STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

THOMPSON ENTERPRISES OF JACKSONVILLE, LLC,

Respondent.

/

Case No. 16-5085

RECOMMENDED ORDER

An administrative hearing was conducted in this case on January 10, 2017, in Tallahassee, Florida, before James H. Peterson, III, Administrative Law Judge with the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Tabitha G. Harnage, Esquire

Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0333

For Respondent: Michael W. Thompson

Thompson Enterprises of Jacksonville, LLC 7600 Bailey Body Road

Jacksonville, Florida 32216

STATEMENT OF THE ISSUES

Whether Thompson Enterprises of Jacksonville, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers' compensation, as alleged in the Stop-Work Order and 2nd Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.

PRELIMINARY STATEMENT

On May 6, 2016, the Department of Financial Services, Division of Workers’ Compensation (the Department), served Respondent with Stop-Work Order #16-210-D1 (Stop-Work Order), an Order of Penalty Assessment, and a Request for Production of Business Records for Penalty Assessment Calculation (Request for Production), alleging that Respondent failed to secure workers' compensation for Respondent's employees as required by

chapter 440. Respondent timely responded to the Request for Production and the Department, in turn, calculated an Amended Order of Penalty Assessment. The Amended Order of Penalty Assessment assessed a penalty of $33,788.90, and was served on Respondent on June 13, 2016.

On July 6, 2016, Respondent filed a petition with the Department requesting a hearing to dispute the Stop-Work Order and Amended Order of Penalty Assessment. Respondent provided additional business records, and, based on those records, the

Department calculated a 2nd Amended Order of Penalty Assessment which assessed a lesser penalty of $33,112.44, served on Respondent on August 22, 2016.

On September 6, 2016, this matter was referred to the Division of Administrative Hearings (DOAH). The final hearing was held on January 10, 2017. At the final hearing, the Department presented the testimony of Compliance Investigator Ann Johnson and Penalty Auditor Eunika Jackson. The Department offered 10 exhibits, all of which were received into evidence. Respondent presented the testimony of Michael Thompson, Jr., as a managing member of Respondent, and offered four exhibits, all of which were received into evidence. On March 15, 2017, in accordance with a ruling at the hearing, the Department filed Exhibit P-11, consisting of Respondent’s Employer’s Quarterly Reports (RT6s), tax forms, and employee earning summaries provided to the Department by Respondent.

The proceedings were transcribed and a transcript was ordered. The parties were given 30 days after the filing of the transcript to file their proposed recommended orders. The Transcript of the final hearing was filed with DOAH on

February 14, 2017. The Department timely filed its Proposed Recommended Order on March 16, 2017, which has been considered in preparing this Recommended Order. Respondent did not submit a proposed recommended order.

FINDINGS OF FACT

1. The Department is the state agency responsible for enforcing workers' compensation coverage requirements applicable to employers under Florida law.

2. Respondent is a Florida limited-liability company organized on October 25, 2011. The managing members listed on Respondent’s State of Florida Articles of Organization are Thomas Thompson, Michael Thompson, and Vicky Thompson.

3. In May 2016, Department Compliance Investigator Ann Johnson was assigned to conduct a job site visit on Respondent’s business because its name appeared on the Department’s Bureau of Compliance’s “lead list.” The “lead list” is one of the Department’s databases listing employers that are potentially out of compliance with Florida's workers' compensation insurance requirements.

4. Prior to the job site visit, Investigator Johnson reviewed the Division of Corporations website, www.sunbiz.org, and confirmed Respondent's address, managing members' names, and that Respondent was a current, active Florida company. Respondent’s website advertised towing, wrecker, mechanic, and body shop services.

5. On May 6, 2016, Investigator Johnson visited Respondent's principal address located at 7600 Bailey Body Road, Jacksonville, Florida 32216. She noted a large commercial sign

   
   

   near Respondent’s address that advertised towing and wrecker services.

