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BEFORE THE BOARD OF INDUSTRIAL INSURANCE
APPEALS STATE OF |
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IN
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LEA'S
DRYWALL INC. |
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DOCKET
nOS. 05 18262, 05 18265, 05 24037, |
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06
14434 & 06 19738 |
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decision
and order |
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Firm, GL & L Enterprises, Inc., dba Precision Drywall, Inc., by
Clausen Law Firm, PLLC, per
Mark A. Clausen
Firm, Lea's Drywall, Inc., by
Clausen Law Firm, PLLC, per
Mark A. Clausen
Department of Labor and Industries, by
The Office of the Attorney General, per
Diane Hunter-Cornell, Assistant
The firm, GL & L Enterprises, Inc., dba Precision Drywall, Inc., filed appeals with the Board of Industrial Insurance Appeals, from Notices and Orders of Assessment under:
Docket No. 05 13857:
On
Docket No. 05 18266:
On
Docket No. 05 18356:
On
Docket No. 06 15457:
On
The firm, Lea's Drywall, Inc., filed appeals with the Board of Industrial Insurance Appeals, from Notices and Orders of Assessment under:
Docket No. 05 18262:
On
Docket No. 05 18265:
On
Docket No. 05 24037:
On
Docket No. 06 14434:
On
Docket No. 06 19738:
On
Pursuant
to RCW 51.52.104 and RCW 51.52.106, this matter is before the Board for review
and decision on a timely Petition for Review filed by the Department to a
Proposed Decision and Order issued on August 6, 2007, in which our industrial
appeals judge reversed the Notices and Orders of Assessment issued by the
Department dated May 4, 2005; September 12, 2005; May 11, 2006; December
22, 2005; April 10, 2006; and September 19, 2006; and remanded them to the
Department of Labor and Industries with direction to (1) recalculate the
premiums owed by Precision Drywall, Inc., and Lea's Drywall, Inc., by first
applying any money collected on the subcontractor's accounts to the payment of
delinquent subcontractor premiums before applying any of the proceeds to the
payment of penalties and interest; (2) grant a credit to GL & L
Enterprises, Inc., dba Precision Drywall and Lea's Drywall for premiums owed
for the full amount of
the surety bonds that were on file with the Department of Labor and Industries
when each subcontractor's premiums became delinquent and not collected by the
Department; (3) reissue Notices of Assessment to GL & L Enterprises, Inc.,
dba Precision Drywall, Inc., and Lea's Drywall, Inc., for any balances owing on
the delinquent subcontractor accounts after reducing the accounts by monies
received first to premiums and granting credit for each uncollected surety
bond.
The Board has reviewed the
evidentiary rulings in the record of proceedings and finds that no prejudicial
error was committed. Those rulings are
affirmed. In the employer's response to
the Department's Petition for Review an objection was raised to the inclusion
of the declaration of W. Alan Jorgenson as an attachment. We agree that this material is evidentiary in
nature and not appropriate for inclusion in a Petition for Review. Accordingly, this material will be stricken
from the record and not considered. The
attorney for the employers has also objected to a letter from the Assistant
Attorney General representing the Department asking the Board to consider the
recent court of appeals decision in Lee's
Drywall Co., Inc. v. Department of Labor & Indus., No 35613-9-II
(November 27, 2007). As this is a published decision by an
appellate court of the state of
We have granted review because we find that the Department has acted appropriately in collecting "premiums" in these appeals. Premiums are defined in RCW 51.08.015 as "the money payments by an employer or worker which are required by this title to be made to the state treasury for the accident fund, the medical aid fund, the supplemental pension fund, or any other fund created by this title." In applying RCW 51.12.070 and RCW 51.08.015 to the facts of these appeals we are required to keep in mind one of the fundamental legislative intents in adopting and amending the Industrial Insurance Act.
Consistent with the legislative intent behind the Industrial Insurance Act, this court has repeatedly emphasized that the Industrial Insurance Act should be given a liberal interpretation. The act "is remedial in nature and is to be liberally applied to achieve its purpose of providing compensation to all covered persons injured in their employment." Sacred Heart Med. Ctr. v. Department of Labor & Indus., 92 Wn.2d 631, 635, 600 P.2d 1015 (1979); Johnson v. Tradewell Stores, Inc., 95 Wn.2d 739, 743, 630 P.2d 441 (1981); Johnson v. Weyerhaeuser, Co., 134 Wn.2d 795, 799, 953 P.2d 800 (1998).
