Source: https://supreme.justia.com/cases/federal/us/243/219/
Timestamp: 2019-04-22 04:53:08+00:00

Document:
payroll. It classifies industries in groups, and aims to adjust the percentage for each group, according to hazard, declaring this the most accurate and equitable method and promising future readjustments by the legislature of both classification and percentages to fit experience. The contributions of each group form a separate account or sub-fund, applicable to no other demands for compensation than those arising in the industries composing that group. Contributions, after the first, are not to exceed what is necessary to meet actual losses in the group for which they are exacted. The act expressly saves all actions and causes existing when it took effect, as between employers and employees, some months after its passage.
(1) The act not being valid against employers if not valid as against employees, an employer may question its constitutionality in both aspects.
(2) Viewed from the standpoint of employees, the act is the same in principle as the act sustained in New York Central R. Co. v. White, ante, 243 U. S. 188.
(3) The act is not objectionable upon the ground that, in violation of the Seventh Amendment, it does away with trial by jury in the federal courts, since it does not undertake to interfere with that mode of trial in respect of private rights of action which are preserved, but abolishes for the future all right of recovery as between employer and employee in the cases which it covers, leaving nothing for trial by jury either in the state or in the federal courts.
(4) Taking effect in futuro and expressly preserving intervening causes of action, the act disturbs no vested rights.
(5) In requiring employers to make payments to the state fund for the compensation of injured employees and the dependents of those killed, without regard to fault, the act does not deprive employers of their property, or of their liberty to acquire it, in violation of the Fourteenth Amendment, provided the compensation be not excessive and unreasonable, and provided the burden be fairly distributed among the employers included in the industries affected.
(6) In the absence of any showing to the contrary, the compensation provided by the act may be regarded as not unreasonable; this is not to say, however, that any scale of compensation, however insignificant on the one hand or onerous on the other, would be supportable; any question of that kind may be met when it arises.
the assessments, after the initial payments, will be limited to the amounts necessary to meet the losses arising in and chargeable to that group.
(8) The declarations of the act should be accepted as further evidence of an intelligent effort to limit the burden to the requirements of each industry.
(9) Since the question whether a state law deprives of a right secured by the Constitution depends not upon how the law is characterized, but upon its practical operation and effect, and since the Constitution does not require a separate exercise of the state powers of regulation and taxation, the crucial question is whether this legislation, be it regarded as an exercise of the power of regulation or a combination of regulation and taxation, clearly appears to be not a fair and reasonable exertion of governmental power, but so extravagant or arbitrary as to constitute abuse of power.
A state, in the exercise of its power to pass such legislation as reasonably is deemed necessary to promote the health, safety, and general welfare of its people, may regulate the carrying on of all those industrial occupations that frequently and inevitably produce personal injuries and disability, with consequent loss of earning power among employees and occasional loss of life of those upon whom others are dependent for support, and may require that these human losses be charged against the industry, either directly or by publicly administering the compensation and distributing the cost among the industries affected by means of a reasonable system of occupation taxes.
In the absence of any particular showing of erroneous classification, the evident purpose of an act to classify various occupations according to the respective hazard of each is sufficient answer to any contention that the act improperly distributes the burdens among the several industries.
One who is engaged in the business of logging timber, operating a logging railroad, and operating a saw mill with power-driven machinery is not in a position to question the validity of a classification of other businesses as hazardous.
The provision in § 4 of the Washington Workmen's Compensation Law making it a misdemeanor for any employer to deduct any part of the premium from the wages or earnings of his employees will not be construed, in the absence of any constraining state construction, so broadly as to prohibit employers and employees, in agreeing upon terms of employment, from taking into consideration the fact that the employer is a contributor to the state fund, and the resulting effect of the act upon the rights of the parties.
This was an action brought by the state against plaintiff in error, a corporation engaged in the business of logging timber and operating a logging railroad and a sawmill having power-driven machinery, all in the State of Washington, to recover under c. 74 of the Laws of 1911, known as the Workmen's Compensation Act, certain premiums based upon a percentage of the estimated payroll of the workmen employed by plaintiff in error during the three months beginning October 1, 1911. Plaintiff in error by demurrer raised objections to the act based upon the Constitution of the United States.
The Supreme Court of Washington overruled them and affirmed a judgment in favor of the state, 75 Wash. 581, following its previous decision in State ex rel. Davis-Smith Co. v. Clausen, 65 Wash. 156, and the case comes here under § 237, Judicial Code.
