STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JESUS MIJARES, )

)

Petitioner, )

)

vs. ) Case No. 07-3625

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS' COMPENSATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice a formal hearing was held on June 9, 2008, by video teleconference from West Palm Beach, Florida, before J. D. Parrish, a designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: R. Patrick Beatty, Esquire

32 East Ocean Boulevard Post Office Drawer 2333 Stuart, Florida 34995

For Respondent: Colin M. Roopnarine, Esquire

Kristian Dunn, Esquire Department of Financial Services

Division of Worker's Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229

STATEMENT OF THE ISSUES

Whether the Petitioner was required to secure workers' compensation insurance for employees as delineated by Subsection 440.107(2), Florida Statutes (2008), and, if so, whether he did

so. If Petitioner was required to provide insurance and did not, this case must also address what penalty for such failure is appropriate.

PRELIMINARY STATEMENT

The Respondent, Department of Financial Services, Division of Workers’ Compensation (Respondent or Department), issued and served a Stop-Work Order and Order of Penalty Assessment Number 06-056-D2 (Order) on the Petitioner, Jesus Mijares (Petitioner), on February 15, 2006. The Order alleged that Petitioner failed to abide by the requirements of the Workers' Compensation Law, by failing to secure workers’ compensation insurance in compliance with the requirements of Chapter 440, Florida Statutes. The Order required Petitioner to cease all business operations.

On August 3, 2006, the Department issued to and served on Petitioner, via certified mail, an Amended Order of Penalty Assessment (Amended Order) assessing a penalty of $635,727.60. The Order requiring Petitioner to cease all business operations remained in effect with the issuance of the subsequent amended orders of penalty assessment. Petitioner timely requested an administrative hearing on August 10, 2007. The Department promptly forwarded the matter to the Division of Administrative Hearings for formal proceedings.

After that negotiations between the parties continued. To that end, the Department moved for leave to amend the penalty assessment. The request was granted and the case went forward

based upon a Second Amended Order of Penalty Assessment (Second Amended Order). The Second Amended Order assessed a penalty in the amount of $236,209.79.

At the hearing, the Department presented the live testimony of the following witnesses: Kathleen Petracco, an investigator employed by the Respondent; the deposition testimony of Joe Jameson, owner of All American General Construction (Department Exhibit 8); and Jesus Mijares, the Petitioner. The Petitioner also testified in his own behalf. The Department’s Exhibits numbered 1 through 11 were offered and received into evidence.

A Transcript of the proceedings was filed on June 26, 2008.

Based upon the pronouncement at the hearing, the parties' proposed recommended orders were due within ten (10) after the filing of the transcript, but the parties jointly requested an extension of time. That motion was granted and the parties were granted an extension of the deadline to August 7, 2008. This deadline was further extended to August 12, 2008. Both parties timely filed proposed order that have been fully considered in the preparation of this order. Statutory references cited herein relate to the 2006 Statutes unless otherwise noted.

FINDINGS OF FACT

1. The Department is the state agency responsible for administering and enforcing the statutory requirement that employers secure workers' compensation insurance for the benefit of their employees. § 440.107, Fla. Stat. At all times material

   to this case, the Department alleged the Petitioner is an "employer" as that term is used within the law. In contrast, the Petitioner has denied being an employer and maintains he was not required to secure workers' compensation insurance for anyone.

2. The Petitioner is from Mexico but is domiciled in Florida. He has been engaged in the business of roofing for approximately twenty years.

3. Roofing is a construction activity under the workers' compensation law.

4. On February 15, 2006, the Department's investigator, Kathleen Petracco, along with an investigator from the Martin County Building Department, Contractor Licensing, made a random stop at 861 SW Bay Pointe Circle, Palm City, Florida. Investigator Petracco observed nine workers performing roofing work at that location.

5. Of the nine workers, only one spoke English well enough to respond directly to inquiries presented by Investigator Petracco. That individual, identified in this record as "Victor," served as the translator for the other workers who spoke Spanish. According to Victor, the lead worker (later known to be Victor Briceno), he and the other eight workers all worked for an individual by the name of “Jesse.” “Jesse” or "Jessie" was later determined to be Jesus Mijares, the Petitioner.

