INDUSTRIAL INSURANCE - LABOR - COMPUTATION OF EMPLOYER PREMIUM PAYMENTS - PENSION CLAIMS

INDUSTRIAL INSURANCE - LABOR - COMPUTATION OF EMPLOYER PREMIUM PAYMENTS - PENSION CLAIMS.

(1) When computing the "average cost of pension claims," under RCW 51.16.020, for the purpose of determining the premium charges to employers under the state industrial insurance act, it is legally permissible for the department of labor and industries to use a five year averaging period in the absence of any statutory provision to the contrary.

(2) It is not legally permissible for the department of labor and industries to include fatalities of unmarried workmen who leave no surviving beneficiaries or dependents in computing the "average cost of pension claims" under RCW 51.16.020, since such cases do not involve "pension claims" within the meaning of the industrial insurance act.

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                                                                 January 14, 1969

Honorable Harold J. Petrie
Director, Department of Labor and Industries
General Administration Building
Olympia, Washington 98501

                                                                                                                   Cite as:  AGO 1969 No. 1

Dear Sir:

            By letter previously acknowledged you have requested an opinion of this office on two questions concerning the method of computing premium charges to employers under the state industrial insurance act.

            We paraphrase your questions as follows:

            (1) Is it legally permissible, under RCW 51.16.020, for the department of labor and industries to use a five year period in computing the "average cost of pension claims"?

            (2) Is it legally permissible for the department to include fatalities of unmarried workmen who leave no surviving beneficiaries or dependents in computing the "average cost of pension claims" under RCW 51.16.020?

            We answer the first question in the affirmative and the second question in the negative.

             [[Orig. Op. Page 2]]

                                                                     ANALYSIS

            The workmen's compensation law, Title 51 RCW, sets forth a system of industrial insurance whereby employers pay premiums into an "accident fund" and a "medical aid fund" and workmen are compensated from such funds for disabilities and medical expenses resulting from injuries and occupational diseases sustained in the course of employment.  (Parenthetically, workmen pay one half of the medical aid fund premiums; RCW 51.16.140.)  The law provides for a variety of benefits and, in cases involving total permanent disability or death, a workman or his beneficiaries or dependents may be entitled to a statutory pension.  While this opinion is concerned with the computation of charges to be assessed against an employer in cases of death or total permanent disability, it should be observed that other types of injuries and disabilities contribute in large part to the total premium charges assessed against employers under the industrial insurance act.  The amount that employers of covered workmen pay into the accident fund is, generally speaking, computed partly on the basis of the cost experience of the entire class of employers (engaged in the same occupation or business) and partly on the cost experience of the particular employer in the class.

            The applicable statute, RCW 51.16.020, reads as follows:

            "The amounts to be paid into the accident fund shall be determined as follows:  The department shall, prior to the first day of January of each year, determine for each class and subclass, a basic premium rate for the ensuing calendar year and, in so doing, shall take into consideration:  First, that no class shall be liable for the depletion of the accident fund for accidents happening in any other class; second, that each class shall meet and be liable for its own accidents; third, the cost experience of each class and subclass over the two year period immediately preceding July 1st of the year in which the basic rate is being fixed; fourth, the then condition of each class and subclass account.

            "The department shall also, prior to the first day of January of each year, determine the premium rate to be paid into said accident fund during the ensuing year by each employer to be credited to each class and subclass account, applicable to the employer's operations or business and, in so doing,  [[Orig. Op. Page 3]] shall take into consideration the average cost experience of each employer for each workman hour reported by him during each fiscal year in each such class or subclass over the five year period immediately preceding July 1st of the year in which the rate is being determined, and in so computing the cost experience of any employer, seventy-five percent of the average cost of pension claims shall be charged against his experience for each injury resulting in death or total permanent disability of a workman instead of the actual cost to the accident fund of such injury.  The actual premium rate which any employer shall be required to pay for the accident fund shall be thirty percent of the basic rate, plus seventy percent of the employer's cost rate for each workman hour reported by him during each fiscal year over the five year period next preceding the then last July 1st, but in no case shall the total rate exceed one hundred sixty percent of the basic rate."  (Emphasis supplied.)

