Appendix — Manor v. Nestle Food Co.

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OFFICE OF THE CLERK

Docket No.:

IN THE UNITED STATES SUPREME COURT

Filed in 1997 October Term

PAUL E. MANOR and LYNETTE MANOR,

husband and wife,

Petitioners,

NESTLE FOOD COMPANY,

Respondent.

On Petition for Writ of Certiorari to the Supreme

Court of the State of Washington [Docket No. 63133-6]

AMENDED APPENDIX

TO PETITION FOR WRIT OF CERTIORARI

James F. Leggett

Washington State Bar # 6630

Admitted to the Supreme Court of

the United States 5 October 1981

Counsel of Record for Petitioners Manor

LEGGETT & KRAM

1901 South I Street

Tacoma WA 98405-3810

Telephone (253) 272-7929

John H. McKean

Washington State Bar # 13284

Co-counsel for Petitioners Manor

704 E Olive St

Moses Lake WA 98837

Telephone (509) 765-4451

——_

_—

(ii)

INDEX TO AMENDED APPENDIX

Original Amended

Opinions entered in conjunction with the

judgment sought to be reviewed

(a) Supreme Court of the State of

Washington, Opinion filed

March 13, 1997, 131 Wash.2d

a A- 4 A- 4

(b) Order Changing Opinion filed 7 October

Se eee ee ee A-41 A- 36

Other orders, opinions of courts or administrative

agencies

(a) Trial Court (Superior Court of

the State of Washington for

Adams County) Judgment &

Order Granting Defendant’s

Motion to Dismiss... [1994] ... A-43 A-37

(b) Court of Appeals of the State of

Washington, Division II

Opinion Reversing the Trial

Court entered 30 May 1995, 78

Wash.App. 5, 895 P.2d 27 .... A-45 A-39

State of Washington Denying

Motion to File Amicus Brief

filed 24 April 1997 ......... A-55 A- 47

Original Amended

(iii) | Order on rehearing: Order of Suipreme Court

of the State of Washington Denying Motion for

Reconsideration filed 7 October 1997 .. A-56 A-48

(iv) Judgment, if different from opiniion: N/A

(v) Material required by 1(f) or 1(g)i)

(a) WAC 296-17-310 .....----- A- 57 A-49

(b) WAC 296-17-360 .....----- A- 62 A-53

(d) WAC 296-17-380 .....----- A- 63 A- 54

(e) WAC 296-17-390 .....----- A- 64 A-54

(vi) | Any other material essential to wnderstanding the

petition

(a) Mountain Timber Company _V.

State of Washington (1917), 37

S.Ct. 260, 243 U.S. 219, 61

L.Ed.685, Ann.Cas. 1917D,

C2 ..«csesteeee A- 66 A- 56

(b) New York Central Railroad

Company v. Sarah White

(1917), 243 U.S. 188, 37 S.Ct.

188, 61 L.Ed. 667 .........- A- 82 A-93

B. Sie. os ssh ewe ene A- 93 A-121

(d) Affidavit of John Hobson .... A-96 A-124

A-2

SS Se ee

(e)

(f)

(g)

(h)

(i)

(k)

(I)

(m)

(n)

Original Amended

Affidavit of Joyce Edwards ... A- 99

Affidavit of Malcom C. Ewing

[Exhibit C to Defendant’s

Memorandum of Authorities in

Support of Motion to Dismiss] . A-104

Memorandum Regarding

Employment / Motion to

AS a A-106

Affidavit of Larry Wilkinson, 13

0 A-131

Affidavit of Larry J. Wilkinson,

rf 8. arr A-133

Declaration Regarding

Documents Re: Employment .. A-135

Defendant’s Memorandum of

Authorities in Support of Motion

6 Sri Ward etal e Gis A-152

Complaint for Personal Injuries A-167

Motion to Dismiss ........ A-170

Connie June Miller’s Motion for

Leave to File Amicus Brief ... A-171

A-126

A-131

A-132

A-155

A-156

A-158

A-175

A-189

A-191

A-192

[FILE STAMP]

SUPREME COURT STATE OF WASHINGTON

Date: MAR 13 1997

/s/_ Durham CJ

CHIEF JUSTICE

SUPREME COURT OF THE STATE OF WASHINGTON

PAUL E. MANOR and LYNETTE _)

MANOR, husband and wife, )

Respondents, ) No. 63133-6

V. ) EN BANC

NESTLE FOOD COMPANY, )

Petitioner. ) Filed MAR 13 1997

TALMADGE, J. -- Nestle Food Company (Nestle), a self-

insured employer, paid more than $455,000 in medical and time-

loss benefits to Paul Manor for a workplace injury he sustained.

Now Manor wants to sue Nestle for the same injury. He asserts

WAC 296-15-023(2), which declares Nestle to be Manor’s

employer, is invalid. Employing the standard of review set forth

in our State’s Administrative Procedure Act (APA), we hold the

regulation is valid, and Nestle is therefore immune to suit by

Manor under the exclusive remedy provision of the Industrial

Insurance Act (IIA).

No. 63133-6

ISSUES

1. Does WAC 296-15-023(2) make Nestle Manor’s

employer for purposes of the Industrial Insurance Act?

ia > Is WAC 296-15-023(2) valid under RCW

34.05.570(2)?

FACTS

On January 15, 1992, while working as a truck driver for

Carnaco Transport, Inc. (Carnaco), Paul Manor went to the

Carnation processed potato plant in Othello, Washington, to pick

up a load. While at the plant, a forklift ran over Manor’s foot.

As a result of the industrial injury, Manor developed Guillain-

Barre syndrome and became paralyzed. He finally was able to

leave the hospital in November 1992, but required additional care

at home.

The Carnation Company (Carnation) became a self-insurer

under the IIA for itself and its various subsidiaries in 1979.

Carnaco was a subsidiary of Carnation and maintained facilities in

Moses Lake. Carnation also owned the processed potato plant in

Othello, Washington, where Manor was injured. From 1979

forward, Carnation treated all of its employees, including those at

the processed potato plant in Othello and its Carnaco employees,

as employees under its certificate of self-insurance with the

Department of Labor & Industries (Department). In 1985,

Carnation became a wholly-owned subsidiary of Nestle Holdings,

Inc., and its name was eventually changed to Nestle Food

Company.!

' There is no indication in the record of manipulation of the corporate

form by Carnation or Nestle to avoid actions by employees. Rather, Carnation,

and then Nestle, continuously treated employees of its transportation subsidiary

and its own employees as the same employees under its certificate of self-

insurance.

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Manor filed a claim with Carnaco for industrial insurance

benefits, listing Carnaco as his employer. The Department

allowed the claim by order of February 14, 1992. Manor did not

appeal the order. Ultimately, Nestle paid Manor medical benefits

of $437,187.02, and time-loss benefits of $18,646.66.

Manor filed a personal injury action against Nestle in

April 1993. He alleged Nestle was liable for its own negligence

and, under the principle of respondeat superior, for the negligence

of the forklift operator who ran over his foot. Nestle argued it

was immune under Title 51 RCW because the forklift operator

was Manor’s fellow employee.

Nestle moved for dismissal. Manor argued, under the

common law, the forklift operator was not a fellow Nestle

employee. The trial court granted the motion to dismiss because

Manor’s injury was caused by a fellow employee and Nestle was

immune under the IIA. The trial court also held the designation

of Nestle as Manor’s employer in the Department’s February 14,

1992 order had preclusive effect.

Manor appealed and the Court of Appeals reversed,

holding a self-insured parent corporation is not, as a matter of

law, the employer of employees working for a subsidiary, and

material issues of fact remained as to whether Nestle should be

considered Manor’s employer. The Court of Appeals also

disagreed with the trial court on the preclusive effect of the

Department’s decision. Manor v. Nestle Food Co., 78 Wn.App.

5, 895 P.2d 27 (1995). We granted review.

ANALYSIS

An employer may comply with the requirements of the IIA

either by insuring with the State Industrial Insurance Fund or

qualifying as a self-insurer under Title 51 RCW. Self-insurers

must pay the claims of their injured workers.

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Therefore, self-insurers obtain the same immunity from actions by

employees as state fund employers. RCW 51.04.010 (exclusive

remedy provision); RCW 51.32.010. Although an injured worker

may not sue his or her employer for a workplace injury, RCW

51.24.030(1) authorizes suit against a third person at fault for the

worker’s injury, provided the third person is not in the worker’s

same employ.

The central issue in this case is whether Manor and the

forklift operator who ran over his foot were "in the same employ"

for purposes of RCW 51.24.030(1). The dispositive regulation is

WAC 296-15-023(2). Promulgated under the Department’s

authority to regulate self-insurers, WAC 296-15-023(2) states:

"One certificate will be issued to an approved self-insurer,

including all subsidiaries or divisions. The entities will be

considered as one employer for all purposes of Title 51 RCW."

(Emphasis added.) This regulation addresses and cures a serious

coverage problem under the Act. In the absence of a mandate that

an employer include all of its subsidiaries or divisions within its

certificate of self-insurance, the self-insured employer could

structure its business so that it was self-insured for employees in

its low risk activities, while employees in its high risk activities

were covered by the state fund, skewing the cost to employers in

the state fund. WAC 296-15-023(2) makes Manor and the forklift

operator employees of the same self-insured employer, Nestle.

However, the Court of Appeals held the regulation invalid.

A. Standard for Judicial Review of an Agency Regulation

WAC 296-15-023(2) provides that Nestle is to be treated

as an employer for all purposes under Title 51.

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No. 63133-6

While this is a regulation and not a Statute, "[i]t has been

established in a variety of contexts that Properly promulgated,

substantive agency regulations have the ‘force and effect of law.’"

Chrysler Corp. v. Brown, 441 U.S. 281, 295, 99 S. Ct. 1705, 60

L. Ed. 2d 208 ( 1979); "[a] legislative rule has the force and effect

of law, if promulgated in accordance with a legislative

delegation." 2 AM. JUR. 2D, Administrative Law § 160, at 182

(1994).

The Court of Appeals, in holding the regulation invalid,

gave it short shrift, deciding it is "not reasonably consistent" with

its enabling legislation because "[it] may result in the denial of a

worker’s right to bring a third-party claim against the parent

company of his employer merely because the parent chose to self-

insure." Manor, 78 Wn.App. at 10. The Court of Appeals did

not further first articulate how WAC 296-15-023, first

Promulgated in 1983 and unaltered by legislative amendment since

then,” was somehow an irrational or aberrational exercise of

delegated legislative authority. The Court of Appeals simply

concluded the regulation is invalid without reference to the APA

Standard for judicial review of the validity of an agency regulation,

or to our leading decision interpreting that APA standard.

> The legislature’s failure to amend a statute interpreted by

administrative regulation Constitutes legislative acquiescence in the agency’s

interpretation of the statute. This is especially true when the legislature has

1324 (1981); State ex rel Pirak v. Schoettler, 45 Wn.2d 367, 371-72, 274 P.2d

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852 (1954).

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No. 63133-6

A proper APA analysis reveals no reason to invalidate WAC 296-

15-023(2).?

The legislature enacted the APA in 1988, Laws of 1988,

ch. 288, and added "a new criterion which significantly expands

the review process." Neah Bay Chamber of Commerce v.

Department of Fisheries, 119 Wn. 2d 464, 469, 832 P.2d 1310

(1992). The Legislature set forth the standard of review for

agency regulations in RCW 34.05.570(2)(c):

In a proceeding involving review of a rule, the

court shall declare the rule invalid only if it finds

that: The rule violates constitutional provisions;

the rule exceeds the statutory authority of the

agency; the rule was adopted without compliance

with statutory rule-making procedures; or the rule

is arbitrary and capricious.

This Court extensively analyzed and interpreted the new statute in

Neah Bay. There, we considered the former version of the

statute, which differed significantly only in the last phrase, "could

not conceivably have been the product of a rational decision-

maker," a phrase now replaced by “arbitrary and Capricious." We

held:

In sum, the "product of a rational decision-maker"

standard adopted by the Legislature at RCW

34.05.570(2)(c) involves an inquiry into the

reasonableness of regulations analogous to the

> Similarly, the dissent neglects to undertake the analysis of the

regulation required by the APA and our case law. The central flaw in the

dissent’s treatment of the regulation is its failure to address how WAC 296-15-

023 was violative of RCW 34.05.570(2)(c) in any respect.

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No. 63133-6

application of the arbitrary and capricious

standard. To decide if a regulation should be

overturned because it could not conceivably be the

product of a rational decision-maker, we hold that

the proper analysis is the 3-part test suggested by

amicus, Professor Andersen, and utilized by the

federal courts. See Motor Vehicle Mfrs. Ass’n of

U.S., Inc. v. State Farm Mut. Auto. Ins. Co. , 463

U.S. 29, 77 L.Ed. 2d 443, 103 S.Ct. 2856

(1983). The court’s task is to determine if a

given regulation is reasonable without substituting

this court’s judgment for that of the agency.

First, the court inquires if the agency’s

explanation of its own rule is clear. Second, the

court must ask if the agency utilized the

appropriate statutory framework, whether it used

correct factors in deciding the rule, and if it

avoided improper factors. Third, the court must

decide if a decision-maker could have reached the

conclusion reached by the agency (taking the

foregoing into account) by some reasonable

process.

This analysis requires the court to review

the administrative record to determine the factors

employed by the agency and the quality of its

reasoning. The court must scrutinize the record

to determine if the result was reached through a

process of reason, not whether the result was itself

reasonable in the judgment of the court.

Neah Bay, 119 Wn.2d at 473. The Court thus equated the

“product of a rational decision-maker" standard with the "arbitrary

and capricious" standard. The Legislature later acquiesced in this

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No. 63133-6

interpretation in 1995 when it changed the language of the final

phrase to “arbitrary and capricious." Laws of 1995, ch. 403, §

802. See 1995 Final Legislative Report, EHSB 1010, at 7

(February 1, 1995) ("The current ‘conceivably the product of a

rational decision maker’ standard of review is changed to

‘arbitrary and capricious’").

B. Analysis of WAC 296-15-023(2) Under the Statutory

Standard of Review

RCW 34.05.570(1) places the burden of demonstrating the

invalidity of a rule on the party asserting invalidity. Although

Manor did not undertake this responsibility, the following analysis,

mandated by RCW 34.05.570(2)(c), demonstrates the rule is valid.

1. Does the Rule Violate Constitutional Provisions?

The Court of Appeals found WAC 296-15-023 appropriate in all

respects, except the phrase treating the self-insurer as a single

employer for all Title 51 RCW purposes, including immunity.

The Court of Appeals held the regulation is inconsistent with the

IIA to the extent it requires parent companies to be treated as

employers for all purposes, because doing so would deprive the

worker of the right to bring a third-party suit against a parent

merely because the parent chose to self-insure. The Court of

Appeals based this conclusion on the ostensibly disparate treatment

between employees of self-insured employers and employees of

state fund employers, citing Johnson v. Tradewell Stores, Inc.., 95

Wn.2d 739, 630 P.2d 441 (1981).

Johnson was an equal protection case under article I,

section 12 of the Washington Constitution. The issue there was

whether a worker who prevails on appeal of a decision of the

Board of Industrial Insurance Appeals is entitled to an award of

reasonable attorney fees.

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No. 63133-6

At the time, RCW 51.52.130 permitted recovery of attorney fees

only if the accident fund was affected by the litigation. This

provision excluded workers of self-insured employers from

receiving attorney fees under the same facts that would entitle a

worker of a state fund insured employer to fees. In holding the

successful plaintiffs were entitled to costs and attorney fees under

the statute, the Court said:

It is a manifest injustice of the most egregious nature, and

we hold it to be a violation of the equal protection clause

of the Fourteenth Amendment and Const. art. 1, § 12 to

classify one group of employees so that they receive fewer

benefits than similarly situated employees simply because

the employer chooses to be self-insured.

Johnson, 95 Wn.2d at 745.

Today, we apply the rational basis test to evaluate equal

protection claims: “Under the rational basis test, a legislative

classification will be upheld ‘unless it rests on grounds wholly

irrelevant to the achievement of legitimate state objectives.’ . . .

The burden is on the party challenging the classification to show

that it is ‘purely arbitrary.’" State v. Cozia, 120 Wn.2d 156, 171-

72, 839 P.2d 890 (1992), quoting Omega Nat'l Ins. Co. v.

Marquardt, 115 Wn.2d 416, 431, 799 P.2d 235 (1990). Applying

the rational basis test, we find no equal protection infirmity in the

regulation before us.

The Court of Appeals expressed concern that a decision

for Nestle would deprive a worker of the "right" to bring a third-

party lawsuit solely because the parent is self-insured, labeling that

result somehow antithetical to the equal treatment to be afforded

workers under the IIA. We disagree. There are at least three

answers to the Court of Appeals’ concern.

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First, the true victim of an equal protection violation under

the Court of Appeals holding would be self-insured, statutory

employers like Nestle. WAC 296-15-023(2) makes a self-

insuring, parent company like Nestle responsible to compensate

injured employees of its subsidiaries. The Act contemplates, and

WAC 296-15-023(2) makes express, that an employer seeking self-

insured status must decide either to have all of its subsidiaries or

divisions self-insured, or all of its subsidiaries or divisions covered

by the state fund. As Nestle is financially responsible for

compensation to injured workers, so should it be immune from

suit by injured workers. To hold otherwise would deny Nestle the

immunity from suit the grants to all employers -- a result without

logic or justice.‘

‘In a similar situation, we found "grave constitutional questions” arose

from a comparable assertion. Epperly v. City of Seattle, 65 Wn.2d 777, 779 n.1,

399 P.2d 591 (1965) (plaintiff injured at job site, who was employee of

contractor, sought to sue owner of property who paid industrial insurance

premium). We said:

We are impressed, as was the trial court [which

rejected the lawsuit against the owner], with the incongruous

result necessarily flowing from the plaintiffs theory under

which the owner of the premises who either directly or

indirectly pays the insurance premium based on the hazards

of his undertaking gets no protection from the employees of

the contractor who may be injured in the course of the work

for which the premiums are paid. The construction of the

statute to permit such a result presents grave constitutional

questions which have not been adequately argued.

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Here, Nestle compensated Manor for his injury, as the law

required it to do. By fulfilling its obligations to Manor under Title

51, Nestle should, a fortiori, be entitled to its side of the quid pro

quo central to the entire workers’ compensation Statutory design:

it should be immune from suit by Manor. In the words of the late

Professor Larson, "immunity follows compensation

responsibility." 2A ARTHUR LARSON , WORKMEN’S COMPENSATION

LAW § 72.33, at 14-290.3 (1993).

Second, Professor Larson writes: "When compensable

injury is the result of a third person’s tortious conduct, all statutes

preserve a right of action against the tortfeasor, since the

compensation system was not designed to extend immunity to

Strangers." LARSON, supra, § 71.00, at 14-1 (1993). Here,

Nestle is hardly a third party to Manor in the ordinary sense of

being a "stranger to the transaction." Nestle insured Manor.

