vs.
ALFRED STRANGE, d/b/a, AL‟S PAINTING SERVICE, LLC, A DISSOLVED FLORIDA LIMITED LIABILITY COMPANY AND AL‟S PAINTING SERVICE, LLC,
Respondents.
Case No. 13-1212
On July 10, 2013, a duly-noticed hearing was held in Port St. Joe, Florida, before F. Scott Boyd, an administrative law judge assigned by the Division of Administrative Hearings.
For Respondents: Alfred T. Strange, pro se
The issue in this case is whether Respondents violated the provisions of chapter 440, Florida Statutes, by failing to
secure the payment of workers‟ compensation as alleged in the Stop-Work Order and Amended Order of Penalty Assessment, and if so, what penalty is appropriate.
Following a site inspection, Petitioner issued a Stop-Work Order, Penalty Assessment, and Request for Production of Business Records for Penalty Assessment Calculation to Respondents on January 7, 2013, by hand delivery at the worksite. Respondents replied with a letter dated January 16, 2013, addressed to the investigator. Respondents did not provide any payroll documents, account documents, or documentation of exemption in response to the Request for Production of Business Records. An Amended Order of Penalty Assessment was served on January 26, 2013, based upon imputed information. Respondents replied with a letter to agency counsel dated February 4, 2013, and a letter to the investigator dated February 11, 2013. Petitioner treated these letters as a request for hearing. A supplemental Stop-Work Order correcting the address shown for the workplace was sent by certified mail on April 4, 2013. The matter was referred to the Division of Administrative Hearings for assignment of an administrative law judge on April 5, 2013.
Petitioner served Respondents with Interrogatories, Requests for Production, and Requests for Admission on or about
April 19, 2013. A Motion to Deem Matters Admitted and Relinquish Jurisdiction was filed on May 16, 2013. Following an Order to Show Cause and a motion hearing, the Motion to Relinquish was denied. Following a renewal of the Motion to Deem Matters Admitted filed on June 11, 2013, some matters were deemed admitted. The case proceeded to hearing on issues related to the authority of the agency and its investigator and issues implicating the existence of Al‟s Painting Service, LLC, at any time during the alleged violations or Respondent Alfred Strange doing business as Al‟s Painting Service, LLC. Matters deemed admitted are included below among the Findings of Fact.
The final hearing was conducted on July 10, 2013.
Petitioner offered 20 exhibits, which were admitted, and presented the testimony of two witnesses: Mr. Carl Woodall, Senior Investigator; and Ms. Monica Moye, Lead Penalty Auditor. Respondent offered no witnesses or exhibits.
The Transcript was filed with the Division of Administrative Hearings on July 29, 2013. Petitioner filed a Proposed Recommended Order on August 8, 2013, which was
considered.
Petitioner, Department of Financial Services, Division of Workers' Compensation (the Department), is the state agency responsible for enforcing the requirement that employers in the
State of Florida secure the payment of workers' compensation for their employees.
Mr. Alfred Strange was a managing member of Respondent Al‟s Painting Service, LLC (the LLC), which had been created at least as early as 2004. The LLC was administratively dissolved on September 24, 2010, for failure to file an Annual Report. After this date, no further Annual Reports were filed.
As a managing member of the LLC, Mr. Strange had initially obtained an exemption from workers‟ compensation coverage beginning on October 21, 2004, which was renewed once for a two-year period and finally expired on October 20, 2008. Mr. Frederick Crutchfield, another managing member of the LLC, had an exemption which expired on November 20, 2008. After this date, no further Requests for Exemption were filed by the company or its officers. Mr. Strange and Mr. Crutchfield did not have exemptions in effect from January 8, 2010, until September 24, 2010, when the LLC was dissolved.
Mr. Carl Woodall is a senior investigator with the Division of Workers‟ Compensation. Mr. Woodall was appointed as an investigator on July 2, 2007, and was appointed as a senior investigator, Position Number 43003044, on September 1, 2012. He has been involved with over 400 enforcement cases under chapter 440.
