Decided April 20, 1932.
Workmen's compensation — Employer's premium rate — Section 1465-54, General Code — Higher individual rate applied in same industry — Classification of individual occupation, constitutional — Section 35, Article II, Constitution.
Section 1465-54, paragraph 4, General Code (108 O. L., Pt. 1, 315), endows the industrial commission with the power of applying "that form of rating system which, in its judgment, is best calculated to merit or individually rate the risk most equitably, predicated upon the basis of its individual industrial accident experience, and to encourage and stimulate accident prevention." Acting thereunder the commission imposed upon relator's individual coal mining occupation a premium rate higher than the premium which is alleged to have been imposed as a basic rate upon other employers engaged in the coal mining industry. Held:
The commission, by virtue of that section of the workmen's compensation law, had the power of applying a premium rate upon relator's individual occupation different from that applying to others engaged in the same industry, if such rate was calculated upon merit and based upon individual accident experience. A classification of individual occupations made upon such calculation and basis is neither unreasonable nor arbitrary and is not violative of the provisions of Section 35, Article II, of the state Constitution.
This is an action in prohibition wherein the relator seeks a writ prohibiting the defendant Industrial Commission from canceling the protection afforded the relator under the Workmen's Compensation Act and from imposing or assessing upon it any rate or premium contribution to the state insurance fund other than that applicable to classification of the industry to which the relator belongs.
The cause is presented to this court upon a general demurrer of the defendant to the relator's petition. Briefly stated the petition alleges, inter alia, that the relator is an Ohio corporation engaged in the business of coal mining; that it is subject to the Workmen's Compensation Laws of the state and has paid into the state insurance fund the premiums theretofore required by the Industrial Commission of the state. It alleges that pursuant to Article II, Section 35, of the state Constitution, and Section 1465-53, of the General Code, the commission had classified all occupations according to their degree of hazard, one of the classifications being the coal mining industry, and had fixed rates of contribution according to such classification; that pursuant to the provisions of Section 1465-54, General Code, the commission in July, 1930, and again in July, 1931, had fixed what are alleged to have been basic rates for all those engaged in the coal mining industry for the period from July, 1930, to July, 1931, at $5.50 per each $100 of pay roll, and for the period from July 1, 1931, to July 1, 1932, at $6.50 per each $100 pay roll, and that such rates, payable semiannually, were based upon the individual employer's estimate of his pay roll for the succeeding six months.
The gravamen of the cause of action is based upon the following allegations of the petition, viz., that, in addition to the basic rates or premiums fixed for the industry, and in violation of the provisions of Section 35, Article II, of the Constitution, and of the provisions of the General Code enacted pursuant thereto, the Industrial Commission imposed and assessed against the relator an additional rate or premium, "based, not upon the classification of any industry or occupation, or upon the breach of any lawful requirement, but based solely and alone upon the individual experience of your relator during the five calendar years next preceding the periods aforesaid." And it is further alleged that the additional rate established in July, 1930, was $1.65 per each $100 of pay roll, and that the additional rate established in July, 1931, was $1.43 per each $100 of pay roll.
While the relator tenders and is willing to pay the basic rate imposed upon the mining industry as a separate class, the commission refuses to accept the premiums tendered on that basis, and refuses to issue to the treasurer of state a pay-in-order unless the relator pays the aforesaid additional premium rates of $1.65 and $1.43, assessed upon the basis of the relator's individual accident experience, and threatens to cancel the protection afforded the relator under the act unless said additional premium rates are paid.
The relator challenges the power and jurisdiction of the commission to establish and exact payment of what are termed individual rates, as distinguished from those which it claims to be entitled to under the general classification of mining industry.
Mr. H.H. Hoppe and Messrs. Taplin Fillius, for relator.
Mr. Gilbert Bettman, attorney general, Mr. R.R. Zurmehly and Mr. Earl R. Hoover, for defendant.
The Industrial Commission contends that under the Constitution and the enabling act, Section 1465-54, paragraph 4, General Code, it had authority to apply a rating system to the relator as an individual employer, calculated upon merit and predicated upon the basis of the relator's individual accident experience in the prosecution of its mining business. Counsel for the relator insist that neither Constitution nor statute contains such authority; but that the rating system is required to be imposed upon occupational groups or class according to the degree of hazard attaching to the occupation, and that such system cannot be applied to separate individual employers composing the class.
In their brief counsel for the relator say that the language employed in the Constitution "empowers the legislature to authorize the industrial commission to fix rates of contribution by employers to the state insurance fund according to the classification of industry. It clearly does not authorize the establishment of a rate in addition thereto based upon the individual experience of an employer."
