STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

SDPHOTONICS, LLC,

Respondent.

/

Case No. 16-1258

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case on May 26, 2016, via video teleconference sites in Orlando and Tallahassee, Florida, before Administrative Law Judge Lynne A. Quimby-Pennock of the Division of Administrative Hearings (Division).

APPEARANCES

For Petitioner: Tabitha G. Harnage, Esquire

Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-4229

For Respondent: Dennis G. Deppe, pro se

SDPhotonics, LLC 4304 Scorpius Street

Orlando, Florida 32816

STATEMENT OF THE ISSUES

The issues in this case are whether SDPhotonics, LLC (Respondent), failed to provide workers' compensation coverage; and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

On December 18, 2015, Department of Financial Services, Division of Workers' Compensation (Department or Petitioner), issued a Stop-Work Order and Order of Penalty Assessment against Respondent. Respondent disputed the Order of Penalty Assessment and requested an administrative hearing. Respondent provided additional business records and an Amended Order of Penalty Assessment was calculated and issued to Respondent. The case was forwarded to the Division on March 3, 2016, and the undersigned was assigned the case.

Following one continuance, the final hearing was scheduled for and heard on May 26, 2016. On Monday, May 23, 2016, Respondent’s Motion for Leave to Amend Petition was filed.

Petitioner filed a response in opposition on May 24, 2016. At the beginning of the hearing, the parties were allowed to provide additional argument. Following those arguments, the undersigned denied Respondent’s Motion for Leave to Amend Petition.

Petitioner presented the testimony of insurance analyst II, Felix Marquez, and penalty auditor supervisor, Anita Proano, from the Department, and offered nine exhibits. Exhibits 1 through 8

were admitted during the hearing. Petitioner’s Exhibit 9 was offered and a ruling on its admissibility was reserved until a dispute regarding a deposition transcript and errata sheet could be resolved.1/ Petitioner’s Exhibit 9 was subsequently admitted into the record and the hearing record closed.

Respondent presented the testimony of Dennis Deppe

(Dr. Deppe) and presented the testimony of a Department compliance supervisor, Robert Cerrone. Respondent offered Exhibits A, D,2/ F, and J, which were admitted into evidence without objection, and Exhibits G and I were admitted over objection.

The two-volume Transcript was filed on June 24, 2016. A Notice of Filing Transcript advised the parties to file their proposed recommended orders (PROs) on or before the close of business on July 5, 2016. On June 29, 2016, an Agreed Motion for Extension of Time to File Proposed Recommended Order was filed, and was granted. The parties filed PROs that have been considered in the preparation of this Recommended Order.

All references to statutes are to Florida Statutes (2015),

unless otherwise noted.

FINDINGS OF FACT

1. The Department is the state agency responsible for enforcing section 440.107, Florida Statutes. Section 440.107 mandates, in relevant part, that employers in Florida must secure

   
   

   workers’ compensation insurance coverage for their employees.

   
   

   § 440.107(3), Fla. Stat.

   
   

2. At all times relevant, Respondent was a limited liability company, organized under the laws of the State of Florida, with its principal office currently located at 4304 Scorpius Street, UCF High Technology Incubator, Orlando, Florida. Dennis Deppe is the founder and CEO of SDPhotonics, LLC, which is a research and development company. Respondent is a non-construction type entity.

3. Mr. Marquez is an insurance analysist II/investigator for the Department in the central part of the state. He has 12 years of experience in this position. His duties include making sure that businesses comply with the workers’ compensation laws of Florida.

4. In order to perform his duties, Mr. Marquez has several methods to check for particular workers’ compensation coverage. Initially, Mr. Marquez may check the Division of Corporations website, “Sunbiz.org,” to obtain the name of the corporation; its federal identification number; the mailing and principle address(es), the registered agent; and corporate officer information. With this information, Mr. Marquez may check Petitioner’s internal database called: coverage and compliance automated system (CCAS). Using a corporate name, Mr. Marquez could check CCAS to see whether a corporation has workers’

   
   

   compensation coverage. Insurance companies are also required to submit workers’ compensation coverage information, and Mr. Marquez could check that registry. Corporate officers may request an exemption from workers’ compensation coverage; however, the officer must apply for the exemption. Mr. Marquez could check that registry as well.

