Pursuant to notice, a final hearing was conducted in this case on July 16, 2009, in Port Charlotte, Florida, before Administrative Law Judge R. Bruce McKibben of the Division of Administrative Hearings.
For Petitioner: Timothy L. Newhall, Esquire
For Respondent: Brian P. Brunderman, pro se
Brunderman Building Company, Inc. 4288 Pinnacle Street
The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees, and, if so, what penalty should be assessed.
On January 8, 2009, Petitioner, Department of Financial Services, Division of Workers' Compensation (hereinafter the "Division"), issued a Stop-Work Order (SWO) to Respondent, Brunderman Building Company, Inc., for "failure to obtain coverage that meets requirements of Chapter 440, F.S., and the Insurance Code." Respondent timely requested an administrative hearing to contest the SWO and the assessed penalty. The hearing was held on the date set forth above, and both parties were in attendance.
At the final hearing, Petitioner called four witnesses: Andrew Sabolic, assistant director of the Division; Ira Bender, former investigator for the Division; Brian Brunderman, Petitioner; and Lynne Murcia, compliance specialist for the Division. Petitioner's Exhibits 1 through 4, 6 through 10, 12,
13, 15 through 17, 19, 21, and 23 through 28 were admitted into evidence. Respondent called Donna Greve, bookkeeper/secretary/office manager for Respondent; and Brian Brunderman, Respondent's president. Respondent's Composite Exhibit 1 was received into evidence. The parties advised that
a transcript of the final hearing would be ordered. They were given ten days from the date the transcript was filed at the Division of Administrative Hearings (DOAH) to file proposed findings of fact and conclusions of law. The Transcript was filed at DOAH on August 7, 2009. Each party timely submitted a Proposed Recommended Order and each was duly considered in the preparation of this Recommended Order.
Petitioner is the state agency responsible for, inter alia, monitoring businesses within the state to ensure that such businesses are providing the requisite workers' compensation insurance coverage for all employees. The Division's headquarters are located in Tallahassee, Florida, but its investigators are spread throughout the state in order to more effectively monitor businesses.
Respondent is a construction company that has been operating in excess of 30 years. It is a small company and usually only has a few employees at any given time. The company is located in Charlotte Harbor, Florida.
Workers' compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. Workers' compensation coverage may be secured via three non-mutually exclusive methods: 1) The purchase of a workers' compensation insurance
policy; 2) Arranging for the payment of wages and workers' compensation coverage through an employee leasing company; or
3) Applying for and receiving a certificate of exemption from workers' compensation coverage, if certain statutorily-mandated criteria are met.
On January 8, 2009, Ira Bender, investigator for the Division, was doing on-site inspections in Port Charlotte, Florida. Bender stopped at the site on Edgewater Drive where new construction was underway at a YMCA. Bender observed a man (later identified as Thomas Woodall) sweeping the floor. Bender questioned Woodall and was told that Woodall worked for Respondent. When asked about his workers' compensation insurance coverage, Woodall advised that his insurance was maintained through Frank Crum Leasing Company ("Crum"). Bender called Crum and found that although Woodall had been carried as an employee of Respondent in the past, he had been released from coverage. The reason for his release was that his employment had been terminated for lack of business.
Bender called Respondent to inquire about workers' compensation coverage. He was told that Respondent did not realize Woodall had been dropped from the Crum insurance coverage and that he would be reinstated immediately. In fact, coverage was restarted on that same day.
Based on his finding that an employee had been working without coverage, Bender called his supervisor and provided his findings. The supervisor authorized issuance of a SWO based on the findings. The SWO was served on Respondent via hand- delivery at 11:45 a.m., on January 8, 2009. The SWO was also posted at the work site.
The Division then requested business records from Respondent in order to determine whether there were any violations. If there were violations, then the Division would ascertain the amount of penalty to assess. Respondent cooperated and submitted the business records, as requested.
After review of the business records, the Division issued its first Amended Order of Penalty Assessment ("Order") on January 14, 2009. The process employed by the Division was to locate all uncovered employees, i.e., those working without workers' compensation insurance for any period of time. The employees were then assigned a class code from the National Council on Compensation Insurance (NCCI) publication. Each trade or type of employment is assigned a code which sets the rate to be applied to an individual depending on the type of work he/she is performing. The Division assigned codes to the employees, determined how much the employee had been paid during the period of non-coverage, assigned the rate to the gross pay, and calculated the insurance premium needed to cover the worker
for the time in question. A penalty of 1.5 times the premium was then assigned.
