CONSOLIDATION OR REARRANGEMENT OF CLASSES UNDER THE WORKMEN'S COMPENSATION ACT

CONSOLIDATION OR REARRANGEMENT OF CLASSES UNDER THE WORKMEN'S COMPENSATION ACT.

The Department of Labor and Industries is authorized under RCW 51.16.100 to divide, rearrange or consolidate any class or classes and make any adjustment or transfer of funds that it may deem proper.

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                                                                 August 19, 1954

Mr. A. M. Johnson, Director
Department of Labor and Industries
Olympia, Washington                                                                                                  Cite as:  AGO 53-55 No. 306

Dear Sir:

            In your letter of July 28, 1954, which has been previously acknowledged, you requested our opinion on the following questions:

            (1) Is the Department required or authorized by law to transfer the deficit of the 50-3 account into the consolidated account of 50-1 with the result that when such transfer is made the burden of liquidating such deficit would be placed upon all the contributors to the consolidated class?

            (2) Considering the circumstances under which the deficit has increased since January 1, 1950, may the Department concurrently with the consolidation of class 50-3 with class 50-1:

            (a) Transfer from the reserves of class 24-1 and into the account of class 50-3 an amount sufficient to cover that portion of the deficit of class 50-3 which accrued since January 1, 1950, if such transfer is consented to by all of the contributors to class 24-1?

            (b) If the burden of liquidating the deficit which accrued prior to January 1, 1950, may not be charged  [[Orig. Op. Page 2]] against all of the contributors to the consolidated class, what would be the proper procedure to place class 50-3 in balance?

            The answer to question (1) must be in the negative.

            The answer to question (2) (a) is in the affirmative.

            The answer to question (2) (b) is that the deficit accruing prior to January 1, 1950, would have to be by legislative act.

                                                                     ANALYSIS

            Question No. 1.  The theory of the act is that each class should bear its own risks.  Pacific Iron & Metal Company v. Department of Labor and Industries, 13 Wn. (2d) 419.  This theory is expressed in the statute (RCW 51.16.120) as a basis for determining just premiums and provides in part, as follows:

            "* * * 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 * * *."

            However, the insolvency of a class fund was considered by the Supreme Court inCampbell v. Department of Labor and Industries, 2 Wn. (2d) 173, 178 (1940), and the court there stated:

            "That the accident fund has always been considered by the legislature a single fund is evidenced by the fact that, beginning with the 1911 session, when the act was passed, successive legislatures have made lump-sum appropriations out of the fund for payment of claims and awards.  The 1939 session appropriated eight million five hundred thousand dollars from the 'Accident Fund' * * *."

            Furthermore, RCW 51.16.100 provides as follows:

            "It is the intent that the accident fund shall ultimately become neither more nor less than self-supporting, exclusive of the expense of administration, and if in the adjustment of premium rates  [[Orig. Op. Page 3]] by the director the moneys paid into the fund by any class or classes shall be insufficient to properly and safely distribute the burden of accidents occurring therein, the department may divide, rearrange, or consolidate such class or classes, making such adjustment or transfer of funds as it may deem proper.  The director shall make corrections of classifications or subclassifications, or changes in rates, classes and subclasses when the best interest of such classes or subclasses will be served thereby."

            Your request for our opinion indicates that, as shown by your recent studies, the differences between logging operations and pulpwood cutting which were originally believed to have existed and which constituted the primary reasons for the classification of pulpwood cutting into a separate class are now nonexistent.  It is felt, therefore, that for the purpose of more properly and safely distributing the burden of accidents occurring therein, consolidation or rearrangement is necessary.

            Under the foregoing statute the Department in dividing, rearranging or consolidating such class or classes, may make such adjustment or transfer of funds as it may deem proper.

            Another statute which has a bearing on the questions involved is RCW 51.16.010, which provides in part as follows:

            "* * *if, however, there should be a deficit in any class or subclass, the director, through the supervisor of industrial insurance, shall assess the same against all the contributors to such class or subclass during the calendar year or fraction thereof in which said deficit was incurred or created.  The director may promulgate, change, and revise such rates according to the condition of the accident and medical aid funds, and establish rates for industries to be hereafter declared extrahazardous and which voluntarily seek coverage under the elective adoption provisions."  (Emphasis supplied)

             [[Orig. Op. Page 4]]

            The underscored portion of this statute limits assessments to any class or subclass having a deficit which was incurred or created during the calendar year or a fraction thereof.  Because of this limitation the contributors to the consolidated class could not be required to liquidate a deficit which occurred prior to the consolidation.  For this reason a consolidation of class 50-3 with class 50-1 should be avoided.

            As an alternative, it is recommended that the Department rearrange these two classes.  This should be done by giving the notice required by section 1, chapter 216, Laws of 1953, RCW 42.32.010 and OAG No. 5-3, 53-55-57, dated May 28, 1953 [[Opinion No. 53-55-57 to A. B. Langlie, Governor]], to the contributors of class 50-3 that commencing with a date to be determined by the director, all contributors to class 50-3 shall report under class 50-1.

            Question No. 2 (a).  A transfer of funds of class 24-1 may be made with the consent of all the contributors of that class.

            Question No. 2 (b).  A transfer of funds from the reserves of class 24-1 accruing subsequent to January 1, 1950, would leave a substantial deficit remaining in class 50-3.  The deficit accruing prior to January 1, 1950, may not be charged against the contributors of class 50-1.  The only way this deficit could be placed in balance would be by legislative appropriation from the General Fund.

            We trust this opinion will be of assistance to you.

Very truly yours,

DON EASTVOLD
Attorney General

BERNARD A. JOHNSON
Assistant Attorney General