Ohio Staff Hearing Officer is to Utilize Equitable Principles in Reviewing VSSR Settlement Agreements

Where Ohio Adm.Code 4121-3-20(F)(1) provides that a staff hearing officer (“SHO”) is to determine whether an agreed settlement of a violation of a specific safety regulation (VSSR) application is “appropriate in its present form,” the Code refers not merely to whether the agreement is “structurally sound,” meeting basic common-law concepts of contractual formation and validity, the SHO is to determine if the agreement is equitable and appropriate in amount, held an Ohio appellate court [State ex rel. Zarbana Indus. v. Hayes, 2020-Ohio-5200, 2020 Ohio App. LEXIS 4046 (Nov. 5, 2020)]. Accordingly, the state’s Industrial Commission was within its powers to refuse to vacate an SHO’s order rejecting a VSSR settlement on the basis that the settlement amount–$2,000–was inadequate in light of the severity of the violation.

Background

Hayes suffered severe injury to his right hand when it was caught in a punch press in June 28 2013, during his employment with the employer. He subsequently applied a VSSR award, alleging that the employer had violated certain safety requirements established through the Ohio Administrative Code. Some months later, the commission advised the parties that its preliminary, non-binding estimate was that the application could result in an award to Hayes ranging from $20,866 to $69,554. A hearing then conducted in March 2016, convinced a commission SHO that the employer had in fact failed to comply with a provision of the Ohio Administrative Code that requires a foot pedal for a punch press of the sort causing Hayes’ injury and to have a front guard protecting against accidental activation.

Because the violation, like the injury, was “serious,” the SHO believed that Hayes was due an additional award of compensation in the amount of 30 percent of the maximum weekly rate (which the appellate court subsequently indicated would amount to an award somewhat toward the middle of the estimated money range.

Before the SHO had issued his VSSR order, however, the employer and Hayes proposed a $2,000 settlement of the VSSR application. The SHO did not approve the settlement and conducted a hearing for the purpose of adjudicating the settlement. Having disapproved the agreement, the SHO issued a VSSR award.

The employer sought reconsideration of the settlement disapproval, but the commission found it lacked authority to exercise continuing jurisdiction. Ultimately, the employer filed a mandamus action asking the appellate court to issue a writ ordering the commission to vacate its disapproval, approve the proposed settlement, and vacate the VSSR award.

Magistrate’s Recommendation

The magistrate concluded that the commission had authority to disapprove the proposed settlement, and that the employer did not, therefore, have a clear legal right to the relief it sought and that the commission did not have a clear legal duty to approve the settlement, the magistrate recommended that the appellate court deny the writ. The employer filed objections to the Magistrate’s Decision.

Appellate Court Sharply Disagrees With the Employer

According to the appellate court, the “gravamen” of the employer’s objections was that the magistrate had suggested that the Commission had reserved the right to overturn “the will of the parties” because of the Commission’s goal to promote safety and through its general authority over VSSR claims. The employer argued that the error in the magistrate’s reasoning was that “there is nothing in Ohio Admin.Code 4121-3-20(F)(1) reserving such a right to the Commission” [indicated the court, quoting the employer]. The court responded:

Well, nothing perhaps but that provision’s instruction that a joint settlement application “shall be considered by a staff hearing officer” who is to determine whether “the settlement is appropriate” and who, if he or she “does not find the settlement to be appropriate in its present form,” is to “consider” the matter at a hearing and then “issue an order either approving or disapproving the settlement,” with that order to be final. Ohio Adm.Code 4121-3-20(F)(1). Nothing except that [Opinion, pp. 6-7].

According to the appellate court, the employer contended that the commission was precluded from taking “fairness or equity” or a “goal to promote safety” into account in evaluating whether a proposed VSSR settlement is “appropriate” [Opinion, p. 8].

Appropriate “in its Present Form”

At the heart of the employer’s objections was its reading of the Administrative Code regarding potential settlements of VSSR violations. The Code provides in relevant part:

If the staff hearing officer finds that the settlement is appropriate, the staff hearing officer shall issue an order approving it. If the staff hearing officer does not find the settlement to be appropriate in its present form, the staff hearing officer shall schedule a hearing with notices to all parties and their representatives where the matter of the proposed settlement is to be considered. Following the hearing, the staff hearing officer shall issue an order either approving or disapproving the settlement, and the order shall be final [Ohio Adm.Code 4121-3-20(F)(1), emphasis mine].

In short, speaking to the employer’s contentions, the appellate court said the employer proposed that the settlement agreement in a VSSR matter is appropriate if it is “structurally sound,” which the employer proposed was limited to assessment of whether the agreement met basic common-law concepts of contractual formation and validity.

The court’s response: “But the administrative code provision doesn’t say that” [Opinion, p. 8].

The court concluded that the commission’s review of a VSSR settlement is to determine whether it is “appropriate in its present form.” Here, pursuant to the processes envisioned by Ohio Adm.Code 4121-3-20(F)(1), the commission SHO conducted a hearing and disapproved as inappropriate the proposal that, as then before him, contemplated a payment of $2,000 on what he saw as a much more significant specific safety requirement claim. The court said the employer had not provided any persuasive argument as to why it had a clear legal right to have that order set aside or why the commission had a clear legal duty to approve the proffered settlement.