IN THE MATTER OF THE PETITION FOR A FINDING OF THE FAILURE TO INSURE WORKERS’ COMPENSATION LIABILITY AND ASSESSMENT OF A CIVIL PENALTY AGAINST, ANGEL AVIATION, INC., Respondent.
AWCB Decision No. 21-0008
AWCB No. 700007570
Alaska Workers Compensation Board
February 4, 2021
FINAL
DECISION AND ORDER
William Soule, Designated Chair
The
Division of Workers’ Compensation, Special
Investigations Unit’s (Division or SIU) September 30,
2019 petition for failure to insure workers’
compensation liability, and for a civil penalty, was heard on
the written record in Anchorage, Alaska on February 3, 2021,
a date selected on December 8, 2020. A November 5, 2020
hearing request gave rise to this hearing. Investigator Doug
Love represents the SIU. Non-attorney Al Merrill represents
Angel Aviation, Inc. (Employer). The record closed at the
hearing’s conclusion on February 3, 2021.
ISSUE
The
division contends Employer was uninsured for workplace
injuries while operating a business with employees in Alaska.
It contends, taking all evidence and legal factors into
account, Employer should pay an appropriate civil penalty.
Employer
does not dispute the Division’s evidence or arguments.
However, it contends financial difficulties in the aviation
industry and nation in general and its own financial problems
militate against a large penalty that could create an
unrecoverable financial hardship, associated business closure
and lost training opportunities and employment for its
clients and employees.
What
is an appropriate civil penalty in this case?
FINDINGS
OF FACT
The
following facts and factual conclusions are undisputed based
on Employer’s voluntary discovery responses and its
hearing brief, or are established by a preponderance of the
evidence:
1)
Employer, a corporation formed on May 20, 2017, is an
aviation flight school located at Merrill Field in Anchorage,
Alaska. It offers aircraft rental and flight instruction for
single and multi-engine aircraft. Employer utilizes certified
flight instructors who provide flight instruction to student
pilots. Its corporate officers include Lucas Merrill,
Director; Robin Merrill, Secretary; and Samuel Merrill,
President. Each officer is at least a 25 percent or more
shareholder. There are no executive officer insurance waivers
on file with the Division for Employer’s corporate
officers. Employer’s brief states Al Merrill is its
president. (Petitioner’s Brief for Hearing, January 22,
2021, with exhibits; Employer’s Hearing Brief, January
27, 2021).
2) The
division’s undisputed evidence, based on
Employer’s discovery responses, shows Employer was
uninsured for workplace injuries from July 4, 2017, to
October 10, 2019, which equals 828 consecutive uninsured
calendar days. Employer had 38 employees during that time and
compiled 15,214 employee working hours, which equals 1,901
uninsured employee workdays (15,214 / eight hours per day =
1,901) (Petitioner’s Brief for Hearing, January 22,
2021, with exhibits).
3)
Employer is currently insured with an estimated annual
premium totaling $4,323; this equals $11.84 per day to insure
against workplace injuries ($4,323 / 365 days = $11.84)
(Petitioner’s Brief for Hearing, January 22, 2021, with
exhibits).
4)
Based on its current insurance costs, the estimated
workers’ compensation insurance premium Employer would
have paid had it been insured for the 828 uninsured calendar
days is $9,803.52 (828 days x $11.84 = $9,803.52)
(Petitioner’s Brief for Hearing, January 22, 2021, with
exhibits).
5)
Twice the estimated premium Employer would have paid had it
been insured for the 828 uninsured calendar days at issue is
$19,607.04 ($9,803.52 x two = $19,607.04) (Petitioner’s
Brief for Hearing, January 22, 2021, with exhibits).
6)
Employer has one aggravating factor because it had an
uninsured lapse exceeding 180 consecutive calendar days.
(Petitioner’s Brief for Hearing, January 22, 2021, with
exhibits).
7) The
Alaska recorder’s office does not show any outstanding
judgments or liens against Employer; other databases do not
show any outstanding bankruptcies, judgments or liens against
Employer in Alaska or Arizona, the two states where Employer
does business. (Petitioner’s Brief for Hearing, January
22, 2021, with exhibits).
8)
Employer’s last quarterly report filed with the Alaska
Department of Labor and Workforce Development for
third-quarter 2020, showed Employer had 19 employees and
third-quarter payroll totaling $108,313.86. This payroll is
higher than payroll Employer reported in 2019, and in the
first two quarters of 2020. Its tax statements show its
annual wages for instructors and mechanics for 2017 and 2018,
were around $192,199. According to Alaska Department of Labor
and Workforce Development records Employer’s average
monthly wages for its employees in Alaska were approximately
$26,382 between September 2019 and September 2020, which
amounts to $316,584 for the 12-month period.
(Petitioner’s Brief for Hearing, January 22, 2021, with
exhibits).
9)
Employer’s financial statements for 2017, show assets
totaling $394,603 with liabilities totaling $1,668,817. Its
2018 assets totaled $277,955 with liabilities totaling
$1,880,883. However, in late 2018, Employer assumed $212,066
in new liabilities from the previous year and reduced its
assets by $116,648. (Petitioner’s Brief for Hearing,
January 22, 2021, with exhibits).
10)
Employer’s financial records showed it earned $698,285
in 2017 and $1,453,110 in 2018. However, its 2017 records
show a $38,461 net loss. Employer did better in 2018, with a
net profit of $113,132; tax returns show its shareholders
received no business income in 2017 or 2018.
(Petitioner’s Brief for Hearing, January 22, 2021, with
exhibits).
11)
Employer did not provide updated financial information for
2019 or 2020. (Petitioner’s Brief for Hearing, January
22, 2021, with exhibits).
12) The
division seeks an order setting an appropriate civil penalty
pursuant to the Act and applicable regulations; it contends
the penalty could be as high as $95,050 under this
case’s facts. It does not object to a penalty assessed...
