STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LOCKER SERVICES, INC., )

)

Petitioner, )

)

vs. )

) Case No. 99-3063 DEPARTMENT OF LABOR AND EMPLOYMENT )

SECURITY, MINORITY BUSINESS ADVOCACY ) AND ASSISTANCE OFFICE, )

)

Respondent. )

)

RECOMMENDED ORDER

On February 23, 2000, a formal administrative hearing in this case was held by videoconference in Tampa and Tallahassee, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Kimberly Gates, President

Locker Service, Inc. 2303 Bayshore Drive

Belleair Beach, Florida 33786

For Respondent: Joseph L. Shields, Esquire

Department of Labor and Employment Security 2012 Capital Circle, Southeast

Hartman Building, Suite 307 Tallahassee, Florida 32399-2189

STATEMENT OF THE ISSUE

The issue in the case is whether the Petitioner’s certification as a Minority Business Enterprise (MBE) should be granted.

PRELIMINARY STATEMENT

By letter dated June 28, 1999, the Florida Department of Labor and Employment Security, Minority Business Advocacy and Assistance Office (the Department), notified Mrs. Kimberly Gates (the Petitioner) that her request for certification of Locker Service, Inc., as a MBE was denied.

As grounds, the denial letter states that Locker Services does not meet the requirements of Section 288.703(2), Florida Statutes, and does not meet the certification requirements set forth at Rule 38A-20.005(2)(b), Rule 38A-20.005 (3)(b), and Rule 38A-20.005(3)(d)3., Florida Administrative Code.

Mrs. Gates requested a formal administrative hearing. The Department forwarded the request to the Division of Administrative Hearings, which scheduled and conducted the proceeding.

At the hearing, the Petitioner testified on her own behalf and had Exhibits numbered 1-11 admitted into evidence. The Department presented the testimony of one witness, and had Exhibits numbered 1-3 and 6-11 admitted into evidence.

At the hearing, the Department stipulated that based on additional information provided by the applicant, the Department believes the Petitioner meets the requirements of Section Rule 38A-20.005(2)(b), Florida Administrative Code.

No transcript of the hearing was filed. Both parties filed Proposed Recommended Orders.

The Petitioner also filed a letter on March 17, 2000, taking issue with statements made in the Department’s proposed order and suggesting that the Department’s proposed order should be disregarded as untimely filed. Treating the Petitioner’s letter as a motion to disregard the Department’s submission, the Petitioner’s request is hereby denied.

FINDINGS OF FACT

1. Locker Services, Inc., is a business owned by Kimberly Gates and her husband, James Gates.

2. Kimberly Gates is a Caucasian female.

   
   

3. There is no evidence that James Gates is within a protected classification under the minority business enterprise certification program.

4. Kimberly Gates is the president of the corporation and owns 60 percent of the stock. James Gates is the vice-president of the corporation and owns the remaining 40 percent of the stock.

5. The bylaws on record for Locker Service, Inc., establish that the Board of Directors directs the corporation’s business affairs.

6. The Board of Directors consists of Kimberly Gates and James Gates. According to the by-laws, both Mrs. and Mr. Gates manage the business.

7. Both Kimberly Gates and James Gates are authorized to sign checks on the corporate checking account.

8. A General Indemnity Agreement underwrites the corporation’s bonding requirements. James Gates is a signatory on the agreement and is personally liable as an Indemnitor.

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. Section 120.57(1), Florida Statutes.

10. As the Petitioner in the case, the Petitioner has the burden of establishing entitlement to certification. Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977). Florida Department of Transportation v. JWC Company, Inc., 396 So. 2d 778 (Fla. 1st DCA 1981). In this case, the evidence fails to establish that the Petitioner meets the certification requirements set forth in the Florida Administrative Code.

11. Section 288.703(2), Florida Statutes, provides as follows:

    "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 51-percent-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 underrepresentation of commercial enterprises under the group's control, and whose management and daily operations are controlled by such persons. A minority business enterprise may primarily

    involve the practice of a profession. Ownership by a minority person does not include ownership which is the result of a transfer from a nonminority person to a minority person within a related immediate family group if the combined total net asset value of all members of such family group exceeds $1 million. For purposes of this subsection, the term "related immediate family group" means one or more children under 16 years of age and a parent of such children or the spouse of such parent residing in the same house or living unit.

