Gange Lumber Co v. Rowley, 53

• Decision Date: 13 November 1945
• Docket Number: No. 53,53
• Parties: GANGE LUMBER CO. v. ROWLEY et al
• Court: U.S. Supreme Court

326 U.S. 295

66 S.Ct. 125

90 L.Ed. 85

GANGE LUMBER CO.

v ROWLEY et al.

No. 53.

Argued Oct. 16, 17, 1945.

Decided Nov. 13, 1945.

Appeal from the Supreme Court of the State of Washington.

Mr. T. J. Hanify, of Seattle, Wash., for appellant.

Mr. Harry Ellsworth Foster, of Olympia, Wash., for appellee, Department of Labor and Industries of State of Washington.

Mr. Charles R. Carey, of Seattle, Wash., for appellee Ralph Rowley.

Mr. Justice RUTLEDGE delivered the opinion of the Court.

This appeal is from a judgment of the Supreme Court of Washington rendered after the case journeyed twice through the state's appropriate administrative and judicial tribunals. Rowley v. Department of Labor and Industries, 21 Wash.2d 420, 151 P.2d 440, 155 P.2d 802.¹ The judgment sustained an award made by the appellee, Department of Labor and Industries, in favor of Rowley, the individual appellee. The award was for compensation on account of the aggravation, by 1943, of injuries originally sustained by Rowley in 1937 in the course of his employment by appellant. A prior award for the original injury, made in 1938, became 'final'² without appeal and is only indirectly in issue. Both awards were made pursuant to the state's statutory provisions for industrial insurance and were payable from a publicly administered fund maintained, as the statute required, by 'premiums' or contributions of employers.³ Appellant claims that the statute has been applied, in respect to its liability for the payment of premiums, in a manner to deprive it of property without due process of law, contrary to the prohibition of the Fourteenth Amendment.

The controversy results from a 1941 amendment of the Washington Industrial Insurance Act,⁴ by which the time allowed for the beneficiary of an award to apply for additional compensation on account of aggravation of his injury was extended from three to five years after the establishment (or termination) of compensation or, by virtue of a proviso, to five years from the amendment's effective date.⁵ Since Rowley's application presently involved was made in time only by virtue of the proviso,⁶ appellant assets that the amendment has been applied retroactively to revive a claim barred by the preexisting law, to its substantial detriment; and thereby, under this Court's decision in Danzer & Co. v. Gulf & S.I.R. Co., 268 U.S. 633, 45 S.Ct. 612, 69 L.Ed. 1126, the claimed unconstitutional consequences have been created.

Appellees have responded by relying upon Campbell v. Holt, 115 U.S. 620, 6 S.Ct. 209, 29 L.Ed. 4823, and Chase Securities Corp. v. Donaldson, 325 U.S. 304, 65 S.Ct. 1137. They have urged that as applied the statute has produced no unconstitutional injury or detriment to any substantive interest of appellant; and that the only effect has been to modify its procedural rights, in particular by supplying judicial review of awards for aggravation where previously only an administrative remedy was available to the employee.⁷ As all of these contentions are somewhat interrelated, precise consideration requires more explicit statement of the statutory scheme in its application to the facts.

Washington's plan of industrial insurance is much like that of Ohio, briefly described in Copperweld Steel Co. v. Industrial Commission, 324 U.S. 780, 65 S.Ct. 1006; cf. Mattson v. Department of Labor and Industries 293 U.S. 151, 55 S.Ct. 14, 79 L.Ed. 251. The state Supreme Court has characterized the system as neither an employers' liability act nor an ordinary workmen's compensation act, but rather as an industrial insurance statute having all the features of an insurance act. Stertz v. Industrial Insurance Commission, 91 Wash. 588, 594, 595, 158 P. 256, Ann.Cas.1918B, 354. Salient characteristics, for present purposes, include the maintenance and administration by the state of an accident fund, which is paid into the state treasury by employers pursuant to annual assessments made by the Director of Labor and Industries, through the Supervisor of Industrial Insurance. Except in situations not presently material,⁸ injured employees are deprived of common-law causes of action against their employers and are restricted to recovery from this fund as reparation for injuries sustained at work.

