Michigan Farm Bureau v. Bureau of Workmen's Compensation, Dept. of Labor

• Decision Date: 18 March 1980
• Docket Number: Docket No. 59815,No. 4,4
• Parties: MICHIGAN FARM BUREAU, Farm Bureau Mutual Insurance Company of Michigan and Underwriters Adjusting Company, Plaintiffs-Appellees, v. The BUREAU OF WORKMEN'S COMPENSATION, DEPARTMENT OF LABOR of the State of Michigan and Director of the Bureau of Workmen's Compensation, Defendants-Appellants. Calendar
• Court: Michigan Supreme Court

Page 699

289 N.W.2d 699

408 Mich. 141

MICHIGAN FARM BUREAU, Farm Bureau Mutual Insurance Company

of Michigan and Underwriters Adjusting Company, Plaintiffs-Appellees, v. The BUREAU OF WORKMEN'S COMPENSATION, DEPARTMENT OF LABOR of

the State of Michigan and Director of the Bureau

of Workmen's Compensation, Defendants-Appellants.

Docket No. 59815.

Calendar No. 4.

Supreme Court of Michigan.

Argued Nov. 14, 1978.

Decided March 18, 1980.

The Ingham Circuit Court, James T. Kallman, J., granted accelerated judgment for the defendants.

Gregory L. Curtner, Nancy N. Grekin, Miller, Canfield, Paddock & Stone, Detroit, for plaintiffs-appellees.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Francis W. Edwards, Jon M. DeHorn, Asst. Attys. Gen., Detroit, for defendants-appellants.

RYAN, Justice.

The facts which underlie the issues to be decided and the decision of the lower court are fully and accurately detailed in Justice Levin's concurring opinion to which reference is invited. There is no need to repeat them here.

We agreed to review this case to answer two questions:

"(1) Whether the letters of the director of the Bureau of Workmen's Compensation, establishing new rate schedules, constitute 'rules' within the meaning of the Administrative Procedures Act of 1969, 1969 P.A. 306, as amended? (2) Whether, assuming pro arguendo that said letters do constitute 'rules' within the meaning of the Administrative Procedures Act, circuit court review of the validity of same pursuant to APA § 64; M.C.L.A. § 24.264; M.S.A. § 3.560(164) is appropriate?" 402 Mich. 920-921 (1978).

Because we answer the first question in the negative, we do not reach the second.

The Michigan Administrative Procedures Act, M.C.L. § 24.201 et seq.; M.S.A. § 3.560(101) et seq., contains a comprehensive provision defining the term "rule" which expressly excludes certain material. The basic definition and the pertinent exclusion are:

" 'Rule' means an agency regulation, statement, standard, policy, ruling or instruction of general applicability, which implements or applies law enforced or administered by the agency, or which prescribes the organization, procedure or practice of the agency, including the amendment, suspension or rescission thereof, but does not include the following:

"(h) A form with instructions, an interpretive statement, a guideline, an informational pamphlet or other material which in itself does not have the force and effect of law but is merely explanatory." (Emphasis supplied.) M.C.L. § 24.207; M.S.A. § 3.560(107).

By way of comparison, the Federal administrative procedures act contains the following definition of the term "rule" as it is there used:

"(4) 'rule' means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing." (Emphasis supplied.) 5 U.S.C. § 551(4).

Although not required to do so by the Federal act, ¹ Federal agencies, as a practical matter, often follow the statutorily prescribed rule-making procedures for interpretative as well as legislative rules. This practice has been the source of litigation in Federal courts going to the issue of whether, in particular cases, agency rules were "legislative" or "interpretative". See generally, 1 Davis, Administrative Law Treatise, § 5.03; Davis, Administrative Law of the Seventies, Supplementing Administrative Law Treatise, § 5.03.

Hence, while under the Federal act a rule can be legislative or interpretative, under the Michigan act an "interpretive statement" is not, by definition, a rule at all. ²

It would seem, then, that rules which are "legislative" under the Federal act would be analogous to "rules" under our act.

