Industrial Commission v. Jordan
| Decision Date | 30 December 1968 |
| Docket Number | CA-CIV,No. 1,1 |
| Parties | The INDUSTRIAL COMMISSION of Arizona, Appellant, v. Joe JORDAN, Jr., dba Jordan's Hacienda, Appellee. 704. |
| Court | Arizona Court of Appeals |
Robert K. Park, Former Chief Counsel, Robert D. Steckner, Chief Counsel, by Michael Lasher, Phoenix, for appellant.
Snell & Wilmer, by Edward Jacobson and Paul Wentworth, Phoenix, for appellee.
This is an appeal from a summary judgment granted by the Superior Court in favor of appellee and against the appellant. Appellant will be hereinafter referred to as the 'Commission' and appellee will be referred to as 'Jordan'.
The judgment appealed from is, in part, as follows:
'(2) that it is unlawful for The Industrial Commission of Arizona to include tips or gratuities received from persons other than the employer in its computation of either premiums or compensation. 'IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Order of The Industrial Commission of Arizona, effective July 1, 1966 which order provides in part as follows:
'II. BASIS OF PREMIUM
'4. In the case of employments or occupations where gratuities or so-called
'insofar as it includes gratuities or so-called tips received from persons other than the employer as a part of an employee's earnings or wages for purposes of computing premiums or compensation under the Workmen's Compensation Act is hereby vacated and set aside.'
The Commission's order as set forth in the above quoted portion of the judgment, will be hereinafter referred to as the 'tips regulation'.
The Arizona Workmen's Compensation Act was enacted in 1925. From 1925 until 1929 there was no Commission regulation relating to the inclusion of tips for premium assessment purposes. In 1929 the Commission adopted a regulation which provided for the inclusion of tips in the computation of premiums to be paid by employers coming within the Act. The regulation remained effective until 1 July, 1954, at which time the regulation was deleted. During this 25-year period, however, tips received by an employee were never treated by the Commission as a factor in computing premiums or compensating unpaid employees.
Jordan is engaged in the restaurant business and as part of the operation of his restaurant, he employs waitresses. The waitresses, in addition to receiving wages paid by Jordan, receive tips from restaurant patrons.
Following the adoption of the tips regulation, Jordan applied to the Commission for a hearing for the purpose of determining whether the July, 1966 tips regulation should be set aside or vacated. A.R.S. § 23--945 and § 23--946. The Industrial Commission entered its order on 24 March, 1967, denying Jordan's petition and ruling that the tips regulation is 'declared valid and in full force and effect'. Jordan then instituted an action in the Superior Court against the Commission to vacate the July 1966 regulation. A.R.S. § 23--946, subsec. A. The case was presented to the Superior Court upon stipulated facts in the form of allegations contained in the complaint which were admitted in the answer. The Superior Court granted Jordan's motion for summary judgment and ordered that the Commission's tips regulation insofar as it related to tips received from customers be vacated and set aside. The Commission filed a timely notice of appeal on 21 July, 1967. Jurisdiction of this Court is found in A.R.S. § 12--120.21; Industrial Commission v. Harbor Insurance Co., 101 Ariz. 578, 422 P.2d 694 (1967).
A.R.S. § 23--946 relates to actions in which the invalidity of a Commission order is asserted, and provides, in part, as follows:
'Any person in interest dissatisfied with an order of the commission may commence an action in the superior court * * * against the commission as defendant to set aside, vacate or amend the order, on the ground that the order is unreasonable or unlawful, and the superior court shall have exclusive jurisdiction thereof.'
The Commission contends that the order vacated by the Superior Court was adopted pursuant to an express grant of authority to the Commission by A.R.S. § 23--922 and that the order was not 'unlawful or unreasonable'.
Jordan urges that although the Commission has authority to adopt rules and regulations fixing rates, such authority is limited and that the Commission may not adopt rules and regulations which conflict with the Workmen's Compensation Act. It is contended that by directing the inclusion of tips in assessing premiums the Commission has exceeded the statutory perimeters of the Act, and therefore the order is unlawful.
The power of the Commission to adopt rules and regulations is found in A.R.S. § 23--922, which is as follows:
The rule making power of the Commission is limited, however, since the Commission may not adopt rules and regulations which enlarge the scope of the Workmen's Compensation Act or which violate any standards of the Act. Bade v. Drachman, 4 Ariz.App. 55, 417 P.2d 689 (1966); Southern Pacific Co. v. Cochise County, 92 Ariz. 395, 377 P.2d 770 (1963); Haggard v. Industrial Commission, 71 Ariz. 91, 223 P.2d 915 (1950); Duncan v. Krull Co., 57 Ariz. 472, 114 P.2d 888 (1941).
The question which we must determine is whether the tips regulation adopted by the Commission was a proper exercise of the Commission's rule making powers.
The statutory standards with which we are here concerned in determining the lawfulness of the tips regulation are set forth in A.R.S. § 23--1002, § 23--1003, § 23--1041, and § 23--983, 8 A.R.S.
A.R.S. § 23--1002 relates to the payment of premiums and is, in part, as follows:
'Except as otherwise provided, every employer, except the state, who has insured in the state's compensation fund shall semi-annually pay into the state compensation fund the amount of premium determined and fixed by the commission for the employment or occupation of such employer.'
A.R.S. § 23--1003 indicates that the basis for the Commission's determination of premiums is employee wages. That provision relates to adjustment of premiums and is quoted later in this opinion.
A.R.S. § 23--1041 requires that an injured employee receive compensation on the basis of his average monthly wage:
'Every employee of an employer within the provisions of this chapter who is injured by accident arising out of or in the course of employment, or his dependents in event of his death, shall receive the compensation fixed in this chapter on the basis of such employee's average monthly wage at the time of injury.'
It is clear from the above quoted portions of the Act that the basis for assessing premiums and for compensating injured employees is the wage the employee received from the employer.
A.R.S. § 23--983 provides that:
'The state compensation fund shall be neither more nor less than self-supporting.'
As applied to the instant case this means that tips received by an employee may be included in the wage base for computing premiums only if the law permits the inclusion of tips for compensation purposes.
The validity of the tips regulation turns upon the question whether tips come within the purview of 'wages' as such term is used as a basis for computing premiums and compensation awards.
We are of the opinion that the tips regulations, insofar as it relates to tips, exceeds the rule making powers of the Commission and is an unlawful exercise of ligislative authority, for two reasons:
(1) The term 'wages', as such term is used as a basis for computing premiums and for making compensation awards, has been judicially interpreted in such a manner as to exclude tips; and
(2) The Workmen's Compensation Act, when read as a whole, indicates a legislative intent that the assessment of premiums be based on the wage--expenditure of the employer, and not on earnings received by an employee from non-employer sources, such as tips.
It is to be noted that while A.R.S. § 23--1041, subsec. A expressly establishes 'average monthly wage' as the basis for computing compensation awards, the statute is silent with reference to what forms of remuneration shall come within the purview of the term 'wage'.
However, the term 'wage' has been defined by judicial interpretation. In Barron v. Ambort, 64 Ariz. 209, 167 P.2d 925 (1946) our Supreme Court was confronted with the question whether 'commissions' received by an employee pursuant to an oral employment contract constituted part of the employee's wage for compensation purposes. The employee died from injuries sustained while working for a dairy. While employed by the dairy and pursuant to an oral agreement the employee was paid $75 per month...
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