more benefits than she is presently receiving,[99] while the agency must show that its actions were correct.[100] The recipient and the agency are permitted to submit evidence and examine witnesses.[101] A fair hearing decision must be supported by substantial evidence. [102] After the fair hearing, the officer compiles the “fair hearing record,”[103] and sends it to the Commissioner of OTDA for a final review.[104] The Commissioner enters the final fair hearing decision.[105] All fair hearing decisions are judicially reviewable.[106]

Although the fair hearing does not follow the strict rules of evidence and procedure found in civil courts, there are safeguards in place during the fair hearing process that afford due process protections to recipients.[107] Before the fair hearing, the recipient can apply for “aid continuing,”[108] which reinstates the recipient’s benefits until the final fair hearing decision.[109] Welfare recipients are entitled to copies of any documentation or other evidence that the local agency intends to admit in the fair hearing proceeding.[110] However, the recipient does not have a reciprocal obligation to the agency.[111] During the fair hearing proceeding, if the recipient does not know the correct question to ask witnesses, the fair hearing officer can question the witnesses and parties.[112] If the recipient does not know what type of documentation may affect the fair hearing outcome, the fair hearing officer can adjourn and explain to the recipient which documents are preferable.[113] If the recipient is a non-English speaker or is deaf, the presence of an interpreter must be arranged by the fair hearing officer free of charge.[114] A fair hearing officer can adjourn a fair hearing if she thinks that the recipient’s due process rights have been impinged in any way.[115] The hearing officer may void the local center’s adverse determination if there is a deficiency in the notice[116] or in the evidence.[117]

After a fair hearing decision is discharged, it is incumbent on the local center to obey the decision upon notification.[118] If the center does not obey the decision, the OTDA must enforce the decision and can compel local compliance.[119] The state agency can sue the local welfare districts or withhold funding as a sanctioning method.[120] But these procedures affording recipients due process protections have been undermined by New York City’s implementation of MDR.

V. MDR AND DUE PROCESS

MDR does not provide the procedural safeguards protecting the due process rights of welfare recipients so afforded by the Goldberg decision or the fair hearing process. First, MDR requires that the welfare recipient meet with the employees of the HRA office who initiated the adverse action before she can commence a fair hearing.[121] Because the HRA and the recipient may have conflicting interests, this meeting could lead to abuse by the administrating supervisor.[122] Second, the MDR interview eliminates the formal procedural protections that the fair hearing afforded welfare recipients, creating a forum for abuse and arbitrariness.[123] Third, the penal nature of the MDR interview eliminates a welfare recipient’s opportunity to be heard, a cornerstone of due process rights.[124] Finally, the grievous nature of these procedural losses of benefits outweighs the government’s interest in saving money.

When a recipient requests a fair hearing, she is forced to attend an MDR interview with the caseworker’s supervisor. Given that the caseworker initiated the adverse action, there is no assurance that the supervisor would be impartial during an MDR interview. Essentially, it is analogous to the fox guarding the chicken coop. If the supervisor has an interest adverse to that of the recipient’s,[125] the risk of abuse, such as influencing the recipient to drop the fair hearing, could be tremendous. Furthermore, a supervisor is not required to be an attorney and therefore does not necessarily have the requisite legal background or knowledge of New York welfare law to advise the recipients on whether or not they have a good claim.

In the case of Burgoyne v. Lukhard,[126] the Federal District Court of the Eastern District of Virginia dealt with this exact situation. An opinion written by Judge Merhige explains why such a procedure has dire consequences for due process rights of welfare recipients:

However, if as the plaintiff suggests, those welfare officials have interests which are adverse to the recipients’, there may be a potential for abuse against which this Court should offer its protection. It was because of the caseworker’s potentially adverse interests to those of the recipient in Goldberg v. Kelly, that led the Court there to consider it unsafe to leave the presentation of the recipient’s claim to the caseworker. Similarly here, it may be that the caseworker would be in a position to exert an undue influence on the recipient.

This is not to suggest, necessarily, bad faith on the part of those welfare officials with whom the recipients would be placed in contact. Rather, it is merely recognition of the fact that such officials, if found to have interests which are adverse to the recipients’, can hardly be considered effective advisors to the recipients who would consult them. Assuming the existence of such adverse interests, there is a sufficient danger that the officials in question, albeit acting in good faith, would seek to influence recipients to drop claims which they, the officials, would consider frivolous, but which, to the objective observer, would not be without merit.[127]

Insistence by the New York City HRA to lower fair hearing numbers automatically places caseworkers in an adverse position against their clients.[128] Taking into account that many of the recipients who appear at the MDR have little education or experience and often times do not have representation, the adverse environment becomes especially troublesome. These were the considerations that the Court in Burgoyne examined.[129] In many cases, the recipient would not know whether or not she had a good claim that should be pursued further at the fair hearing. In essence, the MDR interview acts as a gatekeeper, keeping clients out of the fair hearing process. This is only one of a number of problems with the MDR interview.

