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March 12, 1971
The Honorable Bob McDougall
State Senator, 12th District
Olympia, Washington 98501
Cite as: AGLO 1971 No. 39 (not official)
By recent letter you have requested our opinion concerning the constitutionality of sections 100 and 101 of Senate Bill 701, pertaining to workmen's compensation, insofar as they propose to shift the funding of increases for prior pensioners from the general fund to a supplemental pension fund supported by contributions from employers and workmen. We have examined the provisions in question and believe they would be constitutionally defensible if subjected to court challenge upon enactment.
The first of the pertinent provisions of the presently pending S.B. 701 reads as follows:
Sec. 100. Section 51.32.070, chapter 23, Laws of 1961 as last amended by section 1, chapter 166, Laws of 1965 ex. sess. and RCW 51.32.070 are each amended to read as follows:
Notwithstanding any other provision of law, every widow or invalid widower receiving a pension under this title shall, after July 1, ((1965)) 1971, be paid one hundred ((twenty-five)) forty dollars per month, and every permanently totally disabled workman receiving a pension under this title, shall, after such date, be paid one hundred ((sixty-five)) eighty-five dollars per month, and not to exceed one hundred fifteen dollars per month additional in cases requiring the hiring of the services of an attendant, if unmarried at the time his injury occurred; ((one hundred ninety)) two hundred fifteen dollars per month, and not to exceed one hundred fifteen dollars per month additional in cases requiring the hiring of the services of an attendant, if he or she has a wife or invalid husband; and one hundred ((fifty-five)) seventy-five dollars per month, in addition to any amount now or hereafter allowed in cases requiring the hiring [[Orig. Op. Page 2]] of the services of an attendant, if the husband is not an invalid and the husband and wife are living together as such.
((No part of such additional payments shall be payable from the accident fund or be charged against any class under the industrial insurance law.
The director shall pay)) There shall be paid monthly to every such widow, invalid widower, and totally disabled workman from the ((funds appropriated by the legislature)) supplemental pension fund such an amount as will, when added to the pensions they are presently receiving, exclusive of amounts received for children or dependents or attendants, equal the amounts hereinabove specified.
In cases where money has been or shall be advanced to any such person from the pension reserve, the additional amount to be paid to him or her under this section shall be reduced by the amount of monthly pension which was or is predicated upon such advanced portion of the pension reserve.
((The legislature shall make biennial appropriations to carry out the purposes of this section.))
In addition, a new section, Section 101, provides:
NEW SECTION. Sec. 101. There is added to chapter 23, Laws of 1961 and to chapter 51.32 RCW a new section to read as follows:
Each employer shall retain from the earnings of each workman that number of cents as shall be fixed from time to time by the director for each day or part thereof the workman is employed. The money so retained shall be matched in an equal amount by each employer, and all such moneys shall be remitted to the department at such intervals as the department directs and shall be placed in the supplemental pension fund created by this 1971 amendatory act. The moneys so collected shall be used exclusively for the additional payments prescribed in RCW 51.32.070 and shall be no more than necessary to make such payments on a current basis.
[[Orig. Op. Page 3]]
Both the present law (RCW 51.32.070, supra, in its present form) and S.B. 701 provide for increased benefits to existing pensioners in excess of their original compensation where the original compensation, based upon the benefit schedules in effect on the date of injury, has become inadequate due to rising living costs. Under the present law, the amounts necessary to upgrade pension benefits for those receiving compensation based upon outdated benefit schedules are payable from appropriations from the general fund. The proposal in question, in addition to further increasing the scale of benefits, would shift the funding of such increases from the general fund to a "supplemental pension fund," which fund would be maintained by assessments charged to employers and workmen.
We have been informed that the constitutional objection raised is that the imposition of charges in the manner proposed would be invalid as "retroactive" legislation‑-i.e., as impairing vested rights and the obligation of contracts in violation of the federal and state constitutions. This objection is based on the theory that the contract of employment incorporates the existing benefit schedule; that the obligations of the contracting parties are fixed on the date of injury; and that to change, as to existing pensioners, the benefits and obligations would be an unconstitutional changing of the terms of the contract.
