Opinion ID: 2357537
Heading Depth: 1
Heading Rank: 2

Heading: Interpretation of K.S.A.2010 Supp. 44-532(d)

Text: On appeal to the Court of Appeals, OT Cab argued that the hearing officer erroneously limited his discretion by considering a civil penalty between $6,800 and $25,000 rather than considering the full range of $0 to $25,000, which includes the option to impose no civil penalty at all. OT Cab further argued that the district court avoided ruling on whether a penalty was mandatory under the statute, which effectively affirmed the hearing officer's erroneous interpretation of the statute. The Division responded by arguing that the $10,000 civil penalty imposed was not arbitrary, capricious, or unreasonable. K.S.A.2010 Supp. 44-532(d) states: In addition, whenever the director has reason to believe that any employer has engaged or is engaging in the knowing and intentional failure to secure the payment of workers compensation to the employer's employees as required in subsection (b) of this section, the director shall issue and serve upon such employer a statement of the charges with respect thereto and shall conduct a hearing in accordance with the Kansas administrative procedure act, wherein the employer may be liable to the state for a civil penalty in an amount equal to twice the annual premium the employer would have paid had such employer been insured or $25,000, whichever amount is greater. (Emphasis added.) OT Cab maintains that the language may be liable provides the Division with the discretion to impose a civil penalty up to the described maximum amount, including the discretion to impose no penalty at all. The Division takes a similar position, allowing a hearing officer to exercise discretion to impose civil penalties other than twice the annual premium or $25,000, whichever is greater. Specifically, the Division has incorporated district court Judge Franklin R. Theis' 2006 decision in In the Matter of Henry Hank Lamping, Jr. and Kansas City Marble Corp. v. Kansas Division of Workers Compensation, Kansas Department of Labor, Case No. 04C1685, into the Division's interpretation and application of K.S.A.2010 Supp. 44-532, requiring that hearing officers set forth the rationale supporting their exercise of discretion to impose a civil penalty other than the statutory maximum. Judge Theis noted that his plain language reading of K.S.A. 44-532(d) mandated a penalty of $25,000 or twice the annual premium the employer would have paid had the employer been insured, whichever amount is greater. The Division, however, stated that its interpretation of the statute allowed imposition of a discretionary civil penalty ranging from $0 to $25,000. Judge Theis accepted the Division's interpretation under the doctrine of operative construction, a doctrine which has lost favor with this court, particularly in cases of statutory construction. See, e.g., Ft. Hays St. Univ. v. University Ch., Am. Ass'n of Univ. Profs., 290 Kan. 446, Syl. ¶ 2, 228 P.3d 403 (2010). Judge Theis remanded the case because the hearing officer had not articulated the reasons supporting the $25,000 penalty imposed in that case. Based on Judge Theis' decision, the Secretary of the Kansas Department of Labor has required hearing officers to set forth the particular rationale explaining the amount of civil penalty imposed. The Court of Appeals engaged in a plain language analysis of K.S.A.2010 Supp. 44-532(d), reading the may be liable language in the context of the entire statute and arriving at the following conclusion: Placed in context, the word `may' clearly refers only to the possibility that the Division may find, based upon the evidence produced at a hearing, that the employer violated K.S.A.2008 Supp. 44-532(b). In the event a violation is found, however, the statute clearly anticipates imposition of a penalty in the particular amount established in section (d), i.e., twice the annual premium the employer would have paid had the employer been insured, or $25,000, whichever amount is greater. Hill, 42 Kan.App.2d at 231, 210 P.3d 647. We disagree with the conclusion that the use of the word may refers only to the possibility of a finding of a violation. In our reading of the statute, the language wherein the employer may be liable to the state for a civil penalty. clearly relates to the possibility of the imposition of a civil penalty as one of the potential outcomes of the hearing. We find that K.S.A.2010 Supp. 44-532(b) provides the Division with discretion to impose no civil penalty at all even after a finding that the employer violated the statute. If the civil penalty was intended to be mandatory, the legislature could have used directory language such as shall or must rather than the permissive word may. The Court of Appeals then focused on the language in an amount equal to in its plain language interpretation of the statute. Hill, 42 Kan.App.2d at 231, 210 P.3d 647. The Court of Appeals' interpretation of the statute requires that when a violation of the statute is found, the Division must impose a civil penalty in an amount equal to twice the annual premium the employer would have paid had such employer been insured or $25,000, whichever amount is greater, without the discretion to impose a different amount. Hill, 42 Kan.App.2d at 233, 210 P.3d 647. We agree that once a determination is made that a civil penalty is to be imposed, the statute requires a civil penalty in an amount equal to twice the annual premium the employer would have paid had such employer been insured or $25,000, whichever amount is greater. K.S.A.2010 Supp. 44-532(d). While it may seem illogical that an employer in violation of K.S.A.2010 Supp. 44-532(b) is subject to either no penalty or a substantial one, without discretion to impose a civil penalty between the two extremes, that is clearly the mandate of the legislature. Certainly, the legislature knows how to give an administrative agency the discretion to impose a civil penalty with a maximum amount. See, e.g., K.S.A. 2-1011(3) (allowing for a civil penalty in an amount not more than $1,000 per violation, for the unlawful sale or distribution of commercial feeding stuff); K.S.A. 16a-6-108(3)(b) (allowing, among other possible sanctions, a civil penalty up to a maximum of $5,000 for each violation of the uniform consumer credit code); K.S.A. 65-170d(a)(5) (allowing the director of the division of environment to impose a civil penalty in an amount of up to $10,000 for each violation for certain public water supply and sewer system problems). Language such as in an amount not more than, up to a maximum of, and in an amount of up to clearly provides an administrative agency with the discretion to impose a civil penalty from $0 to a stated maximum. K.S.A.2010 Supp. 44-532(d), however, uses the language in an amount equal to. This language does not leave any discretion for a civil penalty less than the amount set by statute. When a statute is plain and unambiguous, we must give effect to the legislature's intention as expressed, rather than determine what the law should or should not be. Casco v. Armour Swift-Eckrich, 283 Kan. 508, 521, 154 P.3d 494 (2007). Although it may appear somewhat nonsensical that the agency does not have discretion to impose a civil penalty between $0 and $25,000, the expressed intention of the legislature allows only the possibility of no civil penalty or a $25,000 civil penalty, or even greater if the amount of twice the annual premium the employer would have paid for workers compensation insurance exceeds $25,000. We recognize that the resulting penalty extremes leave OT Cab, and those similarly situated, exposed to Under My Thumb as background music at hearings conducted by the Secretary. We further appreciate that this caught between a rock and a hard place posture leaves those found to be in violation of K.S.A.2010 Supp. 44-532(d) either engaged in a celebratory dance of the Harlem Shuffle or left shattered and reciting I Can't Get No Satisfaction in its prayer for appellate relief. However, as we have often stated, it is not for us to add something to a statute not readily found in it. Bergstrom v. Spears Manufacturing Co., 289 Kan. 605, 214 P.3d 676 (2009). In this case, the hearing officer did not first properly determine whether a civil penalty was appropriate under these facts. We remand to the Division of Workers Compensation for a determination of whether a civil penalty is to be imposed at all. Because we remand on this issue, we do not reach the question of whether the Court of Appeals had jurisdiction to increase the civil penalty imposed absent a cross-appeal by the Division. Judgment of the Court of Appeals reversing the district court on the issue subject to our review is affirmed in part and reversed in part. Judgment of the district court on the issue subject to our review is reversed, and the case is remanded with directions to the Division of Workers Compensation. CARL B. ANDERSON, JR., District Judge, assigned.