Opinion
No. 61403-7-I.
March 30, 2009.
Appeal from a judgment of the Superior Court for Snohomish County, No. 06-2-08785-1, Thomas J. Wynne, J., entered February 14, 2008.
Affirmed by unpublished opinion per Lau, J., concurred in by Agid and Leach, JJ.
UNPUBLISHED OPINION
After an audit, the Washington State Department of Labor and Industries (Department) issued an order assessing Sound Beverage Distributors, Inc., for unpaid industrial insurance premiums, penalties, and interest. The assessment was based on the auditor's determination that Sound Beverage had reported its sales personnel in the wrong insurance premium risk class. Sound Beverage argues that (1) there was insufficient evidence to support the Board of Industrial Insurance Appeals' finding that sales personnel were occasionally stocking shelves and handling product, (2) such activities do not exclude sales personnel from the standard exception risk class, and (3) Sound Beverage was unconstitutionally saddled with the burden of proof. We conclude that the Board did not err in upholding the assessment. We affirm.
Facts
Sound Beverage was a wholesale supplier of beer, wine, and water products to grocery stores, convenience stores, taverns, and restaurants in four Washington counties. For the purpose of computing industrial insurance premiums, Sound Beverage reported its warehouse personnel, drivers, stockers, and merchandisers under basic risk classification 2105 (beverage distributors) and its sales staff under standard exception classification 6303 (outside sales personnel).
Sound Beverage is no longer in business.
The Department determines industrial insurance premium rates by classifying occupations or industries in accordance with their degree of hazard. RCW 51.16.035. It assigns a basic risk classification to a business based on the nature of its business operations in Washington. WAC 296-17-31012(1). Basic risk classification 2105 applies to employers "engaged in wholesale, or combined wholesale and retail, distribution of beer, ale, wine and soft drinks." WAC 296-17A-2105 . Employments that are "administrative in nature and common to many industries" are eligible for a standard exception classification. WAC 296-17-31018 . Standard exception classification 6303 includes outside sales personnel and messengers. WAC 296-17-31018(2).
In 2002, the Department audited Sound Beverage to determine whether it had properly classified its sales personnel. Sound Beverage received guidance from the Department as to proper risk classification. Sound Beverage then revised its sales personnel job description and continued to report them under standard exception classification 6303.
After several Sound Beverage sales personnel filed workers compensation claims, Department auditor Kathy Snyder conducted a field audit to determine whether Sound Beverage had properly classified its sales personnel. Snyder determined that Sound Beverage was incorrectly reporting its sales personnel in standard exception classification 6303 (outside sales personnel), when it should have been reporting them in basic risk classification 2105 (beverage distributors).
The audit period was April 1, 2002, through June 30, 2004.
In October 2004, the Department issued a notice of assessment imposing additional premiums and interest on Sound Beverage, plus a misrepresentation penalty. Sound Beverage filed a protest and request for reconsideration, but the Department affirmed the assessment. Sound Beverage then appealed the assessment order to the Board of Industrial Insurance Appeals, and the Board conducted an evidentiary hearing.
The misrepresentation penalty was based on Snyder's conclusion that Sound Beverage knew it should have been reporting outside sales personnel under classification 2105.
At the hearing, Snyder explained that 2105 is a basic class intended to cover all aspects of the beverage wholesale distribution industry, whereas 6303 is a standard exception class for administrative workers exposed to a very low risk of injury. She concluded that Sound Beverage should have classified its sales personnel under 2105 rather than 6303, because they were stocking shelves at least on a part-time basis and 6303 does not allow for any stocking. She testified that she based her conclusion on information gathered from Sound Beverage managers, injured workers, and customers, in addition to her own observations.
The Department also presented the testimony of two of Sound Beverage's customers during the audit period. Minimart owner Kim Baker testified that Sound Beverage sales personnel moved their products from the back cooler to the shelves. "When they come in, they go to the back cooler and count their product. And they move their products forward on the shelves that they've been sold. And they restock from the back where we keep our beer and wine. Pretty much that's it." Certified Appeal Board Record (CABR), Baker Transcript (Nov. 8, 2008) at 6.
Similarly, grocery store assistant manager Shannon Obieglo testified that Sound Beverage sales personnel moved products from the back of the store onto shelves and displays where the store's customers could access them. "If there's empty product on the shelf, like there's no product on the shelf, but it's in the back, they usually bring some up to fill up the space on the shelf where the stuff is supposed to go." CABR, Obieglo Transcript (Nov. 8, 2008) at 35. Obieglo also testified that this happened about 50 percent of the time and that the sales people were handling more beverages than a consumer would.