In considering this objection, it should be noted at the outset that the proposal in question does not provide for retroactive benefit payments for a period of time prior to the effective date; rather, it simply provides for increases in future payments to insure that all pensioners (regardless of date of injury or death) will thereafter receive not less than the designated minimum.
Our state Supreme Court has repeatedly declared that workmen's compensation benefits in this state are payable in an amount based on the schedule in effect at the time of the injury. See, e.g., Ashenbrenner v. Department of Labor & Industries, 62 Wn.2d 22, 380 P.2d 730 (1963); Barlia v. Department of Labor & Industries, 23 Wn.2d 126, 160 P.2d 503 (1945); Lynch v. Department of Labor & Industries, 19 Wn.2d 802, 145 P.2d 265 (1944); Thorp v. Department of Labor & Industries, 145 Wash. 498, 261 Pac. 85 (1927). However, these determinations were made, not on a constitutional basis, but rather simply upon the basis of the legislative intent. Our court has not decided that it would be unconstitutional to increase benefits for "prior pensioners" [[Orig. Op. Page 4]] and to charge employers therefor. Furthermore, although the constitutional question was not specifically discussed, our court, in Talbot v. Industrial Insurance Commission, 108 Wash. 231, 183 Pac. 84 (1919), upheld the allowance of an increased award for workmen needing the services of a personal attendant, effective as to workers injured prior to the passage of the Act. It appears that the legislature, when upgrading the pension benefits for persons already on the pension rolls, has in the past made such increases payable by legislative appropriation from the general fund.1/ Employers and workmen have not been previously charged with the cost of providing such increases.
Our examination of the case law in other jurisdictions indicates that there are two distinct lines of authority on the general question of whether a state legislature may require employers to pay for the cost of an increase in future pension payments for workmen or beneficiaries who are already receiving workmen's compensation pensions based upon the schedule of benefits which was in effect at the time of an injury or death occurring prior to the enactment of the amendatory legislation.
A good example of the "unconstitutional impairment of the obligation of contract" approach is to be found in Yaeger v. Delano Granite Works, 250 Minn. 303, 84 N.W.2d 363 (1955), holding invalid a shifting of the obligation to pay increased benefits from a special compensation fund to a direct imposition upon the employer or carrier liable on the particular claim. The Minnesota court stated, at pp. 365-367:
"The issue to be decided is whether these additional payments of compensation are to be made under the law which was in effect at the time that these employees died, M.S.A. 1945, § 176.13, as amended by L. 1949, c. 705, § 1 (c), or under a subsequently enacted statute, M.S.A. 1949, § 176.12, subd. 20, as amended by L. 1951, c. 457, § 6. Under the former statute the additional compensation would have been paid by the special compensation fund, whereas under the latter statute the additional compensation would have been paid by the employer and insurer.
[[Orig. Op. Page 5]]
"1. We have held that the statute in effect at the time of the employee's death governs the rights of the parties involved. Skjefstad v. Red Wing Potteries, Inc., 240 Minn. 38, 60 N.W.2d 1; Warner v. Zaiser, 184 Minn. 598, 239 N.W. 761; Reichert v. Victory Granite Co., 249 Minn. 407, 82 N.W.2d 497. However, the statute in question here, L. 1951, c. 457, § 6, provides in part as follows:
"'All widows with a dependent child or children, or with a child or children over 18 years of age physically or mentally incapacitated from earning, and all such children who are orphans, who are now receiving, or who may hereafter become entitled to receive, compensation under section 176.12 for the death of their husband or parent shall, after $10,000 has been paid and satisfactory proof thereof filed, receive additional compensation, not exceeding $2,500, in the same manner and with the same limitations as is prescribed by section 176.12, except that the maximum weekly compensation shall not exceed $20, until the youngest dependent child attains the age of 18 years or, if over 18 years of age, becomes physically and mentally able to earn, or the additional sum of $2,500 has been fully paid.' (Italics supplied.)
* * *
"The circumstances in each of these cases come within the purview of the amended act. All of the dependents were receiving compensation for the death of their husband or parent on July 1, 1951, the effective date of L. 1951, c. 457. Thus, it would appear that the dependents are entitled to be paid the additional compensation up to the maximum amount of $2,500 by the employers and insurers unless the statute is unconstitutional. (P. 365.)
