vs. )
Respondent. )
Case No. 04-3041
Upon due notice, this cause came on for a disputed-fact hearing on January 6, 2005, in Jacksonville, Florida, before Ella Jane P. Davis, a duly-assigned Administrative Law Judge of the Division of Administrative Hearings.
Assistant General Counsel Department of Financial Services Division of Workers' Compensation
Did Respondent fail to comply with Sections 440.10 and 440.38, Florida Statutes, and if so, what penalty should be imposed.
On February 26, 2004, Department of Financial Services, Division of Workers' Compensation, through one of its investigators, issued to Respondent a Stop Work Order and Order of Penalty Assessment, Number 04-313-D1 (Stop Work Order) asserting that Respondent had failed to abide by the requirements of Chapter 440, Florida Statutes (the Workers' Compensation Law). The Stop Work Order required Respondent to cease business operations and assessed a penalty, pursuant to Section 440.107(7)(d), Florida Statutes (2003). Respondent timely requested a disputed-fact hearing. The penalty amount was ultimately amended to $51,779.50, pursuant to the Second Amended Order 04-313-D1-03. The case was referred to the Division of Administrative Hearings on or about August 21, 2004.
After one continuance, the case was heard on January 6, 2005. After waiting a half hour, no one appeared on behalf of Respondent, and the hearing was commenced. Petitioner presented the oral testimony of David Kunz, an investigator for the Division of Workers' Compensation, and had six exhibits admitted in evidence. Because there was still no appearance on behalf of Respondent at the close of Petitioner's case, the hearing was concluded without Respondent's presenting any evidence.
A Transcript was filed on January 12, 2005.
February 1, 2005, which has been considered in preparation of this Recommended Order.
Petitioner is the agency of the State of Florida government responsible for enforcing the statutory requirement, pursuant to Chapter 440, Florida Statutes, that employers secure the payment of workers' compensation for the benefit of their employees.
Respondent works in the construction industry, specifically as it relates to drywall services.
On February 25, 2004, Petitioner's investigator, David Kunz, visited Respondent's worksite at 400 West Bay Street in Jacksonville, Florida (also known as the Bennett Federal Building). Petitioner's investigator observed 12 workers engaged in drywall construction. Mr. Kunz spoke with Respondent's project foreman at the worksite, and with the assistance of a Spanish-speaking colleague, he interviewed all of Respondent's workers at the site.
A representative of the general contractor, Skanska, U.S.A., furnished Petitioner's investigator with a certificate of workers' compensation insurance which had been provided to the general contractor by Respondent as a subcontractor on the Bennett Federal Building job. The address listed for Respondent
was in North Carolina, and the producer of the policy also had a North Carolina address.
The next day, Petitioner's investigator obtained a copy of Respondent's workers' compensation insurance policy. After reviewing the policy, the investigator concluded that Respondent had violated Florida's Workers' Compensation Law, because an endorsement applying Florida premium rates was not a part of the policy. Mr. Kunz then issued a Stop Work Order to Respondent on February 26, 2004.
The Stop Work Order required Respondent to cease its business operations immediately, due to its lack of compliance with Chapter 440, Florida Statutes. By the Stop Work Order, Respondent was charged with failure to secure the payment of workers' compensation that met the requirements of Chapter 440, Florida Statutes, and the Florida Insurance Code, because North Carolina premium rates, rather than Florida premium rates, had been applied. The Stop Work Order indicated that the penalty amount assessed against Respondent would be subject to amendment based on further information provided by Respondent, including the provision of business records.
St. Paul's Insurance Companies maintain a presence in Orlando, Florida, but the documents subsequently provided by Respondent to the investigator as purported proof of Respondent's compliance with Chapter 440, Florida Statutes, did
not meet all necessary Florida requirements. The carrier on Respondent's policy is St. Paul Fire and Marine Insurance Company. The "producer" was "Insur A Car Commercial" in North Carolina. The "producer" is the agent responsible for processing the policy for the insurance carrier.
Respondent's workers' compensation insurance policy lists U & M Contractors, Inc., 9036 Arborgate Dr., Apt. A, Charlotte, NC 28273 in the "Insured" column. The policy number is 6S16UB-0130B52-8-03.
Respondent's insurance policy was "produced" outside Florida.
Respondent had procured workers' compensation insurance from an insurance carrier which was appropriately licensed to do business in Florida, but Respondent did not maintain at all times a Florida endorsement to its policy indicating that the applicable premium rates were Florida premium rates. Respondent's workers' compensation insurance policy includes no Florida endorsement showing the application of Florida premium rates. Only North Carolina is listed in Item 3A of Respondent's workers' compensation policy. The endorsement (WC 00 03 26 (A)) for "Other States Insurance" in Respondent's policy specifically states that it "does not satisfy the requirements of that state's workers' compensation
law" for any state not listed in Item 3A. Florida is not listed in Item 3A.