Brand v. Department of Labor & Indus., 139 Wn.2d 659, 668 (1999).
In considering the collection of "premiums" under RCW 51.12.070, we must give effect to the underlying purpose of this statute in the context of the Industrial Insurance Act as a whole. "[T]he obvious purpose of RCW 51.12.070 is to facilitate and broaden the premium collection of the Department. The more the statute facilitates full collection of premiums, the better it serves the accident fund from which compensation is paid." Littlejohn Construction v. Department of Labor & Indus., 74 Wn. App. 420, 426 (1994). The Department, in collecting "premiums" from GL & L Enterprises and Lea's Drywall, and their subcontractors, acted in a manner consistent with the broad grant of authority provided by the legislature in enacting RCW 51.12.070 and chapter 51.16 RCW.
Under RCW 51.12.070 the
"letting" contractor is "responsible primarily and directly for
all premiums upon the work" performed by their subcontractors. This statute also provides two ways to avoid
this responsibility. "[t]he . . . person, firm, or
corporation letting the contract is entitled to collect from the contractor the
full amount payable in premiums and the contractor in turn is entitled to
collect from the subcontractor his or her proportionate amount of the payment."
RCW 51.12.070. This provision in particular is useful in
the situation faced by these firms as the premiums for work done in drywall
installation are based upon the square footage installed, this information is
readily available to all the parties to the contract. The sections of RCW 51.12.070 that follow also provide that "a contractor registered under
chapter 18.27 RCW . . . shall not be responsible for any premiums upon the work
of any subcontractor if" the requirements set forth in the five numbered
provisions are met.
Neither firm took advantage of these options, and both stipulated that they, as "letting contractors," are responsible for the premiums assessed in the Notices and Orders of Assessment. This leaves before us the issues that are common to all of these appeals. The firms challenge the Department's action, or lack thereof, in collecting funds from the subcontractors and in the application of the funds collected. The firms object to the Department's action in first applying the funds collected from subcontractors to interest and penalties owed, and the remainder being applied to premiums owed by the subcontractor. They contend that the money collected from the subcontractors should first be applied to the assessed premiums for which the firms are responsible. In addition, the firms seek further credit or offset for monies that the Department failed to collect through legal action against the subcontractors' assets, in particular the subcontractors' surety bonds, filed with the Department pursuant to RCW 18.27.040(1).
The Industrial Insurance Act, when
originally enacted in 1911, included a provision making the "contractor .
. . responsible, primarily and directly, to the accident fund for the proper
percentage of the total pay roll of the work and the owner of the property
affected by the contract shall be surety for such payment." Laws of 1911, ch. 74, §17. Laws of 1921, ch. 182, §8, eliminated the
provision designating the owner as surety, and Laws of 1923, ch. 136, §5,
changed the language of this provision to state that "[T]he
person, firm or corporation who lets a contract for such extra-hazardous work shall
be responsible primarily and directly for all payments due to the accident fund
and medical aid fund upon the work." As the years have passed this provision has
been further modified, but not changed in substance, to the language now in RCW
51.12.070, providing that "the person, firm, or corporation
who lets a contract for such work is responsible primarily and directly for all
premiums upon the work." The
"premiums" for which the "letting" contractor are
responsible, primarily and directly, are defined in RCW 51.08.015 as being
the "taxes, which are the money payments by an employer or
worker which are required by this title to be made to the state treasury for
the accident fund, the medical aid fund, the supplemental pension fund, or any
other fund created by this title."
RCW 51.16.035(2) authorizes the Department of Labor and Industries
to "formulate and adopt rules and regulations governing the method of
premium calculation and collection . . . consistent with recognized principles
of workers' compensation insurance which shall be designed . . . to
facilitate collection."
The provisions cited above contain clear and unambiguous statements of legislative intent to provide broad collection powers to the Department. Keeping in mind the definition of "premiums" contained in RCW 51.08.015 it is clear that the Legislature intended to provide the Department of Labor and Industries with plenary powers in collection of "taxes," which are by definition money payments required to be made by an employer or worker to any fund created by Chapter 51 RCW. This all‑inclusive definition includes payments other than those designated as "premiums" in a Notice and Order of Assessment. These payments include charges imposed for the failure to file reports and for the failure to pay premiums on time. The collection of penalties and interest are part of the action required of the Department in order to collect the payments necessary to fully fund the act in accordance with "recognized principles of workers' compensation insurance." RCW 51.16.035(2).
