Little v. Tracy, 920193

• Decision Date: 11 March 1993
• Docket Number: No. 920193,920193
• Citation: 497 N.W.2d 700
• Parties: Stephen D. LITTLE and Kathryn L. Dietz, Plaintiffs and Appellants, v. Helen TRACY, as Executive Director of the North Dakota Workers' Compensation Bureau, and the North Dakota Workers' Compensation Bureau, Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 700

497 N.W.2d 700

Stephen D. LITTLE and Kathryn L. Dietz, Plaintiffs and Appellants, v. Helen TRACY, as Executive Director of the North Dakota Workers' Compensation Bureau, and the North Dakota Workers' Compensation Bureau, Defendants and Appellees.

Civ. No. 920193.

Supreme Court of North Dakota.

March 11, 1993.

Dietz & Little, Bismarck, for plaintiffs and appellants; argued by Kathryn L. Dietz, pro se. Appearance by Stephen D. Little.

Ken R. Sorenson (argued), Asst. Atty. Gen., North Dakota Workers' Compensation Bureau, Bismarck, for defendants and appellees.

MESCHKE, Justice.

In a review of rulemaking, we consider whether a new agency regulation on arbitration of an employee's claim exceeds the authority of the Workers' Compensation Bureau. The statute authorizes an employee-claimant to elect decision by arbitrators rather than by a Bureau official, but the regulation gives the employer the power to refuse the employee's election. We hold that, because it exceeds the scope of the statute, the regulation is invalid.

The 1991 North Dakota Legislature enacted a "hoghouse" bill changing much workers' compensation law. One of 77 new sections enacted NDCC 65-02-15 through 65-02-18 to authorize binding panel arbitration to decide a claim at the election of the employee-claimant, as an alternative to the typical administrative decision. The new sections establish procedures for listing eligible arbitrators and for selecting the panel of arbitrators for each claim, ¹ for removing an arbitrator for cause, ² and for the employee-claimant to elect arbitration of the claim "in lieu of a formal administrative hearing or judicial remedy." ³ A decision of an arbitration panel is declared "final and nonreviewable by a district court." ⁴

To implement this arbitration alternative, the Bureau adopted lengthy regulations at NDAC 92-01-02-26. See NDCC Secs. 65-02-08; ⁵ 28-32-02(1). ⁶ After a public hearing by the Bureau and approval of the rules by the North Dakota Attorney General "as to their legality," as required by NDCC 28-32-02, the new regulations were adopted as authorized by NDCC 28-32-03, filed with the office of the legislative council, and effective November 1, 1991.

After publication of the new rules, Stephen D. Little and Kathryn L. Dietz appealed directly to the district court. See NDCC 28-32-15(2). ⁷ They challenged NDAC 92-01-02-26(2), which grants an employer the power to refuse an employee-claimant's election of arbitration, as inconsistent with NDCC 65-02-17, which grants an employee-claimant the power to select arbitration. The district court ruled that the "legislative history shows the legislature expected both employer and employee to consent to enter into binding arbitration" and that the regulation is "valid and legal and is not in violation of N.D.C.C. Sec. 28-32-19.1(3)." ⁸ (emphasis original).

Little and Dietz appeal to this court, arguing that the Bureau exceeded its authority because the regulation conflicts with NDCC 65-02-18, which gave an employee "an absolute right to choose the arbitration dispute resolution process" and "does not allow for or contemplate employer refusal to engage in arbitration."

I. STANDING

The Bureau questions whether Little and Dietz have standing to challenge the regulation, noting that it questioned their standing in the district court but the court did not rule on standing. NDCC 28-32-15(2) allows "[a]ny interested person who has participated in the rulemaking process of an administrative agency" to appeal the agency's rulemaking action. Since Little and Dietz "attended and participated in the North Dakota Workers Compensation Bureau rule-making hearing," and "in light of their role as licensed attorneys who represent numerous claimants before the North Dakota Workers Compensation Bureau," they assert standing to challenge the regulation.

The procedure for direct appeal from administrative rulemaking enacted in NDCC 28-32-15 is new. See 1991 ND Laws ch. 342, Sec. 23. It is similar to the procedure for review of rulemaking under the federal Administrative Procedure Act. See 5 U.S.C. Sec. 553. Like NDCC 28-32-02(3), ⁹ 5 U.S.C. Sec. 553(c) says: "[T]he agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation." North Dakota's Administrative Practice Act, like the federal act, does not define "interested persons."

