[Cite as State ex rel. NHVS Internatl., Inc. v. Ohio Bur. of Workers' Comp., 2014-Ohio-5522.]

                              IN THE COURT OF APPEALS OF OHIO

                                   TENTH APPELLATE DISTRICT

State of Ohio, ex rel.                                 :
NHVS International, Inc.
                                                       :
                 Relator,                                                        No. 13AP-356
                                                       :
v.                                                                         (REGULAR CALENDAR)
                                                       :
Ohio Bureau of Workers'
Compensation,                                          :

                 Respondent.                           :


                                            D E C I S I O N

                                   Rendered on December 16, 2014


                 Finley & Co., L.P.A., David G. Finley and Patrick M.
                 Higgins, for relator.

                 Michael DeWine, Attorney General, and Kevin J. Reis, for
                 respondent.


                                   IN MANDAMUS
                     ON OBJECTION TO THE MAGISTRATE'S DECISION

DORRIAN, J.
        {¶ 1} Relator, NHVS International, Inc. ("relator"), filed this original action
requesting a writ of mandamus ordering respondent, Ohio Bureau of Workers'
Compensation ("BWC"), to vacate the order of the BWC administrator's designee denying
relator's protest of the decision to reclassify certain employees and to apply the
reclassification retrospectively. Relator further requests a writ of mandamus ordering
BWC to assign a different classification as its primary classification, to assign more than
one basic code to relator's business, and to apply any and all classification changes
prospectively from the date of the writ.
No. 13AP-356                                                                              2

       {¶ 2} Pursuant to Civ.R. 53(D) and Loc.R. 13(M) of the Tenth District Court of
Appeals, this matter was referred to a magistrate who issued a decision, including findings
of fact and conclusions of law, which is appended hereto. The magistrate recommends
that this court grant a limited writ of mandamus ordering BWC to vacate the portion of
the order of the administrator's designee determining that the reclassification would be
applied retrospectively and ordering BWC to enter an amended order adjudicating
relator's protest.
       {¶ 3} BWC sets forth one objection to the magistrate's decision:
               The Magistrate erred in finding that the Administrator's
               Designee abused his discretion as the Designee had some
               evidence to support the retrospective application of the audit
               findings.

       {¶ 4} As explained in the magistrate's decision, this case arises from BWC's
reclassification of the basic manual code applied to relator's employees pursuant to an
audit conducted by BWC, the decision of BWC to apply the reclassification retrospectively,
and the corresponding increase in workers' compensation insurance premiums resulting
from the reclassification. Relator protested the audit findings that resulted in the
reclassification and retrospective application of the reclassification. A three-member
adjudicating committee of BWC denied relator's protest. Following an appeal by relator
and a hearing, the BWC administrator's designee issued an order affirming the order of
the adjudicating committee and denying relator's protest.
       {¶ 5} In his decision, the magistrate concluded that the BWC administrator's
designee did not abuse his discretion in determining the appropriate basic classification to
be applied to relator's employees or in determining that relator failed to show that it
should be assigned more than one basic classification. The magistrate concluded,
however, that the administrator's designee abused his discretion in determining that the
audit findings were to be applied retrospectively. The magistrate cited an audit protest
policy discussed in the decision of the administrator's designee. That policy provides that,
if a protest is based on the retroactive assignment of a higher rate classification and the
misclassification was due to an error by BWC, then the revised classification should be
applied prospectively and the audit should be revised. The magistrate concluded that
BWC initially misclassified relator's operations and that the portion of the order of the
No. 13AP-356                                                                              3

administrator's designee concluding that the audit findings should be applied
retrospectively was significantly flawed. Based on this conclusion, the magistrate
recommended that this court issue a writ of mandamus ordering BWC to vacate the
portion of the order determining that the audit findings would be applied retrospectively
and enter an amended order adjudicating relator's protest. BWC objects to this conclusion
and asserts that the magistrate erred by concluding that the administrator's designee
abused his discretion.
       {¶ 6} BWC argues that the magistrate cited to no clear legal right of relator to
prospective application and no clear legal duty of the administrator to grant such
application. "Mandamus is an extraordinary writ that must be granted with caution."
State ex rel. Liberty Mills, Inc. v. Locker, 22 Ohio St.3d 102, 103 (1986). To obtain a writ
of mandamus, a relator must demonstrate (1) that he or she has a clear legal right to the
relief requested; (2) that the respondent has a clear legal duty to grant the relief
requested; and (3) that he or she has no adequate remedy in the ordinary course of law.
State ex rel. Berger v. McMonagle, 6 Ohio St.3d 28, 29. "It is axiomatic that in
mandamus, the legal duty must be the creation of the legislative branch, and courts are
not authorized to create the legal duty enforceable in mandamus." State ex rel. Byrd v.
Ross, 10th Dist. No. 03AP-478, 2004-Ohio-2642, ¶ 14. The right to mandamus must be
shown by clear and convincing evidence, and a writ will not be granted in doubtful cases.
State ex rel. Goldsberry v. Weir, 60 Ohio App.2d 149, 153 (10th Dist.1978).
       {¶ 7} In his decision, the magistrate cites the decision of the Supreme Court of
Ohio in State ex rel. Aaron Rents, Inc. v. Ohio Bur. of Workers' Comp., 129 Ohio St.3d
130, 2011-Ohio-3140 ("Aaron Rents"). In Aaron Rents, BWC applied a reclassification
retroactively following an audit. Id. at ¶ 5. The Supreme Court concluded that BWC failed
to explain why it applied the reclassification retroactively and that an explanation was
required to permit both the employer and a reviewing court to determine whether BWC
abused its discretion in making the retroactive reclassification. Id. at ¶ 12. The Supreme
Court granted a limited writ of mandamus ordering BWC to vacate its order, further
consider the matter, and issue an amended order including an explanation for its
decision. Id. at ¶ 13.
No. 13AP-356                                                                                                 4

        {¶ 8} After the magistrate entered his order in the present case, this court decided
a mandamus action filed following BWC's entry of an amended order pursuant to the
Aaron Rents decision. State ex rel. Aaron's, Inc. v. Ohio Bur. of Workers' Comp., 10th
Dist. No. 13AP-170, 2014-Ohio-3425 ("Aaron's"). In that action, the employer referred to
an internal BWC policy providing that reclassifications would be applied prospectively
unless there was some fault on the part of the employer. Id. at ¶ 7. Although the policy
was not identified or produced in Aaron's, it appears to be similar to the policy referred to
in the present case. In ruling on the mandamus claim, this court "reject[ed] [the]
argument that the internal policy to 'go prospective on an audit' establishes a clear legal
duty on the part of the [BWC], or a clear legal right on the part of the relator, to apply the
reclassification prospectively."1 Id. at ¶ 9.
        {¶ 9} Notwithstanding our conclusion that an internal policy does not create a
clear legal duty or clear legal right, we are mindful of the Supreme Court's instruction in
Aaron Rents2 that the BWC shall provide an explanation for retroactive reclassification so
that the court can determine if such reclassification was an abuse of discretion. In
Aaron's, the BWC asserted "magnitude of misclassification" as the basis for retroactive
reclassification. The employer requested a writ to vacate the order and to prospectively
apply the reclassifications, asserting that "the [bureau's] own internal policy is to 'go
prospective on an audit' unless there is some intentional wrong-doing or disregard on the
part of the employer." Aaron's at ¶ 4. We found magnitude of misclassification to be a
sufficient basis to deny prospective reclassification and, as noted above, rejected the
employer's argument that the internal policy established a clear legal duty or right to
apply reclassification prospectively. Aaron's at ¶ 9. The facts in Aaron's are quite
different from the facts in the case before us. In this case, the only explanation provided
by the administrator's designee for retroactive reclassification was the application of Ohio
Adm.Code 4123-17-17(C) "in accordance with the * * * written policy."                                     The

1As the magistrate notes, it appears that the policy at issue here, and the requirement that audit results will
only be applied prospectively where BWC made an error, has not been promulgated through the rulemaking
process and codified in the Ohio Administrative Code. The audit-protest policy appears to have been
adopted in 2008 and revised in 2011. Although the policy cross-references the Ohio Administrative Code,
the process by which it was created, adopted, and revised is unclear. By contrast, the provision limiting
BWC's authority to make retroactive adjustments to the 24 months prior to the current reporting period is
codified in the Ohio Administrative Code. See Ohio Adm.Code 4123-17-17(C).
2 We note that, in Aaron Rents, the Supreme Court did not discuss the criteria for granting mandamus.
No. 13AP-356                                                                                5

administrator's designee concluded in a March 19, 2013 order that such application of the
written policy was proper because "[t]here was no demonstration that the bureau
originally misclassified the Employer's operations." Relator requested a writ to vacate the
order, asserting that this factual conclusion of the administrator's designee was incorrect.
Relator does not argue that the written policy established a clear legal right and clear legal
duty. In essence, relator argues that, if the policy is to be applied, it should be applied to
correct facts.
       {¶ 10} For the reasons outlined in the magistrate's decision, we agree.            We
conclude that the administrator's designee abused his discretion in concluding that "there
was no demonstration that the bureau originally misclassified the Employer's operations,"
and abused his discretion by applying the reclassification retroactively on the basis of that
incorrect factual conclusion and pursuant to the written policy. No other explanation was
provided for retroactive reclassification. Accordingly, BWC's objection is overruled.
       {¶ 11} Following an independent review of the record, we find that the magistrate
has properly determined the pertinent facts and applied the appropriate law. Accordingly,
we adopt the magistrate's decision as our own. We issue a limited writ of mandamus
ordering BWC to vacate that portion of the order of its administrator's designee that
determined the audit findings shall be applied retrospectively and, in a manner consistent
with this magistrate's decision, to enter an amended order that adjudicate's relator's
protest.
                                                 Objection overruled; limited writ granted.
                              TYACK and KLATT, JJ., concur.
                                  _________________
No. 13AP-356                                                                             6

                                    APPENDIX

                          IN THE COURT OF APPEALS OF OHIO

                             TENTH APPELLATE DISTRICT

State of Ohio, ex rel.                       :
NHVS International, Inc.
                                             :
               Relator,                                           No. 13AP-356
                                             :
v.                                                           (REGULAR CALENDAR)
                                             :
Ohio Bureau of Workers'
Compensation,                                :

               Respondent.                   :




                          MAGISTRATE'S DECISION

                               Rendered on May 30, 2014


               Finley & Co., L.P.A., David G. Finley and Patrick M.
               Higgins, for relator.

