vs.
Case No. 13-2447
Respondent.
Pursuant to notice, a final hearing was held in this case on February 24, 2014, in Tallahassee, Florida, before W. David Watkins, an Administrative Law Judge assigned by the Division of
Administrative Hearings.
Bennett M. Miller, Esquire Dickens and Dunn, P.L.
Whether Petitioner, Department of Financial Services, Division of Workers’ Compensation (the Department), properly issued a Stop-Work Order and Penalty Assessment against Respondent, Ogles Construction and Roofing, LLC (Respondent), for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.1/
On June 12, 2013, the Department issued a Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment (Stop-Work Order), DWC No. 13-293-IA, alleging “the failure to secure the payment of workers’ compensation for the subcontractor or subcontractors or for the employees of the subcontractor or subcontractors” in violation of sections 440.10(1), 440.107(2), and 440.38(1), Florida Statutes. The Stop-Work Order notified Respondent that an Order of Penalty Assessment would be assessed against Respondent pursuant to section 440.107(7)(d).
Respondent disputed the allegation and requested a hearing pursuant to sections 120.569 and 120.57(1), Florida Statutes.
On July 2, 2013, the case was referred to the Division of Administrative Hearings (DOAH) and assigned to the undersigned. The case was consolidated, sua sponte, with related DOAH
Case Nos. 13-2448 and 13-2517, and noticed for hearing on
September 13, 2013. However, at the request of the parties, the hearing was rescheduled to commence on October 10, 2013.
On September 30, 2013, the parties filed their Joint Pre- hearing Stipulation.
On October 8, 2013, the Department filed notices with DOAH that it had revoked the administrative actions in DOAH Case Nos. 13-2448 and 13-2517, citing a material change in the available evidence. The Department also sought leave to amend its charging document and order of penalty assessment in the case sub judice, based upon additional information obtained
through discovery.
Respondent consequently requested a continuance of the October 10, 2013, hearing, which the undersigned granted, and the hearing was rescheduled for January 8, 2014. On October 10, 2013, the undersigned granted the Department's motion for leave to amend its charging document and accepted the Amended Stop- Work Order and Amended Order of Penalty Assessment as filed with DOAH on October 8, 2013.
The Amended Stop-Work Order alleged that Respondent failed to secure the payment of workers' compensation in violation of sections 440.10(1), 440.107(2), and 440.38(1), by “failing to obtain coverage that meets the requirements of chapter 440, F.S., and the Insurance Code” and amended the Stop-Work Order to include all worksites of Respondent in the State of Florida.
At the request of the Department, the hearing was re- scheduled for February 24, 2014, and was convened as scheduled. At hearing, Petitioner presented the testimony of Andre Canellas, penalty auditor for the Department; Anita Proano, the Department's penalty audit manager; and Jonas Hall, a workers' compensation compliance investigator for the Department.
Petitioner offered 13 exhibits, all of which were received in evidence.
Respondent presented the testimony of Matthew Ogles, Robert Ogles, II, and Stephen Ogles, all employees of Respondent, as well as Kathleen Petracco, former compliance investigator for the Department. Respondent offered six exhibits that were received in evidence.
At the conclusion of the final hearing, the parties stipulated that proposed recommended orders would be filed within 20 days of the filing of the official transcript with DOAH, which occurred on March 10, 2014. Thereafter, Petitioner and Respondent timely filed Proposed Recommended Orders which have been carefully considered by the undersigned in the preparation of this Recommended Order.
Based upon the testimony and documentary evidence presented at hearing, the demeanor and credibility of the witnesses, and
on the entire record of this proceeding, the following findings of fact are made:
On September 30, 2013, the parties filed a Joint Pre- hearing Stipulation, by which the parties stipulated to the facts set forth in the following paragraphs 2 through 12. Those facts are accepted and adopted by the undersigned.