6. Through Victor, Investigator Petracco also interviewed Remigio Lopez, Luis Velasquez, Rubin Hernandez, Antonio Briceno,

   Jose Velasca, Sebastian Rodriguez and Marco Duran. All of the workers represented that they worked for the Petitioner who paid them $100.00 per day in either cash or by check.

7. Investigator Petracco contacted the Petitioner who informed her that he was asked by “Steve” (later determined to be Steve Thaden) from All American General Construction (All American) to go to the worksite with a crew to tear off a roof. At that time the Petitioner admitted that the workers on the site were his employees whom he paid $100 per day in either cash or by check.

8. Joe Jameson is one of the owners of All American. The company has been in busy since Hurricane Andrew struck Florida. Mr. Jameson acknowledged that Steve Thaden (his nephew) had been employed by the company but claimed that Mr. Thaden was not authorized to hire the Petitioner or others to perform work on jobsites. There is no evidence that the Petitioner and the nine men at the jobsite in question were employees of All American on the date Inspector Petracco visited the site.

9. An individual may be exempt from workers’ compensation benefits. To be exempt, an application must be filed and the procedures of the law must be met. None of the nine men on the jobsite were exempt under the law.

10. The Department maintains a database (the Coverage and Compliance Automated System or CCAS) of all workers’ compensation exemptions in the State of Florida. Inspector Petracco found a

construction exemption for Jesus Mijares through the Paul E. Hahn Corporation, with an effective period of February 28, 2004, through February 27, 2006.

11. Sections 440.107(3) and 440.107(7)(a), Florida Statutes, authorize the Department to issue stop work orders to employers unable to provide proof of workers’ compensation coverage. Failure to provide such proof is deemed “an immediate serious danger to public health, safety, or welfare. . . ,” and the Department has no discretion in issuing a stop-work order.

See § 440.107(7)(a), Fla. Stat.

1. Prior to issuing a stop-work order, the Department’s investigator must determine: the identity of the employer; whether the employer has secured the payment of workers’ compensation for the workers on a job site, either through a policy or employee leasing; the type of work being performed by the workers; and the type of remuneration (for example, check or cash). In this case, Investigator Petracco accepted the representations of the Petitioner and the nine workers at the site.

2. Accordingly, Investigator Petracco determined that the Petitioner had employees operating at a job site for whom he had failed to secure the payment of workers’ compensation insurance.

3. Based upon this determination, on February 15, 2006, the Department issued to, and personally served on Petitioner, a stop-work order and order of penalty assessment for failing to

   obtain coverage that meets the requirements of Chapter 440, Florida Statute, and the Insurance Code, Chapter 726, Florida Statutes (2006). Also at that time, Investigator Petracco issued a Request for Production of Business Records for Penalty Assessment Calculation (Records Request) to Petitioner. The Records Request required Petitioner to produce business records for a period of three years, from February 15, 2003, through February 15, 2006.

4. Employers working on job sites in Florida are required to keep business records that enable the Department to determine whether the employer is in compliance with the workers' compensation law. At the time the Order was issued, and pursuant to Section 440.107(5), Florida Statutes, the Department had in effect Florida Administrative Code Rule 69L-6.015. The Rule provides, in part:

   In order for the Department to determine that an employer is in compliance with the provisions of Chapter 440, F.S., every business entity conducting business within the state of Florida shall maintain for the immediately preceding three year period true and accurate records. Such business records shall include original documentation of the following, or copies, when originals are not in the possession of or under the control of the business entity:

   
   

   1. All workers’ compensation insurance policies of the business entity, and all endorsements, notices of cancellation, nonrenewal, or reinstatement of such policies.

      
      

      * * *

      1. Records indicating for every pay period a description of work performed and amount of pay or description of other remuneration paid or owed to each person by the business entity, such as time sheets, time cards,

         attendance records, earnings records, payroll summaries, payroll journals, ledgers or registers, daily logs or schedules, time

         and materials listings.