               Michael DeWine, Attorney General, and Kevin J. Reis, for
               respondent.


                                    IN MANDAMUS

       {¶ 12} In this original action, relator, NHVS International, Inc. ("relator" or
"NHVS"), requests a writ of mandamus ordering respondent, Ohio Bureau of Workers'
Compensation ("bureau"), to vacate the March 19, 2013 order of the administrator's
designee that denied relator's protest of the bureau's assignment to relator of manual code
3372 as its basic manual code, and to enter an order assigning to relator manual code
4692 as its basic manual code. Should this court uphold the bureau's assignment to
relator of manual code 3372 as its basic manual code, relator requests that the writ order
the bureau to hold relator accountable on a prospective only basis.
No. 13AP-356                                                                          7

Findings of Fact:
       {¶ 13} 1. NHVS is an Ohio corporation that was incorporated June 1, 2010.
       {¶ 14} 2. On July 1, 2011, NHVS started its business in Ohio from a location in
Mentor, Ohio.
       {¶ 15} 3. On or about September 13, 2011, Sherry Richcreek, NHVS's executive
director, completed for relator an application for Ohio Workers' Compensation Coverage
on bureau form U-3.
       {¶ 16} 4. The U-3 form instructs the applicant:
               Describe your services or products, including your methods
               of operations. Include raw and semi-finished materials used
               (attach additional documentation, if necessary). Note: It is
               important for you to provide as much information as
               possible for BWC to properly determine your correct
               classification.

       {¶ 17} In response, Richcreek stated:

               Light manufacturing Service. Finish cores, prep cores,
               assemble wax, wax injection, and metal finishing.

       {¶ 18} The U-3 form requested additional information:

               Describe machinery, equipment and tools (attach additional
               documentation, if necessary).

       {¶ 19} In response, Richcreek wrote:

               Wax injectors, small wax pots, belters, sanders, and hand
               drills.

       {¶ 20} 5. By letter dated October 31, 2011, the bureau thanked relator for
"establishing Ohio workers' compensation coverage."
       {¶ 21} 6. The bureau provides a form captioned "payroll report" that the employer
must complete to maintain its coverage. The first payroll report received by relator
indicated that relator must report its payroll for the period September 13 through
December 31, 2011. The payroll report indicated that the completed report and the
premium payment must be received by the bureau by February 29, 2012 to prevent a
lapse in coverage and other penalties.
No. 13AP-356                                                                            8

       {¶ 22} The payroll report form provides spaces for the employer to report the
number of covered workers and corresponding payroll for the applicable National Council
on Compensation Insurance ("NCCI") manual codes. On the payroll form received by
relator, "3336RN Type Foundry" was printed by the bureau on the form. In response,
Richcreek entered a zero for the number of covered workers and another zero for the
corresponding payroll.
       {¶ 23} However, in her own hand, Richcreek entered manual code "8810" and that
246 workers are covered under that manual code for a total payroll $3,057,693.
       {¶ 24} Also, Richcreek indicated that NHVS employs 70 "Metal Finishers" for a
payroll of $1,846,379. Applying the rates applicable to those employed under "8810" and
as "Metal Finishers," Richcreek calculated the premium to be $10,735. On a check dated
February 29, 2012, Richcreek made payment to the bureau in the amount of $10,735.
       {¶ 25} 7. By letter dated July 18, 2012, Michael B. Glass, the bureau's director of
underwriting and premium audit ("director Glass") informed relator that manual 8810
with a "Class description" for "Clerical Office Employees Noc" was "activated" effective
January 1, 2012. The letter explained that, "BWC has received additional information
regarding your policy." However, the letter did not identify the additional information.
The letter concluded with the instruction: "Please report payroll for operations described
by the code(s) * * * with your next payroll report."
       {¶ 26} 8. On Tuesday July 24, 2012, at 4:18 p.m., John Best sent an e-mail to
Richcreek:
               Chris contacted BWC pertaining to the assigned NCCI
               classification 3336, which includes casting using wax and is
               exactly what your application for coverage says you do.

       {¶ 27} 9. On Wednesday July 25, 2012, at 10:30 a.m., Richcreek e-mailed to Best:

               Hello John

               We do not manufacture anything we provide a service to the
               foundry which is polishing castings that are delivered to us.
               We add pieces to wax pieces that are made by our customers
               and are brought here. We do not manufacture nor have we
               ever even had a furnace to melt metal. I need to know how to
               appeal this as you have been at our facility and this is wrong.
No. 13AP-356                                                                             9

       {¶ 28} 10. On Wednesday July 25, 2012, at 10:54 a.m., Best e-mailed to Richcreek:

               Hello Sherry,

               Based on your business description below, the code should
               be 3372 for finishing of castings. Below is the Scope as
               published by NCCI. The part is [sic] green is the reference to
               finishing of castings. Are you ok with this as your business
               operations code?

       {¶ 29} 11. On Wednesday July 25, 2012, at 11:45 a.m., Richcreek e-mailed to Best:

               Hello John,

               We only remove small amounts excess metals from castings
               provided by our customer, they are polished and or
               sandblasted and returned to the customer. We do no
               chemical process at all. Most of our work is bench work with
               hand files or very small drills, used on ceramic and wax
               pieces taking dye lines down, adding plastic/wax pieces,
               everything (including the wax pattern) is supplied by our
               customer. The metal department is only about 35% of our
               business.

       {¶ 30} 12. On Wednesday July 25, 2012, at 12:00 p.m., Best e-mailed to Richcreek:

               Ok, I do understand. While your business may not do
               everything indicated by the code Scope published by NCCI,
               3372 is the Code to be assigned to your business and your
               business will be in the low degree of hazard or exposure
               within that particular code.

       {¶ 31} 13. By letter dated July 25, 2012, director Glass informed relator that
manual 3372 with a "Class description" for "Electroplating" was being "activated" effective
September 13, 2011.     The letter also informed relator that manual 8810 was being
"activated" effective September 13, 2011. The letter further informed relator that manual
3336 with a "Class description" for "Type Foundry" has been "deactivated" effective
January 1 and July 1, 2012.
       {¶ 32} 14. The second payroll report that relator received from the bureau
indicated that relator must report its payroll for the period January 1 through June 30,
2012. The payroll report indicated that the completed report and premium payment must
be received by the bureau by August 31, 2012.
No. 13AP-356                                                                           10

       {¶ 33} On the second payroll report, as with the first payroll report, "3336RN Type
Foundry" was printed for relator on the form.           Richcreek did not enter requested
information regarding "3336RN Type Foundry." Rather, in her own hand, Richcreek
entered "8810RN Clerical" under "NCCI Manual Description."
       {¶ 34} On the second payroll report, Richcreek indicated that relator employs 442
workers covered under manual 8810 based upon payroll of $5,126,092. Richcreek
calculated her premium for the first half of calendar year 2012 to be $11,221.01.
       {¶ 35} By check dated July 23, 2012, Richcreek made payment to the bureau in the
amount of $11,221.01.
       {¶ 36} 15. On August 28, 2012, bureau auditor Ed Grau conducted an onsite audit
of NHVS's business records. Under "Description of Findings," Grau reported:
               Reviewed employer's records from 7/1/11 to 6/30/12. There
               were findings for all periods reviewed. Audit found that the
               employer's BWC coverage began 9/13/11, however, the
               employer's payroll began 7/1/11. Audit added a prior to
               coverage period from 7/1/11 to 9/12/11. The employer had
               reported payroll from this period to the 9/13/11-12/31/11
               period. Audit moved the appropriate payroll to the prior to
               coverage period.

               For all periods reviewed, audit will move payroll of
               operational employees previously reported to NCCI manual
               8810 (clerical) to NCCI manual 3372 (electroplating). Payroll
               of employees with clerical only duties will remain classified
               to NCCI manual 8810.

