Court: Hawaii Intermediate Court of Appeals; October 30, 2015; Hawaii; State Appellate Court
Claimant-Appellant Robert G. Irving appeals the Labor and Industrial Relations Appeals Board's (LIRAB) denial of his motion to modify a prior decision and request for attorney's fees, originally issued on June 16, 2014. Irving argues that the LIRAB erred in four respects: 1) denying his motion to modify the decision and request for attorney’s fees, 2) failing to designate Employer-Appellee Ocean House Builders and Insurance Carrier-Appellee First Insurance Company of Hawaii, Ltd. as cross-appellants, 3) not recognizing him as the prevailing party on the Employer’s cross-appeal, and 4) denying attorney fees under Hawaii Revised Statutes (HRS) § 386-93.
Background reveals that Irving, employed as a safety officer trainee, sustained injuries from a fall on October 25, 2010, for which the Employer denied liability. Following an investigation, the Director of Labor and Industrial Relations determined that Irving's injuries arose from his employment and awarded medical benefits up to certain dates for his wrist, elbow, and back injuries. Irving's appeal on June 30, 2011, focused on the limitation of temporary total disability and the absence of permanent disability. The LIRAB subsequently clarified the issues for appeal and concluded that while Irving's injuries were work-related, he did not sustain any permanent partial disability. Consequently, the LIRAB denied Irving's motion for modification and request for attorney fees on July 17, 2014.
The standard of review for administrative rulings under HRS 91-14(g) allows a court to affirm, remand, reverse, or modify an agency decision if the petitioners' substantial rights were potentially infringed. Grounds for such actions include violations of constitutional/statutory provisions, exceeding statutory authority, unlawful procedures, legal errors, clear erroneousness based on substantial evidence, or arbitrary/capricious actions. Legal conclusions are reviewed de novo, while findings of fact are assessed for clear error. Procedural defects are examined for legality, and statutory interpretations are also subject to de novo review, with deference given to agency interpretations unless they yield absurd results or conflict with legislative intent.
In the discussion regarding Irving's appeal, the primary issue is whether the Labor and Industrial Relations Appeals Board (LIRAB) erred by not designating the Employer as a cross-appellant. Irving contends that the Employer's new issue raised on appeal should classify it as a cross-appellant under HRS 386-87. The LIRAB, however, noted a lack of specific rules regarding such designations and stated it routinely accepts new issues from non-appealing parties without classifying them as cross-appellants. Irving acknowledged that the question of non-appealing parties introducing new issues without cross-appeal designation has not been specifically addressed in prior LIRAB or court decisions in Hawaii.
The Director is authorized to create rules necessary for the application and enforcement of workers' compensation laws, as per HRS 386-72. The LIRAB, as an administrative agency, is not governed by the Hawai'i Rules of Civil Procedure unless specific LIRAB rules apply. Since no applicable rule for designating a party as a cross-appellant exists and no alternative procedural rule was cited by Irving, the court finds no unlawful procedure in LIRAB's decision not to designate Employer as a cross-appellant.
Irving argues that for attorney fees under HRS 386-93(b), Employer effectively appealed the Director’s decision regarding his work-related injuries by seeking LIRAB's review at the pretrial conference. He asserts that he was the prevailing party on this issue and that LIRAB erred in denying him attorney fees. HRS 386-93(b) stipulates that if an employer appeals a director's decision and loses, they must cover the costs and reasonable attorney fees.
The court previously interpreted the legislative intent behind HRS 386-93(b) in the Iida case, noting it aims to make employers bear the costs of unsuccessful appeals to discourage them from appealing workers' compensation decisions. The provision also highlights fairness, acknowledging that employers are generally better positioned to handle the costs associated with defending and appealing claims than employees, who often face financial burdens when seeking compensation benefits.
Forcing a worker or their dependents to incur costs for successfully litigating a workers’ compensation claim, only to face additional expenses for the employer's unsuccessful appeals, is deemed inequitable. Employers are therefore responsible for the costs associated with their unsuccessful appeals to discourage weak litigation and to prevent harassment of employees who may already be financially strained. In the precedent set by Iida, it was established that if an employer withdraws an appeal, they are considered an unsuccessful party for the purpose of awarding attorney fees. This interpretation aligns with the legislative intent behind HRS 386-93(b), which aims to protect employees through a liberal construction of the statute.
The case raises the question of whether an employer challenging a Director's decision at a pretrial conference, rather than through a formal appeal, can be held accountable for attorney fees under HRS 386-93(b). If the employer had formally appealed a decision affirming a work-related injury, they would have owed attorney fees due to their loss. However, because the employer was allowed to contest the issue at a pretrial conference, the LIRAB denied the employee’s request for attorney fees, arguing that no formal appeal was filed. This situation undermines the risk associated with direct appeals, allowing employers to avoid costs by integrating their challenges into an employee's appeal. Upholding the requirement for employers to cover costs in such scenarios promotes fairness given the financial disparities between employers and employees, encouraging employees to pursue valid claims without fear of incurring additional legal expenses.
Concerns arise that employees may fear their employers could contest favorable Director decisions without being liable for litigation costs if the employer loses. This could lead employers to raise unsuccessful issues at LIRAB pretrial conferences to deter employee appeals. The LIRAB’s decision allowing the employer to challenge the Director’s ruling contradicts the legislative intent of HRS 386-93(b). The LIRAB erred in its holding regarding this issue.
Irving's work-related injuries on October 25, 2010, were affirmed by the LIRAB, establishing him as the prevailing party. Consequently, he is entitled to recover costs and reasonable attorney fees related to defending against the employer's challenge. On remand, the LIRAB is directed to determine and award these costs, apportioning them between those incurred for defending against the employer's challenge and pursuing his appeal.
The July 17, 2014, order denying Irving’s motion for modification and attorney fees is vacated, and the case is remanded for fee determination consistent with this opinion. Though a transcript of the pretrial conference is absent, this lack of record is not disputed by the employer. Irving's appeal regarding the employer's cross-appeal status is effectively addressed through his arguments on a related point, allowing for a comprehensive review of his claims.
