Magnetic Arts Corp. v. Department of Industrial Relation

Magnetic ArtsCorporation operating in violation of state law requiring workers’ compensation insurance, 1 was served with a stop order prohibiting the use of employee labor and charged a statutory penalty by the Department of Industrial Relations (Department), under Labor Code section 3710.1. 2 When MAC refused to comply with the Department’s order, misdemeanor charges were brought by the district attorney’s office against the company’s president, Arthur Devine, under Labor Code section 3710.2. 3 Pursuant to a plea bargain, MAC was joined as a defendant in the criminal proceedings and all counts against Devine (including the § 3710.2 violation *420 which was inadvertently denominated 3710.1 in the caption of the complaint) were dismissed “in the interest of justice.” MAC pleaded nolo contendere to failing to post a statutorily required notice of compensation insurance coverage (Lab. Code, § 3713) and was ordered to pay a nominal fine.

It is based upon these criminal proceedings that MAC now refuses to pay the original penalty assessment levied against it by the Department. When a penalty lien was filed against MAC to secure payment, it petitioned the superior court for…