Selk v. Detroit Plastic Products

345 N.W.2d 184, 419 Mich. 1

• Court: Michigan Supreme Court
• Decided: March 21, 1984
• Docket: Docket Nos. 70397, 70412, 70417, 70421. (Calendar Nos. 10-12)
• Status: Published

Opinions

Boyle, J.

We granted leave in these consolidated workers’ compensation cases in order to determine whether 1981 PA 194, which amended MCL 418.801; MSA 17.237(801), requires that interest on workers’ compensation awards made after January 1, 1982, the effective date of the amendment, is to be computed at a rate of 12% per annum with respect to payments which became due prior to January 1, 1982.

In each of these cases, the WCAB entered a post-January 1, 1982, award favorable to the employee and ordered the employer or carrier to pay 12% interest on the entire award. The Court of Appeals affirmed. 120 Mich App 135; 328 NW2d 15 (1982). We granted leave to appeal. 417 Mich 934 (1983). We affirm the Court of Appeals.

I. Facts

There is no dispute as to the facts in the instant cases. Therefore, we adopt the Court of Appeals statement of facts:

"A. Furman

"Plaintiff, Ralph Furman, suffered a work-related injury in 1961. He was awarded benefits for partial incapacity at that time. In 1973, he petitioned for total and permanent disability benefits alleging industrial loss of use of both legs and incurable insanity. He presented the testimony of a psychiatrist which supported his claim. Defendants failed to present any contradictory evidence, whereupon in January, 1973, the hearing referee made a finding of total and permanent disability on the basis of plaintiff’s incurable insanity. That decision was not appealed.

"In June, 1976, plaintiff’s 800-week conclusive presumption period ended. MCL 418.351; MSA 17.237(351). At that time, defendants discontinued paying benefits, whereupon plaintiff petitioned for a factual determination of permanent and total disability. At the hearing, defendants presented expert testimony concerning plaintiff’s mental condition. Plaintiff presented contradictory evidence. The hearing referee found that there had been no material change in plaintiff’s condition since the original determination of incurable insanity was made and that plaintiff’s benefits should be resumed. Defendants appealed that decision to the Workers’ Compensation Appeal Board.

"Defendants did not deny that plaintiff’s condition remained unchanged after the 1973 decision. Rather, they argued that the evidence conclusively established that plaintiff had never been incurably insane, under either the definition of insanity which existed at the time the 1973 award was entered or the definition which was established thereafter.

"In a split decision, the board affirmed the hearing referee’s decision by an order entered on January 14, 1982.

"B. Selk

"Plaintiff Selk filed a petition for benefits on July 27, 1978, claiming that she injured her hips in a work-related incident in January, 1978, and that thereafter her condition was aggravated by a further work-related incident. Contradictory evidence was presented at the hearing with plaintiff and her expert testifying that her injury was work-related. Defendant’s expert testified that plaintiff’s condition was related to her normal 'non-work related’ activities of life. The hearing referee found in favor of plaintiff and entered an open award and ordered the payment of back benefits. By order entered January 8, 1982, the board affirmed the decision of the hearing referee.

"C. Kelly

"Plaintiff Kelly suffered a work-related back injury in January, 1974. Thereafter, defendants voluntarily paid benefits until plaintiff returned to work in November, 1975. Plaintiff quit his job in April, 1976, and filed a petition for benefits on November 11, 1976. Following a hearing held on April 26, 1978, the hearing referee found that plaintiff suffered a work-related injury in 1974. However, he refused to award benefits because he found that plaintiff did not have a compensable injury on April 21, 1976, the last day that he worked.

"By an order entered on January 15, 1982, the board reversed the hearing referee’s decision. It found that plaintiff aggravated his pre-existing back injury while performing work for defendants after returning to work in 1975. It further found that plaintiff suffered disabling neck pain and headaches which resulted from the back injury. Therefore, it entered a retroactive award of compensation benefits from April 21, 1976, and thereafter until further order of the board.” 120 Mich App 140-142.

II. The Statutory Amendment

A

While these appeals were pending before the WCAB, the Legislature enacted 1981 PA 194, which amended MCL 418.801; MSA 17.237(801) to provide a new fifth paragraph:

"(5) When weekly compensation is paid pursuant to an award of a hearing referee, the board, or a court, interest on the compensation shall be paid at the rate of 12% per annum from the date each payment was due, until paid.”

The Legislature directed that the amendment "shall take effect January 1, 1982”. Until December 31, 1981, the effective interest rate was 5%. Wilson v Doehler-Jarvis Division of National Lead Co, 358 Mich 510; 100 NW2d 226 (1960).

The issue is whether 1981 PA 194 was intended by the Legislature to operate prospectively or retrospectively. We agree with the Court of Appeals conclusion that this case "does not even involve retrospective application”. 120 Mich App 146. We find that the statute is plain, certain, and unambiguous, Grand Rapids v Crocker, 219 Mich 178, 182; 189 NW 221 (1922), and requires application, not interpretation.