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, a Florida corporation,2/ was engaged in business operations as a roofing company in the State of Florida from June 13, 2010, through June 12, 2013.
Respondent received a Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment from the Department on June 12, 2013.
Respondent received a Request for Production of Business Records for Penalty Assessment Calculation from the Department on June 12, 2013.
The penalty period in this case is from June 13, 2010, through June 12, 2013.
Respondent employed Robert Ogles, II, Matthew Ogles, and Stephen Ogles during the period from June 13, 2010, through June 12, 2013.
Robert Ogles had no exemption from June 13, 2010, through November 14, 2010, and from November 15, 2012, through January 9, 2013.
Respondent was an “employer,” as defined in chapter 440, Florida Statutes, throughout the penalty period.
Respondent did not secure workers' compensation insurance coverage for its employees during the period from June 13, 2010, through June 12, 2013.
The appropriate class code from the National Council on Compensation Insurance, Inc. (NCCI), Scopes Manual for Respondent's employees is 5551, corresponding to “Roofing - All Kinds and Drivers.”
The NCCI manual rates attached to the Prehearing Stipulation as Exhibit “C” are the correct manual rates for NCCI Class Code 5551 during the penalty period.
Given the above stipulations, Respondent was in violation of the workers’ compensation coverage requirements of chapter 440 because Respondent employed uninsured employees working as roofers throughout the penalty period.
Andre Canellas, penalty auditor for the Department, was assigned to assess the appropriate penalty owed by Respondent. Penalties for workers' compensation insurance violations are based on the amount of evaded insurance premiums over the three-year period preceding the Stop-Work Order,
multiplied by 1.5. § 440.107(7)(d)1., Fla. Stat. At the time of his assignment, Mr. Canellas was provided with personal bank statements from Matthew, Stephen, and Robert Ogles, II, some checks that were written to Stephen and Robert Ogles, II, and an excel spreadsheet typed up for Respondent's payroll to Matthew Ogles.
The records from Robert Ogles, II, consisted of statements from his personal bank account, which he jointly held with his wife, covering the course of the penalty period; and checks paid from Respondent to Robert Ogles, II, during the years of 2012 and 2013. The bank statements reference the amounts of all transactions in Robert Ogles, II, and his wife's joint personal bank account and do not distinguish the amounts for payroll from Respondent. From the periods of time in which Robert Ogles, II, produced checks from Respondent, Mr. Canellas was able to determine that Robert Ogles, II, did not deposit the entire amount from Respondent into his joint personal bank account. Thus, Robert Ogles, II's, personal joint bank statements covering the course of the penalty period were insufficient to enable the Department to determine his compensation from Respondent for those time periods.
With respect to Stephen Ogles, the Department received statements from a joint personal bank account for the period of December 2012 through June 2013; checks paid from Respondent
from December 2012 through June 7, 2013; and an IRS Form 1099 for payroll to Stephen Ogles, LLC from Respondent.
The Department received personal bank statements from Matthew Ogles for the entire penalty period and an excel spreadsheet setting forth the payroll to Matthew Ogles from Respondent for all but one month of the penalty period.
Petitioner did not receive any records at all for the payroll to Robert Ogles or to any of Respondent's subcontractors. Although Robert Ogles testified in deposition that he probably has the records requested by the Department, he stated that he “just chose not to” produce them.
Employers in Florida are required to maintain the records that were requested by the Department and produce them upon the Department's request. See Fla. Admin. Code R. 69L-
6.015(1) and 6.032(1).
For the time periods of January 1, 2012, through November 14, 2012, and from January 10, 2013, through June 12, 2013, Mr. Canellas could have potentially ascertained Respondent's payroll to Matthew, Stephen, and Robert Ogles, II- assuming that those individuals had identified all of the payroll they had received from Respondent during those periods. However, Mr. Canellas could not determine Respondent's overall payroll because the Department did not receive any records
concerning Respondent's payroll to the subcontractors that Respondent regularly hires.
