S & S Industries, Inc. v. Director of Bureau of Workers' Disability Compensation , 113 Mich. App. 355 ( 1982 )

Cynar, J.

Plaintiff appeals the decision of the Workers’ Compensation Appeal Board affirming an order which revoked plaintiffs self-insured status and directed plaintiff to obtain private insurance for its workers’ compensation program. We affirm.

Plaintiff was granted self-insured status under the Worker’s Disability Compensation Act, MCL 418.101 et seq.; MSA 17.237(101) et seq., in August of 1975. Self-insured status was renewed annually thereafter. On March 28, 1980, the Department of Labor Bureau of Workers’ Disability Compensation held a formal show cause hearing at which plaintiff presented evidence to show why it should not be required to return to a private insurance program. On April 11, 1980, the director issued an order revoking plaintiff’s self-insured status and directing plaintiff to obtain private insurance.

Plaintiff filed an appeal of the director’s order with the Workers’ Compensation Appeal Board, hereinafter the appeal board. The appeal board heard oral arguments and received briefs from the parties. Plaintiff’s supplemental brief included exhibits containing updated financial statements for the period September 30, 1979, to May 31, 1980. On September 3, 1980, the appeal board issued an order and opinion affirming the director’s revocation of plaintiff’s self-insured status. Plaintiff brings this appeal by leave granted.

MCL 418.611; MSA 17.237(611) authorizes the director to permit an employer to self-insure its liability for workers’ disability compensation benefits. This section provides in pertinent part:

"(1) Every employer subject to this act, subject to the approval of the director, shall secure the payment of compensation under this act by 1 of the following methods:

"(a) By receiving authorization from the director to be a self-insurer. The director may grant that authorization upon a reasonable showing by the employer of the employer’s solvency and financial ability to pay the compensation and benefits provided for in this act and to make payments directly to the employer’s employees as they may become entitled to receive the same under the terms and conditions of this act. If the director determines it to be necessary, the director shall require the furnishing of a bond or other security in a reasonable form and amount.

"(2) The director, from time to time, may review and alter a decision approving the election of an employer to adopt any 1 of the methods permitted by subsection (1) if, in the director’s judgment, that action is necessary or desirable for any reason.” MCL 418.611; MSA 17.237(611).

Plaintiff contends that the appeal board’s determination that plaintiff is not sufficiently solvent to continue as a self-insured employer under the foregoing section was erroneous because it was not supported by "competent, material and substantial evidence on the whole record”.

First we note that plaintiff has failed to invoke the appropriate standard of review. Findings of fact in workers’ compensation proceedings are conclusive in the absence of fraud. Const 1963, art 6, § 28; MCL 418.861; MSA 17.237(861). Plaintiff has alleged no fraud. Moreover, the record contains ample evidence to support the appeal board’s factual determination that plaintiff was not sufficiently solvent to entitle plaintiff to the privilege of self-insured status.

Plaintiff next claims that the statute which authorizes revocation of self-insured status, MCL 418.611(2); MSA 17.237(611)(2), improperly delegates a legislative function to the director of the Bureau of Workers’ Disability Compensation by failing to give sufficient guidelines for the exercise of his authority. Plaintiff contends that the statute gives the director authority to alter the status of any employer whenever he "feels” that action is necessary or desirable for any reason.

In determining whether the statute in question constitutes an improper delegation of legislative authority we are guided by the Supreme Court’s discussion of the issue in Dep’t of Natural Resources v Seaman, 396 Mich 299; 240 NW2d 206 (1976). The Court in Seaman set forth the following guidelines:

"While no hard and fast rule exists for determining whether a given statute has provided sufficient standards, a number of guiding principles have evolved in Michigan jurisprudence to assist in making a determination in this case.

"First, the act in question must be read as a whole; the provision in question should not be isolated but must be construed with reference to the entire act. Argo Oil Corp v Atwood [274 Mich 47, 53; 264 NW2d 285 (1935)].

"Second, the standard should be 'as reasonably precise as the subject matter requires or permits’. Osius v St Clair Shores, 344 Mich 693, 698; 75 NW2d 25; 58 ALR2d 1079 (1956).