            Question (1):

            Your first question is whether it is legally permissible under the statute quoted above for the department to use a five year period in computing the "average cost of pension claims."

            The first paragraph of the statute sets out the method to be used to determine the "base" rate for each class or subclass of employers under the act, and the second paragraph provides the manner of computing the individual "earned" premium rate for the ensuing year for each employer within a class or subclass account.  A difficulty arises in interpreting the second paragraph because two different kinds of "averaging" are required to compute the cost experience of an employer whose operations have resulted in death or total permanent disability of a workman.  The first average is that of the cost to the accident fund by the particular employer for the preceding five fiscal years to determine the cost per workman hour.  The statute then makes an exception to the general rule that an employer's "earned" premium rate is based (in part) on an averaging of his actual costs to the accident fund.  That is, where there has been a death or total permanent disability of an employee during the preceding five fiscal years, a standard amount is substituted for the actual cost to the accident fund for purposes of determining the employer's average cost experience per workman  [[Orig. Op. Page 4]] hour.  The standard charge which is substituted is arrived at by taking "seventy-five percent of the average cost of pension claims" of all employers.  It is apparent that the averaging done to arrive at the standard figure for the cost of pension claims to be used for every employer is a different process from the averaging done to arrive at a particular employer's cost experience per workman hour.  For the individual employer, averaging over a five year period is specified; for the average cost of all pension claims against all employers, no time period is clearly indicated.

            From the time of original passage of the industrial insurance act in 1911 (chapter 74, Laws of 1911) until 1931, there were no special provisions or formulas whereby an individual employer could "earn" a rate based in part upon his own individual cost experience.  Such provisions were written into the law in 1931, and the exact amount of the charges to be made to the employer's cost experience in cases of death or total permanent disability were specifically fixed by statute.  Section 1, chapter 104, Laws of 1931.  At that time the legislature set forth the sum of $4000 as the amount to be charged to an employer in "cases involving death or total permanent disability."  Six years later, by § 1, chapter 89, Laws of 1937, the amount was increased to $4500.  The $4500 "statutory charge" remained until 1951, when the legislature enacted the present statutory language in § 2, chapter 236, Laws of 1951.  The legislature apparently decided in 1951, that the amount to be charged could more properly be established by a method other than periodic legislative revisions of the dollar amount of the charge.  Under the present language above quoted, the department (since 1951) has determined and announced the amount (still commonly referred to as a "statutory charge") equal to seventy-five percent of the average cost of pension claims; designating the sum of $9300 in 1951, and thereafter increasing the charge to $10,785 in 1955, to $11,500 in 1957, $12,000 in 1961, $12,900 in 1963, $15,275 in 1966, and $19,500 in 1968.

            You have advised us in the opinion request that the department has, without exception, consistently and uniformly used a five year base or time period in determining "seventy-five percent of the average cost of pension cases" on each occasion it has updated the "statutory charge."  In the statutory language above quoted, provision is made for the use of a five year  [[Orig. Op. Page 5]] period in computing an employer's average cost per workman hour.1/   However, the statute does not specifically state that "the five year period immediately preceding July 1st of the year in which the [employer's] rate is being determined" should also be used in determining "the average cost of pension claims."  The department in its administrative practices has not strictly adhered to an interpretation that the statutory charge must be based upon the exact five year period mentioned in the statute.  For example, the department has not recomputed the statutory charge each year using the five previous years as a base.  The charge has been revised since 1951, on an irregular basis at intervals of four years, two years, four years, two years, three years, and two years.  Thus, the five year period used to average the pension costs may not correspond to the five year period used to determine a particular employer's average cost per workman hour; for example, a charge for a May 1, 1965, injury and death would be $12,900, which amount would have been determined on the basis of the five years preceding 1963, while the five year period used in "averaging" to determine the cost per workman hour for such injury would be the five year period preceding July 1, 1965.  Further, we are advised the department has for many years followed the practice of charging the employer's account with the statutory charge in effect at the time of injury.  If, for example, a 1960 injury progressed to the point of total permanent disability or death in 1968, the employer would be charged in 1968 (and the charge would remain in his account for five years) with the "statutory charge" in effect in 1960, not the charge which might be determined in 1968.  This practice has apparently been based on the established principle that benefits (and corresponding obligations) under the act are normally determined by the law in effect on the date of injury rather than at the date of death or the date of the existence of total permanent disability.  See,Ashenbrenner v. Dept. of Labor & Ind., 62 Wn.2d 22, 380 P.2d 730 (1963).  In addition, we are advised that the department has, at least on occasion, used a five calendar year base in determining the average cost of pension  [[Orig. Op. Page 6]] claims rather than the five fiscal year base mentioned in the statutory language above quoted.2/