Having not received business records sufficient to determine Respondent's actual payroll for the period of June 13, 2010, through June 12, 2013, Penalty Auditor Canellas calculated an Amended Order of Penalty Assessment of $158,423.82 by imputing the statewide average weekly wage, multiplied by 1.5, to Respondent's payroll for each identified employee during the penalty period. This methodology is required by section 440.107(7)(e), and Florida Administrative Code Rule 69L- 6.028(3).
The Statewide Average Weekly Wage is determined by the Agency for Workforce Innovation (now the Department of Economic Opportunity). When the Average Weekly Wage changes, the Department updates its Coverage and Compliance Automated
System (CCAS) to reflect the new amounts. The Average Weekly Wage that corresponds to various periods of non-
compliance are populated automatically in the penalty worksheet when a penalty auditor selects an imputed penalty in CCAS.
The Department has adopted a penalty calculation worksheet to aid in calculating penalties against employers pursuant to section 440.107. See Fla. Admin Code R. 69L-6.027. Mr. Canellas utilized this worksheet in assessing Respondent's penalty.
In the penalty assessment calculation, the Department's Penalty Auditor consulted the classification codes listed in the Scopes Manual, which has been adopted by the Department through Florida Administrative Code Rule 69L- 6.021(3).
As stipulated by the parties, the appropriate class code from the NCCI Scopes Manual for Respondent's employees is 5551, corresponding to “Roofing - All Kinds and Drivers.”
Penalty Auditor Canellas applied the correct manual rates corresponding to class code 5551 for the periods of non- compliance in calculating the penalty. Mr. Canellas utilized the manual rates to satisfy his statutory obligation to determine the evaded workers' compensation insurance premium amounts for the period of June 13, 2010, through June 12, 2013, pursuant to section 440.107(7)(d)l.
Respondent did not provide records sufficient to enable the Department to determine his actual total payroll for the period at issue. Accordingly, the Department was required to impute Respondent’s payroll in calculating the penalty assessment set forth in the Amended Order of Penalty Assessment.
The Amended Order of Penalty Assessment is calculated correctly, if the manual rates were properly adopted by rule.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and parties pursuant to sections 120.569 and 120.57(1), Florida Statutes (2013).
Petitioner is the agency of the State of Florida charged, pursuant to section 440.107(3), with the duty to:
Enforce workers' compensation coverage requirements, including the requirement that the employer secure the payment of workers' compensation, and the requirement that the employer provide the carrier with information to accurately determine payroll and correctly assign classification codes.
In addition to any other powers under this chapter, the department shall have the power to:
Conduct investigations for the purpose of ensuring employer compliance.
Enter and inspect any place of business at any reasonable time for the purpose of investigating employer compliance.
Examine and copy business records.
* * *
Issue Stop-Work Orders, Penalty Assessment Orders, and any other orders necessary for the administration of this section.
Enforce the terms of a Stop-Work Order.
Levy and pursue actions to recover penalties.
Seek injunctions and other appropriate relief.
Petitioner has the burden of proof in this case and must show by clear and convincing evidence that Respondent violated the Workers' Compensation Law during the relevant period and that the penalty assessments are correct.
§ 120.57(1)(j), Fla. Stat.; Dep’t of Banking & Fin., Div. of
Sec. & Inv. Prot. v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); Pou v.
Dep’t of Ins., 707 So. 2d 941 (Fla. 3d DCA 1998). Clear and
convincing evidence “requires more proof than a ‘preponderance of the evidence’ but less than ‘beyond and to the exclusion of a reasonable doubt.’” In re Graziano, 696 So. 2d 744, 753 (Fla.
1997).
It is well-established that the Department has “broad powers to investigate employers, to halt any work where employers are not complying, and to assess penalties on those who do not comply.” Twin City Roofing Constr. Specialists, Inc.
v. Dep't of Fin. Servs., 969 So. 2d 563, 566 (Fla. 1st DCA
2007).
