State Compensation Ins. Fund v. Sky Country, Inc., 89-72
| Decision Date | 17 October 1989 |
| Docket Number | No. 89-72,89-72 |
| Citation | 780 P.2d 1135,239 Mont. 376 |
| Parties | STATE COMPENSATION INSURANCE FUND, Appellant, v. SKY COUNTRY, INC., Respondent. |
| Court | Montana Supreme Court |
Charles Adams, State Comp. Ins. Fund, Helena, for appellant.
John P. Atkins, Bryan & Atkins, Bozeman, for respondent.
Marc Racicot, Atty. Gen., Clay R. Smith, Sol., Helena, for amicus curiae.
This appeal results from a lengthy administrative process which culminated in the Workers' Compensation Court. Respondent Sky Country, Inc., a Bozeman trucking firm, contested a finding by the Audit Bureau of the Department of Labor and Industry concluding that several of its drivers classified as "independent contractors" were actually "employees" for Workers' Compensation insurance purposes. Further administrative proceedings affirmed the Audit findings, and Sky Country sought judicial relief in the Workers' Compensation Court. The Workers' Compensation Court held that Sky Country had been denied due process of law because the Division of Workers' Compensation was the real party in interest as well as the prosecutor and adjudicator in the administrative process and reversed the administrator's decision. From that decision, the State Compensation Insurance Fund appeals.
Sky Country is insured by the State Compensation Fund under Plan No. 3 of the Workers' Compensation Act, as prescribed in Sec. 39-71-2301, et seq., MCA. Following a February 1986 audit, the Department of Labor and Industry concluded that, for purposes of reporting for workers' compensation and unemployment insurance, certain individuals were employees rather than independent contractors. Because the workers were reclassified as employees, it was determined that Sky Country owed an additional $2,907.59 for premium underpayment for its workers' compensation insurance from July 1, 1984 through June 30, 1985.
In September 1986, Sky Country requested an administrative review of the audit determination. Upon review, which included an informal conference, the administrator of the Division of Workers' Compensation agreed with the audit finding that the individuals were employees rather than independent contractors.
Sky Country next initiated contested case proceedings under the Montana Administrative Procedure Act, found at Title 2, Chapter 4, Part 6, MCA. In May 1987, an evidentiary hearing was held before Steven Shapiro, a hearing examiner and chief legal counsel for the Workers' Compensation Division. Shapiro's findings were also adverse to Sky Country. The administrator of the Division of Workers' Compensation issued the Division's Final Order which adopted the hearing examiner's proposed decision.
Sky Country then sought relief in the Workers' Compensation Court, filing a Petition for Appeal in September, 1988. Of the various grounds for reversal, Sky Country's assertion that it was denied due process because the Workers' Compensation Administrator's decision was "tainted by the pecuniary interest the [Workers' Compensation] Division has in the outcome" persuaded the Workers' Compensation Court. The Workers' Compensation Court reversed, holding that Sky Country had been denied due process of law in violation of Article II, Section 17, Mont. Const. (1972) "because the Division of Workers' Compensation is the real party in interest ... as well as the prosecutor and adjudicator[.]" The Workers' Compensation Court explicitly noted that there was no evidence that either the hearing examiner or the Workers' Compensation Administrator exhibited "any improper, arbitrary conduct in the hearing and decision-making process."
The issues presented by the parties to this action focus on whether Article II, Section 17 of the Montana Constitution barred the Division of Workers' Compensation from assuming jurisdiction of the underlying dispute concerning the employment status of the individuals working for Sky Country. Through an amicus curiae brief, the Montana Attorney General proffers a second, and we think more compelling, issue: Does Sec. 39-71-415, MCA, require that the administrative proceeding be...
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