The amendment provides that interest shall be paid from the date each payment was due. MCL 418.801(1); MSA 17.237(801)(1) provided prior to 1977 that compensation shall "become payable on the fourteenth day after the employer has notice or knowledge of the disability or death”.

In 1977, the Legislature amended § 801 to further clarify when compensation is "dueAs of the time the amendment in issue was enacted the statute provided:

"Compensation * * * shall become due and payable on the fourteenth day after the employer has notice or knowledge of the disability or death”. (Emphasis added.)

Against this backdrop the conclusion is compelling that 1981 PA 194 was unambiguously intended to award interest from the date payment "was due”.

We find further support for our conclusion from the fact that legislative recognition of inflationary interest rates was not confined to the area of compensation awards.

In 1980, the Legislature provided for a change in the interest rate on money judgments which clearly provided for 6% interest to the effective date of the act (June 1, 1980) and 12% thereafter. MCL 600.6013; MSA 27A.6013. In the instant case, the Legislature failed to limit the increase in interest to the effective date of the statute and instead employed language unequivocally stating that the triggering event "was” an occurrence antedating the effective date of the legislation.

Defendants correctly detail the history of the reform efforts which led to the adoption of 12 acts pertaining to workers’ compensation approved on December 30, 1981, and note that the Legislature fixed an effective date of January 1, 1982, for 11 of the 12 acts. However, in our view neither the existence of a legislative concern for the financial burdens on employers or reference to the effective date of the act squarely meet the issue in this case. The Legislature used the language "was due”. Unless this language is unclear, these observations are irrelevant to our task which is to give effect to the plain meaning of the language used. Owendale-Gagetown School Dist v State Bd of Ed, 413 Mich 1; 317 NW2d 529 (1982).

B

Moreover, even if we were to conclude that the language used required construction, we would nonetheless conclude that the board’s application of the legislation was correct.

As a matter of statutory construction, statutes are presumed to operate prospectively unless the contrary intent is clearly manifested. In re Davis Estate, 330 Mich 647, 651-653; 48 NW2d 151 (1951). Moreover, the fact that the statute relates to antecedent events does not, in itself, require a finding that the statute operates retrospectively. Hughes v Judges’ Retirement Bd, 407 Mich 75, 85; 282 NW2d 160 (1979).

An exception to the general rule is recognized where a statute is remedial or procedural in nature. Hansen-Snyder Co v General Motors Corp, 371 Mich 480; 124 NW2d 286 (1963). Statutes which operate in furtherance of a remedy already existing and which neither create new rights nor destroy existing rights are held to operate retrospectively, unless a contrary legislative intention is manifested. Defendant argues that because it is the general rule that an act amending a specific act will be applied retroactively, Rookledge v Garwood, 340 Mich 444; 65 NW2d 785 (1954), it follows that a new provision, which does not amend an existing one, cannot be so applied. However, the Rookledge principle is also simply one of statutory construction. Thus, the fact that § 801 is a new provision does not preclude retroactive application where this is the clearly expressed intent of the Legislature.

As the Second Injury Fund concedes, this Court has held that interest rates relate to a remedy or mode of procedure. See Ballog v Knight Newspapers, Inc, 381 Mich 527, 535; 164 NW2d 19 (1969). While Ballog is not dispositive of the question in the instant case because it related to interest on a money judgment, we there quoted with approval language which characterized interest on a judgment in an action of trespass or trespass on the case for damages to person or property as "not of the substance of the right of action but exclusively an incident attached thereto by legislative fiat after such right has been adjudicated. The period for computation of such interest is in the same category”.

Thus, unless we accept the defendants’ position that the rights in this case are contractual in nature and that a retroactive application of the statute would impair defendants’ vested rights, the conclusion must follow that interest is but an incident and not the essence of a right or liability.

III. Contract Impairment

We recognize the general rule accepted by a majority of jurisdictions that legislative changes in the rate of interest will not be retroactively applied to vary an existing contractual obligation, express or implied, fixing the rate of recoverable interest. Anno: Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 ALR2d 932.

We are persuaded nonetheless that in the instant case interest may be awarded from the date payment was due without running afoul of the constitutional provision against impairment of contract. US Const, art I, § 10; Const 1963, art 1, § 10.

While this Court has characterized workers’ compensation as a liability arising out of the contract of employment, we have nonetheless consistently emphasized that workers’ compensation is a matter of statutory grace. Rookledge v Garwood, supra, p 453; Wilson v Doehler-Jarvis, supra; So-lakis v Roberts, 395 Mich 13; 233 NW2d 1 (1975).

In Lahti v Fosterling, 357 Mich 578, 584; 99 NW2d 490 (1959), the Court held that an amendment to the workers’ compensation act which eliminated a limitation on medical benefits had retroactive effect. The Court considered the theory, also advanced by defendants here, that "since the workmen’s compensation act is statutory, and since the employment is based upon a contract, for the legislature to change the remedies would be a violation of the rights of the parties and the contract”.

