vs. )
Respondent. )
Case No. 12-0272
Pursuant to notice, a hearing was conducted in this case on August 1, 2012, by video teleconference at sites in Miami and Tallahassee, Florida, before Administrative Law Judge June C. McKinney of the Division of Administrative Hearings, pursuant to the authority set forth in sections 120.569 and 120.57(1),
Florida Statutes.
The issue is whether Petitioner properly issued a Stop-Work Order and Second Amended Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
On October 5, 2011, and October 25, 2011, the Division of Workers' Compensation ("Division" or "Petitioner") issued and served a Stop-Work Order and Amended Order of Penalty Assessment ("Order") on Children's Academy Preschool, Inc. ("Children's Academy" or "Respondent"), alleging that Respondent was not in compliance with the coverage requirements of chapter 440, Florida Statutes, and the Florida Insurance Code. Respondent was ordered to cease all business operations.
On or about December 30, 2011, Petitioner received a Petition from Respondent challenging the Order and requesting a hearing on the matter. On July 30, 2012, Petitioner filed a Motion to Amend Order of Penalty Assessment, and, upon the granting of the Motion, issued and served it's Second Amended Order of Penalty Assessment in the amount of $33,167.75.
Respondent's Petition has been applied to the subsequent Second Amended Order of Penalty Assessment so that the final hearing would consider the most recently filed order of assessment. The Petition was transferred to the Division of Administrative
Hearings on January 18, 2012, for assignment of an Administrative Law Judge to conduct the hearing.
At hearing, Respondent testified on his own behalf.
Respondent's Exhibits 1 through 6 were received into evidence. The Division presented the testimony of Cheryl Powell and Anita Proano. The Division's Exhibits 1 through 17 were received into evidence.
The proceedings were transcribed and the parties availed themselves of the right to submit proposed recommended orders after the filing of the transcript. The Transcript of the final hearing was filed with the Division of Administrative Hearings on August 20, 2012. Petitioner and Respondent timely filed Proposed Recommended Orders which have been considered in the preparation of this Recommended Order.
The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to section 440.107, Florida Statutes.
Children's Academy is a corporation operating child care centers in Miami, Florida. Children's Academy was incorporated in 1994 and has been operating with an active status since its inception. Patrick Adeleke ("Adeleke") is the sole shareholder and president of Children's Academy.
Children's Academy has seven locations. Each of the seven day care centers has its own state license and occupational license.
On October 5, 2011, Petitioner's investigator, Cheryl Powell ("Powell"), visited the Children's Academy location at
151 Northwest 162 Street, Miami, Florida.
At the business site, Petitioner's investigator spoke to Laquisha Lewis ("Lewis") regarding the business. Lewis provided Powell a business card during the meeting that contained the seven day care centers under Children's Academy.
Subsequently, Powell visited the headquarters. Adeleke was not at the business site when Powell visited the Children's Academy headquarters. The headquarters had a marquee that indicated it was Children's Academy Preschool, Incorporated. It had children, playground equipment, and was the same colors: red, yellow, and blue as the original business site Powell had visited earlier.
Powell returned to the original business site and input information about Children's Academy into the Department of Financial Services' Coverage and Compliance Automated System (CCAS). She found that Respondent lacked insurance for the payment of workers' compensation coverage. Powell discovered Children's Academy's last known coverage was canceled May 19, 2003. Additionally, Petitioner's investigator verified through
the CCAS that no exemptions from workers' compensation had been issued in connection with Children's Academy.
Eventually, Powell spoke to Adeleke by telephone.
Adeleke informed Powell that he had 27 employees working for Children's Academy and that there was no workers' compensation insurance in place.
Each of the 27 employees are employed by Children's Academy under one tax ID number. Two of the seven day care center locations (Children's Academy #1 and #3) have four or more employees and the other five day care center locations (Children's Academy #2, #4, #5, #6, and #7) have three or fewer employees.
Upon confirmation that Respondent lacked workers' compensation coverage and that no exemptions were in effect, the Department issued Children's Academy a Stop-Work Order ("SWO") and served a Request of Business Records for Penalty Assessment Calculation to Children's Academy ("Request").
On October 7, 2011, Respondent obtained a certificate of insurance for workers' compensation coverage.
Respondent also responded to the Request and provided the Department with some of the requested records. These business records included corporate tax returns, quarterly federal tax returns, quarterly state employer's tax returns and
payroll journals. The records were forwarded to Anita Proana, Penalty Auditor for the Division for review.
The records listed one employer, Children's Academy, for all the business records supplied for each of the seven day care centers. All 27 employees were being paid under one corporation, with one federal employer ID number for Children's Academy. Additionally, the amounts on the payroll journals for the 27 employees matched the amount claimed as wages on the federal tax returns for Children's Academy.
After Proano reviewed the records provided, she properly calculated the worker's compensation amount Children's Academy owed in workers compensation insurance for the period of October 6, 2008, through October 5, 2011, and concluded that Respondent failed to pay workers' compensation premium of
$22,111.20. After the premium was multiplied by the statutory factor of 1.5, it resulted in a penalty assessment in the amount of $33,167.75.
The new calculation superseded the Amended Order and a Second Amended Order of Penalty Assessment was issued on or about July 27, 2012, reducing Respondent's penalty to
$33,167.75.
During the hearing, Respondent admitted not having workers' compensation coverage for his employees but contested Children's Academy being a single employer. Instead, Respondent
contested that the five preschools that had three or fewer employees owed any premium because each preschool was exempt.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto pursuant to sections 120.569 and 120.57(1), Florida Statutes.