Pursuant to sections 440.10 and 440.38, every “employer” is required to secure the payment of workers’ compensation insurance for the benefit of its employees unless exempted or excluded under chapter 440. Strict compliance with the Workers' Compensation Law is, therefore, required by the employer. See, e.g., Summit Claims Mgmt. v. Lawyers Express
Trucking, Inc., 913 So. 2d 1182, 1185 (Fla. 4th DCA 2005); C&L
Trucking v. Corbitt, 546 So. 2d 1185, 1186 (Fla. 5th DCA 1989).
Section 440.02(16)(a) defines “employer” to include “every person carrying on any employment.”
Section 440.02(15)(a) defines “employee” to include “any person who receives remuneration from an employer for the performance of any work or service while engaged in any employment.”
Section 440.02(17) defines “employment” to include “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.”
Section 440.02(8) defines “construction industry” to include “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.”
Section 440.02(8) further provides that Petitioner “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.” Pursuant to this statutory authority, the Department has promulgated Florida Administrative Code Rule 69L-6.021, which adopts the definitions found in the Scopes Manual, including
updates through February 1, 2011. Fla. Admin. Code R. 69L-6.021 (1), (2), and (3).
Rule 69L-6.021(2) lists the workplace operations that fall within the statutory definition of “construction industry” and includes “Roofing – All Kinds and Drivers” using the Scopes Manual's definition under classification code 5551. Thus, the roofing activities performed by Respondent throughout the penalty period constituted construction.
By stipulation of the parties, the record contains clear and convincing evidence that Respondent was an “employer” for workers' compensation purposes because it was doing business in the construction industry. As such, Respondent was required to secure and maintain workers’ compensation insurance for its employees pursuant to section 440.10.
Section 440.107(7)(d)1. provides that:
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 $1,000.00, whichever is greater.
Given Respondent’s refusal or inability to produce complete business records, and the incomplete business records
provided by Respondent’s employees, the Department correctly calculated the assessed penalty in this case using the statutorily-mandated imputation methodology, provided the manual rates were properly adopted.
Stop-Work Order as Immediate Final Order
Respondent argues that a Stop-Work Order entered pursuant to section 440.107 is, in effect, an immediate final order as described in section 120.569(2)(n). Section 120.569(2)(n) provides that:
If an agency head finds that an immediate danger to the public health, safety, or welfare requires an immediate final order, it shall recite with particularity the facts underlying such finding in the final order, which shall be appealable or enjoinable from the date rendered.
Respondent argues that the Stop-Work Order served by Mr. Hall on June 12, 2013, is invalid since the Department’s agency head made no finding “that an immediate danger to the public health, safety, or welfare requires an immediate final order,” and that the Department’s agency head did not “recite with particularity the facts underlying such finding in the final order.”
Through its enactment of chapter 440, the legislature has established that “[t]he workers’ compensation system in Florida is based on a mutual renunciation of common-law rights and defenses by employers and employees alike.” § 440.011, Fla.
Stat. In the view of the undersigned, chapter 440 establishes the comprehensive process by which workers’ compensation benefits and remedies are to be extended, and provides the sole means by which the obligations of the workers’ compensation program are to be enforced by the appropriate officials.
Section 440.107(7)(a) provides in pertinent part that:
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 . . . 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 . . . .
By its enactment of section 440.107(7)(a), the legislature has determined that the failure to maintain workers’ compensation insurance is, as a matter of law, an immediate threat to human health, safety, and welfare, so as to warrant issuance and service of a Stop-Work Order. Thus, no separate finding by the agency head reciting the facts that establish such a danger is necessary.