"Third, if possible the statute must be construed in such a way as to 'render it valid, not invalid’, as conferring 'administrative, not legislative’ power and as vesting 'discretionary, not arbitrary, authority’. Argo Oil Corp v Atwood, supra, 53.” (Footnote omitted.) Seaman, supra, 309.

Plaintiffs argument, in focusing solely on the language of subsection (2) of § 611, "[t]he director * * * may * * * alter a decision * * * if, in the director’s judgment, that action is necessary or desirable for any reason”, ignores the first principle noted in Seaman. That is, the provision should not be isolated. Rather, it must be read with reference to the entire act. Accordingly, the authority granted to the director in subsection (2) to alter a decision is limited by the guidelines contained in subsection (l)(a) for making the initial decision proposed to be altered. The guidelines contained in subsection (l)(a) are as follows:

"* * * The director may grant that authorization upon a reasonable showing by the employer of the employer’s solvency and financial ability to pay the compensation and benefits provided for in this act and to make payments directly to the employer’s employees as they may become entitled to receive the same under the terms and conditions of this act * * MCL 418.611(l)(a); MSA 17.237(611)(l)(a).

Thus, the director’s review of an employer’s self-insured status must be directed to the employer’s ability to make a reasonable showing of solvency and financial ability to pay compensation benefits pursuant to the act. The director’s authority is thereby circumscribed.

In addition to reading the standards of subsection (l)(a) into the authority granted in subsection (2), both subsections must be viewed as guided by the purpose of the provision in question. The legislative purpose was accorded considerable weight in the Supreme Court’s decision sustaining certain legislation in Underhill v Safeco Ins Co, 407 Mich 175; 284 NW2d 463 (1979). The statutory language challenged in that case stated simply "[a]ny other deductible provisions require the prior approval of the commissioner”. MCL 500.3109(3); MSA 24.13109(3). The Supreme Court found that sufficient guidelines were present in the form of the purpose of the no-fault act and the general provisions of the Insurance Code.

The purpose of the Worker’s Disability Compensation Act is to provide financial and medical benefits to the victims of work-connected injuries in an efficient, dignified and certain form. Whetro v Awkerman, 383 Mich 235, 242; 174 NW2d 783 (1970). The purpose of the specific provision in question was stated by the appeal board to be:

"The purpose of director review and determination is protection of the workers who could (temporarily) be deprived of the benefits of workers’ compensation, and of the other self-insured employers in the state who would (eventually) be asked to bear the burden of losses not of their making (MCL 418.502 and 418.537).”

This overall purpose of the act, as well as the purpose of the specific provision in question, provides further guidance to the director in reviewing a prior decision on the method an employer must use to secure payment of compensation.

The second principle of Seaman states that the standards should be as reasonably precise as the subject matter permits. We believe that the Legislature, in enacting MCL 418.611; MSA 17.237(611), was as precise as the subject matter permits. In this we are guided by the Supreme Court’s statement in Seaman:

"The preciseness of the standard will vary with the complexity and/or the degree to which [the] subject regulated will require constantly changing regulation.” (Footnote omitted.) Seaman, supra, 309.

In order to determine whether an employer’s financial condition permits it to maintain a self-insurance program which would protect disabled workers’ interests in compensation, many factors must be taken into account. An employer’s ability to pay claims as they fall due varies with the type of business, the type of assets held by the employers, and economic conditions in general. A set of standards applicable to one type of employer or based on one set of assumptions regarding economic conditions would not necessarily be applicable in another case. Given the broad purposes of the act and the wide variety of circumstances in which its mandate may be applied, the Legislature was as precise as it could have been in enacting in MCL 418.611; MSA 17.237(611).

In view of our duty to construe the statute as conferring administrative, not legislative, power and as vesting discretionary, not arbitrary, authority, we conclude that the Legislature has provided the director with adequate standards to guide him in a decision to alter an employer’s self-insured status. Accordingly, the legislation in question is not an unconstitutional delegation of legislative authority.

After careful review of the other issues raised by plaintiff we find they are without merit.

Affirmed.

D. C. Riley, P.J., concurred.