REGINA LEACH, Applicant
PRENT CORP, Employer
OLD REPUBLIC INS CO, Insurer
An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.
The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission agrees with the decision of the ALJ, and it adopts the findings and order in that decision as its own, subject to the terms of the remand.
The findings and order of the administrative law judge are affirmed. This matter is remanded to the department for further appropriate action on the applicant's claim for bad faith or delayed payment arising from the assessment of interest made by the department by letter dated April 30, 2009.
Dated and mailed April 30, 2010
leachre . wsd : 101 : 1 ND
7.21
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
1. Facts and posture.
This case primarily involves a claim for compensation for bad faith under Wis. Stat. § 102.18(1)(bp).
Specifically, the applicant contends that the employer acted in bad faith with respect to payment of an award based on an unreasonable refusal to rehire under Wis. Stat. § 102.35(3). On July 25, 2008, ALJ Donald Doody issued a decision on the applicant's unreasonable refusal to rehire claim, stating:
Under the circumstances, the applicant is entitled to compensation for lost wages. She has been unemployed or underemployed in excess of 52 weeks since the termination. Accordingly, the maximum amount of compensation, 52 weeks at the applicable rate of $590.51, for a sum total due of $30,706.52, is payable.
After calculating out the attorney fee on the award, ALJ Doody's decision concluded with an order directing the employer to pay the applicant $24,404.22 and to pay her attorney $6,141.302 in fees and $161 in costs.(1)
The commission affirmed ALJ Doody's order on January 29, 2009. Upon the expiration of the 30-day appeal period on Monday, March 2, 2009, payment was due. The employer made no payment.
On March 4, 2009 the applicant's attorney filed an application seeking bad faith penalties on the employer's failure to pay. On March 5, 2009, the employer's attorney, Julie Lewis, wrote to ALJ Doody, inquiring about a credit for temporary total disability payments. Exhibit 1, page 27. On March 6, ALJ Doody responded, stating that payment of temporary total disability did not offset the award for an unreasonable refusal to rehire and that "the unreasonable refusal to rehire amount is in addition to any temporary disability paid during concurrent periods." Exhibit 1, page 28.
On March 17, 2009, the employer sent the applicant's attorney two checks:
a check to the applicant's attorney for $6,302.30 that fully paid the fees and costs awarded to the attorney by ALJ Doody and the commission, and
a check for the applicant in the amount of $8,881.26--far less than the $24,404.22 awarded by ALJ Doody and the commission--because the employer deducted payroll tax and the temporary total disability that ALJ Doody had advised them did not offset the unreasonable refusal to rehire award.
On April 30, 2009, the department sent an assessment to the WC insurer and the attorney who represented the employer and insurer on the disability claim(2) and the refusal to rehire claim, assessing $1,264.39, in interest "as a result of the court appeal." Applicant's exhibit A, attachment H
On May 11, 2009, the employer sent the applicant's attorney another check for applicant, this one for $9,665.29 to pay the payroll taxes withheld from the March 17 check.
The employer still owes the applicant $5,857.67. The employer is still withholding that amount, claiming an offset against the unreasonable refusal to rehire award based on temporary total disability it paid after the applicant's discharge.
The applicant's bad faith claim was heard by ALJ Hamdy Ezalarab on October 9, 2009. At the hearing, Ms. Lewis testified about what was paid by the employer and when on the award by ALJ Doody and the commission on the refusal to rehire claim. She acknowledged nothing was paid as of March 1, 2009. Asked what the employer paid on March 17, 2009, she denied the employer had paid a total of $15,183.56 (which was the sum of the checks for $6,302.30 and $8,881.26 sent that day to the applicant's attorney.) She characterized the payment to the applicant as the "gross" amount of $24,687.85, which was reduced by deductions to a "net" amount of $8,881.26. There followed an exchange between ALJ Ezalarab and Ms. Lewis about how much the check was for, at the conclusion of which Ms. Lewis responded "Not changing my answer, I'm sorry." ALJ Ezalarab then stated he was suspending and cancelling the hearing because Ms. Lewis was not cooperating, not answering correctly, and had failed to answer a simple question. Transcript, pages 14-16. No further testimony was taken.
