Significant Decisions

See PENALTIES Failure to secure payment of compensation
The decision of the Department to assess a penalty for failure to secure the payment of compensation is not discretionary and the Board may review such decision de novo based on a preponderance of the evidence standard. In determining the amount of a penalty under RCW 51.48.010 the Department must consider factors including (1) whether the employer intended to avoid the burdens of the Act, (2) the amount of taxes incurred prior to registering with the Department, and (3) whether the employer had a good faith basis for believing it was not subject to the Act. ....Twin Rivers Inn, 89 0684 (1990); C & R Shingle, 88 2823 (1990)
See SCOPE OF REVIEW Penalty assessments.
See STANDARD OF REVIEW Penalty assessments
The Department's decision to assess a penalty under RCW 51.48.010 for failure to secure the payment of compensation is not discretionary. Board review of the Department's penalty assessment is de novo and based on a preponderance of the evidence, as opposed to an abuse of discretion, standard of review. ....Twin Rivers Inn, 89 0684 (1990) ; C & R Shingle, 88 2823 (1990)


IN RE: TWIN RIVERS INN ) DOCKET NO. 89 0684
  )  
Claim No. 542,198-00-7 ) DECISION AND ORDER
  )  
APPEARANCES
Employer, Steven A. Bruyere, et ux dba Twin Rivers Inn, by
Velikanje, Moore & Shore, Inc., P.S., per
Richard R. Johnson
Department of Labor and Industries, by
The Attorney General, per
Gary McGuire, Paralegal and William R. Strange, Assistant

This is an appeal filed by Twin Rivers Inn on February 24, 1989 from an Order and Notice Reconsidering Notice and Order of Assessment issued by the Department on January 25, 1989 which affirmed Notice and Order of Assessment of Industrial Insurance Penalties No. 20060179 issued on December 13, 1988. The December 13, 1988 Notice and Order assessed a $28,737.00 penalty against Twin Rivers Inn based upon RCW 51.48.010 for failure to secure payment of compensation before an injury to an employee. The penalty was assessed at 100% of the cost established for the injury. Reversed and remanded.

DECISION

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 employer to a Proposed Decision and Order issued on March 1, 1990 in which the order of the Department dated January 25, 1989 was affirmed. [2]

The Board has reviewed the evidentiary rulings in the record of proceedings and finds that no prejudicial error was committed and said rulings are hereby affirmed.

The issues raised by the employer's Petition for Review are whether the $28,737.00 penalty was properly assessed pursuant to RCW 51.48.010, and, whether a waiver pursuant to RCW 51.48.100(1) should be considered by the Department. We have granted review because our Industrial Appeals Judge erred in requiring the employer to prove that the Department had abused its discretion with respect to the penalty assessment under RCW 51.48.010.

In C & R Shingle, Dckt. No. 88 2823 (April 10, 1990), we discussed the second sentence of RCW 51.48.010 providing that an employer "may be liable" for a penalty when the employer has failed to secure the payment of compensation. While the present appeal involves the first sentence of RCW 51.48.010, what we had to say in C & R Shingle applies equally here.

[I]n instances under the Industrial Insurance Act where the legislature has intended to commit a decision to the discretion of the Department, it has explicitly so stated. In re Gary J. Manley, BIIA Dec., 66,115 (1986). Thus, with respect to certain statutory provisions, such as RCW 51.24.060(3) ("sole discretion"), RCW 51.32.095 ("sole discretion"), RCW 51.36.010 ("solely in his or her discretion"), RCW 51.48.100(2) ("at his or her discretion"), and RCW 51.32.250 ("in his or her discretion"), the legislature has clearly enunciated its intent that a particular decision be committed to the discretion of the Department, the Director, or the Director's designee. In such cases, our scope of review is limited to determining whether the exercise of such discretionary authority constitutes an [3] abuse of discretion. In re Johnny R. Smotherman, BIIA Dec., 87 0646 (1989); In re Armando Flores, Dckt. Nos. 87 3913 and 88 0109 (July 6, 1989); In re Frank C. Madrid, BIIA Dec., 86,0224-A (1987).