The position description for Position Number 43003044, effective September 1, 2012, provides in relevant part:
The incumbent in this position is responsible for conducting investigations for the purpose of ensuring employer compliance with the workers‟ compensation requirements; entering and inspecting any place of business at any reasonable time for purpose of investigating employer compliance; examining and copying business records; and issuing, serving, and enforcing stop-work orders, penalty assessment orders, and any other orders required under
s. 440.107 F.S.
On January 7, 2013, Investigator Woodall conducted a site visit to a commercial building at 20721 Central Avenue East, Blountstown, Florida. Outside this address, there was a van with advertising on its side showing a man painting with a paint roller, the words “Al‟s Painting,” and a phone number. Inside, he encountered Mr. Strange painting the east wall of the building. Investigator Woodall was wearing a shirt displaying a seal with the words “State of Florida Workers‟ Compensation Investigator” emblazoned on it. Investigator Woodall showed
Mr. Strange his identification, which contained his name and identification number 03044, and indicated that he was a senior compliance investigator with the Division of Workers‟ Compensation.
In response to questions from Investigator Woodall, Mr. Strange provided identification in the form of his driver‟s
license and stated that he had been working at the Central Avenue address for a few days and was painting only part of the building. Mr. Strange stated that he was being paid $15.00 per hour and that he had been paid once by check.
Mr. Strange provided a business card to Investigator Woodall. Investigator Woodall testified that Mr. Strange may have told him that he had an old card in the van and Investigator Woodall remembered that Mr. Strange did go to the van and look for something. The business card that was provided to Investigator Woodall was printed with “Al‟s Painting Service,
LLC.”
It is not clear that Mr. Strange ever held himself out
as doing business under the name “Al‟s Painting Service, LLC” in obtaining the work at Central Avenue or at any time after the LLC was dissolved.
Investigator Woodall checked workers‟ compensation information for Al‟s Painting Service, LLC, by accessing the Coverage and Compliance Automated System (CCAS) maintained by the Department. The database indicated no workers‟ compensation coverage was in effect for the LLC. It indicated that
Mr. Strange and Mr. Crutchfield were managing members of the LLC but that their exemptions had expired in 2008. Information in the CCAS is submitted by insurance companies and the National Council of Compensation Insurance (NCCI).
Investigator Woodall also accessed the Department of State, Division of Corporations‟ website. That database indicated that Al‟s Painting Service, LLC, had been dissolved on September 24, 2010.
On January 7, 2013, at approximately 12:40 p.m., Investigator Woodall personally served a Stop-Work Order and Order of Penalty Assessment on Mr. Strange and the LLC, along with a Request for Production of Business Records for Penalty Assessment Calculation.
Mr. Strange was actively involved in business operations in Florida during the period of January 8, 2010, through January 7, 2013, inclusively.
Mr. Strange operated within the construction industry during the period of January 8, 2010, through January 7, 2013, inclusively.
Mr. Strange was an "employer" during the time period of January 8, 2010, through January 7, 2013, inclusively, as that term is defined in section 440.02(16).
Mr. Strange neither obtained workers' compensation insurance coverage under chapter 440 for any of the individuals listed on the Penalty Worksheet, nor verified that any of those individuals or corporations had workers' compensation coverage before contracting with them for construction services at any
point in time during the period of January 8, 2010, through January 7, 2013, inclusively.
Class Code 5474, used on the penalty worksheet attached to the Amended Order of Penalty Assessment, and as defined by the NCCI SCOPES Manual, is the correct occupational classification for Alfred Strange, d/b/a Al's Painting Service, LLC, a Dissolved Florida Limited Liability Company.
None of the employees listed on the Penalty Worksheet of Exhibit C were covered by workers' compensation insurance obtained through an employee leasing company for the period of January 8, 2010, through January 7, 2013.
Alfred Strange and Frederick Crutchfield were "employees" of Alfred Strange, d/b/a Al's Painting Service, LLC, a Dissolved Florida Limited Liability Company, as that term is defined in section 440.02(15), during the period of January 8, 2010, through January 7, 2013, whether continuously or not.
Neither Alfred Strange nor Frederick Crutchfield was an independent contractor of Alfred Strange, d/b/a Al's Painting Service, LLC, a Dissolved Florida Limited Liability Company, as that term is defined in section 440.02(15), during the period of January 8, 2010, through January 7, 2013.