The first section contains a declaration of policy, reciting that the common law system governing the remedy of workmen against employers for injuries received in hazardous work is inconsistent with modern industrial conditions, and in practice proves to be economically unwise and unfair; that the remedy of the workman has been uncertain, slow, and inadequate; that injuries in such employments, formerly occasional, have become frequent and inevitable, and that the welfare of the state depends upon its industries, and even more upon the welfare of its wage workers.
act, and to that end all civil actions and civil causes of action for such personal injuries and all jurisdiction of the courts of the state over such causes are hereby abolished, except as in this act provided."
"'Workman' means every person in this state who, after September 30, 1911, is engaged in the employment of an employer carrying on or conducting any of the industries scheduled or classified in section 4, whether by way of manual labor or otherwise, and whether upon the premises or at the plant, or, he being in the course of his employment, away from the plant of his employer,"
with a proviso giving to a workman injured while away from the plant through the negligence or wrong of another not in the same employ, or, if death result from the injury, to his widow, children, or dependents, an election whether to take under the act or to seek a remedy against the third party. "Injury"
is defined as an injury resulting from some fortuitous event, as distinguished from the contraction of disease.
year, it shall be seen that the contribution to the accident fund by any class of industry shall be less than the drain upon the fund on account of that class, the deficiency shall be made good to the fund on the first day of February of the following year by the employers of that class in proportion to their respective payments for the past year."
of life.) For temporary total disability, there is a somewhat different scale, compensation to cease when earning power is restored. For permanent partial disability, the workman is to receive compensation in a lump sum equal to the extent of the injury, but not exceeding $1,500.
By § 6, if injury or death results to a workman from his deliberate intention to produce it, neither he nor his widow, child, or dependents shall receive any payment out of the fund. If injury or death results to a workman from the deliberate intention of the employer to produce it, the workman or his widow, child, or dependent shall have the privilege to take under the act, and also have a cause of action against the employer for any excess of damage over the amount receivable under the act.
By § 19, provision is made for the adoption of the act by the joint election of any employer and his employees engaged in works not extra hazardous. By § 21, the Industrial Insurance Department is created, consisting of three commissioners. By § 20, a judicial review is given, in the nature of an appeal to the superior court from any decision of the department upon questions of fact or of the proper application of the act, but not upon matters resting in the discretion of the department. Other sections provide for matters of detail, and § 11 renders void any agreement by employer or workman to waive the benefit of the act.
From this recital, it will be clear that the fundamental purpose of the act is to abolish private rights of action for damages to employees in the hazardous industries (and in any other industry at the option of employer and employees), and to substitute a system of compensation to injured workmen and their dependents out of a public fund established and maintained by contributions required to be made by the employers in proportion to the hazard of each class of occupation.
While plaintiff in error is an employer, and cannot succeed without showing that its constitutional rights as employer are infringed (Plymouth Coal Co. v. Pennsylvania, 232 U. S. 531, 232 U. S. 544; Jeffrey Mfg. Co. v. Blagg, 235 U. S. 571, 235 U. S. 576), yet it is evident that the employer's exemption from liability to private action is an essential part of the legislative scheme, and the quid pro quo for the burdens imposed upon him, so that, if the act is not valid as against employees, it is not valid as against employers.
However, so far as the interests of employees and their dependents are concerned, this act is not distinguishable in any point raising a constitutional difficulty from the New York Workmen's Compensation Act, sustained in New York Central R. Co. v. White, 243 U. S. 188. It is true that, in the Washington act, the state fund is the sole source from which the compensation shall be paid, whereas the New York act gives to the employer an option to secure the compensation either through state insurance, insurance with an authorized insurance corporation, or by a deposit of securities with the State Commission. But we find here no ground for a distinction unfavorable to the Washington law.
States Telephone & Telegraph Co. v. Oregon, 223 U. S. 118; Kiernan v. Portland, 223 U. S. 151; Marshall v. Dye, 231 U. S. 250, 231 U. S. 256; Davis v. Ohio, 241 U. S. 565.
The Seventh Amendment, with its provision for preserving the right of trial by jury, is invoked. It is conceded that this has no reference to proceedings in the state courts (Minneapolis & St. Louis R. Co. v. Bombolis, 241 U. S. 211, 241 U. S. 217), but it is urged that the question is material for the reason that, if the act be constitutional, it must be followed in the federal courts in cases that are within its provisions. So far as private rights of action are preserved, this is no doubt true, but with respect to those we find nothing in the act that excludes a trial by jury. As between employee and employer, the act abolishes all right of recovery in ordinary cases, and therefore leaves nothing to be tried by jury.
