STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF LABOR AND EMPLOYMENT SECURITY, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

GENESIS PLASTERING, INC.,

Respondent.

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) Case No. 00-3749

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RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on February 14, 2001, at Miami, Florida, before Florence Snyder Rivas, a designated Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: David C. Hawkins, Esquire

Department of Labor and Employment Security

Division of Workers' Compensation 2012 Capital Circle, Southeast Hartman Building, Suite 307 Tallahassee, Florida 32399-2189

For Respondent: Magda Marcelo-Robaina, Esquire

Magda Marcelo-Robaina, P.A. 782 Northwest Le Jeune Road Suite 548 Le Jeune Center Miami, Florida 33126

STATEMENT OF THE ISSUES

Whether the Respondent was required to carry workers' compensation insurance coverage for its employees and, if it failed to do so, whether the Amended Notice and Penalty Assessment Order is correct.

PRELIMINARY STATEMENT

On August 8, 2000, the Department of Labor and Employment Security, Division of Workers' Compensation, Bureau of Compliance (Department), issued a Stop Work Order (SWO) against the Respondent, Genesis Plastering, Inc. (Genesis). The SWO charged violations of Sections 440.10(1) and 440.38(1), Florida Statutes, and directed Genesis to cease operations.

Also on that date, the Department served a request for business records, including payroll records, which could enable the Department to calculate penalties as provided in Section 440.107, Florida Statutes.

By letter dated August 16, 2000, Genesis, through its president Carmen Duque, sought review of the SWO pursuant to Sections 120.569 and 120.57(1), Florida Statutes. The matter was thereafter referred to the Division of Administrative Hearings (DOAH) for the purpose of conducting a formal hearing.

A hearing was initially set for November 6, 2000.

The orderly progress of this case was significantly hampered by Genesis' failure to cooperate with the Department's reasonable discovery requests in a timely fashion.

Genesis' failure to comply with the August 8 request for business records foreshadowed its numerous failures to comply with discovery requests in this proceeding. The Department, preferring not to proceed on an incomplete record, requested and received two continuances of the final hearing.

Some discovery was not produced until the day of the final hearing. The Department moved to keep open the hearing record for a time sufficient to allow the Department to review the discovery and come to a final calculation of Genesis' liability under the penalty statute. Genesis did not object. By order dated March 13, 2001, Department's unopposed motion to fix the penalty assessment at $11,839.74 was granted.

At the hearing, the Department presented the testimony of Jorge Pinera, a workers' compensation investigator employed by the Department's District 5 (Miami, Florida) office, and Russell Gray, workers' compensation investigator supervisor for the District 5 office.

The Department's Exhibits numbered 1 through 16 were admitted into evidence without objection.

Genesis presented the testimony of its president, Carmen Duque, and its vice president, Jose Castro.

Genesis' Exhibits numbered 5 and 14 were admitted over objection. Exhibits 1-4, 7-8, and 12-13 were admitted into evidence without objection. To avoid duplication, Genesis withdrew several exhibits which had been pre-marked for identification and made joint exhibits of Department's Exhibits 14-16.

The transcript of the proceeding was filed with DOAH on March 16, 2001. By agreement at final hearing, the parties were afforded 20 days from the filing of the transcript to submit proposed recommended orders. The Department's filing was timely and has been considered in the preparation of this order.

Genesis elected not to provide a proposed recommended order.

FINDINGS OF FACT

1. At all times material to this case, the Department was the state agency charged with the responsibility of administering compliance with Florida law governing workers’ compensation.

2. At all times material to this case, Genesis has been in the business of providing plastering services.

3. At all times material to this case, Jorge Pinera (Pinera) has been an investigator employed by the Department to perform workers' compensation compliance investigations.

4. On August 8, 2000, Pinera conducted a random inspection at a residential construction site located at 3101 Southwest 129th Avenue, Miami, Florida (the job site).

5. While at the job site, Pinera encountered Jose Castro (Castro), and also observed an individual later identified as Reinaldo Lopez (Lopez). Both men were present on behalf of Genesis, which had been contracted to perform plastering services at the job site.

6. At the time of Pinera's visit, Lopez was applying plaster to a back wall of the house.

7. Pinera conducted field interviews in accordance with Department policies and procedures.

8. At the time the field investigation commenced, Genesis' president, Carmen Duque (Duque), claimed to have relied upon the advice of Genesis' accountant, who allegedly told Duque that compensation insurance was not required for the business. There was no evidence offered to corroborate Duque's claim that such advice had in fact been rendered.

9. Based upon the field interviews of Castro and Lopez, and a review of Department records, Pinera correctly determined that the men were employees of Genesis as that term is defined in Florida Workers' Compensation Law.

10. During the field interview, Lopez informed Pinera that he was being paid an hourly wage by Genesis for plastering

    services. Lopez reduced this and other information demonstrating his employee status to writing contained in Department's Exhibit 8, which was admitted into evidence without objection.

11. There was no physical evidence at the job site to contradict what Lopez told Pinera, i.e. there were no vehicles, equipment, or materials which one would expect to find at a job site where an independent plastering contractor is working.

12. Genesis attempted to discredit Lopez' contemporaneous statements indicating employee status with Exhibit 14, an affidavit, purportedly executed by Lopez on January 22, 2001, in which Lopez asserts that he is an independent contractor. The affidavit was admitted over the Department's timely objection. The facts set forth in the affidavit are insufficient as a matter of law to support the affiant's legal conclusion that he is an independent contractor.

13. Pinera's field interviews revealed, and Genesis stipulates, that it did not hold workers' compensation insurance on August 8, 2000, nor at any time relevant to this case.

