STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

WILLIAM F. FURR,

Respondent.

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) Case No. 06-3639

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RECOMMENDED ORDER

On January 18, 2007, a hearing was held via video teleconference in Tallahassee and Jacksonville, Florida, pursuant to Sections 120.569 and 120.57(1), Florida Statutes. The case was considered by Lisa Shearer Nelson, Administrative Law Judge.

APPEARANCES

For Petitioner: Colin Roopnarine, Esquire

Department of Financial Services Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399-4229

For Respondent: William Furr, pro se

1762 High Brook Court Jacksonville, Florida 32225

STATEMENT OF THE ISSUE

Whether Respondent committed the violations alleged in the Department of Financial Services, Division of Workers' Compensation's (Department's) Stop Work Order and Second Amended Penalty Assessment and if so, what penalty should be imposed?

PRELIMINARY STATEMENT

On August 15, 2006, the Department issued a Stop Work Order against Respondent, alleging violations of Chapter 440, Florida Statutes. On August 21, 2006, an Amended Order of Penalty Assessment was issued, specifying an administrative penalty of

$5,296.37. On August 30, 2006, Respondent requested a Section 120.57(1) hearing and on September 21, 2006, the case was referred to the Division of Administrative Hearings for assignment of an administrative law judge.

On November 3, 2006, the Department moved for leave to file a Second Amended Order of Penalty Assessment, to which the Respondent filed no objection. On December 5, 2006, Petitioner's Motion was granted, and the Second Amended Order of Penalty Assessment, increasing the administrative fine to $5,592.95 was filed. Although formal hearing was originally scheduled for November 29, 2006, at the request of the Department, the matter was continued and rescheduled for January 18, 2007.

At hearing, the Department presented the testimony of Katina Johnson and Gregory Mills, and Petitioner's Exhibits 1-12 were admitted into evidence. Mr. Furr testified on his own behalf and Respondent's Exhibit 2 was admitted.1/

The proceedings were recorded and the transcript was filed February 1, 2007. The parties were given until February 12, 2007, to file proposed recommended orders. The Department filed

its Proposed Recommended Order February 9, 2007, and it has been considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Department is the state agency charged with enforcement of the laws related to workers' compensation pursuant to Chapter 440, Florida Statutes.

2. On August 15, 2006, Katina Johnson, a workers' compensation compliance investigator for the Division, observed two men painting the exterior of a home at 318 First Street, in Jacksonville. The two men were identified as William Furr and his son, Corey Furr.

3. Upon inquiry, Mr. Furr stated that he held a lifetime exemption from workers' compensation requirements. He provided to Ms. Johnson a copy of his exemption card, which was issued April 30, 1995, in the name of Arby's Painting & Decorating. The exemption card had no apparent expiration date.

4. In 1998, Sections 440.05(3) and 440.05(6), Florida Statutes, were amended, effective January 1, 1999, to limit the duration of construction workers' compensation exemptions to a period of two years. Express language in the amended statute provided that previously held "lifetime exemptions" from workers' compensation requirements would expire on the last day of the birth month of the exemption holder in the year 1999.

1. Ms. Johnson researched Respondent's status on the Department's Compliance and Coverage System (CCAS) database that contains all workers compensation insurance policy information from the carrier to an insured, and determined that Respondent did not have a State of Florida workers' compensation insurance policy. The CCAS database indicated that Respondent previously held an exemption as a partner for Arby's Painting and Decorating, and that the exemption expired December 31, 1999. Ms. Johnson also checked the National Council on Compensation Insurance ("NCCI") database which confirmed that Respondent did not have a current workers' compensation insurance policy in the State of Florida.

2. After conferring with her supervisor, Ms. Johnson issued a Stop-Work Order and Order of Penalty Assessment to Respondent on August 15, 2006. She also made a request for business records for the purpose of calculating a penalty for lack of coverage.

