H. B. 4676
(By Delegates Linch, Kuhn, Caputo,
Mahan, Sparks, H. White and Tillis)
[Introduced February 27, 1998; referred to the
Committee on Finance then the Judiciary.]
A BILL to amend and reenact sections four and five-a, article
two, chapter twenty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to
joint and several liability for workers' compensation
premium tax; prohibit shifting of costs between individual
classifications; and grant the compensation programs
performance council the exclusive and complete authority to
decide which defaulted employers to take action against and
to enter into settlements with certain employers.
Be it enacted by the Legislature of West Virginia:
That sections four and five-a, article two, chapter twenty- three of the code of West Virginia, one thousand nine hundred
thirty-one, as amended, be amended and reenacted to read as
follows:
ARTICLE 2. EMPLOYERS AND EMPLOYEES SUBJECT TO CHAPTER;
EXTRATERRITORIAL COVERAGE.
§23-2-4. Classification of industries; rate of premiums;
authority to adopt various systems; accounts;
findings; rule to require joint and several
liability for certain employers; and rule to
prevent cost shifting.
(a) The commissioner, in conjunction with the compensation
programs performance council, is authorized to establish by rule
a system for determining the classification and distribution into
classes of employers subject to this chapter, a system for
determining rates of premium taxes applicable to employers
subject to this chapter, a system of multiple policy options with
criteria for subscription thereto, and criteria for an annual
employer's statement providing both benefits liability
information and rate determination information.
(1) In addition, the rule shall provide for, but not be
limited to:
(A) Rate adjustments by industry or individual employer,
including merit rate adjustments;
(B) Notification regarding rate adjustments prior to the
quarter in which the rate adjustments will be in effect;
(C) Chargeability of claims; and
(D) Such further matters that are necessary and consistent
with the goals of this chapter;
(2) The rule shall be consistent with the duty of the
commissioner and the compensation programs performance council to
fix and maintain the lowest possible rates of premium taxes
consistent with the maintenance of a solvent workers'
compensation fund and the reduction of any deficit that may exist
in such fund and in keeping with their fiduciary obligations to
the fund;
(3) The rule shall be consistent with generally accepted
accounting principles;
(4) The rule shall be consistent with classification and
rate-making methodologies found in the insurance industry; and
(5) The rule shall be consistent with the principles of
promoting more effective workplace health and safety programs as
contained in article two-b of this chapter.
(b) Notwithstanding any other provision of this chapter to
the contrary, the compensation programs performance council may
elect to premise its premium tax determination methodology on the
aggregate number of hours worked by employees of the employer
rather than upon the gross wages of the employer. Such an
election may apply to all industrial classifications or to less
than all. If this election is made, then in all instances in
which this chapter refers to gross wage reports for the purpose of premium tax determination such references shall be taken to
mean a report of the number of hours so worked.
(c) The rule authorized by subsection (a) of this section
shall be promulgated on or before the first day of July, one
thousand nine hundred ninety-six. Until the rule is finally
promulgated the prior provisions of this section as found in
chapter one hundred seventy-one of the acts of the Legislature,
one thousand nine hundred ninety-three, shall remain in effect.
The Legislature finds that certain business practices exist which
result in the avoidance of payment of premium taxes or which
result in the payment of premium taxes in an amount less than
sufficient to cover the risk being incurred. Examples of such
business practices include, but are not limited to,
contractor/subcontractor relationships in the coal industry and
the use of employee leasing in a growing number of industries.
On or before the first day of July, one thousand nine hundred
ninety-eight, the compensation programs performance council shall
by rule determine those business practices which exist in one or
more industrial classifications which result in the avoidance of
premium tax payments or which result in the payment of premium
taxes in an amount less than sufficient to cover the risk being
incurred. The rule shall provide that all entities that receive
an economic benefit from the work performed by employees shall be
jointly and severally liable for the premium taxes due regardless of who is the designated or nominal employer.
(d) In accordance with generally accepted accounting
principles, the workers' compensation division shall keep an
accurate accounting of all money or moneys earned, due, and
received by the workers' compensation fund, and of the liability
incurred and disbursements made against the same; and an accurate
account of all money or moneys earned, due and received from each
individual subscriber, and of the liability incurred and
disbursements made against the same.
(e) The Legislature finds that the premium tax rates now in
effect result in the shifting of costs from one or more
industrial classifications to other industrial classifications.
This cost shift results in the underpayment of premium taxes by
those employers in some industrial classifications based upon the
risk being covered in those industrial classifications and the
overpayment of premium taxes by the employers in those industrial
classifications to which the costs are shifted. Consequently,
employers whose safety practices result in a lowering of risk of
injury to their employees are being unfairly required to pay more
than their fair share of premium taxes. Conversely, those
employers who expose their employees to a greater risk of injury
are often being permitted to pay less than their fair share of
premium taxes. Therefore, on or before the first day of July,
one thousand nine hundred ninety-eight, the compensation programs performance council shall adopt a rule which requires
that each and every industrial classification pay its fair and
appropriate share of premium taxes and that no industrial
classification be permitted to have its costs shifted to another
industrial classification. It is further provided that no
industrial classification shall be permitted to have the costs of
another industrial classification shifted to it.
