STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,
Petitioner,
vs.
M & M MAINTENANCE OF TAMPA BAY, INC.,
Respondent.
/
Case No. 15-5379
RECOMMENDED ORDER
D. R. Alexander, Administrative Law Judge of the Division of Administrative Hearings (DOAH), conducted a hearing in this case on October 11, 2016, by video teleconferencing at sites in Tallahassee and Tampa, Florida.
APPEARANCES
For Petitioner: Jonathan Anthony Martin, Esquire
Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399-4229
For Respondent: Thomas James Cook, Vice President
M & M Maintenance of Tampa Bay, Inc. 725 13th Street North
St. Petersburg, Florida 33705-1326 STATEMENT OF THE ISSUE
The issue is whether the Stop-Work Order and 2nd Amended Order of Penalty Assessment issued by Petitioner, Department of
Financial Services, Division of Workers' Compensation (Department), on July 1, 2015, and February 29, 2016, respectively, should be upheld.
PRELIMINARY STATEMENT
This proceeding arose from the requirement that, except for exempt employees, employers in the construction industry must secure workers' compensation insurance for all employees. After a Stop-Work Order and Order of Penalty Assessment were served on Respondent for failing to obtain coverage that meets the requirements of chapter 440, Florida Statutes, Respondent timely requested a hearing to dispute this action. The matter was referred by the Department to DOAH to resolve the dispute. The Department later issued two amendments to the proposed penalty, which reduced it to $105,663.48 for the period July 2, 2013, through July 1, 2015. On August 26, 2016, the case was transferred from former Administrative Law Judge Quattlebaum to the undersigned.
At the final hearing, the Department presented two witnesses. Department Exhibits 1 through 16 were accepted in evidence. Respondent presented one witness. Respondent's Exhibits 1, 7, 7A, 8, and 9 were accepted in evidence.
A one-volume Transcript of the hearing was prepared. The Department submitted a proposed recommended order, which has been considered in the preparation of this Recommended Order.1/
FINDINGS OF FACT
The Department is the state agency responsible for enforcing the various requirements of chapter 440.
Respondent is a Florida corporation with offices located at 1904 28th Avenue North, St. Petersburg, Florida. The company is engaged in the construction business, and its activities fall within the statutory definition of "construction industry." See § 440.02(8), Fla. Stat. Respondent also does
business under the name of M & M Construction of South Florida, but both are the same corporate entity with the same Federal Employer Identification Number and use the same bank accounts. Respondent's assertion that the two are separate and work done under the "d/b/a" name cannot be used to establish liability under chapter 440 is rejected.
On July 1, 2015, Munal Abedrabbo, a Department compliance inspector, made a random inspection of a job site at 4115 East Busch Boulevard, Tampa, where remodeling work on a commercial building was being performed. When he entered the premises, Mr. Abedrabbo observed Bernard Reed on a ladder painting an interior ceiling. After identifying himself, he informed Mr. Reed that he needed to verify his insurance coverage. Mr. Abedrabbo was directed to Mr. Cook, Respondent's vice-president and part owner, who acknowledged that he was the general contractor on the job and had three employees/painters
working that day, Reed, James Dabnes, and John Russell.
Mr. Cook informed the inspector that the three employees were leased from Paychek, Inc., an employee leasing company, and that firm provided workers' compensation coverage for the leased employees.
Mr. Abedrabbo returned to his vehicle and accessed on his computer the Department of State, Division of Corporations, Sunbiz website to verify Respondent's status as a corporation. After verifying that it was an active corporation, he then checked the Department's Coverage and Compliance Automated System to verify whether Respondent had a workers' compensation policy or any exemptions. He was unable to find any active policy for Respondent, as the most recent policy had lapsed in January 2013. Mr. Cook has an exemption, covering the period October 20, 2014, through October 19, 2016, but the exemption is with a different company, Thomas Cook Carpenter, LLC.
Mr. Abedrabbo spoke again with Mr. Cook and informed him that Department records showed no insurance coverage for his employees. Mr. Cook telephoned Paychek, Inc., and then confirmed that the three painters had no workers' compensation insurance.
Mr. Cook explained that before he allowed Mr. Reed to begin work, Mr. Reed had shown him an insurance certificate that turned out to be "falsified," and then "conveniently lost it"
when the inspector appeared. He also explained his firm "was caught with our pants down once before" and he did not want it to happen again. For that reason, he contended he was especially careful in hiring leased employees. Even so, he does not deny that Respondent has had no insurance in place since January 2013 and Paychek, Inc., failed to provide coverage.
The Department issued a Stop Work Order and Penalty Assessment the same day. To determine the amount of Respondent's unsecured payroll for purposes of assessing a penalty in accordance with section 440.107(7)(d)(1), Florida Statutes, the Department requested Respondent to provide business records for the preceding two years. This period of non-compliance is appropriate, as Respondent was actively working in the construction industry during that time period without securing insurance. The request informed Mr. Cook that if complete records were not provided, the Department would use the imputation formula found in section 440.107(7)(e) to calculate the penalty.