Had the legislature intended for a Stop-Work Order authorized and issued pursuant to section 440.107 to be considered an immediate final order as described in section 120.569(2)(n), it would have used that term.3/ The fact that it did not is compelling evidence that such a result was not
intended. See, e.g., First Quality Home Care, Inc. v. Alliance
for Aging, Inc., 14 So. 3d 1149, 1153-1154 (Fla. 3rd DCA 2009)
(“had the Legislature intended to subject a private corporation designated as an AAA to the APA's bid protest procedures, it would have included that entity in the pertinent statutes defining ‘agency.’”).
In addition to the foregoing, section 120.52(7) defines a “final order” as:
a written final decision which results from a proceeding under s. 120.56, s. 120.565, s. 120.569, s. 120.57, s. 120.573, or
s. 120.574 which is not a rule, and which is not excepted from the definition of a rule, and which has been filed with the agency clerk, and includes final agency actions which are affirmative, negative, injunctive, or declaratory in form.
There is nothing in section 440.107 suggesting that a Stop-Work Order is final in nature, with relief limited to appeal or injunction. Rather, the Stop-Work Order is in the nature of an administrative complaint under rule 28-106.2015, for which the remedy of an administrative proceeding is available. See, e.g., Riopelle v. Dep’t of Fin. Servs. , Div. of
Workers’ Comp., 907 So. 2d 1220, 1222 (Fla. 1st DCA 2005) (“ The administrative law judge advised Riopelle by order that she had the right to request an expedited, summary hearing pursuant to section 120.574, Florida Statutes (2001). She instead sought relief under section 120.57(1), Florida Statutes (2001) . . . .
Riopelle therefore fails to show that section 440.107 is unconstitutional by denying due process to an employer found to be in violation of chapter 440.”).
The Stop-Work Order in this proceeding was accompanied by a Notice of Rights that advised Respondent of the process by which an administrative challenge to the proposed action was to be commenced. Respondent thereupon challenged the proposed action by timely filing its Request for Hearing under sections 120.569 and 120.57(1).
For the reasons set forth herein, a Stop-Work Order issued under the authority of section 440.107(7)(a), Florida Statutes, is not an immediate final order as described in section 120.569(2)(n), Florida Statutes. See, Fla. Dep’t of Fin. Servs. v. Barber Custom Builders, Inc., Case No. 13-2536
(Fla. DOAH Apr. 30, 2014).
NCCI classification codes
Notwithstanding its prehearing stipulation to the contrary, in its Proposed Recommended Order, Respondent argues that it was an error for the Department to apply NCCI classification codes that are not currently adopted by rule to classify the nature of Respondent’s business.
Section 440.107(9) provides that “[t]he department shall adopt rules to administer this section.”
Section 440.02(8) provides, in pertinent part, that “[t]he division 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.”
The Amended Order of Penalty Assessment charges Respondent with failing to obtain workers’ compensation insurance coverage for employees engaged in work described in classification code 5551.
Rule 69L-6.021(1) provides, in pertinent part, that:
The Division adopts the classification codes and descriptions that are specified in the Florida Contracting Classification Premium Adjustment Program, and published in the Florida exception pages of the National Council on Compensation Insurance, Inc. (NCCI), Basic Manual (2001 ed.), including updates through January 1, 2011.
Rule 69L-6.021(2) provides, in pertinent part, that “an employer is engaged in the construction industry when any portion of the employer’s business operations is described in the construction industry classification codes that are adopted in this rule. . . . (uu) 5551 Roofing-All Kinds and Drivers.”
Rule 69L-6.021(3) provides that:
(3) The Division adopts the definitions published by NCCI, SCOPES of Basic Manual Classifications (February 2011), including updates through February 1, 2011, that correspond to the classification codes and descriptions adopted in subsection (1)
above. The definitions identify the workplace operations that satisfy the criteria of the term “construction industry” as used in the workers’ compensation law.
The definitions are hereby incorporated by reference and can be obtained by writing to the Division of Workers’ Compensation, Bureau of Compliance, 200 East Gaines Street, Tallahassee, Florida 32399-4228.