Nestle paid Manor $455,000 in medical and time-loss benefits.

Rather than crediting these salient facts, the Court of Appeals took

the hypertechnical view that if Nestle is not the common law

employer of Manor, must of necessity be a third party and

Epperly, 65 Wn.2d at 779 n.1. The Court decided the case on other grounds.

Although the Court did not elaborate on the nature of the "grave constitutional

questions" presented, the owner had suggested in its brief to the Court that

requiring the party who paid the insurance premium also to be liable to suit by

the contractor’s injured employee, thereby depriving that party of the benefit of

insurance would unconstitutionally deprive the party of property without due

process of law. Br. of Resp’t in Epperly at 30. Violation of equal protection is

probably the better constitutional argument.

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» hone ata

No. 63133-6

therefore not immune from suit by Manor.°

* The IIA does not define a person as a “worker” or “employer” under

Title 51 RCW solely by the common law test of master-servant. We have said

“that the common-law rules, except as modified by statute, apply in determining

whether the relationship of employer and employee exists.” D'Amico v.

Conguista, 24 Wn.2d 674, 680, 167 P.2d 157 (1946) (emphasis added); Clausen

v. Department of Labor & Indus., 15 Wn.2d 62, 69, 129 P.2d 777 (1942).

Thus, the Legislature is not bound by, and may choose to expand or contract, the

common law definitions of “employer” and “employee” for purposes of coverage

under Title 51.

Title 51 is replete with instances where common law principles of the

employer-employee relationship are “modified by statute” to include or exclude

workers from the purview of the IIA. For example, the most significant

departure from common law principles in the IIA is the provision affording

coverage to independent contractors, the essence of whose contract is personal

labor. RCW 51.08.070(1). General contractors are responsible for paying the

premiums of employees of subcontractors, except for certain exclusions, even

though the general contractor is not their common law employer. RCW

51.12.070. Such general contractors may be considered statutory employers, as

they would not be considered common law employers in the ordinary course.

RCW 51.12.035 provides "[vJolunteers shall be deemed employees

and/or workers, as the case may be, for all purposes relating to

medical aid benefits under chapter 51.36 RCW." RCW 51.12.045

provides workers’ compensation coverage for offenders

performing community service pursuant to court order. Likewise,

RCW 51.12.020 excludes from Title 51 coverage several

categories of workers who might ordinarily be employees under

common law principles, including domestic workers, gardeners

and maintenance workers at a private home, jockeys, and

musicians. See also 2A ARTHUR LARSON, WORKMEN’S

COMPENSATION LAW § 49.00 (1993) (enumerating statutory

employees under the various state worker compensation acts).

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No. 63133-6

Our courts have many times in the past looked to the

overall purpose and policy of the IIA to avoid such hypertechnical

readings. For example, in Corr v. Willamette Indus., Inc., 105

Wn.2d 217, 713 P.2d 92 (1986), we held the plaintiff, an

employee of the defendant’s wholly owned subsidiary, did not

State a claim against the defendant for injuries arising out of an

industrial accident because the defendant was the plaintiff's

employer. See also Wolf v. Scott Wetzel Services, Inc., 3 Wn.2d

665, 782 P.2d 203 (1989) (claims administrator entitled to

immunity under IIA); Coulter v. State, 93 Wn.2d 205, 608 P.2d

261 (1980) (Department safety inspectors not third persons under

the IIA); Deeter v. Safeway Stores, Inc., 50 Wn.App. 67, 747

P.2d 4103 (1987) (claims administrator entitled to immunity under

ILA because it was acting as agent of employer), review denied,

110 Wn.2d 1016 (1988). In Wolf, 113 Wn.2d at 676-77, we

referenced with favor Judge Grosse’s concurring opinion in

In similar fashion, to further the ends of the IIA, this Court has gone

beyond the constraints of the common law employer-employee relationship to

find coverage under the Act. See. e.g., Bolin v. Kitsap County, 114 Wn.2d 70,

785 P.2d 805 (1990) (jurors covered under RCW Title 51 although they were not

common law servants and never consented to an “employment” relationship with

counties; their service was, in fact, involuntary).

The dissent’s recitation of cases and authorities from other jurisdictions

on the question of whether a corporate parent is entitled to the immunity of its

subsidiary is interesting, but not pertinent to this case. Dissent at 8-9. As noted

above, the Legislature has frequently departed from the traditional common law

employer-employee relationship in deciding coverage under the Act. Moreover,

the dissent fails to show how WAC 296-15-023 is beyond the authority of the

Legislature or the Department, as the Legislature and Department are not bound

by the common law employer-employee relationship.

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No. 63133-6

Deeter, where he wrote:

The relationship of the employee, the employer,

and the claims adjuster for the employer with

respect to a claim for delay in payment which

involves a dispute over the right to, or amount of,

compensation flows from the rights and

obligations created by the IIA, not from any

independent source. To permit a right of action

against the claims adjuster merely because it is a

"third party" would vitiate the policy of the IIA.

Deeter, 50 Wn.App. at 83-84 (Grosse, J., concurring). Here, the

IIA creates Nestle’s obligations to Manor. The Act makes Nestle

responsible for Manor’s injury compensation. Having fulfilled its

obligation under the IIA to provide Manor “sure and certain

relief,” Nestle is correspondingly entitled to immunity from "all

civil actions and causes of action” stemming from Manor’s injury.

RCW 51.040.010 (declaring purpose of IIA and abolishing

jurisdiction of courts).

Third, the Court of Appeals asserts workers must receive

equal treatment under the IIA in every case, and that equal

protection concerns arise when workers do not receive equal

treatment. This is an overstatement. The IIA treats employees of

self-insured employers differently from employees of state fund-

insured employers in several ways.

For example, the employees of self-insured employers

need not pay one half of the cost of the medical aid fund, as do

the employees of state fund employers. RCW 51.16.140(1). It is

a gross misdemeanor for self-insurers to obtain or even attempt to

obtain a comparable contribution from their employees. RCW

51.16.140(2). Employees of self-insured employers have the right

to a penalty against their employers for delay or refusal to pay

benefits. RCW 51.48.017.

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No. 63133-6

The existence of such a penalty provision obviously gives

employees leverage in bargaining for benefits with their self-

insured employer. RCW 51.32.190 details claim processing

procedures applicable only to self-insurers. These distinctions in

treatment indicate, contrary to the Court of Appeals implication,

there is no requirement in the IIA for precisely similar treatment

of employees of self-insureds and state fund employers, and there

is nothing inherently improper about dissimilar treatment.

Rather, the pivotal equal protection inquiry in this case is

whether WAC 296-15-023(2) passes the rational basis test. There

is plainly nothing arbitrary about WAC 296-15-023(2). It achieves

a legitimate state objective by creating statutory employers to

ensure subsidiary corporations meet their industrial insurance

premium obligations. In return, it grants those statutory

employers immunity from suit by injured workers. The regulation

is simply an accurate reflection of the "grand compromise” of the

IIA. Indeed, to deny immunity to Nestle, a statutory employer,

would violate its right to equal protection compared to similarly

situated common law employers, who would be immune from suit

by Manor under the same circumstances.°

° The dissent’s contention that Manor would be treated differently if he

were an employee of a firm covered by the State Fund is not necessarily even

accurate. Dissent at 7. The Department’s regulations provide that the general

tule for classification of employees in businesses covered by the State Fund is to

cover all employees of an enterprise within a single risk classification just as

WAC 296-15-023 does for employees of self-insured employers and their

subsidiaries. WAC 296-17-380. See also WAC 296-17-390 (business with

multiple enterprises in state); WAC 296-17-420 (certain transportation,

warehousing, and shipping services as general inclusions for coverage); WAC

296-17-87306 (in calculating a business’ claims experience, claims experience of

subsidiaries are included).

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WAC 296-15-023(2) does not violate equal protection

principles. The rule passes the first statutory test.

y Does the Rule Exceed the Statutory Authority of

the Agency? The Department is generally authorized to

promulgate regulations governing the administration of Title 51

RCW, RCW 51.04.020(1), as well as rules for self insured

employers specifically. RCW 51.14.020(7). The rule at issue

here, by mandating that Nestle be treated as an employer for all

purposes of Title 51, is within the bounces of the authorizing

statute. The key provision of the IIA, immunizing employers

from suits by injured workers in return for swift and sure

compensation, is precisely what WAC 296-15-023(2) implements

in this case. it is plainly within the authority of the Department to

designate which entities shall be considered employers for the

purposes of Title 51. Obviously, such determinations are limited

to the purview of Title 51, and do not and cannot affect the

common law or other statutory law governing parents and

subsidiaries or employers and employees. The rule passes the

second statutory test.

2. Was the Rule Adopted Without Compliance With

Statutory Rule-Making Procedures? Neither party makes such a

claim, and there is nothing in the record to support such a claim.

The rule passes the third statutory test.

4. Is the Rule Arbitrary and Capricious? The fourth

test requires the most analysis: "The court’s task is to determine

if a given regulation is reasonable without substituting this court’s

judgment for that of the agency." Neah Bay,119 Wn.2d at 473-74.

A three-part test applies:

First, the court inquires if the agency’s

explanation of its own rule is clear. Second, the

[17-18]

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No. 63133-6

court must ask if the agency utilized the

appropriate statutory framework, whether it used

correct factors in deciding the rule, and if it

avoided improper factors. Third, the court must

decide if a decision-maker could have reached the

conclusion reached by the agency (taking the

foregoing into account) by some reasonable

process.

Id. at 473-74. No agency explanation of the rule appears in the

record, sO we are unable to make the first inquiry. The following

analysis demonstrates, however, the regulation meets all the

remaining requirements of the test.

WAC 296-15-023 is a rational approach to the problem of

self-insured businesses’ spinning a risky portion of their enterprise

off to state fund coverage, and ensuring that corporate parents bear

complete responsibility for the coverage of the workers of the

parent and any of its subsidiaries. The rule is designed to ensure,

with the changes in status of employers through merger,

consolidation, combination, and otherwise, employees will not

have to guess who their employer is for purposes of the IIA, and

employees will receive the statutorily-mandated coverage.

Before an employer is certified as a self-insurer, the

employer must identify the name and location of each of its

businesses. RCW 51.14.030(5)(e). Pursuant to its general

rulemaking authority, the Department adopted WAC 296-15-

023(1), which provides the certification of a firm as a self-insurer

"will include all of its subsidiaries or divisions doing business in

the state of Washington." Subsection (2) of that rule states that

only one certificate will be issued to an approved self-insurer,

"including all subsidiaries or divisions," and "{t}he entities will be

considered as one employer for all Purposes of Title 51 RCW."

(Emphasis added.) See RCW 51.04. 120; WAC 296-17-380:

[18 - 19]

A-20

;

No. 63133-6

WAC 296-17-390; WAC 296-17-87306 (providing analogous

requirements for insuring State fund employers with multiple

enterprises or subsidiaries).

To put the rule in appropriate context, the Department has

evidenced an unambiguous intent to prevent self-insured corporate

parents from evading industrial insurance coverage for employees

of subsidiaries. In addition to the mandate of WAC 296-15-023,

a self-insurer may not cease business, change its corporate

organization, or sell parts of itself without notifying the

Department and assuming liability for all claims during the self-

insured period for the separated part of the business. WAC 296-

15-170. Most significant, a self-insured parent corporation

guarantees the payment of benefits to employees of its

subsidiaries:

If an applicant for self-insurance certification is a

subsidiary, the parent firm shall furnish the

department with its guarantee to assume and be

responsible for the workers’ compensation

liabilities of the subsidiary in the event the

subsidiary firm is unable or unwilling to cover

these liabilities. If a self-insurer is purchased by

another firm, which becomes its parent, the parent

shall provide the department with its most recent

audited financial statement and its guarantee.

WAC 296-15-022. In effect, the parent agrees to stand in the

shoes of the subsidiary corporation for the subsidiary’s industrial

insurance obligation to its workers, if the subsidiary cannot

perform.

In conclusion, ample reasonable bases exist to support the

regulation. The regulation is valid. Nestle paid Manor

compensation for his injuries. This Court has "consistently held

that when an employer . . . pays its industrial insurance premiums

[19 - 20]

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No. 63133-6

pursuant to the Act the employer may no longer be looked to for

recourse." Seattle First Nat’! Bank v. Shoreline Concrete Co., 91

Wn.2d 230, 241, 588 P.2d 1308 (1978). We should not now

disregard this fundamental tenet of the IIA.”

CONCLUSION

Carnation, and later Nestle, complied with the

requirements of self-insurance under Title 51 RCW. They paid

the appropriate premiums and complied with the requirements of

Statute and regulation that self-insurance cover all employees of the

parent corporation and its subsidiaries. Thus, Carnation, and later

Nestle, were Manor’s employer for purposes of the IIA. Nestle

here paid more than $455,000 in industrial insurance benefits to

the injured worker in accordance with the terms of Title 51 RCW.

Having done so, Nestle is entitled to the immunity from suit

afforded by RCW 51.04.010.

The decision of the Court of Appeals is reversed. We

remand this case to the Adams County Superior Court for entry of

an order consistent with this opinion.

/s/ Talmadge, J.

WE CONCUR:

/s/ Durham, C.J. /s/ Dolliver, J. /s/ Smith, J.

/s/ Guy, J. /s/ Johnson, J.

” Nestle also argues the Department’s order Stating it was Manor’s

employer has preclusive effect, citing Marley v. Department of Labor & Indus.,

125 Wn.2d 533, 886 P.2d 189 (1994). In light of our disposition of the principal

issue in this case, we do not reach this issue.

[20 - 22]

mA Aen ie hell nS sabia

Manor v. Nestle Food Co.

Majority by Talmadge, J.

Dissent by Madsen, J.

No. 63133-6

MADSEN, J. (dissenting) - The Industrial Insurance Act

(ILA) grants the worker the valuable right to bring third party

actions. There is no sound basis for denying Mr. Manor that

right.

Nothing in Titlke RCW 51 provides that a self-insured

corporate parent of a subsidiary is the "employer" of the worker.

There is nothing in the history of the self insurance statutes

showing that the Legislature intended when enacting the self-

insurance provisions that a self-insuring corporate parent be

considered the "employer" of a subsidiary’s worker. Nothing in

the quid pro quo compromise underlying the workers’

compensation contemplated the rise of today’s modern corporate

structures, and nothing about that compromise dictates that the

corporate parent must be considered the "employer." The purpose

of WAC 296-15-023(2)’s provision that the entities covered under

the corporate parent’s certification of self-insurance is to prohibit

selective certification where some risks are self-insured while

others are insured by the state fund. Nothing about this purpose

requires that a self-insured corporate parent be considered its

subsidiary’s worker’s "employer."

Nonetheless, under the majority opinion Paul Manor is

barred as a matter of law from bringing a third party action, based

solely on a single sentence in WAC 296-15-023(2). That single

sentence, however, is beyond the authority of the Department of

Labor and Industries to promulgate, and it is contrary to our

workers’ compensation scheme.

Moreover, the majority’s result is unjust. If Manor had

been covered under the state fund he clearly would not be barred

from a third party action as a matter of law. The differing

treatment the majority analysis accords the worker, who happens

[1 -2]

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No. 63166-6

to be covered by self-insurance rather than under the state fund,

is unjustified. Further, Paul Manor has hardly received a windfall

in the form of workers’ compensation benefits. While he received

over $455,000 in total benefits, over $437,000 of that amount

represents medical benefits, attesting to the severe nature and

consequences of his industrial injury. Finally, there is a fact

question in this case whether Nestle Food even paid the workers’

compensation costs attributable to Carnaco, Manor’s employer, or

whether those costs were paid by Carnaco. This is not the

dispositive question, as explained below, but its existence simply

underlines the unfairness of the majority’s result in this case.

For these reasons, I dissent.

Initially, the issues in this case are more complex than the

majority opinion indicates. In one short paragraph the majority

concludes that the Department of Labor and Industries was within

its delegated authority in promulgating WAC 296-15-023(2), but

fails to address relevant statutes and policies affecting the validity

of the WAC. The majority simply assumes that Nestle paid

workers’ compensation premiums and, by virtue of such payment,

is entitled to immunity.

Turning first to the IIA, the statutes plainly contemplate

that an employer may elect to become self-insured. RCW

51.08.173; RCW 51.14.010; RCW 51.14.020(1). The statutes

nowhere contemplate that self-insuring confers the status of

employer to one not otherwise an employer, and neither Nestle

Foods nor the majority cites to any Statute providing a self-

insuring corporate parent is the "employer" of its subsidiary’s

workers.’

' Although the issue here is whether the corporate parent is or is not an employer

by virtue of self-insurance, the majority several times assumes the answer to the

question. See majority at 2 (Nestle Foods’ predecessor Carnation “treated all of

its employees, including. . . its Carnaco employees"); id. at 11 (“[t}o hold

otherwise would deny Nestle the immunity from suit the IIA grants to all

employers”); id. at 20 (“[thhis Court has ‘consistently held that when an

employer . . . pays its industrial insurance premiums”).

[2 - 3]

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No. 63166-6

In addition, the self-insurance statutes were enacted by the

Legislature to permit an alternative means of providing workers’

compensation coverage. There is no inkling that the Legislature

had in mind when enacting the statutes that by self-insuring a

corporate parent could thereby change from nonemployer status to

employer status to employer status and obtain immunity from civil

liability in a third party action.

Nor is there any basis in the origins of the workers’

compensation statutes for the corporate parent as an employer for

purposes of the IIA. The quid pro quo compromise underlying the

workers’ compensation acts was effected before the advent of the

modern system:

Workmen’s compensation laws were

passed before the multi-unit enterprise became the

norm in the American economy and before the

accompanying managerial revolution in American

business. See Chandler, The Visible Hand 377-

498 (1977). For this reason, state workmen’s

compensation jaws . . . do not address the

question of a parent corporation’s immunity from

common law tort liability for injuries to its

subsidiaries employefe]s . . .

Boggs v. Blue Diamond Coal Co., 590 F.2d 655, 658 (6th Cir.),

cert. denied, 444 U.S. 836 (1979). See also, e.g., Gigax v.

Ralston Purina Co., 136 Cal. App. 3d 591, 186 Cal. Rptr. 395,

399 (1982) (because workers’ compensation laws were passed

before modern corporate structuring, whether parent corporation

was entitled to immunity for injuries to an employee of kindred

corporation was an “unresolved” "pristine" issue); Hearn v. Petra

Int'l Corp., 710 P.2d 769, 771 (Okla. Ct. App. 1985).