Because of the limited scope of review and the additional burden imposed upon a party seeking relief in appeals from discretionary decisions, we are unwilling to conclude that a decision is discretionary absent specific statutory language to that effect. In re Susan K. Irmer, Dckt. No. 89 0492 (March 13, 1990). Although RCW 51.48.010 provides that an employer who fails to secure payment of compensation may by liable for a maximum penalty of $500.00 or double the amount of premiums incurred, whichever is greater, we do not construe that language as indicating a legislative intent that the penalty decision be committed to the Department's discretion. In our view, the use of the word "may" in RCW 51.48.101 means no more than that the penalty is not mandatory. We therefore hold that in an appeal from a penalty assessed by the Department pursuant to RCW 51.48.010, the employer is entitled to a de novo review of the penalty assessment. The standard of review in such a case is based on the preponderance of the evidence, and not whether the Department has abused its discretion.

C & R Shingle, at 2-3.

Turning to the facts of this case, there is no dispute that Craig Thiele filed a claim with the Department as a result of an industrial injury he sustained on April 3, 1988 during the course of his employment with Twin Rivers Inn. Additionally, the Department presented undisputed testimony showing that Mr. Thiele's claim costs were not fixed as of the date of hearing and had reached an amount totalling $22,278.05. Pursuant to the penalty calculation rule, WAC 296-17-470, the Department estimated [4] the cost of Mr. Thiele's injury to be $28,737.00 and assessed that amount as a penalty.

The evidence reflects some confusion concerning the date upon which the Department established industrial insurance coverage for Twin Rivers Inn. However, for the purposes contemplated by RCW 51.48.010, it is reasonable to infer that the employer did not secure the payment of compensation until at least April 25, 1988, when it filed a Master Business Application with the state.

It is clear, therefore, that the employer has violated RCW 51.48.010, which provides as follows:

Every employer shall be liable for the penalties described in this title and may also be liable if any injury or occupational disease has been sustained by a worker prior to the time he or she has secured the payment of such compensation to a penalty in a sum not less than fifty percent nor more than one hundred percent of the cost of such injury or occupational disease.

Thus, pursuant to RCW 51.48.010, the employer "may . . . be liable" for a penalty of not more than $28,737.00 and not less than $14,368.50. In addition, the director may waive the penalty in whole or in part pursuant to RCW 51.48.100(1).

In determining the appropriate amount of the penalty, the factors set forth in C & R Shingle apply equally here:

  1. Whether the employer intended to avoid the burdens of the Industrial Insurance Act;
  2. The amount of taxes incurred prior to the employer's registering with the Department; [5]
  3. Whether the employer had a good faith basis for believing it was not subject to the provisions of the Industrial Insurance Act.

C & R Shingle, at 3. The Department may, of course, wish to consider other criteria as well.

There is nothing in the record which would suggest that the Department considered these or other factors in deciding the appropriate penalty amount. From the tenor of Exhibit No. 6, it seems likely that once the Department had determined the estimated total claim costs under WAC 296-17-470, it proceeded to assess that maximum penalty amount without further ado.

The employer's particular circumstances may very well mitigate against a penalty. The Bruyeres purchased the inn in March of 1988. They had never previously done business in Washington and possessed little business experience. They were under the impression that the former owner would transfer any necessary licenses, including whatever was required for workers' compensation coverage, into their names. When they happened to learn otherwise, they made timely efforts to meet all legal requirements. The period of time between Mr. Thiele's injury and filing of the Master Business Application was relatively brief (about 22 days) and during this time the employer was actively trying to meet all legal requirements. Upon receiving Department communications requesting premium payments, the employer promptly fulfilled its responsibilities of reporting and paying premiums for the brief period during which the business as in operation, March 1988 through May 1988. The premiums actually owed amounted to the rather minimal sum of $52.73. Finally, the [6] Bruyeres encouraged the injured worker to seek workers' compensation, suggesting that they had no intention of avoiding the burdens of the Industrial Insurance Act.

In any event, the Department does not appear to have considered any of the factors necessary to properly evaluate the appropriate amount of the penalty under the range allowed in RCW 51.48.010. The matter should therefore be remanded to give the Department the opportunity to do so. On remand, the Department can also take the opportunity to determine whether a penalty waiver, pursuant to RCW 51.48.100(1), is indicated, in whole or in part.