Despite the clear authority for the adoption of construction industry class codes, and the specific adoption of class code 5551, Respondent argues in its Proposed Recommended Order that the application of the rule (which was last amended on October 11, 2011) is invalid because the Respondent was charged with the 2013 version of the class code without re- adoption of the revised versions. There is no evidence in the record of this proceeding to support that allegation. Furthermore, even if the classification code had been amended by NCCI, there is no evidence that the Department used the amended code, or that any amendment was material to the description of the business in which Respondent was engaged, i.e., roofing.
Based on the foregoing, there was statutory authority for the Department to adopt construction industry class codes and, through its promulgation of rule 69L-6.021, the Department adopted the class code, 5551, cited in the Amended Order of Penalty Assessment.
Approved Manual Rates
Finally, Respondent argues that it was an error for the Department to use approved manual rates that have been adopted by the Office of Insurance Regulation, but not by the Department of Financial Services, for establishing presumptive wages for calculating workers’ compensation premiums.
Section 440.015 provides, in pertinent part, that:
[t]he department, agency, the Office of Insurance Regulation, and the Division of Administrative Hearings shall administer the Workers’ Compensation Law in a manner which facilitates the self-execution of the system and the process of ensuring a prompt and cost-effective delivery of payments.
Section 440.107 provides, in pertinent part, that:
(2) For the purposes of this section, “securing the payment of workers’ compensation” means obtaining coverage that meets the requirements of this chapter and the Florida Insurance Code.
* * *
(7)(d)1. 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.
Section 440.10(1)(g) provides, in pertinent part,
that:
Subject to s. 440.38, any employer who has employees engaged in work in this state shall obtain a Florida policy or endorsement for such employees which utilizes Florida class codes, rates, rules, and manuals that are in compliance with and approved under the provisions of this chapter and the Florida Insurance Code.
Rule 69L-6.019(1) provides that:
Every employer who is required to provide workers’ compensation coverage for employees engaged in work in this state shall obtain a Florida policy or endorsement for such employees that utilizes Florida class codes, rates, rules and manuals that are in compliance with and approved under the provisions of chapter 440, F.S., and the Florida Insurance Code, pursuant to sections 440.10(1)(g) and 440.38(7), F.S.
A review of the Florida Insurance Code reveals that the Office of Insurance Regulation (OIR), and not the Department, is the agency that has been granted authority by the legislature to approve manuals of rates for workers’ compensation insurance.
Section 627.091 provides, in pertinent part, that:
(1) As to workers’ compensation . . . insurances, every insurer shall file with the office every manual of classifications, rules, and rates, every rating plan, and every modification of any of the foregoing which it proposes to use. Every insurer is authorized to include deductible provisions in its manual of classifications, rules, and rates. Such deductibles shall in all cases
be in a form and manner which is consistent with the underlying purpose of chapter 440.
* * *
(6) Whenever the committee of a recognized rating organization with responsibility for workers’ compensation and employer’s liability insurance rates in this state meets . . . , such meetings shall be held in this state and shall be subject to s.
286.011. The committee of such a rating organization shall provide at least 3 weeks’ prior notice of such meetings to the office and shall provide at least 14 days’ prior notice of such meetings to the public by publication in the Florida Administrative Register.
Section 627.101(4) provides, in pertinent part, that:
If the office approves a filing, it shall give prompt notice thereof to the insurer or rating organization that made the filing, and in which case the filing shall become effective upon such approval or upon such subsequent date as may be satisfactory to the office and the insurer or rating organization that made the filing.
Section 627.151 provides, in pertinent part, that:
(2) As to workers’ compensation and employer’s liability insurances, no manual of classifications, rule, rating plan, rating system, plan of operation, or any modification of any of the foregoing which establishes standards for measuring variations in hazards or expense provisions, or both, shall be disapproved if the rates thereby produced meet the applicable requirements of this part.