All formal procedures that provide protection during the fair hearing are eliminated at the MDR. There is no indication that a recipient is allowed to present oral evidence, such as witnesses, or to cross-examine adverse witnesses during the MDR interview.[130] The local welfare center is not mandated to provide the welfare recipient with the evidence that it plans to use at the fair hearing, yet the recipient must give the agency any evidence she intends to present.[131] Without being privy to the evidence against her, a recipient has no real way of evaluating whether she should resolve the dispute at the MDR or whether she should continue onto a fair hearing. This leaves her almost entirely dependent on the counsel of the caseworker and supervisor. Because of the opposing positions of the welfare recipient and the supervisor, the potential for abuse is almost certain.

Further potentials for abuse exist because there is no transcript of the MDR interview[132] and the MDR interview is not judicially reviewable.[133] Thus, if some sort of solution is agreed upon during the MDR interview, there is no record of what that agreement is and there is no way to enforce it if the local center does not live up to its end of the agreement.[134] If a recipient withdraws her fair hearing request and the state does not live up to the agreement, her only recourse is to request another fair hearing which would entail another MDR interview.[135] The fair hearing procedural safeguards protect recipients from arbitrary or erroneous government action which result in the loss of benefits.[136] The MDR procedures not only eliminate these procedural safeguards, but they seem to invite arbitrary and erroneous decision-making back into the system.

The due process violation seems to be the most egregious when the recipient does not attend the MDR interview. Although the recipient still has the opportunity to appear in front of the reviewing official at the fair hearing, the recipient has lost her right to present evidence at the fair hearing because she did not present evidence at the interview. This penalty gives no functional effect to the fair hearing. In essence, it denies the recipient her opportunity to be heard regardless of her claim’s merit. The cornerstone of the due process protections @ the opportunity to be heard in a meaningful manner @ is completely subverted by the penal consequences of missing an MDR interview.

In applying the Mathews test, the Court not only looks at procedure, but also at the private and governmental interests at stake, the procedure’s function and the fiscal and administrative burdens of implementing a substitute procedure.[137] Welfare benefits usually represent the only source of income that flows into the recipient’s households.[138] The courts have recognized that loss of welfare benefits can have dire consequences that post termination reimbursement simply cannot remedy.[139] Proponents of MDR would assert that the MDR interview conserves fiscal and administrative resources, hence relying on the same argument that the government did in Goldberg @ that recipients would accept termination or other adverse action without challenge.[140] However, this presents the exact problem in Goldberg and thus should lead to the same conclusion: the government interest in reducing the number of fair hearings through the use of MDR does not override the recipient’s interests in avoiding the loss of benefits. The New York City HRA should be enjoined from using the MDR interview to sidestep due process. While the MDR initiative violates due process rights of welfare recipients, an alternative to fair hearings can be implemented without such consequences.

VI. ALTERNATIVE DISPUTE RESOLUTION IN THE WELFARE CONTEXT

Although the MDR practice in New York City is unconstitutional, that does not automatically disqualify the use of alternative dispute resolution (“ADR”) for resolving disputes regarding welfare benefits. In fact, long before the adoption of MDR, there were proponents for the use of ADR in the welfare context in New York City.[141] Administered properly, the ADR process should provide a solution without compromising due process rights.[142] Changes to the current MDR practice could prove to be beneficial to both welfare recipients and welfare administrators.

Studies have shown that in less formal ADR procedures, such as mediation, indigent parties and less experienced parties tend to be unsuccessful.[143] This is because of the lack of procedural protections afforded in a more formal procedure, such as a fair hearing.[144] Furthermore, studies have shown that people are more likely to express prejudices in an informal setting.[145] This can have terrible consequences for welfare recipients because of their class status. Similarly, since many recipients are women and minorities, their chances of success in an informal setting are further impinged.[146] Formal procedures offer safeguards to ensure that decisions are made fairly.[147]

Changes in the current MDR process could improve the process such that it does not violate due process rights. First, a dispute resolution procedure should not be mandatory. Although this begs the question of whether a dispute resolution program would be utilized if it was not mandatory, there is no basis to assume that recipients do not have as much of an interest in the timely resolution of welfare disputes as do the administrative agencies. In fact, there is no reason to believe that it would not be more convenient for a welfare recipient to deal with the problem at her local welfare office. Dispute resolution can act as a gatekeeper to a fair hearing without being mandatory.

