State ex rel. Aaron's, Inc. v. Ohio Bureau of Workers' Comp.

• Decision Date: 20 July 2016
• Docket Number: No. 2014–1641.,2014–1641.
• Citation: 68 N.E.3d 757,2016 Ohio 5011,148 Ohio St.3d 34
• Parties: The STATE ex rel. AARON'S, INC., Appellant, v. OHIO BUREAU OF WORKERS' COMPENSATION, Appellee.
• Court: Ohio Supreme Court

148 Ohio St.3d 34

68 N.E.3d 757

2016 Ohio 5011

The STATE ex rel. AARON'S, INC., Appellant,

v.OHIO BUREAU OF WORKERS' COMPENSATION, Appellee.

No. 2014–1641.

Supreme Court of Ohio.

Submitted Jan. 5, 2016.

Decided July 20, 2016.

Fisher & Phillips, L.L.P., Daniel P. O'Brien, and Nicole H. Farley, Cleveland, for appellant.

Michael DeWine, Attorney General, and Cheryl J. Nester, Assistant Attorney General, for appellee.

PER CURIAM.

{¶ 1} This action by appellant, Aaron's, Inc., f.k.a. Aaron Rents, Inc. ("Aaron's"), arose as a result of a limited writ of mandamus granted in State ex rel. Aaron Rents, Inc. v. Ohio Bur. of Workers' Comp., 129 Ohio St.3d 130, 2011-Ohio-3140, 950 N.E.2d 551, ordering appellee, the Bureau of Workers' Compensation, to explain why it had denied the company's request that the bureau's order reclassifying some of the company's employees for purposes of workers' compensation premiums be applied solely prospectively.

{¶ 2} On remand, the administrator's designee concluded that the bureau appropriately exercised its discretion under Ohio Adm.Code 4123–17–17(C) to apply the reclassification retroactively. The administrator's designee relied on evidence demonstrating the magnitude and scope of the company's prior reporting discrepancies that resulted in a large underpayment of premiums.

{¶ 3} Aaron's filed this action for mandamus relief. The court of appeals concluded that the evidence in the record supported the bureau's decision and that no internal policy of the bureau created a clear legal duty requiring the bureau to apply the classifications solely prospectively. 10th Dist. Franklin No. 13AP–170, 2014-Ohio-3425, 2014 WL 3867524, ¶ 5–6. For the reasons that follow, we agree, and we affirm the judgment of the court of appeals.

Background

{¶ 4} When a business applies for workers' compensation coverage, the bureau classifies the occupation or industry by degree of hazard according to the categories established by the National Council on Compensation Insurance and incorporated into the Ohio BWC State Insurance Fund Manual. See R.C. 4123.29(A)(1). There are two types of classifications. The "basic" or "manual" classification describes the business of an employer. Ohio Adm.Code 4123–17–08(B)(1) ; see also Ohio Adm.Code 4123–17–02(A). The "standard exception" classification describes an occupation that is common to many businesses. Ohio Adm.Code 4123–17–08(B)(2). For example, clerical office employees, not otherwise classified (code 8810), are defined as those workers "whose duties are confined to keeping the books and records of the risk [i.e., of the employer], and conducting correspondence, and drafting, or who are engaged wholly in office work where such books and records are kept, having no other duties of any nature in or about the risk's premises." Ohio Adm.Code 4123–17–08(B)(2) and 4123–17–09.

{¶ 5} As we have explained:

The [BWC State Insurance Fund Manual] designates the basic rate that an employer must pay, per $100 in payroll, to secure workers' compensation coverage for its employees. Each occupational classification has a corresponding basic dollar rate. This base rate applies to all employers within the classification and effectively spreads the total loss within the classification among all members.

State ex rel. Roberds, Inc. v. Conrad, 86 Ohio St.3d 221, 222, 714 N.E.2d 390 (1999). Once the bureau assigns one or more classifications, it is the employer's responsibility to correctly report premium and payroll data to the bureau. See id. The bureau has the right to audit an employer's records to verify the correctness of its payroll reports used to determine premiums. Ohio Adm.Code 4123–17–17(C).

Facts

{¶ 6} Aaron's, a Georgia corporation, began doing business in Ohio in 1992, primarily as a furniture-rental business. When Aaron's applied for workers' compensation coverage, the bureau assigned the business the basic occupational classification of 8044 (store: furniture & drivers) and the standard-exception classification of 8810 (clerical office employees, not otherwise classified). Aaron's placed its employees into one of those two categories in listing its payroll for the bureau.

{¶ 7} In 2006, the bureau conducted a routine audit of the company's records. The auditor apparently concluded that Aaron's had incorrectly listed many of its employees as 8810 clerical workers instead of placing them under the business's basic classification of 8044. However, the audit report was not finalized, in part because it did not pass the bureau's quality-review process. Therefore, Aaron's was not notified of its results.