5. In mid-December 2015, Mr. Marquez was assigned to check on Respondent’s workers’ compensation coverage. Mr. Marquez checked Petitioner’s CCAS system and determined that Respondent did not have a workers’ compensation policy or any active exemptions for its officers.

6. On December 16, 2015, Mr. Marquez went to Respondent’s physical location and discovered that no one was present. He left a business card with a written request for someone to contact him.

7. On December 17, 2015, Dr. Deppe contacted Mr. Marquez via telephone. Mr. Marquez identified himself and explained the reason for the call to Dr. Deppe. As was his custom, Mr. Marquez requested the name of Respondent’s workers’ compensation insurance carrier, the policy number and the effective date of the coverage. Dr. Deppe thought there was coverage through Paychex,3/ but he was unable to provide the requested information. Dr. Deppe stated he would look into it and return the call.

8. On December 18, 2016, Mr. Marquez spoke with Dr. Deppe again. During that conversation, Dr. Deppe confirmed that

   
   

   Respondent did not have workers’ compensation coverage, but that he was working to have it by the end of the day.

9. Later that same morning, Mr. Marquez met with Dr. Deppe and again requested the name of Respondent’s workers’ compensation insurance carrier, the policy number and the effective date of the coverage. Dr. Deppe was unable to provide the requested information, although he did provide the name of his insurance agent. Additionally, Dr. Deppe provided the names of Respondent’s five employees: James Beadsworth, Jason Leshin, Nick Cox, Jeremy Leshin, and Dennis Deppe.

10. Mr. Marquez then stepped outside to his vehicle, and via his computer consulted the CCAS database to determine whether Respondent had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees.

    At that time, Mr. Marquez determined that Respondent did not have any current workers’ compensation coverage for its employees and Respondent did not have an exemption from such coverage from the Department.

11. Mr. Marquez telephoned his supervisor, Robert Cerrone, who authorized the service of a Stop-Work Order along with a Request for Production of Business Records (Request) on Dr. Deppe on December 18, 2015. Both were served on Respondent at approximately 11:30 a.m. on December 18, 2015.

    
    

12. The following Monday, Dr. Deppe presented to Petitioner’s Orlando field office, paid $1,000.00 towards the penalty and provided proof of coverage with the Hartford Casualty Insurance Company.

13. Ms. Proano confirmed that the appropriate classification code for Respondent’s CEO was 8810 (for a clerical position) and for Respondent’s employees was 4511 (for “analytical laboratories, including laboratory, outside employees, collectors of samples”). These codes were derived from the Scopes Manual, which 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., the nation’s most authoritative data collecting and disseminating organization for workers’ compensation.

14. The corresponding approved manual rates for the classification codes 8810 and 4511 were applied using the methodology specified in section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027 to determine the appropriate penalty. Petitioner is statutorily authorized to use an audit period of two years from the issuance of the Stop-Work Order. Respondent employed less than four employees during 2013 and 2014, and did not have to have worker’s compensation cover. Petitioner only computed the penalty for 2015 because Respondent had five employees during that time.

    
    

15. Petitioner has demonstrated by clear and convincing evidence that Respondent failed to secure workers’ compensation for its employees as required by chapter 440, Florida Statutes. Petitioner determined the appropriate penalty using section 440.107(7)(d)1. The amount of Respondent’s penalty, $6,092.10, is subject to a reduction of $3,843.23, which is the amount it paid to obtain the appropriate insurance. The amended penalty amount is $2,248.87.

    CONCLUSIONS OF LAW

    
    

16. The Division has jurisdiction over the parties to and the subject matter of this proceeding. §§ 120.569 and 120.57, Fla. Stat.

