Upon due notice, a disputed-fact hearing was held in this case on January 16, 2009, in Lake City, Florida, before
Ella Jane P. Davis, a duly-assigned Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: Douglas D. Dolan, Esquire
For Respondent: Stephen C. Norris, pro se
Is Petitioner Division of Workers’ Compensation correct in assessing a penalty (both as to liability and as to amount)
against Respondent Steve Norris, d/b/a Steve Norris Trim Carpentry and Decks, for violating the Florida Workers’ Compensation Law?
This cause was referred to the Division of Administrative Hearings on or about September 28, 2008.
Herein, Petitioner contends that Respondent was an employer engaged in the construction industry during the penalty period, was not compliant with Chapter 440, Florida Statutes, "The Florida Workers' Compensation Law," during that time, and was correctly assessed a penalty. Respondent disputes the assessment of the penalty.
The cause was initially scheduled on October 10, 2008, for final hearing on December 19, 2008. An Order Granting Continuance and Re-scheduling Hearing was entered on October 31, 2008, for January 16, 2009.
At hearing on January 16, 2009, Petitioner presented the oral testimony of Michael Robinson, Gloria Catalan, Mark Mark, and Respondent, and had 13 exhibits (Agency’s A-M) admitted in evidence, including the deposition, with multiple exhibits, of Dayna Clifford1/ and the deposition of Respondent. Respondent testified on his own behalf and had five exhibits (Norris’s One through Five) admitted in evidence. (Norris Five is also
Exhibit B of the Clifford deposition, and Norris Two is also Exhibit C of the Clifford deposition.)
On January 20, 2009, an Order was entered, memorializing oral rulings that had been made at final hearing: the style of the case was amended; the Motion to Amend Witness List was granted as orally stipulated and amended at formal hearing; the Motion for Official Recognition was granted in part and denied in part as set out therein; the Unopposed Motion to Amend Second Amended Order of Penalty Assessment was granted; and the date for the filing of Proposed Recommended Orders was established.
On January 21, 2009, Petitioner filed “hard copies” of certain rules, which were not timely objected-to by Respondent. Therefore, these rules are, pursuant to the January 20, 2009, Order and oral rulings on the record of hearing, both officially recognized and deemed to be applicable.
A Transcript was filed on February 5, 2009.
Both parties timely filed Proposed Recommended Orders, which have been considered in preparation of this Recommended Order.
Petitioner is the state agency responsible for enforcing the statutory requirement that “employers” as defined in Section 440.02(16), Florida Statutes (2005-2008), secure the payment of workers' compensation for the benefit of their
“employees,” as defined in Section 440.02(15), Florida Statutes (2005-2008). See also § 440.107, Fla. Stat. (2005-2008).
Respondent Steve Norris, a/k/a Stephen C. Norris, is being prosecuted under the business name of “Steve Norris Trim Carpentry and Decks.”
Respondent has never been engaged in building “decks.” He is a sole proprietor domiciled in Florida and engaged in the "trimming out" of mobile homes. Respondent is in the business of hiring out to longitudinally join the two halves of a double- wide mobile home, seam the carpet, put vinyl on the two ends, and lap the two ends. In Respondent’s words, he and his crew “put everything together that the [mobile home] factory doesn’t do,” to set up a mobile home for habitation. Respondent, personally, completes the baseboards with a nail gun and the crown molding with a pin gun. He uses a miter saw at one point in the procedure. Respondent concedes that his type of work could be called “carpentry.” However, Respondent maintains that his crew does nothing more technical than putting vinyl on the two ends of a pre-fabricated mobile home. Petitioner Agency claims that the type of work performed by both Respondent and his crew constitutes “construction,” as understood in the applicable statutes, administrative rules, and manuals applicable to workers’ compensation.
Respondent’s business became “Steve Norris Mobile Home Repair, LLC” in October 2008, by registration as a limited liability company (LLC) with the Florida Secretary of State. See, infra.
However, for the time span involving the present workers’ compensation compliance analysis, which is August 1, 2005, through August 1, 2008, Respondent’s business was not incorporated, but was a sole proprietorship going variously by the names of “Steve Norris Trim Carpentry and Decks,” “Steve Norris Trim Outs,” and “Steve Norris Trim Carpentry.” No bad motive is imputed to Respondent’s use of several similar names for his business. The multiple names were the result of errors or inconsistencies on Respondent’s applications for a county occupational license and a business liability insurance policy or were simply the result of a casual attitude to formal business models and appellations.