       {¶ 37} 16. On September 7, 2012, relator's third-party administrator ("Sheakley"),
notified the bureau that relator is protesting the audit findings.
       {¶ 38} 17. By letter dated September 21, 2012, Michael Kennedy, a regional
supervisor of the bureau's underwriting and premium audit department, responded to the
September 7, 2012 protest. Mr. Kennedy stated:
               The complaint received via e-mail dated September 7, 2012
               disagreeing with the reclassification of operational
               employees of NHVS from NCCI manual 8810 Clerical Office
               Employees NOC to NCCI manual 3372 Electroplating has
               undergone a departmental review. The review has confirmed
               that the change in classification was correct.
No. 13AP-356                                                                       11

               Ohio Administrate Code section 4123-17-08 as well as
               section 4123.29 of the Revised Code provides that the BWC
               must conform to the classification of industries according to
               the categories established by the National Council on
               Compensation Insurance (NCCI).

               NCCI manual 3372 "is applicable to metal finishing
               operations such as polishing and buffing small miscellaneous
               articles of metal, plastic, etc…Metal deburring operations are
               classified to Code 3372. This operation involves the removal
               of rough edges or areas from metal goods. Shot peening of
               metal parts is assigned to 3372 by analogy." The audit
               established that the employer's operations are consistent
               with code 3372.

               The use of manual 8810 Clerical is governed by Ohio
               Administrative Code 4123-17-09 which clearly outlines that
               this manual shall include only the payroll of those
               individuals whose duties are confined to keeping the books
               and records of the employer, conducting correspondence and
               drafting or who are engaged wholly in office work where
               such books are kept, having no duties of any nature in or
               about the risk's premises.

               The audit reclassified employees to code 3372 whose duties
               included operational duties or supervisory duties outside of
               an office environment.

               You may appeal BWC's decision pursuant to Ohio Revised
               Code Section 41223.291 [sic] and Ohio Administrative Code
               section 4123-14-06. I have attached a form legal 15 which
               you will need to file if you desire to have this matter heard
               before the Adjudication Committee.

       {¶ 39} 18. By letter dated September 21, 2012, Terrie Weiland, a Sheakley rate
analyst, wrote as follows to the bureau:
               Our client mentioned above has recently been notified of an
               outstanding balance due to the Bureau of Workers'
               Compensation. This balance due is a result of an audit which
               was conducted in June 2011. Based on the unusual
               circumstances surrounding this matter, we are protesting the
               audit findings. We would like to request a phone hearing to
               resolve this issue.

               Originally, Dr. Sherry Richcreek worked for her husband for
               many years. Dr. Richcreek had begun developing her
No. 13AP-356                                                                   12

               company NHVS International Inc. in 2010, she had it
               incorporated and started working on new customers for the
               entity. During this time her husband became ill with cancer
               and was going to downsize because of his health, so her
               company purchased part of the assets. NHVS International
               Inc. submitted paperwork by computer on May 24 of 2011
               for a July 1st start date.

               Ed Grau a BWC Auditor called stating he would be out on
               June 4th for an audit due to them being a split from a
               company that is still in business. The audit was completed,
               however no audit findings were ever sent to the employer
               advising them of the outcome.

               When she received their first payroll report it reflected
               manual codes 8810 and manual code 3336 which is a
               Foundry code. She was very surprised since they are not a
               manufacture[r] and made multiple phone calls to the bureau
               to find out why it was added. She was told that since 30 of
               their employees do metal polishing she must report all of her
               employees under 3336 manual code. She ultimately reported
               and paid her premiums of $10,735 using the 8810 & 3336
               manual codes.

               August 14, 2012 NHVS International received an invoice for
               $79,684.42, unbeknown to them; Ed Grau had changed their
               manual code from 3336 to 3372 which resulted in the
               outstanding balance. No audit findings were ever sent to the
               employer informing them of this change from the audit that
               was completed back in June of 2011. Up to this point they
               thought the were in good standings with the bureau, since it
               had been 10 months since the audit they had no reason to
               think there was an issue.

               Based on NHVS International business operations we feel
               that manual code 3336 and 3372 are inappropriate codes to
               have to report all operational personnel under. They have
               between 400-600 employees working and their highest
               revenue brought into the business is from small bench
               assembly and only 35% of their workforce actually doing the
               metal polishing. They are not disputing the fact that the 30
               employees that are doing the metal polishing should be
               reported under manual code 3372. However, the other 200
               employees that are assembling product should not have to be
               reported under a manufacturing metal code. They want to
               report correctly, and feel they should be assigned
               appropriate manual codes that best reflect the job duties
No. 13AP-356                                                                         13

               performed by their employees. We feel that the employer
               should be allowed to segregate their payroll according to the
               job duty performed.

               NHVS International currently has around $2,082 in total
               claim costs which includes the 2012 claims. If the manual
               codes that are assigned remains they could be paying up to
               $400,000 a year in premiums. This would cause a financial
               hardship on them and could impact whether or not they
               could remain in business.

               In closing we are asking that you add additional manual
               codes under NHVS International and allow them to report
               payroll under the manual code that best fits their employee's
               job duty. We ask that they not be required to report their
               small bench assemblers under a Metal Manufacturing code
               due to the ratio of employees verse job performed. We also
               ask that you take into consideration their main form of
               revenue is not by the metal polishing but from the small
               bench assembly.

       {¶ 40} 19. By letter dated October 2, 2012, director Glass informed relator that
manual 3372 regarding "Electroplating" and manual 8810 regarding "Clerical Office
Employees Noc" are being activated effective July 1, 2011. (Compare with Director Glass'
letter dated July 25, 2012.)
       {¶ 41} 20. On October 2, 2012, the bureau issued to relator an invoice indicating
that $426, 525.51 is due to be paid by October 30, 2012.
       {¶ 42} 21. On November 8, 2012, bureau auditor Harry Yoder conducted a rating
inspection. In his report, under "Nature of the operation," Yoder wrote:
               Deburring and polishing of customers' metal and plastic
               parts.

       {¶ 43} Under "Method of operation in detail," Yoder wrote:

               The customers' parts are small automobile parts, and the
               customers need their parts deburred and polished with the
               use [of] grinding machines, CNC machines, and hand
               polishing equipment. The company's employees debur and
               polish the customers' parts. The parts are metal and plastic.
               The deburring and polishing of the plastic parts also involve
               applying hot wax to some of the parts[.] [E]mployees use a
               prep pad that they dip into the wax to apply the wax to the
               parts. The wax is used to fill cracks and complete add
No. 13AP-356                                                                     14

                substance to the parts. After the parts are deburred and
                polished, the parts are parts are [sic] shipped to the
                customers. The prep pad that was mentioned above for
                applying the wax onto the plastic parts are assembled in a
                separate area of of [sic] the company's buil[d]ing. The
                employees in the prep pad department manufacture the prep
                pads by taking scotch brite material and gluing the scotch
                brite to the ends of popsicle sticks[.] The scotch brite comes
                in rolls, and the employees cut the scotch brite into small
                pieces. The small pieces are glued to the ends of the popsicle
                sticks to form the prep pads. The prep pads are used by the
                employees in the deburring and polishing of the customers'
                parts, and prep pads are sold to customers for use in their
                business. The reason for explaining the prep pad process is
                due to the fact that the prep pad business and
                deburring/polishing business were combined by Columbus
                Central Office, because both businesses are located at the
                same address, and the prep pad business realizes most of its
                business on the deburring/polishing business both
                businesses file separate tax returns. The deburring business
                filesl an 1120, and the prep pad business files an 990. There
                are no intermingling of employees between the two
                businesses, and Dr. Sherry Richcreek is the president of the
                deburing business with the name of NHVS International
                Inc[.], and James Richcreek is the president of the prep pad
                business with the name listed above.

          {¶ 44} In his report, Yoder concluded:

                Manual 3372 is considered correct for the deburring and
                polishing of the customers' parts.

          {¶ 45} 22. On December 4, 2012, Paul A. Watson, secretary to the bureau's
adjudicating committee, issued a document captioned "Statement of Protest," which
states:
                Background Facts and Issues Presented: The Bureau
                audited the employer, for the period from July 1, 2010 to
                June 30, 2012. The auditor found that the employer should
                have reported its operational employees under its main
                operational manual. Instead, the employer had reported the
                payroll to Codes 8810 (Clerical Officers).

                The employer protested the finding and requested a hearing
                before the Adjudicating Committee.
No. 13AP-356                                                                    15

      {¶ 46} 23. On December 12, 2012, the bureau's three-member adjudicating
committee heard relator's protest. On December 27, 2012, the adjudicating committee
mailed an order denying relator's protest. The order explains:
               Background Facts and Issues Presented: The Bureau
               audited the employer, for the period from July 1, 2011 to
               June 30, 2012. The auditor found that the employer should
               have reported its operational employees under its main
               operational manual. Instead, the employer had reported the
               payroll to Code 8810 (Clerical Officers).

               The employer protested the finding and requested a hearing
               before the Adjudicating Committee.

               ***

               Employer's Position:

               The employer was given confusing information from the
               Bureau regarding the manual classifications. The Bureau
               never informed the employer of the audit findings. The
               employer was assigned two manufacturing codes (m3336
               and m3372). The employer only has a few manufacturing
               employees. However, the Bureau classified almost all
               workers as operational employees. Most workers are not
               engaged in metal polishing or grinding. The claims history of
               this employer shows they run a safe operation. Only 30-50
               workers do metal polishing. The employer cannot afford to
               pay the higher rates. Manual 3632 might be a more
               appropriate manual classification. There are also other
               classifications that might be more appropriate.