The Order assessed a total penalty of $21,165.98 against Respondent. Respondent objected to the amount and refused to sign it due to errors contained in the Penalty Worksheet attached to the Order. Signing the Order would have allowed Respondent to return to work, but he refused to sign because he knew it was not correct.
Pursuant to discussions between the parties and "additional records received," the Division issued a second Order on January 16, 2009, assessing a penalty of $6,501.27. Respondent believed that the Division was still in error and provided yet additional information--some verbal--to the Division.
A third Order was issued on January 21, 2009, reducing the penalty to $3,309.56. However, Respondent still believed the penalty worksheet contained errors. Again, Respondent refused to sign and provided additional information to the Division.
The Division issued a fourth Order on January 28, 2009, assessing a penalty of $2,822.24. That Order had an error concerning the spelling of an employee's name, but the penalty amount was correct. Respondent would not sign the fourth Order, because he did not believe he had intentionally violated any
statute or rule concerning workers' compensation coverage for his employees.
A corrected (fifth amended) Order was ultimately issued on May 19, 2009.1 The fifth Order asserts the amount of penalty now in dispute, which is the same amount appearing in the fourth amended Order. Respondent signed the fifth Order and entered into a payment plan for payment of the penalty, paying a down payment of $1,000 and monthly payments of $30 until paid in full.
Respondent takes great offense to the fact that the penalty assessments were not faxed to him more quickly. He maintains that he had every intention to resolve this matter as quickly as possible, but the Division delayed and dragged out the process.
The penalty worksheet attached to the fifth Order listed nine "Employee Names" that are subject to the penalty assessment. Each will be discussed below.
The first "employee" is listed as "Cash" and is assigned Class Code 5403. This "employee" represents checks found in Respondent's records with the payee listed as "cash- casual labor" totaling $2,178.00 in gross payroll. Code 5403 was assigned because that is the code used by Crum for Respondent's general business. The manual rate for Code 5403 is
$24.74. A penalty of $808.26 was assessed for that employee.
The second employee is Jacob Prewitt. Prewitt was assigned Class Code 5221, due to the word "driveway" appearing on a check issued to him. Driveway work falls under a lower approved manual rate ($10.37) than general construction. The gross payroll amount was $1,960, and the penalty assigned to Prewitt was $304.88.
The third employee is Woodall, assigned a Class Code of 5606, with a manual rate of $3.84. That code is used for supervisors and is, again, not as dangerous an occupation as general construction. The gross payroll for this entry was
$1,008, and the penalty assessed for Woodall was $58.07.
Cash is the fourth employee and has been covered in the discussion in paragraph 16, above.
Barry Lawrence is the fifth employee; he is assigned Class Code 5437 as a cabinet maker/installer with a manual rate of $13.01. Lawrence had a Verification Letter issued by the Division indicating he was exempt from workers' compensation coverage. However, that exemption was limited to cabinet- making. By installing the cabinets, Lawrence performed work outside his exemption status. The gross payroll for his work was $6,200, and the penalty assessed for Lawrence was $1,209.33. Respondent was completely unaware that the exemption letter did not cover installation and had, in fact, always allowed cabinet- makers to install the cabinets as well.
Brunderman Builders is listed as the sixth employee.
It is assigned Class Code 5403 with a manual rate of $14.39. The gross payroll for this entry was $550, resulting in a penalty assessment of $118.73.
The seventh employee is Jorge Gonzolas, assigned Class Code 5403, the general contracting code. Gonzolas was the employee of a contractor who was subcontracting with Respondent. The contractor died unexpectedly, and Gonzolas was left without payment for the work he had performed. Respondent generously decided to pay Gonzolas for his work, thereby, effectively making Gonzolas a de facto employee. The amount paid Gonzolas was $599.00; the penalty assessed for Gonzolas was $129.30.
Woodall is again listed as employee number eight, this time with Class Code 5610, reflecting casual labor he did on one date that his insurance was not in place. The payroll amount for this work was $37.50. The penalty assessed for Woodall was
$4.02.
The ninth employee was Julio Garcia, assigned Class Code 8742 for outside sales, with a manual rate of $.64. The payroll amount for Garcia was $1,300. His penalty assessment amount was $12.48. Garcia was another one of the deceased subcontractor's employees that Respondent volunteered to pay for work Garcia had performed.
