State ex rel. V & A Risk Servs. v. Ohio Bur. of Workers' Comp.State ex rel. V & A Risk Servs. v. Ohio Bur. of Workers' Comp.
Rendered on August 9, 2012
Stefanski & Associates LLC, and Janice T. O‘Halloran, for appellees.
Michael DeWine, Attorney General, Gerald H. Waterman, and Elise Porter, for appellants.
APPEAL from the Franklin County Court of Common Pleas.
FRENCH, J.
{¶ 1} Respondents-appellants, the Ohio Bureau of Workers’ Compensation and its administrator, Stephen Buehrer (collectively, “BWC“), appeal the Franklin County Court of Common Pleas’ entry of summary judgment in favor of relators-appellees, V & A Risk Services (“V&A“) and Safety Council of Northwest Ohio (collectively, “relators“), in this mandamus action. For the following reasons, we affirm.
{¶ 2} As part of its duty to administer a workers’ compensation system, BWC classifies occupations or industries according to their degree of hazard and determines the risks of different classes according to the national council on compensation insurance categories for risk. See
{¶ 3} In addition to insuring employers individually, BWC also offers to insure employers under a plan that groups employers and pools their risk within a group, subject to certain conditions. See
{¶ 4} Private sponsoring organizations create and administer employer groups, but BWC approves or disapproves each group upon application. See
{¶ 6} The Safety Council of Northwest Ohio is a BWC-approved sponsor of an employer group plan called BWC Industry Group 4, Construction #58 (the “group“). V&A is the designated third-party plan administrator for the group. In 2004, Total became a member of the group after executing V&A‘s Group Rating Agreement. In the Group Rating Agreement, Total certified that it did not operate as an employee leasing company or a professional employer organization (“PEO“), and it agreed to notify V&A of any material change in its operations.
{¶ 7} Pursuant to
Where a legal entity succeeds in the operation of a portion of a business of one or more legal entities having an established coverage or having had experience in the most recent experience period, the successor‘s rate shall be based on the predecessor‘s experience within the most recent experience period, pertaining to the portion of the business acquired by the successor.
{¶ 8}
Where a legal entity succeeds in the operation of a portion of a business of another legal entity and the successor entity is a member of a group for experience rating, the successor entity shall remain a member of the group for experience rating and the experience of the predecessor shall be included with the experience of the group for the purpose of experience rating.
Thus, a transfer of experience to a group member, as a result of its succession of another‘s business operations, affects the experience rating of the group.
{¶ 9} In 2006, BWC conducted an audit of NOVCO and concluded that Total was a partial successor to NOVCO. As a result of its audit, BWC transferred a portion of NOVCO‘s experience to Total and made the transfer retroactive to 2004.1 Consequently, the group‘s premiums were re-rated, resulting in a premium increase for the group, as a whole, in excess of $1.4 million.
{¶ 10} Total objected to the transfer and requested a hearing before BWC‘s Adjudicating Committee. At the hearing, NOVCO and Total‘s counsel stated that the issue was “[w]hether or not the audit findings were correct, that Total is a succeeding interest to NOVCO.” (Aug. 21, 2007, Tr. 24.) The parties stipulated that, should BWC uphold the transfer, Total would agree to its removal from the group. Therefore,
{¶ 11} The Adjudicating Committee explicitly found that “Total is not a successor employer to Novco.” It stated, as follows:
[W]hat BWC must examine under [
R.C. 4123.32 andOhio Adm.Code 4123-17-02 ] is not the transfer of employees. BWC must ask what business Novco is in, and whether Total succeeded Novco in operating the business in whole or in part. Novco sells chemicals and clears rights-of-way. Those functions did not transfer to Total. Novco continues performing both functions, and Total performs neither. Total does not have the equipment to perform those functions. Total is solely in the business of leasing employees to Novco. Novco has never been in the business of leasing employees to another employer. Thus, under the definitions contained in the statute and rule, Total is not a successor employer to Novco.