17. Chapter 440 is known as "Workers' Compensation Law."

    
    

    § 440.01, Fla. Stat. Employers are required to secure workers' compensation coverage for their employees. §§ 440.10(1)(a) and 440.38(1), Fla. Stat.

18. "Employer" is defined, in part, as "every person carrying on any employment." § 440.02(16)(a) Fla. Stat. "Employment . . . means any service performed by an employee for the person employing him or her" and includes, "[a]ll private employments in which four or more employees are employed by the same employer.” §§ 440.02(17)(a) and (b)2., Fla. Stat.

    
    

19. Section 440.02(15)(a) defines "employee" in part, as:

    
    

    1. ny 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.

       
       

20. Section 440.107(2) provides in pertinent part:

    
    

    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.

21. Section 440.107(7)(d)1. provides in pertinent part:

    
    

    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 2 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 2-year period or $1,000, whichever is greater. For employers who have not been previously issued a stop-work order, the department must allow the employer to receive a credit for the initial payment of the estimated annual workers’ compensation policy premium, as determined by the carrier, to be applied to the penalty. Before applying the credit to the penalty, the employer must provide the department with documentation reflecting that the employer has secured the payment of compensation pursuant to s. 440.38 and proof of payment to the carrier.

    
    

    The method of penalty calculation described in section 440.107(7)(d) is mandatory.

    
    

22. The Department has the burden of proof in this case and must show by clear and convincing evidence that the employer violated the workers' compensation law and that the penalty assessments were correct. Dep't of Banking & Fin. v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996).

23. In Evans Packing Co. v. Department of Agriculture &

    
    

    Consumer Services, 550 So. 2d 112, 116 n.5 (Fla. 1st DCA 1989), the Court defined clear and convincing evidence as follows:

    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 evidence 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 the firm belief of conviction, without hesitancy, as to the truth of the allegations sought to be established. Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

    
    

24. The Department has alleged that Respondent failed to secure workers' compensation coverage for its employees. The Department used the appropriate worksheet, classification codes and remuneration information for calculating the appropriate penalty to be assessed against Respondent for conducting business without the required workers’ compensation coverage. The amended penalty to be imposed is $6,092.104/ less $3,843.23 (the amount paid for workers’ compensation insurance) for a total amended penalty of $2,248.87.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the Amended Order of Penalty Assessment, and assess a penalty in the amount of $2,248.87.5/

DONE AND ENTERED this 22nd day of July, 2016, in Tallahassee, Leon County, Florida.

S

LYNNE A. QUIMBY-PENNOCK

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 22nd day of July, 2016.

ENDNOTES

1/ The ninth exhibit, which was filed on May 31, 2016, was the deposition transcript with the errata sheet of Dennis Deppe.

During the hearing a dispute arose regarding the deposition and errata sheet. The parties were advised that the record in this proceeding would remain open to allow the parties to determine the status of that deposition transcript and errata sheet.

Petitioner timely filed a Notice of Filing Deposition Transcript, Errata Sheet, and Affidavit. The affidavit was executed by the president of the court reporting company averring that an errata sheet had been received from Respondent, but, through an “oversight” had not been forwarded to Petitioner’s counsel.

Additionally, the affidavit averred that Dennis Deppe, president of SDPhotonics, LLC, had been notified of the reporting services’ oversight.

2/ Only select portions of two statutes were provided in Exhibit D.

3/ In January 2015, Paychex was engaged by Respondent to handle its payroll and perform other services, including providing workers’ compensation insurance.

4/ Petitioner failed to subtract the cost of the workers’ compensation insurance in its calculation.

5/ Based on information contained in Respondent’s Exhibit J, it appears that Dr. Deppe, on behalf of Respondent, paid $2,248.87 ($1,000.00 in February 2016, and $1,248.87 in March 2016, for which Respondent should receive credit).

COPIES FURNISHED:

Dennis G. Deppe SDPhotonics, LLC 4304 Scorpius Street

Orlando, Florida 32816 (eServed)

Tabitha G. Harnage, Esquire Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed)

Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

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.

Docket for Case No: 16-001258

Orders for Case No: 16-001258