STATE OF FLORIDA

DEPARTMENT OF LABOR AND EMPLOYMENT SECURITY DIVISION OF WORKERS' COMPENSATION

DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs. DLES Case No. 00/304/DWC

DOAH Case No. 99-3854

BOBBY COX, SR., d/b/a CH WELL DRILLING.

Respondent.

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FINAL ORDER

This is a proceeding under the workers' compensation law to enforce the requirement that Florida employers secure compensation to their employees. §§ 440.10 and .38, Fla. Stat. (1999). The Division of Workers' Compensation (Division) issued Stop Work Order No. S1 A-WD-017 (SWO) on August 3, 1999, directing Bobby Cox, Sr., d/b/a C H Well Drilling (Cox) to shut down its operations at a construction site located in Tallahassee, Florida, due to Cox's failure to secure workers' compensation insurance. On December 8, 1999 the Division issued amended Notice and Penalty Assessment Order No. NlA-WD-047A (NPAO), which assessed a civil penalty of $69,828.00 based on compensation paid by Cox to two employees, Ralph Carroll and Melford Sims, and the evaded workers' compensation insurance premium.

Cox requested a formal hearing to challenge the issuance of the two orders and the associated penalties. The Division referred the matter on September 13, 1999 to the Division of Administrative Hearings. The case was assigned to The Honorable Ella Jane P. Davis, Administrative Law Judge, who conducted an evidentiary hearing on December 15, 1999. Judge Davis issued a Recommended Order (RO) on March 20, 2000 that essentially would have the Division assess a penalty based on compensation paid to Carroll alone, but not to Sims. The parties were permitted fifteen days to submit written exceptions to the RO. § 120.57(1)(k), Fla. Stat. (1999). The Division timely filed exceptions and Cox filed no exceptions.

This cause came before me for the purpose of issuing a Final Order. § 120.569(2)(1), Fla. Stat. (1999).

The Legislature restrained the authority of an agency reviewing a recommended order as follows:

The agency may adopt the recommended order as the final order of the agency. The agency in its final order may reject or modify the conclusions of law and interpretation of administrative rules over which it has substantive jurisdiction. When rejecting or modifying such conclusions of law or interpretation of administrative rule, the agency must state with particularity its reasons for rejecting or modifying such conclusions of law or interpretation of administrative rule and must make a finding that its substituted conclusion of law or interpretation of administrative rule is as or more reasonable than that which was rejected or modified. Rejection or modification of conclusions of law may not form the basis for rejection or modification of findings of fact. The agency may not reject or modify the findings of fact unless the agency first determines from a review of the entire record, and states with particularity in the order, that the findings of fact were not based on competent substantial evidence or that the proceedings on which the findings were based did not comply with essential requirements of law. . .

.

§ 120.57(1)(1), Fla. Stat. (1999).

The record consists of the transcript of the evidentiary hearing, exhibits introduced by the parties at the hearing, the proposed recommended order of each party, the RO, and exceptions filed by the Division. I note that Cox was represented by counsel until May 15, 2000, when the undersigned issued an Order granting his counsel's Motion for Leave to Withdraw filed on May 1.

After reviewing the record in its entirety, I reject the legal conclusions of the administrative law judge that Melford Sims was not Cox's employee and that the penalty calculation relative to compensation paid to Sims was "inappropriate." RO para. 50.

Employment status of Melford Sims.

At the hearing, Cox argued that Sims was an independent contractor. T. 18. The judge agreed, concluding that "Sims has

not been [Cox's] employee but has been a sole proprietor operating as an independent contractor in relation to [Cox]." RO para. 50.

The administrative law judge overlooked dispositive language in the workers' compensation law. "[S]ole proprietors actively engaged in the construction industry are considered employees unless they elect to be excluded from the definition of employee by filing written notice of the election with the division as provided in s. 440.05." § 440.02(14)(c), Fla. Stat. (1999); Smith v. Larry Rice Const., 730 So. 2d 336, 339 (Fla. 1st DCA l999)(construing identical language in 1995 version of section). Moreover, sole proprietors who are actively engaged in the construction industry and lack exemptions are employees regardless of whether they are independent contractors.

Armstrong v. Ormond in the Pines, 734 So. 2d 596, 598 (Fla. 1st DCA 1999).

