STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RECOMMENDED ORDER

Pursuant to notice, the final hearing in this case was conducted by Carolyn S. Holifield, a duly-designated Administrative Law Judge of the Division of Administrative Hearings, on February 23, 2005, by video teleconference between Fort Myers and Tallahassee, Florida.

APPEARANCES

For Petitioner: Colin M. Roopnarine, Esquire

Department of Financial Services Division of Workers' Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229

For Respondent: Elias Bravo, President

Bravo Construction, Inc. 7424 Carrier Road

Fort Myers, Florida 33912

STATEMENT OF THE ISSUES

The issues are: (1) Whether Respondent, Bravo Construction, Inc. ("Respondent"), was in violation of the workers’ compensation requirements of Chapter 440.107, Florida Statutes (2003),1/ by failing to secure workers’ compensation coverage for its workers; (2) Whether such individuals possessed current valid workers’ compensation exemptions; and (3) Whether Respondent paid its workers remuneration outside of Respondent’s employee leasing company.

PRELIMINARY STATEMENT

On May 26, 2004, the Department of Financial Services, Division of Workers’ Compensation ("Department"), issued a Stop Work Order to Respondent, which alleged Respondent failed to secure workers’ compensation coverage for its president and/or owner, Elias Bravo, and its workers. Subsequently, on May 28, 2004, the Department issued an Amended Order of Penalty Assessment ("Amended Order"), which assessed a penalty of

$97,416.68.

Respondent disputed the allegations and requested a formal administrative proceeding. On or about December 21, 2004, the Department referred the matter to the Division of Administrative Hearings.

At the final hearing, the Department presented the testimony of two witness, Carol Porter and Kelley Dunning, both

investigators with the Department. Respondent presented the testimony of one witness, Elias Bravo, Respondent's president. The Department's Exhibits 1 through 9 were received into evidence. Respondent offered no exhibits into evidence.

The Transcript of the hearing was filed on March 7, 2005. The parties agreed to submit their proposed recommended orders no later than ten days after the transcript was filed. The Department timely filed its Proposed Recommended Order on

March 14, 2005. Respondent did not file a proposed recommended order.

FINDINGS OF FACT

1. The Department is the state agency responsible for enforcing the requirement of Section 440.107, Florida Statutes, which requires that employers secure the payment of workers’ compensation coverage for their employees.

2. Respondent is a company engaged in the construction industry. Specifically, Respondent's business is framing houses. At all time relevant to this proceeding, Elias Bravo was president of the company.

3. On May 26, 2004, the Department’s investigators, Carol Porter and Kelley Dunning, conducted a random visit of a work site in Grassy Point, a gated community in Port Charlotte,

   Florida, and discovered Mr. Bravo and his workers on site as the house-framers.

4. When the investigators arrived at the site, they spoke with Mr. Bravo, who advised the investigators that Respondent utilized a personnel leasing company, Time Management, which was actually a brokerage firm for Southeast Personnel Leasing, Inc. ("SEPL"), to secure workers’ compensation coverage.

5. On May 26, 2005, Mr. Bravo was the only person in his crew who had coverage with SEPL. At the time of the site visit, the other men were not listed with SEPL because Mr. Bravo still had their applications in his car.

6. After Respondent was unable to provide proof that the men had workers' compensation coverage pursuant to Subsections 440.107(3) and (7)(a), Florida Statutes, the investigators issued a Stop Work Order to Respondent while at the work site on May 26, 2004.

7. On the same day that the Stop Work Order was issued, Investigator Dunning served Mr. Bravo with a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Production of Business Records"). The Department requested copies of Respondent's business records in order to determine whether Respondent had secured workers' compensation coverage; whether Mr. Bravo or Respondent's employees had workers' compensation exemptions; and, if not, to determine the penalty assessment.

8. In response to the Request for Production of Business Records, Mr. Bravo provided certificates of insurance, Respondent's check stubs written to various entities or individuals on behalf of Respondent, payroll records, and Form 1099s for the year ending 2003. Many of the documents provided by Mr. Bravo indicated that Respondent made payments directly to the entities and individuals.

9. The Department maintains records regarding the workers' compensation coverage of individuals and entities in a statewide database called Compliance and Coverage Automated System ("CCAS"). The CCAS database is utilized by the Department to verify if an individual or entity has workers' compensation coverage or a valid exemption from coverage.

10. As part of the Department's investigation, Investigator Porter conducted a CCAS search for Respondent's workers’ compensation insurance coverage records. This search verified that Mr. Bravo had workers' compensation coverage. However, many of the workers or entities to whom Respondent made direct payments did not have workers’ compensation coverage or current valid workers’ compensation exemptions.

11. Based on a review of the payroll records, check stubs, and the Form 1099s that Respondent provided to the Department, Investigator Porter determined that Respondent was an "employer" as that term is defined in Subsection 440.02(16), Florida

    Statutes. Subsequently, the Department reassessed the original penalty and issued the Amended Order with the attached penalty worksheet which detailed the basis of the penalty assessment.

12. In determining the amended penalty assessment, Investigator Porter disregarded and did not include Respondent's payments to any individual or entity that had workers’ compensation coverage or an exemption from such coverage.

13. The Amended Order, which reflected a penalty assessment of $97,416.68, was issued to Respondent on May 28, 2004.2/

14. Respondent paid remuneration to the individuals listed on the penalty worksheet of the Amended Order for work they performed. Nonetheless, during the period covered by the penalty assessment, Respondent did not secure workers' compensation coverage for the individuals listed on the penalty worksheet, and none of them had workers' compensation coverage or exemptions from such coverage.

15. The individuals listed on the penalty worksheet of the Amended Order were Respondent's employees during the relevant period, in that they were paid by Respondent, a construction contractor, and did not have workers’ compensation coverage or an exemption from such coverage.

16. Mr. Bravo had workers' compensation coverage through SEPL. However, none of the employees listed on the Amended Order

    had workers' compensation coverage through SEPL, because they were paid directly by Respondent.

17. A personnel leasing company provides workers' compensation coverage and payroll services to its clients, then leases those employees back to the clients for a fee.

18. Respondent was a client of SEPL, and based on that relationship, Mr. Bravo believed that he and his workers received workers' compensation coverage through that personnel leasing company. However, the workers' compensation coverage provided by SEPL applied only to those employees SEPL leased to Respondent. In the case of leased employees, Respondent would have to make payments to the leasing company and not directly to his workers. The leasing company would then, in turn, pay the leased employees. When, as in this case, the construction company makes direct payments to individuals performing construction work, those workers are not leased employees and, thus, are not secured by the workers’ compensation coverage provided by the personnel leasing company. See § 468.520, Fla. Stat.

19. Some of the individuals listed on the penalty worksheet

    may have been "dually employed"; that is, sometimes they were employed by Respondent and at other times, they were employees of SEPL and were leased to Respondent. However, during the periods in which individuals worked for Respondent and were paid by Respondent, and were not paid by SEPL, they were without workers’ compensation coverage unless Respondent provided such coverage.

    With regard to the individuals listed on the penalty worksheet, Respondent provided no such coverage.

20. Respondent, through Mr. Bravo, paid its employees directly, thus, circumventing SEPL and losing the coverage that the employees may have had through it.

21. The Department assessed the penalty against Respondent based on the remuneration Respondent gave directly to the employees outside of SEPL, the class code assigned to each employee utilizing the SCOPES Manual adopted by the Department in Florida Administrative Code Rule 69L-6.021, and the guidelines in Subsection 440.107(7)(d), Florida Statutes.

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2004).

23. The Department has the burden of proving by

    
    

    a preponderance of the evidence that an employer has violated the workers’ compensation law and that the penalty assessments were correct under the law. Department of Labor and Employment Security, Division of Workers’ Compensation v. Genesis Plumbing, Inc., Case No. 00-3749 (DOAH April 27, 2001)(Final Order May 24, 2001); Department of Labor and Employment Security, Divisions of Workers’ Compensation v. Bobby Cox, Sr., d/b/a CH Well Drilling, Case No. 99-3854 (DOAH March 20, 2000)(adopted in part by Final Order June 8, 2000); Department of Labor and Employment

    Security, Division of Workers’ Compensation v. Eastern Personnel Servs., Inc., Case No. 99-2048 (DOAH October 12, 1999)(Final Order November 30, 1999), appeal dismissed, Case No. 1D99-4839 (1st DCA April 10, 2000); § 120.57(1)j, Fla. Stat. (2004).

24. Pursuant to Sections 440.10 and 440.38, Florida Statutes, every "employer" is required to secure the payment of workers' compensation for the benefit of its workers unless exempted or excluded under Chapter 400, Florida Statutes.

25. "Employer" is defined, in part, as "every person carrying on any employment . . . ." § 440.02(16), Fla. Stat. "Employment" is "any service performed by an employee for the purpose of 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."

    § 440.02(17)(a) and (b), Fla. Stat.

    
    

26. "Employee" means "any person who receives remuneration from an employer for the performance of any work or service while engaged in any employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed."

    § 440.02(15)(a), Fla. Stat.

    
    

27. The evidence established that Respondent was an employer within the meaning of Subsection 440.02(16), Florida Statutes, during the period specified in the Amended Order.

28. The entities listed on the Amended Order’s penalty worksheet were "employees," as that term is defined in Subsection 440.02(15), Florida Statutes, during the relevant periods for which they were penalized, because they were paid directly by Respondent and could provide neither valid workers’ compensation exemptions nor proof of workers’ compensation coverage as required by law. § 440.02(15)(c), Fla. Stat. Thus, these workers all became "employees" of Respondent by operation of Subsection 440.02(15)(c)2., Florida Statutes.

29. As an employer, Respondent was required to provide workers' compensation coverage pursuant to Sections 440.10 and 440.38, Florida Statutes. Here, the undisputed evidence

    established that Respondent failed to secure the payment of

    
    

    workers’ compensation for its employees. Moreover, Respondent offered no evidence to establish valid workers’ compensation exemptions or proof of workers’ compensation coverage for them as required by law. § 440.02(15)(c)2., Fla. Stat.

30. Respondent argues that it believed that the workers listed in the penalty assessment had workers' compensation coverage through SEPL, but provided no evidence of such coverage.

31. Pursuant to Subsection 468.529(1), Florida Statutes, "a licensed employee leasing company is the employer of leased employees . . . and shall be responsible for providing workers' compensation coverage pursuant to chapter 440."

32. The requirement that employee or personnel leasing companies provide workers' compensation coverage to its employees

    is not without limits. According to the competent and substantial evidence presented by the Department, employee leasing companies, such as SEPL, are obligated to provide workers' compensation coverage only to the employees it leases to construction companies. The employee leasing company then pays the employees directly for the work performed for the construction company.

33. Here, the undisputed evidence established that during the period covered by the penalty assessment, the workers listed on the penalty worksheet were not leased employees, but were paid directly by Respondent. Because the workers were not paid by SEPL, they were not covered by any workers' compensation coverage provided by that employee leasing company.

34. Because the evidence established that Respondent failed to secure the payment of workers’ compensation for its employees for the time period covered in the Amended Order, those individuals were properly included in the penalty base.

35. Pursuant to Subsection 440.107(7)(d), Florida Statutes, an employer who fails to secure the payment of workers’ compensation is subject to

    1. 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.

       
       

36. The Department proved by a preponderance of

    the evidence that Respondent violated Section 440.10, Florida, Statutes, by failing to secure the payment of workers’ compensation coverage for its employees listed on the penalty worksheet. Also, the Department correctly assessed the penalty as prescribed in Section 440.107, Florida Statutes.

37. Respondent is liable for the penalty assessment of

$97,416.68.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order that affirms the Stop Work Order and the Amended Order of Penalty Assessment, which imposes a penalty of $97,416.68.

DONE AND ENTERED this 10th day of May, 2005, in Tallahassee, Leon County, Florida.

S

CAROLYN S. HOLIFIELD

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 10th day of May, 2005.

ENDNOTES

1/ All references are to 2003 Florida Statutes, unless otherwise noted.

2/ Investigator Porter testified that there was a scrivener's error on the Amended Order as to the date of the issuance of the Stop Work Order; the Amended Order indicates Stop Work Order was issued March 3, 2004, but it was actually issued on May 26, 2004.

COPIES FURNISHED:

Colin M. Roopnarine, Esquire Department of Financial Services Division of Workers' Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229

Elias Bravo

Bravo Construction, Inc. 7424 Carrier Road

Fort Myers, Florida 33912

Honorable Tom Gallagher Chief Financial Officer

Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

Carlos G. Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

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: 04-004569

Orders for Case No: 04-004569