14. At all times material to this case, none of the individuals affiliated with Genesis held valid exemptions from coverage.

15. Rather, the evidence suggests that Genesis was aware of the requirements of workers' compensation law, and took steps to evade it.

16. For example, Genesis charged the job site's owners

    
    

    $10,500 for its plastering services. Prior to the commencement of the job, Genesis secured the signature of its employee, Lopez, on a form styled "Short Form Subcontract Agreement" which purports to create a subcontractor relationship with Lopez for the jobsite. The sum specified in this agreement to be paid to Lopez is $1,200.

17. The vast discrepancy in the amount charged to the owners and the sum to be paid to the individual supposedly responsible for providing all labor and materials necessary for the work suggests that the so-called subcontract agreement is a sham.

18. The evidence further establishes that Genesis provided Lopez with $500 to purchase materials to be used at the job site. This fact belies the contention of Genesis that, because Lopez physically purchased the materials, he was in fact an independent contractor. Rather, the purchase of materials was simply one task which Genesis delegated to its employee Lopez in the course and scope of his employment.

19. Upon concluding that Lopez and Castro were not covered by appropriate insurance and were not exempt, Pinera properly caused a SWO to be issued against Genesis.

20. Genesis admits, and the evidence establishes, that it did not have a valid workers' compensation policy during the three years preceding the stop work order.

21. Despite the pendency of a valid SWO, Genesis performed work at the jobsite on August 24, 2000.

22. Genesis stipulated, and the evidence establishes, that the Amended Notice and Penalty Assessment Order issued by the Department accurately calculates the amounts owed by the Respondent for the three-year period.

    CONCLUSIONS OF LAW

    
    

23. DOAH has jurisdiction over the parties to and the subject matter of these proceedings.

24. Section 440.10(1)(a), Florida Statutes, provides:

    
    

    (1)(a) Every employer coming within the provisions of this chapter, including any brought within the chapter by waiver of exclusion or of exemption, shall be liable for, and shall secure, the payment to his or her employees, or any physician, surgeon, or pharmacist providing services under the provisions of s. 440.13, of the compensation payable under ss. 440.13, 440.15, and

    440.16. Any contractor or subcontractor who engages in any public or private construction in the state shall secure and maintain compensation for his or her employees under this chapter as provided in s. 440.38.

    
    

25. Section 440.38(1), Florida Statutes, requires every employer to secure workers' compensation as outlined by Chapter 440, Florida Statutes.

26. An "employer" as defined by the workers' compensation law specifies "every person carrying on any employment." The terms "employment" and "employee" are also set forth by law. See Sections 440.02(14), (15), and (16), Florida Statutes.

27. In this case Genesis contends that the individuals identified by the Department as its "employees" were, instead, "independent contractors."

28. Section 440.02(14)(d)1, Florida Statutes, provides that the term "employee" does not include an "independent contractor" if:

    1. The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations;

    2. The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal requirements;

    3. The independent contractor performs or agrees to perform specific services or work for specific amounts of money and controls the means of performing the services or work;

    4. The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform;

    5. The independent contractor is responsible for the satisfactory completion of work or services that he or she performs or agrees to perform and is or could be held liable for a failure to complete the work or services;

    6. The independent contractor receives compensation for work or services performed for a commission or on a per-job or competitive-bid basis and not on any other basis;

    7. The independent contractor may realize a profit or suffer a loss in connection with performing work or services;

    8. The independent contractor has continuing or recurring business liabilities or obligations; and

    9. The success or failure of the independent contractor's business depends on the relationship of business receipts to expenditures.

       
       

29. In order for an individual to be considered an "independent contractor" all nine of the statutory elements must be fulfilled.

30. The Department has established that Lopez and Castro were, in fact, employees for whom workers' compensation was required to be in place on the jobsite.

31. Duque's claim that she relied upon the advice of Genesis accountant in electing not to secure workers' compensation coverage is not credible. No corroborating evidence of any kind was offered. Even if Duque's testimony had been corroborated, the accountant's professional malpractice in rendering such advice is not a legally recognized defense.

32. The Department has established by a preponderance of the evidence that Genesis intended to evade the requirements of the workers' compensation laws, and to compound its evasion by flouting the SWO.

33. Since, as a matter of law, the workers must be deemed "employees," Genesis was required to provide workers' compensation coverage. It is undisputed that Genesis did not have workers' compensation.

34. Accordingly, by statute, the Department is obligated to use an established formula to compute the penalty to be incurred by Genesis. Genesis does not dispute that the Department has correctly calculated the penalty in the amount of

$11,839.74.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order confirming the SWO entered in this cause and imposing a penalty in the amount of $11,839.74 as set forth in the Amended Notice and Penalty Assessment Order.

DONE AND ENTERED this 27th day of April, 2001, in Tallahassee, Leon County, Florida.

FLORENCE SNYDER RIVAS

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 April, 2001.

COPIES FURNISHED:

David C. Hawkins, Esquire Department of Labor and

Employment Security

Division of Workers' Compensation 2012 Capital Circle, Southeast Hartman Building, Suite 307 Tallahassee, Florida 32399-2189

Magda Marcelo-Robaina, Esquire Magda Marcelo-Robaina, P.A.

782 Northwest Le Jeune Road Suite 548 Le Jeune Center Miami, Florida 33126

Sherri Wilkes-Cape, General Counsel Department of Labor and Employment Security The Hartman Building, Suite 307

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

Mary B. Hooks, Secretary

Department of Labor and Employment Security The 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 should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 00-003749

Orders for Case No: 00-003749