Secondly, dispute resolution should be presided over by an impartial third party. Due to the City’s desire to lower the number of fair hearings, the supervisors are placed in a position that is automatically adverse to the interests of welfare recipients. Additionally, because of their class status and lack of education or experience, welfare recipients are placed in a vulnerable position from the start of the MDR interview. These circumstances lead to opportunities of abuse and erroneous decision-making on the part of the administering supervisor. Having a neutral third-party present could empower the welfare recipient and avoid putting a supervisor in a position to abuse the system.

Finally, the dispute resolution process should not be penal. If the recipient chooses not to attend the dispute resolution appointment or mistakenly fails to appear, she should be able to continue to the fair hearing unobstructed. Closing cases at a fair hearing or precluding recipients from presenting evidence deprives the recipients of their opportunity to be heard and serves no other purpose than to effectively eliminate the fair hearing. More importantly, the dispute resolution would not have a chilling effect on other welfare recipients. For example, when recipients have their case closed because they miss the MDR appointment, the message sent out to other recipients is “don’t challenge the agency.” Recipients, who are only challenging the amount of benefits they receive, will not pursue a fair hearing because they are afraid of losing their benefits altogether. These small changes could substantially increase the success of the dispute resolution process for both recipients and administrators without violating any due process rights.

In 1988, New York City experimented with a pre-hearing mediation program.[148] The program was state initiated and proposed a voluntary mediation between the recipient and the local social service agency prior to fair hearing.[149] The mediation was overseen by an impartial third party, the state agency, and not the local welfare center.[150] Unlike the MDR program, the social service agency was required to produce the recipient’s case record and any supporting documentation to clarify the intended adverse action.[151] On the other hand, the recipient was not required to reveal any evidence that she planned to introduce at the fair hearing, nor was she penalized if she declined to present such evidence or even attend the mediation.[152] If the mediation produced a resolution, the state agency would issue a “mediation order,” which had the same force as a fair hearing decision.[153] The mediation program included the due process protections that MDR lacks. However, when the mediation program was actually implemented in New York, it proved unworkable.[154] Fair hearing recipients preferred to go to the fair hearing rather than return to the local center because participation in the mediation usually required more than one trip, one to the local center and one to the fair hearing.[155] After an analysis of the mediation, the program by the state agency, it was discontinued.[156]

The changes suggested above could help to create an alternative dispute resolution program that comports with due process. However, it is unclear that the suggestions above could help change the MDR program so that it is a workable program. The New York State mediation initiative indicated that voluntary dispute resolution was impractical. However, even if the procedurally sound dispute resolution program is unworkable, a mandatory program, such as MDR, cannot be used as an alternative because it violates and will continue to violate the procedural due process rights of welfare recipients. MDR was initiated to offer an alternative to the fair hearing process, yet it appears that it has established not an alternative, but a substitute. Ideally, the MDR program could quickly purge the systems of those cases where the caseworker’s determination was correct without having to conduct a costly fair hearing. The cost of MDR, however, is the due process rights of welfare recipients. Finding a balance between creating an alternative dispute resolution program in the welfare context and respecting the due process rights of welfare recipients is an arduous task. However, due process rights cannot be overlooked in the pursuit of designing an ADR program aimed at saving time and money.

VII. CONCLUSION

Federal welfare reform has lead to massive changes in state welfare programs. With the switch from federal entitlement programs to block grants, states no longer have to comply with federal regulation. This has resulted in New York City implementing an ADR program that has practically replaced the fair hearing process. Welfare recipients, who have been subjected to or will be subjected to the fair hearing process, now risk losing their benefits without due process of law as required by the Supreme Court. Consequently, this not only jeopardizes the due process rights of welfare recipients but also jeopardizes the only means of existence for these recipients. The task of creating an ADR alternative to the fair hearing is daunting. New York has attempted to develop such a program that also provides procedural safeguards, but that program failed. Thus the question remains, whether it is possible to create a comprehensive, workable ADR program that does not violate due process rights of recipients. Or more importantly, whether ADR is an appropriate approach in matters that directly affect the very means by which people live.

* Notes Editor, Cardozo Online Journal of Conflict Resolution, J.D. Candidate (June 2002). The author would like to thank Peter Vollmer, Esq. for his introduction to MDR and his generosity in sharing his time and thoughts during the development of this Note. She would also like to thank Professor David Rudenstine for his helpful suggestions and feedback; and Deborah Chow and her invaluable staff for their work in the production of this Note. In addition, she would like to thank Billy Spaker for his support, love and words of encouragement throughout the writing process.

