Title: State ex rel. Aaron Rents, Inc. v. Ohio Bureau of Workers Comp.

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
State ex rel. Aaron Rents, Inc. v. Ohio Bur. of Workers’ Comp., Slip Opinion No. 2011-Ohio-
3140.] 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2011-OHIO-3140 
THE STATE EX REL. AARON RENTS, INC., APPELLANT, v. OHIO BUREAU OF 
WORKERS’ COMPENSATION, APPELLEE. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as State ex rel. Aaron Rents, Inc. v. Ohio Bur. of Workers’ Comp., 
Slip Opinion No. 2011-Ohio-3140.] 
Bureau of Workers’ Compensation — Explanation of orders of the bureau 
required — Limited writ granted — Retroactive reclassification of 
employees. 
(No. 2010-0439 — Submitted May 10, 2011 — Decided July 5, 2011.) 
APPEAL from the Court of Appeals for Franklin County, No. 09AP-232,  
2010-Ohio-218. 
__________________ 
Per Curiam. 
{¶ 1} Appellant, Aaron Rents, Inc. (“ARI”), challenges an order from 
appellee, Ohio Bureau of Workers’ Compensation, that retroactively reclassified 
the jobs of certain ARI employees for purposes of workers’ compensation 
premiums.  ARI specializes in lease-to-own sales of consumer items. When ARI 
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established operations in Ohio, its principal category of merchandise was 
furniture. Consistent with that enterprise, the bureau assigned ARI two 
classifications from its manual of occupational classifications — numbers 8044 
(Store: Furniture) and 8810 (clerical workers). In listing its payroll, ARI, in turn, 
placed each employee in one of those two categories. 
{¶ 2} In 2006, the bureau conducted a routine audit of ARI’s records.  
The auditor apparently concluded that ARI had incorrectly listed many of its 
employees as number 8810 clerical workers. The auditor, however, did not inform 
ARI, which was contrary to normal procedure. ARI, moreover, was not given a 
copy of the audit report, because the bureau found that the report, for several 
reasons, “did not pass the audit quality review process.” 
{¶ 3} ARI continued to classify its employees in the same manner as 
before for the next two years.  In March 2008, the bureau again audited ARI, 
examining records from July 1, 2004, through December 31, 2007.  In its 2008 
audit report, the bureau found that ARI’s emphasis had shifted from furniture to 
consumer electronics.  As a result, the bureau substituted manual number 8017 
(Store: Retail) for previously assigned number 8044 (Store: Furniture). Other 
changes placed delivery drivers into a separate category and introduced several 
other new classifications to accommodate an expanded service department. 
{¶ 4} The most contentious element of the bureau’s report was its 
conclusion that ARI should never have classified its sales and managerial staff as 
clerical employees under manual number 8810.  The report recommended that 
these employees be reclassified under manual number 8017 and recommended 
that the reclassification apply retroactively to July 2004.  This retroactive 
reclassification, however, meant that ARI would owe millions of dollars in back 
premiums, since new manual number 8017 had a significantly higher premium 
rate than number 8810. ARI objected to the audit’s findings and requested a 
hearing before the bureau’s Adjudicating Committee. ARI urged the committee to 
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apply the reclassification prospectively, citing the bureau’s problematic 2006 
audit that might have alerted ARI two years earlier to a potential impropriety. In 
the alternative, it asserted that Ohio Adm.Code 4123-17-17(C) limited 
retrospective reclassification to the 24 months preceding the current payroll-
reporting period, which would prohibit the collection of any alleged 
underpayment prior to January 1, 2006. 
{¶ 5} The committee upheld the new classifications but limited the 
retroactive application period to January 1, 2006, through December 31, 2007, 
citing “the delay of processing the audit findings and the lack of proof that the 
Bureau ever provided written notice of the initial April 2006 audit or findings.” 
The order was affirmed by the administrator’s designee. ARI filed a complaint in 
mandamus in the Court of Appeals for Franklin County.  ARI asserted that the 
bureau had abused its discretion by failing to adequately explain why it rejected 
ARI’s request for prospective reclassification only.  ARI argued that the bureau’s 
explanation as to why it limited the period of retroactive reclassification did not 
constitute an explanation as to why retroactive reclassification should be imposed 
at all. The court of appeals disagreed and denied the writ, prompting ARI’s appeal 
as of right to this court. 