               Bureau's Position:

               The employer was originally assigned manual 3336. Later
               manual 8810 was added. The employer reported almost its
               entire payroll to manual 8810. In July 2012, the Bureau's
               underwriting unit assigned manual 3672 [sic] to the policy
               and removed manual 3336. After the classification change
               the Bureau audited the employer. Payroll was divided
               between manual 3672 [sic] and manual 8810. The company
               cleans, paints, deburs, buffs and finishes plastic or metal
               parts. Manual 3672 [sic] is the appropriate classification for
               that type of business. The employer does not qualify for
               segregated manual classifications. All operations are done at
               the same location at the same operation. The various types of
No. 13AP-356                                                                  16

           work done by this employer are incidental to manual 3672
           [sic]. The employer grossly reported its payroll by assigned
           [sic] operational payroll to manual 8810. The employer is
           not entitled to prospective audit findings.

           Findings of Fact and Conclusion of Law:

           In order to make a decision on the classification issue, a brief
           history of the setting of manual classifications must be
           discussed. Prior to 1993, the bureau used its own system to
           categorize operations. In 1993, the legislature required the
           bureau to replace this system with the classifications used by
           the National Council on Compensation Insurance (NCCI).
           See R.C. 4123.29(A)(1); Am.Sub.H.B. No. 107, 145 Ohio
           Laws, Part II, 3113. Under R.C. 4123.29(A)(1), "…subject to
           the approval of the bureau of workers' compensation board
           of directors," the duties of the Administrator include
           "[c]lassify[ing] occupations or industries with respect to
           their degree of hazard and determin[ing] the risks of the
           different classes according to the categories the national
           council on compensation insurance establishes that are
           applicable to employers in this state[.]" The courts have
           consistently given deference to the bureau in using this
           classification system. The Ohio Supreme Court in State ex
           Rel. Cafaro Mgt. Co. v. Kielmeyer (2007) 113 Ohio St.3d 1
           stated "[D]eference is required 'in all but the most
           extraordinary circumstances,' with judicial intervention
           warranted only when the agency has acted in an 'arbitrary,
           capricious or discriminatory manner[.]" Citing State ex Rel
           Progressive Sweeping Contrs., Inc. v. Ohio Bur. of Workers'
           Comp. (1994) 68 Ohio St.3d 393, 395-396.

           Ohio Administrative Code 4123-17-08(D), in implementing
           the NCCI classifications states, "The purpose of the
           classification procedure is to assign the one basic
           classification that best describes the business of the
           employer within a state. Subject to certain exceptions
           described in this rule, each classification includes all the
           various types of labor found in a business." Per 4123-17-08,
           "[t]he purpose of the classification system is to group
           employers with similar operations into classifications so that
           [t]he assigned classification reflects the exposures common
           to those employers [and] [t]he rate charged reflects the
           exposure to loss common to those employers." Additionally,
           "[s]ubject to certain exceptions, it is the business of the
           employer within a state that is classified, not separate
No. 13AP-356                                                                        17

               employments, occupations or operations within              the
               business." Ohio Adm.Code 4123-17-08 (A1,2)[.]

               Per 4123-17-08(B)(1), "[c]lassifications are divided into two
               types — basic classifications and standard exception
               classifications. Basic classifications describe the business of
               an employer. This term is applied to all classifications listed
               in this manual, except for the standard exception
               classifications."

               Given the information provided at the hearing, the
               Adjudicating Committee upholds the classification of manual
               3372. The employer's operations are best described by this
               classification. The employer's operations are cleaning,
               painting, deburring, buffing and finishing of plastic or metal
               parts. These operations are best described in manual 3372.
               The Committee finds that the bureau has properly applied
               NCCI classifications pursuant to R.C. 4123.29. As the court
               reiterates, "[d]eference is required in all but the most
               extraordinary circumstances."

      {¶ 47} 24. Relator administratively appealed the December 12, 2012 order of the
adjudicating committee to the administrator's designee pursuant to R.C. 4123.291.
      {¶ 48} 25. In support of its appeal, relator submitted the affidavit of Sherry
Richcreek executed January 25, 2013. The Richcreek affidavit states:
               [Two] NHVS International began business on July 1, 2011;
               and

               [Three] NHVS International submitted paperwork in May of
               2011 to the Ohio Bureau of Workers' Compensation (herein
               "BWC"); and

               [Four] On June 4, 2011 an auditor, Ed Grau, came to NHVS
               International's future plan for an audit; and

               [Five] NHVS International employees [sic] around 500
               employees; and

               [Six] Of those employees roughly 30 are employed in the
               metal finishing operations; and

               [Seven] The remaining employees work in the waxwork or
               ceramic work operations; and
No. 13AP-356                                                                           18

              [Eight] These operations are not dependent on each other
              and can exist as independent operations; and

              [Nine] NHVS International's products are ultimately used
              for airplane turbines; and

              [Ten] The waxwork operations include filling small bubbles
              with wax and rubbing it smooth, marking with a china
              marker rubbing the part with a scotch brite pad until
              smooth; and rubbing dye lines off the wax piece.

              [Eleven] The ceramic work operations include marking the
              pieces with markers, tape, glue or small amounts of wax to
              give them stability; and soap to prevent the customers wax
              from sticking when it is returned to the customer.

              [Twelve] The primary business of NHVS International is
              working with wax and ceramic cores parts for airplane and
              turbines and

              [Thirteen] The letters and emails attached to this appeal are
              true and accurate copies of letters and emails I received in
              the normal course of business; and

              [Fourteen] Each operation is separated and protected from
              the hazards of the other operations at NHVS International's
              plant; and

              [Fifteen] NHVS International is able to split its payroll into
              metal finishing, waxwork and ceramic work operations; and

              [Sixteen] The current premium charge to NHVS
              International would significantly hinder its ability to
              continue business[.]

       {¶ 49} 26. In further support of its appeal, relator submitted a report from Edward
J. Priz, dated January 31, 2013. In his eight-page report, Priz states:
              Summary of Opinions

              Based upon my review of information regarding the
              operations of NHVSI, and my experience in the field of the
              Workers['] Compensation classification system developed by
              the National Council on Compensation Insurance ("NCCI"), I
              have formed the following opinions to a reasonable degree of
              professional certainty:
No. 13AP-356                                                                19

           Classification Code 3672 [sic] is not the correct governing
           classification for NHVSI, although it is appropriate for one
           part of their operations;

           The Ohio BWC, in its earlier decision to assign Code 3672
           [sic], failed to take into account the nature of the work done
           by the majority of NHVSI workers, and the products
           produced by NHVSI;

           The Ohio BWC also failed to take into consideration the
           NCCI classification rules that call for assigning more than
           one classification code to a manufacturing concern under
           certain circumstances;

           Code 4692 is the proper NCCI classification code for most of
           the manufacturing operations conducted by NHVSI.

           Code 4692 closely matches the materials, equipment, work
           processes, and products of NHVSI in their work with ceramic
           and wax parts.

           ***

           Metal Finishing at NHVSI

           One part of the operations at NHVSI stands apart from the
           rest, however, and this appears to have been the part of
           NHVSI that the earlier BWC classification decisions focused
           upon. In the metal finishing department, small cast metal
           parts made by customers of NHVSI are polished and
           smoothed by means of grinding and sandblasting. This metal
           finishing department is separated from the rest of the
           operations of NHVSI by walls and doors, and there is no
           interchange of labor. This metal finishing department
           functions separately from the work done by the rest of
           NHVSI.

           NCCI classification rules make it clear that under such
           circumstances, a separate classification can properly be
           assigned if "the insured conducts more than one operation in
           a state.["]

           (1) For purposes of this rule, an insured is conducting more
           than one operation in a state if portions of the insured's
           operations in that state are not encompassed by the
           classification applicable to the insured's principal business.
           To qualify for a separate classification, the insured's
No. 13AP-356                                                                         20

             additional operation must meet all of the following
             conditions:

             Be able to exist as a separate business if the insured's
             principal business in the state ceased to exist.

             Be located in a separate building, or on a separate floor in the
             same building, or on the same floor physically separated
             from the principal business by structural partitions.
             Employees engaged in the principal business must be
             protected from the operating hazards of the separate
             additional operations.

             Maintain proper payroll records.

             The metal finishing department of NHVSI meets all of the
             enumerated criteria. The grinding and sandblasting of metal
             castings is not contemplated by Code 4692, and is such that
             it could easily exist as a separate business if the ceramic and
             wax operations of NHVSI were discontinued. The metal
             finishing department is separated from the rest of NHVSI by
             structural walls and doors, and the workers in the ceramic
             and wax operations are protected from the operating hazards
             of the metal finishing department. Finally, proper payroll
             records are maintained that separately record the payrolls of
             these different operations.

             The metal finishing department of NHVSI is properly
             classified under Code 3372, as NHVSI has already conceded.
             But the payroll for the metal finishing department
             constitutes only 29% of the manufacturing payroll of NHVSI.
             The operations of the metal finishing department are distinct
             and separate from the ceramic and wax departments.

(Footnote omitted.)
      {¶ 50} 27. Following a March 19, 2013 hearing, the administrator's designee issued
an order that affirms the order of the adjudicating committee. The March 19, 2013 order
explains:
             Pursuant to Ohio Revised Code Section 4123.291, this matter
             came on for hearing before the Administrator's Designee on
             the employer's appeal of the Administrator's Designee order
             dated December 12, 2012. At issue before the Administrator's
             Designee, the employer protested the Auditor's decision to
             transfer payroll from manual 8810 to the operational
             manual. Further, the employer objected to the Bureau
No. 13AP-356                                                                    21

               assigning manual 3372 as the operational manual for the
               company.

