STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) Case No. 00-4246

)

ANTONIO POWELL, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings by its designated Administrative Law Judge, Ella Jane P. Davis, held a disputed-fact hearing in the above-styled case on

January 18, 2001, in Ocala, Florida.

APPEARANCES

For Petitioner: David C. Hawkins, Esquire

Department of Labor and Employment Security

Suite 307, Hartman Building 2012 Capital Circle, Southeast

Tallahassee, Florida 32399-2189

For Respondent: Anthony Powell, pro se

11235 Southeast Highway 42

Summerfield, Florida 34491

STATEMENT OF THE ISSUE

Is Respondent obligated to pay $1,100.00, pursuant to a September 8, 2000, Notice of Penalty Assessment Order because on August 30, 2000, he was an employer engaged in the "construction industry" as that term is defined by Section 440.02(7), Florida Statutes (2000), and had one or more employees.

PRELIMINARY STATEMENT

On August 30, 2000, Petitioner, the Department of Labor and Employment Security, Division of Workers' Compensation, issued a Stop Work Order (SWO) charging Respondent with violating Sections 440.10 and 440.38, Florida Statutes, for failure to secure workers' compensation insurance at a residential construction site in Ocala. The SWO directed Respondent to cease operations. On September 8, 2000, Petitioner issued a Notice and Penalty Assessment Order (NPAO) that charged a civil penalty of $1,100.00.

Respondent paid the assessed amount and requested an informal hearing, but there were sufficient ambiguities in his request for Petitioner to refer the case to the Division of Administrative Hearings, on or about October 17, 2000, for a disputed-fact hearing.

Two days prior to final hearing, Petitioner filed a Motion to Dismiss and a Motion for Expedited Ruling. Due to the proximity of the final hearing, the time frame guaranteed

Respondent for his response as provided in Rule 28-106.204, Florida Administrative Code, could not be met. Nonetheless, Petitioner was granted oral argument prior to commencement of the final hearing on the merits on January 18, 2001. The Motion to Dismiss was treated as a motion to relinquish jurisdiction upon an allegation that no material facts remained in dispute.

Upon consideration of oral argument, the Motion was denied.1 Petitioner presented the oral testimony of Lisa Lyonais and

had 17 exhibits admitted in evidence. Respondent testified on his own behalf and presented the oral testimony of Lorentina Powell.

Petitioner orally renewed its motion to relinquish jurisdiction at the close of hearing.

A Transcript was filed on February 13, 2001. Only Petitioner timely filed a Proposed Recommended Order, which has been considered.

FINDINGS OF FACT

1. Petitioner is the state agency charged with enforcing the statutory requirement that employers secure workers' compensation insurance for their employees.

2. On August 30, 2000, Lisa Lyonais, Petitioner's investigator, conducted an on-site inspection of a single-family residence under construction in Ocala, Florida. She was accompanied by investigators of the Department of Insurance.

3. Ms. Lyonais observed three persons working inside the house. One person was cleaning-up and sweeping. Ms. Lyonais determined this person to be an employee of Nadeau Construction Unlimited, Inc. (Nadeau). Due to what the other two persons told her, Ms. Lyonais pursued an investigation of Respondent.

4. The building permit posted on the job board outside the house listed Nadeau as the general contractor and as the owner of the house. Ms. Lyonais telephoned Mr. Nadeau. Mr. Nadeau came to the job site and spoke with Ms. Lyonais. Due to what Mr. Nadeau told her, Ms. Lyonais contacted Respondent.

5. Ms. Lyonais interviewed Respondent when he arrived at the job site. Respondent admitted then, and at hearing, that he was laying tile in the house; that he did not have a workers' compensation exemption; and that he did not carry workers' compensation insurance.

6. Respondent's sister-in-law had requested that

   
   

   Mr. Nadeau hire Respondent to lay the tile in the house which Mr. Nadeau was constructing for her. A price for the tile- setting had been agreed-upon between Mr. Nadeau and Respondent prior to Respondent's commencing the work. By his answers to Requests for Admission, Respondent admitted this agreement constituted a "contract." He enlisted the help of his "church brothers," Brown and Sims, who were the two men originally interviewed on the job site by Ms. Lyonais.

7. On August 30, 2000, Ms. Lyonais served on Respondent a Request for Business Records, so that she could determine whether Respondent was required to provide workers' compensation insurance. Respondent provided no records.