FINDINGS OF FACT

  1. On December 13, 1988, the Department of Labor and Industries issued Notice and Order of Assessment of Industrial Insurance Penalties No. 20060179 to Steven and Susan Bruyere, DBA Twin Rivers Inn, alleging that an industrial insurance penalty was owed due to an accident resulting in injuries to an employee prior to the employer securing payment of compensation. Pursuant to RCW 51.48.010, a penalty was assessed at 100% of cost and/or pension reserves established for the accident occurring on April 3, 1988 in the sum of $28,737.00. On January 9, 1989 the employer filed a protest and request for reconsideration of the December 13, 1988 order. On January 25, 1989 the Department issued an order affirming the December 13, 1988 order. The employer filed a notice of appeal on February 24, 1989. The Board of Industrial Insurance Appeals entered an order on March 9, 1989 granting the appeal, assigning Docket No. 89 0684 and directing that further proceedings be held.
  2. On March 1, 1988 Steven and Susan Bruyere, by purchase, became the owners and sole proprietors of Twin Rivers Inn, an existing business operation within Washington state. [7]
  3. On April 3, 1988 Craig Thiele suffered an injury in the course of his employment with Twin Rivers Inn. Craig Thiele filed a claim for industrial insurance benefits as a result of this injury. The claim was allowed by the Department
  4. On April 25, 1988, Steven and Susan Bruyere, DBA Twin Rivers Inn, filed a Master Business Application at the Washington Department of Licensing. That application included requests for Class A, C, E, and F liquor licenses, tax registration, cigarette retailer license, trade name registration, and industrial insurance coverage for employees. The application indicated that Twin Rivers Inn would employ one individual subject to industrial insurance coverage and that that individual would not begin working before May 1, 1988.
  5. On May 20, 1988 the Department mailed a "Certificate of Coverage" to Twin Rivers Inn which was dated March 1, 1988.
  6. As of November 28, 1988, the actual amount of benefits paid to and on behalf of Craig Thiele as a result of his April 3, 1988 industrial injury at Twin Rivers Inn was $22,278.05. His claim remained open and no award for permanent partial disability had yet been determined.
  7. In December 1988 the Department established a cost and/or pension reserve fund for Craig Thiele's industrial injury in the amount of $28,737.00.
  8. The Department assessed $28,737.00 in penalties pursuant to RCW 51.48.010 because Mr. Thiele sustained an injury prior to the employer securing payment of compensation. This amount was assessed without consideration of the facts and circumstances particular to the violation.

CONCLUSIONS OF LAW

  1. The Board of Industrial Insurance Appeals has jurisdiction over the parties and subject matter to this appeal. [8]
  2. Craig Thiele suffered an injury on April 3, 1988 during the course of his employment with Twin Rivers Inn. On that date Twin Rivers Inn was an employer and Craig Thiele was an employee or worker as those terms are defined by the Industrial Insurance Act.
  3. On April 3, 1988 Twin Rivers Inn had not secured payment of industrial insurance compensation for its workers as is contemplated by RCW 51.48.010. RCW 51.48.010 permits the assessment of a penalty ranging from not less than fifty percent nor more than one hundred percent of the cost of the injury. In determining the amount of the penalty, the Department should have considered the facts of this particular case, including but not limited to the following factors: (1) whether the employer intended to avoid the burdens of the Industrial Insurance Act; (2) the amount of the taxes incurred prior to the employer's registering with the Department; and (3) whether the employer had a good faith basis for believing that it was not subject to the provisions of the Industrial Insurance Act at the time of the injury.
  4. The order issued by the Department on January 25, 1989, affirming a Notice and Order of Assessment No. 20060179 issued by the Department on December 13, 1988, which assessed a penalty of $28,737.00 (100% of the cost established for the injury) as a result of an injury to an employee which occurred before the employer had secured payment of compensation is incorrect and is reversed. This matter is remanded to the Department with direction to evaluate the facts of this particular case, in light of this decision, and to determine the appropriate penalty amount pursuant to RCW 51.48.010 and RCW 51.48.100(1). [9]

It is so ORDERED.

Dated this 8th day of October, 1990.

BOARD OF INDUSTRIAL INSURANCE APPEALS

/s/

SARA T. HARMON Chairperson

/s/

FRANK E. FENNERTY, JR. Member

/s/

PHILLIP T. BORK Member


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