§23-2-5a. Collection of premiums from defaulting employers;
interest and penalties; civil remedies; creation and enforcement of lien against employer and purchaser; duty of secretary of state to register liens; distraint powers; insolvency proceedings; secretary of state to withhold certificates of dissolution; injunctive relief; bond; attorney fees
and costs; and role of the compensation programs performance council.
(a) The workers' compensation division in the name of the
state may commence a civil action against an employer who, after
due notice, defaults in any payment required by this chapter. If
judgment is against the employer, such employer shall pay the
costs of the action. Civil action under this section shall be
given preference on the calendar of the court over all other
civil actions. Upon prevailing in any such civil action, the division shall be entitled to recover its attorneys' fees and
costs of action from the employer.
(b) In addition to the foregoing provisions of this section,
any payment, interest and penalty thereon due and unpaid under
this chapter shall be a personal obligation of the employer
immediately due and owing to the division and shall, in addition
thereto, be a lien enforceable against all the property of the
employer: Provided, That no such lien shall be enforceable as
against a purchaser (including a lien creditor) of real estate or
personal property for a valuable consideration without notice,
unless docketed as provided in section one, article ten-c,
chapter thirty-eight of this code: Provided, however, That such
lien may be enforced as other judgment liens are enforced through
the provisions of chapter thirty-eight of this code and the same
shall be deemed by the circuit court to be a judgment lien for
this purpose.
(c) In addition to all other civil remedies prescribed
herein, the division may in the name of the state, after giving
appropriate notice as required by due process, distrain upon any
personal property, including intangible property, of any employer
delinquent for any payment, interest and penalty thereon. If the
division has good reason to believe that such property or a
substantial portion thereof is about to be removed from the county in which it is situated, upon giving appropriate notice,
either before or after the seizure, as is proper in the
circumstances, the division may likewise distrain in the name of
the state before such delinquency occurs. For such purpose, the
division may require the services of a sheriff of any county in
the state in levying such distress in the county in which the
sheriff is an officer and in which such personal property is
situated. A sheriff so collecting any payment, interest and
penalty thereon shall be entitled to such compensation as is
provided by law for his or her services in the levy and
enforcement of executions. Upon prevailing in any distraint
action, the division shall be entitled to recover its attorneys'
fees and costs of action from the employer.
(d) In case a business subject to the payments, interest and
penalties thereon imposed under this chapter shall be operated in
connection with a receivership or insolvency proceeding in any
state court in this state, the court under whose direction such
business is operated shall, by the entry of a proper order or
decree in the cause, make provisions, so far as the assets in
administration will permit, for the regular payment of such
payments, interest and penalties as the same become due.
(e) The secretary of state of this state shall withhold the
issuance of any certificate of dissolution or withdrawal in the
case of any corporation organized under the laws of this state or organized under the laws of any other state and admitted to do
business in this state, until notified by the division that all
payments, interest and penalties thereon against any such
corporation which is an employer under this chapter have been
paid or that provision satisfactory to the division has been made
for payment.
(f) In any case when an employer required to subscribe to
the fund defaults in payments of premium, premium deposits,
penalty or interest thereon, for as many as two calendar
quarters, which quarters need not be consecutive, and remains in
default after due notice, the division may bring action in the
circuit court of Kanawha County to enjoin such employer from
continuing to carry on the business in which such liability was
incurred: Provided, That the division may as an alternative to
this action require such delinquent employer to file a bond in
the form prescribed by the commissioner with satisfactory surety
in an amount not less than fifty percent more than the payments,
interest and penalties due.
(g) The compensation program performance council shall from
time to time review all accounts receivables due to the division
from defaulted employers. The council has the exclusive and
complete authority to decide what employers to take action
against under this code for the collection of defaulted premium
taxes and the type of action to take. Notwithstanding any provision of this code to the contrary including, but not limited
to, subsection (f), section five of this article, the council
has the exclusive and complete authority to enter into the
settlement of any defaulted employer's account for an amount less
than the total amount due. The council shall exercise this
authority in keeping with its fiduciary duties to the fund and
shall permit settlements for less than the full amount due only
when the equities of the employer's situation make such a
reduction fair and appropriate not only for the employer involved
but all other employers and injured workers.
NOTE: This bill authorizes the compensation programs
performance council to adopt rules by which certain entities will
be jointly and severally liable for the payment of premium taxes
where business practices exist which have resulted in the
avoidance of payment or the underpayment of premium taxes by the
employer. Secondly, the bill prohibits the shifting of premium
tax payments from one industrial classification to another and
requires that each classification pay its full and proper share
of costs. Thirdly, the bill grants the compensation programs
performance council sole and complete authority to decide which
defaulted employers to take action against and to settle accounts
for less than the amount otherwise due where such a settlement is
fair and equitable and in keeping with the fiduciary duties owed
to the fund.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.