Immediately after high school graduation, Respondent went to work for a mobile home factory. A few years later, in 1993, he began the business described above. Again, with no understanding of business models or appellations, and with an erroneous “word of mouth” understanding that one could employ three persons full-time, besides oneself, without running afoul of Chapter 440, “The Florida Workers’ Compensation Law,”2/ it was Respondent’s habit, for 15 years, to frequently help out friends
and acquaintances in desperate financial straits by providing them with honest work for a day or two at a time. Accordingly, Respondent periodically simultaneously employed one to five people (including at least two, and possibly three, of his sons and himself) until Petitioner Agency closed down his business in 2008, with its Stop-Work Order. See, infra.
At all times material, Respondent has operated his business out of his personal residence.
Petitioner Agency’s investigator, Michael Robinson, issued and served a Request for Production of Business Records to Steve Norris Trim Carpentry and Decks at Respondent’s combined business and personal address, to verify compliance with the workers' compensation statutes. Petitioner signed for this item by certified mail on October 12, 2007.
The requested records were not received, so on October 22, 2007, Petitioner's investigator issued a Stop-Work Order to Steve Norris, d/b/a Steve Norris Trim Carpentry and
Decks, for failure to produce business records within five days. However, the Stop-Work Order was not served on Respondent until August 13, 2008.
Based on conversations with Respondent, Petitioner's investigator decided that Respondent's occupation was within the “construction industry.”
On August 19, 2008, Petitioner's investigator issued an Amended Stop-Work Order to Steve Norris d/b/a Steve Norris Trim Carpentry and Decks for failure to secure the payment of workers' compensation.
Also on August 19, 2008, Petitioner's investigator issued a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation to Steve Norris Trim Carpentry and Decks.
On August 25, 2008, the Amended Stop-Work Order was served on Respondent by certified mail.
Also on August 25, 2008, the Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation was served on Respondent by certified mail.
In response to the Request for Production of Business Records for Penalty Assessment Calculation, Ms. Dayna Clifford, who has assisted Respondent in preparation of his “year end papers” and taxes for many years, provided the requested payroll records and 1099 tax forms to Petitioner's investigator.
Respondent’s payrolls fluctuated during the analysis period, but for most months he was paying at least himself and two or more employees. At no time did he use the services of a leasing company or professional employment organization to secure the payment of workers' compensation.
Petitioner's investigator was unable to locate proof that Respondent had secured payment of workers' compensation on behalf of himself or any of the employees listed on his payroll sheets for any time material to the period analyzed. Indeed, Respondent testified that at all times material, he was in ignorance of the law to the extent that he believed that as long as he had no more than three regular, full-time employees plus himself, he did not have to purchase workers’ compensation coverage.
By obtaining a workers' compensation exemption, a corporate officer or a member of an LLC may exempt themselves from the coverage requirements of Chapter 440, Florida Statutes.
Petitioner's investigator did not receive any information indicating that Respondent was a corporation or an LLC at any time during the period analyzed.
Respondent and Ms. Clifford testified that Respondent had applied for an exemption for workers’ compensation purposes, as did two other men who had worked for Respondent and who appear repeatedly, and indeed, regularly, on Respondent's payroll sheets. These men were Michael Fralick and Scott Latham III.3/ Ms. Clifford’s deposition testimony is clear that she believes she mailed three un-notarized election of exemption forms, each purportedly signed respectively on September 2, 2008, by Respondent, Fralick, and Latham, together with her
check to the correct agency address, but there is no copy in evidence of any check from Ms. Clifford to the granter of such exemptions, which is Petitioner, Division of Workers’ Compensation. The three election-of-exemption forms which are in evidence reveal that they were prepared in connection with Respondent’s attempts to qualify with the Secretary of State as “Steve’s Mobile Home Service, LLC,” and sequential variations of that name which Respondent submitted in September 2008, to the Secretary of State, trying to come up with a business name that was unique and which had not already been incorporated. Other evidence shows that Respondent ultimately qualified “Steve Norris Mobile Home Repair, LLC,” with the Secretary of State on October 13, 2008. Although there is, in evidence, a copy of a November 2, 2007, check for $200.00, that Respondent and
Ms. Clifford agree Respondent wrote to Ms. Clifford to cover the Division of Workers’ Compensation’s fee(s) for processing the three election of exemption forms, and this check also shows the bank accepted the check for deposit to Ms. Clifford’s account on November 2, 2007, the confusion of dates and the fact that the check amount is more than the charges for three exemptions, results in there being no clear evidence of when the three September 2, 2008, exemption requests were mailed to Petitioner Agency.4/
Moreover, and more to the point, even if Petitioner Agency had granted each of the three applicants an exemption on or about November 2, 2007 (the date of the check), or
September 2, 2008 (the date beside the applicants’ signatures on their respective election of exemption applications), the exemptions would have been prospective, rather than retroactive, and therefore ineffective for all of the time preceding issuance of an exemption card.