The total payroll at issue for Respondent was
$14,477.50. The total premium for that amount of payroll would have been $1,881.48, and the penalty assessed was $2,822.84.
This is a fairly insignificant portion of Respondent's $5.5 million annual payroll.
Respondent did not intentionally attempt to avoid the payment of workers' compensation insurance for its employees. There is no pattern of avoidance or indication that non-payment was Respondent's goal. Rather, there are plausible and reasonable explanations about the unpaid premiums.
For Woodall, Respondent believed he was still covered through the Crum policy. For Gonzolas and Garcia, Respondent was simply attempting to be a nice guy. For Prewitt, the employee's exemption had unknowingly lapsed. For Lawrence, Respondent relied upon a Verification Letter from the state, but misinterpreted its scope.
The Division, on the other hand, only pursued Respondent based on an actual finding of non-coverage. But for Woodall's presence at a work site doing manual labor (sweeping the floor), the Division would not have looked at Respondent's records. There is no indication the Division acted other than in strict accordance to its governing rules.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding pursuant to Section 120.569 and Subsection 120.57(1), Florida Statutes.2
The Division has the burden of proof in this case in that the administrative fines being proposed are penal in nature. The standard of proof is clear and convincing evidence. See Department of Banking and Finance Division of Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932 (Fla. 1996).
Clear and convincing evidence is an intermediate standard of proof which is more than the "preponderance of the evidence" standard used in most civil cases, but less than the "beyond a reasonable doubt" standard used in criminal cases. See State v. Graham, 240 So. 2d 486 (Fla. 2d DCA 1970). Further, clear and convincing evidence has been defined as evidence which:
[R]equires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.
Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 1st DCA 1983) (Citations omitted).
Many of the material facts in this case are undisputed. There is no disagreement by Respondent as to the amount of the penalty found in the fifth Order. The names of the employees found on the penalty worksheet are accurate. The time frames for which the named employees did not have appropriate coverage is not in dispute. As to these undisputed facts, the Division has met its burden of proof.
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 the employee is exempted or excluded under Chapter 440, Florida Statutes. Strict compliance with the workers' compensation laws is required by the employer. See C&L Trucking v. Corbitt, 546 So. 2d 1185, 1187 (Fla. 5th DCA 1989).
Subsection 440.107(7)(a), Florida Statutes, states, in relevant part:
Whenever the department determines that an employer who is required to secure the payment to his or her employees of the compensation provided for by this chapter has failed to secure the payment of workers' compensation required by this chapter . . . 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 the cessation of all
business operations. If the department makes such a determination, the department shall issue a stop-work order within 72 hours.
Thus, even though Respondent corrected the workers' compensation coverage lapse immediately, such lapse is statutorily deemed an immediate serious danger to the public health, safety, and welfare. Nonetheless, the Division does have the authority not to issue a SWO if it sees fit. In the instant case, a SWO was entered and cannot be retroactively revoked.
"Employee" is defined in Subsection 440.02(15), Florida Statutes, as:
ny 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.
Under this broad definition, each of the individuals listed in the SWO was an employee for purposes of the workers' compensation laws.
As to penalties, Subsection 440.107(7)(d)1., Florida Statutes, states:
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 the 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 payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater.
There is no provision in law for mitigation of a correctly applied penalty against an employer failing to properly maintain coverage for its employees. Once the Division asserts its authority and completes its investigation, it may impose a penalty for all violations it uncovers. Regardless of Respondent's obvious lack of knowledge of violations in the instant case, there is no procedure whereby the undersigned may recommend reduction of the penalty amount.
Clearly Respondent had no intent to violate the law or to fail in his provision of workers' compensation insurance coverage for himself and all his employees. Nonetheless, the required insurance was not in place for the employees discussed in the Findings of Fact, above.
RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, upholding the assessment of a penalty of $2,822.24 against Respondent, Brunderman Building Company, Inc.
DONE AND ENTERED this 9th day of October, 2009, in Tallahassee, Leon County, Florida.
R. BRUCE MCKIBBEN Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 9th day of October, 2009.
1/ The Division did not fully explain why the fifth Order was issued so long after the other Orders. Each of the previous Orders had been issued within a day or so of receipt of clarifying information. The fifth Order came several months later.
2/ Unless stated otherwise herein, all references to Florida Statutes shall be to the 2008 version.
Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307
Timothy L. Newhall, Esquire Department of Financial Services
Brian P. Brunderman
Brunderman Building Company, Inc. 4288 Pinnacle Street
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.