Remuneration was paid to Alfred Strange and Frederick Crutchfield during January 8, 2010, through January 7, 2013.
The Request for Admission that the approved manual rates applied on the Penalty Worksheet attached to the Amended Order of Penalty Assessment were correct was deemed admitted pursuant to Florida Rule of Civil Procedure 1.370.1/
The penalty shown in column „g‟ of the Penalty Worksheet attached to the Amended Order of Penalty Assessment is the correct penalty for the employees listed there.
Mr. Strange did not provide the Department any of the records requested in the Request for Production of Business Records for Penalty Assessment Calculation.
The imputed salary amounts for each employee listed on the penalty worksheet of the Amended Order of Penalty Assessment equal the statewide average weekly wage multiplied by 1.5.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this proceeding pursuant to sections 120.569 and 120.57(1), Florida Statutes (2013).
Petitioner has the responsibility to enforce workers‟ compensation requirements, including the requirement that employers secure the payment of workers‟ compensation, pursuant to section 440.107(3), Florida Statutes (2012).2/
In this proceeding, Petitioner seeks to penalize Respondents for failure to secure the payment of workers'
compensation for the benefit of employees, as required by chapter 440.
Petitioner has the burden of proof to show, by clear and convincing evidence, that Respondent committed the violation alleged in the Administrative Complaint. Dep‟t of Banking &
Fin. v. Osborne Stern and Co., 670 So. 2d 932, 935 (Fla. 1996) (the imposition of administrative fines which are penal in nature and implicate significant property rights must be justified by a finding of clear and convincing evidence of a related violation); Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987)(evidence must be clear and convincing to support penal sanction such as revocation of a professional license).
The clear and convincing standard of proof has been described by the Florida Supreme Court:
Clear and convincing evidence requires 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.
In re Davey, 645 So. 2d 398, 404 (Fla. 1994) (quoting Slomowitz
v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983)).
Respondents argue as a preliminary matter that
Mr. Woodall had no authority to issue a Stop-Work Order and that neither he nor Petitioner‟s counsel has authority to act on behalf of the State of Florida. Respondents allege that these agents of the Department acted in violation of the U.S. Constitution3/ in that they failed to demonstrate that they were bound by oath or affirmation to support the Constitution of the United States. See U.S. Const. art. VI, cl. 3.; State ex rel.
Irvine v. District Court, 239 P. 2d 272 (Mont. 1951)(every judge in every state is required to take an oath of office as prescribed on the U.S. Constitution).
It is not entirely clear whether Respondents‟ contention is that the Department itself is acting without authority because it has no properly sworn “executive or judicial officers” of the State of Florida or whether it is his contention that even preliminary action to enforce the workers‟ compensation law may only be taken by such officers. See Fla. Const. art. IV, § 4. In any event, it is well-established that an administrative law judge does not have the authority to make rulings on constitutional issues and that these allegations must be decided in a different forum. Gulf Pines Mem‟l Park, Inc. v.
Oaklawn Mem‟l Park, Inc., 361 So. 2d 695, 699 (Fla. 1978).
As for statutory authority, the Florida Statutes expressly provide that the Department shall designate
representatives who may serve subpoenas and other process of the Department issued under the workers‟ compensation law.
§ 440.107(4). Petitioner proved by clear and convincing evidence that Mr. Woodall has been explicitly so designated in his job description. The evidence was also clear that
Mr. Woodall identified himself to Respondents at the time of the site visit. Respondents‟ contentions that Petitioner acted without authority are not persuasive and are rejected.
Section 440.10(1)(a) provides in relevant part:
Every employer coming within the provisions of this chapter shall be liable for, and shall secure, the payment to his or her employees, or any physician, surgeon, or pharmacist providing services under the provisions of s. 440.13, of the compensation payable under ss. 440.13, 440.15, and
440.16. Any contractor or subcontractor who engages in any public or private construction in the state shall secure and maintain compensation for his or her employees under this chapter as provided in s. 440.38.