             However, it would seem apparent there is considerable support for the adoption of a five year base in averaging the cost of pension claims (for purposes of determining the amount to be charged to an employer) in view of the fact a five year base is used to average the employer's costs in determining his premium rate.  We notice, for example, that the state of Oregon under an analogous law in effect prior to 19653/ used a five year period in computing the employer's premium rate and the same five year period in computing an "average amount" chargeable to an employer in death or total permanent disability cases.  The following language is quoted from § 3, chapter 352, Oregon Laws of 1933; chapter 12, Oregon Laws of 1933, Second Special Session; formerly Oregon Code 49-1825-b as amended; also set forth in Vol. 4, Schneider, Workmen's Compensation Statutes, pp. 3199-3200:

            "The rate of contribution of an employer for each succeeding fiscal year shall be determined, as provided in this section, from the time such employer first became subject to this act, but for not more than the preceding five fiscal years; . . .

            ". . . For the purpose of determining the experience rating, as provided in this section, the amount paid out or set aside on account of an accident resulting in the fatal injury or permanent total disability of a workman shall be deemed to be theaverage amount paid out and set aside on accountof all such injuries during the preceding five fiscal years."  (Emphasis supplied.)

            It is perhaps unfortunate that the Washington legislature did not specify the time period for determining the "average cost of pension claims" as clearly as did the Oregon lawmakers; it is also somewhat unfortunate (from the standpoint of statutory interpretation) that the department in its administrative practices since 1951, has not strictly adopted or adhered to the particular five year period outlined in the statute so  [[Orig. Op. Page 7]] that it could be more confidently asserted that the department practices constitute an administrative interpretation or "reading" of an ambiguous statute which would be entitled to considerable weight under such decisions as Bradley v. Dept. of Labor & Ind., 52 Wn.2d 780, 329 P.2d 196 (1958).  However, in any event, in the absence of a specific statutory direction to the contrary, we conclude that the department's use of a five year period for this averaging is legally permissible.

            Question (2):

            By this question you have asked whether it is legally permissible for the department to include fatalities of unmarried workmen who leave no surviving beneficiaries or dependents in computing the "average cost of pension claims."  This question also involves that portion of RCW 51.16.020, supra, which reads:

            ". . . and in so computing the cost experience of any employer,seventy-five percent of the average cost of pension claims shall be charged against his experience for each injury resulting in death or total permanent disability of a workman instead of the actual cost to the accident fund of such injury. . . ."  (Emphasis supplied.)

            Where the language of a statute is plain and unambiguous, there is no room for construction.  King Cy. v. Seattle, 70 Wn.2d 988, 425 P.2d 887 (1967); In re Baker's Estate, 49 Wn.2d 609, 304 P.2d 1051 (1956);Seattle v. Ross, 54 Wn.2d 655, 344 P.2d 216 (1959).  The language above italicized is clear; "seventy-five percent of the average cost ofpension claims" is to be charged against the employer's cost experience for each injury resulting in death or total permanent disability.  It is thus apparent that only pension claims are to be considered in determining the "average cost of pension claims."  Had the legislature intended the charge to be based simply upon [seventy-five percent of] the average cost of all injuries resulting in death or total permanent disability, it could very easily have so stated.  We cannot ignore the plain reference to pension claims.  A "pension" is referred to throughout the industrial insurance act as the monthly benefits payable to a totally permanently disabled workman or to the monthly benefits payable to a dependent or beneficiary  [[Orig. Op. Page 8]] based upon the workman's death or total permanent disability prior to death.  [See, e.g., RCW 51.32.070, RCW 51.32.060 (6), RCW 51.32.135, and RCW 51.16.120.]