Director-Imposed Penalties

In Gallego, Claimant and uninsured employer (“Respondent”) previously entered into a settlement agreement for work-related injury suffered by Claimant. The agreement included a penalty schedule if Respondent failed to comply with its terms. Respondent failed to comply with the settlement, and as a result, the Division of Workers’ Compensation (“Division”) sought enforcement of the agreement and requested penalties. In September 2018, Director entered an order imposing penalties in accordance with the penalty schedule, in an amount totaling $71,940.00. Respondent filed a petition to review this order, arguing that the fine violated the Excessive Fines clause of the U.S. Constitution. A month later, the Director of the Division entered another order finding that the penalty was past due and Respondent had not made any payment. In October 2018, the Director imposed a daily penalty of $71.94, which would continue until Respondent complied with and paid off the penalty from the September order. Through a series of orders and appeals between the Director and Respondent, Respondent ultimately sought an evidentiary hearing be held. Respondent wanted to present testimony, evidence, and argument about its inability to pay the penalty and argue the excessiveness of the penalties. Respondent appealed the most recent Director’s order issued in June 2020, claiming that the excessiveness of the penalty should be considered in the aggregate, and that Respondent was due an evidentiary hearing to demonstrate its inability to pay penalties imposed by the Director.

The Industrial Claim Appeals Office (“the Panel”) reviewed Respondent’s argument that the Director erred in failing to hold an evidentiary hearing, where Respondent could demonstrate its ability – or inability – to pay the penalty, and on the excessiveness of the penalty. The Panel explained that by imposing penalties, the Director’s action constituted a deprivation of property, which implicated Respondent’s due process rights. Although the Director may impose penalties, Respondent is entitled to a hearing where it may present evidence, confront adverse evidence, and make arguments in support of its positions as it relates to those penalties. The Panel also explained that submitting written evidence to the Director showing an inability to pay in lieu of a hearing is not sufficient to satisfy due process requirements.

Additionally, Respondent argued that in evaluating whether a fine is excessive, the aggregate penalty is to be considered, not the daily amount. However, the Panel explained that the Colorado Supreme Court has held that the analysis is to be done in reference to each individual daily fine. There is no requirement to gauge excessiveness of fines by looking at the aggregate penalty. For that reason, the Panel did not opine on excessiveness of the fine, but remanded the matter for the purpose of allowing Respondent the right to a hearing regarding its ability to pay the penalties.

Gallego v. Wizbang Solutions, W.C. No. 5-026-699 (I.C.A.O. Sept. 11, 2020)

Want to know more? Contact Brianna Tancher at or 877-259-5693.

October 2020 Newsletter