8. Petitioner is the state agency authorized to issue workers' compensation exemptions and to which insurance carriers report that they have issued workers' compensation insurance policies to employers. Petitioner's electronic data base of this information allows its investigators to determine whether a particular employer has obtained an exemption or secured workers' compensation insurance. Ms. Lyonais verified on this electronic data base that Respondent had not secured workers' compensation insurance.

9. Based on her observations on the job site, the search results of Petitioner's data base, and her understanding of the Florida Workers' Compensation Law, Ms. Lyonais issued a Stop Work Order on August 30, 2000, for Respondent's failure to secure workers' compensation insurance for himself and his two employees, Brown and Sims.

10. On September 7, 2000, Respondent signed an Employer Payroll Affidavit in which he declared that he was a sole proprietor, that he had employees, and that he did not currently have workers' compensation insurance. Respondent also completed an Employee Payroll Worksheet in which he indicated that he

    employed the other two tile workers, Brown and Sims, whom he would pay $300.00 and $80.00 respectively, once he was paid by Mr. Nadeau.

11. Mr. Nadeau paid Respondent $1,800.00, by business check dated September 8, 2000, for ceramic tile labor. Respondent endorsed the check and used some of the proceeds to pay Brown and Sims.

12. The National Council on Compensation Insurance (NCCI) classifies types of employment and prescribes workers' compensation insurance premium rates for those classifications. Petitioner has adopted NCCI's SCOPES Manual by rule. See Rule 38F-5.111, Florida Administrative Code.

13. Tile setting is classified by the SCOPES Manual under class code 5348 (stone, mosaic or terrazzo or ceramic tile work).

14. The premium rate for each $100.00 of compensation paid under class code 5348 is 0.116.

15. Ms. Lyonais calculated the evaded premium, or the premium that Respondent would have paid had he secured workers' compensation insurance, by multiplying the gross compensation to employees by the premium rate, resulting in a total of $208.80. She calculated the statutory penalty as twice that amount

    ($417.60) or $1,000.00, whichever is greater, and assessed

    
    

    $100.00 for each day the employer operated in violation of the Workers' Compensation Law.

16. There is some evidence that Respondent, Brown, and Sims worked more than one day at the job site. Although an assessment might have been made for every day which Respondent, Brown, and Sims worked the job site, Petitioner is satisfied with assessing a $100.00 penalty only for the one day of August 30, 2000.

17. At hearing, Respondent did not refute the foregoing formula or Ms. Lyonais' calculations, noted that he had paid the

    $1,100.00 penalty to Petitioner when it was assessed and that to do so had been a hardship on his family. He asserted that he had made an honest mistake because he felt he was working for his sister-in-law, whom he believed to be the homeowner.

    Respondent's wife also testified that the house belonged to her sister. However, Respondent presented no corroborative documentary evidence that his sister-in-law, in fact, owned the house at any time material. He also did not present any documents to refute the building permit. (See Finding of Fact No. 4).

18. Respondent did not suggest that he had filed proof with the Agency of his financial ability to pay compensation,

    which filing, under Chapter 440, Florida Statutes, is an alternative to securing coverage through an insurance company.

19. Respondent did not suggest that he, Brown, or Sims had filed an election not to be covered by Chapter 440, Florida Statutes.

    CONCLUSIONS OF LAW

    
    

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

21. Florida's Workers' Compensation Law is confusing, because in some situations, an employer can be his own employee while simultaneously being an independent contractor in relationship to the general contractor, and because a general contractor may be considered the employer of a subcontractor's employees, for purposes of providing workers' compensation benefits to that subcontractor's employees unless the subcontractor also has secured compensation coverage.

22. Herein, Nadeau was the prime contractor which sub- contracted the tile work to Respondent, at the request of Respondent's sister-in-law, who, at best, was the potential home-buyer. Nadeau directly paid Respondent, and Respondent in turn, paid Respondent's two employees, Brown and Sims.

23. The Stop Work Order and Notice of Penalty Assessment Order proceeded on the basis that Respondent was a subcontractor

    in the construction business who had not elected to exempt himself from Chapter 440, Florida Statutes, and who had not purchased workers' compensation insurance coverage to protect himself or his employees. The facts, as proven, fit that scenario, rather than the new argument presented in Petitioner's Proposed Recommended Order, to the effect that Respondent, Brown, and Sims were each "sole proprietors."

24. Every "employer" is required to secure workers' compensation insurance for his/her employees, as is any contractor or subcontractor (see Section 440.10(1)(a), Florida Statutes), or shall otherwise furnish satisfactory proof of his/her ability to pay compensation (see also, Section 440.38(1), Florida Statutes (2000)).