The parties submitted posthearing briefs to ALJ Ezalarab. The employer--after requesting a chance to finish the hearing--continued to insist it was entitled to offset $5,857.67 for post-discharge TTD payments from the amount ordered paid by ALJ Doody. The applicant asked for almost $86,000 in penalties, identifying four separate instances of nonpayment:
The applicant also sought a penalty on the $1,264.39 interest calculation, as set out in the letter sent by the department to the insurer on April 30, 2009.
ALJ Ezalarab awarded $30,000 for bad faith based on the employer's failure to timely pay the amounts awarded by ALJ Doody and the commission on the applicant's refusal to rehire claim. ALJ Ezalarab also ordered the employer to pay the $1,264.39 interest assessed by the department.
Both sides appeal. The applicant continues to seek an award for multiple instances of bad faith, and on the interest assessment. The employer contends it was denied a fair hearing, and that it has not acted in bad faith.
4. Discussion.
The commission affirms ALJ Ezalarab's order, subject to modifications dealing with the interest on the unpaid interest on the underlying disability claim.
a. No denial of a fair hearing.
Regarding due process in an administrative proceeding, the court of appeals has held:
By statute, all parties to a worker's compensation claim are entitled to a "full, fair, public hearing." WIS. STAT. § 102.18(1)(a). This requirement means a party is entitled to:
(1) The right to seasonably know the charges or claims proferred; (2) the right to meet such charges or claims by competent evidence; and (3) the right to be heard by counsel upon the probative force of the evidence adduced by both sides and upon the law applicable thereto
Denial of a "fair hearing" is a due process violation as well as a violation of § 102.18. [Citations omitted.]
Waste Management Incorporated v. LIRC, 2008 WI App 50, 9, 308 Wis.2d 763.
ALJ Ezalarab did not deny the employer a full, fair, public hearing. He conducted a hearing which gave the employer the right to be heard and to meet the charges against it with competent evidence. He obtained Ms. Lewis's testimony (1) that the employer did not pay the amounts awarded by ALJ Doody on the refusal to rehire claim, as affirmed by the commission, when due; and (2) that when the employer did make payments, it paid less than the amount ordered by ALJ Doody. ALJ Ezalarab also obtained Ms. Lewis's explanation that the employer paid less than the full amount awarded by ALJ Doody because of the "withholding." Moreover, the ALJ accepted the exhibits offered by both parties, and they present a reliable chronology of events. Further, in its posthearing briefs to ALJ Ezalarab and the commission, the employer had the opportunity to be heard on the probative force of the evidence adduced at hearing, and indeed provided a detailed explanation of its actions.
ALJ Ezalarab's decision to end the hearing did not deny the employer an opportunity to be heard. Worker's compensation a hearings are conducted in a manner to secure the facts as simply and directly as possible. Wis. Admin. Code § DWD 80.12. Ms. Lewis became nonresponsive and argumentative when ALJ Ezalarab questioned her. At that point, ALJ Ezalarab could reasonably conclude that he had obtained the employer's version of the facts, or at least that he had given the employer sufficient opportunity to present its version of the facts. Finally, this is not a case of a decision rendered against the employer based on a failure of proof. Even giving weight to the employer's explanations in its brief regarding its delay in paying, and its underpayment of, the amount awarded by ALJ Doody and the commission on the unreasonable refusal to rehire claim, the commission concludes the $30,000 maximum award for bad faith is warranted.
b. Maximum award for bad faith warranted.