Nevertheless, the Adjudicating Committee upheld the transfer of a portion of NOVCO‘s experience because it viewed the relationship between NOVCO and Total as “a form of labor leasing involving a completely captive new employer.” The committee rejected the parties’ stipulation as to Total‘s removal from the group and held that BWC lacked authority to remove an employer from a group after the April 1 deadline in
{¶ 12} Total appealed the Adjudicating Committee‘s order to the BWC Administrator‘s Designee pursuant to
{¶ 13} The Administrator‘s Designee adopted the Adjudicating Committee‘s statement of facts and affirmed the committee‘s decision, findings, and rationale. Thus, the Administrator‘s Designee agreed that Total was not a successor employer to NOVCO, but nevertheless affirmed the transfer of experience. In an Amended Order, the Administrator‘s Designee also found that the evidence did not demonstrate that Total is an unregistered PEO.
{¶ 14} On June 4, 2008, relators filed a complaint for declaratory judgment against BWC in the Franklin County Court of Common Pleas. The trial court granted summary judgment in favor of relators, and both BWC and relators appealed. This court reversed and remanded to the trial court after concluding that relators’ sole vehicle to challenge BWC‘s discretionary decision was a mandamus action, and not an action for declaratory judgment. See V & A Risk Servs. v. Ohio Bur. of Workers’ Comp., 10th Dist. No. 09AP-919, 2010-Ohio-6118.
{¶ 15} On remand, relators filed an amended complaint for relief in mandamus. Mandamus is “a writ, issued in the name of the state to an inferior tribunal, a corporation, board, or person, commanding the performance of an act which the law specially enjoins as a duty resulting from an office, trust, or station.” The parties filed a stipulation of evidence and again moved for summary judgment. {¶ 16} On September 12, 2011, the trial court granted relators’ motion for summary judgment. The trial court reiterated the substance of its prior summary judgment decision, which it incorporated by reference. The court held that BWC abused its discretion by finding that Total was not operating as an unregistered PEO and by transferring NOVCO‘s experience to Total. The trial court did not address the other issues raised in relators’ mandamus complaint. {¶ 17} BWC now raises the following, single assignment of error: The court below erred in finding that [BWC] abused its discretion and acted contrary to law in transferring part of the risk experience of [NOVCO] to the account of its partial successor, [Total]. {¶ 18} When an administrative agency makes a discretionary decision that is not subject to direct appeal, a writ of mandamus is the sole vehicle to challenge the decision. Ohio Academy of Nursing Homes v. Ohio Dept. of Job & Family Servs., 114 Ohio St.3d 14, {¶ 19} In State ex rel. Avalon Precision Casting Co. v. Indus. Comm., 109 Ohio St.3d 237, 2006-Ohio-2287, ¶ 9, the Supreme Court addressed the standard of review in a direct appeal from an original mandamus action, as follows: “The appropriate standard guiding our review is whether there is * * * ‘some evidence’ in the record to support the [industrial] commission‘s decision. * * * If so, then the commission will not be deemed to have abused its discretion, and the granting of a writ of mandamus to correct an abuse of discretion is not warranted.” State ex rel. Secreto v. Indus. Comm., 80 Ohio St.3d 581, 582-83 (1997). This court‘s role is not to “micromanage the commission as it carries out the business of compensating for industrial/occupational injuries and illness.” State ex rel. Mobley v. Indus. Comm., 78 Ohio St.3d 579, 584 (1997). “Where a commission order is adequately explained and based on some evidence, even evidence that may be persuasively contradicted by other evidence of record, the order will not be disturbed as manifesting an abuse of discretion.” Id. {¶ 20} BWC raises two distinct arguments in support of its position that the trial court erred by granting judgment in favor of relators. First, BWC argues that relators are not entitled to a writ of mandamus because they have adequate remedies at law. Second, BWC argues that it acted within its discretion to transfer risk experience from NOVCO to Total. BWC also argues that its actions did not deprive relators of a remedy, as guaranteed by the Ohio Constitution, an issue the trial court did not address. For ease of discussion, we first address BWC‘s argument that it acted within its discretion by transferring NOVCO‘s experience rating to Total. {¶ 21} BWC was undisputedly authorized to audit NOVCO and Total‘s books and