6. During her visit, Investigator Johnson spoke with Vicky Thompson and Michael Thompson, both of whom advised that they were owners of Respondent. The Thompsons informed Investigator Johnson that Respondent had six employees, including the three listed as managers on Respondent’s Articles of Organization. When Investigator Johnson asked for proof of workers’ compensation coverage, Michael Thompson admitted that Respondent had no such coverage.

7. Under Florida law, employers in the non-construction industry, such as Respondent, must secure workers' compensation insurance if "four or more employees are employed by the same employer." §§ 440.02(17)(b) and 440.107, Fla. Stat.

8. On the same day as her site visit, Investigator Johnson confirmed Respondent’s lack of insurance with a search of the Department's internal database, Coverage and Compliance Automated System. At the time, Respondent had no active exemptions from the requirements of obtaining workers’ compensation for its three managing members.

9. Based on her investigation, Investigator Johnson served Respondent with the Stop-Work Order and a Request for Production on May 6, 2016. Upon serving the documents, Investigator

   
   

   Johnson explained the effect and purpose of the documents and how Respondent could come into compliance.

10. Respondent came into compliance that same day by paying a $1,000 down payment, reducing Respondent's workforce to three employees, applying for exemptions for its three managing members, and executing an agreed Order of conditional release with the Department.

11. Respondent subsequently complied with the Department’s Request for Production.

12. In June 2016, the Department assigned Penalty Auditor Eunika Jackson to review records obtained from Respondent and calculate the penalty to be assessed against Respondent. In accordance with applicable law, the Department's audit spanned the preceding two-year period, starting from the date of the Stop-Work Order. See § 440.107(7)(d)1., Fla. Stat. The audit period in this case was from May 7, 2014, through May 6, 2016.

13. Based on information obtained during the investigation, Auditor Jackson assigned classification codes 7219, 8380, and 8810 to those identified as employees working for Respondent during the audit period.

14. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance ("NCCI") to assist in the calculation of workers' compensation insurance premiums. Classification code

    
    

    8810 applies to clerical office employees, code 7219 applies to trucking and "towing companies," and code 8380 applies to automobile service or repair centers.

15. According to Respondent, it was out of compliance with the coverage requirements of chapter 440 for only "368 days" during the two-year audit period. Respondent's records, however, do not support this contention.

16. Respondent provided a detailed "Employee Earnings Summary" for each employee stating the employee’s name, pay rate, and pay period. Respondent's payroll records reflect that Respondent employed "four or more employees" during the audit period. Throughout the two-year audit period, Respondent employed four or more employees with the following duties: Anna Lee, mechanic/bodywork; Cedric Blake, mechanic/bodywork; David Raynor, mechanic/bodywork; James Budner, mechanic/bodywork; Jason Leighty, mechanic; Kevin Croker, Jr., porter/detailer; Nicholas Conway, bodywork; Ralph Tenity, bodywork; Rebecca Thompson, secretary/office help; Stephen Collins, shop helper/porter; Todd Gatshore, tow truck driver/shop helper; and Williams Reeves, tow truck driver/shop helper.

17. Evidence further demonstrated that, during the audit period, managing member Michael Thompson worked as a wrecker truckdriver, and worked with the Sheriff's Office to clear

    
    

    traffic accidents. He was assigned class code 7219 — tow truck driver.

18. Managing member Vicky Thompson was given the clerical class code 8810 because she was observed working in the office during Investigator Johnson's site visit.

19. Managing member Thomas Thompson was assigned the clerical class code 8810 based upon the fact that he occasionally does office work for the business.

20. The corresponding approved manual rates for classification codes 8810, 7219, and 8380 were correctly applied to each employee for the related periods of non-compliance to determine the final penalty.