"2-3. In contending that the legislature may not constitutionally shift the liability of paying the additional compensation from the special compensation fund to the employer and insurer, the employer-insurer-relators assert that to hold L. 1951, c. 457, to be retroactive would impair constitutional and vested property rights [[Orig. Op. Page 6]] so as to be unconstitutional and in violation of Minn. Const. art. 1, § 7, M.S.A., U.S. Const. art. I, § 10, and U.S. Const. Amend. XIV. 3. (P. 366.)
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"4. Where, as here, the liability of the employers and insurers has been fixed under L. 1949, c. 705 (§ 176.13 [c]), their vested right in such determined liability may not be destroyed by legislation which imposes a new obligation or an additional liability. McCord v. Smith, Fla., 43 So.2d 704. In these cases the statute imposed a new obligation on the employer and insurer in that they were made liable for the payment of an additional $2,500 compensation. Since a workmen's compensation act is contractual in nature, any statute which purports to alter a substantial term of the contract which was in effect at the time the controlling event occurred (the death of the employee in these cases) impairs the obligation of such contract and is therefore unconstitutional. [Citing authority.] We therefore hold that L. 1951, c. 457, § 6, is unconstitutional and of no effect insofar as it purports to apply to dependents or employees who died before the effective date of the statute, July 1, 1951." (PP. 366-367.)2/
[[Orig. Op. Page 7]]
The opposite approach is exemplified in decisions from New York and Michigan. The following language appears in Schmidt v. Wolf Contracting Co., Inc., 269 App. Div. 201, 55 N.Y.S.2d 162 (1945), affirmed 295 N.Y. 748, 65 N.E.2d 568 (1946), in which the New York court held constitutional an increase for prior pensioners payable by the employer or carrier initially liable for the claim (pp. 165-170):
"Appellants assert that in applying this amendment to the accident in this case the State Industrial Board has misconstrued the intention of the Legislature; that substantive rights are effected by the amendment; that a retrospective application of the statute to accidents which happened prior to June 1, 1944, renders it unconstitutional.
* * *
"A reading of the amendment clearly indicates to us that the Legislature intended that it should apply to injuries sustained prior to June 1, 1944, if disability is present and payments are due during the year commencing on that date.
* * *
"The Workmen's Compensation Law creates the liability under which compensation is required to be paid by the employer to an injured employee or, in the event of his death, to his dependents. The obligation is purely statutory and does not arise out of an employer-employee relationship. Liability imposed by the Act is neither ex contractu (Matter of Smith v. Heine Boiler Co., 224 N.Y. 9, 119 N.E. 878, Ann. Cas. 1918D, 316) nor ex delicto (Matter of Doey v. Clarence P. Howland Co., 224 N.Y. 30, 120 N.E. 53). (P. 167.)
* * *
"Even if it be assumed that liability under the Workmen's Compensation Law is contractual, the amendment is not thereby violative of the provisions of the Constitution of the United States. The police power of the state may be exercised to affect the due process of law clause as well as the impairment of contract clause of the Federal Constitution.
[[Orig. Op. Page 8]]
"The subject matter of workmen's compensation reposes within the control of the Legislature.
"A law enacted pursuant to rightful authority is proper, and private contracts are entered into subject to that governmental authority. Norman v. Baltimore & Ohio Railroad Co., 294 U.S. 240, 55 S.Ct. 407, 79 L.Ed. 885, 95 A.L.R. 1352; Union Dry Goods Co. v. Georgia Public Service Corporation, 248 U.S. 372, 39 S.Ct. 117, 63 L.Ed. 309, 9 A.L.R. 1420; Louisville & N. R. Co. v. Mottley, 219 U.S. 467, 31 S.Ct. 265, 55 L.Ed. 297, 34 L.R.A., N.S., 671.
"The constitutional prohibition that no state shall pass any law which shall deprive a person of life, liberty or property without due process is not absolute. Matter of People v. Title & Mortgage Guarantee Co. of Buffalo, 264 N.Y. 69, 190 N.E. 153, 96 A.L.R. 297; Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413, 88 A.L.R. 1481.