The only serious question is that which is raised under the "due process of law" and "equal protection" clauses of the Fourteenth Amendment. It is contended that, since the act unconditionally requires employers in the enumerated occupations to make payments to a fund for the benefit of employees, without regard to any wrongful act of the employer, he is deprived of his property, and of his liberty to acquire property, without compensation and without due process of law. It is pointed out that the occupations covered include many that are private in their character, as well as others that are subject to regulation as public employments, and it is argued that, with respect to private occupations (including those of plaintiff in error), a compulsory compensation act does not concern the interests of the public generally, but only the particular interests of the employees, and is unduly oppressive upon employers, and arbitrarily interferes with and restricts the management of private business operations.
in that year, actions pending and causes of action existing on September 30 being expressly saved. It therefore disturbed no vested rights, its effect being confined to regulating the relation of employer and employee in the hazardous occupations in futuro.
If the legislation could be regarded merely as substituting one form of employer's liability for another, the points raised against it would be answered sufficiently by our opinion in New York Central R. Co. v. White, 243 U. S. 188, where it is pointed out that the common law rule confining the employer's liability to cases of negligence on his part or on the part of others for whose conduct he is made answerable, the immunity from responsibility to an employee for the negligence of a fellow employee, and the defenses of contributory negligence and assumed risk, are rules of law that are not beyond alteration by legislation in the public interest; that the employer has no vested interest in them, nor any constitutional right to insist that they shall remain unchanged for his benefit, and that the states are not prevented by the Fourteenth Amendment, while relieving employers from liability for damages measured by common law standards and payable in cases where they or others for whose conduct they are answerable are found to be at fault, from requiring them to contribute reasonable amounts and according to a reasonable and definite scale by way of compensation for the loss of earning power arising from accidental injuries to their employees, irrespective of the question of negligence, instead of leaving the entire loss to rest where it may chance to fall -- that is, upon particular injured employees and their dependents.
injury or death, he nevertheless is required to make periodical contributions to a fund for making compensation to the injured employees of his perhaps negligent competitors.
In the present case, the Supreme Court of Washington (75 Wash. 581, 583) sustained the law as a legitimate exercise of the police power, referring at the same time to its previous decision in the Clausen case (65 Wash. 156, 203, 207), which was rested principally upon that power, but also (pp. 203, 207) sustained the charges imposed upon employers engaged in the specified industries as possessing the character of a license tax upon the occupation, partaking of the dual nature of a tax for revenue and a tax for purposes of regulation. We are not here concerned with any mere question of construction, nor with any distinction between the police and the taxing powers. The question whether a state law deprives a party of rights secured by the federal Constitution depends not upon how it is characterized, but upon its practical operation and effect. Henderson v. Mayor of New York, 92 U. S. 259, 92 U. S. 268; Stockard v. Morgan, 185 U. S. 27, 185 U. S. 36; Galveston, Harrisburg & San Antonio Ry. Co. v. Texas, 210 U. S. 217, 210 U. S. 227; Western Union Telegraph Co. v. Kansas, 216 U. S. 1, 216 U. S. 28-30; Ludwig v. Western Union Telegraph Co., 216 U. S. 146, 216 U. S. 162; St. Louis Southwestern Ry. Co. v. Arkansas, 235 U. S. 350, 235 U. S. 362. And the federal Constitution does not require a separate exercise by the states of their powers of regulation and of taxation. Gundling v. Chicago, 177 U. S. 183, 177 U. S. 189.
its validity, and the burden of proof and argument is upon those who seek to overthrow it. Erie R. Co. v. Williams, 233 U. S. 685, 233 U. S. 699. In the present case, it will be proper to consider (1) whether the main object of the legislation is, or reasonably may be deemed to be, of general and public moment, rather than of private and particular interest, so as to furnish a just occasion for such interference with personal liberty and the right of acquiring property as necessarily must result from carrying it into effect, (2) whether the charges imposed upon employers are reasonable in amount, or, on the other hand, so burdensome as to be manifestly oppressive, and (3) whether the burden is fairly distributed, having regard to the causes that give rise to the need for the legislation.
for supplying water, preventing fires, lighting districts, cleaning streets, opening parks, and many other objects. Regulations for these purposes may press with more or less weight upon one than upon another, but they are designed not to impose unequal or unnecessary restrictions upon anyone, but to promote, with as little individual inconvenience as possible, the general good. Though in many respects necessarily special in their character, they do not furnish just ground of complaint if they operate alike upon all persons and property under the same circumstances and conditions. Class legislation, discriminating against some and favoring others, is prohibited, but legislation which, in carrying out a public purpose, is limited in its application, if within the sphere of its operation it affects alike all persons similarly situated, is not within the Amendment."