Today, giant multi-unit national and even international

enterprises are common, and the IIA, the result of the compromise

in Washington, could not have contemplated and did not

3-4]

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No. 63166-6

contemplate this modern business environment. The IIA has not

remained static, of course, and numerous additions to its

provisions have occurred over the years, adding new dimensions

to the "compromise." However, as noted, there are no statutes

addressing the parent-subsidiary issue raised in this case.

As Nestle Food’s counsel conceded at oral argument, then,

the sole basis for treating Nestle Foods as Manor’s employer is

WAC 296-15-023(2). WAC-296-15-023 provides that the self-

insurance certification of a firm will include all of its subsidiaries

doing business in Washington, and that one self-insurance

certificate "will be issued to an approved self-insurer, including all

subsidiaries or divisions. The entities will be considered as one

employer for all purposes of Title 51 RCW." WAC 296-15-

023(2). The purpose of the WAC is explained in an affidavit by

a senior surety analyst with the Department of Labor and

Industries who explained that the rule effectuates the Department

policy "to prohibit selective certification where some risks are

allowed to self-insure and others would be insured by the state

industrial insurance fund.” Clerk’s Papers at 91.

This purpose does not, however, require that a self-

insuring corporate parent be considered to be the employer of its

subsidiary’s employees. The same purpose could be achieved by

simply requiring in such circumstances that all the affiliated

companies must self-insure, without declaring that all such

affiliates are "one employer" for purposes of the IIA.

In providing that affiliated companies are “one employer,”

the Department of Labor and Industries exceeded its authority

when providing that affiliated companies constitute one employer

if they self-insure. An administrative agency is limited to the

powers and authority which the Legislature grants to it. Fahn v.

Cowlitz County, 93 Wn.2d 368, 374, 610 P.2d 857, 621 P.2d

1293 (1980). In general, an agency or a board charged with

enforcement of certain statutes may lawfully exercise delegated

authority where the Legislature has provided standards or

[4 - 5]

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No. 63166-6

guidelines, if adequate safeguards are provided in regard to

promulgation of rules and testing the constitutionality of the rules

after promulgation. Auburn v. King County, 114 Wn.2d 447, 452,

788 P.2d 534 (1990); Barry & Barry, Inc. v. Department of Motor

Vehicles, 81 Wn.2d 155, 500 P.2d 540 (1972), appeal dismissed,

410 U.S. 977 (1973). Authority may be delegated to determine

a fact or issue of findings upon which application of the law is

made to depend. Fahn, 93 Wn.2d at 374.2

If an agency rule exceeds its delegated authority, the rule

is invalid. RCW 34.05.570(2)(c). This court has explained that

under this principle, where the Legislature has specifically

delegated rule-making authority to an administrator, the rules are

presumed valid so long as they are reasonably consistent with the

Statutes being implemented. St. Francis Extended Health Care v.

Department of Social & Health Servs., 115 Wn.2d 690, 702, 801

P.2d 212 (1990). However, if there are compelling reasons which

show that the rule is in conflict with the content and purpose of

the legislation, the rule will be struck down. Omega Nat’l Ins.

Co. v. Marquardt, 115 Wn.2d 416, 428, 799 P.2d 235 (1990).

For two reasons the provision in WAC 296-15-023(2)

affiliated companies will be considered one employer for all

purposes of the IIA is contrary to the content and the purpose of

the IIA. First, the statutes provide that an employer may self-

insure, but do not provide that an election to self-insure by a

corporate parent makes that parent the employer. The rule is thus

contrary to the RCW 51.08.173 and statutes to similar effect.

Second, the rule is contrary to two policies of the IIA. The first

is one this court previously and emphatically recognized in

Johnson v. Tradewell Stores, Inc., 95 Wn.2d 739, 630 P.2d 441

(1981): The thrust of RCW 51.14 is not that it is intended to treat

* Although the majority criticizes the dissent for not explaining how WAC 296-

15-023(2) is invalid, this paragraph, and the three which follow, address

precisely that issue.

[6 - 7]

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No. 63166-6 ~

employees differently dependent upon whether they are covered

under a self-insurance scheme or the state fund. “Nowhere in

RCW Title 5] is there even a hint that the legislature intended

some covered employees to be treated differently than others."

Johnson, 95 Wn.2d at 745 (emphasis added). The second policy

is recognition of the worker’s important right to bring third party

claims which is embodied in RCW 51.24.030(1). As this court has

recognized, if an employment agreement is_ established,

"moderate" benefits are available to the worker under the IIA.

But where the employment relationship is asserted as a defense in

a third party action, reaching the conclusion that an employment

relationship exists "results in the destruction of valuable common-

law rights to the injured work{er]." Novenson v. Spokane Culvert

& Fabricating Co., 91 Wn.2d 550, 555, 588 P.2d 1174 (1979).

These two policies foreclose the disputed WAC provision

because it destroys the right of an injured worker to maintain a

third party action solely because he or she is covered under a self-

insurance program rather than under the state fund.’

If Paul Manor was not covered under a self-insurance

would be no automatic bar to his third party suit. There are fact

questions as to whether Nestle Foods was his employer under

Washington’s control test of an employment relationship for

* In a footnote the majority seems to suggest that the Legislature has acquiesced

in WAC 296-15-023(2)’s “interpretation” because the WAC has not been

amended since promulgation. Majority at 6 n.2. Legislative acquiescence may

be found where a statutory interpretation is left standing following legislative

amendment of the statute. Here, however, there is no relevant statute which has

been amended. Moreover, although I cannot see how the principle applies in this

case at all, the rule of silent acquiescence following administrative construction

of a statute applies only when the subsequent legislative consideration involves

the same issue as that covered by the administrative rule. Safeco Ins. Co. v.

Meyering, 102 Wn.2d 385, 392, 687 P.2d 195 (1984); City of Seattle v. King

County, 52 Wn.App. 628, 633, 762 P.2d 1152 (1988), review denied, 112

Wn.2d 1002 (1989). There is no indication the Legislature has considered WAC

296-15-023(2).

[6 - 7]

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No. 63166-6

purposes of workers’ compensation which requires that "(1) the

employer has the right to control the servant’s physical conduct in

the performance of his duties, and (2) there is consent by the

employee to this relationship." Novenson, 91 Wn.2d at 553:

accord Marsland v. Bullitt Co., 71 Wn.2d 343, 428 P.2d 586

(1967); Fisher v. City of Seattle, 62 Wn.2d 800, 384 P.2d 852

(1963); see Jackson v. Harvey, 72 Wn.App. 507, 864 P.2d 975,

review denied, 124 Wn.2d 1003 (1994); Smick v. Burnup & Sims,

35 Wn. App. 276, 666 P.2d 926 (1983). Moreover, there are also

fact questions about whether Nestle Foods and Carnaco have

separate corporate identities or whether they have one identity and

thus Nestle Foods is Manor’s employer entitled to immunity under

the IIA. See generally 2A Arthur Larson & Lex K. Larson, The

Law of Workmen’s Compensation § 72.40, at 14-290.29,.32-33

(1996)(footnotes omitted).

The overwhelming majority of courts in other jurisdictions

have concluded, as the Court of Appeals did in Meads v. Ray C.

Roberts Post 969, Inc., 54 Wn.App. 486, 774 P.2d 49 (1989),

that a parent corporation is not as a matter of law entitled to the

workers’ compensation immunity of its subsidiary.‘ See, e.g.,

Muniz v. National Can Corp., 737 F.2d 145 (ist Cir. 1984)

(Puerto Rico law); Boggs v. Blue Diamond Coal Co., 590 F.2d

655 (Kentucky law); First Nat’! Bank v. Tracor, Inc., 851 F.2d

212 (8th Cir. 1988) (Arkansas law); Love v. Flour Mills, 647 F.2d

1058 (10th Cir. 1981) (Oklahoma law); Gregory v. Garrett Corp.,

578 F.Supp. 871 (S.D.N.Y. 1983) (Connecticut and North

Carolina law); Peterson v. Trailways, Inc., 555 F.Supp. 827

* The majority thinks that this citation to other authority is irrelevant. Majority

at 13 n.5. It also disputes the dissent’s view that Manor would be treated

differently had he been covered under the state fund. Majority at 17 N.6.

However, there is no basis in the IIA for treating Paul Manor as Nestle’s

employee merely because he is covered under a self-insurance plan. That being

the case, the common law is relevant to whether Nestle is his employer. Unless

Nestle is his employer, his third party suit should not be barred.

[7 - 8}

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No. 63166-6

(Colo. 1983); Stoddard v. Ling-Temco-Vought, Inc., 513 F.Supp.

314 (C.D. Cal. 1980) (Texas law), remanded on other grounds,

711 F.2d 1431 (9th Cir. 1983); Croxton v. Crowley Maritime

Corp., 817 P.2d 460 (Alaska 1991); Oliver v. Bluegrass Resources

Corp., 284 Ark. 1, 678 S.W.2d 769 (1984); Gigax v. Ralston

Purina Co., 136 Cal.App. 3d 591, 196 Cal.Rptr. 395 (1982);

Gaber v. Franchise Servs., Inc., 680 P.2d 1345 (Colo.Ct.App.

1984); Gulfstream Land & Dev. Corp. v. Wilkerson, 420 So.2d

587 (Fla. 1982); McQuade v. Draw Tite, Inc., 659 N.E.2d 1016

(Ind. 1995); Phillips v. Stowe Mills, Inc., 5 N.C.App. 150, 167

S.E.2d 817 (1969); Leeman v. Boylan, 134 N.H. 230, 590 A.2d

610 (1991); Volb v. G.E. Capital Corp., 139 N.J. 110, 651 A.2d

1002 (1995); Samaras v. Gatx Leasing Corp., 75 A.D.2d 890,

428 N.Y.S.2d 48 (1980); Hearn v. Petra Int’l Corp., 710 P.2d

769 (Okla.Ct.App. 1985); Kiehl v. Action Mfg. Co., 517 Pa. 183,

535 A.2d 571 (1997); Stratman v. Admiral Beverage Corp., 760

P.2d 974 (Wyo. 1988); of. Porter v. Beloit Corp., 667 F.Supp.

367 (S.D. Miss. 1987) (exclusive remedy provision of workers’

compensation act did not bar suit against subsidiary corporation by

employee of parent corporation); Boswell v. May Ctrs., Inc., 669

S.W.2d 595 (Mo.Ct.App. 1994) (same); Gurry v. Cumberland

Farms, Inc., 406 Mass. 615, 550 N.E.2d 127 (1990) (involving

affiliated and successor corporations). Some courts have held the

corporate parent is entitled to immunity. F.g., Wells v. Firestone

Tire & Rubber Co., 421 Mich. 641, 364 N.W.2d 670 (1984)

(under Michigan’s economic reality test); Rasnick v. Pittston Co..,

237 Va. 658, 379 S.E.2d 353 (1989). See generally 2A Arthur

Larson & Lex K. Larson, The Law of Workmen’s Compensation

§ 72.40 (1996) (discussing immunity of affiliated corporations and

citing numerous cases); Charles R.P. Keating & Gail O’Gradney,

Fletcher Cyclopedia on the Law of Private Corporations § 43.80

(1990); Annot., Workers’ Compensation Immunity as Extending to

One Owning Controlling Interest in Employer Corporation, 30

A.L.R.4th 948 (1984).

[8 - 10}

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No. 63166-6

The court should hold the WAC provision invalid. It

neither serves its own purpose nor is it consistent with the IIA or

its policies.

The majority says, though, that Nestle Foods is entitled to

immunity because it paid costs of workers’ compensation for

Manor. Whether Nestle Foods paid costs of its subsidiary, and

the extent to which corporate finances may have been intertwined

is a question which is relevant to the issue whether the corporate

parent and the subsidiary were in effect one entity entitled to

immunity under the IIA. It is not, however, dispositive on the

issue of whether Nestle Foods is Manor’s employer. In Marsland,

71 Wn.2d 343, this court found no immunity for a company which

had responsibility for workers’ compensation premiums because

the entity was not factually the worker’s employer under the

consent-control test. See also, e.g., Gulfstream Land & Dev.

Corp. v. Wilkerson, 420 So.2d 587 (1982) (unless there is absolute

integration of the two entities, a parent corporation is not the

employer of the subsidiary’s employee, and a joint policy of

workers’ compensation insurance does not provide a basis for

immunity); Stratman v. Admiral Beverage Corp. , 760 P.2d 974,

984 (Wyo. 1988) ("[cloverage of affiliated corporations under the

same worker’s compensation insurance policy or state account is

not relevant to the issue of whether the employee of one affiliate

is also the employee of the other;" if the worker is not an

employee of the particular corporation sued, that corporation is not

immune regardless of whether it made fund payments).

In this case, there is also a fact question as to whether

Nestle Foods paid the workers’ compensation costs or whether

they were charged back to Carnaco. Of course, charging them

back would lend support to Manor’s claim that Nestle Foods was

not factually his employer because in that event it would be

evidence that Carnaco had a separate corporate identity from

Nestle Foods.

[10 - 11]

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No. 63166-6

It is also significant to note that if Manor were able to

pursue a third party claim against Nestle and prevail, he would not

be entitled to any double recovery nor would Nestle have to pay

more than his actual damages. Even if a corporate parent has

provided self-insured workers’ compensation coverage, the IIA

provides for an offset or similar reduction of a damages award to

account for workers’ benefits paid. RCW 51.24.050; RCW

51.24.060. Cf. Goodman v. Boeing Co., 127 Wn.2d 401, 404-06,

899 P.2d 1265 (1995) (where self-insuring employer paid time-loss

benefits, that part of jury award against self-insuring employer for

discrimination against employee which represented lost wages

capacity was offset by time-loss benefits paid, and the self-insuring

employer was subrogated to future workers’ compensation

benefits); 2A Arthur Larson & Lex K. Larson, Law of Workmen ’s

Compensation § 72.97, at 14-342 (1996) (carrier sued as third

party would be entitled to set off in judgment against itself as

tortfeasor the amount of compensation paid by the carrier). Thus,

a self-insuring corporate parent would not be obliged to fully pay

both workers’ compensation and benefits and tort damages and the

employee would not obtain a double recovery.

Finally, I must point out that none of the four cases cited

by the majority for the proposition that Nestle Foods should be

considered Manor’s employer in accord with the policy of the IIA

supports that proposition. In Wolf v. Scott Wetzel Servs., Inc.,

113 Wn.2d 665, 782 P.2d 203 (1989) and Deeter v. Safeway

Stores, Inc., 50 Wn.App. 67, 747 P.2d 1103 (1987), review

denied, 110 Wn.2d 1016 (1988), the courts held that the claims

administrators hired by the employer were entitled to immunity

under the IIA. In Wolf, 113 Wn.2d 665, the worker tried to bring

a claim for wrongful delay of benefits based upon his entitlement

to workers’ compensation benefits. In Deeter, 50 Wn.App. 67,

the worker sought damages based on delay in paying workers’

compensation benefits and refusal to settle his industrial insurance

claim. In each case "(t]he relationship of the employee, the

[11 - 12]

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Peete eed ee te ee i

No. 63166-6

employer, and the claims adjuster for the employer . . . flow/ed]

from the rights and obligations created by the IIA, not from any

independent source." Deeter, 50 Wn.App. at 83-84 (emphasis

added) (Grosse, J., concurring), cited in Wolf, 113 Wn.2d at 675-

77. In marked contrast, the present case involves a claim for

damages under tort law apart from any entitlement to workers’

compensation benefits. Moreover, the second factor heavily

influencing this court in Wolf was the fact that the IIA contains a

penalty provision for wrongful delay or termination of benefits

thus evidencing legislative intent that the remedy for wrongful

delay or termination of benefits lies within the workers’

compensation system. Wolf, 113 Wn.2d at 670 (citing RCW

51.48.017). There is no analogous provision in the IIA

establishing legislative intent that a corporate parent is immune

from a third party suit merely because its affiliated companies

provide coverage through self-insurance.

In Corr v. Willamette Indus., Inc., 105 Wn.2d 217, 713

P.2d 92 (1986), Willamette Industries absorbed Corco, Inc. in a

corporate merger and acquired its plant equipment. After the

merger, a worker employed by Western Paper Kraft Group, a

wholly owned subsidiary of Willamette, was injured by machinery

designed and built by Corco before the merger. The worker sued

Willamette, arguing that it had succeeded to Corco’s liabilities.

This court affirmed the trial courts’ dismissal of the action on the

basis that Willamette was immune under the IIA. The court did

not address the parent/subsidiary immunity issue raised in this

case, however. Instead, the issue addressed was whether a

corporation could be considered a third party under either the

"dual capacity" or "dual persona” doctrines. Because the issue

raised here was not addressed in Corr, it does not support the

proposition that a corporate parent is the employer of its

subsidiary’s employee, as the Court of Appeals recognized in

Meads v. Ray C Roberts Post 969, Inc., 54 Wn.App. 486, 774

P.2d 49 (1989).

[12 - 13]

A-33

No. 63166-6

The last case is Coulter v. State, 93 Wn.2d 205, 608 P.2d

261 (1980). There the court disallowed a third party suit against

the state for alleged negligent inspection by a state safety inspector

acting pursuant to RCW 49.17, holding that the worker’s failure

to file a claim with the state’s chief fiscal office precluded any

third party action. Jd. at 207. Further, the court observed in

dicta that under former RCW 51.24.010 the Department was

subrogated to the injured person’s right against a third party, with

the right to prosecute the action. Ifa third party action against the

Department was possible, the Department would sue itself for not

performing duties which are the Department’s responsibilities

under RCW 49.17, thus becoming plaintiff and defendant. The

court did not believe "such an anomalous result" was intended by

the Legislature. Coulter, 93 Wn.2d at 208. Although Nestle

Foods argues similar anomalous results ensue if it is subject to a

third party suit, the source of the problem is WAC 296-15-023

which requires the corporate parent to include subsidiaries in its

certification, and not the statutes enacted by the Legislature.

Moreover, as a practical matter, it is difficult to imagine Nestle

wanting to pursue an action against itself if the injured worker

elects not to sue. There seems to be little danger of a self-insuring

corporate parent in these circumstances placing itself in the

peculiar position of being both plaintiff and defendant in a suit.

Finally, courts have rejected on various grounds the argument that

legislatures could not have intended that a subrogated carrier sue

itself, including the ground that the subrogation provisions simply

did not deal with the issue whether the employee’s common law

right to sue a third party was taken away from him. 2A Arthur

Larson & Lex K. Larson, The Law of Workmen’s Compensation

§ 72.95, at 14-331 through 332 (1996) (citing cases).

The majority’s result is not supported by the self-insurance

provisions of the IIA, the history of the quid pro quo compromise

underlying the IIA, this court’s case law, or the purpose under

WAC 296-15-023(2). The WAC is inconsistent with the IIA and

its provisions, particularly because it results in unfairly treating

[13 - 15]

A-34

No. 63166-6

employees covered under a self-insurance program differently than

those covered under the state fund, and it should be invalidated.

