R. ROHN, INC., Respondent.
) Case No. 11-0008
On July 20, 2011, a duly-noticed hearing was held by video teleconference with sites in Jacksonville and Tallahassee, Florida, before Lisa Shearer Nelson, an Administrative Law Judge assigned by the Division of Administrative Hearings.
Barry Bobek, P.A.
The issue to be determined is the penalty to be assessed for the admitted violation of chapter 440, Florida Statutes, by conducting business operations in the State of Florida without
obtaining workers' compensation coverage for all employees that meets the requirements of chapter 440.
On October 27, 2010, Petitioner, Department of Financial Services, Division of Workers' Compensation (the Department or Petitioner), issued a Stop-Work Order for Specific Worksite Only to Respondent, W.R. Rohn, Inc. On November 19, 2010, Respondent filed an Election of Proceeding form disputing the allegations in the Stop Work Order and requesting a hearing pursuant to section 120.57(1), Florida Statutes. On January 4, 2011, the case was transferred to the Division of Administrative Hearings for the assignment of an administrative law judge.
On January 19, 2011, a Notice of Hearing was issued scheduling the final hearing for March 15, 2011. At Petitioner's request, the case was continued and rescheduled for July 20, 2011, and proceeded as scheduled. On July 13, 2011, the Department filed a Motion to Amend the Penalty Assessment, and the motion was granted at the commencement of the hearing. The parties filed a Joint Pre-Hearing Stipulation that contained several stipulated facts that, to the extent that they are relevant, have been incorporated into the findings of fact below.
At hearing, the Department presented the testimony of Lucio Cabrera, Jr. and Catherine Ferguson, and Petitioner's Exhibits 1-12 were admitted without objection. Respondent presented the testimony of William Rohn, Sr., and Fred Vining. The Transcript
of the hearing was filed with the Division on August 5, 2011, and on August 15, 2011, the Department filed its Proposed Recommended Order. To date, no post-hearing submission has been received from Respondent.
The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees and corporate officers.
Respondent is an active Florida corporation whose principal office is located at 2159 St. Johns Bluff Road, Jacksonville, Florida 32246. Respondent was an active construction industry business in the State of Florida during the period of February 15, 2008, through December 22, 2010 (the audit period).
On October 22, 2010, Investigator Lucio Cabrera began an investigation on Respondent's compliance with chapter 440, Florida Statutes.
On that date, Respondent was the contractor of record for a construction project at 4160 Julington Creek Road, Jacksonville, Florida.
During the audit period, which included October 22, 2010, Respondent had an active employee leasing agreement with SouthEast Employee Leasing, Inc. (SouthEast).
On October 22, 2010, Noble Construction Group, Inc. (Noble) was a sub-contractor of Respondent.
On October 22, 2010, Noble had an active employee leasing agreement with Convergence Employee Leasing, Inc. (Convergence).
On October 22, 2010, Salvador Perez was one of Noble's employees.
Prior to the commencement of work on October 22, 2010, Respondent did not receive a Certificate of Liability Insurance and a list of the employees leased to Noble from the professional employer organization or employee leasing company used by Noble.
On October 22, 2010, Salvador Perez was not listed as an employee on the roster of leased employees between Noble and Convergence.
Based upon the omission of Perez on the list from Convergence, Investigator Cabrera determined that Respondent was in violation of chapter 440 and issued a Stop-Work Order and Order of Penalty Assessment to Respondent, which was served on Respondent on October 27, 2010.
On that same date, the Department served a Request for Production of Business Records for Penalty Assessment Calculation. The records requested were for the period from October 28, 2007, through October 27, 2010, and included all documentation identifying the legal business name and business form, including the Federal Employer Identification Number
(FEIN); all business tax receipts, trade licenses or certifications, and competency cards held by the employer; all documents reflecting the payroll of the employer, including but not limited to time sheets, time cards, attendance and earning records, check stubs and payroll summaries, and federal income tax documents reflecting the amount paid or payable to each employee; account documents such as business check journals and statements for all business accounts; all records of each business disbursement; all contracts for work performed by the employer; workers' compensation policies and certificates of insurance; professional employer organization records; records related to all subcontractors used; and documentation of subcontractors' workers' compensation coverage.
Respondent complied with the request for records by providing profit and loss detail reports for 2008, 2009, and 2010, as well as payroll summaries from SouthEast. While the Department reviewed the records provided, it did not interview anyone connected with Respondent regarding the records received. The records were provided to Department employee Cathy Ferguson for use in calculating the penalty owed.
Fred Vining was an employee of Respondent during the period of February 15, 2008, through July 27, 2009. Mr. Vining was covered through Respondent's arrangement with SouthEast for workers' compensation coverage from February 15, 2008, through July 27, 2009.
During Ms. Ferguson's review of the records provided by Respondent, she discovered that Mr. Vining received several disbursements characterized as "loans" from Respondent. While Mr. Vining was covered by Respondent's employee leasing agreement with SouthEast, the agreement provides that
"Client represents and warrants that all wages (including bonuses) paid to any assigned employee are to be paid through SPLI and that any such assigned employees shall receive no additional wages in any form from Client. . . ".