12. Rule 38A-20.005, Florida Administrative Code, sets forth criteria to be considered when determining whether an applicant meets the requirements for certification as a MBE.

13. An applicant for certification must establish that the minority owners possess the authority to control and exercise dominant control over the management and daily operations of the business. Rule 38A-20.005(3), Florida Administrative Code.

14. Rule 38A-20.005(3)(b), Florida Administrative Code, provides as follows:

    If the applicant business is a corporation and the business affairs of the corporation are managed under the direction of a board of directors as provided by the articles of incorporation or bylaws of the corporation or Section 607.0824, Florida Statutes, the articles of incorporation or bylaws must explicitly clarify the number of the board of directors for establishing a quorum, or it will be deemed by this office that a quorum of the board of directors consists of a majority of the number of directors presented by the articles of incorporation or the bylaws.

15. In this case, according to the state-filed records of the corporation, Mrs. Gates and Mr. Gates are the Board of

    Directors, and the Board of Directors controls the business affairs of the corporation.

16. Mrs. Gates asserts that the by-laws are form orders which she purchased and which do not reflect the actual operation of the business. Whether or not the company operates pursuant to by-laws, the fact remains that Mr. Gates can avail himself, should he choose to do so, of his right to participate in the total management of the company as a member of the Board.

17. Rule 38A-20.005(3)(d)3., Florida Administrative Code, provides as follows:

    (d) The control exercised by the minority owners shall be real, substantial and continuing. In instances where the applicant business is found to be a family-operated business, with duties, responsibilities and decision-making occurring either jointly and mutually among owners and principals, or severally along managerial and operational lines between minority owners and non- minority owners or principals, the minority owners shall not be considered as controlling the business. Where the minority owners substantiate that the assumption of duties is not based on their lack of knowledge or capability to independently make decisions regarding the business' management and day- to-day operations, but on their execution of delegation of duties the minority owners' demonstration of control may not be affected. The minority owners shall establish that they have dominant responsibility for the management and daily operations of the business as follows:

    * * *

    
    

    3. The minority owners shall have knowledge and control of all financial affairs of the business. The ability of any non-minority owner or employee to sign checks and enter

    into financial transactions on behalf of the business shall be considered in determining financial control. The minority owners shall expressly control the investments, loans to/from stockholders, bonding, payment of general business loans, payroll, and establishment of lines of credit. (Emphasis supplied)

18. The rule specifically requires that the minority owner expressly control bonding and payroll functions. In this case, the evidence fails to establish that Mrs. Gates expressly controls payroll and bonding.

19. While Mrs. Gates is generally responsible for preparation of the payroll, Mr. Gates is authorized to write and sign checks from the corporate business account. Mrs. Gates asserts that he writes only minor checks to pay for day labor. The corporate checking account authorization does not limit the type or the amount of the checks Mr. Gates can draw on the account.

20. Further, Mr. Gates is a personal indemnitor on the corporation’s bonding agreement and is liable for potential losses. Mrs. Gates asserted that they were required to both sign the bond as indemnitors because their personal assets are held jointly; nonetheless, the arrangement does not meet the requirements of the cited rule.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Florida Department of Labor and

Employment Security enter a final order denying the Petitioner’s application for certification as a minority business enterprise.

DONE AND ENTERED this 27th day of March, 2000, in Tallahassee, Leon County, Florida.

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 27th day of March, 2000.

COPIES FURNISHED:

Kimberly Gates, President Locker Service, Inc.

2303 Bayshore Drive

Belleair Beach, Florida 33786

Joseph L. Shields, Esquire Department of Labor and

Employment Security

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

Sheri Wilkes-Cape, General Counsel Department of Labor and

Employment Security Hartman Building, Suite 307

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

Mary Hooks, Secretary Department of Labor and

Employment Security Hartman Building, Suite 303

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

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

Docket for Case No: 99-003063

Orders for Case No: 99-003063