STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FIRE STOP SYSTEMS, INC., )

)

Petitioner, )

)

vs. ) Case No. 96-5582

)

DEPARTMENT OF LABOR AND )

EMPLOYMENT SECURITY, ) DIVISION OF MINORITY BUSINESS ) ADVOCACY AND ASSISTANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal administrative hearing was held in this case before Administrative Law Judge, Daniel M. Kilbride, Division of Administrative Hearings, on June 9, 1997, by video conference to Fort Myers, Florida.

APPEARANCES

For Petitioner: David E. Bryant, Esquire

215 Airport Road South Naples, Florida 34104

For Respondent: Joseph L. Shields Senior Attorney

Commission on Minority Economic and Business Development

2012 Capital Circle, Southeast Hartman Building, Suite 307 Tallahassee, Florida 32399-2189

STATEMENT OF THE ISSUES

Whether Petitioner should be certified as a minority business enterprise by the Respondent, pursuant to Section

288.703(1) and (2), Florida Statutes and the applicable rules implementing the statute.

PRELIMINARY STATEMENT

On July 30, 1996, the Petitioner applied to the Respondent's office for certification as a Minority Business Enterprise (MBE). By letter dated October 22, 1996, the Respondent notified the Petitioner that its application for MBE certification was denied. Petitioner filed a Petition for formal

hearing on November 22, 1996. This matter was referred to the Division of Administrative Hearings on November 25, 1996, and this proceeding followed. The formal hearing was scheduled twice at the request of the parties. At the hearing, Barbara Pedone, President, and Michael Pedone, Vice President, testified on behalf of the applicant, and nineteen exhibits were offered in evidence. Respondent presented the testimony of one witness and eight exhibits were admitted in evidence. Official recognition was taken of the Respondent's statutes and rules as set forth herein. A transcript of the proceedings was not prepared.

Petitioner filed its proposed findings of fact or conclusions of law on June 30, 1997. Respondent filed its proposals on July 9, 1997. Based upon all of the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. Petitioner is a Florida corporation, established in 1988 and is owned by Barbara Pedone (Pedone). Pedone is the corporation's president and sole stockholder.

   
   

2. Michael Pedone, who is married to Barbara Pedone, of the applicant company, is not a minority under Florida law.

   
   

3. Pedone has been involved in the construction business since the early 1960's in a administrative capacity.

   
   

4. Pedone has been a part owner of certain construction businesses with her husband that involved residential insulation, as well as the installation of pipe and duct insulation material.

   
   

5. Michael Pedone is employed by the applicant company as its Vice President. He runs the field operation. He does the field work for the applicant company, gathering materials, supervising the workers and working on proposals for new jobs. He consults on these matters with his wife.

   
   

6. The applicant company is a family-run business with shared responsibilities between Barbara and Michael Pedone. Both Mr. And Mrs. Pedone make decisions concerning which jobs to bid on, what equipment to buy and whom to hire and fire. Hiring and firing duties are also shared with the field lead, Alex Uzaga.

   
   

7. Pedone concentrates on the management end of the business, and Michael Pedone concentrates more on the technical and field work of the applicant company.

   
   

8. The applicant is required to have a license in most of the jurisdictions in which it does business.

9. Michael Pedone carries all the necessary licenses and is the qualifier for the applicant company.

   
   

10. Barbara Pedone does not have a license and cannot qualify the applicant company.

    
    

11. Barbara Pedone writes most, if not all, of the business checks for the applicant company, performs bidding functions, and administrative responsibilities, visits the various job sites, and, in recent months, has signed most of the job proposals.

    
    

12. Barbara Pedone has never performed any work of installing or applying insulations or fireproofing materials.

    
    

13. Barbara Pedone draws a weekly salary of $100. Michael Pedone draws a weekly salary of $1,000. The reason given for the disparity in salaries is that this allows Michael Pedone to accrue certain social security retirement credits. Barbara Pedone accrues her credits through her other employment.