3. Respondent submitted a written payroll record for his son, Corey Furr, along with a summary of what Respondent had earned on various jobs he performed from 2004 through 2006 and a Miscellaneous Income Tax Form 1099 for himself. On August 30, 2006, he also provided to the Department a copy of his occupational license with the City of Jacksonville.

4. Based on the financial records supplied by Respondent, Ms. Johnson calculated a penalty for a single day, August 15, 2006, for Corey Furr. She calculated a penalty from January 1,

   2005, through August 15, 2006, for William Furr. Ms. Johnson assigned a class code to the type of work performed by Respondent using the SCOPES Manual, multiplied the class code's assigned approved manual rate with the payroll per one hundred dollars, and then multiplied the result by 1.5. The Amended Order of Penalty Assessment assessed a penalty of $5,296.37.

5. A Second Amended Order of Penalty Assessment was issued November 1, 2006, with a penalty of $5,592.95. This Second Amended Order of Penalty Assessment was issued because

   Ms. Johnson used the incorrect period of violation for Respondent when she initially calculated the penalty.

6. On August 25, 2006, Respondent entered into a Payment Agreement Schedule for periodic payment of the penalty, and was issued an Order of Conditional Release from Stop-Work Order by the Department. Respondent paid ten percent of the assessed penalty, provided proof of compliance with Chapter 440, Florida Statutes, by forming a new company and securing workers' compensation exemptions for both himself and his son, Corey Furr, and agreed to pay the remaining penalty in sixty equal monthly payments.

7. Respondent claims that he was not aware of the change in the law and continued to operate under the belief that his "lifetime exemption" remained valid.

8. Although under no statutory obligation to do so, the Department sent a form letter to persons on record as holding exemptions to inform them of the change in the law and the process to be followed to obtain a new exemption.

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action in accordance with Sections 120.569 and 120.57(1), Florida Statutes.

10. Given the penal nature of these proceedings, Petitioner has the burden of proof and must demonstrate by clear and convincing evidence that Respondent violated the Workers' Compensation Law during the relevant period and that the penalty assessment is correct. Department of Banking and Finance v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996).

11. Every "employer" is required to secure the payment of workers' compensation insurance for the benefit of its employees unless exempted or excluded under Chapter 440, Florida Statutes.

    §§ 440.10 and 440.38, Fla. Stat. "Employer" is defined in part as "every person carrying on any employment." § 440.02(16),

    Fla. Stat. An "employee" is defined as including "a partner or partnership that is engaged in the construction industry."

    § 440.02(15)(c)4., Fla. Stat.

    
    

12. Pursuant to the authority in Section 440.02(8), Florida Statutes, the Department has adopted construction industry

    classification codes contained in the Basic Manual (Scopes Manual) published by the National Council on Compensation Insurance. Fla. Admin. Code R. 69L-6.021. The Scopes Manual lists painting as part of the construction industry.

13. Section 440.107(7), Florida Statutes, provides in pertinent part:

    (7)(a) Whenever the department determines that an employer . . . 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 cessation of all business operations. . . . The Department may issue an order of conditional release from a stop-work order to an employer upon a finding that the employer has complied with coverage requirements of this chapter and has agreed to remit periodic payments of the penalty pursuant to a payment agreement schedule with the department. . . .

    
    

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    (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.

14. The method used by Ms. Johnson for assessing the penalty is mandated by Section 440.107, Florida Statutes.

15. At the time that Respondent received his exemption, Section 440.05(3), Florida Statutes (1994), provided in pertinent part:

    Each sole proprietor, partner, or officer of a corporation who is actively engaged in the construction industry and who elects an exemption from this chapter or who, after electing such exemption, revokes that exemption, must mail a written notice to such effect to the division The

    certification of the election is valid until the sole proprietor, partner, or officer revokes his election.