               ***

               The Administrator's Designee adopts the statement of facts
               contained in the order of the Adjudicating Committee.

               Based on the testimony and other evidence presented at the
               hearing, the Administrator's Designee affirms the
               Adjudicating Committee's findings, decision, and rationale
               set forth in the order.

               However, this order will specifically address three issues not
               fully addressed in the order of the Adjudicating Committee[.]
               1.) The reason why the audit will not be applied [only]
               prospectively.
                2.) The reason why payroll will not be allowed to be
               segregated between two operational manual classifications
               3.) The reason why manual 3372, not manual 4692 is the
               appropriate operational manual classification for this
               employer's operations.

               Regarding the denial of the prospective [only] audit findings,
               ORC 4123.32 states in part:

               The administrator of workers' compensation, with the advice
               and consent of the bureau of workers' compensation board of
               directors, shall adopt rules with respect to the collection,
               maintenance, and disbursements of the state insurance fund
               including all of the following:

               (A) A rule providing that the premium security deposit
               collected from any employer entitles the employer to the
               benefits of this chapter for the remainder of the six months
               and also for any additional adjustment period of two months,
               and, thereafter, if the employer pays the premium due at the
               close of any six-month period, coverage shall be extended for
               an additional eight-month period beginning from the end of
               the six-month period for which the employer pays the
               premium due;

               (B) A rule providing for ascertaining the correctness of any
               employer's report of estimated or actual expenditure of
               wages and the determination and adjustment of proper
               premiums and the payment of those premiums by the
               employer for or during any period less than eight months
No. 13AP-356                                                                      22

               and notwithstanding any payment or determination of
               premium made when exceptional conditions or
               circumstances in the judgment of the administrator justify
               the action.

               And Ohio Administrative Code 4123-17-17(C) states "[t]he
               bureau shall have the right at all times by its members,
               deputies, referees, traveling auditors, inspectors or assistants
               to inspect, examine or audit any or all books, records,
               papers, documents and payroll of private fund, county, or
               public employer taxing district employers for the purpose of
               verifying the correctness of reports made by employers of
               wage expenditures as required by law and rule 4123-17-14 of
               the Administrative Code. The bureau shall also have the right
               to make adjustments as to classifications, allocation of wage
               expenditures to classifications, amount of wage expend-
               itures, premium rates or amount of premium. * * * Except as
               provided in rule 4123-17-28 of the Administrative Code, no
               adjustments shall be made in an employer's account which
               result in increasing any amount of premium above the
               amount of contributions made by the employer to the fund
               for the periods involved, except in reference to adjustments
               for the semi-annual or adjustment periods ending within
               twenty-four months immediately prior to the beginning of
               the current payroll reporting period. The twenty-four month
               period shall be determined by the date when such errors
               affecting the reports and the premium are brought to the
               attention of the bureau by an employer through written
               application for adjustment or from the date that the bureau
               provides written notice to the employer of the bureau's intent
               to inspect, examine, or audit the employer's records." The
               Administrator's Designee finds that the bureau has properly
               applied that rule. Specifically, the Administrator's Designee
               finds that the bureau applied the rule in accordance with the
               following written policy:

                     Pull the Application for Coverage and see what
                      operations, duties were listed when they opened their
                      policy.

                     Look for a previous audit[.]

                     Determine whether the operations changed/were not
                      disclosed or whether the bureau made an error in the
                      classification assignment.
No. 13AP-356                                                                      23

                     If BWC made the error, the classification should be
                      assigned prospectively and the audit should be revised
                      with no hearing necessary. The employer should be
                      contacted.

               Examples of mistakes are: 1) [T]he Bureau originally
               misclassified the employer's operations when the employer
               gave an accurate description of their operations on the U3; 2)
               The BWC had previously given the employer clear
               instructions on how to report and then the current audit
               changed those instructions. Under both examples, there
               should not have been a substantial change in the employer's
               operations.

               The Administrator's Designee finds that the Employer
               misreported payroll for a [sic] periods immediately prior to
               the current payroll period. There was no demonstration that
               the bureau originally misclassified the Employer's operations
               or that the Employer relied on clear instructions previously
               provided to it by the bureau. In fact, the employer was the
               party who requested manual 8810 be added to the policy and
               then reported clearly operational payroll to the manual.

               Regarding the segregation of payroll between two
               operational manuals, the administrator's designee does not
               find the employer's arguments to be well founded.

               OAC 4123-17-08(D)(3) states in part:

               (i) For purposes of this rule, an insured is conducting more
               than one operation in a state if portions of the insured's
               operations in that state are not encompassed by the
               classification applicable to the insured's principal business.
               To qualify for a separate classification, the insured's
               additional operation must:

               (a) Be able to exist as a separate business if the insured's
               principal business in the state ceased to exist.

               (b) Be located in a separate building, or on a separate floor in
               the same building, or on the same floor physically separated
               from the principal business by structural partitions.
               Employees engaged in the principal business must be
               protected from the operating hazards of the separate
               additional operations.
No. 13AP-356                                                                           24

               (c) Maintain proper payroll records. Refer to paragraph
               (F)(2) of this rule on maintenance of proper payroll records.

               The employer has failed to provide any records to support its
               contention that the business has two separate and distinct
               operations which could stand alone if the other operation
               failed. In fact the Bureau audit supervisor argued that the
               two operations share incidental employees, do not have
               segregated payroll records and only recently were the
               operations separated by physical partitions.

               Regarding the appropriate manual classification, the
               Administrator's Designee's [sic] concludes that manual 3372
               is the appropriate manual classification for the employer's
               operations. Manual 3372 applies to metal finishing
               operations such as polishing and buffing small miscellaneous
               articles of metal or plastic. Metal deburring operations are
               classified to manual 3372. The waxing, molding and casting
               operations are all incidental operations to those operations
               included in manual 3372. Manual 4692 applies to Dental
               Laboratories. This employer does not manufacture teeth
               replacements, dental appliances or enhancement products
               such as braces, bridges, crowns, dentures, palatal expanders
               or retainers. Therefore, manual 4692 is not an appropriate
               manual classification for this employer.

      {¶ 51} 28. On April 29, 2013, relator, NHVS International, Inc., filed this
mandamus action.
Conclusions of Law:
      {¶ 52} The administrator's designee addressed three issues in his order in the
following order: (1) whether the audit findings should be applied prospectively only;
(2) whether relator has shown it should be assigned more than one basic classification
because it allegedly conducts more than one operation in the state; and (3) whether
manual 3372 rather than manual 4692 is the appropriate basic classification.
      {¶ 53} The magistrate shall address the issues addressed by the administrator's
designee in reverse order: (1) whether the administrator's designee abused his discretion
in determining that manual 3372 rather than manual 4692 is the appropriate basic
classification; (2) whether the administrator's designee abused his discretion in
determining that relator has failed to show that it should be assigned more than one basic
No. 13AP-356                                                                             25

classification; and (3) whether the administrator's designee abused his discretion in
determining that the audit findings shall not be applied prospectively only.
       {¶ 54} The magistrate finds: (1) the administrator's designee did not abuse his
discretion in determining that manual 3372 rather than manual 4692 is the appropriate
basic classification; (2) the administrator's designee did not abuse his discretion in
determining that relator has failed to show that it should be assigned more than one basic
classification; and (3) the administrator's designee did abuse his discretion in determining
that the audit findings shall not be applied prospectively only.
                                         Basic Law
       {¶ 55} In State ex rel. Ohio Aluminum Industries, Inc. v. Conrad, 97 Ohio St.3d
38, 2002-Ohio-5307, the Supreme Court of Ohio decided a case involving an employer's
mandamus challenge to the bureau's manual reclassification that resulted in a higher
premium to the employer. In Ohio Aluminum, the court set forth law applicable to the
instant case:
                Section 35, Article II of the Ohio Constitution authorizes the
                board to "classify all occupations, according to their degree
                of hazard * * *." Implemented by what is now R.C.
                4123.29(A)(1), the result is the Ohio Workers' Compensation
                State Fund Insurance Manual. The manual is based on the
                manual developed by NCCI and has hundreds of separate
                occupational classifications. See Ohio Adm.Code 4123-17-04,
                Appendix A. It also specifies the basic rate that an employer
                must pay, per $100 in payroll, to secure workers'
                compensation for its employees. See Ohio Adm.Code 4123-
                17-02(A).

