STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RYDER TRUCK LINES, INC., )

)

Petitioner, )

)

vs. )

) FLORIDA DEPARTMENT OF LABOR AND ) EMPLOYMENT SECURITY, DIVISION OF )

WORKERS' COMPENSATION, ) CASE NO. 80-1050RP

)

Respondent. )

and )

)

WALT DISNEY WORLD COMPANY, )

)

Intervenor-Petitioner. )

)

FINAL ORDER

This proceeding brought pursuant to Section 120.54 (4), Florida Statutes (1979) challenges the validity of proposed rules 38F-13.01-13.07 promulgated by the Florida Department of Labor and Employment Security (Department).

APPEARANCES

For Petitioner: Martin R. Harkavy, Esquire

HARKAVY MOXLEY MITCHELL & STEWART

219 South Orange Avenue Sarasota, Florida 33577

For Intervenor- Lee G. Schmudde, Esquire Petitioner: WALT DISNEY WORLD COMPANY

Post Office Box 40

Lake Buena Vista, Florida 32830

For Respondent: Michael Rudicell, Esquire

Department of Labor and Employment Security 2562 Executive Center Circle, East

Suite 131, Montgomery Building Tallahassee, Florida 32301

This case began when Petitioner, Ryder Truck Lines, Inc., (Ryder) on May 22, 1980, filed a "Mailgram" request for hearing under Section 120.54, Florida Statutes to challenge the validity of the Department's proposed rules establishing and regulating the operation of a guaranty trust fund for self- insurers, pursuant to Section 440.38(1)(b), Florida Statutes (1979). Because the mailgram did not state with particularity facts sufficient to show the invalidity of the proposed rules, the Director of the Division of Administrative Hearings entered an Order dismissing the Petition, but granting leave to file an Amended Petition within 7 days. An Amended Petition was thereafter filed on

June 16, 1980, and on June 19, 1980, the case was assigned to Michael Pearce Dodson for the holding of a final hearing.

Prior to the hearing noticed for and held on June 14, 1980, Walt Disney World Company (Disney World) moved and was granted permission to intervene on the side of the Petitioner with party status. At the hearing, it was stipulated that both Ryder and Disney World who are self-insurers in Florida, would be substantially affected by the proposed rules if they became final. No other evidence was presented and oral argument of counsel was heard.

CONTENTIONS OF THE PARTIES

Ryder and Disney World argue that the proposed rules are an exercise of unbridled discretion by the Department. The pertinent part of Section 440.38(1)(b), Florida Statutes provides only that:

"There is created in the State Treasury a guaranty fund for individual self-insurers authorized under this paragraph, and all such self-insurers, other than individual self-insurers which are public utilities or governmental entities, shall participate in such fund. Said guaranty fund shall operate subject to rules adopted by the division and shall become effective on July 1, 1980." (emphasis added)

By promulgating rules pursuant to such a legislative carte blanche, the Department has taken upon itself the power of the Legislature, the petitioners argue. In support of their position, the Petitioner cite numerous Florida cases which stand for the principle that the Legislature may not delegate its authority to an administrative agency. Wasserman v. Florida State Board of Architecture, 361 So.2d 792 (Fla 1st D.C.A. 1978); Florida Home Building Association v. Division of Labor, Bureau of Apprenticeship, 367 So. 2d 219 (Fla 1979); Lewis v. Bank of Pasco County, 346 So. 2d 53 (Fla 1976).

Petitioners further argue that Rule 38F-13.04(b) establishes a penalty where it provides that if a self-insurer fails to mail to the Department its assessment toward the operation of the fund on time, then a civil penalty of 10 percent (10%) of the amount not paid should be due. There must be specific legislative authority to impose a penalty for the violation of an administrative rule. Section 120.54 (14), Florida Statutes (1979) states that:

"No agency has inherent rulemaking authority; nor has any agency authority to establish penalties for violation of a rule unless the Legislature, when establishing a penalty, specifically provides that the penalty applies to rules."

Those portions of the Petition filed by Disney World challenging the rule on the basis of improper notice and a faulty economic impact statement were abandoned at the hearing. The equal protection portion of the Petition was not seriously urged and no evidence was offered in support of it.

The Department responded by saying that if the Legislature gave it carte blanche for the rules it promulgated, so be it. It has no choice but to follow

the Legislative mandate to adopt rules and if the mandate is imperfect, then the fault is that of the Legislature and not that of the Department or of the rules. With respect to the penalty provisions of the late payment of assessments the Department asserts that the power to impose a penalty is implied in the grant of rulemaking authority to establish the trust fund because the trust fund could not operate without a late payment penalty.