"In the case of Sliosberg v. New York Life Insurance Company, 244 N.Y. 482, at page 497, 155 N.E. 749, at page 755, in discussing the question of impairment of the obligation of contract the court said:
"'All contracts are made subject to the exercise by government of a sovereign right to legislate for the protection of "the lives, health, morals, comfort and general welfare of the people." Manigault v. Springs, 199 U.S. 473, 26 S.Ct. 127, 50 L.Ed. 274. That the government may be required, in times of public stress, so to legislate as to nullify private contracts, is an implied term of the law of every contract, so that such legislation, if enacted, does not impair the obligation of the contract within the meaning of the limitation. Marcus Brown [Holding] Co. v. Feldman, 256 U.S. 170, 41 S.Ct. 465, 65 L.Ed. 877.'" (P. 170.)
Again, in Hogan v. Lawlor, 286 App. Div. 600, 146 N.Y.S.2d 119 (1955), a provision was held valid which allowed custodial care where the right to such did not exist at the time of the injury:
"The appellant argues that it is 'illegal and unjust' to impose liability upon the carrier for custodial care occuring after the 1944 amendments because the insurance premiums [[Orig. Op. Page 9]] collected by it from its insured had been based upon liability of a less burdensome character, but considerations of that kind are solely for the Legislature to weigh, in determining whether to increase the burden of future disability or expenses in pending compensation cases. Here it is clear that the Legislature did intend to increase the burden in pending cases and the insurance company must be deemed to have assumed the risk of such changes in the law, in its dealings with its insured.
"If by the words 'illegal and unjust', the appellant means to question the constitutionality of the statute construed as we have construed it here and as it was construed in the Metzger case, that question was settled in Schmidt v. Wolf Contracting Co., Inc., 269 App. Div. 201, 55 N.Y.S.2d 162, affirmed 295 N.Y. 748, 65 N.E.2d 568. In that case, it was held that the Legislature had the power to amend the Workmen's Compensation Law so as to increase the rate of weekly compensation payments to be made thereafter to employees who had been injured prior to the taking effect of the amendment. As this court pointed out in the Schmidt case, 'The amendment in question was enacted in the exercise of the police power of the State and hence violates neither its constitution nor the Federal Constitution. The principle of workmen's compensation is the promotion of public good.' 269 App. Div. at page 208, 55 N.Y.S.2d at page 170. The due process clause of the State and Federal Constitutions does not freeze the burden of compensation liability as of the date of the occurrence of an industrial accident, beyond the power of legislative change. In carrying out its social purpose, the Legislature has the power to increase the burden on the employer for disability or expenses occurring or continuing after the date of the enactment of the amendatory statute, even though the accident which gave rise to the disability or expense had occurred prior to that time. DiMartino v. Mountain Valley Water Company, 270 App. Div. 968, 62 N.Y.S.2d 174; cf. McCann v. Walsh Construction Co., 282 App. Div. 444, 123 N.Y.S.2d 509, affirmed 306 N.Y. 904, 119 N.E.2d 596." (P. 123.)
Michigan has followed the New York view in allowing for the "retroactive" application of a statute where the legislature has clearly intended it should have such application. In Lahti v. [[Orig. Op. Page 10]] Fosterling, 357 Mich. 578, 99 N.W.2d 490 (1959), the court allowed an increase in the duration of medical benefits to be applied to past injuries, stating:
"The act was originally adopted to give employers protection against common-law actions and to place upon industry, where it properly belongs, not only the expense of the hospital and medical bills of the injured employee, but place upon it the burden of making a reasonable contribution to the sustenance of that employee and his dependents during the period of time he is incapacitated from work. This was the express intent of the legislature in adopting this law. (P. 493.)
* * *
"One of the changes made through the years was the adoption, effective June 25, 1955, of the amendment to part 2, § 4, of the act (C.L.S. 1956, § 412.4 [Stat. Ann. 1957 Cum. Supp. § 17.154]) so that the commission, in its discretion, might order the payment of medical, surgical and hospital services and medicines for a longer period of time than under the old act. . . . (P. 494.)