                ***

                "[T]he bureau is afforded a 'wide range of discretion' in
                dealing with the 'difficult problem' of occupational
                classification." State ex rel. Roberds, Inc. v. Conrad (1999),
                86 Ohio St.3d 221, 222, 714 N.E.2d 390, quoting State ex rel.
                McHugh v. Indus. Comm. (1942), 140 Ohio St. 143, 149, 23
                O.O. 361, 42 N.E.2d 774. Thus, we have "generally deferred
                to the [bureau's] expertise in premium matters" and will find
                an abuse of discretion "only where classification has been
                arbitrary, capricious or discriminatory." State ex rel.
                Progressive Sweeping Contrs., Inc. v. Ohio Bur. of Workers'
                Comp. (1994), 68 Ohio St.3d 393, 396, 627 N.E.2d 550. * * *
No. 13AP-356                                                                      26

Id. at ¶ 17, 20.
       {¶ 56} In State ex rel. Progressive Sweeping Contrs., Inc. v. Bur. of Workers'
Comp., 68 Ohio St.3d 393, 396 (1994), the Supreme Court of Ohio pronounced:
               Judicial intervention in premium matters has traditionally
               been warranted only where classification has been arbitrary,
               capricious or discriminatory. Id.; [ State ex rel. Minutemen,
               Inc. v. Indus. Comm., 62 Ohio St.3d 158 (1991)]. See,
               generally, 4 Larson, Workmen's Compensation Law (1990),
               Section 92.67. Given this high threshold, we have been-and
               will continue to be-reluctant to find an abuse of discretion
               merely because the employer's actual risk does not precisely
               correspond with the risk classification assigned.

       {¶ 57} However, in Progressive Sweeping, the court issued a writ of mandamus
against the bureau. The court explained:
               The bureau should not be permitted under the guise of
               administrative convenience to shoehorn an employer into a
               classification which does not remotely reflect the actual risk
               encountered.
Id.
       {¶ 58} R.C. 4123.29 currently provides:
               (A) The administrator of workers' compensation, subject to
               the approval of the bureau of workers' compensation board
               of directors, shall do all of the following:

               (1) Classify occupations or industries with respect to their
               degree of hazard and determine the risks of the different
               classes according to the categories the national council on
               compensation insurance establishes that are applicable to
               employers in this state.

       {¶ 59} Supplementing the statute, Ohio Adm.Code 4123-17-08 provides:

               In accordance with division (A)(1) of section 4123.29 of the
               Revised Code, the purpose of this rule is for the bureau of
               workers' compensation to conform the classifications of
               industries according to the categories the national council on
               compensation insurance (NCCI) establishes that are
               applicable to employers in Ohio. This rule is based upon
               "Rule 1, Classification Assignment," effective January 1,
               2002, of the classification rules of the NCCI and "Rule 2G,
               Interchange of Labor." The rule is used with the permission
               of the NCCI and is modified to conform to the requirements
No. 13AP-356                                                                     27

               of the Ohio administrative code and the bureau of workers'
               compensation. Where the NCCI scopes of basic manual
               classifications contains additional rules and information
               relating to the reporting of payroll or classification of
               industries under the manual classifications, such scopes and
               rules shall apply under the rules of the bureau of workers'
               compensation, unless otherwise specifically excepted.

               (A) Classification system.

               (1) The purpose of the classification system is to group
               employers with similar operations into classifications so
               that:

               (a) The assigned classification reflects the exposures
               common to those employers.

               (b) The rate charged reflects the exposure to loss common to
               those employers.

               (2) Subject to certain exceptions, it is the business of the
               employer within a state that is classified, not separate
               employments, occupations or operations within the business.

               (B) Explanation of classifications.

               Classifications are divided into two types -              basic
               classifications and standard exception classifications.

               (1) Basic classifications.

               Basic classifications describe the business of an employer.
               This term is applied to all classifications listed in this
               manual, except for the standard exception classifications.

               ***

               (2) Standard exception classifications.

               Standard exception classifications describe occupations that
               are common to many businesses. These common
               occupations are not included in a basic classification unless
               specified in the classification working. The standard
               exception classifications are described below.

               (a) Clerical office or drafting employees NOC (code 8810);
No. 13AP-356                                                                       28

               ***

               (5) Governing classification.

               The governing classification at a specific job or location is the
               classification, other than a standard exception classification,
               that produces the greatest amount of payroll.

               ***

               (6) Principal business.

               Principal business is described by the classification, other
               than a standard exception or general exclusion, with the
               greatest amount of payroll.

               ***

               (D) Classification procedures.

               The purpose of the classification procedure is to assign the
               one basic classification that best describes the business of the
               employer within a state. Subject to certain exceptions
               described in this rule, each classification includes all the
               various types of labor found in a business.

               It is the business that is classified, not the individual
               employments, occupations or operations within the business.

               Certain exceptions apply and are noted below.

               ***

               (3) Assignment of more than one basic classification.

               More than one basic classification may be assigned to an
               insured who meets conditions set forth in paragraphs
               (D)(3)(a) to (D)(3)(c) of this rule

               ***

               (c) The insured conducts more than one operation in a state.

               (i) For purposes of this rule, an insured is conducting more
               than one operation in a state if portions of the insured's
               operations in that state are not encompassed by the
               classification applicable to the insured's principal business.
No. 13AP-356                                                                      29

               To qualify for a separate classification, the insured's
               additional operation must:

               (a) Be able to exist as a separate business if the insured's
               principal business in the state ceased to exist.

               (b) Be located in a separate building, or on a separate floor in
               the same building, or on the same floor physically separated
               from the principal business by structural partitions.
               Employees engaged in the principal business must be
               protected from the operating hazards of the separate
               additional operations.

               (c) Maintain proper payroll records. Refer to paragraph
               (F)(2) of this rule on maintenance of proper payroll records.

             Is Manual 3372 the Appropriate Basic Classification?
       {¶ 60} The administrator's designee addressed the issue of whether manual 3372
rather than manual 4692 is the appropriate basic classification as follows:
               Regarding the appropriate manual classification, the
               Administrator's Designee's concludes [sic] that manual 3372
               is the appropriate manual classification for the employer's
               operations. Manual 3372 applies to metal finishing
               operations such as polishing and buffing small miscellaneous
               articles of metal or plastic. Metal deburring operations are
               classified to manual 3372. The waxing, molding and casting
               operations are all incidental operations to those operations
               included in manual 3372. Manual 4692 applies to Dental
               Laboratories. This employer does not manufacture teeth
               replacements, dental appliances or enhancement products
               such as braces, bridges, crowns, dentures, palatal expanders
               or retainers. Therefore, manual 4692 is not an appropriate
               manual classification for this employer.

       {¶ 61} The record contains the NCCI manual description for manual 3372:

               3372
               PHRASEOLOGY ELECTROPLATING.
               Shall not be assigned to a risk engaged in operations
               described by another classification unless the operations
               subject to 3372 are conducted as a separate and distinct
               business.

               CROSS-REF. Detinning—includes incidental manufactur-
               ing of tin or tin compounds; Metal: Finishing.
No. 13AP-356                                                                      30


               SCOPE Electroplating—Code 3372 applies to the process of
               placing a decorative or protective metallic coating on metal
               or other conducting surfaces by the use of electrolysis. The
               article to be plated is immersed in a solution containing the
               necessary chemical mixture. An electric current is then
               passed through the solution. This process deposits a coating
               of the desired metal on the article. Gold, nickel and
               chromium are examples of metals that have been used to
               coat other metals. Electroplating risks will typically engage in
               substantial finishing operations consisting of cleaning,
               polishing and buffing the plated articles.

               Anodizing metal articles to prevent or retard oxidation is
               contemplated by Code 3372. This is analogous to
               electroplating as the articles are placed in an acid solution
               followed by the application of an electric charge.

               Code 3372 is applicable to metal finishing operations such as
               polishing and buffing small miscellaneous articles of metal,
               plastic, etc. This work involves castings, plated sheet metal
               parts, as well as fine articles such as jewelry, silverware and
               optical frames.

               Metal deburring operations are classified to Code 3372. This
               operation involves the removal of rough edges or areas from
               metal goods.

               Shot peening of metal parts is assigned to Code 3372 by
               analogy. This work involves bombarding metal parts with
               steel or glass shot under controlled conditions to improve the
               surface structure of the metal.

               Detinning—this classification applies to entities engaged in
               recovering or reclaiming tin from tin plate scrap. The
               methods in general use follow:

               Detinning by chemical process—the scrap is treated with a
               hot solution of caustic soda in the presence of an oxidizing
               agent. This causes the tin to precipitate from the scrap. The
               tin is then collected, washed and pressed into bales.

               Detinning by electrolysis—this is an additional step in the
               recovery by chemicals and involves the introduction of an
               electric current in the chemical solution. This precipitates a
               purer form of tin than the tin recovered by the exclusive
               chemical process.
No. 13AP-356                                                                         31


               Detinning by chlorine process— this is a variation in the
               chemical recovery method whereby chlorine is forced under
               pressure into cylinders containing tin plate scrap. The
               chlorine dissolves the tin, which is then collected.

(Emphasis sic.) (Supplemental stipulation, 6.)
       {¶ 62} Apparently, relator does not engage in electroplating which is the caption
for manual 3372. See Ohio Adm.Code 4123-17-08(C) captioned "Classification wording."
Also, relator does not engage in "the use of electrolysis" and it does not engage in
"anodizing metal articles." However, that does not mandate a finding that manual 3372 is
not the appropriate basic manual because the following portion of manual 3372's
description covers relator's operation:
               Code 3372 is applicable to metal finishing operations such as
               polishing and buffing small miscellaneous articles of metal,
               plastic, etc. This work involves castings, plated sheet metal
               parts, as well as fine articles such as jewelry, silverware and
               optical frames.

               Metal deburring operations are classified to Code 3372. This
               operation involves the removal of rough edges or areas from
               metal goods.

       {¶ 63} Completing the U-3 application for workers' compensation coverage on
September 13, 2011, Richcreek described relator's method of operation as:
               Light manufacturing Service. Finish cores, prep cores,
               assemble wax, wax injection, and metal finishing.