I would hold that Paul Manor is not foreclosed as a matter of law

from pursuing a third party action against Nestle Foods, and

would accordingly affirm the Court of Appeals and remand this

matter for further proceedings.°

/s/ Madsen, J.

/s/ Alexander, J.

/s/ Sanders, J.

* The Court of Appeals also correctly concluded that Paul Manor’s action is not

barred by res judicata or collateral estoppel. Collateral estoppel is the relevant

doctrine, and the reason it does not bar this action is because in light of WAC

296-15-023(2) the administrative body never had occasion to determine whether

Nestle Foods was factually Manor’s employer for purposes of a third party

action.

[15]

A-35

THE SUPREME COURT OF WASHINGTON

No. 63133-6

PAUL E. MANOR, et al, Respondents,

Vv. ORDER CHANGING

NESTLE FOOD COMPANY, Petitioner. OPINION

It is hereby ordered that the opinion in the above cause,

as the same appears at 131 Wn.2d 439, be changed as follows:

Footnote 3 at the bottom of page 446 is deleted, and the

following footnote is inserted in its place:

> In Weyerhaeuser Co. v. Department of

Ecology, 86 Wn.2d 310, 545 P.2d 5 (1976), we

first set forth the standard of review for agency

regulations. We now ask only whether the

challenged regulation is "reasonably consistent

with the statute being implemented." Sv.

Francis Extended Health Care v. Department of

Soc. & Health Servs., 115 Wn.2d 690, 702, 801

P.2d 212 (1990). We believe the four-part test

for evaluating the validity of an agency rule

under the APA set forth at RCW

34.05.570(2)(c) helpfully informs the

"reasonably consistent" inquiry, and we adopt it

as the standard for review of agency rules.

[File stamp, Supreme Court, State of

Washington, 97 Oct-7 p.m. 1:33

by C. J. Merritt, Clerk

Dated this 7th October, 1997.

/s/ Durham, C.J.

Chief Justice

Approved:

/s/ Dolliver, J. /s/ Guy, J.

/s/ Smith, J.

/s/ Talmadge, J.

131 Wn.2d 439

A-36

Se eee ones

Be Rec Prete AOR NE we ms Lp we esa Bose IN Ete

oak’ POT Me AMR 8 =

iit

a ah

IN THE SUPERIOR COURT OF THE STATE OF

WASHINGTON

IN AND FOR THE COUNTY OF ADAMS

PAUL E. MANOR and LYNETTE) NO. 93-2-00044-1

MANOR, husband and wife, ) JUDGMENT AND

) ORDER GRANTING

Plaintiffs, ) DEFENDANT’S

vs. ) MOTION TO DISMISS

NESTLE FOOD COMPANY, ) AND AWARDING

Defendant. ) STATUTORY

_) ATTORNEY’S FEES

Judgment Creditor: Nestle Food Company

Judgment Creditor’s Attorney: Wayne L. Williams

Judgment Debtors: Paul E. and Lynette Manor

Judgment Debtors’ Attorney: John Luke McKean

Judgment Amount: $125.00 (statutory attorney’s fees)

THIS MATTER came on before the Honorable Richard

W. Miller, on December 1, 1993, by virtue of the Defendant’s

Motion to Dismiss. The Plaintiffs appeared by and through

their attorneys, McKean Law Office, per John Luke McKean.

The Defendant appeared by and through its attorneys, Rolland,

O’Malley, Williams & Wyckoff, P.S., per Wayne L. Williams.

The court has considered the Defendant’s Motion to

Dismiss; Defendant’s Memorandum of Authorities in Support of

Motion to Dismiss; Plaintiff's Memo Re: Res Judicata;

Plaintiffs’ Supplemental Memo re: "Fellow Servant";

Defendant’s Second Memorandum of Authorities in Support of

Motion to Dismiss; Defendant’s Response to Plaintiffs’ Fellow-

Servant Arguments; Affidavit of Paul Manor Re:

A-37

ROLLAND, O’MALLEY, WILLIAMS & WYCKOFF, P.S.

JUDGMENT & ORDER GRANTING P. O. Box 316

DEF’S MOTION TO DISMISS -2- Olympia, Washington 98507

Telephone (206) 352-9331

Facsimile (206) 943-2430

"Employment"; Plaintiffs’ Memorandum Re: Employment /

Motion to Dismiss; the affidavits and exhibits attached to the

memoranda; Plaintiff's Declaration Re: Documents Re:

Employment and attached documents, and having heard and

considered the argument of counsel, NOW, THEREFORE,

IT IS HEREBY ORDERED, ADJUDGED AND

DECREED that pursuant to Title 51 RCW the Defendant is

immune from suit and this court lacks subject matter

jurisdiction. It [sic.] this court had jurisdiction, this action

would be barred by res judicata.

IT IS FURTHER ORDERED, ADJUDGED and

DECREED that the Defendant’s Motion to Dismiss is hereby

DISMISSED, with prejudice. Defendant is AWARDED

Statutory attorney’s fees in the amount of One Hundred Twenty

Five Dollars and NO/100 ($125.00).

DONE IN OPEN COURT THIS day of

, 1994.

{our copy not dated nor signed]

Judge Richard W. Miller

Presented by:

ROLLAND, O'MALLEY, WILLIAMS

& WYCKOFF, P.S.

/s/ Wayne L. Williams

Wayne L. Williams, WSBA# 4145

Attorney for Defendant

A-38

ROLLAND, O"MALLEY, WILLIAMS & WYCKOFF, PS.

JUDGMENT & ORDER GRANTING P. O. Box 316

DEF’S MOTION TO DISMISS -2- Olympia, Washington 98507

Telephone (206) 352-9331

Facsimile (206) 943-2430

;

File Stamp

In Clerk’s Office

Court of Appeals

State of Washington - Division III

Date May 30 1995

/s/ Philip J. Tharp

Chief Judge

IN THE COURT OF APPEALS OF THE

STATE OF WASHINGTON

PAUL E. MANOR and ) No. 13819-4-II]

LYNETTE MANOR, )

husband and wife, ) Division Three

Appellants, ) Panel Three

v. )

NESTLE FOOD COMPANY, )

Respondent, ) Filed May 30 1995

MUNSON, J.--Paul E. and Lynette Manor appeal the

summary judgment dismissal of their personal injury claim

against Nestle Food Company. Because we hold a self-insured

parent company is not, as a matter of law, the “employer” of its

subsidiary’s workers and that the Manors’ suit is not barred by

a previous Department of Labor and Industries’ determination.

we reverse.

Mr. Manor was injured January 15, 1992, at the

Carnation Processed Potato Plant in Othello when a forklift

driver backed over his foot. On January 26, he was

hospitalized and diagnosed as having acute inflammatory

polyradiculoneuropathy (Guillain-Barre syndrome). He became

completely paralyzed and was placed on a respirator until June

|. He remained hospitalized until November 20, when he was

allowed to go home although he still needed assistance with

basic living functions.

A-39

No. 13819-4-III

Manor v. Nestle Food Company

Mr. Manor began driving truck for Midwest Motors, a

division of the Carnation Company, in 1975. In 1981, Midwest

Motors was incorporated as Carnaco Transport, Inc. Carnaco

maintained facilities in Moses Lake separate and distinct from

the facilities owned by Carnation in Moses Lake. Asa Carnaco

driver, Mr. Manor often hauled general freight for businesses

that were not related to Carnation.

In 1979, Carnation was authorized to self-insure its

workers’ compensation liability in Washington. This included

the liability of its subsidiary Carnaco. In 1985, Carnation

became a wholly owned subsidiary of Nestle Holdings, Inc.,

and the name was changed to Nestle Food Company in 1991.

Mr. Manor filed a workers’ compensation claim on

January 15, 1992, the day of the injury. On February 14, the

Department of Labor and Industries issued a notice of decision

allowing Mr. Manor’s claim. The Manors filed suit against

Nestle seeking damages as a result of Mr. Manor's injury on

April 14, 1993, and on January 21, 1994, the trial court granted

Nestle’s motion to dismiss. The Manors now appeal that

dismissal.

When reviewing an order granting summary judgment,

an appellate court engages in the same inquiry as did the trial

court. Barr v. Day,+24 Wn.2d 318, 324, 879 P.2d 912

(1994). The summary judgment must be affirmed if the

pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law. CR

56(c). Under RAP 9.12, only the evidence and issues called to

the attention of the trial court may be considered on appeal . All

facts and reasonable inferences are considered in a light most

favorable to the nonmoving party, and all questions of law are

reviewed de novo. Caritas Servs., Inc., v. Department of

Social & Health Servs., 123 Wn.2d 391, 402, 869 P.2d 28

(1994)

No. 13819-4-III

Manor v. Nestle Food Company

Here, the facts are essentially undisputed; the parties

raise only issues of law. The first such issue is whether Nestle

is Mr. Manor’s employer as a matter of law and, thus, immune

from suit. The Manors contend the question is one of fact, not

of law.

Under Washington’s workers’ compensation statutes,

RCW 51, employees injured in their work may not sue their

employers, their relief is limited to that provided by workers’

compensation "except as otherwise provided in this title".

RCW 51.04.010. One of those exceptions permits an injured

worker to sue a third party “not in a worker’s same employ”

who may be liable for his or her injuries. RCW 51.24.030(1).

"For purposes of workmen’s compensation, an

employment relationship exists only when: (1) the employer has

the right to control the servant’s physical conduct in the

performance of his duties, and (2) there is consent by the

employee to this relationship." Novenson v. Spokane Culvert

& Fabricating Co., 91 Wn.2d 550, 553, 588 P.2d 1174 (1979).

Both of these prongs present questions of fact. Smick v.

Burnup & Sims, 35 Wn.App. 276, 279, 666 P.2d 926 (1983).

In Washington, there are two methods by which

employers may provide workers’ compensation coverage for

their employees: (1) they may insure with the state fund; or (2)

if qualified, they may self-insure. RCW 51.14.010. Nestle is a

qualified self-insurer. Nestle argues it, together with its

subsidiaries, must be considered as one employer under WAC

296-15-023. WAC 296-15-023 deals with certification of self-

imsurers; it states:

(1) The certification of a firm will

include all of its subsidiaries or divisions doing

business in the state of Washington. A

subsidiary is defined, for the purpose of this

rule, as an entity which is fifty percent owned

and has its interest controlled by another single

firm.

A-41

No. 13819-4-III

Manor v. Nestle Food Company

(2) One certificate will be issued to an

approved self-insurer, including all subsidiaries

or divisions. The entities will be considered as

one loyer for all f Title 51 RCW.

(Italics ours.) Nestle maintains that it, as well as Carnaco, must

be considered Mr. Manor’s employer, and that it is

consequently immune from any lawsuit arising from the injury.

Included in the record is an affidavit of Larry J.

Wilkinson, senior surety analyst with the Department of Labor

and Industries. Mr. Wilkinson states the policy behind the

requirement a self-insurer include all subsidiaries or divisions is

to prevent an employer from selectively self-insuring some risks

while leaving others insured by the state fund.

In Meads v. Ray C. Roberts Post 969, Inc., 54

Wn.App. 486, 774 P.2d 49 (1989), an employee of Ray C.

Roberts Service Club, Inc., was injured at work. She sued Ray

C. Roberts Post 969, Inc., the owner of the building. The court

Stated:

The Post argued essentially that the Service

Club corporation was a subsidiary of and

completely controlled by the Post, and that, ipso

facto, this made Meads the Post’s employee.

The trial court agreed; we do not. We reverse.

105 Wn.2d 217, 713 P.2d 92 (1986)] does not

support the Post’s "parent-subsidiary ipso facto”

argument, nor does any other Washington case.

Meads, at 487-88. Under Meads, if Nestle had been a

participant in the state fund rather than a self-insurer, it would

not, as a matter of law, have been immune from the Manors’

suit. Our Supreme Court has stated that employees should

receive the same treatment whether their employer is self-

insured or insures through the state fund:

A-42

ee ee

SPAIN a phn, Sl le Allien A te i

ee ae

No. 13819-4-III

Manor v. Nestle Food Company

At no place in the statute is there any suggestion

that employees who are employed by self-

insurers are somehow to receive fewer benefits

than those employees whose employers are

under the state system. Nowhere in RCW Title

51 is there even a hint that the legislature

intended some covered employees to be treated

differently than others.

Johnson v. Tradewell Stores, Inc., 95 Wn.2d 739, 745, 630

P.2d 441 (1981).

Where, as here, an agency has specifically been

delegated rule-making power by the Legislature, its regulations

are presumed valid. Weyerhaeuser Co. v. Department of

Ecology, 86 Wn.2d 310, 314, 545 P.2d 5 (1976). A challenged

regulation will be upheld if it is reasonably consistent with the

Statute it implements. Weyerhaeuser, at 314.

To the extent WAC 296-15-023 requires all self-insurers

to include subsidiaries and divisions, it prevents an employer

from selectively self-insuring its low risk employees while

leaving its high risk employees insured with the state fund. To

that extent, it is reasonably consistent with RCW 51. However,

it is not reasonably consistent to the extent it requires all entities

covered by a self-insurance certification to be considered one

employer for all purposes under RCW 51. To do so may result

in the denial of a worker’s right to bring a third party claim

against the parent company of his employer merely because the

parent chose to self-insure.'

' We note corporate mergers, consolidations, and combinations are

commonplace in today’s business world. In Jackson v. Harvey, 72 Wn. App.

507, 519, 864 P.2d 975, review denied, 124 Wn.2d 1003 (1994), the court

noted an employee should not be required to guess who his employer is.

Similarly, an employee should not have to guess whether a particular

corporation is related to his employer as parent or some other affiliate.

A-43

No. 13819-4-III

Manor v. Nestle Food Company

Nestle was not, as a matter of law, Mr. Manor’s

employer. Construed most favorably toward the Manors, the

affidavits present material issues of fact as to whether Nestle

could be considered Mr. Manor’s employer. Summary

judgment was improper.

The second issue raised by the parties is whether the

Department’s February 14, 1992 “Notice of Decision" precludes

the Manors’ claim either through res judicata or collateral

estoppel. The Manors contend it does not. The notice issued

by the Department allowed both time loss compensation and

medical benefits because Mr. Manor had “sustained an injury

while in the course of employment with a self-insured

employer". The notice lists Mr. Manor’s "EMP" as Nestle and

gives Carnaco’s Moses Lake address as the work location.”

In Bordeaux v. Ingersoll Rand Co.,71 Wn.2d 392, 429

P.2d 207 (1967), the Department denied a worker’s claim he

was injured by a power tamper stating the tamper did not cause

the injury. In his later suit against the manufacturer of the

tamper, the manufacturer argued the claim was precluded

because the Department’s decision was res judicata. The court

set forth the requirements for the application of res judicata:

To make a judgment res judicata in a subsequent

action there must be a concurrence of identity in

four respects: (1) of subject-matter; (2) of cause

of action; (3) of persons and parties; and (4) in

the quality of the persons for or against whom

the claim is made.

Bordeaux, at 396 (quoting Northern Pac. Ry. v. Snohomish

Cy., 101 Wash. 686, 688), 172 P. 878 (1918)). Of the four,

the court found only a concurrence of subject matter, and thus

held the suit was not barred by res judicata.

* Mr. Manor's claim identified Carnaco as his employer.

AR —crhe R aa hz PT Pail rhe EE

bs PO ye ee

No. 13819-4-III

Manor v. Nestle Food Company

Here, as in Bordeaux, there is a concurrence of subject

matter--Mr. Manor’s injuries are the subject of both actions.

The causes of action, however, are different. Mr. Manor’s

negligence claim against Nestle is based on fault. Fault is not

an issue in a workers’ compensation claim. As a self-insurer,

Nestle was a party to the action before the Department.

Bordeaux, at 399. Thus, there is a concurrence of persons and

parties. However, the quality of the person against whom the

claim is made differs. In the workers’ compensation claim,

Nestle’s position was not adversarial while it is clearly an

adversary in the present claim. In short, there is not such a

concurrence of identity between the claims that the present

claim should be barred by res judicata.

In Malland v. Department of Retirement Sys., 103

Wn.2d 484, 489, 694 P.2d 16 (1985), the court stated the

requirements for the application of collateral estoppel:

(1) identical issues; (2) a final judgment on the

merits; (3) the party against whom the plea is

asserted must have been a party to or in privity

with a party to the prior adjudication; and (4)

application of the doctrine must not work an

injustice on the party against whom the doctrine

is to be applied.

Here, it is not clear from the Department’s order

whether it considered the question of whether Nestle or Carnaco

was Mr. Manor’s employer. Nor does it appear such a

determination was necessary to the Department’s decision. In

either case, Mr. Manor’s workers’ compensation claim would

have been under Nestle’s self-insurance certificate. While the

Department’s decision is final as to Mr. Manor’s entitlement to

workers’ compensation benefits, the Department does not appear

to have addressed the merits of the Manors’ current claim. The

Manors are not raising the identical issue, and the Department’s

A-45

No. 13819-4-III

Manor v. Nestle Food Company

decision was not a final judgment as to the merits of the current

claim. As noted, Nestle was a party to the action before the

Department. Thus, both Nestle and the Manors were parties to

the earlier proceeding. Finally, because Mr. Manor was

completely paralyzed and on a respirator in intensive care at the

time the notice was issued and throughout the 60 days allowed

for appeal, application of the doctrine would work a serious

injustice against him. The Manors are not collaterally estopped

from asserting their claim against Nestle.

The summary judgment is reversed and the case

remanded for trial.

/s/ Munson, J.

/s/ Thompson, C.J.

/s/ Schultheis, J.

Pee ee

wales atten ys Ra

SN ROME ASS BUY BOA IM Ree Nini NE RAP ae

ital

GEOFFREY CROOKS TEMPLE OF JUSTICE

Commissioner Post Office Box 40929

Olympia WA 98504-0929

(360) 357-2057

THE SUPREME COURT

STATE OF WASHINGTON

STEVEN M. GOFF

DEPUTY

COMMISSIONER

[Seal]

April 24, 1997

Mr. James F. Leggett

Leggett & Kram

1901 South I Street

Tacoma WA 98405-3810

RE: Manor v. Nestle Food Co., Cause No. 63133-6

Dear Mr. Leggett: :

The Chief Justice has denied your motion to file an

amicus curiae brief, on behalf of Connie June Miller and others,

in support of the pending motion for reconsideration in this

case. In the event the court grants reconsideration, however,

you may renew your request for amicus status.