The "Extension of Information" page of Respondent's workers' compensation insurance policy indicates the type of work that Respondent intends to perform, pursuant to the policy. The type of work is indicated by a class code, or number, assigned to the type or category of work. The Extension of Information page assigns class code 5445 (drywall installation) as to the work Respondent would be performing under the policy.
The source for the class codes is the SCOPES Manual, published by the National Council on Compensation Insurance (NCCI). Petitioner's Agency's adoption of the SCOPES Manual was accomplished by Florida Administrative Code Rule 69L-6.021.
Respondent's policy's Extension of Information page further indicates that a premium rate (rate per $100.00 of remuneration provided to Respondent's employees) of $10.20 had been applied by the insurer for class code 5445, and that the premium rate was for North Carolina, not Florida. By contrast, the approved Florida premium rate for class code 5445 is $20.88 per $100.00 of remuneration.
The source for Florida premium rates is the NCCI Basic Manual. Mr. Kunz testified that the Basic Manual is used regularly by workers' compensation investigators.
Mr. Kunz issued an Agency Request for Business Records on February 26, 2004, the same date as the Stop Work Order. He specifically sought Respondent's payroll records, because Chapter 440 requires Petitioner "to calculate the penalty of an employer who is in noncompliance based on the employer's payroll." Some payroll records were forwarded to Mr. Kunz by Respondent. Some payroll records were provided to one of Petitioner's fellow investigators by a general contractor for whom Respondent had subcontracted drywall installation at the Bennett Federal Building worksite. The latter records were part of a separate investigation, but were shared between the two investigators.
However, several weeks of Respondent's payroll records were not initially provided from any source.
Respondent's payroll records include, among other entries, the names of its workers and the dates and amounts of remuneration provided to those workers. The records indicate that Respondent provided remuneration to its workers in the years 2003 and 2004.
The penalty period assigned by Petitioner against Respondent is from November 17, 2003, through February 25, 2004, because November 17, 2003, was the day that work on the Bennett Federal Building began, and February 25, 2004, was the date listed in the Stop Work Order.
Mr. Kunz used the payroll records he had to calculate an initial penalty amount of $74,479.90. Payroll for weeks not accounted for in Respondent's first production of payroll records was imputed by Mr. Kunz in the initial penalty amount, pursuant to Chapter 440, by calculations based on the first records he had. He issued the First Amended Penalty Assessment Order (Amended Order) to Respondent on March 3, 2004, in the amount of $74,479.90.
A subsequent production of records by Respondent caused Petitioner to recalculate the penalty for some weeks for which payroll previously had only been imputed. The recalculation caused the assessed penalty amount to decrease to
$51,779.50, and on March 9, 2004, a second Amended Order in the amount of $51,779.50 was issued to Respondent.
The second Amended Order included the imputation of payroll for Respondent's two owners, Juan Mitchell (Mitchell) and Hector Urbina (Urbina). Mr. Kunz had received no payroll records at any time for the two owners, though he had twice specifically requested those records. He determined that the owners were named on Respondent's insurance policy and had actually been present on the Florida worksite. Mitchell and Urbina are classified under code 5445 (drywall installation). Their respective average weekly wages for the entire penalty period was imputed according to Chapter 440, and the penalty
amount for Mitchell and Urbina was calculated by first multiplying the evaded premium amount by the premium rate for class code 5445. The evaded premium amount was determined by taking the amount of wages for a penalty period, dividing it by one hundred (100), and multiplying it by the premium rate for the pertinent class code. The evaded premium amount was then multiplied by 1.5 to arrive at the penalty amount assessed for Mitchell ($4,434.72) and for Urbina ($4,434.72). The 1.5 multiplier is specifically required by Section 440.107(7)(d)1., Florida Statutes.
Wages were similarly imputed for the following employees for February 23, 24, and 25, in 2004, because records did not exist for that partial work week: Alex Rosales; Jose Jimenez: Julio Betata; Orlin Betata; Erick Estrada; Melvin Landaverde; Neptale Lopez; and Jose Valentin.
In calculating the penalty for the remainder of Respondent's workers for whom payroll records were provided, Petitioner's investigator similarly applied the foregoing
methodology.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this proceeding, in accordance with Sections 120.569 and 120.57(1), Florida Statutes (2003).
Pursuant to the reasoning in Department of Banking and Finance, Division of Securities and Investor Protection v.
Osborne Stern, Inc., 670 So. 2d 932 (Fla. 1996) and the Recommended Order in Triple M Enterprises Inc., v. Department of Financial Services, Division of Workers' Compensation, DOAH Case No. 04-2524 (RO January 13, 2005), it is concluded that Petitioner bears the burden of proof herein by clear and convincing evidence.
