A dispute arose between Advantage Personnel Consultants, Inc. and the Tennessee Department of Commerce regarding the classification of employees for workers' compensation insurance. The Department ruled in favor of the insurer, Liberty Mutual Insurance Company, which had reclassified Advantage's employees from 3113 (manufacturing small tools) to 3507 (construction or agricultural machinery manufacturing) following audits. Advantage contested this reclassification, arguing for a return to 3113 or for a new classification of 3620 (boilermaking), asserting it better represented the manufacturing process at TAG Manufacturing Company, which produced backhoe buckets. An administrative hearing featured testimony from Advantage’s Operations Manager, Michael Fowler, who maintained that the work performed at TAG aligned with boilermaking processes, challenging the appropriateness of the 3507 classification. Ultimately, the Tennessee Workers’ Compensation Insurance Plan Administrator upheld the 3507 classification after an inspection by the National Council of Compensation Insurance (NCCI). The trial court affirmed the Department's decision, concluding it was supported by substantial evidence. The judgment of the Chancery Court was affirmed by the Court of Appeals.
Advantage argues that a bucket is classified as a tool, not machinery, based on Caterpillar’s designation, and therefore does not fall under classification code 3507. Michael Welch, a premium auditor for Liberty, initially assigned code 3632 to TAG’s operations but later changed it to 3507 after an audit of a similar company, C. P, confirmed that classification. Welch consulted with TAG’s Terry Wilt before finalizing this change, which was also supported by an NCCI inspection. The final order from October 1, 2010, upheld the classification of 3507. Advantage's petition for review in the Chancery Court of Davidson County was affirmed by the chancellor, leading to an appeal involving only Advantage and Liberty, as the Department of Commerce and Insurance chose not to participate. Advantage contends that the Commissioner’s decision is unsupported by substantial and material evidence per Tenn. Code Ann. 4-5-322(h)(5), arguing that the court may reverse or modify the decision if the administrative findings are not sufficiently substantiated. The substantial and material evidence standard requires a reasonable basis for the agency's actions, and the courts must carefully scrutinize the agency's decision without substituting their judgment on factual matters. The Commissioner concluded that 3507 was the appropriate classification based on TAG's operations, necessitating an examination of those operations.
TAG Manufacturing Inc. is identified as a manufacturer of attachments for heavy equipment used in construction, industrial, and agricultural sectors, producing items like loader buckets and dozer blades. Their operations occur in two facilities: a manufacturing plant and an administrative building. The manufacturing process begins with raw materials such as steel plate, which is cut using a CNC laser machine according to specifications. Additional processes include forming, drilling, and assembly within designated work cells, culminating in final welding and painting. Notably, the teeth for the buckets are sourced from an external contractor.
The classification of TAG's operations is debated, with the NCCI asserting that Code 3507, related to the manufacture of agricultural machinery and heavy equipment, applies, while Advantage claims Code 3620 is more appropriate for manufacturing plate steel tanks and similar products. The latter code involves processes including cutting, forming, and assembling various steel components. After reviewing testimony and evidence, the court finds substantial support for the Commissioner's decision favoring the NCCI's classification, affirming it and assigning appeal costs to Advantage.