Yours very truly,

/s/

Geoffrey Crooks

Commissioner

GC:sw

cc: Mr. Wayne L. Williams

Mr. John H. McKean

Mr. Craig A. Staples

Clerk

AAT

”

THE SUPREME COURT OF WASHINGTON

No. 63133-6

PAUL E. MANOR, et al, Respondents,

V. ORDER DENYING

MOTION FOR

NESTLE FOOD COMPANY, Petitioner. RECONSIDERATION

[File Stamp]

[Supreme Court, State of Washington]

[97 Oct 7 PM 1:38]

[By C. J. Merritt, Clerk]

The Court having considered the Respondents’ Motion

for Reconsideration;

Now, therefore, it is hereby

ORDERED:

That the Respondents’ Motion for Reconsideration is

denied.

DATED at Olympia, Washington this 7th day of

October, 1997.

/s/ Durham, C.J.

CHIEF JUSTICE

131 Wn.2d 439

A-48

ae CERO 2. 76 8x

WAC 296-17-310 General rules and instructions.

This section constitutes general rules and instructions for

chapter 296-17 WAC.

(1) Purposes. This chapter of the Washington

Administrative Code, including classifications of risk, premium

rates, the experience rating plan, and all other rules contained

herein governing the use thereof, is herein referred to as the

manual. This manual is promulgated by the department of labor

and industries pursuant to RCW 51.16.035. This manual

contains a formulation of the rules and regulations providing for

basic classifications, rates of premium, method of premium

calculation and cellection, and a rating system, consistent with

recognized principles of workers’ compensation insurance. This

manual governs the department’s underwriting of workers’

compensation insurance and assessment of other monetary

obligations, under the industrial insurance law of the state of

Washington, Title 51 RCW.

(2) Overview. Washington law (RCW 51.16.035)

requires that the department of labor and industries classify all

occupations or industries by degree of hazard. To accomplish

this, the department has established approximately three hundred

classifications of risk embracing the various industries within

the state (the actual number may vary from year to year).

These classifications are set forth in WAC 296-17-501 through

296-17-779. The general principles and objectives of the basic

classification system are set forth in WAC 296-17-310.

The first step in determining the appropriate

classification for an employer is to determine the nature of the

employer’s business being insured in this state. If the

department determines that an employer’s business consists of a

single operation or a number of separate operations which

normally prevail in that business then the single enterprise rule

(WAC 296-17-380) is applicable. This rule provides that the

department is to assign the single basic classification which most

A-49

PO = er em i el ry ee oe

accurately describes the employer’s entire enterprise. This

process begins with the search for a basic classification which

specifically describes the employer’s business. If such a basic

classification is found the process of assigning a basic

classification is complete.

If the employers’ business operation is not specifically

described by any basic classification then the employer’s

business is to be classified as provided for in WAC 296-17-360

(assignment of classification by analogy). In classifying by

analogy the department examines the process and hazard of the

employer’s business and compares it to that of other basic

classifications with processes and hazards that are similar to

those of the employer’s business and assigns the most analogous

classification on that basis.

In the event that a review of the employer’s business

operations indicates the possibility that the employer conducts

more than one business within this state, a determination will be

made as to whether any additional basic classifications should be

assigned on the basis of the criteria set out in the multiple

enterprise rule (WAC 296-17-390).

Once the employer’s basic classification has been

established, the department must determine whether additional

classifications should be assigned to apply to specific

employments within an employer’s business such as the standard

exception rule (WAC 296-17-440), the general exclusion rule

(WAC 296-17-430), the special exception rule (WAC 296-17-

441), or those indicated by the language of any applicable basic

classifications that permit or require separate reporting of any

operations within that business or industry or as otherwise

provided by this chapter.

(3) Premium payments - quarterly reports. Each

employer shall, upon such forms as prescribed by the

department, prior to the last day of January, April, July and

October of each year, pay to the department for the preceding

calendar quarter, for the accident fund, and for the medical aid

fund, a certain number of cents for each worker hour or

fraction thereof worked by the worker in their employ except

A-50

when the rules of this manual provide for a different method of

premium computation. Provided, that in the event an employer

has no employment subject to coverage under Title 51 RCW

during a calendar quarter the employer shall submit to the

department, according to the schedule described above, a

quarterly report indicating "no payroll" or be subject to the

penalties provided for in RCW 51.48.210. The director may

promulgate, change and revise such rates at such times as

necessary, according to the condition of the accident and

medical aid funds, and assign rates as appropriate to employers

who voluntarily seek coverage under the elective adoption

provisions of the law.

(4) Determining accident fund premium. The

amounts to be paid into the accident fund shall be determined as

follows: The department shall determine a manual premium

rate for each classification which shall not be inadequate,

excessive or unfairly discriminatory, taking into consideration

past and prospective costs in each classification and the financial

condition of the accident fund as a whole.

Every employer shall pay into the accident fund at the

manual premium rate unless such employer meets the

requirements for the experience rating plan provided elsewhere

in this manual, in which event such employer’s premium rate

for the accident fund shall be paid according to their experience

modification as determined under the experience rating plan.

(5) Basis for determining medical aid premium.

The amounts to be paid into the medical aid fund shall be

determined as follows: The department shall determine a manual

medical aid rate for each classification which shall not be

inadequate, excessive or unfairly discriminatory, taking into

consideration past and prospective costs in each classification

and the financial condition of the medical aid fund as a whole.

Every employer shall pay into the medical aid fund at

the manual premium rate unless such employer meets the

requirements for the experience rating plan provided elsewhere

in this manual, in which event such employer’s premium rate

for the medical aid fund shall be paid according to their

experience modification as determined under the experience

rating plan. A-51

(6) All section captions or titles or catch lines used

in this manual, chapter 296-17 WAC, do not constitute any part

of these rules.

(7) Assignment of classifications. The classifi-

cations in this manual are all basic classifications other than the

standard exception classifications which are defined in WAC

296-17-440 and those classifications specified in subsection (9)

of this section. Basic classi-fications are used to implement the

object of the classifica-tion system, which is to assign the one

basic classification which best describes the business of the

employer within this state. Each basic classification includes all

the various types of labor found in a business unless it is

specifically excluded by language contained within the

Classification or covered by a separate rule found elsewhere in

this chapter, such as "standard exceptions" or "general

exclusions." The classification procedure used within this state

is intended to classify the business undertaking of the employer

and not the separate employments, occupations, or operations of

individuals within a business.

In the event an employer operates a secondary business

within this state, multiple basic classifications can be assigned

provided that the conditions set forth in WAC 296-17-390

"multiple enterprises" have been met. However, construction

or erection operations are to be assigned classifications as

provided in WAC 296-17-45003 "Special construction industry

rules."

(8) Classification assignment of separate legal

entities. Each separate legal entity shall be assigned to the

basic classification or classifications which best describe its

operations within the state using the classifi-cation procedures

outlined in subsections (2) and (7) of this section and WAC

296-17-45003.

(9) All operations. Each basic classification in this

manual includes all the operations normally associated with the

business undertaking without regard to the location(s) of such

operation(s) unless an operation is specifically excluded from

the manual language of the basic classification. The following

classifications are not considered to be basic classifications and

A-52

are limited in scope to the definition contained within each

classification 4806, 4904, 5206, 6301, 6302, 6303, 7101 or the

temporary help classifications 7104 through 7121.

WAC 296-17-360 Assignment of classification by

analogy. The classification section of this manual contains a

listing of basic classifications covering most businesses and

industries.

Any enterprise or operation which is not described by

such classifications shall be assigned to the basic classi-

fication(s) most analogous from the standpoint of process and

hazard.

The alphabetical index section of the manual includes a

number of businesses and industries that are not contained in the

rule part of this manual. When such a listing is identified by

the letter "A" standing for analogy, it is the intended purpose of

this symbol and listing of such operations in the index to be

included in the same manner as if such operations were

contained in the rule part of this manual.

The limitations and conditions of the basic classifica-

tion(s) so assigned and all manual rules pertaining thereto shall

be applicable: Provided, That when a basic classification carries

the phraseology of N.O.C. and the business undertaking of the

employer to be classified is not specifically described by a basic

manual classification or listed in the alpha index but the

classification containing the phraseology of N.O.C. contains

common or similar businesses or industries it is intended that

the operation be classified into the N.O.C. Code.

WAC 296-17-370 Governing classification. The

governing classification of a risk is defined as that classification,

other than classifications 4806, 4904, 5206, 6301, 6302, 6303,

7101 or temporary help classifications 7104 through 7121,

which carries the largest number of worker hours. Provided,

that this rule is only applicable when multiple basic

classifications are to be assigned to an employer’s business

undertakings.

A-53

WAC 296-17-380 Single enterprise. If the employer’s

business, conducted at one or more locations, consists of a

singie operation or a number of separate operations which

normally prevail in the business described by a single basic

classification, that single classification which most accurately

describes the entire enterprise shall be applied. Division of

worker hours shall be made as provided hereinafter in respect to

standard exceptions, general exclusions and special exceptions.

No division of worker hours shall be permitted in respect to any

other operation even though such operation may be specifically

described by some other classification, unless the applicable

classification phraseology or other manual provision specifically

provides for such division of worker hours.

WAC 296-17-390 Miultiple enterprises. If an

employer operates a secondary business within this state, an

additional basic classification shall be assigned only if the

following conditions exist:

(1) The secondary business does not normally

prevail in the principal business undertaking of the employer.

(2) The secondary business is conducted as a

separate undertaking or enterprise. This condition does not

apply if the classification wording requires the assignment of an

additional classification for specified employees or operations.

(3) Separate and distinct payroll records are

maintained for each business undertaking.

(4) Each business is physically separated by

structural partitions and is conducted without an interchange of

labor.

(5) The assignment of the separate classification is

not prohibited by the wording of the classification governing the

principle business undertaking of the employer or any other

classification assigned to the employer.

If all of the above conditions do not exist:

(a) All employees shall be assigned to the

classification applicable to the principle business if the

classification for the principle business carries a rate which is

the same or higher than that for the classification of the

secondary business. A-54

(b) The secondary business shall be assigned to the

classification which describes that business if such classi-fication

carries a rate higher than that applicable to the principal

business.

greatest number of worker hours, excluding standard exception

or general exclusion operations.

(6) Employers with more than one classification

may have employees working in connection with several

classifications. Payroll assignment for such employees is

subject to WAC 296-17-410 "division of single employee’s

worker hours."

A-55

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

MOUNTAIN TIMBER COMPANY, Piff. in Err.,

v. STATE OF WASHINGTON.

(See S. C. Reporter’s ed. 219-246.)

Constitutional law - due process of law - Workmen’s

Compensation Act - validity as against employees.

1. Rights of employees under U.S. Const. 14th Amend.

are not invaded by the abolition, under the Washington

Workmen’s Compensation Act (Wash. Laws 1911, chap. 74),

of private rights of action for damages in case of disabling or

fatal accidental personal injuries received by employees in

certain employments denominated "extra hazardous" (and in any

other industry, at the option of employer and employees), and

the substitution of a system of compensation to injured workmen

and their dependents out of a public fund established and

maintained by contributions required to be made by the

employers in proportion to the hazards of each class of

occupation.

[For other cases, see Constitutional Law, IV.b, 7, in Digest

Sup. Ct. 1908.]

Note. -- On Workmen’s Compensation Acts—-see notes

to Milwaukee v. Miller, L.R.A.1916A, 23, and Linnane v.

Aetna Brewing Co. L.R.A. 1917D, 80.

On constitutionality of Workmen’s Compensation and

Industrial Insurance Statutes--see notes to Jensen v. Southern

P.Co. L.R.A. 1916A, 409, and Hunter v. Colfax Coal Co.

L.R.A. 1917D, 51.

Courts - jurisdiction - political question — republican form

of government.

2. Whether or not a state has violated the provision

of U. S. Const. art. 4, § 4, guaranteeing to every state in the

Union a republican form of government, is not a judicial

question, but is a political one, which is solely for Congress to

determine.

A-56

243 U. S.

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

[For other cases, see Courts, I. c, 2; Constitutional Law, III. c,

in Digest Sup. Ct. 1908.]

Jury -- right to trial by - effect of Workmen’s

Compensation Act.

3. The right to trial by jury, guaranteed by U. S.

Const. 7th Amend., cannot be said to be infringed by the

Washington Workmen’s Compensation Act (Wash. Laws 1911,

Chap. 74), on the theory that if such act be valid, it must be

followed in the Federal courts in cases that are within its pro-

visions, where there is nothing in such act that excludes trial by

jury in any private rights of action which are preserved, and, as

between employer and employee, the act abolishes all right of

recovery in ordinary cases, and therefore leaves nothing to be

tried by a jury.

[For other cases, see Jury, I. d, In Digest Sup. Ct. 1908.]

Constitutional law -- due process of law —- equal protection

of the laws - Workmen’s Compensation Act.

4. A state may, consistently with U.S. Const. 14th

Amend., substitute a system of compulsory compensation for

disabling or fatal accidental personal injuries received by

employees in the course of their employment in certain so-called

hazardous employments without regard to fault of the employer,

in lieu of the existing right to maintain actions for damages in

cases of the employers’ negligence, in which the latter may

assert immunity for the negligence of a fellow servant and the

defenses of contributory negligence and assumed risk. [For

other cases, see Constitutional Law, IV. a, 5; IV. b, 7, in

Digest Sup. Ct. 1908.]

Constitutional law — due process of law -- equal protection

of the laws - Workmen’s Compensation Act.

5. The exaction, under the Washington Workmen’s

Compensation Act (Wash. Laws 1911, chap. 74), from

employers in certain industries denominated “extra hazardous,"

without regard to any wrongful act on their part, or to whether

A-57

61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

injuries have befallen their own employees or not, of periodical

contributions based upon percentages of pay rolls to a state fund

from which compensation shall be made for disabling or fatal

injuries received by employees in the course of their

employment in such industries, is not inconsistent with the due

process of law and equal protection of the laws clauses of U. S.

Const. 14th Amend., but such exaction is a valid exercise of the

State’s police power, there being no claim that the scale of

compensation is unduly large, and the schedule of contribution

evidencing an intent to proportion the various percentages

according to the hazard of each of the groups into which the

industries are divided, and to limit the burden to the

requirements of each industry.

[For other cases, see Constitutional Law, IV. a, 5; IV. b, 7:

IV. c, 3, in Digest Sup. Ct. 1908.]

Constitutional law -- due process of law — equal protection

of the laws — Workmen’s Compensation Act.

6. The evident purpose of the Washington

Workmen’s Compensation Act (Wash. Laws 1911, chap. 74), to

classify the various occupations according to the respective

hazard of each, is a sufficient answer (there being no particular

showing of erroneous classification) to the objection, founded

on U. S. Const. 14th Amend., that the statute goes too far in

classifying as hazardous large numbers of occupations that are

not hazardous in their nature.

[For other cases, see Constitutional Law, IV. a, 5; IV. b, 7, in

Digest Sup. Ct. 1908.]

Statutes — construction favoring constitutionality.

rp The Federal Supreme Court will not assume, in

the absence of an actual decision of the state court, that the

provision of the Washington Workmen’s Compensation Act

(Wash. Laws 1911, chap. 74), making it unlawful for the

employer to deduct any part of his compulsory contribution to

the state fund created by the act from the wages or earnings of

A-58

243 U. S.

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

his workmen, will be so broadly construed as to bring it in

conflict with the Federal Constitution.

[For other cases, see Statutes, II. a, in Digest Sup. Ct. 1908.]

[No. 13]

Argued March 1 and 2, 1916. Restored to docket for

reargument November 13, 1916. Reargued January 30, 1917.

Decided March 6, 1917.

IN ERROR to the Supreme Court of the State of Washington to

review a judgment which affirmed a judgment of the Superior

Court of Cowlitz County, in that state, in favor of the state in

an action to recover certain premiums alleged to be due under

the Workmen’s Compensation Act. Affirmed.

See same case below, 75 Wash. 581, L.R.A. —,—.

135 Pac. 645, 4 N.C.C.A. 81].

The facts are stated in the opinion.

Messrs. F. Markoe Rivinus and Theodore W. Reath

argued the cause, and, with Messrs. Edmund C. Strode and

Coy Burnett, filed a brief for plaintiff in error:

The considerations advanced by our opponent are

expressions of good intentions against which Webster warned.

2 Writings & Speeches of Daniel Webster, National Ed.

Little, Brown & Co. 1903, pp. 207, 208.

Under the pretext of the police power a state may not

abrogate the guaranties of the 14th Amendment.

Lochner v. New York, 198 U. S. 45, 49 L. ed. 937, 25

Sup. Ct. Rep. 539, 3 Ann. Cas. 1133; Muller v. Oregon, 208

U. S. 420, 52 L. ed. 555, 28 Sup. Ct. Rep. 324, 13 Ann. Cas.

957.

The Washington Compensation Act is not referable to

the taxing power.

Cooley, Taxn. p. 1125; Citizens’ Sav. & L. Assn. v.

Topeka., 20 Wall. 655, 22 L. ed. 455; Chicago v. Sturges, 222

A-59

61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

U. S. 313, 323, 324, 56 L. ed. 215, 220, 221, 32 Sup. Ct.

Rep. 92, Ann. Cas. 1913B, i349; Hammett v. Philadelphia, 65

Pa. 146, 3 Am. ep. 615; Weismer v. Douglas, 64 N. Y. 91,

21 Am. Rep. 586; Ohio & M. R. Co. v. Lackey, 78 Ill. 55, 20

Am. Rep. 259; Ives v. South Buffalo R. Co. 201 N. Y. 320, 34

L.R.A.(N.S.) 162, 94 N.E. 431, Ann. Cas. 1912B, 156, 1 N.

C. €. A, Siz.

A compulsory Workmen’s Compensation Act takes the

employer’s property without legal reason, invades his and his

employee’s right of private contract in a matter with which the

public has no concern by introducing a term of industrial

insurance, and is not the due process or equal protection

required by the 14th Amendment.

Dartmouth College v. Woodward, 4 Wheat. 518, 581, 4

L. ed. 629, 645; Bank of Columbia v. Okely, 4 Wheat. 244, 4

L. ed. 562; Washington ex rel. Oregon R. & Nav. Co. v.

Fairchild, 224 U. S. 510, 524, 525, 56 L. ed. 863, 868, 32

Sup. Ct. Rep. 535.

The current of judicial decision in the United States

appears to incline toward the unconstitutionality of workmen’s

compensation legislation in compulsory form. Evidently for this

reason have so many states adopted the voluntary form. As of

interest the following cases, upholding voluntary compensation

laws on the theory of contract, are cited:

Opinion of Justices, 209 Mass. 607, 96 N.E. 308, 1

N.C.C.A. 557; Borgnis v. Falk Co. 147 Wis. 327, 37 L.R.A.

(N.S.) 489, 133 N.W. 209, 3 N. C. C. A. 649; Sexton v.

Newark Dist. Teleg. Co. 84. N. J. L. 85, 86 Atl. 451, 3 N. C.

C. A. 569; Clem v. Chalmers Motor Co. 178 Mich. 340,

L.R.A. 1916A, 352, 144 N.W. 848,4.N.C.C. A. 876;

Deibeikis v. Link-Belt Co. 261 Ill. 454, 104 N.E. 211, Ann.