FINDINGS OF FACT

1. Both Ryder and Disney World are self-insurers as defined by Section 440.38, Florida Statutes (1979). If the proposed rules were adopted both parties would be liable for assessments required by the rules.

   
   

   CONCLUSIONS OF LAW

   
   

2. The Division of Administrative Hearings has jurisdiction over this cause, Section 120.54(4), Florida Statutes (1979).

   
   

3. Both Petitioner and Intervenor-Petitioner are substantially affected by the proposed rules.

   
   

4. The Florida Administrative Procedure Act (APA) in Section 120.54(4), Florida Statutes (1979) provides that:

   
   

   "Any substantially affected person may seek an administrative determination of the

   invalidity of any proposed rule on the grounds that the proposed rule is an invalid exercise of delegated legislative authority."

   
   

   No agency has inherent rulemaking authority, Section 120.54 (14), Florida Statutes (1979).

   
   

5. In Section 440.38(1)(b), Florida Statutes (1979) the Department is authorized to adopt rules for the operation of the self-insurer's guaranty trust fund. This authorization does not provide any specifics about the operation of the fund or its regulation.

   
   

6. Pursuant to Section 440.38(1)(b), Florida Statutes (1979) the Department has proposed rules 38F-13.01 through 38F-13.07 attached hereto as the Appendix.

   
   

7. The Division of Administrative Hearings does not have the ability to declare proposed rules invalid because the Legislature invalidly delegated its authority to the rulemaking agency. While the Division of Administrative Hearings, a unit of the executive branch, may hold unconstitutional a proposed rule of another executive agency, Leon County v. Department of Environmental Regulation, 344 So. 2d 297 (Fla 1st DCA. 1977) it may not rule on the validity of the Legislature's action in delegating legislative functions to the executive branch. This conclusion was recognized by the Legislature itself when it enacted Chapter 76-131, Laws of Florida (1976). Then the APA was first adopted in 1974, it allowed rule challenges on two grounds: (1) that the rule is an invalid exercise of validly delegated legislative authority, and (2) that the rule is an exercise of invalidly delegated legislative authority. Chapter 76-

   131 repealed the second ground.

8. Whether or not the Legislature erred in Section 440.38(1) by giving the Department unbridled rulemaking authority with respect to the trust fund is not an issue which may be determined in this forum, as the Division of Administrative Hearings may not exercise judicial power. See State of Florida, Department of Administration v. Stevens, 344 So.2d 290, 295 n.2 (Fla 1st DCA. 1977) where the court held that:

   
   

   "We have previously held, however, that the power to adjudicate that a rule is un- constitutional is a judicial power rather than quasi-judicial and such adjudication

   may not be made by an administrative office

   or agency. State Department of Administration

   v. State Department of Administration, etc.,

   326 So.2d 187 (Fla 1st DCA. 1976), also, it should be noted, as we have heretofore

   pointed out, that the Legislature by Chapter 76-131, Florida Statutes, (sic) withdrew

   from the Hearing Officer authority to determine the invalidity of a rule on the ground that

   the rule is an exercise of invalidly delegated legislative authority--a constitutional question."

   
   

   The challenged rules therefore may not be declared invalid here because the legislature failed to give adequate direction for their promulgation.

   
   

9. There is merit however to the argument that the Department may not establish a penalty without specific legislative authorization. Section 120.54(14), Florida Statutes, (1979) expressly prohibits the creation of penalties by administrative agencies unless first expressly authorized. Even in those cases where there is already an existing legislatively created penalty, the agencies may not tack that penalty to a rule without prior legislative approval. Here the agency created a penalty out of thin air. For this reason all language relating tot he imposition of a penalty for the late payment of an assessment should be stricken from proposed Rule 38F-13.04 at paragraph b.

   
   

   CONCLUSION

   
   

10. While the Legislature may have invalidly delegated its authority to govern the operation of the self-insurers guaranty trust fund, and while the rules proposed as a result of the delegation may necessarily be invalid, See Cross Ley Waterways v. Askew, 351 So.2d 1062 (Fla 1st DCA. 1977). such a determination may not be made here. What can be determined is that the penalty for the late payment of assessment is without authority and must be stricken.