Sound Beverage general manager Gary Randall testified that he trained sales personnel on what was expected of them. He testified that sales personnel were not told that their jobs included physical lifting, and he had no personal knowledge that they did so. He did not tell the sales personnel that there were certain things they could not do. He admitted that sales personnel could have delivered special orders at times. Sound Beverage controller Julie Eifert testified that she reported the sales personnel in classification 6303 based on the written job description. Sound Beverage operations manager David Dinwiddie did not recall anything in the job description instructing sales staff to lift product, build displays, or stock shelves. He said it never came to his attention that sales personnel were routinely engaged in such activities. Sound Beverage president Ellis Tofte described changes in the beverage distribution industry over the years. He testified that the sales personnel's job description did not include moving product and it never came to his attention that any of the sales personnel were violating their job descriptions.
In March 2006, the Board's Industrial Appeals Judge (IAJ) issued a proposed decision and order finding that Sound Beverage's sales personnel "engaged in stocking shelves and handling inventory when, on occasion, they moved product from the area where it was stored to fill spaces in the displays of the product and took special orders and delivered product to a customer." CABR at 39. The IAJ's decision stated,
It was the Firm's burden to establish that the Department order was incorrect, and could have done so by presenting testimony from some of the actual sales personnel employed by the company who would be in the best position to describe their work activities. No such evidence was presented, and the Firm has failed to establish on a more-probable-than-not basis that the Department assessment was in error.
CABR at 37-38. The IAJ concluded that Sound Beverage's sales personnel did not fall within classification 6303 and should have been reported in classification 2105. Accordingly, the IAJ affirmed the Department's assessment of premiums and interest owed for the misclassification. But the IAJ also found that Sound Beverage had a good-faith belief that it was properly reporting sales personnel under classification 6303. Accordingly, the IAJ reversed the Department's assessment order and remanded it to the Department with directions to recalculate the premiums and interest owed for the audit period, without the misrepresentation penalty.
The misrepresentation penalty is not at issue on appeal.
Sound Beverage petitioned the Board for review of the IAJ's proposed decision. The Board denied review and adopted the IAJ's decision as the Board's final order. Sound Beverage appealed the Board's final order to superior court, which affirmed the Board's decision. Sound Beverage then appealed to this court.
Standard of Review
The Administrative Procedure Act governs judicial review of the Board's decision in an assessment case. RCW 51.48.131; ch. 34.05 RCW; Wash. State Dep't of Labor Indus. v. Mitchell Bros. Truck Line, Inc., 113 Wn. App. 700, 704, 54 P.3d 711 (2002). Appellate review is based on the administrative record before the Board. RCW 34.05.570(3)(e); R G Probst v. Dep't of Labor Indus., 121 Wn. App. 288, 293, 88 P.3d 413 (2004). This court reviews the Board's findings of fact to determine whether they are supported by substantial evidence and, if so, whether the findings support the conclusions of law. Inland Foundry Co. v. Dep't of Labor Indus., 106 Wn. App. 333, 340, 24 P.3d 424 (2001). Evidence is substantial if it is "sufficient to persuade a fair-minded, rational person of the truth of the matter." R G Probst, 121 Wn. App. at 293. The Board's conclusions of law are reviewed de novo, with the appellate court according substantial weight to the agency's interpretation when the subject is within the agency's expertise. Mitchell Bros., 113 Wn. App. at 704. Constitutional challenges are questions of law reviewed de novo. Amunrud v. Bd. of Appeals, 158 Wn.2d 208, 215, 143 P.3d 571 (2006), cert. denied, 549 U.S. 1282 (2007). On appeal, the employer has the burden of proving that the Department's assessment was incorrect. RCW 51.48.131.
Analysis
Substantial Evidence
Sound Beverage argues that the Board erred in concluding that the sales personnel occasionally stocked shelves and delivered product. It contends that none of the Department's witnesses was able to clearly differentiate between the employees of Sound Beverage and the various other companies that made deliveries to their stores. It further contends that the Department's evidence was contradicted by the testimony of Ellis and Tofte, who explained that Sound Beverage established a structure whereby drivers and merchandisers were responsible for transporting and stocking product and sales personnel performed sales functions.
As a preliminary matter, we note that Sound Beverage's opening brief failed to expressly assign error to any of the Board's findings of fact as required by RAP 10.3(g) or to set out the text of challenged findings as required by RAP 10.4(c). Failure to set out findings of fact and conclusions of law to which an appellant assigns error justifies dismissal of the appeal. Macey v. Dep't of Empl. Sec., 110 Wn.2d 308, 311, 752 P.2d 372 (1988).
Sound Beverage's assignment of error merely states, "Where the Department of Labor and Industries could not establish sales personnel of Sound Beverage stocked shelves or delivered products, did the Board of Industrial Insurance Appeals err by concluding affirmatively?" And the corresponding issue is stated as follows: "Did the Board of Industrial Appeals err by concluding that Sound Beverage sales personnel stocked shelves or delivered products?"