Cas. 1915A, 241,5 N. C. C. A. 401; Hawkins v. Bleakley,

220 Fed. 378; Matheson v. Minneapolis Street R. Co. 126

Minn. 286, L.R.A. 1916D, 412, 148 N.W. 71,5. N.C. C. A.

A-60

243 U. S.

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

871; Gorrell v. Battelle, 93 Kan. 370, 144 Pac. 244; Bayou v.

Beckley, 89 Conn. 154, 93 Atl. i39, 8 N.C.C.A. 588;

Behringer v. Inspiration Consol. Copper Co. 17 Ariz. 232, 149

Pac. 1065; Coakley v. Mason Mfg. Co. -— R. I. --, Atl. 1073;

De Constantin v. Public Service Commission, 75 W. Va. 32,

L.R.A. 1916A, 329, 83 S. E. 88.

In New York a constitutional amendment was deemed

necessary to overcome the due process of the New York

Constitution. Probably for the same reason express

constitutional authority for such legislation was thought

necessary in the state of Ohio in order to substitute for the

previous elective compensation law, a law in compulsory form.

Porter v. Hopkins, 91 Ohio St. 74, 109 N. E. 629, 9 N.

C. C. A. 839.

So, too, in California it was thought necessary to amend

the state Constitution in order to pass such a law in compulsory

form.

Western Indemnity Co. v. Pillsbury, 170 Cal. 686, 151

Pac. 398, 10 N.C.C.A. 1.

On the other hand, without an enabling constitutional

provision the original compulsory compensation law of the state

of New York was declared repugnant to the due process clause

of the New York Constitution (Ives v. South Buffalo R. Co.,

201 N. Y. 271, 34 L.R.A. (N.S.) 162, 94 N. E. 431, Ann.

Cas. 1912B, 156, 1 N.C.C.A. 517). And in Texas, in spite of

the color of a voluntary form, a compensation law has been

declared repugnant to the due process clause of the Federal and

the Texas Constitutions (Middleton v. Texas Power & Light Co.

-- Tex. Civ. App. -- , 178 S. W. 956, 9 N.C.C.A. 847). In

Kentucky a compensation law in voluntary form was declared

unconstitutional as really compulsory (Kentucky State Journal

Co. v. Workmen’s Compensation Bd. 161 Ky. 562, L.R.A.

1916A, 389), 170 S. W. 437, 1166, Ann. Cas. 1916B, 1273).

The law of property affords security to one in the

A-61

61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

possession of his property who is without fault, actual or

constructive.

Harvey v. Dunlap, Hill & D. Supp. 193; Nitro-

glycerine Case (Parrott v. Wells) 15 Wall. 524, 21 L. ed. 206;

Jensen v. Union P. R. Co. 6 Utah, 253, 4 L.R.A. 724, 21 Pac.

994; Zeigler v. South & North Ala. R. Co. 58 Ala. 594;

Sirmingham Mineral R. Co. v. Parsons, 100 Ala. 662, 27

L.R.A. 263, 46 Am. St. Rep. 92, 13 So. 602; Bielenberg v.

Montana Union R. Co. 8 Mont. 271, 2 L.R.A. 813, 20 Pac.

314; Schenck v. Union P. R. Co. 5 Wyo. 430, 40 Pac. 840;

Cantril v. Union P. R. Co. 2 Idaho, 576, 21 Pac. 416; Camp

[column omitted here] v. Rogers, 44 Conn. 297; Black, Const.

Law, 2d ed. 351.

Any legislation which interferes with the equality of

right of employer and employee is an arbitrary interference with

the liberty of contract which no government can legally justify

in a free

land.

Adair v. United States, 208 U. S. 161, 175, 52 L. ed.

436, 28 Sup. Ct. Rep. 277, 13 Ann. Cas. 764.

Messrs. Edmund C. Strode and Coy Barnett filed a

separate brief for plaintiff in error:

As far back as 1798, the Supreme Court of the United

States in Calder v. Bull, 3 Dall. 386, 1 L. ed. 648, was called

upon to warn the people of the United States that the

Constitution must be held sacred, and that no authority upon

any pretext should be allowed to supersede the same.

See also Wilkinson v. Leland, 2 Pet. 627, 7 L. ed. 542;

Kilbourn v. Thompson, 103 U. S. 168, 26 L. ed. 377.

The Washington statute denies the right to trial by jury.

Parsons v. Bedford, 3 Pet. 433, 7 L. ed. 732; Maxwell

v. Dow, 176 U. S. 581, 44 L. ed. 597, 20 Sup. Ct. Rep. 448,

494.

A-62

243 U. S.

MOUNTAIN TIMBER CO. v. WASHINGTON.

The act unconditionally requires employers engaged in

occupations enumerated therein to make payment to a fund for

the benefit of employees, without regard to any wrongful act of

the employer. In addition to taking away a of his defenses, it

makes him liable from the mere fact that he employs the person

injured. He is given by this act no day in court to determine

his liability for a failure to comply with the law, and is given no

opportunity to be heard as to how much of his property should

be taken, whether he is or is not at fault.

This amounts to depriving Mountain Timber Company

of its property without due process of law, and denies to it the

equal protection of the laws.

Dartmouth College v. Woodward, 4 Wheat. 518, 4 L.

ed. 629; State v. Strasburg, 60 Wash. 106, 32 L.R.A. (N.S.)

1246, 110 Pac. 1020, Ann. Cas. 1912B, 917; Jolliffe v. Brown,

14 Wash. 155, 53 Am. St. Rep. 868, 44 Pac. 149; Lochner v.

New York, 198 U. S. 45, 49 L. ed. 937, 25 Sup. Ct. Rep.

539, 3 Ann. Cas. 1133; Louisville & N. R. Co. v. Baldwin, 85

Ala. 619, 7 L.R.A. 266, 5 So. 311; Wadsworth v. Union P. R.

Co. 18 Colo. 600, 23 L.R.A. 812, 36 Am. St. Rep. 309, 33

Pac. 515; Denver & R. G. R. Co. v. Outcalt, 2 Colo. App.

395, 31 Pac. 177; Gulf, C. & S. F. R. Co. v. Ellis, 165 U. S.

150, 41 L. ed. 666, 17 Sup. Ct. Rep. 255; Zeigler v. South &

North Ala. R. Co. 58 Ala. 594, Birmingham Mineral R. Co. v.

Parsons, 100 Ala. 662, 27 L.R.A. 263, 46 Am. St. Rep. 92, 13

So. 602; Gibbs v. Tally, 133 Cal. 373, 60 L.R.A. 815, 65 Pac.

970; South & North Ala. R. Co. v. Morris, 65 Ala. 193;

Bielenberg v. Montana Union R. Co. 8 Mont. 271, 2 L.R.A.

813, 20 Pac. 314; Bennett v. Ford, 47 Ind. 264; Brown v.

Collins, 53 N. H. 442, 16 Am. Rep. 372; Lewis v. Flint & P.

R. Co. 54 Mich. 55, 52 Am. Rep. 790, 19 N. W. 744; Steffen

v. Chicago & N. W. R. Co. 46 Wis. 259, 50 N. W. 348;

Colon v. Lisk, 153 N. Y. 188, 60 Am. St. Rep. 609, 47 N. E.

304; California Reduction Co. v. Sanitary Reduction Works,

A-63

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

C. C. A. 91, 126 Fed. 34; Republic Iron & Steel Co. v. State,

160 Ind. 379, 66 N. E. 1007; State v. Dalton, 22 R. I. 77, 48

L.R.A. 775, 84 Am. St. Rep. 818, 46 Atl. 234; State v.

Redmon, 134 Wis. 89, 14 L.R.A. (N.S.) 229, 126 Am. St.

Rep. 1003, 114 N. W. 137, 15 Ann. Cas. 408; State ex rel.

Richey v. Smith, 42 Wash. 237, 5 L.R.A. (N.S.) 674, 114 Am.

St. Rep. 114, 84 Pac. 851, 7 Ann. Cas. 577; Lawton v. Steel,

152 U. S. 137, 38 L. ed. 388, 14 Sup. Ct. Rep. 449.

A comparison of the acts of the various states with the

act in question shows a radical difference in that the act in

question is made compulsory, and the employer and employee

are compelled to come under the act, whether voluntarily or

involuntarily. Many of the courts of the various states which

have passed upon the constitutionality of the acts of other states

have made a point of the fact that the acts which they were

considering were elective acts, and for that reason did not

infringe Constitutional guaranties.

Jeffrey Mfg. Co. v. Blagg, 235 U. S. 571, 59 L. ed.

364, 35 Sup. Ct. Rep. 167, 7 N. C. C. A. 570; Borgnis v. Falk

Co. 147 Wis. 327, 37 L.R.A. (N.S.) 489, 133 N. W. 209, 3

N. C. C. A. 649; State ex rel. Yaple v. Creamer, 85 Ohio St.

349, 39 L.R.A. (N.S.) 694, 97 N. E. 602, 1 N.C. C. A. 30;

Sexton v. Newark Dist. Teleg. Co. 84 N. J. L. 85, 86 Atl.

451,3 N.C. C. A. 569; Deibeikis v. Link-Belt Co. 261 Ill.

454, 104 N. E. 211, Ann. Cas. 1915A, 241,5 N.C. C.A.

401; Opinion of Justices, 209 Mass. 607, 96 N. E. 308, 1 N.

C. C. A. 557; Kentucky State Journal Co. v. Workmen’s

Compensation Bd. 161 Ky. 562, L.R.A. 1916A, 389, 170 S.

W. 437, 1166, Ann. Cas. 1916B, 1273; Cunningham v.

Northwestern Improv. Co. 44 Mont. 180, 119 Pac. 554, 1 N.

C. C. A. 720; Matheson v. Minneapolis Street R. Co. 126

Minn. 286, L.R.A. 1916D, 412, 148 N. W. 71,5.N.C.C. A.

871; Ives v. South Buffalo R. Co. 201 N. Y. 271, 34 L.R.A.

A-64

243 U. S.

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

(N.S.) 162, 94 N. E. 431, Ann. Cas. 1912B, 156, 1 N. C. C.

A. 517; State ex rel. Davis-Smith Co. v. Clausen, 65 Wash.

156, 37 L.R.A.(N.S.) 466, 117 Pac. 1101, 2 N. C. C. A. 823,

3 N. C. C. A. 599; Shade v. Ash Grove Lime & Portland

Cement Co. 93 Kan. 257, 144 Pac. 249.

Mr. W. V. Tanner, Attorney General of Washington,

argued the cause and filed a brief for defendant in error:

Whether or not a state has ceased to be republican in

form within the meaning of the Constitution of the United States

is not a judicial question, but a political end, which is solely for

Congress to determine.

Pacific States Teleph. & Teleg. Co. v. Oregon, 223 U.

S. 118, 56 L. ed. 377, 32 Sup. Ct. Rep. 224; Kiernan v.

Portland, 223 U. S. 151, 56 L. ed. 386, 32 Sup. Ct. Rep. 231.

The guaranty that no person shall be deprived of life,

liberty, or property without due process of law may be traced to

the great charter, and was originaily intended as a safeguard

against the arbitrary and despotic exercise of executive power,

and not against legislation. The same meaning was probably

attached to it by the framers of our first Constitutions. Not that

arbitrary acts depriving an individual of life, liberty, or property

had never taken the form of statutes; Parliament, on the

contrary, had frequently been made the instrument of despotism;

but these abuses were guarded against by special constitutional

prohibitions: the prohibition of acts of attainder, the provision

that private property must not be taken for public use without

compensation, and that the obligation of contracts must not be

impaired. An act of legislation taking life, liberty, or property,

and not covered by either of these clauses, was probably not

thought of when the first Constitutions were framed. At the

present time, however, the idea of due process is freely applied

to legislation, and means with regard to it "conformity to the

settled maxims of free government."

Freund, Pol. Power, § 20.

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61 L. ed.

—— ee

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

The limitations contained in the 14th Amendment to the

Federal Constitution were not designed to limit or in any way

interfere with the exercise of the state’s police power.

Barbier v. Connolly, 113 U. S. 27, 28 L. ed. 923, 5

Sup. Ct. Rep. 357; Jones v. Brim, 165 U. S. 180, 41 L. ed.

677, 17 Sup. Ct. Rep. 282, 1 Am. Neg. Rep. 547; L’Mote v.

New Orleans, 177 U. S. 587, 44 L. Ed. 899, 20 Sup. Ct. Rep.

788; Cunnius v. Reading School Dist. 198 U. S. 458-469, 49

L. ed. 1125-1130, 25 Sup. Ct. Rep 721, 3 Ann. Cas. 1121.

The police power has been variously defined.

License Cases, 5 How. 505, 12 L. ed. 256; Munn v.

Illinois, 94 U. S. 113, 124, 24 L. ed. 77, 83; Crowley v.

Christensen, 137 U. S. 86, 89, 34 L. ed. 620, 621, 11 Sup. Ct.

Rep. 13; Camfield v. United States, 167 U. S. 518, 524, 42 L.

Ed. 260, 262, 17 Sup. Ct. Rep. 864; Chicago, B & Q. R. Co.

v. Illinois, 200 U. S. 561, 692, 50 L. ed. 596, 609, 26 Sup.

Ct. Rep. 341, 4 Ann. Cas. 1175.

The term "police power" has sometimes been used in a

narrow sense, embracing merely regulations for the preservation

of the order, peace, health, morals, and safety of the

community. More recently, however, it has been extended to

include all legislation looking to the well-being of society in its

economic and intellectual aspects.

McGehee, Due Process of Law, p. 301.

The courts formerly, under different social, economic,

and industrial conditions, emphasized the constitutional guaranty

of the contractual freedom and strict property rights of the

individual. Now the tendency is to give increased recognition

to the limitations of that freedom which modern considerations

of public welfare require.

Holden v. Hardy, 169 U. S. 366, 387, 42 L. ed. 780,

789, 18 Sup. Ct. Rep. 383.

A-66

243 U. S.

Pa ae ee

MOUNTAIN TIMBER CO. v. WASHINGTON.

The true criterion by which to determine whether any

exercise of legislative power is violative of the due process of

law clause is that of reasonableness as distinguished from

arbitrary or capricious action.

Gundling v. Chicago, 177 U. S. 183, 188, 44 L. ed.

725, 728, 20 Sup. Ct. Rep. 633; McLean v. Arkansas, 211 U.

S. 539, 547, 53 L. ed. 315, 29 Sup. Ct. Rep. 206; 547, 53 L.

ed. 315, 29 Sup. Ct. Rep. 206; Atkin v. Kansas, 191 U. S.

207, 223, 48 L. ed. 148, 158, 24 Sup. Ct Rep. 124; Hurtado v.

California, 110 U.S. 516, 28 L. ed. 232, 4 Sup. Ct. Rep. 111,

292; Den ex dem. Murray v. Hoboken Land & Improv. Co. 18

How. 272, 15 L. ed. 372; Twining v. New Jersey, 211 U. S.

78, 100, 53 L. ed. 97, 106, 29 Sup. Ct. Rep. 14, Otis v.

Parker, 187 U. S. 606, 47 L. ed. 323, 23 Sup. Ct. Rep. 168;

Powell v. Pennsylvania, 127 U. S. 678, 32 L. ed. 253, 8 Sup.

Ct. Rep. 992, 1275; Booth v. Illinois, 184 U. S. 425, 46 L. ed.

623, 22 Sup. Ct. Rep. 425; Schmidinger v. Chicago, 226 U. S.

578, 57 L. ed. 364, 33 Sup. Ct. Rep. 182, Ann. Cas. 1914B,

284; Central Lumber Co. v. South Dakota, 226 U. S. 157, 57

L. ed. 164, 33 Sup. Ct. Rep. 66; Rosenthal v. New York, 226

U. S. 260, 57 L. ed. 212, 33 Sup. Ct. Rep. 27, Ann. Cas.

1914B, 71; Jacobson v. Massachusetts, 197 U. S. 11, 49 L. ed.

643, 25 Sup. Ct. Rep. 358., 3 Ann. Cas. 765; Erie R. Co. v.

Williams, 233 U. S. 685, 58 L. ed. 1155, 51 L.R.A.(N.S.)

1097, 34 Sup. Ct. Rep. 761; Bacon v. Walker, 204 U. S. 311,

51 L. ed. 499, 27 Sup. Ct. Rep. 289; Missouri, K. & T. R.

Co. v. May, 194 U. S. 267, 48 L. ed. 971, 24 Sup. Ct. Rep.

638; Austin v. Tennessee, 179 U. S. 343, 45 L. ed. 224, 21

Sup. Ct. Rep. 132; Halter v. Nebraska, 205 U. S. 34, 51 L.

ed. 696, 27 Sup. Ct. Rep. 419, 10 Ann. Cas. 525; Knoxville

Iron Co. v. Harbison, 183 U. S. 13, 46 L. ed. 55, 22 Sup. Ct.

Rep. 1; Noble State Bank v. Haskell, 219 U. S. 104, 55 L. ed.

112, 32 L.R.A.(N.S.) 1062, 31 Sup. Ct. Rep. 186, Ann. Cas.

1912A, 487; Murphy v. California, 225 U. S. 623, 56 L. ed.

A-67

61 L. ed.

SUPREME COURT OF THE UNITED STATES. OCcT. TERM,

1229, 41 L.R.A.(N.S.) 153, 32 Sup. Ct. Rep. 697; Patsone v.

Pennsylvania, 232 U. S. 138, 58 L. ed. 539, 34 Sup. Ct. Rep.

281; German Alliance Ins. Co. v. Lewis, 233 U. S. 389, 58 L.

ed. 1011, L.R.A.1915C, 1189, 34 Sup. Ct. Rep. 612;

Missouri, K. & T. R. Co. v. Cade, 233 U. S. 642, 58 L. ed.

1135, 34 Sup. Ct. Rep. 678; Chicago, B. & Q. R. Co. v.

McGuire, 219 U. S. 549, 55 L. ed. 328, 31 Sup. Ct. Rep. 259;

Welch V. Swasey, 214 U. S. 91, 53 L. ed. 923, 29 Sup. Ct.

Rep. 567; Watson v. Maryland, 218 U. S. 173, 54 L. ed. 987,

30 Sup. Ct. Rep. 644; Petit v. Minnesota, 177 U. S. 164, 44 L.

ed. 716, 20 Sup. Ct. Rep. 666; McGehee, Due Process of Law,

p. 306.

If the act under consideration has a legitimate and

proper end, beneficial to the state, and does not arbitrarily or

unduly oppress any person, then it is within the legislative

power. Its purpose is to substitute for the old system of

employer’s liability (so many times the subject of legislative

action) a newer and better system which shall place upon each

industry a part of the burden of caring for the workmen and

their dependents injured in that industry. Like every employers’

liability act its main purpose is to keep the injured workmen

from being a burden on society at large or on public charity. If

that purpose is not an appropriate or proper one, then every act

regulating employers’ liability by increasing it is improper.