         
         

      2. All contracts entered into with a professional employer organization (PEO) or employee leasing company, temporary labor company, payroll or business record keeping company. If such services are not pursuant to a written contract, written documentation including the name, business address, telephone number, and FEIN or social security number of all principals if an FEIN is not held, of each such PEO,

         temporary labor company, payroll or business record keeping company; and

         
         

         1. For every contract with a PEO: a payroll ledger for each pay period during the contract period identifying each worker by name, address, home telephone number, and social security number or documentation showing that the worker was eligible for employment in the United States during the contract for his/her services, and

      a description of work performed during each payperiod by each worker, and the amount paid each pay period to each worker. A business entity may maintain such records or contract for their maintenance by the PEO to which the records pertain.

      
      

      * * *

      
      

      1. All check ledgers and bank statements for checking, savings, credit union, or any other bank accounts established by the business entity or on its behalf; and

         
         

      2. All federal income tax forms prepared by or on behalf of the business and all State of Florida, Department of Unemployment Compensation UCT-6 forms and any other forms

      or reports prepared by the business or on its behalf for

      filing with the Florida Department of Unemployment Compensation.

      
      

5. The Petitioner failed to provide any of the requested records, including his federal tax returns. The Petitioner failed to provide a credible explanation as to why he did not provide the records requested. Further, the Petitioner's self- serving assertions at the hearing that the nine men were not his employees has not been deemed credible. It is undisputed that nine workers were performing a roofing construction service at the jobsite. They were dispatched to the site by the Petitioner, paid a daily wage by the Petitioner, and were accountable to the Petitioner for the quality of their work performance.

6. When an employer fails to provide requested business records that the statute requires it to maintain and to make those records available to the Department, the Respondent may impute that employer’s payroll using the statewide average weekly wage as defined in Section 440.12(2), Florida Statutes, multiplied by a factor of l.5. See § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028. Based upon the foregoing, the Department imputed the gross payroll for the entire period for which the requested business records were not produced.

7. By imputing the gross payroll of the employees utilizing the average weekly wage in effect at the time the stop- work order was issued, the Department calculated a penalty for

   the time period of October 1, 2003, through February 15, 2006. The average weekly wage was $683.00 in 2006.

8. Investigator Petracco assigned a class code to the type of work performed by Petitioner utilizing the SCOPES Manual, multiplied the class code’s assigned approved manual rate by the imputed gross payroll per $100.00, and then multiplied all by

   1.5. She then utilized the imputed payroll for the same number of employees for each of the years assessed pursuant to Florida Administrative Code Rule 69L-6.028(2). The Amended Order was issued and assessed a penalty of $635,727.60. That Amended Order was served on Petitioner by certified mail on August 3, 2006.

9. Investigator Petracco acknowledged that the approved manual rate for class codes may fluctuate from year to year and the penalty worksheet reflected any such fluctuations for the computations she performed. Additionally, Investigator Petracco did not include the Petitioner on the penalty worksheet, and did not factor him into the penalty calculation because he possessed a valid workers’ compensation exemption for the penalty period.

10. Later, after further reflection on the matter, Investigator Petracco recalculated the penalty assessment. This decision was based, in part, upon Investigator Petracco giving the Petitioner the benefit of the doubt in accepting the assertions that the employees were paid at a rate of $100 per day and by going back only to January 1, 2005. The Department relied

    on these assertions and thus recalculated the penalty to the reduced amount of $236,209.79.

11. Investigator Petracco issued the Second Amended Order which was served via a Motion to Amend Order of Penalty Assessment. The Motion to Amend Order of Penalty Assessment was granted by order on February 11, 2008.

12. Investigator Petracco also utilized business records that were subsequently provided by Petitioner’s counsel in response to the prior records request. In so doing, Jesus Mijares was included in the penalty for the period of May 15, 2003, through January 23, 2004, for which he was paid remuneration (in the form of checks written to him), and during which he did not have a current, valid workers’ compensation exemption. These checks were made payable directly to Jesus Mijares from the Paul E. Hahn Company. That company did not have a workers’ compensation policy or any coverage for its employees.

13. Although the Petitioner claimed that all of the workers were employees of various companies that he procured them for, there are no copies of checks or any records that would corroborate this assertion. The Petitioner further asserts that he was the victim of the matter.

14. The credible evidence supports the findings that the Petitioner was contacted to perform roofing construction, that he procured the workers to do the work requested, that the workers were paid a daily rate of $100.00 (either in cash or check), and

    that the Petitioner was responsible for assuring that the roofing work was performed correctly. The Petitioner has been doing roofing for 20 years. Presumably, he performs the work in a satisfactory manner. The Petitioner does not have workers' compensation insurance coverage for any of the men who work for him. Moreover, the men are not covered by any of the general contractors for whom the Petitioner does the work. Finally, the men are not part of an employment pool that covers them.

