### IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
LSI LOGISTIC SERVICE SOLUTIONS LLC, a Washington limited liability company; LABELING SERVICES, INC, an inactive Washington corporation, Appellant,

v. STATE OF WASHINGTON, DEPARTMENT OF LABOR AND INDUSTRIES, Respondent. No. 74125-0-1 DIVISION ONE UNPUBLISHED OPINION

FILED: September26, 2016 

### Appelwick, J. — LSI applied to the Department to change its risk 

### classification for purposes ofindustrial insurancefrom freight handler service to warehouse. TheDepartmentconcludedthat thefreight handlerclassificationwas correct. Both the Board of Industrial Insurance Appeals and the superior court affirmed the Department. We affirm. FACTS 

### Labeling Services, Inc. isnow an inactiveWashington corporation. When itwas in business, Labeling operated in awarehouse facility, employing about 15 

### employees. From the secondquarter of2010 through thefirst quarter of2011,No. 74125-0-1/2

most of its business involved receiving canned salmon from Alaska, labeling it, storing it, and shipping itwhen requested. 

### LSI Logistic Service Solutions LLC is the successor company to Labeling. LSI expandedthe businesstootherproducts, including rice, sugar, salmon oil, and laminate flooring. LSI's business consists of receiving inventory from other 

### companies, storing it, and shipping it out when requested.1 In 2013, LSI requested a change in classification for industrial insurance 

### premiums. The Departmentof Labor &Industries (Department) is responsible for 

### classifyingindustriesforpurposesofinsurancepremiums accordingto the hazards involved in an occupation. RCW51.16.035. LSI had previouslybeen classified as 

### a freight handler service under WAC 296-17A-2002-13, and it sought to be reclassified as a warehouse under WAC 296-17A-2102-00. LSI filed amended 

### reports withthe Departmentfor the period ofApril 1, 2010 through March 31, 2013. Under its proposed classification, LSI sought a refund of$22,293.93. 

### In response to this request, the Department reviewed the appropriate risk classification for LSI. Thomas Boyle, the account manager, conducted an 

### investigation and performed a site visitto observe LSI'sbusiness operations and interview its employees. The Department concluded that the freight handling
classification was correct.

1 Below, the parties stipulated that Labeling and LSI performed the same 

### services during the time period at issue and that the Board's determination would apply to both Labelingand LSI. Forclarity, we refer to Labelingand LSI collectively as LSI, except as necessary to distinguish between the two.No. 74125-0-1/3
LSIappealedthe Department's decisionto the Board ofIndustrial Insurance Appeals. The Board held a hearing to determine whetherthe Departmentcorrectly classified LSI as a freight handler service. Nic Klamke, co-ownerand presidentof LSI, testified at the hearing. He described LSI's business operations. Boyle testified as well, providing the details of his investigation. After the hearing, the industrial appeals judge (IAJ) issued a proposed decision and order affirming the Department's decision. The IAJ found that LSI employees unloaded, repackaged, and reloaded goods for shipping using pallet 

### jacks and forklifts. And, the IAJ found that the properrisk classification wasfreight handling. The Board adopted the proposed decision and order. 

### LSI appealed to the superior court. After reviewing the record, the court affirmed the decision ofthe Department. The courtalso found that LSIemployees 

### unloaded, inspected, labeled, repackaged, and reloaded goods forshipping using 

### palletjacks and forklifts. And, the court found that the proper classification for Labeling during the second quarter of 2010 through the firstquarter of2011 and for LSI during the second quarter of2011 through the first quarter of 2013 was freight handling. Itconcluded that the Board properly affirmed the Department's order classifying LSI as such. LSI appeals.
BACKGROUND The Industrial Insurance Act (IIA), title 51 RCW, exists to mitigate the suffering and economic loss arising from injuries and death occurring inthe course ofemployment. RCW 51.12.010. The IIA is to be liberally construed to achieve the purpose of providing compensation to all covered employees injured in theirNo. 74125-0-1/4 

### employment. Hubbard v. Dep't of Labor &Indus., 140 Wn.2d 35, 41, 992 P.2d 1002(2000). 

### To accomplish this purpose, the IIA tasks the Department with classifying 

### all industries by the degree ofhazard and assigning premium rates accordingly. RCW 51.16.035. Bydelegating this authority to the Department, the legislature 

### gave the Departmentbroad discretion to create a system of risk classification. Di Pietro Trucking Co. v. Dep't of Labor &Indus., 135 Wn. App. 693, 704, 145 P.3d 419(2006). 