       {¶ 64} In her July 25, 2012 e-mail to Best, Richcreek stated:

               Hello John,

               We only remove small amounts excess metals from castings
               provided by our customer, they are polished and or
               sandblasted and returned to the customer. We do no
               chemical process at all. Most of our work is bench work with
               hand files or very small drills, used on ceramic and wax
               pieces taking dye lines down, addition plastic/wax pieces,
               everything (including the wax pattern) is supplied by our
               customer. The metal department is only about 35% of our
               business.
No. 13AP-356                                                                              32

          {¶ 65} In his November 8, 2012 inspection report, Yoder wrote:

                The company's employees debur and polish the customers'
                parts. The parts are metal and plastic.

          {¶ 66} Yoder further wrote:

                Manual 3372 is considered correct for the deburring and
                polishing of the customers' parts.

          {¶ 67} In the "Employer's Position" portion of the order of the adjudicating
committee, the committee states:
                Most workers are not engaged in metal polishing or grinding.
                * * * Only 30-50 workers do metal polishing.

          {¶ 68} Under the "Findings" portion of the order, the adjudicating committee
states:
                The employer's operations are cleaning, painting, deburring,
                buffing and finishing of plastic or metal parts. These
                operations are best described in manual 3372.

          {¶ 69} In the magistrate's view, the U-3 application, the July 25, 2012 e-mail, and
Yoder's November 8, 2012 rating inspection report clearly provide some evidence
supporting the finding of the administrator's designee that manual 3372 is the
appropriate basic manual. This is particularly so given the deference this court must give
to the bureau's expertise in premium matters. See, Progressive Sweeping Contrs.
          {¶ 70} Nevertheless, relator argues here that it "has provided ample, convincing
evidence that its operations encompass more than just metal and plastic work." (Relator's
brief, 23.) According to relator, "[t]he BWC is stuck on NHVSI's metal and plastic
operations." (Relator's brief, 22.)
          {¶ 71} Relator further argues that the Richcreek affidavit indicates that only "30
employees out of around 500 are employed in metal finishing areas." (Relator's brief, 24.)
          {¶ 72} According to relator, "its primary business is small handheld work on wax
and ceramic pieces." (Relator's brief, 32.) According to relator, the administrator's
designee believed that relator "performs work only on metal and plastic parts." (Relator's
brief, 32.)
No. 13AP-356                                                                              33

       {¶ 73} Relator's suggestion that the administrator's designee failed to consider the
entire record before this court, including the Richcreek affidavit and the Priz report, lacks
merit. There is a presumption of regularity that attaches to agency proceedings which
would include proceedings of the administrator's designee. State ex rel. Lovell v. Indus.
Comm., 74 Ohio St.3d 250 (1996).
       {¶ 74} Moreover, the administrator's designee considered relator's alternative
manual 4692. That manual is described as follows:
               4692

               Phraseology Dental Laboratory

               Scope: Dental labs manufacture teeth replacement dental
               appliances or enhancement products such as braces, bridges,
               crowns, dentures, palatal expanders and retainers. These
               products are usually ordered by dental professional for use in
               their practices. Raw materials used by the dental lab include
               but are not limited to gold, porcelain, plastic, wire and other
               natural minerals and man-made substances. Tools and
               equipment used include small hand tools, small grinders,
               miniature molds, miniature furnaces, work tables and other
               specialty trade items.

(Emphasis sic.) (Supplemental stipulation, 8.)
       {¶ 75} Interestingly, relator never offered manual 4692 until its appeal of the order
of the adjudicating committee. The Priz report submitted by relator on appeal is the first
instance in the record of relator's claim that manual 4692 is the more appropriate
manual.    In the magistrate's view, it is rather obvious that manual code 4692 is
inappropriate given the availability of manual 3372. In short, relator has failed to submit
a viable alternative to manual 3372.
       {¶ 76} Based on the forgoing analysis, the magistrate concludes that the
administrator's designee did not abuse his discretion in holding that manual 3372 is the
appropriate basic classification.
                        More Than One Basic Classification?
       {¶ 77} The administrator's designee addressed the issue of whether relator should
be assigned more than one basic classification because it allegedly conducts more than
one operation in the state as follows:
No. 13AP-356                                                                                34

               The employer has failed to provide any records to supports
               [sic] its contention that the business has two separate and
               distinct operations which could stand alone if the other
               operation failed. In fact the Bureau audit supervisor argued
               that the two operations share incidental employees, do not
               have segregated payroll records and only recently were the
               operations separated by physical partitions.

       {¶ 78} Apparently, the reference of the administrator's designee to "the Bureau
audit supervisor," is a reference to Michael Kennedy who, as earlier noted, is a regional
supervisor of the bureau's underwriting and premium audit department. Kennedy
authored the September 21, 2011 letter as earlier noted. The order of the administrator's
designee indicates that "Mike Kennedy, Audit Supervisor" was present for the bureau at
the March 19, 2013 hearing before the administrator's designee.
       {¶ 79} Unfortunately, the March 19, 2013 hearing was not recorded so we do not
know verbatim what Kennedy said at the hearing. All we know is what the administrator's
designee reported—that Kennedy "argued that the two operations share incidental
employees, do not have segregated payroll records, and only recently were the operations
separated by physical partitions."
       {¶ 80} The issue here is whether Kennedy's statement as reported by the
administrator's designee is some evidence upon which the administrator's designee can
and did rely to support the determination that relator has failed to show that more than
one basic classification should be assigned to relator.
       {¶ 81} Priz addressed the issue in his January 31, 2013 report in which he states:
               Metal Finishing at NHVSI

               One part of the operations at NHVSI stands apart from the
               rest, however, and this appears to have been the part of
               NHVSI that the earlier BWC classification decisions focused
               upon. In the metal finishing department, small cast metal
               parts made by customers of NHVSI are polished and
               smoothed by means of grinding and sandblasting. This metal
               finishing department is separated from the rest of the
               operations of NHVSI by walls and doors, and there is no
               interchange of labor. This metal finishing department
               functions separately from the work done by the rest of
               NHVSI.
No. 13AP-356                                                                      35

               NCCI classification rules make it clear that under such
               circumstances, a separate classification can properly be
               assigned if "the insured conducts more than one operation in
               a state.["]

               (1) For purposes of this rule, an insured is conducting more
               than one operation in a state if portions of the insured's
               operations in that state are not encompassed by the
               classification applicable to the insured's principal business.
               To qualify for a separate classification, the insured's
               additional operation must meet all of the following
               conditions:

               Be able to exist as a separate business if the insured's
               principal business in the state ceased to exist.

               Be located in a separate building, or on a separate floor in the
               same building, or on the same floor physically separated
               from the principal business by structural partitions.
               Employees engaged in the principal business must be
               protected from the operating hazards of the separate
               additional operations.

               Maintain proper payroll records.

               The metal finishing department of NHVSI meets all of the
               enumerated criteria. The grinding and sandblasting of metal
               castings is not contemplated by Code 4692, and is such that
               it could easily exist as a separate business if the ceramic and
               wax operations of NHVSI were discontinued. The metal
               finishing department is separated from the rest of NHVSI by
               structural walls and doors, and the workers in the ceramic
               and wax operations are protected from the operating hazards
               of the metal finishing department. Finally, proper payroll
               records are maintained that separately record the payrolls of
               these different operations.

               The metal finishing department of NHVSI is properly
               classified under Code 3372, as NHVSI has already conceded.
               But the payroll for the metal finishing department
               constitutes only 29% of the manufacturing payroll of NHVSI.
               The operations of the metal finishing department are distinct
               and separate from the ceramic and wax departments.

(Footnote omitted.)
No. 13AP-356                                                                          36

       {¶ 82} The Priz report does not address whether "the two operations share
incidental employees" as was stated by Kennedy. Moreover, while Kennedy stated that
the two operations "do not have segregated payroll records," Priz asserts that "proper
payroll records are maintained that separately record the payrolls of these different
operations." Also, Priz fails to indicate when the so-called "structural walls and doors"
were installed at NHVS's facility. Kennedy stated that "only recently were the operations
separated by physical partitions."
       {¶ 83} It was for the administrator's designee to weigh the evidence before him.
The administrator's designee was not required to accept the factual assertions and
opinions contained in the Priz report. Moreover, the administrator's designee was not
required to address or even mention the Priz report in his order. The presumption here is
simply that the administrator's designee found the Priz report unpersuasive and, thus, it
was not relied upon. Lovell.
       {¶ 84} Given the above analysis, the magistrate concludes that the administrator's
designee did not abuse his discretion in determining that relator failed to show that it
should be assigned more than one basic classification.
           Should the Audit Findings be Applied Prospectively Only?
       {¶ 85} Ohio Adm.Code 4123-17-17(C) currently provides:
               The bureau shall have the right at all times by its members,
               deputies, referees, traveling auditors, inspectors or assistants
               to inspect, examine or audit any or all books, records,
               papers, documents and payroll of private fund, county, or
               public employer taxing district employers for the purpose of
               verifying the correctness of reports made by employers of
               wage expenditures as required by law and rule 4123-17-14 of
               the Administrative Code. The bureau shall also have the right
               to make adjustments as to classifications, allocation of wage
               expenditures to classifications, amount of wage
               expenditures, premium rates or amount of premium. * * *
               Except as provided in rule 4123-17-28 of the Administrative
               Code, no adjustments shall be made in an employer's
               account which result in increasing any amount of premium
               above the amount of contributions made by the employer to
               the fund for the periods involved, except in reference to
               adjustments for the semi-annual or adjustment periods
               ending within twenty-four months immediately prior to the
               beginning of the current payroll reporting period. The
               twenty-four month period shall be determined by the date
No. 13AP-356                                                                           37

               when such errors affecting the reports and the premium are
               brought to the attention of the bureau by an employer
               through written application for adjustment or from the date
               that the bureau provides written notice to the employer of
               the bureau's intent to inspect, examine, or audit the
               employer's records.