The administrative law judge correctly found that Sims had neither an exemption nor workers' compensation insurance during the three years before issuance of the SWO. RO paras. 50 and 26, respectively. For these reasons, Sims is deemed to be an employee.

Penalty calculation on Sims.

The judge concluded that the Division's penalty calculations on Sims were "inappropriate." RO para. 50. The conclusion derives from the findings that the Division "could not establish that Mr. Sims had ever been on [Cox's] payroll" and that the compensation to Sims was "usually by a general contractor," with Cox serving as a pass through. RO para. 20-22 and n.2.

The Division is authorized under section 440.107(7), Florida Statutes, to assess a civil penalty based on the employer's evaded insurance premium:

In addition to any penalty, stop-work order, or injunction, the division may assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the amount of:

1. Twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3-year period; or

2. One thousand dollars, whichever is greater.

Any penalty assessed under this subsection is due within 30 days after the date on which the employer is notified, except that, if the division has posted a stop-work order or obtained injunctive relief against the employer, payment is due, in addition to those conditions set forth in this section, as a condition to relief from a stop-work order or an injunction.

Interest shall accrue on amounts not paid when due at the rate of 1 percent per month.

The section does not define the term "payroll." The Division interprets "payroll" as it is used in this section to mean remuneration or compensation paid to individuals who could receive workers' compensation benefits for work-related injuries.

T. 131. Because Sims is an employee, he would be entitled to seek workers' compensation benefits from Cox if he suffered a workplace injury while employed by Cox.

Cox admitted to compensating Sims $31,641.00 during the three years preceding the SWO. Had Cox secured workers' compensation insurance on the compensation to Sims, he would have paid a premium of $7,636.00. Section 440.1 07(7)(a) prescribes a penalty of twice the evaded premium, or $15,272.00. RO para. 7.

I reject the finding that compensation paid to Sims was "usually by a general contractor." The compensation amount was derived from IRS 1099 tax forms. RO para. 6. On its face, each tax form identifies Cox as the "payer." Respondent's Exh. 6. Cox introduced no records to show receipts from one of the fifty or so general contractors with whom he did business during the three years in question. Under these circumstances, it is fair to infer that were Sims truly acting "independently" of Cox, he would have received his compensation directly from each general contractor, rather than Cox.

The Division appropriately assessed a penalty under section 440.107(7), Florida Statutes. I reject the legal conclusion to the contrary. See RO para. 50.

For these reasons, I have determined that the findings and conclusions in the RO that Sims was an independent contractor and not an employee of Cox failed to comply with essential requirements of law. There is competent substantial evidence on the record to support the finding that Sims was Cox's employee.

In all other respects, I accept the recommended findings and conclusions of the RO.

On consideration of the record in its entirety, it is:

ORDERED that the Recommended Order dated March 20, 2000, as modified above, the Stop Work Order dated August 3, 1999, and the amended Notice and Penalty Assessment Order dated December 8, 1999, all of which are attached hereto and made a part hereof, be and the same are ADOPTED as the Final Order of the Department.

Judicial review of this Final Order is available under section 120.68(2), Florida Statutes (1999). The original notice of appeal shall be filed with the clerk of the Department of Labor and Employment Security, and a copy of the notice, accompanied by the filing fees prescribed by law, with the clerk of the appellate district court where the Department maintains its headquarters or where the party resides. Further, the notice must be filed within thirty (30) days after the date the Final Order is filed with the clerk of the Department, as certified below.

DONE AND ORDERED in Tallahassee, Florida, this 6th day of June 2000.

Charles Williams, Director Division of Workers' Compensation 2728 Centerview Drive

Suite 301, Forrest Building Tallahassee, FL 32399

850-488-2514

CERTIFICATE OF FILING AND OF SERVICE

I hereby certify that the foregoing Final Order has been filed in the official records of the Department and that a copy was furnished by U.S. Mail to Bobby Cox, Sr., 1054-D Balkin Road, Tallahassee, FL 32310, and by courier to The Honorable Ann Cole, Clerk, Division of Administrative Hearings, The DeSoto Building, 1230 Apalachee Parkway, Tallahassee, FL 32399, this 7th day of June 2000.

Nelda J. Atkinson Agency Clerk

850-488-9370

Docket for Case No: 99-003854

Orders for Case No: 99-003854