Section 440.02(8) defines “construction industry” in pertinent part as “for-profit activities involving any building, clearing, filling, excavation, or substantial improvement in the size or use of any structure or the appearance of any land.” Allied Trucking of Fla. v. Lanza, 826 So. 2d 1052, 1052-1053 (Fla. 1st DCA 2002). Respondents‟ painting for payment constituted construction, as was deemed admitted by Respondent Mr. Strange.
Although not clearly cast as responses to Requests for Admissions, the pleadings of Respondents, appearing pro se, reasonably denied the Requests as they related to Respondent Al‟s Painting Service, LLC. The Motion to Deem Matters Admitted as to the LLC was therefore denied in the Order of June 19, 2013. However, the lack of admissions as to issues implicating the LLC provides scant defense to Respondent Mr. Strange.
Respondents argue that Mr. Strange is not an “employer” within the meaning of that term in chapter 440. If he is not an employer, he is not required to secure workers‟ compensation coverage and the Department may not impute wages and hours in computation of penalty. Respondents argue that at the time the Stop-Work Order was served, there was no longer any such entity as Respondent “Al‟s Painting Service, LLC,” and that Mr. Strange never held himself out as the LLC in obtaining the work at 20721 Central Avenue East, Blountstown, Florida.
Mr. Strange logically argues that since he was not a Limited Liability Company and had personally hired no one to work for him, he could not possibly be an employer.
The statutory definition of employer is not straightforward. Section 440.02(16)(a) defines "employer" to include "every person carrying on any employment."
Section 440.02(17) then defines "employment" in a somewhat circular fashion as “any service performed by an
employee for the person employing him or her.” The definition excludes certain types of labor and services not applicable here, and includes, "with respect to the construction industry, all private employment in which one or more employees are employed by the same employer."
Historically, and consistent with Mr. Strange‟s argument, it was held that a sole proprietor could not be his own employee because there was no legal entity apart from the individual which could be considered to be the individual‟s employer. Stevens v. Int'l Builders of Fla., 207 So. 2d 287,
290 (Fla. 3d DCA 1968)(sole proprietor could not be a “statutory employee” of himself under the workers‟ compensation law because it is a logical anomaly to conceive of an individual as an entity apart from itself).
Particularly with respect to the relatively dangerous construction industry, statutory changes were subsequently enacted to effect expansion of workers‟ compensation coverage. First, a sole proprietor was permitted to “opt in” by becoming an “employee” of his own business. § 440.02(2)(c), Fla. Stat. (1981); Boyd-Scarp Enters. v. Saunders, 453 So. 2d 161, 163 (Fla. 1st DCA 1984)(sole proprietor who failed to affirmatively elect to be an employee of his own business could not be considered a “statutory employee” of the general contractor either).
The statute was next changed to create an “opt out” structure. That is, a sole proprietor in the construction industry was considered to be an employee for purposes of workers‟ compensation unless the sole proprietor affirmatively elected to be excluded from the definition of employee by filing written notice of such election with the Division of Workers' Compensation. § 440.02(13)(c), Fla. Stat. (1995); Armstrong v.
Ormond in the Pines, 734 So. 2d 596, 597-598 (Fla. 1st DCA 1999)(without evidence of election to be exempt, sole proprietor was an employee of the general contractor).
In 2004, the statute was amended again.
Section 440.02(15)(c) now defines "employee" to include:
A sole proprietor or a partner who is not engaged in the construction industry, devotes full time to the proprietorship or partnership, and elects to be included in the definition of employee by filing notice thereof as provided in s. 440.05.
All persons who are being paid by a construction contractor as a subcontractor, unless the subcontractor has validly elected an exemption as permitted by this chapter, or has otherwise secured the payment of compensation coverage as a subcontractor, consistent with s. 440.10, for work performed by or as a subcontractor.
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.
This definition does away with all elections for sole proprietors engaged in construction, and simply declares as a matter of law that they are employees. Although not obvious from the text alone, which does not refer to “employers” at all and confusingly blends forms of legal organization with types of business relationships, the court cases and legislative history summarized above make it clear that this language also makes a sole proprietor who engages in the construction industry his own “employer.”
