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Employer on hook for retroactive comp premiums


The Ohio Bureau of Workers' Compensation can retroactively reclassify a company's workforce and collect more than $1 million in back premiums regardless of whether the employer was at fault, the state Supreme Court has ruled.

Aaron's Inc., formerly Aaron Rents Inc., is an Atlanta-based rent-to-own retailer that has done business in Ohio for more than 20 years, court records show. When the company first applied for workers comp coverage, the Ohio Bureau of Workers' Compensation assigned it occupational classifications of 8044 and 8810 for furniture and clerical workers, respectively.

“Once the bureau assigns one or more classifications, it is the employer's responsibility to correctly report premium and payroll data to the bureau,” according to records. “The bureau has the right to audit an employer's records to verify the correctness of its payroll reports used to determine premiums.”

In a routine audit of Aaron's records in 2006, the bureau found the company had incorrectly listed “a large percentage” of operational employees as clerical workers, which resulted in them “paying substantially less in premiums than it should have,” records show. However, the audit report wasn't shared with Aaron's because it didn't pass the bureau's quality-review process, among other reasons.

A new audit issued in March 2008 led the bureau to add additional classifications to Aaron's payroll, according to records. They were then applied retroactively to 2004, and the company was billed for more than $2 million in premiums.

The new classifications were upheld after a hearing, but the retroactive application period was reduced to two years, cutting the premiums owed, records show.

Aaron's filed a complaint, which was denied by Ohio's 10th District Court of Appeals in Columbus. The Ohio Supreme Court then reversed the appellate court's decision, ordering the workers comp bureau to issue an amended order explaining its decision, according to records.

Following a hearing on remand, a bureau administrator's designee in January 2012 decided that the bureau properly exercised its discretion, records show. Aaron's again filed a complaint in the 10th District Court of Appeals, which upheld the bureau's decision.

The Ohio Supreme Court on Wednesday affirmed the judgment of the appellate court 4-3.

“The evidence supported the bureau's decision,” according to the state Supreme Court's ruling. “The purpose of retroactive adjustment is to correct an error or mistake, even if the employer was not at fault for the mistake.”

Meanwhile, according to the dissent, there's no evidence to justify a retroactive application since “there is no indication that Aaron's knowingly or intentionally misrepresented its payroll.”

In addition, the dissent states that “the bureau does not account for its failure to notify Aaron's of the results of its 2006 audit, which could have prevented Aaron's from underpaying the $1.6 million that the bureau now orders Aaron's to pay … The bureau does not explain why it is deviating from its internal policy of applying audit adjustments retroactively only when there is evidence of knowing or intentional wrongdoing.”

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