21. In accordance with the Request for Production, Respondent provided the Department payroll summary reports, tax reports, and unemployment tax reports. The payroll summary reports and records provided by Respondent listed the payroll and duties for each employee. The gross payroll amounts for each employee reflected in the penalty in this case were derived from those documents. Upon receiving those reports and records, the Department correctly determined the gross payroll for Respondent's employees.

22. On June 13, 2016, the Department served the Amended Order of Penalty Assessment on Respondent, assessing a penalty

    
    

    of $33,788.90. A portion of the first penalty was based on imputed payroll for Respondent’s three managing members.

23. After service of the Amended Order of Penalty Assessment, Respondent provided additional records showing the payroll of its three managing members, and the 2nd Amended Order of Penalty Assessment was calculated after removing the imputed payroll. On August 22, 2016, the Department served the 2nd Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,112.44, which was correctly calculated in accordance with section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027(1).

24. In sum, the clear and convincing evidence demonstrated that Respondent was a tow truck company engaged in the wrecker/tow truck and body shop mechanic industries in Florida during the periods of noncompliance; that Respondent failed to secure the payment of workers' compensation for its employees in violation of Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027(1) to determine the appropriate penalty of $33,112.44.

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. §§ 120.569 and 120.57(1), Fla. Stat.

    
    

26. Chapter 440 is known as the "Workers' Compensation Law." § 440.01, Fla. Stat.

27. The Department is responsible for enforcing the requirement that employers coming within the provisions of chapter 440 obtain workers' compensation coverage for their employees "that meets the requirements of [chapter 440] and the Florida Insurance Code." § 440.107(2), Fla. Stat.

28. Section 440.107(3) provides that “[t]he department shall enforce workers’ compensation coverage requirements,” and “the department shall have the power to . . . (g) [i]ssue stop- work orders, penalty assessment orders, and any other orders necessary for the administration of this section.”

29. Because the Department is seeking to prove violations of a statute and impose administrative fines or other penalties, it has the burden to prove the allegations in the complaint by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d

    292 (Fla. 1987).

    
    

30. Chapter 440 broadly defines "employer" as "every person carrying on any employment." § 440.02(16)(a), Fla. Stat.

31. "Employment" subject to Florida's Workers' Compensation Law includes “[a]ll private employments in which four or more employees are employed by the same employer or, with respect to the construction industry, all private

employment in which one or more employees are employed by the same employer.” § 440.02(17)(b)(2), Fla. Stat.

32. Under sections 440.10, 440.107(2), and 440.38 every employer is required to secure the payment of workers’ compensation for the benefit of its employees unless exempted or excluded under chapter 440.

1. At the final hearing, Respondent’s managing member Michael Thompson testified that a letter sent by the Department to Respondent in February 2012, led him to believe that Respondent was exempt from being required to comply with workers' compensation requirements.

2. The letter, appearing on the State of Florida Chief Financial Officer's letterhead, is entitled "VERIFICATION OF AUTOMATIC EXEMPT STATUS FROM WORKERS' COMPENSATION COVERAGE REQUIRMENTS." The initial sentence of the letter states:

   This letter verifies that the individual listed below is AUTOMATICALLY EXEMPT from Florida's workers' compensation coverage requirements within the scope of the non- construction business or trade listed below and is not required to obtain an exemption issued by the Division of Workers' Compensation in order to achieve exempt status.

   
   

3. Michael Thompson is the "individual listed below" referenced in the letter. The last paragraph of the letter, however, states:

   
   

   If MICHAEL THOMPSON is a corporate officer as defined in Section 440.02(9), Florida Statutes, this verification of Automatic Exemption Status from Workers' Compensation Coverage Requirements does not apply. In order to become exempt, MICHAEL THOMPSON is required to complete an exemption application and submit the application to the Division of Workers' Compensation.

4. Section 440.02(9) defines a corporate officer as: [A]ny person will fills an office

   provided for in the corporate charter or articles of incorporation filed with the Division of Corporations of the Department of State . . . . The term "officer of a corporation" includes a member owning at least 10 percent of a limited liability company created and approved under chapter 608.