25. "Employer" is defined, in part, as "every person carrying on any employment." Section 440.02(15), Florida Statutes (2000). "Employment . . . means any service performed by an employee for the person employing him or her," and "with respect to the construction industry, [includes] all private employment in which one or more employees are employed by the same employer." (Emphasis supplied) See Section 440.02(16)(a) and (b)2, Florida Statutes (2000).

26. "Employee" is defined as "any person engaged in any employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether

    lawfully or unlawfully employed. . . ." Section 440.02(14)(a), Florida Statutes (2000).

27. The first two sentences of Section 440.02(14)(c), Florida Statutes (2000), are possibly contradictory. However, for our purposes here, "employee" is defined in the second sentence as:

    Partners or sole 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. . . .

    A sole proprietor or partner who is actively engaged in the construction industry and who elects to be exempt from this chapter by filing a written notice of the election with the division as provided in s. 440.05 is not an employee. For purposes of this chapter, an independent contractor is an employee unless he or she meets all of the conditions set forth in subparagraph (d)1. (Emphasis supplied).

28. Herein, there is insufficient evidence on some of the elements defining "independent contractor" in subparagraph 440.02(d)1, but due to Respondent's signing papers declaring himself to be the "employer" of himself, Brown, and Sims, it is not necessary to determine, independently, that all of the elements set forth in the subparagraph apply.

29. Section 440.02(14)(d), Florida Statutes, provides that "employee" excludes a sole proprietor who is actively engaged in the construction industry only if the sole proprietor is issued

    a valid workers' compensation exemption. Smith v. Larry Rice

    
    

    Constr., 730 So. 2d 336, 339 (Fla. 1st DCA 1999); Aruda v. Gold Crest Kitchens, 642 So. 2d 624 (Fla. 1st DCA 1994).

30. Neither Respondent nor either of his employees had a valid workers' compensation exemption during the period of uninsured liability.

31. Petitioner is required to assess an employer $100 per day for each day that the employer was out of compliance with Chapter 440. Section 440.107(5), Florida Statutes. In addition, an employer who fails to secure workers' compensation is subject to a penalty of "[t]wice the amount the employer would have paid during the period 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 .

    . . [o]ne thousand dollars, whichever is greater." Section 440.107(7)(a) and (b), Florida Statutes.

32. Based on a total of $1,800.00, without assignment among the three "employees," the calculation is correct and the

    $100.00 for one day is reasonable.

    
    

33. Respondent is guilty of a mistake only. Had there been clear evidence that his sister-in-law already owned the house, if the tile had been installed by Respondent after his sister-in-law purchased the house, or if his sister-in-law had taken occupancy and the general contractor was no longer

    involved in the tile-setting transaction, the result might be different. See Section 440.02(7), Florida Statutes. Respondent had no intent to defy the law. This is not a criminal proceeding. Based upon the general contractor's (Nadeau's) obligations under Section 440.10(1)(a) and (b), Florida Statutes, Respondent and his employees Brown and Sims,

    were probably protected by Nadeau's workers' compensation carrier at all times, and the undersigned has reservations concerning the propriety of the Petitioner gaining the admissions contained in Finding of Fact 10 after the Stop Work Order was entered. Nonetheless, under the law and facts of this case, the $1,100.00 civil penalty should be upheld and not refunded.

34. Due to the determination on the merits, it is not necessary to revisit Petitioner's renewed motion to relinquish jurisdiction.

RECOMMENDATION

Based upon the findings of fact and conclusions of law, it

is

RECOMMENDED:

That the Department of Labor and Employment Security,

Division of Workers' Compensation enter a Final Order declaring Respondent to have been a statutory employer on August 30, 2000;

ratifying the $1,100.00 penalty assessment; and denying Respondent any refund.

DONE AND ENTERED this 30th day of March, 2001, in Tallahassee, Leon County, Florida.

ELLA JANE P. DAVIS

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 30th day of March, 2001.

ENDNOTE

1/ Respondent did not understand the nature of the stipulation which he was asked to make on the merits. His answers to the Requests for Admission were unclear even to Petitioner's counsel. The amount of penalty was still in dispute. (TR 14-18).

COPIES FURNISHED:

David C. Hawkins, Esquire Department of Labor and

Employment Security Suite 307, Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

Anthony Powell

11235 Southeast Highway 42

Summerfield, Florida 34491

Sheri Wilkes-Cape, General Counsel Department of Labor and

Employment Security Suite 307, Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

Mary B. Hooks, Secretary Department of Labor and

Employment Security Suite 307, Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

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: 00-004246

Orders for Case No: 00-004246