records and to adjust premium rates as a result of its audit, if warranted. In its answer to relators’ interrogatories, BWC stated that its audit revealed that NOVCO transferred some of its operations, including brush control and tree trimming, to Total and that Total provided the employees’ W-2 forms. BWC transferred a portion of NOVCO‘s experience rating to Total, pursuant to {¶ 22} BWC has a duty to explain its administrative decisions for the benefit of the parties and reviewing courts. State ex rel. Ochs v. Indus. Comm., 85 Ohio St.3d 674, 676 (1999). The Adjudicating Committee adequately explained its determination that Total was not a successor in interest to NOVCO by referencing the applicable statute and rule and reasoning that Total performs neither of the business functions that NOVCO performed prior to Total‘s creation and that NOVCO continues to perform. In contrast, neither the Adjudicating Committee nor the Administrator‘s Designee explained the {¶ 23} Courts generally must give due deference to an administrative interpretation formulated by an agency that has accumulated substantial expertise and that has responsibility for implementing a legislative command. Frisch‘s Restaurants, Inc. v. Ryan, 121 Ohio St.3d 18, 2009-Ohio-2, ¶ 16. Deference to an administrative agency‘s interpretation of its rules, however, is not unfettered. An appellate court need not defer to an agency‘s interpretation when it is unreasonable and fails to apply the plain language of a statute or rule. Id.; HCMC, Inc. v. Ohio Dept. of Job & Family Servs., 179 Ohio App.3d 707, 2008-Ohio-6223, ¶ 25 (10th Dist.). {¶ 24} The Adjudicating Committee and the Administrator‘s Designee‘s interpretation of {¶ 25} In the trial court, the focus of this case shifted from the question of whether Total succeeded a portion of NOVCO‘s business operations to the question of “Professional employer organization” or “PEO” means a sole proprietor, partnership, association, limited liability company, or corporation that enters into an agreement with one or more client employers for the purpose of coemploying all or part of the client employer‘s workforce at the client employer‘s work site. “Professional employer organization” or “PEO” does not include a temporary service agency. A PEO assumes responsibility for the payment of wages, taxes, and workers’ compensation premiums for shared employees, as established by its PEO agreement. {¶ 26} Where a client employer enters into a PEO agreement * * * [t]he PEO shall be considered the succeeding employer, solely for purpose of workers’ compensation experience, and shall be subject to rule A PEO that operates in Ohio must register with BWC annually. {¶ 27} The thrust of relators’ argument is that Total operated as an unregistered PEO, and BWC abused its discretion by concluding otherwise. {¶ 28} It is undisputed that Total did not comply with at least some of the requirements of a PEO under {¶ 29} The Administrator‘s Designee disposed of relators’ PEO argument in two sentences. He stated as follows: “the evidence adduced at hearing does not demonstrate that [Total] is an unregistered PEO. [NOVCO] and [Total] have common ownership and there is no indication that [Total] held itself out to be a PEO.” Relators correctly note that {¶ 31} Although {¶ 32} The trial court refused to defer to BWC‘s interpretation of {¶ 33} When “two or more corporations [are] controlled by the same, or substantially the same, owners,” the corporations are “sister corporation[s].” Black‘s Law Dictionary at 394. “[T]he common shareholder ownership of sister corporations does not provide one sister corporation with the inherent ability to exercise control over the other.” Minno v. Pro-Fab, Inc., 121 Ohio St.3d 464, 2009-Ohio-1247, ¶ 12. The separate legal identities of related corporations must be respected even where directors and officers serve in various capacities in multiple entities. CSAHA/UHHS-Canton, Inc. v. Aultman Health Found., 5th Dist. No. 2010CA00303, 2012-Ohio-897, ¶ 110. There is no legal prohibition against sister corporations contracting with each other. See, e.g., Edgar Spring, Inc. v. Winters, 5th Dist. No. 91AP-110087 (Nov. 13, 1992) (acknowledging that one sister corporation purchased material from another sister corporation). Moreover, other courts have expressly recognized one sister corporation as a customer of another. See State v. N. Atlantic Refining Ltd., 160 N.H. 275, 999 A.2d 396 (2010) (identifying North Atlantic‘s sole gasoline customer as its sister company); Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413 (6th Cir.1990) (“NOAP claims damages because of the alleged wrongful injuries to sister corporation Langenderfer, its principal customer.