[1] See Elana S. Marton, Note, Due Process Rights Under Connecticut’s Time Limited Benefit Program for Families in Need, 5 Geo. J. Fighting Poverty 349, 352 (1998).

[2] See id. at 352-53.

[3] Pub. L. No. 104-193, 110 Stat. 2105 (1996).

[4] Large-scale federal involvement in welfare programs evolved from the poverty that resulted from the Great Depression. See Marton, supra note 1, at 350. In 1935, President Roosevelt signed into law the Social Security Act of 1935, Social Security Act of 1935, Pub. L. No. 74-271, 49 Stat. 620, which created the Aid to Dependent Children (“ADC”) program, the precursor to AFDC. See Marton, supra note 1, at 350. The purpose of this program was to provide temporary assistance to the children of single mothers. Id. ADC was seen as temporary aid; however, as time went on the number of single-mother families on ADC grew due to increases in the frequency of divorce, abandonment and out-of-wedlock births. The program changed from a cash assistance program to a program designed to help women learn to support themselves and their families. Id. Under ADC, states could design their own requirements for eligibility and benefit levels, but could only receive money from the federal government if the state plan complied with federal regulations. See Michelle L. Van Wiggeren, Experimenting with Block Grants and Temporary Assistance: The Attempt to Transform Welfare by Altering Federal-State Relations and Recipients’ Due Process Rights, 46 Emory L. J. 1327, 1331 (1997). Similarly, the Social Security Act granted the ADC recipients a right to some sort of fair hearing before termination of their benefits. Id. at 1332. Starting in the 1980’s, there was a backlash against the expansion of welfare that had resulted from the political activity of the previous decades. Welfare programs became more expensive to administer as the economy experienced a decline. Id. at 1334. Congress passed legislation, see The Omnibus Budget Reconciliation Act of 1981, Pub. L. No. 97-35, 95 Stat. 357; see also The Family Support Act of 1988, Pub. L. No. 100-485, 102 Stat.2342, that encouraged work programs, limited eligibility criteria and reduced AFDC benefits. See Van Wiggeren at 1334. Also born out of this legislation was the waiver program, which allowed states to obtain waivers from the Department of Health and Human Services to design benefit programs that would meet unique circumstances of people in their borders. See Marton, supra note 1, at 352.

[5] In the 1990’s, there was a growing concern that welfare programs were not achieving the purpose for which they were established, namely to reduce poverty levels. See Van Wiggeren, supra note 4, at 1335. Similarly, there was a revival of public sentiment that poor people did not deserve help. See Marton, supra note 1, at 351. PRWORA eliminated AFDC, the welfare entitlement system of distributing money, and replaced it with a block grant system called TANF. See id. at 352-53. Under the entitlement program, a state was required to give public assistance to any person who fit the eligibility criteria and could not deprive an individual of those benefits without due process of law. See id. Under the present block grant system, there is no entitlement to benefits. See Pub. L. No. 104-193, 110 Stat. 2105 (1996) (“The purpose of this part is to increase the flexibility of States in operating a program designed to (1) provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives (2) end the dependence of needy parents on government benefits by promoting job preparation, work and marriage (3) prevent and reduce the incidence of out of wedlock pregnancies … (4) encourage the formation and maintenance of two-parent families. This part shall not be interpreted to entitle any individual or family to assistance under any State program funded under this part.”) (emphasis added). For example, if the number of individuals who seek benefits outnumber the amount of resources the state has to provide, there is no federal requirement that the state give assistance to those individuals. See Marton, supra note 1, at 353. Similarly, under TANF, states are no longer required to comply with extensive federal regulation. See Zeitlow, infra note 7, at 1127.

Welfare reform emerged in New York during the 1990’s. In 1997 New York enacted the Welfare Reform Act (“WRA”). Under the Act, AFDC became Family Assistance and Home Relief became Safety Net Assistance, which limited the number of years a recipient could receive cash assistance. See The Committee on Social Welfare Law, infra note 10, at 474. New York City’s initiative in implementing WRA centered on administrative barriers, particularly the application process and strict compliance with work rules. See id. at 475. Former New York City Mayor Rudolph Giuliani had been an adamant proponent of time limits and work requirements. See id. His philosophy was fueled “by the belief that poverty and the need for public assistance is largely the product of the failure of individual will.” Id. He pledged to end welfare in New York City by the year 2000. See id. As part of his decision to get tough on welfare, Giuliani brought in Jason Turner, who was in part responsible for the Wisconsin Works program that drastically reduced Wisconsin welfare cases. See id. at 476. It is within this climate of welfare reform in New York City and the easing of federal requirements on the states, that the New York City HRA initiated the MDR program.

