Workers' Compensation Division v. Hodgdon

Workers' Compensation Division v. Hodgdon (99-254); 171 Vt. 526; 759 A.2d 73 

[Filed 19-Jul-2000]


                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 99-254

                             FEBRUARY TERM, 2000


Workers' Compensation Division	       }	APPEALED FROM:
                                       }
                                       }
     v.	                               }	Department of Labor &
                                       }	Industry
Darcy Hodgdon and 	               }
Quick Fix Truck Parts, Inc.	       }	DOCKET NO. 20-97WCPen    

                                                Trial Judge: Richard W. Norton             	


             In the above-entitled cause, the Clerk will enter:


       Darcy Hodgdon appeals on his own behalf and on behalf of Quick Fix
  Truck Parts, Inc.  from  a decision of the Commissioner of the Department
  of Labor and Industry, which imposed a $5,000  fine for failure to maintain
  workers' compensation insurance from September 13, 1996, through July  4,
  1997.  He argues that the Commissioner (1) erred in imposing the fine
  against Hodgdon personally  because he is not the employer; (2) should be
  estopped from imposing a fine because the Department  failed to provide
  Quick Fix notice, as it had in the past, that its coverage had lapsed; and
  (3) abused  his discretion in imposing a $5,000 fine without revealing the
  factors to be considered in determining  the amount and without providing
  Hodgdon an opportunity to address them.  We reverse the  Commissioner's
  decision because the Commissioner failed to promulgate rules identifying
  the  guidelines used to determine the amount of the fine as required by 21
  V.S.A. § 688(b).

       As best we can discern from the record, the facts are as follows.  In
  1995, Hodgdon Brothers,  Inc. received a citation because it failed to
  carry workers' compensation insurance.  At that time,  Hodgdon Brothers was
  having difficulty obtaining insurance.  After discussion with the
  Department,  Hodgdon Brothers transferred all its employees, except
  corporate officers, to Quick Fix in order to  obtain insurance coverage.
  Quick Fix obtained workers' compensation insurance effective September  13,
  1995.  Hodgdon owns both Hodgdon Brothers and Quick Fix.  

       On July 24, 1996, the insurance company sent Quick Fix a renewal
  notice and a bill, which  required payment by September 13, 1996, to
  continue the coverage.  No payment was received, and  the insurance expired
  on September 13, 1996.  The insurance company sent Quick Fix a termination 
  notice.  On June 30, 1997, an employee filed a workers' compensation claim,
  and the Department  discovered that Quick Fix had been uninsured for
  several months.  On July 1, 1997, the Department  ordered Quick Fix to
  obtain worker's compensation insurance and provide proof of coverage. 
  Quick  Fix obtained the insurance and provided the Department with 

 

  proof that coverage was effective July 4, 1997.  On July 7, 1997, the
  Department cited Hodgdon and  Quick Fix for failure to have workers'
  compensation from September 13, 1996, to July 4, 1997, and  imposing a
  $5,000 fine.  Hodgdon and Quick Fix requested a hearing.

       At the hearing, Hodgdon argued that the fine was unreasonably high
  because turnover in office  personnel, lack of notice clearly marked
  "cancellation," and failure of the Department to provide  notice of the
  lapse in coverage all militated against a $5,000 fine.  The Commissioner
  rejected all of  Hodgdon's arguments and held that the $5,000 fine was
  within the Department's discretion given that  Quick Fix was without
  coverage for a lengthy period, Hodgdon had experience with the workers' 
  compensation system due to the previous citation against Hodgdon Brothers,
  and Quick Fix had  received notice from the insurance company about the
  impending expiration of coverage if payment  was not made.  Hodgdon and
  Quick Fix appeal. 

       First, Hodgdon claims that the Department erred in imposing a fine
  against him personally  because he is not the employer; rather, Quick Fix
  is the employer.  The Department agrees.   Consequently, we do not consider
  whether a fine could have been imposed against Hodgdon  personally, but
  rather reverse the Commissioner's decision to the extent that it imposed
  personal  liability.  Hodgdon also claims that he is entitled to a jury
  trial if the fine is imposed against him  personally.  Because we reverse
  the fine against Hodgdon, we need not address whether he would be  entitled
  to a jury trial on a claim against him personally.

       Second, Hodgdon contends that the Department is partially responsible
  for the lapse in  insurance because it failed to send Quick Fix any notice
  of the lapse as it always had in the past.   Essentially, we understand
  Hodgdon's argument to be that Quick Fix relied to its detriment on the 
  Department to provide notice of a lapse of workers' compensation coverage,
  a claim of equitable  estoppel.  Thus, according to Hodgdon, it is
  inequitable to allow the Department to impose upon  Quick Fix the maximum
  fine.  Estoppel against the government is rare but may be applied where the 
  four elements of estoppel are met and "the injustice that would result from
  a failure to uphold an  estoppel is of sufficient magnitude to justify any
  effect upon public interest or policy that would  result from raising
  estoppel."  See Stevens v. Department of Social Welfare, 159 Vt. 408, 419,
  620 A.2d 737, 743 (1992).  Hodgdon cannot meet the elements of estoppel.

    The four essential elements of estoppel are: (1) the party to be
    estopped  must know the facts; (2) the party to be estopped must
    intend that its  conduct shall be acted upon or the acts must be
    such that the party  asserting the estoppel has a right to believe
    it is so intended; (3) the party  asserting estoppel must be
    ignorant of the true facts; and (4) the party  asserting estoppel
    must detrimentally rely on the conduct of the party to be 
    estopped. 
    