State ex rel. Davis-Smith Co. v. Clausen, 65 Wash.

195, 37 L.R.A.(N.S.) 466, 117 Pac. 1101, 2 N.C. C. A. 823,

3 N. C. C. A. 599; Muller v. Oregon, 208 U. S. 412, 52 L.

ed. 551, 28 Sup. Ct. Rep. 324, 13 Ann. Cas. 957.

In his opinion in Noble State Bank v. Haskell, 219 U.

S. 104, 55 L. ed. 112, 32 L.R.A.(N.S.) 1062., 31 Sup. Ct.

Rep. 186, Ann. Cas. 1912A, 487, Holmes, J., regards

"prevailing morality or strong and preponderant public opinion"

as entitled to consideration in the determination of the question

of the validity of social legislation.

A-68

243 U. S.

Ol ———

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

The power of the legislature to abolish the doctrine of

fellow servant is beyond question.

Jeffrey Mfg. Co. V. Blagg, 235 U. S. 571, 59 L. ed.

364, 35 Sup. Ct. Rep. 167, 7 N. C. C. A. 570; Second

Employers’ Liability Cases (Mondon v. New York N. H. & H.

R. Co.) 223 U. S. 1, 56 L. ed. 327, 38 L.R.A.(N.S.) 44, 32

Sup. Ct. Rep. 169, 1 N. C. C. A. 875; Mobile J. & K. C. R.

Co. v. Turnipseed, 219 U. S. 35, 55 L. ed. 78, 32

L.R.A.(N.S.) 226, 31 Sup. Ct. Rep. 136, Ann. Cas. 1912A,

463.

The whole subject of contributory negligence is within

the legislative power.

Jeffrey Mfg. Co. v. Blagg and Second Employers’

Liability Cases supra; El Paso & N. E. R. Co. v. Gutierrez,

215 U. S. 87, 54 L. ed. 106, 30 Sup. Ct. Rep. 21; Employers’

Liability Cases (Howard v. Illinois C. R. Co.) 207 U. S. 463,

52 L. ed. 297, 28 Sup. Ct. Rep. 141.

It is within the power of the legislature to abolish the

defense of assumed risk.

Jeffrey Mfg. Co. v. Blagg and Second Employers’

Liability Cases, supra.

In those states which have adopted the so-called

"elective" workmen’s compensation laws it is uniformly held

that the legislature may abolish the defenses of (b) fellow

servant, (c) contributory negligence, and (d) assumed risk.

Borgnis v. Falk Co. 147 Wis. 327, 37 L.R.A.(N.S.)

489, 133 N. W. 209, 3 N.C. C. A. 649; State ex rel. Yaple v.

Creamer, 85 Ohio St. 349, 39 L.R.A. 694, 97 N. E. 602, 1 N.

C. C. A. 30; Deibeikis v. Link-Belt Co. 261 Ill. 454, 104. N.

E. 211, Ann. Cas. 1915A, 241, 5 N. C. C. A. 401; Opinion of

Justices, 209 Mass. 607, 96 N. E. 308, 1 N. C. C. A. 557;

Sexton v. Newark Dist. Teleg. Co. 84 N. J. L. 85, 86 Atl.

451, 3 N. C. C. A. 569; Matheson v. Minneapolis Street R.

A-69

61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

Co. 126 Minn. 286, L.R.A. 1916D, 412, 148 N. W. 71,5 .N.

C. C. A. 871; Shade v. Ash Grove Lime & Portland Cement

Co. 93 Kan. 257, 144 Pac. 249.

Liability may be imposed upon one who is in no manner

at fault.

3 Select Essays on Anglo-American Legal History, pp.

474, 507, 509, et seq.; Castle v. Duryee, 2 Keyes, 169; Street

Foundations of Legal Liability, pp. 52-59; Holmes v. Mather,

L. R. 10 Exch. 261, 44 L. J. Exch. N. S. 176, 33 L. T. N. S.

361, 23 Week. Rep. 864; Stanley v. Powell [1891] 1 Q. B. 86,

60 L. J. Q. B. N. S. 52, 63 L. T. N. S. 809, 55 J. P. 327, 39

Week. Rep. 76.

See also The Osceola, 189 U. S. 158, 47 L. ed. 760, 23

Sup. Ct. Rep. 483; Curtis, Merchant Seamen, 106; Heeg v.

Licht, 80 N. Y. 579, 36 Am. Rep. 654, 11 Mor. Min. Rep. 74;

Rylands v. Fletcher, L. R. 3 H. L. 330, 6 Mor. Min. Rep.

129, 1 Eng. Rul. Cas. 235; Thomas v. Winchester, 6 N. Y.

397, 57 Am. Dec. 455; Tonawanda R. Co. v. Munger, 5

Denio, 255, 49 Am. Dec. 239; Wells v. Howell, 19 Johns.

385; Noyes v. Colby, 30 N. H. 143; Wagner v. Bissell, 3

Iowa, 396; Union P. R. Co. v. Rollins, 5 Kan. 167; Sullivan v.

Dunham, 161 N. Y. 290, 47 L.R.A. 715, 76 Am. St. Rep.

274, 55 N. E. 923, 7 Am. Neg. Cas. 126; Muller v.

McKesson, 73 N. Y. 195, 29 Am. Rep. 123, 1 Am. Neg. Cas.

188; Chicago, R. I. & P. R. Co. v. Zernecke, 183 U. S. 582,

46 L. ed. 339, 22 Sup. Ct. Rep. 229; Minneapolis & St. L. R.

Co. v. Emmons, 149 U. S. 364, 37 L ed. 769, 13 Sup. Ct.

Rep. 870; St. Louis & S. F. R. Co. v. Mathews, 165 U. S. 1,

41 L. ed. 611, 17 Sup. Ct. Rep. 243; Jensen v. South Dakota

C. R. Co. 25 S. D. 506, 35 L.R.A.(N.S.) 1015, 127 N. W.

650, Ann. Cas. 1912C, 700; Atchison, T. & S. F. R. Co. v.

Matthews, 174 U. S. 96, 43 L. ed. 909, 19 Sup. Ct. Rep. 609;

Missouri P. R. Co. v. Humes, 115 U. S. 513, 29 L. ed. 463, 6

Sup. Ct. Rep. 110; Jones v. Brim, 165 U. S. 180, 41 L. ed.

A-70

243 U. S.

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

677, 17 Sup. Ct. Rep. 282, 1 Am. Neg. Rep. 547; Atlantic

Coast Line R. Co. v. Riverside Mills, 219 U. S. 186, 55 L. ed.

167, 31 L.R.A.(N.S.) 7, 31 Sup. Ct. Rep. 164; St. Louis, I.

M. & S. R. Co. v. Taylor, 210 U. S. 281, 294, 52 L. ed.

1061, 1067, 28 Sup. Ct. Rep. 616, 21 Am. Neg. Rep. 464;

Chicago, B. & Q. R. Co. v. McGuire, 219 U. S. 549, 55 L.

ed. 328, 31 Sup. Ct. Rep. 259; Orient Ins. Co. v. Daggs, 172

U. S. 557, 43 L. ed. 552, 19 Sup. Ct. Rep. 281; Wilmington

Star Min. Co. v. Fulton, 205 U. S. 60, 51 L. ed. 708, 27 Sup.

Ct. Rep. 412; Noble State Bank v. Haskell, 219 U. S. 104, 55

L. ed. 112, 32 L.R.A.(N.S.) 1062, 31 Sup. Ci. Rep. 186, Ann.

Cas. 1912A, 487; Chicago v. Sturges, 222 U. S. 313, 56 L. ed.

215, 32 Sup. Ct. Rep. 92, Ann. Cas. 1913B, 1349.

The act is not invalid unless it can be said that the

imposition of the liability is arbitrary, or that the plan for

distributing the burden is arbitrary. The plan of distributing the

burden adopted in the Washington act, namely, the collection of

premiums upon the pay roll of the workmen employed, is that

adopted in every state in the Union having a similar law, and by

every foreign country, so far as we have been able to ascertain.

It is that adopted by insurance companies handling like risks,

and is everywhere recognized as a proper insurance system.

Certainly, if it is within the legislative power to impose liability

without fault, and to distribute such liability among those within

the terms of the act, the method of distribution adopted in this

case must be held to be proper.

Cunningham v. Northwestern Improv. Co. 44 Mont.

180, 119 Pa. 554, 1 N. C. C. A. 720; Charlotte, C. & A. R.

Co. v. Gibbes, 142 U. S. 386, 35 L. ed. 1051, 12 Sup. Ct.

Rep. 255; New York ex rel. New York Electric Lines v.

Squire, 145 U. S. 175, 36 L. ed. 666, 12 Sup. Ct. Rep. 880;

Consolidated Coal v. Illinois, 185 U. S. 203, 46 L. ed. 872, 22

Sup. Ct. Rep. 624; State v. Cassidy, 22 Minn. 312, 21 Am.

Rep. 765; McGlone v. Womack, 129 Ky. 274, 17 L.R.A.

A-71

61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

(N.S.) 855, 111 S. W. 688; Noble State Bank v. Haskell, 219

U. S. 104, 55 L. ed. 112, 32 L.R.A.(N.S.) 1062, 31 Sup. Ct.

Rep. 186, Ann. Cas. 1912A, 487; Mitchell v. Williams, 27 Ind.

62; Van Horn v. People, 46 Mich. 183, 41 Am. Rep. 159, 9

N. W. 246; Chicago v. Sturges, 222 U. S. 313, 56 L. ed. 215,

32 Sup. Ct. Rep. 92, Ann. Cas. 1913B, 1349; Cole v. Hall,

103 Ill. 30; Holst v. Roe, 39 Ohio St. 340, 48 Am. Rep. 459,

Louisville & N. R. Co. v. Melton, 218 U. S. 36, 54 L. ed.

921, 47 L.R.A.(N.S.) 84, 30 Sup. Ct. Rep. 676.

The act is valid as to the employee.

Kirby v. Pennsylvania R. Co. 76 Pa. 509; Martin v.

Pittsburgh & L. E. R. Co. 203 U. S. 284, 295, 51 L. ed. 184,

191, 27 Sup. Ct. Rep. 100, 8 Ann. Cas. 87; Middleton v.

Fowler, 1 Salk. 282, 91 Eng. Reprint, 247; Cooley, Const.

Lim. 6th ed. p. 437; Bl. Com. 431; Gray v. Portland Bank, 3

Mass. 364, 3 Am. Dec. 156; Harlow v. Humiston, 6 Cow.

189; Munn v. Illinois, 94 U. S. 113, 134, 24 L. ed. 77, 87;

Vindicator Consol. Gold Min. Co. v. Firstbrook, 36 Colo. 498,

86 Pac. 313, 10 Ann. Cas. 1108; Western U. Teleg. Co. v.

Commercial Mill. Co. 218 U. S. 406, 416, 54 L. ed. 1088,

1091, 36 L.R.A.(N.S.) 220, 31 Sup. Ct. Rep. 59, 21 Ann. Cas.

815; Templeton v. Linn County, 22 Or. 313, 15 L.R.A. 730,

29 Pac. 795; Williams v. Galveston, 41 Tex. Civ. App. 64, 90

S. W. 505; Sawyer v. El Paso & N. E. R. Co. 49 Tex. Civ.

App. 106, 108 S. W. 718; Eastman v. Clackamas County, 32

Fed. 24; Bennet v. Hargus, 1 Neb. 419; Atchison, T. & S. F.

R. Co. v. Sowers, 213 U. S. 55, 53 L. ed. 695, 29 Sup. Ct.

Rep. 397.

The liberty of contract is not protected by the 14th

Amendment against the rightful exercise of the police power of

the state.

Hooper v. California, 155 U. S. 648, 658, 39 L. ed.

297, 301, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207;

Booth v. Illinois, 184 U. S. 425, 428, 46 L. ed. 623, 625, 22

A-72

243 U. S.

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

Sup. Ct. Rep. 425; Barbier v. Connolly, 113 U. S. 27, 31, 28

L. ed. 923, 924, 5 Sup. Ct. Rep. 357; Frisbie v. United States,

157 U. S. 160, 165, 39 L. ed. 657, 658, 15 Sup. Ct. Rep. 586;

Holden v. Hardy, 169 U. S. 366, 391, 42 L. ed. 780, 790, 18

Sup. Ct. Rep. 383; Chicago, B. & Q. R. Co. v. McGuire, 219

U. S. 549, 568, 55 L. ed. 328, 338, 31 Sup. Ct. Rep. 259;

Mutual Loan Co. v. Martell, 222 U. S. 225, 235, 56 L. ed.

175, 179, 32 Sup. Ct. Rep. 74, Ann. Cas. 1913B, 529; Erie R.

Co. v. Williams, 233 U. S. 685, 58 L ed. 1155, 51

L.R.A.(N.S.) 1097, 34 Sup. Ct. Rep. 761; Knoxville Iron Co.

v. Harbison, 183 U. S. 13, 46 L. ed. 55, 22 Sup. Ct. Rep. 1;

Muller v. Oregon, 208 U. S. 412, 52 L. ed. 55, 28 Sup. Ct.

Rep. 324, 13 Ann. Cas. 957; McLean v. Arkansas, 211 U. S.

539, 53 L. ed. 315, 29 Sup. Ct. Rep. 206; Central Lumber Co.

v. South Dakota, 226 U. S. 157, 57 L. ed. 164, 33 Sup. Ct.

Rep. 66; Gundling v. Chicago, 177 U.S. 183, 44 L. ed. 725,

20 Sup. Ct. Rep. 633; German Alliance Ins. Co. v. Lewis, 233

U.S. 389, 58 L. ed. 1011, L.R.A. 1915C, 1189, 34 Sup. Ct.

Rep. 612.

Mr. Justice Pitney delivered the opinion of the court:

This was an action brought by the state against plaintiff

in error, a corporation engaged in the business of logging

timber and operating a logging railroad and a sawmill having

power-driven machinery, all in the state of Washington, to

recover under chap. 74 of the Laws of 1911, known as the

Workmen’s Compensation Act, certain premiums based upon a

percentage of the estimated pay roll of the workmen employed

by plaintiff in error during the three months beginning October

1, 1911. Plaintiff in error by demurrer raised objections to the

act, based upon the Constitution of the United States. [228]

The supzeme court of Washington overruled them, and affirmed

a judgment in favor of the state (75 Wash. 581, L.R.A. —, —,

135 Pac. 645,4.N. C. C. A. 811), following its previous

decision in State ex rel. Davis-Smith Co. v. Clausen, 65 Wash.

A-73

61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

156, 37 L.R.A.(N.S.) 466, 117 Pac. 1101, 2 N. C. C. A. 823,

3 N. C. C. A. 599; and the case comes here under § 237,

Judicial Code (36 Stat at L. 1156, chap. 231. Comp. Stat.

1913, § 1214].

The act establishes a state fund for the compensation of

workmen injured in hazardous employment abolishes except in a

few specified cases, the action at law by employee against

employer to recover damages on the ground of negligence, and

deprives the courts of jurisdiction over such controversies. It is

obligatory upon both employers and employees in the hazardous

employments, and the state fund is maintained by compulsory

contributions from employers in such industries, and is made

the sale source of compensation for injured employees and for

the dependents of those whose injuries result in death. We will

recite its provisions to an extent sufficient to show the character

of the legislation.

The 1st section contains a declaration of policy, reciting

that the common-law system governing the remedy of workmen

against employers for injuries received in hazardous work is

inconsistent with modern industrial conditions, and in practice

proves to be economically unwise and unfair; that the remedy of

the workman has been uncertain, slow, and inadequate; that

injuries in such employments, formerly occasional, have become

frequent and inevitable; and that the welfare of the state depends

upon its industries, and even more upon the welfare of its wage

workers. "The state of Washington, therefore, exercising

herein its police and sovereign power, declares that all phases of

the premises are withdrawn from private controversy, and sure

and certain relief for workmen injured in extra hazardous work,

and their families and dependents is hereby provides regardless

of questions of fault and to the exclusion of every other remedy,

proceeding or compensation, except as otherwise provided in

this [229] act, and to that end all civil actions and civil causes

of action for such personal injuries and all jurisdiction of the

A-74

243 U. S.

herrea

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

courts of the state over such causes are hereby abolished, except

as in this provided."

The 2d section, declaring that while there is a hazard in

all employment, certain employments are recognized as being

inherently constantly dangerous enumerates those intended to be

embraced within the term "extra hazardous," including

factories, mills, and workshops where machinery is used,

printing, electrotyping, photoengraving and stereotyping plants

where machinery is used; foundries, blast furnaces, mines,

wells, gas works, waterworks, reduction works, breweries,

elevators, wharves, docks, dredges, smelters, powder works,

logging, lumbering, and ship-building operations, logging,

Street, and interurban railroads, steamboats, railroads, and a

number of others; at the same time declaring that if there be or

arise any extra hazardous occupation not enumerated, it shall

come under the act, and its rate of contribution to the accident

fund shall be fixed by the department created by the act upon

the basis of the relation which the risk involved bears to the

risks classified, until the rate shall be fixed by legislation. The

3d section contains a definition of terms, and, among them:

"Workman means every person in this state, who, after

September 30, 1911, is engaged in the employment of an

employer carrying on or conducting any of the industries

scheduled or classified in § 4, whether by way of manual labor

or otherwise, and whether upon the premises or at the plant, or,

he being in the course of his employment, away from the plant

of his employer;" with a proviso giving to a workman injured

while away from the plant through the negligence or wrong of

another not in the same employ or, if death result from the

injury, to his widow, children, or dependents, an election

whether to take under the act or to seek a remedy against the

third party. "Injury" [230] is defined as an injury resulting

from some fortuitous event, as distinguished from the

contraction of disease.