The Legislature has provided the Department with the power to collect premiums from either the subcontractor employer, under chapter 51.16 RCW, or the contractor "who lets a contract . . ." under RCW 51.12.070. Chapter 51.16 RCW provides the Department with the power to initiate action to collect taxes from a defaulting employer, but it does not require the Department to take such action. Rather, RCW 51.12.070 and chapter 51.16 RCW provide alternative nonexclusive collection methods without a statutory requirement to employ one before the other. There is no statutory requirement placed on the Department to exhaust remedies against subcontractors for failure to pay premiums, penalties, and interest before collecting against the letting contractor under RCW 51.12.070.
In light of the
Legislature's removal of the provision making the owner a surety for the
payments, it is not appropriate to consider the "letting"
contractor's responsibility as being that of a surety as that term is defined
as a legal term of art. The
"letting" contractor's "surety like" premium responsibility
described in Hildahl v. Bringolf, 101
Wn. App. 634 2000, is not limited to that of a surety. Rather "the person, firm, or
corporation who lets a contract … is responsible primarily and directly for all premiums upon the work." RCW 51.12.070. (Emphasis added.) It also should be noted that the court in Hildahl v. Bringolf did not determine the "letting"
contractor's responsibility for the amounts assessed in the Notices and Orders
of Assessment that were the subject of appeals to this Board. The amount that Mr. Bringolf had to pay was
based upon an agreement between the parties to those appeals limiting his
responsibility to the assessment for taxes in the amount of $1,168.78, and not
upon a decision by the Court of Appeals.
This case does not stand for the proposition that the Department of
Labor and Industries is limited to collecting premiums and not allowed to
collect penalties and interest from a "letting" contractor.
The firms also contend that the
Department did not have a legal basis for their application of the funds
collected to the subcontractor's obligations.
Although the Department's internal Policy No. 64.30 has not been adopted
as a regulation, it is consistent with the broad powers granted to the
Department by the Legislature to fully fund the Act. "Application of payment . . . to the
oldest open item first . . . in this order: interest, fees, penalties,
premiums" is consistent with the Legislative direction to collect the
payments necessary to fully fund the Act in accordance with "recognized
principles of workers' compensation insurance." RCW 51.16.035(2). The collection of premiums months and years
after they were due does not provide "the payments necessary to fully fund
the act" in a way that is equivalent to the collection of premiums when
they are due. The collection of interest
and penalties provides the additional money that is necessary to insure that
the Industrial Insurance Act is fully funded.
While the Department clearly has the ability under RCW
18.27.040(3) to proceed against the subcontractors' bonds or assets, there is
no statutory requirement that it do so. It
is possible for the Department to perform an audit that results in a Notice and
Order of Assessment long after the taxes and contributions owing the
state of
Although we are sympathetic to the firms' situation, we
can find no basis for our application of equitable remedies. This Board does not have authority to provide
equitable relief unless such relief can be applied under the principle of stare
decisis. In re Isaiah Chavez Dec'd., BIIA Dec., 85 2867 (1987). Thus, the Board may grant equitable relief
only under circumstances where the
facts before it are controlled by established precedent. In re
AEX Corp., BIIA Dec., 90 5314 (1992). In
re State Roofing & Insulation, Inc., BIIA Dec. 89,1770 (1991) provides
an example of equitable relief being provided in the collection of taxes based
on the application of an established precedent analogous factual situation. The principle reason equitable relief was
provided in State Roofing &
Insulation is absent in these appeals.
State Roofing & Insulation relied, to its detriment, on incorrect
information provided by the Department in calculating and paying premiums. The record here does not establish reliance
by the firms on
information provided by the Department, or on the Department's action or
failure to take action in securing payment of the subcontractors'
"premiums." We can find no appellate
decision by a
Applying the broad legislative
grant of authority to the Department regarding collections to the facts of
these appeals we find that each Notice and Order of Assessment must be
affirmed. GL & L Enterprises and Lea's Drywall have failed to
establish that the Department exceeded its legislated authority in assessing,
collecting, and applying the amounts owed by, and collected from, the subcontractors,
including premiums, interest, and penalties as authorized by chapter 51.16 RCW;
or in assessing the "premiums" in the Notices and Orders of
Assessment that are the subjects of these appeals.
