Appeal from Superior Court of Snohomish County. Docket No: 94-2-06756-5. Date filed: 10/09/95. Judge signing: Hon. Richard J. Thorpe.
Authored by William W. Baker. Concurring: Walter E. Webster, Ann L. Ellington.
The opinion of the court was delivered by: Baker
BAKER, C.J. - We are asked to decide whether equitable estoppel prevents the Department of Labor and Industries (the Department) from retroactively assessing Don's Tree Service, Inc. (DTS) for a deficiency in its industrial insurance payments arising from its improper classification of its employees. DTS claims that the improper classification arose from its reasonable reliance on the Department's 1990 audit and its subsequent silence, both indicating that the classifications DTS used were correct. We agree with the Department that equitable estoppel is inapplicable because DTS could not reasonably rely on the 1990 audit after attending a March 1991 meeting at which a Department audit supervisor clarified that the classifications to be used in the tree topping industry differed from DTS's practice.
DTS is engaged in tree topping and trimming, which involves some employees cutting limbs from trees and others collecting and chipping the limbs on the ground. As an employer, DTS is required to submit quarterly reports to the Department, listing employees by classification. The Department uses these reports to determine the amount DTS must pay in industrial insurance premiums. DTS reported its employees in one of three classifications: clerical, tree topping, or landscaping. A 1990 audit by the Department did not question that practice.
In March 1991 DTS's owner attended an informal meeting arranged by the industry, at which a Department audit supervisor spoke about worker classifications for the tree topping industry. The supervisor stated that tree topping was the only proper classification for all employees working both in the trees and on the ground. The Department did not provide any subsequent written directive regarding classification.
DTS's owner testified that he did not recall any specific Discussion about classifications at the meeting. Others who attended the meeting disagreed. The owner of a stump grinding business thought that the message about the proper classification of tree service workers on the ground was "very black and white." The owner of another tree service business also remembered the Discussion about classification, which clarified that outdoor employees of a tree service company could not be classified as landscape workers. After the meeting, DTS's owner told that owner that he was going to continue paying premiums as he had in the past.
An April 1993 audit for the period between October 1990 and December 1992 indicated that DTS had not properly classified its employees and had thus underpaid its industrial insurance. The rules and classifications did not change between the 1990 and 1993 audits.
The Department issued DTS a notice of assessment for unpaid industrial insurance premiums, demanding $39,282.04 for the period from April 1, 1991, through December 31, 1992. *fn1 Because the proper classification of ground workers before the March 1991 meeting may have been confusing, the Department sought payment only for the period beginning in April 1991. DTS appealed the assessment.
DTS appeared pro se through its owner and its accountant before an Industrial Appeals Judge (IAJ). *fn2 DTS argued that the Department should be estopped from imposing a retroactive assessment because the reporting error was caused by its reliance on the Department's 1990 audit report, indicating that its classifications were correct.
The IAJ rejected this argument, finding that (1) the 1990 audit was not in error, merely an oversight or mistake by the auditor, (2) the Department did not change its classification policy between 1990 and 1993, (3) the Department informed DTS about the correct classification at the March 1991 meeting that DTS's owner attended, and (4) the Department did not assess DTS for the period before the March 1991 notice. The IAJ concluded that DTS could not reasonably rely on the 1990 audit after that meeting.
DTS appealed the IAJ decision, attaching numerous documents that were not presented to the IAJ. The Board of Industrial Insurance Appeals (Board) refused to consider the additional documents and adopted the IAJ decision as its final order. DTS appealed that decision. The superior court affirmed the Board, entering additional findings and Conclusions. DTS appeals the trial court's ruling upholding the Board's decision and challenges the trial court's specific findings and Conclusions. *fn3
DTS argues that this is the "quintessential" case for equitable estoppel because (1) any error in DTS's industrial insurance payments arose from its reasonable reliance on the Department's repeated representations that DTS was properly reporting, and (2) that reliance was not defeated by notice at an informal meeting. DTS also argues that the ...