# Appendix — Manor v. Nestle Food Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_2283%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1998 - **Citation:** 523 U.S. 1102 ## Text (9, 9Y1403 sans 198 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, V. 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 (c) Order of Supreme Court of the 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 (c) WAC 296-17-370 .....--+--- A- 63 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 (c) Supplemental Affidavit of Paul 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) Q) (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). At 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. [2 - 3] A-5 No. 63133-6 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. [3 - 4] A-6 No. 63133-6 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. [4 - 5] A-7 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 [5 - 7] A-8 852 (1954). in eine 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. [7] A-9 aad 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 [8] A-10 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. [8 - 10] A-11 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. [10 - 11] A-12 No. 63133-6 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. [11 - 12] A-13 No. 63133-6 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. [11 - 13] A-14 » 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). [13] A-15 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. [13 - 15] A-16 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. [15 - 16] A-17 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). [16 - 17] A-18 4 a 3 No. 63133-6 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] A-19 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] A-21 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] A-23 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] A-24 | 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] A-25 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] A-26 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] A-27 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] A-28 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} A-29 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} A-30 eee OO OOOO 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] A-31 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] A-32 a x : + 4 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 ; Md z 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) AO 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. AH 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. A6 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. (c) The principle business is the business with the 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. A-65 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 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_2283%3A2. Public record. Not legal advice.