“). {¶ 34} BWC argues that cases involving corporate liability of sister corporations are inapplicable in the workers’ compensation context. BWC cites Lake Erie Constr. Co., which centered on the meaning of “successor in interest.” In that case, BWC argued that the applicable workers’ compensation-related statute and rule defined “successor in interest” as a transferee of a business in whole or in part, whereas the appellant urged the court to adopt a common-law definition of the term. The Supreme Court rejected the appellant‘s argument, and the court‘s application of the plain language of the statute and the rule negated the “need to look beyond [those] provisions.” Id. at 84. {¶ 36} The Twelfth District Court of Appeals recently applied the definition of PEO in the context of sister corporations in Roberts v. RMB Ents., Inc., 197 Ohio App.3d 435, 2011-Ohio-6223 (12th Dist.). RMB Enterprises, Inc. (“RMB“), a business that operated a steel storage warehouse, contracted to provide AK Steel Corp. (“AK“) with intraplant hauling services. Bowling Transportation, Inc. (“BTI“), an over-the-road steel hauler that shared common owners with RMB, leased employees to RMB to provide RMB‘s hauling services for AK. The Twelfth District held that BTI did not qualify as a PEO. The court stated, at ¶ 16, as follows: The trial court found, and we agree, that “it was not the intent of the legislature, when it passed [Am.Sub.H.B. No. 183, enacting The court cited the Legislative Service Commission‘s final bill analysis of Am.Sub.H.B. No. 183, which stated that the General Assembly intended for the provisions regarding PEOs to apply to ” ‘employers that specialize in “leasing” employees to other employers.’ ” (Emphasis sic.) Id. at ¶ 14. The court did not premise its determination upon the common ownership of RMB and BTI. Instead, the court based its conclusion {¶ 37} Roberts is also otherwise distinguishable on its facts. In Roberts, the court focused on the fact that BTI‘s business was over-the-road hauling and not leasing employees to other employers. BTI simply leased some of its hauling employees to RMB to perform RMB‘s hauling obligations for convenience and consolidation of human resource functions, even though its own business was hauling. In contrast, Total‘s sole business was the leasing of employees to NOVCO. Total was specifically created for that purpose, which provided its sole source of revenue, and it did not engage in any of the business activity that the leased employees performed for NOVCO. In this way, Total satisfies the Twelfth District‘s requirement that an entity must specialize in leasing employees to other employers to qualify as a PEO. {¶ 38} NOVCO and Total are separate legal entities, despite their common ownership, and both report payroll and pay workers’ compensation premiums. There is no evidence that NOVCO exercised control over Total or that the entities did not observe corporate formalities. The entities are sister companies, and, like the trial court, we conclude that BWC abused its discretion by determining that NOVCO could not be a “client” of Total for purposes of the regulatory definition of PEO. BWC‘s imposition of a requirement that a client relationship demands two unrelated parties unreasonably adds a prerequisite to the definition of PEO that the plain meaning of the rule does not support. Accordingly, we do not defer to BWC‘s interpretation in that regard. {¶ 39} In its reply brief before this court, BWC additionally argues that Total does not qualify as a PEO because the record contains no evidence of a written PEO contract between Total and NOVCO, as required by {¶ 40} BWC also argues that relators’ interpretation of {¶ 41} We acknowledge BWC‘s reliance on the National Association of Professional Employer Organization‘s (“NAPEO“) description of PEOs as entities that ” ‘enter into a co-employment arrangement typically involving all of the client‘s existing worksite employees in a long-term relationship, and sponsor benefit plans for the workers and provide human resources services to the worksite employer.’ ” The NAPEO {¶ 42} We now turn to BWC‘s second argument against mandamus, that relators possessed adequate remedies at law. Relief in mandamus is unavailable where the relator has a plain and adequate remedy in the ordinary course of the law. Berger, 6 Ohio St.3d at 30. For a remedy at law to be adequate, it must be complete in its nature, beneficial, and speedy. State ex rel. Liberty Mills, Inc. v. Locker, 22 Ohio St.3d 102, 104 (1986), citing State ex rel. Merydith Constr. Co. v. Dean, 95 Ohio St. 108, 123 (1916). BWC specifically contends that relators had adequate remedies by way of a statutory ability to remove Total from the group and by way of a breach of contract action against Total, based on Total‘s misrepresentation of its business on its application for group membership. {¶ 43} BWC first contends that {¶ 44} Generally, a relator‘s failure to meet a deadline applicable to another remedy does not render the other remedy inadequate. See State ex rel. Pontillo v. Pub. Emp. Retirement Sys. Bd., 98 Ohio St.3d 500, 2003-Ohio-2120, ¶ 34 (member‘s failure to timely submit additional, objective medical evidence to challenge a board‘s decision did not render that remedy inadequate); State ex rel. Ullmann v. Hayes, 103 Ohio St.3d 405, 2004-Ohio-5469, ¶ 9 (where relator could have requested documents that allegedly gave rise to a claim of fraud during administrative appeal process, administrative proceedings and statutory appeal therefrom provided an adequate remedy by which she could have raised her fraud claim). The Supreme Court of Ohio has expressly held that failure to timely pursue a right of appeal does not make that remedy inadequate. State ex rel. Nichols v. Cuyahoga Cty. Bd. of Mental Retardation & Dev. Disabilities, 72 Ohio St.3d 205, 209 (1995); State ex rel. Cartmell v. Dorrian, 11 Ohio St.3d 177, 178 (1984). “If that were the case, this criterion for a writ of mandamus would be met whenever the opportunity to pursue another adequate remedy expired. Would-be appellants could thwart the appellate process simply by ignoring it.” Id. {¶ 45} Relators argue that {¶ 47} In some instances, the availability of a breach of contract action will preclude relief in mandamus. See State ex rel. Wright v. Weyandt, 50 Ohio St.2d 194, 199 (1977) (a contract action for specific performance of a release agreement with relators’ former employer was an adequate remedy at law and precluded relators’ action for a writ of mandamus, compelling their former employer to reinstate relators, based on the release agreement); State ex rel. Russell v. Duncan, 64 Ohio St.3d 538, 538-39 (1992) (breach of contract action was an adequate remedy at law to enforce private rights between private parties). “A breach of contract action is not a plain and adequate remedy in the ordinary course of law that precludes issuance of a writ of mandamus if relator is being damaged not solely by a breach of contract, but also by a failure of public officers to perform official acts that they are under a clear legal duty to perform.” State ex rel. The V Cos. v. Marshall, 81 Ohio St.3d 467, 472 (1998). {¶ 48} In State ex rel. Bossa v. Giles, 64 Ohio St.2d 273 (1980), the Supreme Court held that a writ of mandamus was appropriate to compel the administrator of the Bureau of Employment Services to credit relator for vacation leave during periods she was considered an intermittent employee. The Supreme Court held that, contrary to the agency‘s interpretation, the applicable statute and administrative rule compelled the administrator to credit the relator with the requested leave. The court rejected the agency‘s argument that the relator had an adequate remedy at law through an action in the Court of Claims of Ohio. In its decision, at 276, the court quoted State ex rel. Montrie Nursing Home, Inc. v. Aggrey, 54 Ohio St.2d 394, 397 (1978), in which it held that mandamus was not barred by an alternative remedy where the relator was ” ‘not {¶ 49} As with an ability to remove Total from the group, a breach of contract action against Total does not address the question of whether BWC abused its discretion by transferring NOVCO‘s experience to Total. Relators maintain that they have been harmed by BWC actions that were unsupported by law and contrary to the authority granted BWC by the applicable statutes and administrative rules. The question of whether Total breached its contract with V&A is separate from, and does not address, the issues raised by Total‘s mandamus complaint. Accordingly, a breach of contract action would not provide relators with a complete remedy. We therefore conclude that relators did not have an adequate remedy in the ordinary course of law to contest BWC‘s application of the relevant statutes and administrative rules in this case. {¶ 50} Having concluded that BWC abused its discretion by transferring NOVCO‘s experience rating to Total and that relators had no adequate remedy in the ordinary course of law, we overrule BWC‘s assignment of error and affirm the judgment of the Franklin County Court of Common Pleas. Judgment affirmed. SADLER and DORRIAN, JJ., concur.
II. ASSIGNMENT OF ERROR
III. DISCUSSION
IV. CONCLUSION