Consideration of the Proposed Decision and Order, the Department's Petition for Review filed thereto, the firms' Response to the Department's Petition for Review, and a careful review of the entire record before us, persuades us that the Notices and Orders of Assessment are correct and must be affirmed, with the modification based on the parties' stipulation.
FINDINGS OF FACT
1. On
2. On
3. On
4. On
5. On
6. On
7. On
8. On
9. On
Supreme Quality Drywall, which was not received by the firm. On
10. The Department of Labor and Industries has collected money on the subcontractors' accounts; the money collected has been applied first to the interest owed on the subcontractor account; secondly to penalties owed by the subcontractor; and lastly to the premiums owed by the subcontractor.
11. The Department of Labor and Industries then issued the Notices and Orders of Assessment assessing GL & L Enterprises, Inc., dba Precision Drywall, Inc. and Lea's Drywall for the balance of premiums owed after the application of the funds collected from the subcontractors.
12. The subcontractors for GL & L Enterprises, Inc., dba Precision Drywall were Victor's Drywall, Chivo's Drywall, Zagy's Drywall, and Rodriguez Drywall. All of these subcontractors had surety bonds on file with the Department of Labor and Industries in the sum of $6,000, except Chivo's Drywall, which had a $12,000 surety bond.
13. The subcontractors for Lea's Drywall were Romero's Drywall, Chivo's Drywall, Zagy's Drywall, Roman Drywall, and Supreme Quality Drywall. All of these subcontractors had surety bonds on file with the Department of Labor and Industries in the sum of $6,000, except Chivo's Drywall, which had a $12,000 surety bond.
14. All of the subcontractors failed at different times commencing in 2001 through 2004 to file timely reports of the square footage of sheetrock installed, pursuant to contracts let by GL & L Enterprises, Inc., dba Precision Drywall and Lea's Drywall, and the subcontractors failed to pay premiums when due, interest when due, and penalties assessed.
15. The Department of Labor and Industries used the information provided by GL & L Enterprises, Inc., dba Precision Drywall, Inc. and Lea's Drywall regarding the square footage of sheetrock installed in assessing the premiums owed by the subcontractors.
16. The Department was prevented from filing timely claims against the surety bonds of the subcontractors by their delinquency in filing reports and failing to pay premiums to the State Fund.
17. The amount of delinquent premiums chargeable against GL & L Enterprises, Inc., dba Precision Drywall are as follows: Victor's Drywall, $7,054.21; Chivo's Drywall, $50,882.23; Zagy's Drywall, $21,200.01; and Rodriguez Drywall, $60,299.10.
18. The amount of delinquent premiums chargeable against Lea's Drywall are as follows: Romero's Drywall, $3,575.39; Chivo's Drywall, $7,284.16; Zagy's Drywall, $7,399.68; Roman Drywall, $12,606.37; and Supreme Qualtiy Drywall, $19,781.71.
19. The Department of Labor and Industries' action or failure to take action in securing payment of delinquent premiums from the subcontractors' surety bonds or from other sources did not prevent the letting contractors from taking action on their own to avoid responsibility for their subcontractors' premiums or to collect or withhold the premiums from their subcontractors.
CONCLUSIONS OF LAW
1. The Board of Industrial Insurance Appeals has jurisdiction over the parties to and the subject matter of these consolidated appeals.
2. The Department acted in accordance with the provisions of chapter 51.16 RCW in collecting money from the subcontractors of GL & L Enterprises, Inc., dba Precision Drywall, Inc., and Lea's Drywall Inc., and in applying the money collected to the obligations of the subcontractors.
3. The
Notices and Orders of Assessment against GL & L Enterprises, Inc., dba
Precision Drywall on appeal under Docket Nos. 05 13857, 05 18266,
05 18356 and 06 15457 are correct and are affirmed.
4. The
Notices and Orders of Assessment against Lea's Drywall, Inc. on appeal under
Docket Nos. 05 18262,
05 18265, 05 24037, 06 14434 and 06 19738 are correct and
are affirmed.
It is ORDERED.
Dated:
BOARD OF INDUSTRIAL INSURANCE APPEALS
/s/_____________________________________
THOMAS E. EGAN Chairperson
/s/_____________________________________
FRANK E. FENNERTY, JR. Member