"Under our statutes, the workman is the soldier of organized industry, accepting a kind of pension in exchange for absolute insurance on his master's premises."
Stertz v. Industrial Insurance Commission, 91 Wash. 588. It is said that the compensation or pension under this law is not confined to those who are left without means of support. This is true. But is the state powerless to succor the wounded except they be reduced to the last extremity? Is it debarred from compensating an injured man until his own resources are first exhausted? This would be to discriminate against the thrifty and in favor of the improvident. The power and discretion of the state are not thus circumscribed by the Fourteenth Amendment.
so, the corresponding burden upon the industry cannot be regarded as excessive if the state is at liberty to impose the entire burden upon the industry. With respect to the scale of compensation, we repeat what we have said in New York Central R. Co. v. White, that, in sustaining the law, we do not intend to say that any scale of compensation, however insignificant, on the one hand, or onerous, on the other, would be supportable, and that any question of that kind may be met when it arises.
the fund shall ultimately become neither more nor less than self-supporting, and that the rates are subject to future adjustment by the legislature and the classifications to rearrangement according to experience, as plain evidence of an intelligent effort to limit the burden to the requirements of each industry.
We may conveniently answer at this point the objection that the act goes too far in classifying as hazardous large numbers of occupations that are not in their nature hazardous. It might be sufficient to say that this is no concern of plaintiff in error, since it is not contended that its businesses of logging timber, operating a logging railroad, and operating a sawmill with power-driven machinery, or either of them, are nonhazardous. Plymouth Coal Co. v. Pennsylvania, 232 U. S. 531, 232 U. S. 544. But further, the question whether any of the industries enumerated in § 4 is nonhazardous will be proved by experience, and the provisions of the act themselves give sufficient assurance that, if in any industry there be no accident, there will be no assessment, unless for expenses of administration. It is true that, while the section as originally enacted provided for advancing the classification of risks and premium rates in a particular establishment shown by experience to be unduly dangerous because of poor or careless management, there was no corresponding provision for reducing a particular industry shown by experience to be included in a class which imposed upon it too high a rate. This was remedied by the amendment of 1915, quoted in the margin, above, which, however, cannot affect the decision of the present case. But, in the absence of any particular showing of erroneous classification -- and there is none -- the evident purpose of the original act to classify the various occupations according to the respective hazard of each is sufficient answer to any contention of improper distribution of the burden amongst the industries themselves.
There remains, therefore, only the contention that it is inconsistent with the due process and equal protection clauses of the Fourteenth Amendment to impose the entire cost of accident loss upon the industries in which the losses arise. But if, as the Legislature of Washington has declared in the first section of the act, injuries in such employments have become frequent and inevitable, and if, as we have held in New York Central R. Co. v. White, the state is at liberty, notwithstanding the Fourteenth Amendment, to disregard questions of fault in arranging a system of compensation for such injuries, we are unable to discern any ground in natural justice or fundamental right that prevents the state from imposing the entire burden upon the industries that occasion the losses. The act in effect puts these hazardous occupations in the category of dangerous agencies, and requires that the losses shall be reckoned as a part of the cost of the industry, just like the payroll, the repair account, or any other item of cost. The plan of assessment insurance is closely followed, and none more just has been suggested as a means of distributing the risk and burden of losses that inevitably must occur, in spite of any care that may be taken to prevent them.
the compensation and distributing the cost among the industries affected by means of a reasonable system of occupation taxes. The act cannot be deemed oppressive to any class of occupation, provided the scale of compensation is reasonable, unless the loss of human life and limb is found in experience to be so great that, if charged to the industry, it leaves no sufficient margin for reasonable profits. But certainly, if any industry involves so great a human wastage as to leave no fair profit beyond it, the state is at liberty, in the interest of the safety and welfare of its people, to prohibit such an industry altogether.