[6] Federal monies to states for programs under the Social Security Act of 1935 came in the form of matching funds. See 42 USC 601-687 (2001).

[7] Rebecca E. Zeitlow, Two Wrongs Don’t Add Up to Rights: The Importance of Preserving Due Process in Light of Recent Welfare Reform Measures, 45 Am. U. L. Rev. 1111-1112 (1996).

[8] See id. With the enactment of PRWORA and its elimination of federal entitlement to welfare benefits, the question remains whether welfare recipients are still afforded due process protections before their benefits can be terminated.

[9] See Plaintiffs’ Brief at 33, Khana v. Turner (E.D.N.Y. 2000) (No. CV-99-5629).

[10] HRA is the local New York City social services agency responsible for administering cash assistance, food stamps, and Medicaid programs. See The Committee on Social Welfare Law, The Wages of Welfare Reform: A Report on New York City’s Job Centers, 54 The Record 472, 473, note 3 (July/August 1999).

[11] Staten Island is one of the five boroughs in New York City. The five boroughs of New York City are Manhattan, Brooklyn, Staten Island, Queens, and the Bronx.

[12] See N.Y. Comp. Codes R. & Regs. tit. 18, 358-2.12 (Consol. 2000). “Fair hearing means a formal procedure provided by the department upon a request made for an applicant or recipient to determine whether an action taken or failure to act by a social services agency was correct.”

[13] For the purposes of this paper, welfare recipients refer to those individuals that receive Temporary Aid to Needy Families (TANF), Safety Net Assistance, Food Stamps and Medicaid. However, the MDR initiative is not used in adverse actions taken against Food Stamps or Medicaid beneficiaries. The Food Stamps program is a federal benefit program overseen by the Department of Agriculture and the Medicaid program is overseen, in part, by the New York State Department of Health. Upon the commencement of the MDR program, both the Department of Agriculture and the New York Department of Health asked that each program be exempt from the MDR process. See Plaintiffs’ Brief, supra note 9, at 24-25.

[14] See Memorandum draft from Patricia M. Smith, Executive Deputy Commissioner of Family Independence Administration to IS/JOB Center Staff (May 4, 1999)[hereinafter Memorandum] (on file with author).

[15] See Plaintiffs’ Brief, supra note 9, at 21.

[16] Supra note 11.

[17] See Plaintiffs’ Brief, supra note 9, at 33.

[18] In November 2000, seven (7) named plaintiffs brought a class action preliminary injunction against New York City filed in Federal Court for the Eastern District of New York. They claim that they were subjected to the MDR process, which deprived them of due process protections and resulted in the loss of benefits. See Plaintiffs’ Brief, supra note 9, at 1-2.

[19] Goldberg v. Kelly, 397 U.S. 254 (1970).

[20] Id. at 262. (“Such benefits are a matter of statutory entitlement for persons qualified to receive them. Their termination involves state action that adjudicates important rights.”) (emphasis added).

[21] Id. at 264 (stating that there must be a pre-termination evidentiary hearing before the termination of benefits in order to comport with due process).

[22] Id. at 269-270.

[23] Mathews v. Eldridge, 424 U.S. 319 (1976).

[24] Id. at 334.

[25] Id. at 335.

[26] See Walters v. National Association of Radiation Survivors, 473 U.S. 305, 332-33 (1985); Parratt v. Taylor, 451 U.S. 527, 538 (1981); Gete v. Immigration and Naturalization Services, 121 F.3d 1285, 1297 (9th Cir. 1997); Chalkboard, Inc. v. Brandt, 902 F.2d 1275, 1381 (9th Cir. 1989); Martinez v. Blum, 624 F.2d 1 at 2 (2d Cir. 1980); Almenes v. Wyman, 453 F.2d 1075, 1089 (2d Cir. 1971); Hart v. Westchester Co. Dep’t of Social Services, 2001 U.S. Dist. LEXIS 4064, at *9-10 (S.D.N.Y. 2001); Richardson v. Kelaher, 1998 U.S. Dist. LEXIS 18287, at *10-12 (S.D.N.Y. 1998); Ford v. Shalala, 87 F.Supp.2d 163, 167 (E.D.N.Y. 1999); DuPaul v. Jackson, 8 F.Supp.2d 237, 241 (W.D.N.Y 1998).