### The Department's classification plan has over three hundred business or 

### industry classifications. WAC 296-17-31011(4). The two at issue here— warehouses of general merchandise and freighthandling services—are setoutin WAC 296-17A-2102-00 and WAC 296-17A-2002-13. WAC 296-17A-2102-00 is the classification for warehouses storing general 

### merchandise. It "[ajpplies toestablishments operating as warehouses for general merchandise. This merchandise belongs to a customer and is usually stored for 

### long periods of time." Id. Typically, warehouses store bulk, nonperishable materials, such as coffee, dry cement, potatoes, or rice. Id Employees perform duties such as maintaining the facility, moving merchandise within the facility, recordkeeping, routine maintenance, and security. ]d. The equipment they use includes cleaning and recordkeeping supplies, forklifts, pallet jacks, and shop
vehicles. Id. WAC 296-17A-2002-13 is the freight handler services classification. It 

### "[ajpplies to establishments engaged in packing, handling, shipping, orNo. 74125-0-1/5 

### repackaging merchandise or freight which is owned byothers and is not covered 

### by another classification." Id These establishments handle general cargo, which is usually in boxes, cartons, crates, bales, orbags. id. General cargo also includes lumber, logs, steel, pipe, grains, produce, machinery, and vehicles, id. Freight handler services are usually located at railroad yards, airports, orwarehouses. Id 

### Theiremployees "perform duties such as, but not limited to, unloading, checking in and weighing goods, sorting and repackaging goods, tiering (placing in a series of rows one above the other), and reloading goods for shipment." id. They use 

### equipment such as "palletjacks, hand trucks, forklifts, boom trucks, mobilecranes
or overhead track cranes, and hand tools." id 

### The freight handler services classification excludes "establishments 

### engaged in warehousing operations for general merchandise which are to be reported separately in classification [WAC 296-17A-]2102[-00]." Under the 

### heading "Specialnotes," itclarifiesthedistinctionbetweenwarehouses andfreight
handlers: 

### Establishments engaged as freighthandlers have the hazard of the continual movementofgoods, incontrasttowarehousing operations in classification 2102-00 that usually store goods for long periods of time. In addition, freight handling services providers do not operate warehouses and storage facilities as a general rule. Id.No. 74125-0-1/6

DISCUSSION Appeals of proceedings under the IIA are governed by the ordinary civil standard of review.2 RCW 51.52.140. Therefore, this court reviews the superior court's decision rather than the Board's decision.3 Birgen v. Dep't of Labor & Indus.. 186 Wn. App. 851, 855-56, 347 P.3d 503 (2015). We determine whether substantial evidence supports the superior court's findings and whether those findings supportthe court's conclusions of law. Id at 856. Conclusions of law are reviewed de novo, id LSIargues that undertheAPA we must reversethe Department's decision, because itacted inconsistentlybyclassifying LSIdifferentlythan LSI's competitors. LSI relies only on evidence of those competitors' risk classifications that was 

### presented through Klamke's testimony.4 However, the APAdoes not apply here. The issue ofwhether LSI's competitors are correctly classified is not before this
court. We decline to review LSI's claims of inconsistent treatment. See Ramos
v. Dep't of Labor &Indus., 191 Wn. App. 36, 40-41, 361 P.3d 165 (2015) (noting



### 2As the Departmentcorrectly points out, the Administrative Procedure Act(APA), chapter 34.05 RCW, does not govern this appeal. RCW 51.52.140 (stating that the practice in civil cases applies to appeals under the IIA, unless otherwise provided). TheAPA applies to an industrial insurance case ifappeal is taken from a decision concerning a notice of assessment. RCW 51.48.131. The term "assessment" refers to taxes—money payments made by an employer or worker for the accidentfund, the medical aid fund, the supplemental pension fund, or any otherfund under the IIA. RCW 51.08.015. Because this case involves a request for a reclassification rather than a notice that payments were due, the APA does not apply. 3To the extent LSI assigns error to the Board's findings and conclusions, we treatthem as challenges to the superior court's findings and conclusions. 4LSIoffered exhibits showing the risk classifications ofthese competitors, but the IAJ rejected them.No. 74125-0-1/7
that whether self-serving testimony should be disregarded is a credibility issue for the trial court). The question before this court is whether the superior court erred in classifying LSIas a freight handlerservice ratherthan a warehouse. LSIcontends that the findings of fact that LSI and Labeling were freight handler services 