15. The Petitioner provided copies of checks to the Department from the Paul E. Hahn Company that were provided to other individuals who were employees of that company. The checks were remuneration to the employees only. In contrast, the Petitioner was unable to explain why some employees received checks and he received checks from which he was to pay other workers. Based upon the most credible assessment of the facts, it must be found that the Petitioner operated as a subcontractor. He paid his employees from the check written to him.

16. Based upon the checks written to him by the Paul E. Hahn Company, based on the lack of records provided by the Petitioner, and the past trend of his work history as a roofing subcontractor, together with the statements from the men on the jobsite, it is found that the Petitioner was an employer within the meaning of the workers' compensation law.

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings. § 120.57(1), Fla. Stat. (2008).

18. The Department has the burden of proof in this case and must show by clear and convincing evidence that the Petitioner violated the Workers' Compensation Law during the relevant period and that the penalty assessment is correct. Department of Banking and Finance Department of Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932 (Fla. 1996).

19. 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 employees unless exempted or excluded under Chapter 440, Florida Statutes. 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). In this case it is concluded the Petitioner acted as a subcontractor and was therefore an "employer" as provided by law.

20. Section 440.10(1), Florida Statutes, provides in pertinent part:

    (a) Every employer coming within the provisions of this chapter shall be liable for, and shall secure, the payment to his or her employees . . .of the compensation. . . .

21. "Employer" is defined as "every person carrying on any employment..." § 440.02(16), Fla. Stat. "Employment . . . means 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)2. Fla. Stat.

22. "Employee" is defined in Section 440.02(15), Florida Statutes, in pertinent part:

    (a) '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 for hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed . . . .

    
    

23. Pursuant to Section 440.107(3)(g), Florida Statutes,

    
    

    1. The department shall enforce workers' compensation coverage requirements, including the requirement that the employer secure the payment of workers' compensation. [and]

       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. Section 440.107(7)(d)1., Florida Statutes, provides 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.

    
    

25. Employers are obligated to maintain records for the prior three years to prove compliance with the coverage requirements of Chapter 440, Florida Statutes. See also Fla. Admin. Code R. 69L-6.015. The Petitioner cannot permissibly ignore the statutes and rule without defeating the purposes of the Workers’ Compensation Law.

26. Under the “Required Records Doctrine” of the Administrative Procedure Act, an agency may request the production of any records that it must keep and maintain by law. See Saviak v. Gunter, 379 So. 2d 450 (Fla. 3d DCA 1980); Sheppard v. Florida State Board of Dentistry, 369 So. 2d 629 (Fla. 1st DCA 1979). An agency may also use investigatory devices permissible by statute, that are enforceable even in the absence of preexisting proof of statutory non-compliance. See Florida Dept. of Insurance & Treasurer v. Bankers Insurance Co., 694 So. 2d 70 (Fla. 1st DCA 1997). In this case, the Department, under the authority of Section 440.107(5), Florida Statutes, and Florida Administrative Code Rule 69L-6.015, properly issued a records request for penalty calculation. The Petitioner did not comply with that request.

38 Under these circumstances, the Department is charged with assessing a penalty through imputation of the gross payroll. Pursuant to Section 440.107(7)(e), Florida Statutes:

When an employer fails to provide business records sufficient to enable the department to determine the employer's payroll for the period requested for the calculation of the penalty provided in paragraph (d), for penalty calculation purposes, the imputed weekly payroll for each employee, corporate officer, sole proprietor, or partner shall be the statewide average weekly wage as defined in s. 440.12(2) multiplied by 1.5.

1. Florida Administrative Code Rule 69L-6.028(2)(a) states:

   For employees other than corporate officers, for each employee identified by the department as an employee of such employer at any time during the period of the employer’s non-compliance, the imputed weekly payroll for each week of the employer’s non- compliance for each such employee shall be the statewide average weekly wage as defined in Section 440.12(2), F.S., that is in effect at the time the stop work order was issued to the employer, multiplied by 1.5. Employees include sole proprietors and partners in a partnership.