{¶ 6} For purposes of workers’ compensation premiums, every business 
is classified by degree of hazard and placed into a corresponding category, 
commonly referred to as a manual classification. R.C. 4123.29(A)(1).  These 
classifications have been established by the National Council on Compensation 
Insurance and have assigned rates that reflect the risk of injury due to the hazards 
associated with that industrial pursuit. Id.  The total payroll in each of the 
classifications assigned to a given employer is a key element in determining the 
amount of premium that the employer pays to secure workers’ compensation 
coverage. R.C. 4123.29(A)(2). 
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{¶ 7} In 2008, the bureau reassigned ARI’s sales and managerial 
employees to a different manual classification.  This reclassification was initially 
made retroactive to 2004, but it was later limited to the period from January 1, 
2006, through December 31, 2007.  This change in time frame was based on Ohio 
Adm.Code 4123-17-17(C), which provides: 
{¶ 8} “The bureau shall have the right * * * to inspect, examine, or audit 
* * * employers for the purpose of verifying the correctness of reports made by 
employers of wage expenditures * * *.  The bureau shall also have the right to 
make adjustments as to classifications, allocation of wage expenditures to 
classifications, amount of wage expenditures, premium rates or amount of 
premium. * * * Except as provided in Rule 4123-17-28 of the Administrative 
Code, no adjustments shall be made in an employer’s account which result in 
increasing any amount of premium above the amount of contributions made by 
the employer to the fund for the periods involved, except in reference to 
adjustments for the semi-annual or adjustment periods ending within twenty-four 
months immediately prior to the beginning of the current payroll reporting period.  
The twenty-four month period shall be determined * * * from the date that the 
bureau provides written notice to the employer of the bureau’s intent to inspect, 
examine, or audit the employer’s records.” (Emphasis added.) 
{¶ 9} Under Ohio Adm.Code 4123-17-17 (C), the bureau can make 
adjustments to an employer’s account either prospectively or retroactively. State 
ex rel. Granville Volunteer Fire Dept., Inc. v. Indus. Comm. (1992), 64 Ohio St.3d 
518, 520-521, 597 N.E.2d 127.  ARI objects to retroactive reclassification and 
argues, among other things, that its ability to challenge the bureau’s decision has 
been compromised because the order does not explain why retroactive rather than 
prospective reclassification was favored.  We agree. 
{¶ 10} We “generally defer[] to the [bureau’s] expertise in premium 
matters,” but we will intercede when an occupational classification has been made 
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in an arbitrary, capricious, or discriminatory manner. State ex rel. Progressive 
Sweeping Contractors, Inc. v. Ohio Bur. of Workers’ Comp. (1994), 68 Ohio 
St.3d 393, 396, 627 N.E.2d 550.  The agency’s expertise, moreover, “does not 
supersede the duty this court has imposed upon the Industrial Commission and 
bureau to adequately explain their decisions.” Id.; State ex rel. Craftsman 
Basement Finishing Sys., Inc. v. Ryan, 121 Ohio St.3d 492, 2009-Ohio-1676, 905 
N.E.2d 639, ¶ 15.  An order must “inform the parties and potentially a reviewing 
court of the basis of the [agency’s] decision.” State ex rel. Yellow Freight Sys., 
Inc. v. Indus. Comm. (1994), 71 Ohio St.3d 139, 142, 642 N.E.2d 378. 
{¶ 11} ARI contends that without explaining why its request for 
prospective application was denied, it cannot know whether the imposition was 
arbitrary, capricious, or, in this case, punitive. ARI fears that the bureau 
retroactively reclassified its employees as punishment for what the bureau 
believed was ARI’s deliberate misclassification of its workers.  ARI asserts that if 
that is the case, it deserves to know so that it can prove that the misclassification 
was unintentional and consistent with what it believed the bureau desired initially. 
{¶ 12} ARI’s points are valid.  There is no way to know why the bureau 
exercised its reclassification discretion as it did.  Further explanation as to why 
the bureau reached its decision is necessary before we can determine whether an 
abuse of discretion occurred. 
{¶ 13} The judgment of the court of appeals is reversed, and a limited writ 
is granted ordering the bureau to vacate its order, further consider the matter, and 
issue an amended order including an explanation for its decision. 
Judgment reversed 
and limited writ granted. 
 
O’CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, O’DONNELL, 
LANZINGER, CUPP, and MCGEE BROWN, JJ., concur. 
__________________ 
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Millisor & Nobil Co., L.P.A., Daniel P. O’Brien, Mark E. Snyder, and 
Nicole H. Farley, for appellant. 
Michael DeWine, Attorney General, and Gerald H. Waterman, Assistant 
Attorney General, for appellee. 
______________________