{¶ 8} The bureau initiated a new audit and on March 18, 2008, issued its audit report. As a result of the 2008 audit, the bureau added several classifications to Aaron's payroll, applied them retroactively to July 1, 2004, and billed Aaron's for more than $2 million in back premiums.

{¶ 9} Aaron's filed an administrative protest of both the 2008 audit findings and the retroactive application of the new classifications. Following a hearing, the bureau's adjudicating committee upheld the new classifications but limited their retroactive application to a period of two years.

2009 Complaint for Writ of Mandamus

{¶ 10} Aaron's filed a complaint in mandamus in the Tenth District Court of Appeals alleging that the bureau had abused its discretion when it failed to adequately explain why it rejected the company's request to apply the reclassifications solely prospectively. The court of appeals disagreed and denied the writ. We reversed that judgment and issued a limited writ of mandamus ordering the bureau to further consider the matter and to issue an amended order explaining why it decided to apply the reclassifications retroactively and not solely prospectively as Aaron's had advocated. State ex rel. Aaron Rents, Inc., 129 Ohio St.3d 130, 2011-Ohio-3140, 950 N.E.2d 551, ¶ 13.

{¶ 11} Following a hearing on remand, the administrator's designee concluded that the bureau properly exercised its discretion under Ohio Adm.Code 4123–17–17(C) to apply the reclassification retroactively. The version of Ohio Adm.Code 4123–17–17(C) that was in effect at the time of the audit and hearing¹ provided:

The bureau shall have the right * * * to inspect, examine or audit * * * employers for the purpose of verifying the correctness of reports made by employers of wage expenditures * * *. The bureau shall also have the right to make adjustments as to classifications, allocation of wage expenditures to classifications, amount of wage expenditures, premium rates or amount of premium. * * * Except as provided in Rule 4123–17–28 of the Administrative Code, no adjustments shall be made in an employer's account which result in increasing any amount of premium above the amount of contributions made by the employer to the fund for the periods involved, except in reference to adjustments for the semi-annual or adjustment periods ending within twenty-four months immediately prior to the beginning of the current payroll reporting period.

Former Ohio Adm.Code 4123–17–17(C), 2008–2009 Ohio Monthly Record 2–1840.

{¶ 12} The administrator's designee relied on the testimony of Charles Goellnitz, a bureau auditor, and the audit results showing that Aaron's had improperly reported a large percentage of its operational employees as clerical employees, resulting in its paying substantially less in premiums than it should have. The administrator's designee stated that "Goellnitz concluded that because of the scope of the reporting discrepancies, and the fact that the inaccurate reporting resulted in a large underpayment of premiums, it would have been inappropriate to allow the employer to benefit from its inaccurate reporting of payroll."

2013 Complaint for Writ of Mandamus

{¶ 13} Aaron's filed the instant complaint in the Tenth District seeking a writ of mandamus regarding the January 17, 2012 order of the administrator's designee. Aaron's alleged that the bureau's decision to bill it for back premiums was an abuse of discretion and violated Ohio law.

{¶ 14} The case was referred to a magistrate, who concluded that the administrator's designee appropriately exercised his discretion under Ohio Adm.Code 4123–17–17(C) in ordering the reclassifications to be applied retroactively. The magistrate noted that the administrator's designee did not find that Aaron's was at fault or that it intentionally misreported its payroll. The magistrate nevertheless concluded that the magnitude of the misclassification was a sufficient basis for the bureau to deny the request to apply the audit findings solely prospectively.

{¶ 15} Aaron's objected, arguing that the magistrate's conclusion was not supported by the record and that the bureau's internal policy was to "go prospective on an audit" unless there was intentional wrongdoing or disregard on the part of the employer.

{¶ 16} The court of appeals rejected these arguments, adopted the magistrate's decision, and denied the writ.

{¶ 17} This matter is before the court on an appeal as of right filed by Aaron's.

Legal Analysis

{¶ 18} To be entitled to the extraordinary remedy of mandamus, a relator must establish a clear legal right to the relief requested, a clear legal duty on the part of the bureau to provide the relief, and the lack of an adequate remedy in the ordinary course of the law. State ex rel. Gen. Motors Corp. v. Indus. Comm., 117 Ohio St.3d 480, 2008-Ohio-1593, 884 N.E.3d 1075, ¶ 9. When an order is adequately explained and based on some evidence, there is no abuse of discretion and a reviewing court must not disturb the order. State ex rel. Mobley v. Indus. Comm., 78 Ohio St.3d 579, 584, 679 N.E.2d 300 (1997).

{¶ 19} Aaron's alleges that it is entitled to relief in mandamus because the bureau's explanation for retroactive application of the reclassification was arbitrary and contrary to bureau policy. According to Aaron's, the magnitude of its misreporting was due to the bureau's inaction and failure to...