   
   

2. Based on the foregoing, since the Petitioner did not provide records sufficient to compute payroll and a penalty, the Department was mandated by law to impute the gross payroll based upon the findings of its investigation, and assess a penalty for the period for which the records were requested for the same number of employees.

3. Big Bend Hospice, Inc., v. Agency for Health Care Administration, DOAH Case No. 01-4415 (Final Order filed April 8,

   2003), provides support for the imputation of gross payroll:

   
   

   When an employer fails to provide requested Business records that the statutes requires it to maintain, and to make such records available to the Department within 45 days of the request, the Department, effective October 1, 2003, is authorized to impute that employer's payroll using "the statewide average weekly wage as defined in Section 440.12(2), multiplied by l.5." § 440.107(7)(e), Fla. Stat., and Fla. Admin.

   Code R. 69L-6.028. Petitioner thus imputed the payroll for the entire period for which the requested business records were not produced.* * * Accordingly, under these circumstances, Petitioner is charged with assessing a penalty through imputation of the payroll.

   
   

4. The Legislature did not intend mere refusal to be a defense to the Department’s records request. It recognized that some employers would refuse such requests in an attempt to avoid the Department’s penalty. The Department’s mandate to impute gross payroll when an employer fails to provide records sufficient to calculate a penalty has been upheld in Twin City Roofing Construction Specialists, Inc. v. State of Florida, Department of Financial Services, 969 So. 2d 563, 566 (Fla. 1st DCA 2007), wherein the court stated:

   The legislature has recognized that in order to enforce compliance with the requirement to secure the payment of workers' compensation, companies would have to maintain business records and produce them to the Department upon request. § 440.107(3), Fla. Stat. (2005). The Department, pursuant to section 440.107, Florida Statutes, has implemented its own rules requiring employers to keep detailed employment records and to hand them over when requested. See Fla. Admin. Code R. 69L-6.015. When, as here, an employer

   refuses to provide business records, the Division is required to impute the missing payroll for the period requested in order to assess the penalty. § 440.107(7)(e), Fla.

   Stat. (2005).

   
   

5. Florida Administrative Code Rule 69L-6.028(3) states:

   
   

   If subsequent to imputation of weekly payroll pursuant to subsection (2) herein, but before 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.

   
   

6. The Petitioner failed to provide the requested tax records which may have provided some proof of his status as an employee and not an employer. In fact, the Petitioner could have shown that he was the employee of more than one company for the subject time. Without records it is impossible to know the actual earnings.

7. Florida Administrative Code Rule 69L-6.028(3) does not require the Department to impute Petitioner’s gross payroll if records are received after 45 days. The Department could have refused to accept the records provided by Petitioner’s attorney and proceeded with the Amended Order, which would have resulted in a penalty of $635,727.60. Instead, the Department exercised discretion and accepted the records, relied on the statements

   made by the Petitioner's employees on the job site that they were paid at the rate of $100/day, and recalculated the penalty.

8. The weight of the creditable evidence supports the conclusion that the Petitioner acted as a roofing subcontractor, procured labor for roofing purposes, paid his employees at the rate of $100/day, and was required to obtain workers' compensation coverage for such employees.

9. There is competent and substantial evidence to support the Department’s issuance of a stop work order to Petitioner because it was shown that Petitioner failed to secure the payment of workers’ compensation for the workers on the job site. The Department met its burden of proof and established by clear and convincing evidence that Petitioner failed to secure the payment

of workers’ compensation as that term is defined in Section 440.107(7)(2), Florida Statutes correctly imputed Petitioner’s payroll, then correctly recalculated the penalty.

RECOMMENDATION

Based on 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 sustaining the Second Amended Order of Penalty Assessment and imposing a penalty in the amount of $236,209.79 against this Petitioner.

DONE AND ENTERED this 15th day of September, 2008, in Tallahassee, Leon County, Florida.

J. D. Parrish 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 15th day of September 2008.

COPIES FURNISHED:

Colin M. Roopnarine, Esquire Kristian Dunn, Esquire Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229

R. Patrick Beatty, Esquire

32 East Ocean Boulevard Post Office Drawer 2333 Stuart, Florida 34995

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

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: 07-003625

Orders for Case No: 07-003625