[27] MDR has no statutory or regulatory basis.

[28] See Memorandum, supra note 14.

[29] See N.Y. State Bar Assoc. Report of the Special Committee on Administrative Adjudication (1999).

[30] See Report of the State Comptroller, see State of N.Y. Office of the State Comptroller Division of Management Audit and State Financial Services, REP. 97-S-42, Office of Temporary and Disability Assistance: Fair Hearing Process, at 2 (September 23, 1998)[hereinafter Report Of State Comptroller] . The 85% represents the total percentage of fair hearings that were either reversed or withdrawn. The City will withdraw from a fair hearing for a number of reasons, including defective agency notice, misapplication of law or regulation, insufficient documentation or testimony, failure to produce the case record, or failure to send requisite documentation to the recipient. Thirty two percent of fair hearings are reversed while the City withdraws from 53%. See id.

[31] See id. at 7. Ironically, the $16 million cost was due to losses that were within the City’s control, that is losses due to the City’s inability to prepare for the hearing. See id. at 8.

[32] See Plaintiffs’ Brief, supra note 9, at 22-23.

[33] See N.Y. Comp. Codes R. & Regs. tit. 18, 358-5.1 (Consol. 2000).

[34] See Memorandum, supra note 14, at 2.

[35] See id.

[36] See id.

[37] See id.

[38] See id.

[39] See Plaintiffs’ Brief, supra note 9, at 28.

[40] See id. at 29.

[41] See Memorandum, supra note 14, at 1.

[42] See id. at 2.

[43] See id.

[44] See id.

[45] See id.

[46] See Plaintiffs’ Brief, supra note 9, at 31-32.

[47] See Memorandum, supra note 14, at 3.

[48] See id.

[49] See id.

[50] See id.

[51] See id.

[52] See id.

[53] See Plaintiffs’ Brief, supra note 9, at 31-32.

[54] See id.

[55] Interview with Cathleen Clements, Esq., Director of The Office of Public Policy & Client Advocacy at the Children’s Aid Society, in New York, N.Y. (September 20, 2000).

[56] See Plaintiffs’ Brief, supra note 9, at 3.

[57] See Marton, supra note 1, at 354 (1998).

[58] See id.

[59] See generally Marton, supra note 1. See also Stone, Seidman et. al., Constitutional Law, 1048 (2d. ed. 1996). “[T]he Court defined liberty and property interests by reference to the common law. If the government took someone’s property. . . the due process clause required some kind of hearing. But the clause was inapplicable if the government denied an individual some public benefit.”

[60] See Marton, supra note 1, at 354. “Legal doctrine distinguished between deprivations of rights,’ which were to be treated as protected interests, and deprivation of privilege,’ which were not to be treated as protected interests. If an individual owned some object of value like a house or a car, she had a property right’ protected by due process. Most benefits an individual received from the government. . .were only privileges’ that the government could take at any time for any reason.”

[61] See Zeitlow, supra note 7, at 1121-1122. Professor Charles Reich’s work, The New Property, 73 Yale L. J. 733 (1963), was a major influence on the Court’s decision in the Goldberg case and was even quoted in a footnote of the case. Reich stated that a kind of “new property” should be created that would carry procedural protections such that persons receiving benefits would not be subjected to capricious governmental decisions. See STONE, supra note 59, at 1048-1049.

[62] See Goldberg, 397 U.S. at 262.

[63] Id. (emphasis added).

[64] “This part shall not be interpreted to entitle any individual or family to assistance under any State program funded under this part.” Pub. L. No. 104-193, 110 Stat. 2105 (1996).

[65] See Goldberg, 397 U.S. at 262.

[66] See Van Wiggeren, supra note 4, at 1361.

[67] See Pub. L. No. 104-193, 110 Stat. 2105, 2114.

[68] See Van Wiggeren, supra note 4, at 1359.

[69] See id.

[70] N.Y. Soc. Serv. 131 (Consol. 2000). “No individual who is under the age of eighteen and is not married, who resides with and provides care for his or her dependent child or is pregnant and otherwise entitled to family assistance.” N.Y. Soc. Serv. 349(b)(2) (Consol. 2000) “[T]he department may by regulation require that some or all persons, or households containing such persons, who are otherwise eligible for family assistance and are permanently disabled and awaiting determinations of eligibility for federal supplemental security income under title XVI of the federal social security act receive family assistance without use of federal funding and the department is authorized to reclassify retroactively all or a portion of the amount of any family assistance which otherwise has been or would be received by any such person or household if such reclassification is in the financial interests of the state; provided, however, that any such retroactive reclassification shall be accomplished without diminution or increase of the family assistance grant previously paid and shall not affect any rights, obligations or entitlements of any such person under the family assistance program.” (emphasis added).