### engaged in unloading, inspecting, labeling, repackaging, and reloading goods for shipping are not supported by substantial evidence. The evidence below shows that LSI certainly does perform some of the functions of a warehouse. It operates within a warehouse and as such must maintain the warehouse and the goods within it. Ituses forklifts to move products 

### within the facility. And, itstores goods for at least one month at a time, withsome goods stored for two to three years. But, the evidence also establishes that Labeling did and LSI does much 

### more than operate a warehouse. Klamke explained that Labeling's primary function was to handle canned salmon. The product was shipped to Labeling's 

### facility from Alaska. The company then unloaded the pallets using forklifts. Labeling ran the product through its production line. In the production line, the product went through a machine with a magnet. Itwas inspected. Next, it was labeled by a labeling machine and a casing machine. When this process was complete, the productwas then stored inthe warehouse awaiting shipment. The productwas shipped out when Labeling's customer requested it. Klamke testified that while LSI no longer handles the canned salmon 

### product, it now receives, stores, and ships products such as rice, sugar, andNo. 74125-0-1/8
laminate flooring. He stated that products are usually shipped to LSI on pallets. Products are driven through the warehouse with forklifts or palletjacks. Klamke explained that sometimes, LSI employees have to unload products by hand and stack them onto pallets. LSI has a pallet shrink wrap machine that it uses when repalleting some ofthe freight. Klamke estimated that LSI uses the pallet shrink wrap machine for around 25 percent ofthe floor loaded freight. LSIthen puts the 

### productin the warehouseforstorage until itreceives an orderto ship it out. Later, LSI loads the productout of the warehouse and prepares itforshipment, based on demand from retail customers. 

### Klamke gave the example ofUnilin Flooring to explain how LSI operates. He stated that Unilin Flooring sends LSI the product and LSI holds it. When 

### requested, LSI pulls the product, stages it, and loads it. Then, LSI sends the productto Costco distribution centers on Unilin Flooring's behalf. And, the IAJ admitted as exhibits several pages from LSI's website. This website lists LSI's value-added services: "Labeling and Packaging"; "Bundle 

### Wrap"; "Pick and Pack"; "Shrink Wrap"; "Ticketing and Labeling"; "Routing and 

### Return Processing"; "FED EX" (Federal Express), "UPS" (United Parcel Service)
or customer choice; "Bundling"; "Repackaging"; "Special Handling"; "G.O.H. 

### (Garment on Hanger)." It specifies that these services promote "[f]ast, efficient product conversion." Klamke acknowledged that LSI offers these services, 

### although he stated that customers rarely request them. LSI's website also advertises LSI as able to serve customers needing large volume distribution of

8No. 74125-0-1/9 goods and customers needing assistance inemergency situations, such as short notice customer requests, product recalls, and high volume rollouts. This evidence shows thatduring the relevanttime frames, Labeling and LSI 

### employees unloaded, inspected, labeled, repackaged, and reloaded goods for 

### shipping. They used specialized machinery to accomplish these services. Thus, substantial evidence supports the superior court's findings. 

### These findings clearly support the conclusion that Labeling and LSI are 

### properly classified as freight handler services rather than warehouses. The 

### purpose ofthese classifications is to weigh the hazards inherent in a business and
assess premiums accordingly. RCW 51.16.035. The hazards of LSI's line ofwork
are not those involved in simply maintaining a warehouse. Instead, LSI's 

### employees riskthe hazards involved inthe continual movement of goods. Wehold thatthe superiorcourt did not err in concludingthatLabeling and LSIwerecorrectly classified as freight handler services. 

### LSI requests attorney fees on appeal under RCW4.84.350. Because LSI has not prevailed on this appeal, we decline to award fees.
We affirm.

WE CONCUR: 

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