Most to the point, there is no evidence that a workers’ compensation exemption was ever granted by Petitioner Agency to any of the three applicants: Respondent, Fralick, or Latham, and there is no evidence that any of the applicants ever received an exemption card.
Conclusive, however, is Respondent’s testimony that the business in question never registered as a corporation or LLC before October 2008.
Petitioner's investigator was unable to locate an election to be exempt from workers' compensation for Respondent in the material time frame.
Mark Mark, an employee of the Department of Financial Services, and supervisor of the statewide exemption program, testified that when received, an application for an exemption from workers' compensation is scanned into a computer imaging system and placed in an assignment queue but does not become
effective until processed and an exemption card is issued. He was unable to locate any record that applications for elections to be exempt had ever been received on behalf of Respondent Steve Norris, Michael Fralick or Scott Latham, III.
The Agency’s Coverage and Compliance Automated System (C-CAS) contains information on business entities in Florida and whether they have secured the payment of workers' compensation and whether exemptions from workers' compensation have been granted to individuals.
Using C-CAS, Petitioner's investigator and penalty calculator, Gloria Catalan, verified that the individuals listed in Respondent's payroll records had not secured the payment of workers' compensation on behalf of themselves in the material time frame.
Using C-CAS, Petitioner's investigator and penalty calculator verified that Respondent had not secured the payment of workers' compensation on behalf of his employees in the material time frame.
Using C-CAS, Petitioner's investigator and penalty calculator verified that none of the individuals listed in Respondent's payroll records had an active exemption from workers' compensation in the material time frame.
Using C-CAS, Petitioner's investigator and penalty calculator verified that no exemptions from workers'
compensation had been obtained through Steve Norris Trim Carpentry and Decks or any other similarly-named entity in the material time frame.
Using Respondent's business records, Petitioner's penalty calculator calculated a penalty to be assessed against Respondent for his failure to secure workers’ compensation coverage for himself and his workers from August 1, 2005, to August 1, 2008. On August 29, 2008, Petitioner issued an Amended Order of Penalty Assessment, assessing a penalty of
$66,695.93 to Respondent, which was served on Respondent on September 2, 2008.
Petitioner's penalty calculator assessed a penalty representing the workers' compensation premium that Respondent had not paid, multiplied by 1.5, as provided by law.
Petitioner's penalty calculator based Respondent's assessed penalty on Code 5437 of the National Council on Compensation Insurance (NCCI) Class Code 5437, contained in the SCOPES Manual. That NCCI Class Code has provided, at least since October 1, 2005, as follows:
5437: Carpentry—Installation of Cabinet Work or Interior Trim
* * *
Code 5437 is intended primarily for specialist contractors performing interior carpentry finish or trim such as the installation of paneling, molding, cornices,
parquet or finished wooden flooring, materials, staircases, cabinets, and counters. Carpentry of this kind generally involves skilled workmanship.
* * *
No rough carpentry work is included under this classification.
Analogy Assignments:
Additional operations assigned to this classification by analogy include the installation of locks in new buildings and the installation of weather stripping.5/
Respondent produced additional business records, and as a result, Petitioner issued a Second Amended Order of Penalty Assessment on October 1, 2008, lowering the assessed penalty to
$60,881.71.
Petitioner issued a Third Amended Order of Penalty Assessment to Respondent on January 15, 2009, further amending and reducing the assessed penalty to $53,908.51, due to the imputed amount (the “statewide average weekly wage” in 2007, and in 2008) being less in those years than the wages Respondent paid himself in those years.
Respondent testified that all the individuals included on the Third Amended Order of Penalty Assessment had worked for him “at one time or another” in the last three years and that the amounts paid to the individuals listed on the penalty worksheet of the Third Amended Order of Penalty Assessment were accurate.
There is no persuasive evidence that any of the individuals listed on the penalty worksheet of the Third Amended Order of Penalty Assessment were members of an LLC or corporate officers or had secured the payment of workers' compensation on behalf of themselves at any time material to the charges herein.
Respondent represented that since complying with the First Stop-Work Order, he has been unable to find employment. Quite obviously, he has been unable to employ anyone or operate his business since the Stop-Work Order was served. He is in danger of having his vehicles repossessed, and he has no reserve funds with which to enter into an agreement with Petitioner Agency which would let him get back to work in his own business, based on obtaining workers’ compensation insurance and entering into a payment schedule for his fine, by paying ten per cent down and a percentage of the assessed $53,908.51, per month.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause, pursuant to Sections 120.579 and 120.57(1), Florida Statutes (2008).