    
    

16. Section 440.05 was amended by s. 2, Chapter 98-174, Laws of Florida, effective January 1, 1999. The amendment added the following language:

    (6) A construction industry certificate of election to be exempt which is issued in accordance with this section shall be valid for 2 years after the effective date stated thereon. Both the effective date and the expiration date must be listed on the face of the certificate by the division. The construction industry certificate must expire at midnight, 2 years from its issue date, as noted on the face of the exemption certificate. Any person who has received from the division a construction industry certificate of election to be exempt which is in effect on December 31, 1998, shall file a new notice of election to be exempt by the last day in his or her birth month following December 1, 1998. A construction industry certificate of election to be exempt may be revoked before its expiration by the sole proprietor, partner, or officer for whom it was issued by the division for the reasons

    stated in this section. At least 60 days prior to the expiration date of a construction industry certificate of exemption issued after December 1, 1998, the division shall send notice of the expiration date and an application for renewal to the certificateholder at the address on the certificate.

    
    

17. As a result of this amendment, Respondent's exemption expired by operation of law in December 1999.

18. While the 1998 amendment to Section 440.05 required the Department to send to those holding exemptions issued after December 1, 1998, notices of the expiration date of their exemption and an application for renewal, the amendment did not require the Department to notify those holding a "lifetime exemption" of the need to seek a new exemption. Therefore, any notification sent by the Department to exemption holders such as Respondent holding exemption certificates issued prior to December 1, 1998, was a courtesy. Compare Department of Financial Services, Division of Workers' Compensation v. Clark Green, d/b/a Clark W. Green Painting, DOAH Case No. 05-3190 (Final Order January 10, 2007).

19. Respondent maintains that he did not receive any notice from the Department It remains his obligation, even without notice by the Department, to keep current on the laws and regulations affecting his industry. The fact remains that he was not in compliance with the requirements of Chapter 440, Florida Statutes.

20. Respondent also contends that his occupational license, which is included in Petitioner's Exhibit 9, indicates that he is allowed to paint with his occupational license only, with no LLC required. He contends that Chapter 440 governs the formation of an LLC, and if none is required, he is not governed by these statutory provisions.

21. Unfortunately for Respondent, his understanding of the law is in error. Chapter 440 does not govern the creation of limited liability companies, but rather governs workers' compensation. More importantly, nothing on his occupational license indicates that he is outside the reach of workers' compensation requirements. In fact, on the face of the occupational license, it states:

    This is an occupational tax only. It does not permit the licensee to violate any existing regulatory or zoning laws of the County or City. Nor does it exempt the licensee from any other license or permit required by law. This is not a certification of the licensee's qualifications.

    
    

    The occupational license in no way exempts Respondent from the requirements of Chapter 440.

22. Respondent failed to secure either workers' compensation insurance or a current exemption from the requirement to do so. Petitioner has satisfied its burden of proof with respect to both the issuance of the Stop Work Order and the calculation of penalty as reflected in the Second Amended Order of Penalty Assessment.

RECOMMENDATION

Upon consideration of the facts found and conclusions of law reached, it is

RECOMMENDED:

That the Division of Workers' Compensation enter a Final Order affirming the Stop Work Order issued August 15, 2006, and the Second Amended Order of Penalty Assessment issued to Respondent on November 1, 2006.

DONE AND ENTERED this 23rd day of February, 2007, in Tallahassee, Leon County, Florida.

S

LISA SHEARER NELSON

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 23rd day of February, 2007.

ENDNOTE

1/ At hearing, Respondent sought to introduce Respondent's Exhibit numbered 1, which was a written summary of his position with regard to the workers' compensation exemption. However, only Petitioner's Exhibit numbered 2 was forwarded with the transcript of the hearing. A reporter's note indicates that Respondent "decided after the hearing that he had stated the paragraph contained in Respondent's Exhibit 1 on the record and the written copy did not need to be included in this hearing transcript."

COPIES FURNISHED:

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

200 East Gaines Street Tallahassee, Florida 32399-4229

William Franklin Furr 1762 High Crook Court

Jacksonville, Florida 32225

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 32399-0300

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: 06-003639

Orders for Case No: 06-003639