Section 440.10(1)(a), Florida Statutes (2003), states:
(1)(a) Every employer coming within the provisions of this chapter 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.
Section 440.107, Florida Statutes, provides in part as follows:
The Legislature finds that the failure of an employer to comply with the workers' compensation coverage requirements under this chapter poses an immediate danger to public health, safety, and welfare.
* * *
(7)(a) Whenever the department determines that an employer who is required to secure the payment of his or her employees of the
compensation provided for by this chapter has failed to secure the payment of workers' compensation required by this chapter or to produce the required business records under subsection (5) within 5 business days after receipt of the written request of the department, such failure shall be deemed an immediate serious danger to public health, safety, or welfare sufficient to justify service by the department of a stop-work order on the employer, requiring the cessation of all business operations. If the department makes such a determination, the department shall issue a stop-work within 72 hours. The order shall take effect when served upon the employer or, for a particular employer work site, when served at that work site. In addition to serving a stop-work order at a particular work site which shall be effective immediately the department shall immediately proceed with service upon the employer which shall be effective upon all employer work sites in the state for which the employer is not in compliance. A stop-work order may be served with regard to an employer's work site by posting a copy of the stop-work order in a conspicuous location at the work site. The order shall remain in effect until the department issues an order releasing the stop-work order upon a finding that the employer has come into compliance with the coverage requirements of this chapter and has paid any penalty assessed under this section. The department may require an employer who is found to have failed to comply with coverage requirements of s.
440.38 to file with the department, as a condition of release from a stop-work order, periodic reports of a probationary period that shall not exceed 2 years that demonstrate the employer's continued compliance with this chapter. The department shall by rule specify the reports required and the time for filing under this subsection.
Section 440.38, Florida Statutes (2003), states:
Every employer shall secure the payment of compensation under this chapter:
By insuring and keeping insured the payment of such compensation with any stock company of mutual company or association or exchange, authorized to do business in the state;
* * *
(7) Any employer who meets the requirements of subsection (1) through a policy of insurance issued outside of this state must at all times, with respect to all employees working in this state, maintain the required coverage under a Florida endorsement using Florida rates and rules pursuant to payroll reporting that accurately reflects the work performed in this state by such employees. (Emphasis supplied.)
Section 440.02(16)(a), Florida Statutes (2003), defines "employer" in relevant part as "every person carrying on an employment. . . ." Further, "employment" is defined in relevant part in Section 440.02(17)(a), Florida Statutes (2003) as "any service performed by an employee for the person employing him or her."
Respondent is an "employer" for the purposes of Chapter 440, Florida Statutes, because during the penalty period of November 17, 2003 through February 25, 2004, Respondent engaged and remunerated its employees for the performance of drywall installation services.
Respondent failed to comply with Section 440.38(7),
Florida Statutes (2003), because during the penalty period, Respondent was working in Florida without the required endorsement to its workers' compensation insurance policy that would base its coverage on Florida premium rates and rules.
Respondent's policy indicates that Respondent's coverage was issued in North Carolina and was based on North Carolina premium rates, not Florida premium rates. The policy, including the "Other States Insurance" endorsement, does not satisfy the requirements of Section 440.38(7). Respondent failed to maintain, at all times, the Florida premium rate endorsement required by Section 440.38(7). Moreover, under this policy, Respondent paid less than half the required Florida premium rate. The unmistakable directive in Section 440.38(7) is that employers whose coverage is issued outside of Florida must pay Florida premium rates in order to do business in Florida.
Respondent failed to meet the requirement.
Respondent was required to secure the payment of workers' compensation for its employees "that meets the requirement of . . . Chapter [440] and the Florida Insurance Code." See § 440.107(2), Fla. Stat. (2003).
Section 440.107(7)(d)1., Florida Statutes (2003), states that an employer who fails to secure the payment of workers' compensation is subject to
a penalty equal to 1.5 times the amount the
employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater.
Petitioner proved that Respondent failed to satisfy the requirements of both Sections 440.10 and 440.38, Florida Statutes.
Petitioner correctly imputed the payroll for Respondent's owners, Mitchell and Urbina, according to Section 440.107(7)(e), Florida Statutes.
Petitioner further showed that it applied the methodology in Section 440.107(7)(d)1., in its calculations of the penalty amount assessed against Respondent and correctly calculated the penalty amount.
RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order that affirms the Stop Work Order and assesses the $51,779.50 penalty cited in the Second Amended Order.
DONE AND ENTERED this 7th day of April, 2005, in Tallahassee, Leon County, Florida.
ELLA JANE P. DAVIS
Filed with the Clerk of the Division of Administrative Hearings this 7th day of April, 2005.
Assistant General Counsel Department of Financial Services Division of Workers' Compensation
Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
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.