Based upon the foregoing Findings of Fact, Conclusions of Law, it is therefore,

ORDERED THAT:

1. The following language in proposed Rule 38F-13.04(b) is objectionable as an invalid exercise of delegated legislative authority:

   
   

   "If the self-insurer fails to mail the total assessment due by the due date, there shall be assessed a civil penalty equal to

   10 percent (10%) of the amount so unpaid

   . . . .and penalties . . . .No penalty assessed under this section demonstrates circumstances entirely beyond its control were responsible for the late payment of assessment. Protest

   as to penalties assessed by this section shall be made pursuant to Section 440.021, Florida Statutes."

   
   

2. The remainder of proposed Rules 38F-13.01 through 13.07 are not an invalid exercise of delegated legislative authority.

DONE AND ORDERED this 4th day of August, 1980, in Tallahassee, Florida.

MICHAEL PEARCE DODSON

Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 4th day of August, 1980.

COPIES FURNISHED:

Martin R. Harkavy, Esquire HARKAVY MOXLEY MITCHELL & STEWART

219 South Orange Avenue Sarasota, Florida 33577

Lee G. Schmudde, Esquire WALT DISNEY WORLD COMPANY

Post Office Box 40

Lake Buena Vista, Florida 32830

Michael Rudicell, Esquire Department of Labor and Employment

Security

2562 Executive Center Circle, East Suite 131, Montgomery Building Tallahassee, Florida 32301

Carroll Webb, Executive Director Joint Administrative Procedures

Committee

Room 112, Holland Building Tallahassee, Florida 32301

Liz Cloud, Bureau Chief Bureau of Administrative Code Room 1802, The Capitol Tallahassee, Florida 32301

Exhibit A

PROPOSED RULE OF

DEPARTMENT OF LABOR AND EMPLOYMENT SECURITY DIVISION OF WORKERS' COMPENSATION

SELF-INSURERS' GUARANTY TRUST FUND RULE CHAPTER 38F-13

38F-13.01 Purpose

38F-13.02 Statutory Requirements 38F-13.03 Definitions

38F-13.04 Payments to Fund

38F-13.05 Liability of the Fund

38F-13.06 Administration of the Fund 38F-13.07 Claims Procedures

38F-13.01 Purpose. The purpose of this chapter of administrative rules is to implement the provisions of Paragraph 440.38(1) (b), Florida Statutes, by establishing criteria, requirements, and procedures to be utilized in the operation of the guaranty fund for individual self-insurers.

Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

38F-13.02 Statutory Requirements. Paragraph 440.38(1)(b), Florida Statutes creates a guaranty fund for self-insurers in the State Treasury and requires that all self-insurers authorized under Paragraph 440.38(1)(b), Florida Statutes other than individual self-insurers which are public utilities or governmental entities shall participate in the guaranty fund. The statute also directs the Division of Workers' Compensation to adopt rules regarding the operation of the guaranty fund.

Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

38F-13.02 Statutory Requirements. Paragraph 440.38(1)(b), Florida Statutes creates a guaranty fund for self-insurers in the State Treasury and requires that all self-insurers authorized under Paragraph 440.38(1)(b), Florida Statutes other than individual self-insurers which are public utilities or governmental entities shall participate in the guaranty fund. The statute also directs the Division of Workers' Compensation to adopt rules regarding the operation of the guaranty fund.

Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

38F-13.03 Definitions: When used in this chapter of administrative rules, unless the context clearly requires otherwise, the following terms shall have the following meanings:

1. "Self-Insurer" means an individual employer who has secured the payment of compensation pursuant to Paragraph 440.38(1)(b), Florida Statutes, except public utilities or governmental entities. The term does not include individual employers who are members of a group self-insurer's fund.

2. "Group self-insurer's fund" means a group fund authorized under Section

   440.57 through which two or more employers pool their liabilities under this chapter for the purpose of qualifying as self-insurers.

   
   

3. "Insolvent" means or refers to an employer who at the time of the injury was a self-insurer and is prohibited or relieved by court order entered under the bankruptcy laws of Florida or the United States from paying full workers' compensation benefits to or providing full workers' compensation benefits on behalf of one or more of its injured workers.

   
   

4. The "Fund" means the Self-Insurers' Guaranty Trust Fund as established by Paragraph 440.38(1)(b), Florida Statutes.

   
   

   Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

   
   

   38F-13.04 Payments to Fund. The Fund shall be maintained by annual assessments upon self-insurers, commencing with the fiscal year beginning July 1, 1980. The assessment shall become due and be paid on a quarterly basis at the same time and in addition to the assessments provided in subparagraph 440.49(5)(h)(2) and Section 440.51, Florida Statutes. The division shall estimate annually in advance on a fiscal year basis the amount necessary for the administration of this section and the maintenance of this fund and shall make such assessment in the manner hereinafter provided:

   
   

   1. The Division shall as soon as practicable after July 1 each year, determine the expense of administration of the fund for the preceding fiscal year. The expense of administration for such preceding fiscal year shall be used, together with actuarial determined potential claims against the fund, as the basis for determining the amount to be assessed against each self-insured in order to provide for the expenses of the administration of the Fund for the current fiscal year.