Ms. Lewis' testimony, and the exhibits offered by both parties at the hearing before ALJ Ezalarab, establish that the employer did not ask the department about offsetting the post-discharge temporary total disability payments from the refusal to rehire award until March 5, 2009. At that point, the employer was already delinquent in payment on the commission's January 29, 2009 affirmance of ALJ Doody's refusal to rehire award.
When the employer did ask the department about offsetting the post-discharge temporary disability compensation from the refusal to rehire award on March 5, ALJ Doody responded immediately and negatively on March 6, 2009. Nonetheless, the employer still offset the post-discharge temporary disability--and withheld payroll taxes--when it finally made partial payment on March 17, 2009, 15 days late (and 11 days after ALJ Doody's response.)
The employer has acknowledged that it incorrectly withheld payroll taxes from ALJ Doody's refusal to rehire award. ALJ Ezalarab's decision thoroughly explains the rationale behind the commission's prior holdings that employers should not deduct payroll taxes from awards under Wis. Stat. § 102.35(3). To the extent there has been any debate on this issue, it was conclusively resolved several years ago by the court of appeals in its published decision in Beverly Enterprises, Inc., v. LIRC, 2002 WI App 23, 250 Wis. 2d 246. In that case, the court upheld a commission decision assessing the maximum bad faith penalty against an employer who, like the employer in this case, withheld payroll taxes from an award under Wis. Stat. § 102.35(3).
Further, there is no basis for offsetting the post-discharge temporary total disability under the facts of this case. As ALJ Ezalarab observed, and as the commission has often stated,(3) the one year's lost wages provision under Wis. Stat. § 102.35(3) sets a monetary, not a temporal, limit. That is, the award is limited by the dollar amount awarded, not by the passage of 52 weeks from the discharge or refusal to rehire. In this case, the award is limited is 52 weeks times the applicant's average weekly wage of $590.51, or $30,706.52. Wisconsin Stat. § 102.35(3) provides that the employer's liability continues, up to that amount, for as long it refuses to rehire the applicant, and the employer may be held liable for wages lost after the first 52 weeks following the initial unreasonable refusal to rehire.
In this case, regardless of the merits of the argument that weeks of temporary disability payment are not weeks of wage loss, the applicant here had substantial continuing wage loss well after the first 52 weeks from her discharge. Exhibit A from the May 22, 2008 hearing before ALJ Doody shows the applicant's reduced earnings--and resultant continuing wage loss--during two years of employment for another employer (Dungarvin Master Co.) after several months of unemployment following her discharge from the employer. See also the transcript of the May 22, 2008 hearing before ALJ Doody, pages 52 et seq. By the time ALJ Doody heard the refusal to rehire claim in May 2008, the applicant's total wage loss greatly exceeded the $30,708.52 liability ALJ Doody imposed.
Thus, even assuming for the sake of argument that the law permitted the employer to offset $5,857.22 in temporary disability paid in the first few weeks of wage loss following its unreasonable discharge of the applicant, the applicant still had a wage loss of more than $30,708.52 as of the date of the hearing before ALJ Doody. And given the uncontested evidence about the applicant's earnings at the hearing before ALJ Doody, and ALJ Doody's findings, the employer was aware of that fact. Yet the employer has not paid that amount to date, and what it has paid, it paid late.
Summarizing the bad faith statute, Wis. Stat. § 102.18(1)(bp), the supreme court stated:
17 Section 102.18(1)(bp) provides, in relevant part, that the Department of Workforce Development (DWD) may include a penalty in an award to an employee if the department determines that "the employer's or insurance carrier's . . . failure to make payments . . . resulted from malice or bad faith." Wis. Stat. § 102.18(1)(bp). A claimant seeking to impose penalties for bad faith failure to make payments under § 102.18(1)(bp) must prove two elements: 1) the employer or insurer did not have a reasonable basis for denying benefits; and 2) the employer or insurer knew it lacked a reasonable basis for denying benefits or recklessly disregarded a lack of a reasonable basis for denying payment. [Citation omitted.]