[71] See Pub. L. No. 104-193, 110 Stat. 2105. “The document shall set forth objective criteria for the delivery of benefits and the determination of eligibility and for fair and equitable treatment, including an explanation of how the State will provide opportunities for recipients who have been adversely affected to be heard in a State administrative or appeal process.”

[72] N.Y. Const. art 1, 6. “No person shall be deprived of life, liberty or property without due process of law.” Id.

[73] See Goldberg, 397 U.S. at 257.

[74] Home Relief was a benefit entitlement program similar to AFDC except it did not have the same family structure requirements. Home Relief was the child of New York State. It provided cash assistance to single adults and couples without children. See The Committee on Social Welfare Law, supra note 10, at 474.

[75] See Goldberg, 397 U.S. at 256.

[76] See id.

[77] See id. At the time that the suit was filed there was no notice requirement or hearing procedure in place. After a suit was filed, the State and City implemented the procedures that the complaint alleged were constitutionally inadequate. Id.

[78] See id. at 259.

[79] See id.

[80] See id.

[81] See id. at 261.

[82] See id.

[83] Id. This balancing test was later more concretely defined in Mathews. However, the Mathews case was not factually identical to Goldberg. In Mathews, the Court decided whether the Due Process clause of the Fifth Amendment requires a pre-termination hearing before the State denies social security disability benefits. In this case, the State relied on written communication by the recipient to determine continued eligibility for social security disability payments. See Mathews, 424 U.S. at 337 . The Court held that a pre-termination evidentiary hearing was not required in social security disability benefit cases. See id. at 343. The Court distinguished Goldberg in a couple of different ways. First, the determination of continued eligibility was based upon a medical assessment, which is “a more sharply focused and easily documented decision than the typical determination of welfare entitlements.” See id. at 342. Second, whereas welfare recipients lacked the educational capacity to write effectively, social security recipients do not necessarily face the same obstacle. See id. at 345. And finally, the consequences for the termination of disability benefits would not be as grievous as the termination of welfare benefits because social security recipients could have income coming from other sources such as family members, workman’s compensation or a tort award as compared to welfare recipients whose governmental benefits were the only source of income that came into the household. See id. at 340-341.

[84] See Goldberg, 397 U.S. at 265.

[85] See id. at 264.

[86] Id. at 266. (The Court did indicate that an informal hearing would suffice.) “[T]he pretermination hearing need not take the form of a judicial or quasi-judicial trial. We bear in mind that the statutory fair hearing’ will provide the recipient with a full-administrative review. Accordingly, the pre-termination hearing has one function only: to produce an initial determination of the validity of the welfare department’s grounds for discontinuance of payments in order to protect a recipient against an erroneous termination of his benefits.” See id. Read alone, this quote from the majority opinion might justify the use of MDR. However, the court went further to explain that particular procedural safeguards must be provided in the hearing, which do not exist in the MDR interview.

[87] See id. at 267.

[88] See id. at 269.

[89] Disputes arise when a recipient challenges an adverse action notice. The recipient learns of the adverse action through a notice from a social service agency regarding the status of an application for benefits or benefits already being received by the recipient. See N.Y. Comp. Codes R. & Regs. tit. 18, 358-2.3 (Consol. 2000).

[90] See id. 358-2.4. “Agency conference means an informal meeting at which an applicant or recipient may have any decision of social services agency concerning the applicant’s or recipient’s public assistance . . . or services reviewed or may have any other aspect of the applicant’s or recipient’s case reviewed by an employee of that agency who has the authority to change the decision with which the applicant or recipient disagrees.” The case law that surrounds the right to an agency conference is beyond the scope of this Note.

[91] See N.Y. Soc. Serv. Law 22(5)(a)-(d) (Consol. 2000).

[92] OTDA is responsible for supervision of the public assistance programs in the State of New York. See The Committee on Social Welfare Law, supra note 10, at 474.

[93] See Report Of State Comptroller, supra note 30, at 1.

[94] A fair hearing officer can be removed if she “displays any bias . . . to any party to the hearing.” See N.Y. Comp. Codes R. & Regs. tit. 18, 358-5.6(c)(1)(iii) (Consol. 2000).

[95] See id. 358-2.13.

[96] See N.Y. Soc. Serv. Law 22.12(c)(Consol. 2000).