      
      

   2. The total expenses of administration shall be prorated among the self- insurers. Actual payrolls for the preceding year shall be the basis for the assessment due for the following year in advance. A full year shall be used, except when a shorter period is necessary due to changes in the experience rating anniversary date. Actual year ending audited payrolls properly segregated into workers' compensation payroll classifications shall be multiplied by the appropriate premium rates and then experience modified and discounted. This normal premium shall be the basis for the adjustment of the amounts paid for the prior year in advance. Applicable debits or credits shall be applied to the amount to be assessed in advance for the next year and this total shall be the assessment due. The assessment calculations shall be shown on LES Form DWC-18 and this form shall be sent to the self-insurer by certified mail. This form shall include the amount due and the self-insurer shall mail a check for the total amount due to the Division, along with a copy of the invoice within thirty (30) days after the date that the invoice was mailed. If the

self-insurer fails to mail the total assessment due by the due date, there shall be assessed a civil penalty equal to ten percent (10%) of the amount so unpaid. Failure to mail the assessment and penalties within thirty (30) days after the due date shall be considered good cause for the revocation of the self-insurance privilege pursuant to Section 440.38(3), Florida Statutes. No penalty assessed under this section shall be waived unless the self-insurer demonstrates circumstances entirely beyond its control were responsible for the late payment

of assessment. Protests as to penalties assessed by this section shall be made pursuant to Section 440.021, Florida Statutes.

1. All amounts collected under this rule shall be paid into the fund.

   
   

2. Notwithstanding the preceding provisions of this section, the Self- Insurers' Guaranty Trust Fund assessment rate against self-insurers for the first year commending July 1, 1980, shall be one percent of the premium which the self-insurer would have to pay if commercially insured for workers' compensation. Thereafter, the division shall be authorized to reduce the annual assessment rate to less than one percent (1%) if after an actuarial analysis of the Fund's assets and the actual and potential liabilities have been determined that a lesser rate of assessment is sufficient to guarantee the Fund's continued solvency. A self-insurer participating in the Fund for the first time or upon rejoining the Fund shall for one year be assessed and pay to said Fund a minimum amount equal to one percent (1%) of the premium which the self-insurer would have had to pay if commercially insured for workers' compensation, unless the rate then currently being assessed is greater than one percent (1%). If the rate then being assessed is greater than one percent (1%) such self-insurer shall pay the current rate. Thereafter, such self-insurer shall be annually assessed and shall annually pay to the Fund an amount based upon the then current assessment rate.

Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

38F-13.05 Liability of the Fund. The Fund shall pay to or on behalf of any worker, or in the case of death, the worker's spouse, children or other dependents, those workers' compensation benefits which the injured worker of his survivors would have been entitled to had the self-insurer not become insolvent. However, the Fund shall not be liable in any instance for penalties, interest, costs, or attorney fees nor shall it be liable for any claim against it unless the claim is based upon an injury suffered on or after July 1, 1980 while employed by a self-insurer.

Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

38F-13.06 Administration of Fund. The Fund shall be administered by the Director of the Division of Workers' Compensation or by whoever he designates. The Office of the General Counsel of the Department of Labor and Employment Security shall represent the Fund in proceedings involving claims against the Fund, including negotiation and consummation of settlements, hearings before deputy commissioners, and judicial review.

Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

38F-13.07 Claims Procedures. The Fund may, upon its own initiative, commence payment under this section, or any person entitled to receive payments from the Fund may file a written claim for the same with the Division at its office in Tallahassee. The Fund shall not be liable for any payment which was otherwise due and payable by the insolvent self-insurer for more than two years, unless during that two year period, a claim for such payment was filed with the Division. Should the Division, its attorney or its servicing agent controvert a claim, the right to payment shall be barred unless an application for hearing thereon is filed with the Division at Tallahassee within 60 days after notice of

the controversion is mailed to the person who filed the claim. When such application for hearing is timely filed, the claim shall be heard and determined in accordance with the procedure prescribed in Section 120.57, Florida Statutes, to the extent the same is applicable.

Specific Authority: 440.38(1)(b), Florida Statutes Law Implemented: 440.38(1)(b), Florida Statutes

Docket for Case No: 80-001050RP

Orders for Case No: 80-001050RP