* * *
"Justice Cooley in Gibson v. Hibbard, 13 Mich. 214, 219, said:
"'As the constitution does not prohibit the passing of retrospective laws, except when they are of the class technically known as Ex post facto, congress may unquestionably pass them, even though private rights are affected thereby, unless they are invalid for some other reason than their retrospective character.'
"In Peak v. State Compensation Commissioner, 141 W.Va. 453, 458, 459, 91 S.E.2d 625, 628, a death case rather than injury, the Supreme Court of Appeals of West Virginia said:
"'An act of the Legislature, though it have retrospective effect, is not necessarily invalid, and does not, for that reason, come into conflict with any constitutional provision, unless vested, not potential, rights, are [[Orig. Op. Page 11]] disturbed. See Huntington Water Corp. v. City of Huntington, 115 W.Va. 531, 177 S.E. 290; City of Benwood v. Public Service Commission, 75 W.Va. 127, 83 S.E. 295, L.R.A. 1915C, 261. It is true that this Court has held, we believe correctly, that the basis of liability of employers under the Workmen's Compensation statutes, is contractual. But we cannot say that such contractual relationship or liability necessarily precludes a subsequent Legislature from effecting changes in the Workmen's Compensation laws. Those who enter into such contractual relationships do so with knowledge of the right and power of the Legislature to enact any new law relating to the subject matter, not in conflict with any constitutional provision, and must be presumed to have agreed to any such change.'
"18 NACCA Law Journal 128 states as follows:
"'Furthermore these same laws which originally modified contracts of employment by substituting workmen's compensation for employers' liability did not except existing contracts from their operation, and their constitutionality has long been established. New York C[ent.] [[Cent. or C.]]R. Co. v. White, 1917, 243 U.S. 188 [37 S.Ct. 247, 61 L.Ed. 667]. If it is constitutional to totally deprive an employee of the right to seek unlimited damages against his employer by prohibition of common-law suits and substitution of a statutory scheme for payment of fixed benefits, surely it cannot be unconstitutional to so amend the benefit scale provisions as to insure that the amounts to be awarded remain sufficient to carry out the purpose for which the substitution was originally made.'
"Believing as we do that no vested right or contractual right exists that prohibits the legislature from making a change in the remedies afforded employees under the workmen's compensation law, and keeping in mind the express primary purpose of the act to transfer to industry the expense of injuries to employees growing out of and in the course of their employment, it is apparent to us that the legislature intended, as was held in the Rookledge case, supra, to substitute for the existing remedies under the act some expansion thereof. We find [[Orig. Op. Page 12]] from all facts and circumstances that the legislature intended the amendment ot be applicable to an existing award entered prior to the effective date of the amendment and intended to allow, upon proper application and proofs, additional medical benefits even though all previous benefit periods had been exhausted. We must hold that those cases in conflict with this position are overruled." (PP. 498-499.)
We believe it entirely possible that our court might follow the approach of the New York and Michigan courts rather than the strict "impairment of contract" theory. However, we do not feel it necessary to rely upon such speculation. Even assuming, arguendo, that the strict contract theory would be applied by our state court, we do not believe the proposal in question would be held to impair the obligation of contracts. This is because, as we view the proposal, it does not purport to alter the "contract" between the employer and the workman; the employer (or carrier) is not required to pay increased benefits for any injuries for which compensation was payable in lesser amounts on the date of injury. This provison is to be contrasted to the statute in the Yaeger case, previously discussed, in which the employer or carrier was directly required to pay additional compensation. The court in Yaeger held such an obligation invalid and ordered the payments to be made from a special fund supported by assessments against employers, which fund was established in part to update benefits for existing pensioners‑- through a method analogous to that provided in S.B. 701. Under the proposal in S.B. 701, all (covered) employers and workmen are assessed a number of cents per day‑-payable into a special fund‑-from which the increased benefits are to be paid. An employer originally charged for a total permanent disability or death is not re‑assessed [[reassessed]]for the increased benefits payable to "his pensioner."