Professor Davis describes a Federal legislative rule as follows:

"A legislative rule is the product of an exercise of legislative power by an administrative agency, pursuant to a grant of legislative power by the legislative body. In the clearest case of a legislative rule, a statute has conferred power upon the agency to issue the rule and the statute provides that the rule, if within the granted power, shall have the force of law. But a legislative rule may rest upon an implied or an unclear grant of power as well as upon an express and clear grant of power. When a rule is legislative, the reviewing court has no authority to substitute judgment as to the content of the rule, for the legislative body has placed the power in the agency and not in the court. A legislative rule is valid and is as binding upon a court as a statute if it is (a) within the granted power, (b) issued pursuant to proper procedure, and (c) reasonable. The requirement of reasonableness stems both from the idea of constitutional due process and from the idea of statutory interpretation that legislative bodies are assumed to intend to avoid the delegation of power to act unreasonably." (Emphasis supplied.) 1 Davis, Administrative Law Treatise, § 5.03, p. 299. See, also, 2 Davis, Administrative Law Treatise (2d ed., 1978), § 7:8, p. 36.

In addition, Professor Davis offers an analysis of the difference between "legislative" and "interpretative" rules under the Federal act which is relevant to our analysis of the difference between "rules" and "interpretive statements" under our state act:

"A helpful proposition not stated in the Treatise is this: Any officer who has discretionary power necessarily also has the power to state publicly the manner in which he will exercise it, and any such public statement can be adopted through a rulemaking procedure, whether or not the legislative body has separately conferred a rulemaking power on the officer. But what such an officer says in explaining what he does is necessarily the law only to the extent that he is exercising power delegated to him by the legislative body.

"When an agency has no delegated power to make law through rulemaking, the rules it issues are necessarily interpretative. When it has the delegated power, its rules may be either legislative or interpretative, depending on which kind of rules the agency intends to make. An agency with power to make both kinds of rules necessarily has authority to determine which kind it is making, and the best evidence of its intent is what it says when it issues the rules. If it says it is not following notice and comment procedure because it intends the rules to be interpretative, then the rules are clearly interpretative no matter what their impact. If the agency says it is using notice and comment procedure because it intends the rules to be legislative, then that makes them so; if they are valid, the courts are bound by them as if they were statutes. The crucial question is whether the agency intends to exercise delegated power to make rules having force of law, and the intent usually can best be found in what the agency says at the time of issuing the rules." Davis, Administrative Law of the Seventies, Supplementing Administrative Law Treatise, § 5.03, pp. 147-148.

These authorities suggest that what is essential to a valid Federal "legislative rule" or Michigan "rule" is: a reasonable exercise of legislatively delegated power, pursuant to proper procedure.

In the present case, it is acknowledged that the director never took the procedural steps ³ necessary to the formulation of a rule under our act. ⁴ Moreover, as Justice Levin recognizes, the letters in this case were "the director's announcement of his interpretation of Jolliff ". Consequently, the letters were "interpretive statements" within the above discussed exclusion to the definition of "rule".

The decision of the Court of Appeals, 75 Mich.App. 362, 254 N.W.2d 890, is reversed.

COLEMAN, C. J., and KAVANAGH, FITZGERALD and MOODY, JJ., concur.

LEVIN, Justice, concurring.

In Jolliff v. American Advertising Distributors, Inc., ¹ the Court of Appeals held that the minimum, as well as the maximum, workers' compensation benefit payable to an injured worker was subject to adjustment to reflect the increase in the average weekly wage in covered employment.

Shortly after Jolliff was decided, the Director of the Bureau of Worker's Compensation sent letters to workers' compensation insurance companies and self-insured employers which included new compensation rate schedules reflecting adjustments in death benefits as well as disability benefits and which applied Jolliff retroactively to the date of the amendment to the act which provided for adjustment.

The question presented is whether those letters set forth rules within the meaning of the Administrative Procedures Act. ² The Court of Appeals held that they did. We agree with the majority that they did not, and that the Court of Appeals should be reversed.

I

The Worker's Disability Compensation Act was amended (effective September 1, 1965), to provide that "(t)he maximum weekly rate in each dependency classification shall be adjusted once each year in accordance with the increase or decrease in the average weekly wage in covered employment, as determined by the Michigan employment security commission." ³

The Court of Appeals held in Jolliff that by reason of other language in the statute the minimum as well as the maximum benefit rates were "adjustable according to" that provision. ⁴ This Court denied leave to appeal ⁵ and a motion to reconsider. ⁶

The director advised all insurance companies and self-insured employers, in April, 1974, that Jolliff had held that minimum compensation rates are adjustable, that leave to appeal had been denied, and that "the attached table...