We cannot agree to so narrow a construction of the various provisions employed in Section 35, Article II, of the Constitution. When we consider its context and scope, the legislative authority conferred thereby is far broader and more comprehensive than is claimed by the relator. Without quoting the entire constitutional article, it is evident that its purpose is to provide compensation for workmen and their dependents, to establish a state fund created by compulsory contribution from employers, to be administered by the state, the state being empowered to determine the terms and conditions upon which payment shall be made from such fund. It provides for the setting aside, as a separate fund, such part of the contributions paid by employers as in the judgment of the board may be necessary, so as to equalize, as far as possible, the burden on the fund; and the constitutional provision which is especially germane to the question now presented for our determination reads as follows: "Laws may be passed establishing a board which may be empowered to classify all occupations, according to their degree of hazard, to fix rates of contribution to such fund according to such classification, and to collect, administer and distribute such fund, and to determine all rights of claimants thereto." It will be noted that, under the quoted provision, the Legislature has authority to classify, not industries or groups in industry, but "to classify all occupations, according to their degree of hazard." We have no doubt that the Legislature could apply a rating system to groups of employers if it so desired; but we find no language in the Constitution inhibiting the Legislature from departing from the group classification, if it determines that the group system is inequitable or unwise. The legislative authority "to classify all occupations," as we view and construe the phrase, comprehends a classification of each and every occupation according to the degree of hazard affecting the individual occupation engaged in by an employer. The various provisions of the Constitution connote that meaning; their underlying spirit contemplates a purpose, not only to provide compensation to workmen and their dependents, but to preserve, as far as possible, the factor of safety in the conduct of an employer's particular business, and to prevent loss of life and injuries to his employees. That this was the purpose of the Constitution was shown by the following significant clause: "Such board shall set aside as a separate fund such proportion of the contributions paid by employers as in its judgment may be necessary, * * * to be expended by such board * * * for the investigation and prevention of industrial accidents and diseases."
The grave importance attaching to this case is recognized by the employers and employees, both of whom have engaged counsel who, as amici; have submitted briefs sustaining the constitutionality of the act. The state fund is in the nature of insurance for the benefit of employees; contributions thereto by employers are compulsory, and are made upon the theory that the amount of their contributions will cover the individual risk and hazards attaching to their several occupations. Those employers who, in the language of the statute, do "encourage and stimulate accident prevention," are naturally interested that the fund shall not be depleted, thereby entailing heavier contributions on their part. It would be inequitable to impose upon the careful employer not only an amount of premium sufficient to cover his own individual risk, but also an additional premium necessary to pay for heavy casualties sustained by other less careful employers. There are some individual employers in a group of similar occupations who are more diligent than others in the conduct of their particular plant operation, and in the prevention of accidents, and by such conduct impose a lesser burden upon the state insurance fund.
In the early years, following the adoption of the Constitution, the Legislature, acting under its general police powers and its then judgment, confined its classification to groups of similar industries, and established a system of an attempted equality of rating to such groups. Actuated by a wide experience, gained from information and statistical reports, covering the various occupations during former years, and so that premium rates should be equitably imposed upon the various employers of the state, the Legislature in 1919 (108 Ohio Laws, Part 1, 315) adopted the following provision, applying the rating system to a more equitable method of classification: Section 1465-54, paragraph 4, General Code: "The industrial commission of Ohio shall have the power to apply that form of rating system which, in its judgment, is best calculated to merit or individually rate the risk most equitably, predicated upon the basis of its individual industrial accident experience, and to encourage and stimulate accident prevention."
The preceding section authorized the commission to classify occupations or industries with respect to their degree of hazard. The language employed in the quoted paragraph is clear and explicit. It authorizes the commission to apply to the relator and any others an individual rating system calculated upon merit and "predicated upon the basis of its individual industrial accident experience." The present classification employed by the commission embraces two classes, both predicated upon experience: First, those employers who carry on their occupation with care, and safeguard the life and limb of their employees; and, second, those employers, who although they be in the same group, so carelessly manage their individual occupations or businesses as to cause a higher percentage of injuries to their employees. These two classifications possess the merit of having employers pay into the state insurance fund an amount of premium that will substantially cover their own individual risks; and do not impose upon the careful employer the additional burden of paying a further and higher premium to cover risks or casualties incurred in a similar business or occupation which is not being operated with the same care. The argument advanced by the relator, that the latter class of employers is penalized by the imposition of additional awards for failure to comply with specific requirements, does not always relieve the situation; for a particular business may be unskillfully conducted where no such requirements have been authorized.
In an attempt to "encourage and stimulate accident prevention," the Legislature has adopted a reasonable basis for classification of individual occupations according to their several degrees of hazard; its action in so doing is predicated upon "individual industrial accident experience." Section 1465-54, paragraph 4, in our opinion, does no violence either to the federal or state Constitutions by authorizing the commission to apply to individual occupations "that form of rating system which, in its judgment, is best calculated to merit or individually rate the risk most equitably, predicated upon the basis of its individual industrial accident experience, and to encourage and stimulate accident prevention." Such a classification is neither unreasonable nor arbitrary; and we think its basis is fully sustained by state and federal courts.
"There is a strong presumption that a Legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience, and that its discriminations are based upon adequate grounds." Middleton v. Texas Power L. Co., 249 U.S. 152, 157, 39 S.Ct., 227, 63 L.Ed., 527.
"A classification having some reasonable basis does not offend against that clause [the equal protection clause] merely because it is not made with mathematical nicety, or because in practice it results in some inequality. * * * When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed." Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78, 31 S.Ct., 337, 340, 55 L.Ed., 369, Ann. Cas., 1921C, 160.
For the reasons stated the demurrer of the defendants will be sustained and the writ denied.
Demurrer sustained and writ denied.
MATTHIAS, DAY, ALLEN, KINKADE and STEPHENSON, JJ., concur.