OIR rule 69O-189.016, entitled “Filing Procedures for Workers’ Compensation Classifications, Rules, Rates, Rating Plans, Deviations and Forms,” provides, in pertinent part, that:
Purpose: To establish the procedures to be utilized by insurers in the filing of workers’ compensation classifications, rules, rates, rating plans, deviations and forms pursuant to sections 627.091, 627.211 and 627.410, F.S.
Any insurer authorized to transact workers’ compensation and employer’s liability insurance in Florida shall file with the Office every manual of classifications, rules, rates, rating plans, deviations and every modification of any of the foregoing, which it proposes to use. An insurer may satisfy its obligation to make such filings by becoming a member of, or a subscriber to, a licensed rating organization which makes such filings and by authorizing the Office to accept such filings in its behalf. No insurer shall use any workers’ compensation and employer’s liability classification, rule, rate or rating plan unless it has been filed with the Office and the filing has been affirmatively approved.
The issues of whether the OIR properly approved the NCCI manuals establishing rates and premiums for various businesses in Florida, or whether the Department applied a correct version of the NCCI manuals, have not been raised and are not subject to determination herein. Rather, the issue is whether the Department may use manual rates approved by the OIR rather than the Department for establishing presumptive wages
for calculating workers’ compensation premiums. Thus, the issue is one of authority, not implementation.
The provisions of the Florida Insurance Code referenced herein demonstrate that the OIR has specific legislative authority to approve manuals of classifications, rules, rates, and rating plans, including those of a rating organization such as the NCCI.
Given the authority legislatively conferred jointly on the OIR and the Department to administer the workers’ compensation law, the specific authority granted by the legislature to the OIR to approve workers’ compensation rating organization manual rates, and the direction of the legislature for the Department to calculate penalties by applying those “approved manual rates” to the employer’s payroll in calculating penalties, it was not error for the Department to apply current NCCI manual rates approved by OIR in calculating the penalty to be assessed against Respondent for failing to maintain workers’ compensation insurance for its employees. Cf., Eastern Air Lines, Inc. v. Dep’t of Rev., 455 So. 2d 311, 316 (Fla.
1984) (explaining that where the legislature has “directed with precision” the manner in which a calculation is to be made, it is not an error to apply an independently-derived pricing index to provide aid in making the ministerial determination).
See also, Fla. Dep’t of Fin. Servs. v. Barber Custom Builders,
Inc., (Fla. DOAH Apr. 30, 2014).
Imputation of Payroll for Penalty Calculation
The Department is required to impute the payroll of any employer that is out of compliance and fails to provide business records sufficient to enable the Department to determine the employer's payroll for the period requested for the calculation of a penalty. § 440.107(7)(e), Fla. Stat. The imputed payroll is equal to 1.5 multiplied by the statewide weekly average. Id. The statewide weekly average wage is the
wage determined by the Agency for Workforce Innovation to be “the average weekly wage paid by employers subject to the Florida Unemployment Compensation Law as reported to the Agency for Workforce Innovation for the four calendar quarters ending each July 30.” § 440.12(2), Fla. Stat.
Rule 69L-6.028(3) sets forth the method for imputing an employer's payroll:
When an employer fails to provide business records sufficient to enable the department to determine the employer's payroll for the time period requested in the business records request for purposes of calculating the penalty provided for in section 440.107(7)( d), Florida Statutes, the imputed weekly payroll for each employee, corporate officer, sole proprietor or partner shall be calculated as follows:
For each employee, other than corporate officers, identified by
the department as an employee of such employer at any time during the period of the employer's noncompliance, the imputed weekly payroll for each week of the employer's non-compliance for each such employee shall be the statewide average weekly wage as defined in section 440.12(2), F.S., that is in effect at the time the Stop-Work Order was issued to the employer, multiplied by 1.5. Employees include sole proprietors and partners in a partnership.