Because an administrative fine deprives the person fined of substantial rights in property, such fines are punitive in nature. Herein, Petitioner Agency has the duty to go forward to prove 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); Dept. of Financial Services, Division of Workers' Compensation v. U&M Contractors, Inc., DOAH Case No. 04-3041 (RO: 4/7/05; FO: 4/27/05); Triple M. Enterprises, Inc. v. Department of Financial Services, Division of Workers' Compensation, DOAH Case No. 94- 2524 (RO: 1/13/05; FO not provided to the Division by the Agency.)
The Agency complied with the appropriate statutes in obtaining Respondent's business records, investigating Respondent, and issuing its Stop-Work Order(s). See §§ 440.107(3)(c), (3)(g), and 440.107(7)(a), Fla. Stat.
At all times material, that is, August 1, 2005, through August 1, 2008, Section 440.02, Florida Statutes, has provided, in pertinent parts:
* * *
(8) “Construction industry” means for- profit activity involving any building, clearing, filling, excavation, or substantial improvement in the size or use of any structure or the appearance of any land. . . . The Division [of Workers’ Compensation] may, by rule, establish standard industrial classification codes and definitions thereof which meet the criteria of the term “construction industry” as set forth in this section.
(15)(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, and includes, but is not limited to, aliens and minors.
* * *
(c) “Employee” includes:
* * *
An independent contractor working or performing services in the construction industry.
A sole proprietor who engages in the construction industry and a partner or partnership that is engaged in the construction industry.
* * *
(16)(a) "Employer" means the state and all political subdivisions thereof, all public and quasi-public corporations therein, every person carrying on any employment, and . . .
* * *
(17)(a) "Employment," subject to the other provisions of this chapter, means any service performed by an employee for the person employing him or her.
(b) "Employment" includes:
* * *
2. All private employments in which four or more employees are employed by the same employer or, with respect to the
construction industry, all private employment in which one or more employees are employed by the same employer. (Bracketed material and underlining supplied.)
The Agency did not submit any of the usual proofs that Respondent was “doing business as” Steve Norris Trim Carpentry and Decks –- not even the insurance policy allegedly obtained in the name of “Steve Norris Trim Carpentry and Decks” or the occupational license Respondent indicated might have been issued in the name of “Steve Norris Trim Outs” or “Steve Norris Trim Carpentry”. So, the question arises of whether or not the Agency has prosecuted the correct Respondent. It is concluded that Respondent’s oral testimony and acknowledgement that the foregoing “doing business” documents exist is sufficient on this score, and the undersigned submits, at least for argument’s sake, that the prosecution of an individual Respondent as a solo “employer” is permitted by the statute, so that multiple business appellations ought not to be controlling in this type of case.
The question also arises of whether this Respondent was operating in “the construction industry.” The Section 440.02(8), definition of “construction” set out supra certainly supports that interpretation, because, for at least an intended profit, Respondent was rendering “substantial improvement in the use of a structure.”
Despite Respondent’s down-playing his crew’s involvement in “carpentry,” a term that has a common meaning and which also comes up in the classification coding system, the crew’s installation of vinyl end coverings on mobile homes meets the foregoing statutory definition of “construction,” because a “structure” was being improved. If there remains any question as to whether the crew was involved in the “construction industry,” the definition of “mobile home” as a “structure . . . designed to be used as a dwelling . . .” found at Section 320.01(2)(a), and the definition of “construction” of a mobile home being for “. . . resistance to the elements . . .” at Section 320.822(3) [2008], also bolster the concept that Respondent and his crew simultaneously were involved in “construction,” as understood under Chapter 440.6/ For this reason, and because the “employment” of Respondent and his crew constitutes a single business/employment operation, it is here concluded that both Respondent and his employees were involved in the “construction industry,” as that term is defined in Section 440.02(8), Florida Statutes.
Respondent meets the definition of “employer” at Section 440.02(16)(a), Florida Statutes, and of "employee" at 440.02(15)(c)4.
Members of Respondent’s crew meet the definition of “employee” at Section 440.02 (15)(a), and were engaged in “employment,” as defined in Section 440.02 (17)(a) and (17)(b)2.
Respondent had neither an exemption nor LLC protection in place at the material time, and he failed to secure workers' compensation coverage for his employees, including himself, as required by law. See §§ 440.10(1)(a) and 440.38(1), Fla. Stat.
Overall, it is concluded that from August 1, 2005, to August 1, 2008, Respondent was an employer, engaged in employment, with employees, working in the construction industry, and was not in compliance with Chapter 440, Florida Statutes.