The Director is empowered to promulgate, change and revise rates to be paid by employer contributors. The scheme for determining the rates is somewhat complicated, requiring classification of contributors and their work according to its hazard; and adjustment of premiums to take account of the cost experience not only of each class but also of each employer, as well as the condition of the fund. Rem.Rev.Stat.Wash. § 7676. A basic premium rate, to apply for the ensuing calendar year, is fixed annually for each class, which takes account of its cost experience over a two-year period and of the condition of the class fund. At the same time a premium rate of each employer is fixed with relation to each class, also to apply for the ensuing year, which takes into consideration the employer's average cost experience 'for each workman hour reported by him during each fiscal year * * * over the five-year period' immediately preceding the determination. The actual premium rate the employer is required to pay consists of 40 per cent of the basic rate plus 60 per cent of his cost rate as thus determined; but in no event is the total rate to exceed 160 per cent of the basic rate.

Premiums when paid are placed to the credit of the employer in the appropriate fund, but become the exclusive property of the state earmarked and appropriated for the specific uses provided by the statute. Rem.Rev.Stat.Wash. § 7676. See State ex rel. Trenholm v. Yelle, 174 Wash. 547, 550, 25 P.2d 569, 28 P.2d 1119. No provision is made for repayment or recovery of any employer's contribution once it is paid in, regardless of whether the full amount is required to compensate his or others' employees for injuries sustained; and no such repayments are contemplated. Awards are payable solely from the appropriate fund thus accumulated and payment is in no wise dependent upon the employer's continued existence, operation or contribution to the fund. Nor, under the plan, can payment affect the rate of premium for the year in which the award is allowed.

In view of these provisions and effects, the state Supreme Court has declared that neither the employer nor the employee has a vested right or interest in the fund; the moneys when collected are public moneys, held and administered by the state, albeit pursuant to the statutory purpose they constitute a 'trust fund' for the benefit of injured workmen and their dependents.⁹ The fund is therefore in no sense the private property of the employer. Consequently the payment of awards out of the fund in itself could not amount to a deprivation of the employer's property. Indeed, appellant does not urge that the application of moneys previously paid into the payment of an award of itself works the claimed unconstitutional result. Rather this is said to arise from the effect the award and its payment may have, by virtue of the statute's provisions relating to cost experience in the fixing of rates, upon appellant's liability for the payment of premiums in the future. It is anticipated, not presently realized or immediate, financial injury of which complaint is made.

As has been noted, in computing the rate of premium the Director is required to take into account not only the cost experience of each class over a previous two-year period, but also the average cost experience of each employer over the immediately preceding five-year period, in addition to 'the then condition of each class and/or sub-class account.' The quoted reference relates to the requirements for the keeping of class accounts, in the administration of the fund, for crediting of the payments made by each employer to the appropriate accounts, and for the charging of awards made to or on account of injuries to his employees against his experience. Rem.Rev.Stat.Wash. § 7676. It is this charge of which appellant complains, in the view apparently that it necessarily will entail the payment of a higher premium in years following the one in which the award is made, when the rate computed as the statute requires will reflect inclusion of the award in its cost experience. Accordingly, since it determines that the charge will be made, the allowance of an award is said to be a matter vitally affecting the employer's substantive liability and constitutes a final adjudication of that liability to the extent that the charge may affect the future rate.

Moreover, the statute provides in its procedural phases for the employer to have notice and the right to participate fully in the determination¹⁰. It must be taken that this right is conferred for the employer's protection in the fixing of rates as they may be affected by the allowance of awards through the inclusion of his cost experience as a factor in rate computation. Especially in view of these procedural protections, appellant urges that its substantive liability, once it is terminated through barring of a claimant's right to proceed by lapse of time, becomes an adjudicated matter, substantive, not merely procedural or remedial in character; and cannot therefore be revived consistently with the decision in the Danzer case.

Were this all, and were the state of the record plain that the allowance of the award necessarily would result in a later increase of the premium, we would be confronted with the necessity of determining whether such an increase would constitute the kind of injury or detriment forbidden by the due process clause. A mere increase in premium, under a compulsory and publicly administered accident insurance plan, designed to operate at cost based upon general and individual experience rather than at an arbitrary figure,¹¹ and surrounded with adequate procedural safeguards against arbitrary action,...