Penalties made big news in early 2020. Three articles caught attention in this regard recently: Rules Would Cap Penalties for Lack of Comp Insurance (WorkCompCentral, subscription), Supreme Court Rejects State's Appeal in Excessive Fine Case (WorkCompCentral, subscription), and U.S. Department of Labor Proposes $1,007,717 in Fines Against North Florida Roofing Contractor (WorkersCompensation.com).
The second, involving the Supreme Court of the United States (SCOTUS) rejection of jurisdiction is intriguing. Not because it is a rejection; I can assure you the Supreme Court rejects about 98 percent of cases in which review is sought (about 7,000 filed and at most about 150 accepted). The review in this instance was sought by the State of Colorado. It wanted the SCOTUS to reverse its own state Supreme Court, which ruled last June that the state could not collect a penalty of $841,200 that it had imposed for an employer failing to have workers' compensation insurance.
The foundation for the Colorado Supreme Court decision was the Eighth Amendment to the U.S. Constitution, which prohibits "excessive fines." Colo. Dep’t of Labor & Emp’t, Div. of Workers’ Comp. v. Dami Hosp., LLC, No. 17SC200. The Court noted that the purpose of the Amendment "is to prevent the government from abusing its power to punish." As such, the law requires that in imposing fines there must be "an assessment of whether the fine is grossly disproportional to the offense for which it is imposed."
The employer there was a hotel owner. The article quotes Dami Hospitality's attorney. He asserts that the owner of that business "speaks little English and doesn’t understand technical or legal concepts." Though the business is being fined for lacking workers' compensation insurance for an extended period, the business "owner had no idea that its workers’ compensation coverage had lapsed." Some may perceive that as troubling, feeling affronted by such a surprise. Others will perhaps feel that knowing about the coverage and the technical concept of "you must have insurance" should not be beyond a business owner.
The Colorado Supreme Court took no position in determining whether the fine in this instance was "grossly disproportional." Instead, it reversed the decision endorsing that fine and instructed the lower tribunal (Division of Workers' Compensation) to "develop an evidentiary record sufficient to determine whether the $250–$500 fine" daily was "proportional to the harm or risk of harm caused by each day of noncompliance." It is not necessarily that the fine is too much, then, but that the Court could not decide that on the record that was developed.
That raises some interesting questions. Is the risk of harm a "best case" or "worst case" scenario? A work accident might result in needing first aid and nothing further or could be a catastrophic injury requiring near-boundless medical intervention and lost income. There have been many injuries across the country in which the claim costs exceeded the $841,200 this business was fined.
Is the analysis a risk of harm to the state's population, or just to the individual employees of Dami Hospitality? Obviously, the risk of harm to an individual employee group might be statistically low. That is, it is possible that a particular employer might have a stellar safety record; or, alternatively, that an employer records many injuries. The same might be said of any particular industry. Is it appropriate to look at injury or risk rates for a particular employer, an industry, or the whole state when assessing "risk of harm?" And, is there any equal protection under the law issue with treating some more specifically?
This will be interesting to watch. I am certain our workers' compensation community compatriots in Colorado are up to the task. It will be interesting to see what they decide.
The Oklahoma story, Rules Would Cap Penalties for Lack of Comp Insurance, is seemingly a relaxation of penalties there, at least for first offenses. But, the article raises curiosity in describing that under the proposed rule, the "commission would no longer be able to consider the appropriateness of the penalty or the employer's circumstances." The failure of Colorado to consider just such topics may well lie at the foundation of the Colorado Supreme Court reversal. Some will argue that the Colorado Court is specifically instructing the Colorado Division to engage in such considerations. Does that mean Oklahoma should not eschew that analysis in such instances? Is there solace in that respect from the fact that penalties would be capped at $50,000 and not allowed to reach the significant figure in Dami Hospitality?
Finally, there is the story of the U.S. Department of Labor Proposes $1,007,717 in Fines Against North Florida Roofing Contractor. There is nothing in this story that describes how the Department of Labor engaged in an analysis of "proportional risk of harm." It stresses the government's allegations that this employer is engaged in a dangerous field, that falls are a significant risk and preventable, and that the company has been cited repeatedly for "improper fall protection" and other violations. Thus, the analysis of the federal government seems focused on both the field (roofing) and the particular record of this employer.
The U.S. Department of Labor website discusses the various forms of violations. It mentions the employer's option of abating the violation. But, there is no apparent discussion of being excused from OSHA fines because of failure to understand the law, knowing that there were violations, or not "understand(ing) technical or legal concepts." Furthermore, there is no mention of a reduction of fines based upon some analysis of the proportional relationship between the fine and the "harm or risk of harm." It is unclear whether the Occupational Safety and Health Administration (OSHA) processes are constrained similarly to Colorado's.
In all, the three stories illustrate a few points. First, it may be difficult sometimes to understand what the law requires. That might not be ameliorated by the presence of various national, state, and even local laws that might be interpreted to be inconsistent with each other. Second, that three stories surface within days of each other suggests that penalties are on the minds of regulators and business people in 2020; this may be a topic to watch.
Finally, with the Colorado decision it is perhaps likely that other state workers' compensation systems may face legal challenges regarding the imposition of penalties for failing to have workers' compensation insurance. Shall they consider the possible harm to that one employee in that one workplace, or is it relevant to think and act on a broader basis and consider the impact that uninsured employers may have collectively on a state's workforce? The subject of harm is likely to be increasingly discussed as employers are encouraged by the Colorado court to avoid premium expenses and claim ignorance when someone is hurt.