After reviewing the information provided by Respondent, on August 18, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $114,144.52 for the period July 7, 2014, through June 30, 2015. Based on two depositions of Mr. Cook, a 2nd Amended Order of Penalty Assessment in the amount of $105,663.48 was issued on February 29, 2016.
The Department penalty auditor calculated the final penalty assessment using the "imputed" method because insufficient business records were provided to determine Respondent's payroll for all relevant time periods, except the month of October 2014. In addition to missing bank statements and check images, Respondent failed to provide its entire second bank account. Although Mr. Cook contends some records were in the possession of M & M Construction of South Florida, and he could not access them in a timely manner, this does not excuse Respondent's failure to timely produce all relevant records.
Under the imputed method, the penalty auditor used the average weekly wage ($841.57) times two to determine Respondent's payroll for the imputed portions. See Fla. Admin. Code R. 69L-6.028(2); § 440.107(7)(e), Fla. Stat. The gross payroll was then divided by 100 in order to be multiplied by the applicable approved manual rates. The Department applied the proper methodology in computing the penalty assessment.
A class code is a numerical code, usually four digits, assigned to differentiate between the various job duties or scope of work performed by the employees. The codes were derived from the Scopes Manual Classifications (Manual), a publication that lists all of the various jobs that may be performed in the context of workers' compensation. The Manual is produced by the National Council on Compensation Insurance,
Inc., an authoritative data collecting and disseminating organization for workers' compensation.
The Manual provides that class code 5474 applies to painters who perform painting activities. Reed, Dabnes, and Russell were assigned this code. Mr. Cook agrees this code is correct.
Mr. Cook was assigned class code 5606 (construction executive) and placed on the penalty assessment because he is an owner of the corporation and was managing the work. Although Mr. Cook argues he had an exemption and should not be placed on the assessment, Department records reflect that Mr. Cook had an exemption with a different company during the audit period. Therefore, his inclusion in the employee census was correct.
Because Respondent's business records included checks written to Kerry Francum for tile work, he was assigned class code 5348 (tile work) and placed on the penalty assessment as an employee. At his deposition, Mr. Cook acknowledged that Francum performed tile work for his firm and was an employee. At hearing, Mr. Cook changed his testimony and contended Francum was only a material supplier, not a subcontractor, and should not be on the penalty assessment. This assertion has not been accepted. Mr. Francum's inclusion on the assessment is appropriate.
Respondent's business records also indicated a check was written to Kerry Randall, a tile subcontractor. At hearing, however, Mr. Cook established, without contradiction, that because of Mr. Randall's violent temper, he was paid a one-time fee of $1,000.00 and let go before he performed any work.
Mr. Randall should be removed from the assessment.
The Department has demonstrated by clear and convincing evidence that the 2nd Amended Order of Penalty Assessment is correct, less any amount owed for Mr. Randall.
CONCLUSIONS OF LAW
The Department is responsible for enforcing the requirement that employers subject to chapter 440 secure the payment of workers' compensation by obtaining workers' compensation coverage for their employees "that meets the requirements of [chapter 440] and the Florida Insurance Code."
§ 440.107(1), Fla. Stat.
Because administrative penalties are penal in nature, the Department is required to prove by clear and convincing evidence that Respondent violated the Workers' Compensation Law during the relevant time period and the penalty assessment is correct. See Dep't of Banking & Fin. v. Osborne Stern & Co.,
670 So. 2d 932, 935 (Fla. 1995).
By clear and convincing evidence, the Department has established that Respondent failed to have workers' compensation
insurance during the audit period. The 2nd Amended Order of Penalty Assessment should be sustained, less any amount owed for Mr. Randall.
Based on the foregoing Findings of Fact and Conclusions of Law, it is
RECOMMENDED that the Department of Financial Services enter a final order assessing Respondent the penalty in the 2nd Amended Order of Penalty Assessment, less any amount owed for Mr. Randall.
DONE AND ENTERED this 21st day of November, 2016, in Tallahassee, Leon County, Florida.
S
D. R. ALEXANDER Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 21st day of November, 2016.
ENDNOTE
1/ Proposed recommended orders (PROs) were due ten days after the hearing. See Tr. at 68. DOAH rules contemplate that they be filed simultaneously by the parties. Replies are not authorized. The Department timely filed its PRO on November 14,
2016, and served a copy on Respondent by email. On November 16, 2016, Respondent filed a paper styled as "Respondent's Rebuttal and Motion for Dismissal." Notwithstanding its non-compliance with the rules, to the extent Respondent's filing is based on evidence adduced at the hearing on October 11, 2016, it has been considered.
COPIES FURNISHED:
Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
Jonathon Anthony Martin, Esquire Department of Financial Services
200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed)
Thomas James Cook, Vice President
M and M Maintenance of Tampa Bay, Inc. 725 13th Street North
St. Petersburg, Florida 33705-1326 (eServed)
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within
15 days of the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will render a final order in this matter.
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 05, 2017 | Agency Final Order | |
| Nov. 21, 2016 | Recommended Order | Department established by clear and convincing evidence that 2nd amended penalty assessment was correct. |