  Id. at 421, 620 A.2d  at 744.  Here, Hodgdon has failed to show that Quick
  Fix was ignorant of the  true facts.  As the Commissioner found, due to the
  previous citation against Hodgdon Brothers, this  employer had enough
  experience with the workers' compensation system to understand that the 
  renewal notice meant exactly what it said: a failure to pay the premium 

 

  would result in a lapse of coverage.  Consequently, we hold that estoppel
  does not apply.

       Finally, Hodgdon contends that the Commissioner abused his discretion
  in imposing the  maximum fine without providing Hodgdon an opportunity to
  address the factors the Commissioner  considers in determining the amount
  of the fine.  Hodgdon points out that neither 21 V.S.A. § 692  (penalties),
  nor the regulations promulgated pursuant to 21 V.S.A. § 688 (administrative
  penalties)  provides any guidelines for the Commissioner's exercise of
  discretion in determining the amount of a  fine. Section 692(a) provides
  that, where the Commissioner determines that the employer has failed  to
  secure workers' compensation for its employees, "the employer shall be
  assessed an administrative  penalty of not more than $50.00 for every day
  the employer neglected to secure liability, but in no  case shall the fine
  be more than $5,000.00."  Further, § 688 provides: "The commissioner shall
  adopt  rules regarding the amount and imposition of penalties."  

       Pursuant to § 688, the Commissioner adopted a rule on the amount of
  penalties.  It states: "An  employer who fails to comply with 21 V.S.A. §
  687 (providing workers' compensation insurance (or  self insurance as
  permitted by law)) may be assessed a penalty of $50.00 per day for every
  day that  the employer neglected to insure workers' compensation . . . .
  but not to exceed $5000.00."   Department of Labor and Industry, Workers'
  Compensation Division, Rules for Administrative  Citations and Penalties,
  Rule 45.000 § 5(a), 3 Code of Vt. Rules 24010005-3.  The regulation 
  provides no guidelines for determining the amount of the fine, other than
  setting the limit established  by the statute.  Hodgdon argues that he was
  entitled to notice of the guidelines or factors to be  considered prior to
  the hearing in order to present relevant evidence.

       We agree that the Legislature intended the Commissioner "to adopt
  rules regarding the amount  and imposition of penalties" beyond reciting
  the maximum already set by statute.  The legislative  directive to
  promulgate the rules serves no purpose if the rules merely repeat the
  statutory maximum.  We will not construe the statutory language as pure
  surplusage.  See Trombley v. Bellow Falls  Union High Sch., 160 Vt. 101,
  104, 624 A.2d 857, 860 (1993).  Because § 688 requires the  Commissioner to
  promulgate guidelines for determining the amount of the fine, and the 
  Commissioner failed to do so, we reverse the fine imposed against Quick
  Fix.

       The Department first contends that § 692 does not require the
  Commissioner to promulgate  rules stating the factors to consider in
  assessing a penalty and that the Commissioner is authorized to  exercise
  discretion in determining the amount of the penalty.  Section 692(a)
  provides, however, that  the employer is entitled to a hearing under § 688
  prior to assessment of the penalty.  Section 688 in  turn requires the
  Commissioner to adopt the rules regarding the amount and imposition of
  penalties.   Thus, we reject the Department's contention that the statutory
  framework does not require the  Commissioner to promulgate any guidelines.  

       Second, the Department argues that this case is virtually identical to
  Piche v. Department of  Taxes, 152 Vt. 229, 565 A.2d 1283 (1989).  Piche is
  inapposite.  The issue in that case was whether  the Tax Commissioner could
  automatically impose a fine under 32 V.S.A. § 5875 for delinquent  payment
  of a tax when the statute provided that the authority to impose the fine
  was 

 

  discretionary.  We upheld the automatic imposition of the penalty because
  it "merely represent[ed]  the full extent to which the Commissioner ha[d]
  chosen to exercise his discretionary authority as  granted under the
  statute." Id. at 234, 656 A.2d  at 1286.  The case is distinguishable,
  however.   First,  in Piche, there was no discretion in determining the
  amount of the fine under § 5875, just whether to  impose it.  Here, the
  discretion is in determining the amount of the fine; there is no discretion
  in  imposing it.  More importantly, there was no statutory directive in
  Piche requiring the Commissioner  to set guidelines to determine the amount
  of the fine.   Here, § 688 requires the Commissioner to  promulgate such
  guidelines. 

       Finally, the Department maintains that the discretion granted to the
  Commissioner here is no  different than the discretion exercised by courts
  in imposing civil contempt fines.  We disagree.   Unlike courts, which are
  granted their power by the Constitution, see Vt. Const. ch. II, § 4, 
  administrative bodies have only the adjudicatory authority conferred on
  them by statute.  See Gloss  v. The Delaware & Hudson R.R. Co., 135 Vt.
  419, 422, 378 A.2d 507, 509 (1977) (distinguishing  powers of courts to
  impose fines and order damages from powers of administrative bodies, which
  are  limited to those conferred by statute).  The authority granted by §
  692 to impose penalties is limited  by the requirement in § 688 that the
  Commissioner establish guidelines for determining the amount  of the
  penalty.   

       Reversed.


                                       BY THE COURT:


                                       _______________________________________
                                       Jeffrey L. Amestoy, Chief Justice
                            
                                       _______________________________________
                                       John A. Dooley, Associate Justice                   	

                                       _______________________________________
                                       James L. Morse, Associate Justice                  	

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice                  	

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice