STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FOREVER READ DRYWALL AND )

PLASTERING, INC., )

)

Petitioner, )

)

vs. )

)

DEPARTMENT OF FINANCIAL ) SERVICES, DIVISION OF WORKERS' ) COMPENSATION, )

)

Respondent. )

Case No. 06-3266

)

RECOMMENDED ORDER

Pursuant to notice, this case was heard by Suzanne F. Hood, Administrative Law Judge with the Division of Administrative Hearings, on November 21, 2006, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Stanley Roberts, pro se

Forever Ready Drywall

272 Robert Willis Road Cairo, Georgia 39827

For Respondent: Douglas D. Dolan, Esquire

Department of Financial Services Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399

STATEMENT OF THE ISSUES

The issues are whether Petitioner violated Chapter 440, Florida Statutes, and the Insurance Code by not securing

workers’ compensation insurance or workers’ compensation exemptions, and if so, what penalty should be assessed.

PRELIMINARY STATEMENT

On June 26, 2006, Respondent Department of Financial Services, Division of Workers’ Compensation (Respondent) issued a Stop Work Order and Order of Penalty Assessment (hereinafter “Order”), alleging that Petitioner Forever Ready Drywall and Plastering, Inc. (Petitioner) was not in compliance with the workers’ compensation insurance requirements of Chapter 440, Florida Statutes. The Order commanded Petitioner to cease all business operations. Respondent then issued an Amended Order of Penalty Assessment (hereinafter Amended Order) to Petitioner on July 18, 2006, assessing against Petitioner a penalty in the amount of $8,213.30 under Section 440.107(7)(d), Florida Statutes.

On August 7, 2006, Respondent received Petitioner’s Petition for Hearing, in which Petitioner disputed material facts in the charging documents and requested a formal hearing.

On August 23, 2006, Petitioner entered into a Payment Agreement Schedule for Periodic Payment of Penalty and was conditionally released from the Order.

Respondent forwarded the Petition for Hearing to the Division of Administrative Hearings on August 29, 2006.

The undersigned issued an Initial Order on August 29, 2006.

The parties filed a Joint Response to Initial Order on September 6, 2006. On September 7, 2006, the undersigned issued

a Notice of Hearing, scheduling the hearing on October 12, 2006.

On September 27, 2006, Respondent issued a Second Amended Order of Penalty Assessment (hereinafter “2nd Amended Order”) to Petitioner, increasing the assessed penalty to $10,270.76. On the same day, Respondent filed a Motion to Amend Order of Penalty Assessment with the Court. That motion is hereby granted.

On October 3, 2006, the parties filed a Joint Motion for Continuance of Administrative Hearing. The undersigned granted the motion and rescheduled the final hearing for November 21, 2006.

During the hearing, Respondent presented the testimony of two witnesses. Respondent offered 13 exhibits, R1-R13, that were admitted into evidence.

Petitioner presented the testimony of two witnesses.

Petitioner offered four exhibits, P1-P4, that were admitted into evidence.

When the hearing concluded, Respondent ordered a hearing transcript. Therefore, the undersigned advised the parties they would have an opportunity to file proposed recommended orders on

the tenth day after the transcript was filed with the Division of Administrative Hearings.

On December 15, 2006, Respondent filed an unopposed Motion for Extension of Time to File Proposed Recommended Orders.

Assuming the transcript would be filed in late December 2006 or early January 2007, the undersigned granted the motion, extending the final date on which to file proposed recommended orders to January 25, 2007.

Respondent filed a Proposed Recommended Order on

January 25, 2007. However, neither party had filed the hearing transcript with the Clerk of the Division of Administrative Hearings.

On February 8, 2007, the undersigned contacted the office staff of Respondent’s counsel by telephone. The undersigned requested that Respondent file the hearing transcript as soon as possible.

Respondent filed the Transcript on February 8, 2007. As of the date of issuance of this Recommended Order, Petitioner had not filed proposed findings of fact and conclusions of law.

FINDINGS OF FACT

1. Respondent is the state agency responsible for enforcing the requirement of workers’ compensation law that requires employers to secure payment of compensation for their employees.

2. On June 26, 2006, Petitioner was operating in the construction industry installing drywall. At approximately 10:30 a.m., Respondent’s investigator, Vicki Chamelin, conducted a workers’ compensation compliance check at 5574 Hampton Hill Circle, Tallahassee, Florida.

3. While at the site, Ms. Chamelin recorded the names of the workers who claimed to be or were claimed to be employed by Petitioner. The names of these individuals were Brandon Roberts, Kelvin Williams, Charles Carter, Willie Oliver, and Jerry Pompey.

4. Next, Ms. Chamelin consulted Respondent’s Coverage and Compliance Automated System (CCAS). She then spoke with Christine Conley, branch manager of U.S. Labor, Inc./USA Staffing, the company that Petitioner contracted with to provide workers’ compensation coverage. Ms Chamelin concluded that Petitioner had not secured the payment of workers’ compensation for Brandon Roberts, Kelvin Williams, and Jerry Pompey.

5. After consulting with her supervisor, Ms. Chamelin issued a Stop Work Order and Order of Penalty Assessment (hereinafter “Stop Work Order”). The Stop Work Order commanded Petitioner to cease business operations and assessed a $1000 penalty against Petitioner.

6. In addition to the Stop Work Order, Ms. Chamelin served Petitioner with a Request for Business Records for Penalty Assessment Calculation (hereinafter “Request”).

7. After serving Petitioner with the Stop Work Order and Request, Ms. Chamelin again verified with Christine Conley which employees were and were not covered by U.S. Labor, Inc./USA Staffing’s workers’ compensation insurance.

8. U.S. Labor, Inc./USA Staffing is a staffing company whose employees must apply and be approved by USA Staffing prior to placement with client companies.

9. Pursuant to the contract between USA Staffing and Petitioner, an employee is not covered by workers’ compensation insurance unless the employee applies to and is approved by USA Staffing prior to starting work.

10. If an approved employee of USA Staffing does not work for USA Staffing for between two and four weeks, USA Staffing deactivates the employee from their payroll and notifies the client company. Inactivated employees are not covered by USA Staffing’s workers’ compensation insurance policy.

11. Ms. Conley advised Ms. Chamelin that Kelvin Williams, Brandon Roberts, and Jerry Pompey were not being leased by Petitioner from USA Staffing on June 26, 2006.

12. USA Staffing’s payment records reflected that no payroll was being run by USA Staffing for Brandon Roberts between the dates of April 6, 2006, and June 26, 2006.

13. U.S. Staffing’s payment records reflected that no payroll was being run by USA Staffing for Kelvin Williams between the dates of March 2, 2006, and June 26, 2006.

14. Jerry Pompey was never an employee of USA Staffing.

    
    

15. In order to reactivate an employee, a client company must call USA Staffing and reactivate the employee prior to that employee commencing work with the client company.

16. Ms. Chamelin called USA Staffing to investigate the coverage status of Jerry Pompey, Brandon Roberts, and Kelvin Williams before Petitioner called USA Staffing to reactivate the individuals.

17. Petitioner did not provide Respondent with any of the documents identified in the Request. Because Petitioner failed to provide Respondent with the requested business records,

    Ms. Chamelin properly imputed Petitioner’s penalty. First, Ms. Chamelin imputed Petitioner’s payroll. Next, Ms. Chamelin divided the imputed payroll amount by 100, multiplied the quotient by the approved manual rate to arrive at the premium the Petitioner would have paid, then multiplied the product by 1.5.

18. Petitioner entered into a Payment Agreement Schedule for Periodic Payment of Penalty by paying 10 percent of the total penalty with the balance due in equal monthly installments over 60 months. Petitioner was issued an Order of Conditional Release From Stop-Work Order after entering into the Payment Agreement Schedule for Periodic Payment of Penalty and demonstrating compliance with the coverage requirements of Chapter 440, Florida Statutes (2005).

19. Respondent issued a Second Amended Order of Penalty Assessment to Petitioner. The Second Amended Order of Penalty Assessment adjusted Petitioner’s assessed penalty to $10,270.76.

    CONCLUSIONS OF LAW

    
    

20. The Division of Administrative Hearings has jurisdiction pursuant to Sections 120.57(1) and 120.569, Florida Statutes (2006).

21. Respondent has the burden of proof in this case and must show by clear and convincing evidence that Petitioner violated the workers' compensation Law during the relevant period and that the penalty assessments are correct. Department of Banking and Finance Division of Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932 (Fla. 1996).

22. Pursuant to Sections 440.10 and 440.38, Florida Statutes (2005), every “employer” is required to secure the payment of workers’ compensation for the benefit of its

    employees unless exempted or excluded by law. Strict compliance with the workers' compensation law is, therefore, required by the employer. See C&L Trucking v. Corbitt, 546 So. 2d 1185, 1187 (Fla. 5th DCA 1989).

23. Section 440.107(3)(g), Florida Statutes (2005), provides as following in pertinent part:

    (3) The department shall enforce workers’ compensation coverage requirements, including the requirement that the employer secure the payment of workers’ compensation, and the requirement that the employer provide the carrier with information to accurately determine payroll and correctly assign classification codes. In addition to any other powers under this chapter, the department shall have the power to:

    
    

    * * *

    
    

    (g) Issue stop-work orders, penalty assessment orders, and any other orders necessary for the administration of this section.

    
    

24. Pursuant to Section 440.02(16), Florida Statutes (2005), the law defines “employer” as “every person carrying on any employment.”

25. Pursuant to Section 440.02(15)(a), Florida Statutes (2005), the law defines “employee” as “any person who receives remuneration from an employer for the performance of any work or service while engaged in any employment.”

26. Pursuant to Section 440.02(17)(a), Florida Statutes (2005), the law defines “employment” in the construction

    industry as “all private employment in which one or more employees are employed by the same employer.”

27. Although U.S. Staffing’s business model is not precisely the same as that of an employee leasing company, its duties are so similar that they are subject to Chapter 468, Florida Statutes (2005).

28. Employers conducting business in Florida are required to maintain business records that enable Respondent to determine whether the employer is in compliance with the workers’ compensation law. At the time that Respondent issued the Stop Work Order, Florida Administrative Code Rule 69L-6.015 stated as follows in relevant part:

    1. Employers must at all times maintain the records required by this rule and must produce the records when requested by the division pursuant to Section 440.107, F.S.

       
       

       * * *

       
       

       1. Employment records. Every employer shall maintain employment records pertaining to every person to whom the employer paid or owes remuneration for the performance of any work or service in connection with any employment under any appointment or contract for hire or apprenticeship.

          
          

          1. The employment records required by this subsection shall indicate with regard to every such person:

             
             

             1. Name of the person.

             2. Social Security Number, Federal Employer Identification Number, or IRS Tax Identification Number of the person.

                
                

             3. Each day, month, and year or pay period when the employer engaged the person in employment.

                
                

             4. Amount of remuneration paid or owed by the employer for work or service performed by the person. Where remuneration is paid or owed on an hourly basis, the record shall indicate the day, month, and year of work or service and the number of hours worked by the person during each pay period. Where remuneration is paid or owed on any basis other than hourly, the record shall specify the basis, such as competitive bid, piece rate, or task, and indicate the day, month, and year, when remuneration was earned.

             
             

          2. In addition, every employer shall maintain the following records for each such person:

       
       

       1. All checks or other records provided to the person for salary, wage, or earned income.

          
          

       2. All Form 1099 Miscellaneous Income and Form W-2 Wage and Tax Statements issued to the person.

          
          

       3. All written contracts or agreements between the employer and the person that describe the terms of employment.

          
          

       4. All employment and unemployment reports filed pursuant to Florida law.

       
       

       * * *

       
       

       1. Employee leasing company, labor pool, and temporary labor service records.

          1. Every employee leasing company licensed under Chapter 468, F.S., including a professional employer organization, shall maintain:

             
             

             1. Records that indicate the Federal Employer Identification Number of each client company.

                
                

             2. The application of each client company and contract between the employee leasing company and the client company whereby the employee leasing company assigned its employees to a client company.

                
                

             3. Records that indicate the name, gross pay, deductions from gross pay, net pay, and rate of pay for every employee assigned to each client company.

             
             

          2. Every labor pool under Chapter 448, F.S., shall maintain:

             
             

             1. The written itemized statement showing in detail the wages and each deduction made from wages paid to each day laborer.

                
                

             2. The annual earnings summary provided to each day laborer.

             
             

          3. Every temporary labor service shall maintain records that identify the name, Social Security Number or IRS Tax Identification Number of each employee who the temporary labor service provided to a client, and the payments to and the pay period, type of service, and location of service performed by each such employee. In addition, the temporary labor service shall maintain records of payments that it received from the client.

             
             

       2. Subcontractor invoices. Every employer shall maintain all invoices received from a subcontractor for work or

          service performed by the subcontractor for the employer.

          
          

       3. Workers’ compensation insurance and certificates of election to be exempt.

          
          

          1. Every employer shall maintain all workers’ compensation insurance policies obtained by the employer or on the employer’s behalf and all endorsements, declaration pages, certificates of workers’ compensation insurance, notices of cancellation, notices of non-renewal, or notices of reinstatement of such policies.

             
             

          2. Every employer shall maintain all premium audit documents provided by the workers’ compensation carrier to the employer and all premium self-audits, together with supporting documentation and correspondence provided by the employer to its workers’ compensation carrier.

             
             

          3. Every contractor shall maintain evidence of workers’ compensation insurance of every subcontractor and for every subcontractor that is a corporation or limited liability company that has an officer or a member who elects to be exempt from the coverage requirements of the workers’ compensation law the contractor shall maintain a valid certificate of election to be exempt issued to the officer or member under Section 440.05, F.S.

             
             

          4. Every corporation that is actively engaged in the construction industry and has officers who possess valid certificates of election to be exempt issued under Section 440.05, F.S., shall maintain written statements of those exempt officers affirmatively acknowledging each such officer’s exempt status. A written statement may be in the form of a copy of a completed DWC 250 (rev. 9/01) Notice of Election to be Exempt as adopted in paragraph 69L- 6.009(1)(a), F.A.C.

          5. Every employer who claims that an employee or officer of a corporation is exempt from the coverage requirements of the workers’ compensation law shall maintain a valid certificate of election to be exempt issued under Section 440.05, F.S., for that employee or officer of a corporation.

             
             

       4. Contracts. Each employer shall maintain:

          
          

          1. All complete executed written contracts between it and a general contractor, subcontractor, independent contractor, or employee leasing company licensed under Chapter 468, F.S., that specify the terms of reimbursement and performance of any work or service while engaged in any employment under any appointment or contract for hire or apprenticeship.

             
             

          2. Any records that establish the statutory elements of independent contractor prescribed in Section 440.02(15)(d), F.S., for each worker who claims to be or who the employer claims to be an independent contractor and not an employee under the workers’ compensation law.

          
          

       5. Records retention. An employer under the workers’ compensation law shall maintain the records specified in this rule for the current calendar year to date and for the preceding three calendar years, in original form, whether paper, film, machine readable electronic material, or other media. A legible copy of the original record is an acceptable substitute for the original.

       
       

29. Florida Administrative Code Rule 69L-6.028(3) states as follows in relevant part:

    (3) If subsequent to imputation of weekly payroll pursuant to subsection (2) herein, but before and only until the expiration of forty-five calendar days from the receipt by the employer of written request to produce business records, the employer provides business records sufficient for the department to determine the employer’s payroll for the period requested for the calculation of the penalty pursuant to Section 440.107(7)(e), F.S., the department shall recalculate the employer’s penalty to reflect the payroll information provided in such business records.

    
    

    Petitioner did not comply with the Request and did not supply Respondent with the requested documents. Therefore, Respondent was required to impute the appropriate penalty assessment.

30. Respondent has adopted construction industry classification codes contained in the Basic Manual (Scopes Manual) published by the National Council on Compensation Insurance. See Fla. Admin. Code R. 69L-6.021. The Basic Manual lists drywall installation as a construction industry. Id.

31. Section 440.107(7)(d)1., Florida Statutes (2005), states as follows in pertinent part:

    (d)1. In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter 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.

    
    

32. Respondent’s investigator used the above-referenced mandatory method of penalty calculation to arrive at Petitioner’s final penalty amount.

RECOMMENDATION

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

RECOMMENDED:

That Respondent enter a final order, affirming the Stop Work Order and Second Amended Order of Penalty Assessment that assessed a penalty of $10,270.76.

DONE AND ENTERED this 8th day of March, 2007, in Tallahassee, Leon County, Florida.

S

SUZANNE F. HOOD

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 8th day of March, 2007.

COPIES FURNISHED:

Honorable Alex Sink Chief Financial Officer

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

Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307

Stanley Roberts Forever Ready Drywall

272 Robert Willis Road Cairo, Georgia 39827

Douglas D. Dolan, Esquire Department of Financial Services

Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399

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: 06-003266

Orders for Case No: 06-003266