The amounts characterized as loans were not paid through SouthEast. Further, Ms. Ferguson was unable to find any records that indicated these amounts had been repaid in full or in part. However, she did not speak to anyone from Respondent to inquire about possible repayment. Moreover, the documents requested focus on disbursements by the company, as opposed to receipts and the types thereof.
In calculating the penalty to be imposed, Ms. Ferguson used the worksheet authorized by Florida Administrative Code Rule 69L-6.027. With respect to Mr. Perez, she imputed the gross payroll by multiplying the average weekly wage as determined by the Agency for Workforce Innovation, for the audit period.
Respondent does not dispute the imputed payroll or the amount of penalty attributable to the lack of coverage for
Mr. Perez.
Ms. Ferguson also calculated a penalty based upon the amount of the loans made to Mr. Vining. Respondent does not dispute the method of calculation or the assignment of the class code for Mr. Vining. Respondent's dispute is with considering the loans to be wages paid by the company, as opposed to personal loans made by Mr. Rohn, Sr., to Mr. Vining.
W.R. Rohn, Inc., is a family-owned business run primarily by William R. Rohn, Sr. Mr. Rohn has known Fred Vining for over 25 years, and many of those years, Mr. Vining has been an employee.
Mr. Rohn freely admits loaning Mr. Vining money, and doing so through the corporate account for Respondent. When asked whether the loans were from the company or from him, he stated, "Well, they were from me because I figure I'm the company. I'm me and it was my money. I do what I want to with it."
Mr. Rohn and Mr. Vining testified that the loan was a personal loan, and that Mr. Vining had paid back a part of it when he received his income tax refunds. No records regarding these repayments were provided to the Department because Mr. Rohn did not consider repayment of what he viewed as a personal loan to be a business record. No record of payment was produced at hearing.
CONCLUSIONS OF LAW
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 (2010).
Chapter 440, Florida Statutes, is known as the "Workers' Compensation Law." § 440.01, Fla. Stat.
In this case, the Department is seeking an administrative fine. Accordingly, the Department bears the burden of proof and must establish its case by clear and convincing evidence. Dep't of Banking and Fin. v. Osborne Stern & Co., 670 So. 2d 932, 935 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 291 (Fla. 1987). To meet this burden, the Department must demonstrate that Respondent was required to comply with the Workers' Compensation Law, that Respondent failed to comply with the requirements of the Workers' Compensation Law, and that the penalty assessed by the Department is appropriate.
Respondent does not dispute that it is required to comply with the Workers' Compensation Law, or that it failed to do so with respect to Mr. Perez. See § 440.10(1)(b), (c); Fla. Admin. Code R. 69L-6.032(3). It disputes the amounts loaned to Mr. Vining should be included as wages for which workers' compensation coverage is required.
Employment is defined in section 440.02(17)(a) as "any service performed by an employee for the person employing him or
her" and includes "with respect to the construction industry, all private employment in which one or more employees are employed by the same employer." § 440.02(17)(b)2.
An employee is defined in pertinent part as "any person who receives remuneration from an employer for the performance
of any work or service while engaged in any employment."
§ 440.02(15)(a)
Every employer is required to secure the payment of workers' compensation coverage for the benefit of its employees, unless exempted or excluded under chapter 440. In order to enforce this requirement, the Department is authorized to examine the records of an employer to determine whether it is in compliance, and to assess a penalty equal to "1.5 times the amount the employer would have paid in premium when applying the approved manual rates to the employer's payroll during the periods for which it failed to secure payments of workers' compensation . . . within the preceding 3-year period or $1,000, whichever is greater." § 440.107(3), (7)(d)
Florida Administrative Code Rule 69L-6.035 defines remuneration for the purpose of calculating penalties. Included within the definition are "[l]oans made to employees by or on behalf of the employer to the extent that such loans have not been repaid to the employer." Fla. Admin. Code R. 69L- 6.035(1)(g).
This definition of remuneration requires that the Department include the loans made to Mr. Vining as remuneration for which workers' compensation coverage was required. While Mr. Rohn did not consider the loans to be a business matter, he used a corporate account to make them. While his attitude is understandable given the family nature of the business, as long as the funds were paid from corporate accounts, they are within the purview of the rules and statutes regarding the corporate responsibility for workers' compensation coverage.
Respondent also claims that Mr. Vining has paid him a portion, albeit small, of the loan from his income tax refunds. However, no documentation identifying the exact amount was provided to the Department or at hearing to substantiate this claim. While it seems in this case that Mr. Rohn is being penalized for his charity toward a long-time friend, chapter 440 and rule 69L-6.035 leave little or no discretion for the Department.
The Department has proven by clear and convincing evidence that Respondent failed to comply with the requirements of the Workers' Compensation Law, and that the penalty assessed by the Department is appropriate.