Chapter 440, Florida Statutes, is known as the Workers' Compensation Law. See § 440.01, Fla. Stat.
Employers are required to secure payment of compensation for their employees. § 440.38(1), Fla. Stat.
The question in this matter is whether each individual preschool was an employer for workers' compensation compliance purposes.
"Employer" is defined, in part, as "every person carrying on any employment." § 440.02(16), Fla. Stat. "If the employer is a corporation, parties in actual control of the corporation, including, but not limited to the president, officers who exercise broad corporate powers who . . . directly or indirectly own a controlling interest in the corporation, are considered the employer for the purposes of ss 440.105, 440.106, and 440.107." § 440.02(16)(a), Fla. Stat.
"Employee" is defined, in part, as "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 . . . ." §440.02(15)(a), Fla. Stat.
Because an administrative fine deprives the person fined of substantial rights in property, such fines are punitive in nature. Petitioner has the burden of proof and must establish through clear and convincing evidence that Respondent violated the workers' compensation law. Dep't of Banking & Fin., Div. of Sec. and Investor Prot. v. Osborne Stern, Inc., 670 So. 2d 932 (Fla. 1996).
Respondent asserts that the five preschool locations that have three or fewer employees are individual preschools that do not have to carry workers' compensation insurance. The undersigned rejects the contention as not persuasive.
Although not controlling, the "integrated enterprise test" established in relation to Title VII case law to determine "single employers" is persuasive in this matter. For Petitioner to be able to include the employees of the other "Frier companies" in the count to establish the statutory requirement by complying with the definition of "employer" at section 760.02(7), it must by extension of case law meet the "single employer" or "integrated enterprise" test. In Title VII actions the integrated enterprise test is recognized by the courts as being part of a "liberal construction" pertaining to the term
"employer" set forth in Title VII. See Reeves v. DSI Security Serv., supra, and Lyes v. the City of Rivera Beach, Fla, 166 F.3d 1332, 1341 (11th Cir. 1999). The court in Lyes, 166 F.2d
at 1341, explained:
In keeping with this liberal construction, we sometimes look beyond the nominal independence of an entity and ask whether two or more ostensibly separate entities should be treated as a single, integrated enterprise when determining whether a plaintiff's "employer" comes within the coverage of Title VII.
We have identified three circumstances in which it is appropriate to aggregate multiple entities for the purposes of counting employees. First, where two ostensibly separate entities are 'highly integrated with respect to ownership and operations,' we may count them together under Title VII. McKenzie, 834 F.2d at 933 (quoting Fike v. Gold Kist, Inc., 514 F.Supp. 722, 726 (N.D.Ala.), aff'd, 664 F.2d
295 (11th Cir. 1981)). This is the 'single employer' or "integrated enterprise" test .
. . .
* * *
The issue before us involves the "single employer" test. In determining
whether two non-governmental entities should be consolidated and counted as a single employer, we have applied the standard promulgated in NLRA cases by the National Labor Relations Board. See, e.g., McKenzie, 834 F.2d at 933. This standard sets out four criteria for determining whether nominally separate entities should be treated as an integrated enterprise. Under the so-called "NLRB test," we look for "(1) interrelation of operations, (2) centralized control of labor relations, (3) common
management, and (4) common ownership or financial control."
"The totality of the circumstances controls, thus, no single factor is conclusive, and the presence of all four factors is not necessary to a finding of single employer." E.E.O.C. v. Dolphin Cruise Line, Inc., 945 F. Supp. 1550 (S.D. Fla. 1996).
In determining whether the interrelation of operations factor is met, courts look to whether the companies share employees and resources. Guaqueta, supra (citing Walker v. Boys & Girls Club of Am., 38 F. Supp. 2d 1326, 1331 (M.D. Ala. 1999))("[T]he National Labor Relations Board has identified seven indicia of interrelatedness: (1) combined accounting records; (2) combined bank accounts; (3) combined lines of credit; (4) combined payroll preparation; (5) combined 21 switchboards; (6) combined telephone numbers and (7) combined officers.")
Applying the above persuasive analysis in this matter, the five preschools that have three or fewer employees should not be exempt because each of the seven locations under the corporation, Children's Academy, shared the same tax ID number, payroll records, corporate tax returns, quarterly federal tax returns, and quarterly state employer's tax returns. These facts established that the accounting records were "combined"
and that there is "common financial control." Further, there is "common ownership," management, and a "common director and officer," Adeleke, the president and sole shareholder of all seven preschools.
Accordingly, Children's Academy, the corporation, is the employer for workers' compensation purposes pursuant to section 440.02(16)(a). Children's Academy is therefore required to secure the payment of workers' compensation for all 27 employees.
The parties stipulated that Children's Academy did not pay workers' compensation premiums during the period from October 6, 2008, to October 5, 2011. Therefore, Petitioner correctly issued the SWO and Second Amended Penalty Assessment prescribed in section 440.107(7)(d). The evidence here clearly indicates that Respondent owes $33,167.75 as a penalty for not "securing the payment of workers' compensation."
RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop-Work Order and Second Amended Order of Penalty Assessment in the amount of $33,167.75 minus the payments made to date.
DONE AND ENTERED this 25th day of September, 2012, in Tallahassee, Leon County, Florida.
JUNE C. McKINNEY
Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 2012.
Law Office of Layne Verebay, P.A. Building B, Suite 104
Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services
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.