       {¶ 86} Recently, in State ex rel. Aaron Rents, Inc. v. Ohio Bur. of Workers' Comp.,
129 Ohio St.3d 130, 2011-Ohio-3140, the Supreme Court of Ohio had occasion to interpret
Ohio Adm.Code 4123-17-17(C) and to require the bureau to provide an adequate
explanation when it determines whether an audit shall be applied retrospectively or
prospectively only. In that case, the court states:
               Under Ohio Adm.Code 4123-17-17(C), the bureau can make
               adjustments to an employer's account either prospectively or
               retroactively. State ex rel. Granville Volunteer Fire Dept.,
               Inc. v. Indus. Comm. (1992), 64 Ohio St.3d 518, 520-521, 597
               N.E.2d 127. ARI objects to retroactive reclassification and
               argues, among other things, that its ability to challenge the
               bureau's decision has been compromised because the order
               does not explain why retroactive rather than prospective
               reclassification was favored. We agree.

               We "generally defer[ ] to the [bureau's] expertise in premium
               matters," but we will intercede when an occupational
               classification has been made in an arbitrary, capricious, or
               discriminatory manner. State ex rel. Progressive Sweeping
               Contractors, Inc. v. Ohio Bur. of Workers' Comp. (1994), 68
               Ohio St.3d 393, 396, 627 N.E.2d 550. The agency's expertise,
               moreover, "does not supersede the duty this court has
               imposed upon the Industrial Commission and the bureau to
               adequately explain their decisions." State ex rel. Craftsmen
               Basement Finishing Sys., Inc. v. Ryan, 121 Ohio St.3d 492,
               2009-Ohio-1676, 905 N.E.2d 639, ¶ 15. An order must
               "inform the parties and potentially a reviewing court of the
               basis of the [agency's] decision." State ex rel. Yellow Freight
               Sys., Inc. v. Indus. Comm. (1994), 71 Ohio St.3d 139, 142,
               642 N.E.2d 378.

               ARI contends that without an explanation why its request for
               prospective application was denied, it cannot know whether
               the imposition was arbitrary, capricious, or, in this case,
               punitive. ARI fears that the bureau retroactively reclassified
               its employees as punishment for what the bureau believed
               was ARI's deliberate misclassification of its workers. ARI
No. 13AP-356                                                                          38

                 asserts that if that is the case, it deserves to know so that it
                 can prove that the misclassification was unintentional and
                 consistent with what it believed the bureau desired initially.

                 ARI's points are valid. There is no way to know why the
                 bureau exercised its reclassification discretion as it did.
                 Further explanation as to why the bureau reached its
                 decision is necessary before we can determine whether an
                 abuse of discretion occurred.

                 The judgment of the court of appeals is reversed, and a
                 limited writ is granted ordering the bureau to vacate its
                 order, further consider the matter, and issue an amended
                 order including an explanation for its decision.

Id. at ¶ 9-13.
       {¶ 87} Here, the administrator's designee addressed the issue of whether the audit
findings should be applied prospectively only:
                 Specifically, the Administrator's Designee finds that the
                 bureau applied the rule in accordance with the following
                 written policy:

                       Pull the Application for Coverage and see what
                        operations, duties were listed when they opened their
                        policy.

                       Look for a previous audit[.]

                       Determine whether the operations changed/were not
                        disclosed or whether the bureau made an error in the
                        classification assignment.

                       If BWC made the error, the classification should be
                        assigned prospectively and the audit should be revised
                        with no hearing necessary. The employer should be
                        contacted.

                 Examples of mistakes are: 1) [T]he Bureau originally
                 misclassified the employer's operations when the employer
                 gave an accurate description of their operations on the U3; 2)
                 The BWC had previously given the employer clear
                 instructions on how to report and then the current audit
                 changed those instructions. Under both examples, there
                 should not have been a substantial change in the employer's
                 operations.
No. 13AP-356                                                                               39


               The Administrator's Designee finds that the Employer
               misreported payroll for a [sic] periods immediately prior to
               the current payroll period. There was no demonstration that
               the bureau originally misclassified the Employer's operations
               or that the Employer relied on clear instructions previously
               provided to it by the bureau. In fact, the employer was the
               party who requested manual 8810 be added to the policy and
               then reported clearly operational payroll to the manual.

       {¶ 88} Preliminarily, the magistrate notes that, on May 28, 2014, at the request of
the magistrate, the parties filed a supplemental stipulation that identifies the source of the
"written policy" that was quoted by the administrator's designee. The supplemental
stipulation submits a five-page document which is captioned "Complaint Policy Audit
Protest." Thereunder, at page one, the document provides:
               Unit Responsible: Underwriting and Premium Audit
               Policy Effective Date: June 1, 2008
               Policy Revision Date: October 17, 2011

       {¶ 89} Presumably this five-page document presents an internal bureau policy that
has not been promulgated as an administrative rule and codified in the Ohio
Administrative Code. It is not clear whether the document is published and available to
the public upon request.
       {¶ 90} As earlier noted, the stipulated record indicates that the first payroll report
received by relator indicated that relator must report its payroll for the period September
13 through December 31, 2011, and that the premium payment must be received by the
bureau by February 29, 2012. On the payroll report received by relator "3336RN Type
Foundry" was preprinted by the bureau on the form. No other manual codes were
preprinted on the form.
       {¶ 91} In her own hand, Richcreek entered manual code "8810" and that 246
workers were covered under manual 8810. Richcreek also entered the words "Metal
Finishers" and that 70 workers were covered thereunder. Richcreek calculated relator's
premium to be $10,735 and a check in that amount is dated February 29, 2012.
       {¶ 92} Later, by letter dated July 25, 2012, director Glass informed relator that
manual 3372 with a "Class description" for "Electroplating" was being "activated" effective
September 13, 2011 and that manual 3336 with a "Class description" for "Type Foundry"
No. 13AP-356                                                                               40

has been "deactivated" effective January 1, 2012 and July 1, 2012.            Also, the letter
informed that manual 8810 was being activated regarding the clerical office employees.
       {¶ 93} Given that the bureau deactivated manual 3336 and has not contended here
that manual 3336 was correct or appropriate for relator's business, it is difficult for the
magistrate to agree with the administrator's designee that "[t]here was no demonstration
that the bureau originally misclassified the employer's operations." To the contrary, it
appears the bureau did in fact originally misclassify relator's operations.
       {¶ 94} Moreover, given that the bureau did belatedly activate manual 8810 by
letter dated July 25, 2012 retrospective to September 13, 2011, it is difficult for the
magistrate to understand why the administrator's designee felt it was significant that
relator "was the party who requested manual 8810 be added to the policy."
       {¶ 95} The bureau has never contended that relator misstated the nature of its
business on the U-3 application for coverage. In that document, Richcreek described
relator's operations as "light manufacturing service. Finish cores, prep cores, assemble
wax, wax injection, and metal finishing."
       {¶ 96} Moreover, it is not clear to this magistrate what is meant by the statement of
the administrator's designee that relator "misreported" payroll. Of course, from the
hindsight of the bureau's audit it can be said that payroll was misreported. However, the
stipulated record contains a check dated July 23, 2012 that pre-dates by two days the July
25, 2012 letter from director Glass. That is to say, the date on the check at least suggests
that Richcreek had not been informed of the activation of manual codes 8810 and 3372 at
the time she completed the second payroll report.
       {¶ 97} Given the above analysis, the portion of the order of the administrator's
designee that determines the audit findings shall be applied retrospectively is significantly
flawed.   However, the magistrate does not intend to suggest that relator's situation
necessarily merits prospective application only. The determination of whether the audit
findings shall be applied prospectively only is a determination to be made by the
administrator's designee. The magistrate concludes, however, that the administrator's
designee abused his discretion in determining the audit findings shall be applied
retrospectively.
No. 13AP-356                                                                           41

       {¶ 98} Accordingly, it is the magistrate's decision that this court issue a writ of
mandamus ordering respondent to vacate that portion of the order of its administrator's
designee that determined the audit findings shall be applied retrospectively, and, in a
manner consistent with this magistrate's decision, enter an amended order that
adjudicates relator's protest.

                                                 /S/ MAGISTRATE
                                                 KENNETH W. MACKE

                                 NOTICE TO THE PARTIES

               Civ.R. 53(D)(3)(a)(iii) provides that a party shall not assign
               as error on appeal the court's adoption of any factual finding
               or legal conclusion, whether or not specifically designated as
               a finding of fact or conclusion of law under Civ.R.
               53(D)(3)(a)(ii), unless the party timely and specifically
               objects to that factual finding or legal conclusion as required
               by Civ.R. 53(D)(3)(b).