The general concept embodied in S.B. 701 appears to be one that a number of other states have adopted without, so far as we can ascertain, any court challenge as to its constitutionality. Apparently recognizing, for whatever reason, that the particular employer or carrier initially responsible for the claim should not be held directly responsible for the increased benefits, a number of states have established special funds supported by assessment against all employers and/or workmen from which to pay the added benefits. Thus, in Connecticut, the increased [[Orig. Op. Page 13]] benefits are payable from a special fund supported by assessments against all self-insured employers and workmen's compensation carriers. See Connecticut General Statutes, § 31-307 (a) and § 31-307 (c), providing for "cost of living adjustments" and increases for prior pensioners payable by the carrier or self-insured employer subject to reimbursement from the "second injury and compensation assurance fund." In Michigan, Michigan Stats. Anno., Vol. 12, § 17.237 (521) and § 17.237 (551) provide for a similar plan. In Ohio, each employer is assessed an amount payable into the "disabled workmen's relief fund" to upgrade benefits for those receiving workmen's compensation for total permanent disability based on prior injuries under a lesser schedule of benefits. Ohio Revised Statutes, § 4123.411-419.
In the state of Oregon, a "retroactive reserve account" has been established (Oregon Revised Statutes, § 656.636) from which the increases for prior pensioners are paid. This account is supported by contributions from workmen based upon a two cents per day assessment (of which three‑fourths is payable into the retroactive reserve). See Oregon Revised Statutes 656.506. See also, the New York law previously discussed, McKinney's Consolidated Laws of New York, Vol. 64, § 15-6.
We also notice that the Council of State Governemnts Model Workmen's Compensation Act, in § 21 and § 55, provides for increased benefits for prior pensioners supported by assessments charged to employers and carriers. In comments concerning these provisions, Arthur Larson, chairman of the committee which drafted the model act and the leading authority on workmen's compensation, has made the following statement (at p. 138 of the published model act):
"Workmen's compensation is supposed to make public assistance unnecessary and to a large extent the program does accomplish this goal for cases of a temporary nature and of a short duration. The program has fallen woefully short, however, in those cases where the accident happened many years ago and the injured person or his widow is drawing compensation based on the benefit rate that was in effect at the time of the accident. The record shows that many beneficiaries are attempting to subsist on a monthly income far below the amount provided for a recent injury."
[[Orig. Op. Page 14]]
There is much language in the decisions of our own Washington state Supreme Court which would indicate that it would likely view the assessments or charges contemplated by S.B. 701 as a valid exercise of the police power. Moreover, both our court and the United States Supreme Court have referred to charges assessed to support our state industrial insurance program as being in the nature of an "occupational tax" partaking of the dual nature of a tax for revenue and a tax for purposes of regulation. See State ex rel. Davis v. Clausen, 65 Wash. 156, 117 Pac. 1101 (1911), at p. 207, and Mountain Timber Co. v. State of Wash., 243 U.S. 219 (1916), at p. 237. In the latter case, the United States Supreme Court, in upholding the constitutionality of our workmen's compensation law as originally enacted, made the following comments:
"In the present case the Supreme Court of Washington (75 Washington, 581, 583), sustained the law as a legitimate exercise of the police power, referring at the same time to its previous decision in the Clausen Case, 65 Washington, 156, 203, 207, which was rested principally upon that power, but also (pp. 203, 207), sustained the charges imposed upon employers engaged in the specified industries as possessing the character of a license tax upon the occupation, partaking of the dual nature of a tax for revenue and a tax for purposes of regulation. We are not here concerned with any mere question of construction, nor with any distinction between the police and the taxing powers. The question whether a state law deprives a party of rights secured by the Federal Constitution depends not upon how it is characterized, but upon its practical operation and effect. Henderson v. Mayor of New York, 92 U.S. 259, 268; Stockard v. Morgan, 185 U.S. 27, 36; Galveston, Harrisburg & San Antonio Ry. Co. v. Texas, 210 U.S. 217, 227; Western Union Telegraph Co. v. Kansas, 216 U.S. 1, 28, 30; Ludwig v. Western Union Telegraph Co., 216 U.S. 146, 162; St. Louis Southwestern Ry. Co. v. Arkansas, 235 U.S. 350, 362. And the Federal Constitution does not require a separate exercise by the States of their powers of regulation and of taxation. Gundling v. Chicago, 177 U.S. 183, 189.
