$841,200 Fine Against Small Colorado Employer Was Unconstitutionally Excessive

While upholding the facial constitutionality of Colo. Rev. Stat. § 8–43–409, which provides for the imposition of fines against certain employers that fail to maintain workers’ compensation insurance, a Colorado appellate court nevertheless found that the imposition of a fine of $841,200 against a small employer was excessive because the Director of the Division of Workers’ Compensation failed to apply the excessive fine factors adopted under the Eighth Amendment to the U.S. Constitution (and a similarly-worded provision of the Colorado constitution) [see Dami Hospitality, LLC v. Indus. Claim Appeals Office, 2017 COA 21, 2017 Colo. App. LEXIS 207].

The Fine Violated 8th Amendment, as Applied to Employer

The Court concluded that the Director violated the employer’s constitutional protections against excessive fines and abused his discretion in failing to consider facts specific to the employer—including its ability to pay. For example, the employer argued that its annual payroll was less than $50,000.

The Court observed that the appropriate factors to be considered had been set out in Associated Business Products v. Industrial Claim Appeals Office, 126 P.3d 323 (Colo. App. 2005):

  • The degree of reprehensibility of the defendant’s misconduct;
  • The disparity between the harm or potential harm suffered and the fine to be assessed; and
  • The difference between the fine imposed and the penalties authorized or imposed in comparable cases.

Finding that the Eighth Amendment protected corporations—not just “persons”—the Court also acknowledged that setting an appropriate fine was not always easy. Here, however, the Director had merely multiplied a daily fine by the time period for which there was no coverage. That mechanical method of computing the fine was inappropriate under Associated Business Products.

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