COLORADO DEPARTMENT OF LABOR AND EMPLOYMENT, Division of Workers Compensation, Petitioner
v.
DAMI HOSPITALITY, LLC; and Industrial Claim Appeals Office, Respondents.
As
Modified on Denial of Rehearing June 17, 2019
Page 95
Certiorari to the Colorado Court of Appeals,
Colorado Court of Appeals Case No. 16CA249
Attorneys
for Petitioner: Philip J. Weiser, Attorney General, John T.
Lee, Senior Assistant Attorney General, Emmy A. Langley,
Assistant Solicitor General, Denver, Colorado
Attorneys
for Respondent Dami Hospitality, LLC: Law Offices of Daniel
T. Goodwin, Daniel T. Goodwin, Paige Orgel, Broomfield,
Colorado
Attorney
for Amici Curiae Cato Institute and Independence Institute:
David B. Kopel, Denver, Colorado
No
appearance on behalf of Industrial Claim Appeals Office.
OPINION
JUSTICE
HART
Page 96
[¶1]
This case requires us to consider whether the Eighth
Amendments prohibition on the government imposition of
"excessive fines" applies to fines levied on
corporations.[1] We conclude that the purpose of the
Excessive Fines Clause is to prevent the government from
abusing its power to punish by imposing fines, and nothing in
that purpose or in the text of the Eighth Amendment limits
its reach to fines imposed on individuals. We further
conclude that the proper test to assess the constitutionality
of government fines under the Eighth Amendment is that set
forth by the United States Supreme Court in United States
v. Bajakajian, 524 U.S. 321, 334, 118 S.Ct. 2028, 141
L.Ed.2d 314 (1998), which requires an assessment of whether
the fine is grossly disproportional to the offense for which
it is imposed. We thus reverse the court of appeals ruling
and remand to that court for return to the Division of
Workers Compensation with instructions to, as appropriate
and necessary, develop an evidentiary record sufficient to
determine whether the $ 250-$ 500 fine that a business was
required to pay for each day that it was out of compliance
with Colorados workers compensation law is proportional to
the harm or risk of harm caused by each day of noncompliance.
I. Facts and Procedural History
[¶2]
Dami Hospitality, LLC ("Dami") is the
owner-operator of a Denver motel located on Peoria Street.
Dami employs between four and ten people at any given time.
As an employer, Dami is required by statute to maintain
workers compensation insurance. See § 8-43-409,
C.R.S. (2018).
[¶3]
Dami allowed its workers compensation coverage to lapse on
or about July 1, 2005. Upon receiving notification of the
lapse from the Division of Workers Compensation
("DWC"), Dami conceded the violation and paid a
corresponding settlement in June 2006.
[¶4]
Approximately two months later, Dami again allowed its
workers compensation coverage to lapse. This time, Dami went
without coverage from August 10, 2006, through June 8, 2007.
[¶5]
From June 9, 2007, to September 11, 2010, Dami carried the
proper insurance, but the companys workers compensation
coverage again lapsed on September 12, 2010. Dami was without
such insurance from that time until July 9, 2014.
[¶6]
On February 19, 2014, the DWC discovered that Dami had
allowed its workers compensation insurance to lapse for
these periods of time and issued a notice to Dami regarding
this. That written correspondence was dispatched to Damis
Peoria Street address, which was the address on file with the
Colorado Secretary of State for both the limited liability
company and its registered agent, Soon Pak. The DWC notice
advised Dami that it had twenty days to return an enclosed
compliance questionnaire and to submit documents either
establishing that it had maintained coverage during the
relevant periods or demonstrating an exemption from the
coverage requirement. It also specified that Dami could
"request a prehearing conference on the issue of
default."
[¶7]
After Dami failed to respond to the notice of subsequent
violation, the DWC mailed a second notice to Dami on June 25,
2014, this time sending it to an East Dartmouth Place
address.[2] For the second time,
Page 97
Dami was given twenty days to return the same compliance
questionnaire and to submit documents either establishing
coverage during the relevant periods or demonstrating an
exemption from the coverage requirement. The DWC also
specified, again, that Dami could request a prehearing
conference on the issue of default.
[¶8]
On July 11, 2014, the DWC received a faxed certificate of
workers compensation insurance for Dami effective from July
10, 2014, through July 10, 2015. Dami did not offer any other
documentation or any explanation for the extended periods of
noncompliance.
[¶9]
Having received no claim of exemption or proof of coverage
for the second and third periods of noncompliance, and no
request for a prehearing conference, the DWC concluded its
legally mandated investigation into Damis noncompliance on
October 29, 2014. The applicable statutory framework provides
that the DWC shall:
For every day that the employer fails or has failed to insure
or to keep the insurance required by articles 40 to 47 of
this title in force, allows or has allowed the insurance to
lapse, or fails or has failed to effect a renewal of such
coverage: impose a fine of: (I) Not more than two hundred
fifty dollars for an initial violation; or (II) Not less than
two hundred fifty dollars or more than five hundred dollars
for a second and subsequent violation.
§ 8-43-409(1)(b), C.R.S. (2018). In implementing this
provision, the DWC promulgated Rule 3-6(D), 7 CCR 1101-3,
which provides that:
For the Directors finding of an employers second and all
subsequent defaults in its insurance obligations, daily fines
from $ 250/day up to $ 500/day for each day of default will
be assessed in accordance with the following schedule of
fines until the employer complies with the requirements of
the Workers Compensation Act regarding insurance or until
further order of the Director:
Class VII 1-20 Days $250/Day
Class VIII 21-25 Days $260/Day
Class IX 26-30 Days $280/Day
Class X 31-35 ...