Generally, North Dakota has employed a "factually aggrieved" standard, similar to the "injury in fact" standard employed in federal precedents on standing for appeal of adverse administrative decisions. See Application of Bank of Rhame, 231 N.W.2d 801 (N.D.1975); Washburn Public School District No. 4 v. State Board of Public School Education, 338 N.W.2d 664 (N.D.1983). Compare Bernard Schwartz, Administrative Law Sec. 6.1 (3d ed. 1991); 4 Kenneth Culp Davis, Administrative Law Treatise Sec. 24:2 (2d ed. 1983). Yet for rulemaking, those who directly participate to represent persons adversely affected have standing.

In Hunt v. Washington Apple Advertising Commission, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977), the Court held that a state agency for the promotion of the apple industry had standing to represent interests of apple growers and dealers when the relief requested required no individualized proof. See Nader v. Nuclear Regulatory Commission, 513 F.2d 1045, 1055 (D.C.Cir.1975) ("those who refrain from participation in rulemaking proceedings may not obtain direct judicial review of the regulations resulting"); Laurence H. Tribe, American Constitutional Law, Sec. 3-20 (2d ed. 1988). See also International Brotherhood of Electrical Workers v. Interstate Commerce Commission, 862 F.2d 330, 334 (D.C.Cir.1988) (union had standing to appeal I.C.C.'s assertion of authority to review arbitrator's award to union member). We conclude that NDCC 28-32-15(2) allows "[a]ny interested person who has participated in the rulemaking process" to represent persons who are factually aggrieved by the regulation.

Little and Dietz represent the interests of their employee-claimant clients who have elected arbitration. Little and Dietz participated in the rulemaking, without objection or protest by the Bureau at the time when they could have supplemented the record to specifically evidence the interests represented. "In the appeal of agency action taken pursuant to section 28-32-02, any person who has participated in the rulemaking process has the right to participate in the appeal." NDCC 28-32-15(5). We conclude that Little and Dietz have representational standing to challenge this regulation.

II. THE REGULATION DISPUTED

The key statute implemented by the disputed regulation says:

Following constructive denial of a claim or issuance of an administrative order under chapter 28-32 reducing or denying benefits, an aggrieved employee may request that the action be submitted to binding arbitration before the workers' compensation binding arbitration panel in lieu of a formal administrative hearing or judicial remedy.

NDCC 65-02-17. See n. 3 for complete text. The new statutes are silent about an employer's right to elect or refuse arbitration.

The challenged feature of the regulation gives most employers a right to refuse the employee-claimant's election of arbitration.

In all cases relating to an injury for which the risk or payments are chargeable to an employer with an open account with the bureau, the employer has fifteen days from the date of mailing of the notice to give notice in writing to the bureau if the employer does not agree to submit to binding arbitration. The employer may notify the bureau of its consent to submit to binding arbitration prior to expiration of the fifteen days. An employer that fails to file timely notice in writing of refusal to consent to arbitration is deemed to have consented. If the employer files a timely notice of refusal to consent to arbitration, the matter is deemed submitted for reconsideration and formal rehearing and the employee is not entitled to arbitration. If the risk or payments are not chargeable to any employer, the employee is entitled to binding arbitration upon filing of the request with the bureau.

NDAC 92-01-02-26(2). Although the new statutes express the employer's role in selecting one member of the arbitration panel, see NDCC 65-02-15 at n. 1 above, they do not express a role for the employer in the election to arbitrate. Still, the Bureau's regulation makes arbitration hinge in most cases on the employer's consent or refusal.

"It is a basic rule of administrative law that an administrative regulation may not exceed statutory authority or supersede a statute, and that a regulation which goes beyond what the Legislature has authorized is void." Moore v. North Dakota Workmen's Compensation Bureau, 374 N.W.2d 71, 74 (N.D.1985); Steele v. North Dakota Workmen's Compensation Bureau, 273 N.W.2d 692, 701 (N.D.1978). If a regulation conflicts with the statute that it implements, the regulation is beyond the agency's authority to adopt. NDCC 28-32-19.1(3). Such a regulation is invalid.

The Bureau says that "[t]he statute is uncertain as to the rights of the employer," and insists that there "is no language in any of the four arbitration statutes that effectively provides that the employer must submit to arbitration if there is a request for arbitration by an aggrieved employee." The Bureau argues that, because "the employer has a right of appeal and a right not to consent to binding arbitration," it would be an "unjust result" for an employee to "dictate whether or not an employer has a right to an appeal" and to "effectively bar the employer's right of appeal." ¹⁰ The Bureau says that the regulation's "interpretation is consistent with the legislative intent" because "[t]he statutory language does not expressly require that the employer submit to arbitration."

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