2008-083. Mario Velderrain Appellant vs. State of Alaska Division of Workers' Compensation Appellee.

• Case Date: July 09, 2008
• Court: Alaska

Alaska Workers Compensation Decisions 2008. Workers' Compensation Appeals Commission 2008-083. Mario Velderrain Appellant vs. State of Alaska Division of Workers' Compensation Appellee Alaska Workers' Compensation Appeals CommissionMario Velderrain, Appellant, vs. State of Alaska, Division of Workers' Compensation, Appellee.Decision No. 083 July 9, 2008AWCAC Appeal No. 07-032 AWCB Decision No. 07-0196 AWCB Case No. 700001708Final Decision Appeal from Alaska Workers' Compensation Board Decision No. 07-0196, issued on July 11, 2007, by northern panel members Jeffrey P. Pruss, Member for Labor, and William Walters, Chair. Appearances: Zane D. Wilson, Cook, Schuhmann and Groseclose for appellant Mario Velderrain. Talis J. Colberg, Attorney General, and Rachel Witty, Assistant Attorney General, for State of Alaska, Division of Workers' Compensation. Commission proceedings: Appellant's motion to accept a late-filed appeal heard October 25, 2007. Memorandum Decision and Order on motion to accept a late-filed appeal, Dec. No. 065, issued November 29, 2007. Oral Argument on appeal presented April 10, 2008.Commissioners: Jim Robison,Philip Ulmer,Kristin Knudsen.This decision has been edited to conform to technical standards for publication. By: Kristin Knudsen, Chair. Philip Ulmer, Appeals Commissioner, concurring. Mario Velderrain appeals the board's decision assessing a $255,000 civil penalty for violation of a stop order pursuant to AS 23.30.080(d). Velderrain asserts that the penalty is so excessive as to be unconstitutional. Velderrain also asserts that the board's finding that he was not in violation of the stop order until August 13, 2006, necessarily precludes a finding that he violated the July 19, 2006, order. The State contests these assertions, arguing that the penalty set by the legislature is not excessive and was correctly assessed. The State also argues that the stop order was effective when issued verbally, and continued to be valid. This appeal requires the commission to examine whether the board had substantial evidence on which to base its assessment of the mandatory civil penalty of $1000 per day for violation of a valid stop order. The commission is also asked to determine whether the penalty assessed is unconstitutionally excessive. The commission determines that although the board had substantial evidence to find Velderrain used employee labor in violation of the stop order, the board did not have substantial evidence in the record as a whole that Velderrain used employee labor every day between August 13, 2006, and April 11, 2007. The commission also finds the board lacked sufficient evidence in the record to support a finding that Velderrain reasonably believed that he was insured between June 22, 2006, and August 13, 2006. The commission remands the case to the board for further findings of fact and recalculation of the penalty that is owed. The commission may not decide the constitutional question raised. The power to declare a statute unconstitutional is reserved to the courts. However, the commission notes that a penalty of $1000 per day for violation of a state order not to use employee labor is not outside the range of other fines levied for violation of protective administrative stop orders issued by the state, as in occupational safety and health proceedings involving unsafe work conditions. 1. Factual background and board proceedings. Mario Velderrain operates a business called "Hot Tamale" in Fairbanks. On July 19, 2006, the board issued a decision finding Velderrain had failed to secure insurance for his workers' compensation liability to his employees from January 8, 2006, through the date of hearing on June 22, 2006.(fn1) The board wrote that "at hearing, we issued an oral stop order. By way of this decision and order, we memorialize the stop order."(fn2) In the order, the board stated, "We hereby memorialize a Stop Order under AS 23.30.080(d), prohibiting the employer from using employee labor within the territorial jurisdiction of the State of Alaska until he comes into compliance with AS 23.30.075 and AS 23.30.085."(fn3) On December 12, 2006, State Division of Workers' Compensation Investigator Sandra Stuller filed a Petition for assessment of civil penalties under AS 23.30.080(d)-(f). The petition was heard June 21, 2007. Investigator Stuller testified that Velderrain had not obtained insurance that provided workers' compensation coverage until April 25, 2007.(fn4) She testified that the Department of Labor and Workforce Development, Employment Security Division records showed Velderrain had employed 10 people in the first quarter of 2007 and that, based on discovery from Velderrain and his admissions, he employed 17 different people from January 8, 2006, through December 12, 2006.(fn5) The board found this information yielded "a total of 974 uninsured employee work days for that period."(fn6) The board found that Velderrain was a credible witness.(fn7) The board found, based on Velderrain's testimony, that he believed his finance company had been paying the insurance for a period of time.(fn8) However, the board found, the "Account Statement gave the employee [sic] clear notice that his employees were not covered by workers' compensation insurance and that he was in violation of AS 23.30.075 and AS 23.30.085, and that he was in violation of the Stop Order."(fn9) The board concluded that Velderrain was "in violation of the July 19, 2006, Stop Order for the period from the August 13, 2006 Account Statement until the employer secured an insurance policy, effective April 11, 2007; a total of 255 days."(fn10) The board concluded that "we must assess a penalty under AS 23.30.080(d), in the amount of $255,000.00."(fn11) 2. Standard of review. The commission must uphold the board's findings of fact if substantial evidence in light of the whole record supports the findings.(fn12) The commission does not consider evidence that was not in the board record when the board's decision was made.(fn13) A board determination of the credibility of testimony of a witness who appears before the board is binding upon the commission.(fn14) However, the commission must exercise its independent judgment when reviewing questions of law and procedure within the Workers' Compensation Act.(fn15) The question whether the quantum of evidence is substantial enough to support a conclusion in the contemplation of a reasonable mind is a question of law.(fn16) If a provision of the Act has not been interpreted by the Alaska Supreme Court, the commission draws upon its specialized knowledge and experience of workers' compensation(fn17) to adopt the "rule of law that is most persuasive in light of precedent, reason, and policy."(fn18) 3. Discussion. a. The board's finding that Velderrain violated the stop order for 255 days is not supported by substantial evidence in light of the whole record. The board found that Velderrain was "in violation of the July 19, 2006 Stop Order for the period from the August 13, 2006, Account Statement until the employer secured an insurance policy, effective April 11, 2007; a total of 255 days." As support for this finding the board cited the confusing nature of his correspondence with the insurer and Velderrain's credible testimony. Velderrain testified:

[T]he first time [I] was here, I immediately got insurance because we cannot proceed or - the problem started when we had the two restaurants going. It lasted for two months and then we stopped the restaurant - the restaurant. So then for some reason we stopped the insurance. It was an outrageous insurance. And I could never get it down to where I'm up to this point right now. I presented a letter showing that I had insurance and my insurance expired in October of 2006. The insurance company refund me money for the policy that I had. They wouldn't refund me money if I wasn't insured.(fn19) . . . We've processed the papers to the insurance company and the insurance company refund us the money.(fn20)

[T]wo weeks later, they sent me a letter saying that money was sent by mistake. Then . . . they wouldn't restore the insurance, that if I pay it, they would restore it. So I - I tried to emphasize that please insure me if I send payments; we will do it immediately. We send the first check and, I don't know, but I got the feeling that they weren't going to insure me or they wanted the money back.(fn21)

So I

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