Bosco v. LIRC, 2004 WI 77, 17, 272 Wis. 2d 586.
Here, the record--including the employer's own exhibits--amply demonstrates bad faith, the employer's claim that ALJ Ezalarab limited its testimony notwithstanding. Again, ALJ Ezalarab's decision to impose the maximum penalty, $30,000, is the most reasonable result on this record.
c. Assessment of multiple penalties.
The applicant, of course, asserts that $30,000 is not the maximum penalty that may be assessed based on the employer's failure to pay the refusal to rehire award. Rather, the applicant seeks about $89,000. She asserts the employer should be held liable for multiple penalties, not only for the initial nonpayment, but also because when the employer later did make payments on the refusal to rehire award, it did so incrementally.
It is true that Wis. Stat. § 102.18(1)(bp) now specifically provides for a maximum of $30,000 "for each event or occurrence of malice or bad faith." Indeed, even before the statute was amended to insert the "each event or occurrence language," the commission had held that the maximum bad faith penalty may be awarded more than once in a single claim involving successive bad faith offenses. See: Hildebrandt v. Advance Transportation, WC claim no. 82-00227, 1986 WestLaw 192251 and 1987 WestLaw 245757 (LIRC, July 3, 1986 and February 13, 1987), later case affirmed sub nom. Advance Transportation v. LIRC, Appeal No. 88-0621 (Wis. Ct. App. December 21, 1988). See also: Neal and Danas, Worker's Compensation Handbook, sec. 7.24 (5d ed. 2007).
However, Hildebrand v. Advance Transportation involved (1) an order awarding vocational rehabilitation benefits and a separate bad faith award on unpaid temporary disability and permanent disability, followed by (2) a later bad faith award on then unpaid vocational rehabilitation benefits and unpaid first bad faith award. That is, these were separate penalties for separate late payments of separate awards arising from the same injury. It was not, as here, a claim based on continuing nonpayment of a single award prior to the initial bad faith assessment on that award.
Indeed, the court of appeals decision in Advance Transfer,(4) suggests in this case a second penalty on the failure to pay the unreasonable refusal to rehire award may be assessed only after the administrative assessment of the first penalty becomes final. In other words, a second assessment of a bad faith penalty for a continuing nonpayment of an award may be based on a failure to pay the first penalty assessment, but not on the continuing failure to pay the underlying award before any penalty has been assessed. Thus, if the commission's order in this matter goes unappealed and unpaid, there may be another bad faith penalty assessed on the employer's continuing failure to pay the unreasonable refusal to rehire award. But that point has not been reached yet.
d. The interest assessment.
The last issue involves the department's April 30, 2009 letter to the insurer, Old Republic Ins. Co., regarding interest "as a result of the court appeal."(5) It does not appear that the underlying disability for which the WC insurer was liable was appealed to the commission, much less to court. It appears the interest assessment may have been based on the amount due on the refusal to rehire claim. The award for an unreasonable refusal to rehire--and interest and penalties assessed on a failure to pay that award--are properly assessed against the employer alone. Indeed, ALJ Ezalarab's award requires the employer, not Old Republic, to pay the interest assessment.
The applicant seeks assessment of a bad faith penalty based on delayed payment of the interest assessed by the department in its April 30, 2009 letter. An additional bad faith penalty on the failure to pay the interest assessment may be viable under the Advance Transfer cases outlined above. However, the commission is not certain that this claim was covered in the issues discussed by the parties at the hearing before ALJ Ezalarab. July 27, 2009 transcript, page 6. This case shall therefore be remanded for further appropriate action on the claim for a penalty arising from a failure to pay the interest assessment.
cc:
Attorney James A. Meier
Attorney Julie Lewis
Appealed to circuit court. Affirmed March 10, 2011. Appealed to the court of appeals. Affirmed March 8, 2012. Petition for review filed. Petition voluntarily dismissed. December 3, 2012.
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