"Whether this legislation be regarded as a mere exercise of the power of regulation, or as a combination of [[Orig. Op. Page 15]] regulation and taxation, the crucial inquiry under the Fourteenth Amendment is whether it clearly appears to be not a fair and reasonable exertion of governmental power, but so extravagant or arbitrary as to constitute an abuse of power. All reasonable presumptions are in favor of its validity, and the burden of proof and argument is upon those who seek to overthrow it. (PP. 237-238.)
* * *
"We are clearly of the opinion that a State, in the exercise of its power to pass such legislation as reasonably is deemed to be necessary to promote the health, safety, and general welfare of its people, may regulate the carrying on of industrial occupations that frequently and inevitably produce personal injuries and disability with consequent loss of earning power among the men and women employed, and, occasionally, loss of life of those who have wives and children or other relations dependent upon them for support, and may require that these human losses shall be charged against the industry, either directly, as is done in the case of the act sustained in New York Central R.R. Co. v. White, supra, or by publicly administering the compensation and distributing the cost among the industries affected by means of a reasonable system of occupation taxes. (P. 244.)
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"The idea of special excise taxes for regulation and revenue proportioned to the special injury attributable to the activities taxed is not novel. In Noble State Bank v. Haskell, 219 U.S. 104, this court sustained an Oklahoma statute which levied upon every bank existing under the laws of the State an assessment of a percentage of the bank's average deposits, for the purpose of creating a guaranty fund to make good the losses of depositors in insolvent banks. There, as here, the collection and distribution of the fund were made a matter of public administration, and the fund was created not by general taxation but by a special imposition in the nature of an occupation tax upon all banks existing under the laws of the State. In Hendrick v. Maryland, 235 U.S. 610, 622, and Kane v. New Jersey, 242 U.S. 160, 169, we sustained [[Orig. Op. Page 16]] laws, of a kind now familiar, imposing license fees upon motor vehicles, graduated according to horse power, so as to secure compensation for the use of improved roadways from a class of users for whose needs they are essential and whose operations over them are peculiarly injurious. And see Charlotte, Columbia & Augusta R.R. Co. v. Gibbes, 142 U.S. 386, 394-5, and cases cited. Many of the States have laws protecting the sheep industry by imposing a tax upon dogs in order to create a fund for the remuneration of sheep-owners for losses suffered by the killing of their sheep by dogs. And the tax is imposed upon all dog-owners, without regard to the question whether their particular dogs are responsible for the loss of sheep. Statutes of this character have been sustained by the state courts against attacks based on constitutional grounds. Morey v. Brown, 42 N.H. 373, 375; Tenney, Chairman, v. Lenz, 16 Wisconsin, 566; Mitchell v. Williams, 27 Indiana, 62; Van Horn v. People, 46 Michigan, 183, 185, 186; Longyear v. Buck, 83 Michigan, 236, 240; Cole v. Hall, Collector, 103 Illinois, 30; Holst v. Roe, 39 Ohio St. 340, 344; McGlone, Sheriff v. Womack, 129 Kentucky, 274, 283 et seq." (PP. 244-245.)
Thus, while it is true that our court has often recognized a distinction between tax laws and regulatory laws3/ , assessments under the workmen's compensation law have been sustained both on the basis of being an exercise of the police power and also as [[Orig. Op. Page 17]] "possessing the character of a license tax upon the occupation, partaking of the dual nature of a tax for revenue and a tax for purposes of regulation".4/
In any event, it seems to us that the assessments to be imposed under S.B. 701, whether tested under a tax concept or as an exercise of police power, or both, are based upon a reasonable classification and one which bears a reasonable relationship to the ends sought by the act. As pointed out in the Mountain Timber case, it is not unreasonable to charge industry with the cost of compensating and maintaining workmen and their families where the disabilities and wage losses are industrially caused. Further, assessments against workmen seem valid under the same tests because workmen, as a class, participate in the benefits of the assessment.5/
Lastly, there is one final important consideration to be noted: Should the provisions of S.B. 701 be enacted into law, they would become entitled to a strong presumption of constitutionality. As stated in Clark v. Dwyer, 56 Wn.2d 425, 353 P.2d 941 (1960), at p. 431:
"It must be borne in mind that the state constitution is not a grant, but a restriction on the law-making power, and the power of the legislature to enact all reasonable laws is unrestrained except where, either expressly or by fair inference, it is prohibited by the state and federal constitutions. Where the validity of a statute is [[Orig. Op. Page 18]] assailed, there is a presumption of the constitutionality of the legislative enactment, unless its repugnacy to the constitution clearly appears or is made to appear beyond a reasonable doubt. Port of Tacoma v. Parosa, 52 Wn.2d 181, 324 P.2d 438; In re Bartz, 47 Wn.2d 161, 287 P.2d 119; Union High School Dist. No. 1 v. Taxpayers of Union High School Dist. No. 1, 26 Wn.2d 1, 172 P.2d 591. Where possible, it will be presumed that the legislature has affirmatively determined any special facts requisite to the validity of the enactment, even though no legislative finding of fact appears in the statute. State ex rel. Collier v. Yelle, 9 Wn.2d 317, 333, 115 P.2d 373."