The question then becomes whether or not Respondent was correctly assessed a penalty of $53,908.51.
Section 440.107(7)(d)1. provides that 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 $1,000.00, whichever is greater."
§ 440.107(7)(d)1., Fla. Stat. (2008).
At all times material, the statute has provided that the Department "may, by rule, establish standard industrial classification codes and definitions thereof which meet the criteria of the term 'construction industry.'" See § 440.02(8), Fla. Stat. (2005-2008), quoted supra at Conclusion of Law No. 42.
Pursuant to that provision, Petitioner has used its Florida Administrative Code Rule 69L-6.021, to adopt, by reference, construction industry classification codes contained in the SCOPES Manual, published by the National Council on Compensation Insurance. Respondent’s work is clearly “carpentry” per Classification Code 5437, quoted in Finding of Fact No. 33. His crew’s work is less fine-tuned than Respondent’s own work and is clearly not “internal trim,” so the crew’s work could, conceivably, fall in another classification, but all the evidence herein suggests that placing the vinyl on the mobile home’s ends constitutes protection against the elements, which is at least something akin to “weather stripping,” listed in the “analogy assignment” of Code Classification 5437. For this reason, and because the “employment” is a single business/employment operation, it is concluded that the Agency assigned the appropriate classification code to all of Respondent's business activities,
at least for whatever period Classification Code 5437, has been in effect in Florida.
A problem arises, however, in that Classification Code 5437, quoted in Finding of Fact No. 33, was not adopted by the NCCI until October 1, 2005, (see Agency Exhibit M) and then, the whole of the October 1, 2005, NCCI Code was not adopted by Florida Administrative Code Rule 69L-6.021, until that rule was amended, effective March 15, 2006. (History and content to be found at https://www.flrules.org/Default.asp). Code 5437 Exception pages of the Basic Manual (October 1, 2005) was then adopted anew, in that same Rule 69L-6.021, as amended, effective February 8, 2007.7/
Petitioner has failed to demonstrate that Code Classification 5437 was applicable in Florida prior to March 15, 2006. Because Petitioner bears the affirmative burden to prove every element of the fine it seeks to impose, Petitioner has failed to prove that Code 5437 applied prior to March 15, 2006. Therefore, Respondent can only be fined for the period of
March 15, 2006, to August 1, 2008.
The fine must be recalculated to cover only the period from March 15, 2006, through August 1, 2008. Respondent is liable for that reduced fine.
RECOMMENDED that the Department of Financial Services enter a Final Order that recalculates Respondent's fine to cover only the period from March 15, 2006, to August 1, 2008, and requires his payment thereof.
DONE AND ENTERED this 1st day of April, 2009, in Tallahassee, Leon County, Florida.
ELLA JANE P. DAVIS
Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 2009.
1/ Two spellings of Ms. Clifford’s first name appear in the record. She clearly calls herself “Dayna.”
2/ This provision of the Florida Workers’ Compensation Law was repealed for employers in the construction industry before the 2005-2008, period analyzed herein.
3/ Respondent, cooperative but clearly confused, suggested at final hearing that perhaps one of his sons had also applied for an exemption. There is no persuasive corroborative evidence to substantiate this version of events, and it is rejected.
4/ The check would have covered a fourth election of exemption if Respondent’s son had been involved, but there is no application form signed with the son’s name.
6/ Chapter 320, Florida Statutes, regulates the mobile home industry. Chapter 320’s definitions do not govern or modify the application of Chapter 440, "The Florida Workers' Compensation Law." However, given the nature of the “structure” (mobile home) herein, some additional comfort may be found in the recognition of the mobile home industry and the Legislature that mobile homes are, in fact, “structures”. Cf. — Section 320.822 (14), defining “set up” and “installation of mobile homes as operations performed at the occupancy site which render a mobile home . . . fit for habitation . . . not limited to . . . assembling multiple or expandable units.”
7/ Petitioner Agency's "hard copy" of the rule, which was officially recognized, reflects the March 15, 2006, and February 8, 2007, amendments, just not the contents of the March 15, 2006, amendment. For that, one must go to the website. Therefore, any stipulation as to effective period notwithstanding, the actual rule in effect must be applied.
Douglas D. Dolan, Esquire Department of Financial Services Division of Legal Services
Stephen C. Norris
Department of Financial Services Plaza Level 11, The Capitol Tallahassee, Florida 32399-0300
Daniel Sumner, General Counsel Department of Financial Services Plaza Level 11, The Capitol Tallahassee, Florida 32399-0307
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.