    
    

14. Barbara Pedone is employed full-time by Collier County and works no less than 40 hours weekly there.

    
    

15. Other income and dividends of the corporation are deposited in a joint account.

    
    

16. Barbara Pedone has full authority to sell the company or to change its corporate existence in any manner she may determine.

    
    

17. Applicant has not established by competent evidence that Barbara Pedone exercises a real, substantial continuing ownership and control of the applicant corporation.

    
    

18. Other than her minimum salary, no evidence was introduced to establish that Barbara Pedone receives income commensurate with the percentage of her ownership in the company.

    
    

19. Barbara Pedone failed to establish that she shares in all of the risk through her role in decision-making, negotiations, or execution of documents and risk capital as either an individual or officer of the corporation.

    CONCLUSIONS OF LAW

    
    

20. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding, and the parties thereto, pursuant to subsections 120.569 and 120.57(1), Florida Statutes.

    
    

21. The Minority Business Advocacy and Assistance Office of the Department of Labor and Employment Security is required, by statute, to ensure that the preferences for minority business firms obtained by the certification process are awarded only to those firms for which the benefit is intended. Petitioner, as

    applicant for minority business enterprise status, has the burden of proving its entitlement to certification. Florida Department of Transportation v. J. W. C. Company, Inc., 396 So. 2d 778 (Flat 1st DCA 1981).

    
    

22. Subsection 288.703(2) Florida Statutes (Supp. 1996), defines MBE as follows:

    
    

    (2) "Minority business enterprise" means any small business concern as defined in subsection (1) which is organized to engage in commercial transactions, which is domiciled in Florida, and which is at least 51percent-owned by minority persons who are members of an insular group that is of a particular racial, ethnic, or gender makeup or national origin, which has been subjected historically to disparate treatment due to identification in and with that group resulting in an under-representation of commercial enterprises under the group's control, and whose management and daily operations are controlled by such persons.

    
    

23. Subsection 288.703(3), Florida Statutes, (Supp. 1996) defines a minority person as follows:

    
    

    (3) "Minority person" means a lawful, permanent resident of Florida who is: (e) An American woman.

    
    

24. The Department of Labor and Employment Security has promulgated rules to be followed in determining the certification of eligibility of applicants for MBE status.

    
    

25. Rule 38A-20.005, Florida Administrative Code defines the eligibility requirements for MBE certification. In substance, to be considered 51 percent minority owned, and thereby eligible for MBE certification, the applicant must

    establish real, substantial, continuing ownership of the firm by (a), owning 51 percent of the issued stock of the company; (b), receiving income commensurate with the percentage of her ownership from any means; (c), demonstrating she shares in all of the business and financial risks through her role in decision making, negotiation and execution of documents as either an individual or officer of the firm, and (d), not being subject to rights of others which would dilute the minority's ownership below 51 percent. In addition, as paraphrased here, the rule requires the minority owner to exercise unfettered discretion in the control over the management and daily operation of the business; constitute a majority of the board of directors, if the entity is a corporation; exercise sufficient management and technical responsibilities to maintain control of the business; and, if a family business, control the purchase of goods, equipment, and services needed, the hiring and firing of personnel and the setting of all employment policies. The minority owner must demonstrate knowledge and control of the financial affairs of the business, have managerial and technical capability, knowledge and training, and display independence and initiative in seeking and negotiating contracts and in conducting all operations of the business. Further, the minority owner shall exercise substantive personal direction and actual involvement with all major aspects of the business -- those tasks essential to accomplish all business objectives and operations.

    
    

26. The Petitioner corporation does not meet the requirements of 38A-20.005, Florida Administrative Code, because Barbara Pedone, although involved in a major part of the administration, does not exercise dominant control over the daily operations of the business. She works full-time for Collier County and part-time in the applicant business. Barbara Pedone has therefore not shown that she has dominant control over the management and daily operations of the business. Testimony at final hearing shows that there is a division of duties between Barbara and Michael Pedone as well as sharing of duties.

    
    

27. Rule 38A-20.005(3)(d)2, Florida Administrative Code provides:

    
    

    The minority owners shall control the hiring, firing and supervision of all employees, and the setting of employment policies, wages, benefits, and other employment conditions.