[97] See Plaintiffs’ Brief, supra note 9, at 7.

[98] For purposes of this Note the pronoun her refers to any singular welfare recipient. It is not intended to imply that there is connection between the gender and welfare recipients.

[99] See N.Y. Comp. Codes R. & Regs. tit. 18, 358-5.9(a) (Consol. 2000).

[100] Id.

[101] See id. 358-5.9(c)-(d).

[102] See id. 358-5.9(b).

[103] See id. 358-5.11(a).

[104] See id. 358-6.1(a).

[105] Id.

[106] See id. 358-6.1 (c).

[107] See Plaintiffs’ Brief, supra note 9, at 6.

[108] See N.Y. Comp. Codes R. & Regs. Tit. 18, 358-2.5 and 358-3.6 (Consol. 2000).

[109] See Plaintiffs’ Brief, supra note 9, at 9-10.

[110] See id.

[111] See id.

[112] See id. at 11.

[113] See id.

[114] See id.

[115] See id. at 11-12.

[116] See id. There are a number of ways that notice of an adverse action may be deficient. If the notice does not include an explanation for the adverse action or lacks pertinent information that could be harmful to the recipient, the fair hearing officer can hold in favor of the recipient. Id. Furthermore, if the agency’s adverse action is based on a budget calculation, that calculation must be included in the notice. Id. at 13.

[117] See id. at 12. Evidentiary deficiencies occur when the agency is unable to produce the recipient’s file or relevant documentation needed for the hearing. Id.

[118] See id. at 14.

[119] See id. at 15.

[120] See id.

[121] See Memorandum, supra note 14, at 1.

[122] See Plaintiffs’ Brief, supra note 9, at 34-35.

[123] See id. at 28.

[124] See id. at 32. The opportunity is lost when a recipient does not appear at the MDR interview and then is effectively barred from presenting evidence at a later fair hearing. Similarly, a fair hearing officer can summarily close a recipient’s case at the fair hearing for non-attendance at the MDR interview.

[125] For instance, the memorandum that was distributed to the local welfare centers during the implementation of MDR stressed to the caseworkers that fair hearings “are expensive to conduct and often place a strain on the Agency.” See Memorandum, supra note 14, at 1. This type of pressure from welfare officials to lower the number of fair hearings can consciously or unconsciously manifest an adverse intention on the part of the caseworker or the supervisor.

[126] Burgoyne v. Lukhard, 363 F.Supp. 831 (E.D. Va. 1973). In Burgoyne, recipients who wanted to request fair hearings, were directed to the same local agency that had issued the adverse decision.

[127] See id. at 834.

[128] See Memorandum, supra note 14, at 1.

[129] See Burgoyne, 363 F. Supp. at 835.

[130] See Memorandum, supra note 14, at 2.

[131] See Plaintiffs’ Brief, supra note 9, at 3.

[132] See id. at 30.

[133] See id. at 36.

[134] See id. at 30-31.

[135] See id. at 36.

[136] See id. at 7.

[137] See Mathews, 424 U.S. at 335.

[138] See Goldberg, 397 U.S. at 264.

[139] See Brown v. Giuliani, 158 F.R.D. 251 (E.D.N.Y. 1994)(quoting Goldberg, 397 U.S at 264); See also Morel v. Giuliani, 927 F. Supp. 622, 635 (S.D.N.Y. 1995) (“[T]o an indigent person, the loss of benefits constitutes irreparable harm”). See also Reynolds v. Giuliani, 35 F.Supp.2d 331, 339-340 (S.D.N.Y. 1999) (“[T]he hardship endured by plaintiffs deprived of public assistance unquestionably establishes immediate and irreparable harm.”).

[140] See Goldberg, 397 U.S. at 265.

[141] See generally The Committee on Administrative Law, Dispute Resolution in the Welfare System: Toward an End to the Fair Hearing Overload, The Record 411 (February 1993). The Committee focused its attention on preventative measures rather than on a formalized ADR program. These changes included making the service path between caseworker and the center director more accessible, improving caseworker training, and improving attitudes, quality control and caseworker accountability. However, the Committee also considered the use of an outside problem solver, in-center advocates and mediation.

[142] See Zeitlow, supra note 7, at 1112.

[143] See id. at 1116.

[144] Id.

[145] See id. at 1117.

[146] See id. at 1113.

[147] See id. at 1117.

[148] See Plaintiffs’ Brief, supra note 9, at 17.

[149] See id.

[150] See id. at 17-18.

[151] See id.

[152] See id.

[153] See id.

[154] See id. at 19.

[155] See id.

[156] See id.