If the employer is a corporation, for each corporate officer of such employer identified as such on the records of the Division of Corporations at the time of issuance of the Stop-Work Order, the imputed weekly payroll for each week of the employer's noncompliance for each such corporate officer shall be the statewide average weekly wage as defined in section 440.12(2), Florida Statutes, that is in effect at the time the Stop-Work Order was issued to the employer, multiplied by 1.5.
The imputation methodology is required in relation to all employees when the Department cannot determine the employer's payroll. It does vary or allow the Department to impute for some employees and not others during any period of time in which the Department is able to determine only a portion of the employer's payroll.
Since Respondent failed to provide the Department with the requisite business records sufficient to enable the Department to accurately calculate the Respondent's payroll for the relevant time periods at issue, based upon the monies (salaries) paid by the Respondent to his three employed sons and
other subcontractors/employees, the Department properly imputed the Respondent's payroll pursuant to section 440.107(7)(d)1.
Conclusion
Based on the foregoing, Petitioner proved, by clear and convincing evidence, that Respondent is liable for payment of a penalty in the amount of $158,423.82 for its failure to secure and maintain compensation for its employees as set forth in the Amended Penalty Assessment.
RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a final order assessing a penalty of $158,423.82 against Respondent, Ogles Construction and Roofing, LLC, for its failure to secure and maintain required workers’ compensation insurance for its employees.
DONE AND ENTERED this 23rd day of May, 2014, in Tallahassee, Leon County, Florida.
W. David Watkins Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 23rd day of May, 2014.
1/ Unless otherwise indicated, all references to the Florida Statutes and Florida Administrative Code are to the 2013 versions.
2/ The undersigned notes that Respondent is actually a limited liability company.
3/ The legislature has expressly defined certain orders as falling under the auspices of section 120.569(2)(n), a definition that is not applied to Stop-Work Orders. See section 409.913(16)(d) (“The agency shall impose [immediate suspension] on a provider or a person for any of the acts described in subsection (15): . . . (d) Immediate suspension, if the agency has received information of patient abuse or neglect or of any act prohibited by s. 409.920. Upon suspension, the agency must issue an immediate final order under s. 120.569(2)(n).”); section 496.419(10) (“A finding of a violation . . . constitutes an immediate threat to the public health, safety, and welfare and is sufficient grounds for the department to issue an immediate order to cease and desist all solicitation activities. The order shall act as an immediate final order under s.120.569(2)(n) . . . .”); section 497.157(3) (“Where the
department determines that an emergency exists regarding any violation of this chapter by any unlicensed person or entity, the department may issue and serve an immediate final order upon such unlicensed person or entity, in accordance with
s. 120.569(2)(n).”); section 501.608(3) (“Failure to obtain or display a license or a receipt of filing of an affidavit of exemption is sufficient grounds for the department to issue an immediate cease and desist order, which shall act as an immediate final order under s. 120.569(2)(n).”); section 628.461(5)(a) (“The office shall, however, at any time that it finds an immediate danger to the public health, safety, and welfare of the domestic policyholders exists, immediately order, pursuant to s. 120.569(2)(n), the proposed acquisition temporarily disapproved and any further steps to conclude the acquisition ceased.”); section 628.4615(6)(a) (“The office shall, however, at any time it finds an immediate danger to the public health, safety, and welfare of the insured’s exists, immediately order, pursuant to s. 120.569(2)(n), the proposed acquisition disapproved and any further steps to conclude the acquisition ceased.); and section 633.228(2)(a) (“If . . . it is determined that a violation described in this section exists which poses an immediate danger to the public health, safety, or welfare, the State Fire Marshal may issue an order to vacate the building in question, which order shall be immediately effective and shall be an immediate final order under s. 120.569(2)(n).”).
Kristian Eiler Dunn, Esquire Dickens and Dunn, P.L.
Elizabeth A. Miller, Esquire Department of Financial Services
Trevor S. Suter, Esquire Department of Financial Services
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.