    In instances where minority owners have delegated the hiring and firing of employees, the minority owners shall demonstrate that their knowledge and capability is sufficient

    to evaluate the employees' performance in the given industry.

    
    

28. Barbara Pedone failed to prove that she controls the hiring, firing and supervision of all employees. Indeed, the evidence presented shows that Michael Pedone shares hiring and firing with the field lead Alex Uzaga, and that Michael Pedone supervises all employees.

    
    

29. Rule 38A-20.005(3)(d)4, Florida Administrative Code provides:

    
    

    The minority owners shall have managerial and technical capability, knowledge, training, education and experience required to make decisions regarding that particular type of work. In determining the applicant business' eligibility, the Office will review the prior employment and educational backgrounds of the minority owners, the professional skills, training and/or licenses required for the given industry, the previous and existing managerial relationship between and among all owners, especially those who are familiarly related, and the timing and purpose of management changes. If the minority owners have delegated management and technical responsibility to others, the minority owners must substantiate that they have caused the direction of the management and the technical responsibilities of the business. When the applicant business provides services which require that the business and/or its professional qualifier be licensed, the minority owner shall hold the requisite license issued by the State of Florida or local licensing entity. The minority license holder, need not be the controlling owner of the business, but must hold an ownership interest.

30. Rule 38A-20.001(23), Florida Administrative Code, defines "professional Qualifier" as follows:

    
    

    "Professional qualifier" means the individual to a license has been issued as required by the State of Florida, local

    governments or any other licensing entity in order for that individual and his/her business to provide goods or services to the public.

    
    

31. Subsection 287.0943(1)(e)1, Florida Statutes, 1996 provides:

    
    

    (e) In assessing the status of ownership and control, certification criteria shall, at a minimum:

    
    

    1. Link ownership by a minority person, as defined in s. 288.703(3), or as dictated by the legal obligations of a certifying organization, to day-to-day control and financial risk by the qualifying minority owner, and to licensure of a minority owner in any trade or profession that the minority business enterprise will offer to the state when certified; however, the minority licenseholder need not be the controlling owner of the enterprise, but must hold an ownership interest. Minority business enterprises presently certified by the state will not be subject to the licensure requirement until 5 years after the effective date of this act.

    
    

32. It is clear from the record that Michael Pedone, a non minority, non-owner holds all the necessary licenses required to qualify the applicant company to do business.

    
    

33. Rule 28A-20.005(3)(d)6, Florida Administrative Code, provides:

    
    

    The minority owners shall substantiate personal direction and actual involvement with all major aspects of the applicant business. The major aspects shall be defined as those tasks essential to accomplish all objectives and operations related to those services or commodities for which the applicant business requests certification.

    
    

34. The evidence shows that Pedone, the minority owner, cannot substantiate personal direction and actual involvement with all major aspects of the applicant business. She is

    involved only in the administrative end of the business, leaving the technical (field) supervision to Michael Pedone.

    
    

35. Although Barbara Pedone makes a valuable contribution to the success of the Applicant corporation, the Applicant does not qualify for certification as an MBE.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that the application for Minority Business Certification filed by Fire Stop Systems, Inc., on July 30, 1996, be DENIED.

DONE AND ENTERED this 31st day of July 1997, in Tallahassee, Leon County, Florida.

DANIEL M. KILBRIDE

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 31st day of July, 1997.

COPIES FURNISHED:

David E. Bryant, Esquire

215 Airport Road South Naples, Florida 34104

Joseph L. Shields Senior Attorney Commission on Minority Economic and

Business Development Hartman Building, Suite 307

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

Douglas L. Jamerson, Secretary

Department of Labor and Employment Security

303 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

Edward A. Dion, General Counsel Department of Labor and

Employment Security

307 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

Veronica Anderson Executive Administrator

Commission on Minority Economic and Business Development

Collins Building, Suite 201

107 West Gaines Street Tallahassee, Florida 32399-2000

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 96-005582

Orders for Case No: 96-005582