In summary, based upon the foregoing analysis, we conclude that the provisions of Senate Bill 701 which have been questioned would be constitutionally defensible if enacted in their present form. These provisions do not retroactively impair the obligation of existing contracts‑-rather, they establish a system of charges or assessments levied against all employers and workers to support workmen and beneficiaries whose economic plight is industrially caused and whose compensation is inadequate because it is tied to a schedule of benefits which does not take into account the increases in the cost of living. Further, we believe the general acceptance of such legislative plans in other states significantly supports our view.
We trust the foregoing will be of assistance to you.
Very truly yours,
JOHN C. MARTIN
Deputy Attorney General
*** FOOTNOTES ***
1/Sec. 1, Ch. 233, Laws of 1947; Sec. 1, Ch. 196, Laws of 1957; Sec. 1, Ch. 108, Laws of 1961; Sec. 1, Ch. 161, Laws of 1965.
2/It should be noticed that the Minnesota court, in holding invalid the shift of liability for payment from the special fund to the employer or insurance carrier, did not question the validity of the earlier statute authorizing payment from the special fund; the special fund referred to in the opinion was maintained by assessments against employers and provided for increased benefits for "prior pensioners"‑- similar to the provisions of S.B. 701 here in question. Minn. Stats. of 1947, § 176.13 (prior). See also, for similar language, Peterson v. Federal Mining & Smelting Co., 67 Ida. 111, 170 P.2d 611 (1946); Salmon v. Denhart Elevators, 72 S.D. 110, 30 N.W.2d 644 (1948). As we shall presently see, we do not view these cases as directly applicable to the proposal in question as they involve a different method of funding and payment of the "retroactive" benefits.
3/Hemphill v. Tax Commission, 65 Wn.2d 889, 400 P.2d 297 (1965), at p. 891:
"It should be pointed out once again that there is a distinction between the power of the legislature to designate classes for taxation and classes for regulation. In the former, the legislature acts under its revenue power and is given very broad power in the determination of classes for the imposition of taxation, subject only to the requirement that the division between the classes rest on a basis in reason that is not arbitrary and capricious. In the second category, the legislature acts under its police power, and then the test becomes whether the classification bears a reasonable relationship to the ends sought by the act. This distinction is recognized and well discussed in Texas Co. v. Cohn, 8 Wn.2d 360, 375, 112 P.2d 522 (1941)."
4/Mountain Timber Co. v. Wash., supra. See also, Lane v. Department of Labor & Industries, 21 Wn.2d 420, 151 P.2d 440 (1944), at p. 427; Monroe Logging Co. v. Department of Labor & Industries, 21 Wn.2d 800, 153 P.2d 511 (1944), at p. 803, classifying the contribution as "excise taxes." Unemployment compensation assessments are also considered excise taxes. State v. Lawton, 25 Wn.2d 750, 172 P.2d 465 (1946). Our unemployment compensation statute and workmen's compensation are said to be similar in nature and purpose. In re Jullin, 23 Wn.2d 1, 160 P.2d 1023 (1945), at p. 13.
5/Workmen have been assessed for many years for one‑half of the cost of supporting the medical aid fund. See RCW 51.16.140.