Petitioner showed by clear and convincing evidence that Mr. Strange was engaged in contracting on January 7, 2013, and that he was the “employer” of himself as the “employee” for purposes of the workers‟ compensation law.
Section 440.38(1) provides several methods by which an employer may satisfy the requirement to secure the payment of compensation, including through insuring payment with any stock company or mutual company or association or exchange. It is undisputed that Mr. Strange had not satisfied this requirement. Petitioner proved by clear and convincing evidence that Respondent Mr. Strange failed to secure the payment of workers‟ compensation to himself as employee.
Further, by failing to timely respond to the Requests for Admission propounded by Petitioner, despite an Order to Show Cause and subsequent motion hearing, Respondent Mr. Strange is deemed to have admitted that both he and Frederick Crutchfield were employees of Alfred Strange during the period of January 8, 2010, through January 7, 2013, though not necessarily continuously. Doing business under a fictitious name does not create an entity distinct from the person operating the business; the fictitious name and the sole proprietor's name are simply two different names for one legal person.
Computation of Penalty
Section 440.107(7)(d)1. provides:
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 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, whichever is greater.
In order to compute the amount the employer would have paid in premium, the Department must determine the rate of pay and the period of employment. The statutes require employers to maintain detailed business records regarding this information,
and to provide them to the Department when requested.
§ 440.107(5). Respondents did not provide this information.
In the absence of business records, the Department imputes a weekly payroll for each employee based upon the statewide average weekly wage as defined in section 440.12(2) multiplied by 1.5 for the time period requested in the Business Records Request. § 440.107(7)(e); Fla. Admin. Code R. 69L- 6.028(3).
Respondent Mr. Strange was deemed to have admitted that he was his own employer, yet evidence at hearing suggests that his sole proprietorship in fact only began at the dissolution of the LLC. In light of Respondents‟ failure to respond to the Business Records Request, however, Mr. Strange must be imputed to be his own employer for the full three years. Twin City Roofing Constr. Specialists, Inc. v. Dep‟t of Fin. Servs., 969 So. 2d
563 (Fla. 1st DCA 2007)(employer's failure to produce required business records necessary to establish the duration of non- compliance takes precedence over any evidence at hearing that actual length of noncompliance was shorter).
Section 440.02(8) authorizes the Department to establish standard industrial classification codes and definitions for the construction industry by rule.
Florida Administrative Code Rule 69L-6.021 incorporates by reference classification codes and descriptions
of the NCCI Basic Manual, 2001 edition, with updates through January 1, 2011. Classification code number 5474 covers painting not otherwise classified in the Manual, and is applicable here.
The Request for Admission that the approved manual rates applied on the Penalty Worksheet attached to the Amended Order of Penalty Assessment were correct was deemed admitted pursuant to Florida Rule of Civil Procedure 1.370.
The $28,175.64 penalty, as shown in column „g‟ of the Penalty Worksheet attached to the Amended Order of Penalty Assessment, was correctly computed, as deemed admitted by
Mr. Strange.
That the Department of Financial Services, Division of Workers‟ Compensation, enter a final order determining that Respondent Mr. Alfred T. Strange violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage, and imposing upon him a total penalty assessment of
$28,175.64.
DONE AND ENTERED this 22nd day of August, 2013, in Tallahassee, Leon County, Florida.
F. SCOTT BOYD Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 22nd day of August, 2013.
1/ Petitioner offered no citation to any rule incorporating the applied manual rates. Florida Administrative Code Rules 69L-
6.021 and 69L-6.031 incorporate classification codes of versions of the SCOPES Manual without mention of periodic updates to the manual rates established by NCCI.
2/ All references to statutes and rules are to the versions in effect from 2010 through 2012, except as otherwise indicated. No relevant changes in statutes or administrative rules were identified during the time of the alleged violations.
3/ In pre-hearing pleadings, Respondents advanced similar challenges to the jurisdiction of the Division of Administrative Hearings and the undersigned. These contentions were treated as a Motion to Dismiss for Lack of Jurisdiction, which was denied by Order issued April 25, 2013.
Jesse Abraham Haskins, Esquire Division of Financial Services Division of Legal Services
Alfred T. Strange
Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial 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.