Nevertheless, we infer that Sound Beverage is challenging the Board's finding that the sales personnel occasionally stocked shelves, handled inventory, and delivered special orders as unsupported by substantial evidence. We disagree. Baker and Obieglo both testified that they observed Sound Beverage sales personnel stocking shelves and handling product. Although they were not able to provide specific names and dates, their testimony described general practices of Sound Beverage sales personnel rather than extraordinary events.
Moreover, none of Sound Beverage's witnesses directly contradicted the testimony of Baker and Obieglo. Randall and Tofte did not testify that Sound Beverage sales personnel did not stock shelves or handle product; they said they had no personal knowledge that sales people had done such things. And Randall and Tofte did not testify that sales people were instructed not to stock shelves or handle product; rather, they testified that sales personnel had not been told to do such things. Furthermore, Randall's acknowledgement that the sales people could have delivered special orders at times supports the finding that they occasionally "took special orders and delivered product to a customer." Sound Beverage had the burden of proving that the Department's assessment was incorrect. It did not meet this burden. There is substantial evidence to support the Board's finding.
Risk Classification
Sound Beverage argues that it met its burden of proving that the classification it used for its sales staff was within the meaning of class 6303. It contends that the classification regulations do not mention "handling inventory" as a disqualifying factor for class 6303. It further contends that the regulations allow sales personnel to handle a bottle for demonstration purposes, and even if a sales person did occasionally move product from the back to fill a hole on the shelf, this does not constitute "stocking."
We infer that Sound Beverage argues that the findings of fact did not support the conclusions of law and that the Board misinterpreted the Department's regulations. Sound Beverage did not assign error to any of the conclusions of law and did not cite any case law in support of this argument. The argument, however, is meritless. Because risk class 6303 is a standard exception classification, "[e]mployees covered . . . cannot be exposed to any operative hazard of the business." WAC 296-17-31018(2). That regulation strictly limits the duties sales personnel may perform within class 6303.
Sales personnel whose duties include customer service activities such as, but not limited to, the delivery of product, stocking shelves, handling inventory, or otherwise merchandising products sold to retail or wholesale customers are excluded from all standard exception classifications. Sales personnel with duties such as delivery and stocking of shelves are to be reported in the basic classification applicable to the business unless the basic classification assigned to the business requires another treatment.
WAC 296-17-31018(2). Accordingly, class 6303 "excludes the delivery of products or merchandise or the stocking of shelves. . . ." WAC 296-17A-6303-21. It is a restrictive classification that applies "to those employees whose job duties and work environment meet all the conditions of the general reporting rules covering outside sales personnel and who are not covered by another classification . . . assigned to the employer's account." WAC 296-17A-6303-00.
We conclude that the Board did not err in concluding that Sound Beverage sales personnel were not within class 6303 and should have been reported under 2105. The Board found that the sales personnel were occasionally stocking shelves, handling inventory, and delivering special orders. Obieglo testified that it happened about 50 percent of the time and that the sales people handled more product than a customer would. And Randall admitted that the sales people might have delivered special orders. These activities created an occupational hazard of the business that was not permissible under class 6303.
Burden of Proof
RCW 51.48.131 provides, "The burden of proof rests upon the employer in an appeal to prove that the taxes and penalties assessed upon the employer in the notice of assessment are incorrect." Sound Beverage argues that it was unable to defend itself because the Department failed to identify specific dates, times, locations, and names of particular employees who allegedly stocked shelves or handled product. Due process requires giving parties a full and fair opportunity to be heard on the merits of their claim. Jacquins v. Dep't of Social Health Servs., 69 Wn. App. 21, 27-31, 847 P.2d 513 (1993); State v. Malone, 9 Wn. App. 122, 128, 511 P.2d 67 (1973) ("If a person has his day in court, he has not been deprived of due process."). Thus, Sound Beverage contends that RCW 51.48.131 was unconstitutional as applied because it was not placed on full and fair notice as to what it had to defend against.
We disagree. Sound Beverage has failed to explain why it could not have determined which of its sales staff were working on those accounts and presented their testimony at the hearing to rebut the Department's allegations. The Board issued a litigation order providing Sound Beverage with more than six months to engage in discovery. The Board also ordered the Department to disclose the identity of its witnesses more than six weeks before the hearing. The Department complied fully with the litigation order. Sound Beverage inexplicably failed to present rebuttal evidence. We conclude that Sound Beverage had a full and fair opportunity to be heard on the issues. Its due process challenge, therefore, fails.
In sum, the Board did not err in upholding the Department's assessment. We affirm.