State ex rel. Roberds, Inc. v. Conrad

• Decision Date: 25 August 1999
• Docket Number: No. 97-225.,97-225.
• Parties: THE STATE EX REL. ROBERDS, INC., APPELLANT, v. CONRAD, ADMR., BUREAU OF WORKERS' COMPENSATION, APPELLEE.
• Court: Ohio Supreme Court

86 Ohio St.3d 221

714 NE 2d 390

THE STATE EX REL. ROBERDS, INC., APPELLANT, v. CONRAD, ADMR., BUREAU OF WORKERS' COMPENSATION, APPELLEE.

No. 97-225.

Supreme Court of Ohio.

Submitted May 4, 1999.

Decided August 25, 1999.

Pickrel, Schaeffer & Ebeling Co., L.P.A., David C. Korte and Michelle Depew Bach, for appellant.

Betty D. Montgomery, Attorney General, and Gerald H. Waterman, Assistant Attorney General, for appellee. Per Curiam.

Section 35, Article II of the Ohio Constitution authorizes a board to "classify all occupations, according to their degree of hazard * * *." The provision was implemented in what is now R.C. 4123.29(A)(1), which directs the bureau to "[c]lassify occupations or industries with respect to their degree of hazard."

This directive is reflected in over two hundred separate occupational classifications within the Ohio Workers' Compensation Insurance Fund Manual, and each classification reflects a distinct degree of occupational hazard.

The 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.

The employer's submission of premium and payroll data to the bureau is essentially on an honor system. Unless an audit of the employer's records reveals otherwise, the bureau presumes that the employer has correctly reported its premiums. In this case, the, audit revealed that Roberds had misclassified some of its employees. The bureau ultimately classified Roberds's carpet sales employees under Manual No. 8015-03, "Furniture Stores—retail or wholesale— no manufacturing including warehouse, delivery and all incidental operations." Roberds seeks reclassification of these workers into the lower rate category of Manual No. 8747-15, "Traveling Salespersons," and advances two reasons in support. Neither reason is persuasive.

Roberds first argues that because carpet sales employees do some work outside the store, i.e., measuring rooms and providing on-site advice, they should be considered Traveling Salespersons. A considerable amount of work, however, is also done in-store by these employees, and it was the bureau's prerogative to best characterize the activity performed by them.

Roberds also argues that because its corporate officers have been classified as Traveling Salespersons, so should its carpet sales people. This argument is untenable, since the two groups of employees do not have similar functions.

The bureau is afforded a "wide range of discretion" in dealing with the "difficult problem" of occupational classification. State ex rel. McHugh v. Indus. Comm. (1942), 140 Ohio St. 143, 149, 23 O.O. 361, 364, 42 N.E.2d 774, 777. Therefore, we have "generally deferred to the commission's expertise in premium matters" and will intervene "only where classification has been arbitrary, capricious or discriminatory." State ex rel. Progressive Sweeping Contractors, Inc. v. Ohio Bur. of Workers' Comp. (1994), 68 Ohio St.3d 393, 396, 627 N.E.2d 550, 552. Here, the bureau's classification was reasonable, negating Roberds's claim to a clear legal right to the proposed reclassification. Turning now to the issue of premium underpayment, there is no dispute that as a result of its employee misclassification, Roberds owes the bureau over $1,000,000. The bureau seeks to recover all or part of the arrearage. At issue is the length of the period over which recovery is permissible.

Two provisions are relevant. Ohio Adm.Code 4123-17-17 governs "auditing and adjustment of payroll reports," and at paragraph (C) reads:

"The bureau shall have the right at all times * * * to inspect, examine or audit any or all books, records, papers, documents and payroll of * * * 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. No adjustments, however, shall be made in an employer's account which result in reducing any amount of premium below the amount of contributions made by the employer to the fund for the periods involved, except in reference to adjustments for the semiannual or adjustment periods ending within twenty-four months immediately prior to the beginning of the current payroll reporting period * * *."

The other provision, Ohio Adm.Code 4123-17-28, states:

"(A) Whenever the bureau of workers' compensation detects an inaccuracy in the recording or processing of data, records, payroll, claims, or other pertinent items affecting the risk's status, merit-rated modification or premium, such discrepancy shall be corrected. This correction shall be accomplished regardless of whether this entails increasing or decreasing the risk's merit-rated modification or premium rate. * * *

"(B) Any correction made pursuant to the provisions of paragraph (A) of this rule shall be applied to the current rating year, the immediately preceding rating year, and to all subsequent rating years as of the date on which the error was discovered by the bureau or reported to the bureau, whichever date is earlier * * *"

Becau...