To the criticism that carefully managed plants are in effect required to contribute to make good the losses arising through the negligence of their competitors, it is sufficient to say that the act recognizes that no management, however careful, can afford immunity from personal injuries to employees in the hazardous occupations, and prescribes that negligence is not to be determinative of the question of the responsibility of the employer or the industry. Taking the fact that accidental injuries are inevitable, in connection with the impossibility of foreseeing when or in what particular plant or industry they will occur, we deem that the state acted within its power in declaring that no employer should conduct such an industry without making stated and fairly apportioned contributions adequate to maintain a public fund for indemnifying injured employees and the dependents of those killed, irrespective of the particular plant in which the accident might happen to occur. In short, it cannot be deemed arbitrary or unreasonable for the state, instead of imposing upon the particular employer entire responsibility for losses occurring in his own plant or work, to impose the burden upon the industry through a system of occupation taxes limited to the actual losses occurring in the respective classes of occupation.
proportioned to the special injury attributable to the activities taxed, is not novel. In Noble State Bank v. Haskell, 219 U. S. 104, this Court sustained an Oklahoma statute which levied upon every bank existing under the laws of the state an assessment of a percentage of the bank's average deposits for the purpose of creating a guaranty fund to make good the losses of depositors in insolvent banks. There, as here, the collection and distribution of the fund were made a matter of public administration, and the fund was created not by general taxation, but by a special imposition in the nature of an occupation tax upon all banks existing under the laws of the state. In Hendrick v. Maryland, 235 U. S. 610, 235 U. S. 622, and Kane v. New Jersey, 242 U. S. 160, 242 U. S. 169, we sustained laws, of a kind now familiar, imposing license fees upon motor vehicles, graduated according to horse power, so as to secure compensation for the use of improved roadways from a class of users for whose needs they are essential, and whose operations over them are peculiarly injurious. And see Charlotte, Columbia & Augusta R. Co. v. Gibbes, 142 U. S. 386, 142 U. S. 394-395, and cases cited. Many of the states have laws protecting the sheep industry by imposing a tax upon dogs in order to create a fund for the remuneration of sheep owners for losses suffered by the killing of their sheep by dogs. And the tax is imposed upon all dog owners, without regard to the question whether their particular dogs are responsible for the loss of sheep. Statutes of this character have been sustained by the state courts against attacks based on constitutional grounds. Morey v. Brown, 42 N.H. 373, 375; Tenney v. Lenz, 16 Wis. 566; Mitchell v. Williams, 27 Ind. 62; Van Horn v. People, 46 Mich. 183, 185; Longyear v. Buck, 83 Mich. 236, 240; Cole v. Hall, 103 Ill. 30; Holst v. Roe, 39 Ohio St. 340, 344; McGlond v. Womack, 129 Ky. 274, 283 et seq.
We are unable to find that the act, in its general features, is in conflict with the Fourteenth Amendment. Numerous objections are urged founded upon matters of detail, but they call for no particular mention, either because they are plainly devoid of merit, are covered by what we have said, or are not such as may be raised by plaintiff in error.
"It shall be unlawful for the employer to deduct or obtain [sic] any part of the premium required by this section to be by him paid from the wages or earnings of his workmen or any of them, and the making or attempt to make any such deductions shall be a gross misdemeanor."
If this were to be construed so broadly as to prohibit employers and employees, in agreeing upon wages and other terms of employment, from taking into consideration the fact that the employer was a contributor to the state fund, and the resulting effect of the act upon the rights of the parties, it would be open to serious question whether, as thus construed, it did not interfere to an unconstitutional extent with their freedom of contract. So far as we are aware, the clause has not been so construed, and, on familiar principles, we will not assume in advance that a construction will be adopted such as to bring the law into conflict with the federal Constitution. Bachtel v. Wilson, 204 U. S. 36, 204 U. S. 40; Plymouth Coal Co. v. Pennsylvania, 232 U. S. 531, 232 U. S. 546.
"In that the intent is that the fund created under this section shall ultimately become neither more nor less than self-supporting, exclusive of the expense of administration, the rates named in this section are subject to future adjustment by the industrial insurance department, in accordance with any relative increase or decrease in hazard shown by experience, and if in the judgment of the industrial insurance department the moneys paid into the fund of any class or classes shall be insufficient to properly and safely distribute the burden of accidents occurring therein, the department may divide, rearrange or consolidate such class or classes, making such adjustment or transfer of funds as it may deem proper."

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