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61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

Section 4 contains a schedule of contribution, reciting

that industry should bear the greater portion of the burden of

the cost of its accidents, and requiring each employer prior to

January 15th of each year to pay into the state treasury, in

accordance with the schedule, a sum equal to a percentage of

his total pay roll for the year, "the same being deemed the most

accurate method of equitable distribution of burden in

proportion to relative hazard." The application of the act as

between employers and workmen is made to date from the Ist

day of October, 1911, the payment for that year to be made

prior to that date and upon the basis of the pay roll of the last

preceding three months of operation. At the end of each year

an adjustment of accounts is to be made upon the basis of the

actual pay roll. The schedule divides the various occupations

into groups, and imposes various percentages upon the different

groups, the lowest being 114 per cent, in the case of the textile

industries, creameries, printing establishments, etc., and the

highest being 10 per cent, in the case of powder works. The

same section establishes forty-seven different classes of

industry, and declares: "For the purpose of such payments

accounts shall be kept with each industry in accordance with the

classification herein provided and no class shall be liable for the

depletion of the accident fund from accidents happening in any

other class. Each class shall meet and be liable for the

accidents occurring in such class. There shall be collected from

each class as an initial payment into the accident fund as above

specified on or before the Ist day of October, 1911, one fourth

of the premium of the next succeeding year, and one twelfth

thereof at the close of each month after December, 1911:

Provided, any class having sufficient funds credited to its

account at the end of the first three months or any month

thereafter, to meet [231] the requirements of the accident fund,

that class shall not be called upon for such month. In case of

accidents occurring in such class after lapsed payment or

A-76

243 U. S.

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

payments said class shall pay the said lapsed or deferred

payments commencing at the first lapsed payment, as may be

necessary to meet such requirements of the accident fund. The

fund thereby created shall be termed the ‘accident fund’ which

shall be devoted exclusively to the purpose specified for it in

this act. In that the intent is that the fund created under this

section shall ultimately become neither more nor less than self-

supporting, exclusive of the expense of administration, the rates

in this section named are subject to future adjustment by the

legislature, and the classifications to rearrangement following

any relative increase or decrease of hazard shown by

experience.’ . . .

If, after this act shall have come into operation, it is shown by

experience under the act, because of poor or careless

management, any establishment or work is unduly dangerous in

comparison with other like establishments or works, the

department may advance its classification of risks and premium

rates in proportion to the undue hazard. In accordance with the

same principle, any such increase in classification or premium

rate, shall be subject to restoration to the schedule rate. . . . If,

at the end of any [232] year, it shall be seen that the

contribution to the accident fund by any class of industry shall

be less than the drain upon the fund on account of that class, the

' By Sess. Laws 1915, Chap. 188, pp. 674, 677, § 4 was amended

SO as to substitute in the place of the clause italicized the following: “In that

the intent is that the fund created under this section shall ultimately become

neither more nor less than self-supporting, exclusive of the expense of

administration, the rates named in this section are subject to future adjustment

by the industrial insurance department, in accordance with any relative

increase or decrease in hazard shown by experience, and if in the judgment of

the industrial insurance department the moneys paid into the fund of 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.”

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61 L. ed.

SUPREME COURT OF THE UNITED STATES. Oct. TERM,

deficiency shall be made good to the fund on the Ist day of

February of the following year by the employers of that class in

proportion to their respective payments for the past year."

~—Section 5 contains a schedule of the compensation to be

awarded out of the accident fund to each injured workman, or

to his family or dependents in case of his death, and declares

that except as in the act otherwise provided, such payment shall

be in lieu of any and all rights of action against any person

whomsoever. Where death results from the injury, the

compensation includes the expenses of burial, not exceeding $75

in any case, a monthly payment of $20 for the widow or invalid

widower, to cease at remarriage, and $5 per mouth for each

child under the age of sixteen years until that age is reached,

but not exceeding $35 in all, with a lump sum of $240 to a

widow upon her remarriage; if the workman leaves no wife or

husband, but a child or children under the age of sixteen years,

there is to be a monthly payment to each child until that age is

reached, but not exceeding a total of $35 per month; if there be

no widow, widower, or child under the age of sixteen years,

other dependent relatives are to receive monthly payments equal

to 50 per cent of the average monthly support actually received

by such dependent from the workman during the twelve months

next preceding his injury, but not exceeding a total of $20 per

month. For permanent total disability of a workman, he is to

receive, if unmarried, $20, or, if married, $25 per month, with

$5 per month additional for each child under the age of sixteen

years, but not exceeding $35 per month in all. (Section 7

provides that the monthly payment, in case of death or

permanent total disability, may be converted into a lump sum

payment, not in any case exceeding $4,000, according to the

expectancy [233] of life.) For temporary total disability there is

a somewhat different scale, compensation to cease when earning

power is restored. For permanent partial disability the

workman is to receive compensation in a lump sum equal to the

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1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

extent of the injury, but not exceeding $1,500.

By § 6, if injury or death results to a workman from his

deliberate intention to produce it, neither he nor his widow,

child, or dependents shall receive any payment out of the fund.

If injury or death results to a workman from the deliberate

intention of the employer to produce it, the workman or his

widow, child, or dependent shall have the privilege to take

under the act, and also have a cause of action against the

employer for any excess of damage over the amount receivable

under the act.

By § 19 provision is made for the adoption of the act by

the joint election of any employer and his employees engaged in

works not extra hazardous. By § 21, the Industrial Insurance

Department is created, consisting of three commissioners. By §

20, a judicial review is given, in the nature of an appeal to the

superior court, from any decision of the department upon

questions of fact or of the proper application of the act, but not

upon matters resting in the discretion of the department. Other

sections provide for matters of detail, and § 11 renders void any

agreement by employer or workman to waive the benefits of the

act.

From this recital it will be clear that the fundamental

purpose of the act is to abolish private rights of action for

damages to employees in the hazardous industries (and in any

other industry, at the option of employer and employees), and

to substitute a system of compensation to injured workmen and

their dependents out of a public fund established and maintained

by contributions required to be made by the employers in

proportion to the hazard of each class of occupation.

[234] While plaintiff in error is an employer, and cannot

succeed without showing that its constitutional rights as

employer are infringed (Plymouth Coal Co. v. Pennsylvania,

232 U. S. 531, 544, 58 L. ed. 713, 719, 34 Sup. Ct. Rep. 359;

Jeffrey Mfg. Co. v. Blagg, 235 U. S. 571, 576, 59 L. ed. 364,

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SUPREME COURT OF THE UNITED STATES. Oct. TERM,

368, 35 Sup. Ct. Rep. 167, 7 N. C. C. A. 570), yet it is

evident that the employer’s exemption from liability to private

action is an essential part of the legislative scheme and the quid

pro quo for the burdens imposed upon him, so that if the act is

not valid as against employees, it is not valid as against

employers.

However, so far as the interests of employees and their

dependents are concerned, this act is not distinguishable in any

point raising a constitutional difficulty from the New York

Workmen’s Compensation Act, sustained in New York C. R.

Co. v. White, decided this day [243 U.S. 188, ante, 667, 37

Sup. Ct. Rep. 247]. It is true that in the Washington act the

state fund is the sole source from which the compensation shall

be paid, whereas the New York act gives to the employer an

option to secure the compensation either through state

insurance, insurance with an authorized insurance corporation,

or by a deposit of securities with the state Commission. But we

find here no ground for a distinction unfavorable to the

Washington law.

So far as employers are concerned, however, there is a

marked difference between the two laws, because of the

enforced contributions to the state fund that are characteristic of

the Washington act, and it is upon this feature that the principal

stress of the argument for plaintiff in error is laid.

Two of the constitutional objections may be disposed of

briefly. It is urged that the law violates § 4 of article 4 of the

Constitution of the United States, guarantying to every state in

the Union a republican form of government. As has been

decided repeatedly, the question whether this guaranty has been

violated is not a judicial but a political question, committed to

Congress, and not to the courts. Luther v. Borden, 7 How. 1,

39, 42, 12 L. ed. 581, 597, 599; Pacific [235] States Teleph. &

Teleg. Co. v. Oregon, 223 U. S. 118, 56 L. ed. 377, 32 Sup.

Ct. Rep. 224; Kiernan v. Portland, 223 U. S. 151, 56 L. ed.

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1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

386, 32 Sup. Ct. Rep. 231; Marshall v. Dye, 231 U. S. 250,

256, 58 L. ed. 206, 207, 34 Sup. Ct. Rep. 92; Ohio ex rel.

Davis v. Hildebrandt, 241 U. S. 565, 60 L ed. 1172, 36 Sup.

Ct. Rep. 708.

The 7th Amendment, with its provision for preserving

the right of trial by jury, is invoked. It is conceded that this has

no reference to proceedings in the state courts (Minneapolis &

St. L. R. Co. v. Bombolis, 241 U. S. 211, 217, 60 L. ed. 961,

963, L.R.A.1917A, 86, 36 Sup. Ct. Rep. 595), but it is urged

that the question is material for the reason that if the act be

constitutional it must be followed in the Federal courts in cases

that are within its provisions. So far as private rights of action

are preserved, this is no doubt true; but, with respect to those,

we find nothing in the act that excludes a trial by jury. As

between employee and employer, the act abolishes all right of

recovery in ordinary cases, and therefore leaves nothing to be

tried by jury.

The only serious question is that which is raised under

the "due process of law" and "equal protection" clauses of the

14th Amendment. It is contended that since the act

unconditionally requires employers in the enumerated

occupations to make payments to a fund for the benefit of

employees, without regard to any wrongful act of the employer,

he is deprived of his property, and of his liberty to acquire

property, without compensation and without due process of law.

It is pointed out that the occupations covered include many that

are private in their character, as well as others that are subject

to regulation as public employments, and it is argued that, with

respect to private occupations (including those of plaintiff in

error), a compulsory compensation act does not concern the

interests of the public generally, but only the particular interests

of the employees, and is unduly oppressive upon employers,

and arbitrarily interferes with and restricts the management of

private business operations.

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SUPREME COURT OF THE UNITED STATES. Oct. TERM,

The statute, although approved March 14, 1911, took

effect as between employers and workmen on October 1 [236]

in that year, actions pending and causes of action existing on

September 3 being expressly saved. It therefore disturbed no

vested rights, its effect being confined to regulating the relation

of employer and employee in the hazardous occupations in

futuro.

If the legislation could be regarded merely as

substituting one form of employer’s liability for another, the

points raised against it would be answered sufficiently by our

opinion in New York C. R. Co. v. White, 243 U. S. 188, ante,

667, 37 Sup. Ct. Rep. 247, where it is pointed out that the

common-law rule confining the employer’s liability to cases of

negligence on his part or on the part of others for whose

conduct he is made answerable, the immunity from responsi-

bility to an employee for the negligence of a fellow employee,

and the defenses of contributory negligence and assumed risk,

are rules of law that are not beyond alteration by legislation in

the public interest; that the employer has no vested interest in

them nor any constitutional right to insist that they shall remain

unchanged for his benefit; and that the states are not prevented

by the 14th Amendment, while relieving employers from

liability for damages measured by common-law standards and

payable in cases where they or others for whose conduct they

are answerable are found to be at fault, from requiring them to

contribute reasonable amounts and according to a reasonable

and definite scale by way of compensation for the loss of

earning power arising from accidental injuries to their

employees, irrespective of the question of negligence, instead of

leaving the entire loss to rest where it may chance to fall; that

is, upon particular injured employees and their dependents.

But the Washington law goes further, in that the

enforced contributions of the employer are to be made whether

injuries have befallen his own employees or not; so that,

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—

1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

however prudently one may manage his business, even to the

point of immunity to his employees from accidental [237] injury

or death, he nevertheless is required to make periodical

contributions to a fund for making compensation to the injured

employees of his perhaps negligent competitors.

In the present case the supreme court of Washington (75

Wash. 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 Wash. 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 charac-

terized but upon its practical operation and effect. Henderson

v. New York (Henderson v. Wickham) 92 U. S. 259, 268, 23

L. ed. 543, 547; Stockard v. Morgan, 185 U. S. 27, 36, 46 L.

ed. 785, 794, 22 Sup. Ct. Rep. 576; Galveston, H. & S. A. R.

Co. v. Texas, 210 U. S. 217, 227, 52 L. ed. 1031, 1037, 28

Sup. Ct. Rep. 638; Western U. Teleg. Co. v. Kansas, 216 U.

S. 1, 28, 30, 54 L. ed. 355, 366, 367, 30 Sup. Ct. Rep. 190;

Ludwig v. Western U. Teleg. Co. 216 U. S. 146, 162, 54 L.

ed. 423, 429, 30 Sup. Ct. Rep. 280; St. Louis Southwestern R.

Co. v. Arkansas, 235 U. S. 350, 362, 59 L. ed. 265, 271, 35

Sup. Ct. Rep. 99. 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, 44 L. ed. 725, 729, 20 Sup. Ct. Rep. 633.

Whether this legislation be regarded as a mere exercise

of power of regulation, or as a combination of regulation and

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SUPREME COURT OF THE UNITED STATES. OcT. TERM,

taxation, the crucial inquiry under the 14th 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 [238] its validity, and the burden of proof ana

argument is upon those who seek to overthrow it. Erie R. Co.

v. Williams, 233 U. S. 685, 699, 58 L. ed. 1155, 1160, 51

L.R.A.(N.S.) 1097, 34 Sup. Ct. Rep. 761. In the present case

it will be proper to consider: (1) Whether the main object of the

legislation is, or reasonably may be deemed to be, of general

and public moment, rather than of private and particular

interest, so as to furnish a just occasion for such interference

with personal liberty and the right of acquiring property as

necessarily must result from carrying it into effect. (2) Whether

the charges imposed upon employers are reasonable in amount,

or, on the other hand, so burdensome as to be manifestly

oppressive. And (3) whether the burden is fairly distributed,

having regard to the causes that give rise to the need for the

legislation.

As to the first point: The authority of the states to enact

such laws as reasonably are deemed to be necessary to promote

the health, safety, and general welfare of their people carries

with it a wide range of judgment and discretion as to what

matters are of sufficiently general importance to be subjected to

state regulation and administration. Lawton v. Steele, 152 U.

S. 133, 136, 38 L. ed. 385, 388, 14 Sup. Ct. Rep. 499. "The

police power of a state is as broad and plenary as its taxing

power." Kidd v. Pearson, 128 U. S. 1, 26, 32 L. ed. 346, 352,

2 Inters. Com. Rep. 232, 9 Sup. Ct. Rep. 6. In Barbier v.

Connolly, 113 U. S. 27, 31, 28 L. ed. 923, 924, 5 Sup. Ct.

Rep. 357, the court, by Mr. Justice Field, said: "Neither the

[14th] Amendment--broad and comprehensive as it is--nor any

other Amendment, was designed to interfere with the power of

the state sometimes termed its police power, to prescribe

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243 U. S.

ee he ae ee

haba agra

Prec meer

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1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

regulations to promote the health, peace, morals, education, and

good order of the people, and to legislate so as to increase the

industries of the state, develop its resources, and add to its

wealth and prosperity. From the very necessities of society,

legislation of a special character, having these objects in view,

must often be had in certain districts, such as for draining

marshes and irrigating arid plains. Special burdens are often

necessary for general benefits ,--[239] for supplying water,

preventing fires, lighting districts, cleaning streets, opening,

parks, and many other objects. Regulations for these purposes

may press with more or less weight upon one than upon

another, but they are designed, not to impose unequal or

unnecessary restrictions upon anyone, but to promote, with as

little individual inconvenience as possible, the general good.

Though, in many respects, necessarily special in their character,

they do not furnish just ground of complaint if they operate

alike upon all persons and property under the same

circumstances and conditions. Class legislation, discriminating

against some and favoring others, is prohibited, but legislation

which, in carrying out a public purpose, is limited in its

application, if within the sphere of its operation it affects alike

all persons similarly situated, is not within the Amendment." It

seems to us that the considerations to which we have adverted in

New York C. R. Co. v. White, supra, as showing that the

Workmen’s Compensation Law of New York is not to be

deemed arbitrary and unreasonable from the standpoint of

natural justice, are sufficient to support the state of Washington

in concluding that the matter of compensation for accidental

injuries with resulting loss of life or earning capacity of men

employed in hazardous occupations is of sufficient public

moment to justify making the entire matter of compensation a

public concern, to be administered through state agencies.

Certainly the operation of industrial establishments that, in the

ordinary course of things, frequently and inevitably produce

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ii ites

SUPREME COURT OF THE UNITED STATES. OcT. TERM,

disabling or mortal injuries to the human beings employed, is

not a matter of wholly private concern. It hardly would be

questioned that the state might expend public moneys to provide

hospital treatment, artificial limbs, or other like aid to persons

injured in industry, and homes or support for the widows and

orphans of those killed. Does direct compensation stand on a

less secure ground? A [240] familiar exercise of state power is

the grant of pensions to disabled soldiers and to the widows and

dependents of those killed in war. Such legislation usually is

justified as fulfilling a moral obligation, or as tending to

encourage the performance of the public duty of defense. But is

the state powerless to compensate, with pensions or otherwise,

those who are disabled, or the dependents of those whose lives

are lost, in the industrial occupations that are so necessary to

develop the resources and add to the wealth and prosperity of

the state? A machine as well as a bullet may produce a wound,

and the disabling effect may be the same. In a recent case, the

supreme court of Washington said: "Under our statutes the

workman is the soldier of organized industry, accepting a kind

of pension in exchange for absolute insurance oh his master’s

premises." Stertz v. Industrial Ins. Commission, 91 Wash.

588, 158 Pac. 256, 263. It is said that the compensation or

pension under this law is not confined to those who are left

without means of support. This is true. But is the state

powerless to succor the wounded except they be reduced to the

last extremity? Is it debarred from compensating an injured

man until his own resources are first exhausted? This would be

to discriminate against the thrifty and in favor of the

improvident. The power and discretion of the state are not thus

circumscribed by the 14th Amendment.

Secondly, is the tax or imposition so clearly excessive

as to be a deprivation of liberty or property without due process

of law? If not warranted by any just occasion, the least

imposition is oppressive. But that point is covered by what has

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1916. MOUNTAIN TIMBER CO. v. WASHINGTON.

been said. Taking the law, therefore, to be justified by the

public nature of the object , whether as a tax or as a regulation,

the question whether the charges are excessive remains. Upon

this point no particular contention is made that the compensation

allowed is unduly large; and it is evident that, unless it be [241]

so, the corresponding burden upon the industry cannot be

regarded as excessive if the state is at liberty to impose the

entire burden upon the industry. With respect to the scale of

compensation, we repeat what we have said in New York C. R.

Co. v. White, that, in sustaining the law, we do not intend to

say that any scale of compensation, however insignificant, on

the one hand, or onerous, on the other, would be supportable,

and that any question of that kind may be met when it arises.

Upon the third question,--the distribution of the burden,-

-there is no criticism upon the act in its details. As we have

seen, its 4th section prescribes the schedule of contribution,

dividing the various occupations into groups, and imposing

various percentages evidently intended to be proportioned to the

hazard of the occupations in the respective groups. Certainly

the application of a proper percentage to the pay roll of the

industry cannot be deemed an arbitrary adjustment, in view of

the legislative declaration that it is "deemed the most accurate

method of equitable distribution of burden in proportion to

relative hazard." It is a matter of common knowledge that, in

the practice of insurers, the pay roll frequently is adopted as the

basis for computing the premium. The percentages seem to be

high; but when these are taken in connection with the provisions

requiring accounts to be kept with each industry in accordance

with the classification, and declaring that no class shall be liable

for the depletion of the accident fund, from accidents happening

in any other class, and that any class having sufficient funds to

its credit at the end of the first three months or any month

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