In rejecting this conclusion the Court quoted with approval the following language:

" 'It is true that this Court has held, we believe correctly, that the basis of liability of employers under the Workmen’s Compensation Statutes, is contractual. But we cannot say that such contractual relationship or liability necessarily precludes a subsequent Legislature from effecting changes in the Workmen’s Compensation laws. Those who enter into such contractual relationships do so with knowledge of the right and power of the Legislature to enact any new law relating to the subject matter, not in conflict with any constitutional provision, and must be presumed to have agreed to any such change.’ ” Lahti, supra, pp 594-595, quoting Peak v State Compensation Comm’r, 141 W Va 453, 459; 91 SE2d 625 (1956).

In McAvoy v H B Sherman Co, 401 Mich 419, 457; 258 NW2d 414 (1977), we held constitutional the application of MCL 418.862; MSA 17.237(862), which provided that no stay on appeal from an award entered by a referee was available with respect to 70% of the weekly benefit in cases involving injuries or appeals taken by employers before the effective date of the act. We recognized the contractual nature of the relationship while reiterating the principle "that remedies for the enforcement of a contract may be modified without violating the impairment of contract clauses”.

We conclude that the interest rate on a compensation award relates to an additional remedy, and that retroactive application of the statute does not alter the substance of the relationship. See Guardian Depositors Corp v Brown, 290 Mich 433; 287 NW 798 (1939).

Defendant correctly contends that the characterization of a particular legislative action as remedial is not a talisman which forecloses further analysis of a constitutional claim. The Contract Clause retains viability as a restriction on legislative action. The state may, however, alter the terms of a private contract to either lighten or increase obligations, save where its activities constitute a substantial alteration of the terms of a contract. In the latter event, the alteration is permissible if the legislation is necessary to meet a broad and pressing social need and is reasonably related to that goal. Allied Structural Steel Co v Spannaus, 438 US 234; 98 S Ct 2716; 57 L Ed 2d 727 (1978).

Certainly the change involved here is not of the magnitude of the pension fund charge found defective in Allied Structural Steel, supra. Moreover, if it is conceded that the retroactive application of the 12% interest rate is a "substantial alteration” of the contract, we think it abundantly clear that compensation for worker disability is legislation for the public welfare. Energy Reserves Group, Inc v Kansas Power & Light Co, 459 US 400; 103 S Ct 697; 74 L Ed 2d 569 (1983). It is also clear that the act is an attempt to remedy a serious social problem, depreciation of the value of the award as a result of the escalation in the interest rate over the period preceding final determination.

Nor can we say that the legislative solution to the problem is not reasonably related to the goal sought to be obtained. We cannot say that the Legislature acted irrationally in considering that 12% interest was an appropriate compensation on an award ultimately deemed to have been rightfully due 14 days from notice of the injury. Defendants do not dispute plaintiffs’ assertion that for two years prior to the date of enactment, governmental investment instruments provided interest generally in excess of 12%.

Defendants contend that § 801 is irrational because to the extent that the marketplace interest rate was less than 12% during the period before final judgment, plaintiffs will receive a windfall. We note that the converse is true for those periods in which the 12% interest rate was less than that obtainable in the marketplace. Moreover, if defendants’ contentions were accepted and the statute was applied only to payments which are due on or after January 1, 1982, it is foreseeable that some number of workers would not, because of the length of the appeal process, receive 12% interest until 1984, 1985, or later. The wisdom of retroactive application of the 12% interest rate is, in any event, a matter confined to the exclusive judgment of the Legislature. That in any given case the statute may operate imperfectly does not authorize this Court to invalidate an act which is reasonably related to a permissible legislative objective. Shavers v Attorney General, 402 Mich 554, 612; 267 NW2d 72 (1978).

IV. Due Process

Having found that the statute is reasonably related to a legitimate state interest for purposes of the impairment of contract claim, we conclude that defendants’ due process claim is likewise without merit. In Lahti v Fosterling, supra, 357 Mich 591-592, we quoted from Matter of Hogan v Lawlor & Cavanaugh Co, 286 App Div 600; 146 NYS2d 119 (1955), in'holding:

" 'The due process clause of the State and Federal Constitutions does not freeze the burden of compensation liability as of the date of the occurrence of an industrial accident, beyond the power of legislative change. In carrying out its social purpose, the Legislature has the power to increase the burden on the employer for disability or expenses occurring or continuing after the date of the enactment of the amendatory statute, even though the accident which gave rise to the disability or expenses had occurred prior to that time.’ ”

V. Conclusion

For the reasons stated, we conclude that where an employer pays compensation pursuant to an award of a hearing referee, the WCAB, or a court which is entered after January 1, 1982, interest shall be paid at 12% from the date each payment was due. As to the remaining issues, the judgment of the Court of Appeals is affirmed for the reasons stated in its opinion. No costs, a public question being involved.

Williams, C.J., and Ryan, Brickley, and Cav-anagh, JJ., concurred with Boyle, J.