   
   

5. Certain officers, partners, shareholders, and sole proprietors may elect to be exempt from the coverage requirements of chapter 440. §§ 440.02(15)(b) and 440.05, Fla. Stat. Only those officers of a limited-liability company with "at least 10 percent" stock ownership may elect to be exempt from the coverage requirements of chapter 440.

   § 440.02(15)(b)(2), Fla. Stat.; Fla. Admin. Code R. 69L-6.012.

   
   

6. Michael Thompson, Vicky Thompson, and Thomas Thompson are the managing members of Respondent. All three officers own "at least 10 percent of the stock" of Respondent, evidenced by the three exemptions obtained after the Stop-Work Order was issued.

   
   

7. Corporate officers who qualify for a workers' compensation coverage exemption are not automatically exempt. Rather, in order to qualify for an exemption, corporate officers must submit a Notice of Election to Be Exempt and comply with certain other requirements set forth in section 440.02(15)(b). Fla. Admin. Code R. 69L-6.012(2)(a).

8. In this case, Respondent did not have a workers' compensation policy in place, nor were there any active exemptions for the managing members of Respondent at the time of the issuance of the Stop-Work Order. Rather, Respondent filed its applications for exemptions for its three managing members after the issuance of the Stop-Work Order.

9. In his testimony, managing member Michael Thompson further suggested that Respondent's failure to obtain workers' compensation insurance coverage should be excused as a "mistake" and a "terrible oversight." Mr. Thompson also complained that there was "no warning" received from the Department that Respondent was out of compliance and that the "first time [Respondent] heard from the Division of Workers' Compensation was on the date" of the Stop-Work Order.

10. Mr. Thompson admitted, however, that Respondent was aware that the prior owners of the tow truck company had a workers' compensation insurance policy in place.

    
    

11. Further, a violation of the workers' compensation insurance requirements of Florida's Workers' Compensation Law requires no intent. Section 440.107(7)(d)1. provides for the assessment of a penalty for noncompliance with chapter 440, and does not provide authority or discretion for a reduction in the penalty.

12. The penalty for an employer who has failed to secure the payment of compensation as required is equal to two times the amount the employer would have paid in premium within the preceding two-year period, or $1,000, whichever is greater.

13. Rule 69L-6.027 adopts a penalty calculation worksheet for the Department's penalty auditors to utilize "[f]or purposes of calculating penalties to be assessed against employers pursuant to section 440.107, Florida Statutes." Fla. Admin. Code R. 69L-6.027(1).

14. Rule 69L-6.035 defines payroll for calculating penalties. Remuneration includes, but is not limited to, wages, salaries, loans, 1099 income, profit sharing, income distributions, dividends, and cash payments. Fla. Admin. Code R. 69L-6.035(1).

15. Considering evidence of payroll during the applicable period, the classification codes, and the applicable process for determining the penalty, it is concluded that the Department applied the proper methodology in computing the Amended Order of

    
    

    Penalty Assessment and 2nd Amended Order of Penalty Assessment in accordance with sections 440.107(7)(d)1. and 440.107(7)(e) and rules 69L-6.027, 69L-6.028, and 69L-035.

16. Therefore, the Department has proven by clear and convincing evidence that it correctly issued the Stop-Work Order and calculated the 2nd Amended Order of Penalty Assessment of

$33,112.44, for Thompson Enterprises of Jacksonville, LLC.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Thompson Enterprises of Jacksonville, LLC.

DONE AND ENTERED this 27th day of April, 2017, in Tallahassee, Leon County, Florida.

S

JAMES H. PETERSON, III

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 27th day of April, 2017.

ENDNOTE

1/ Unless otherwise indicated, all citations to the Florida Statutes are to current versions which have not substantively changed since the time of the allegations in this case.

COPIES FURNISHED:

Tabitha G. Harnage, Esquire Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0333 (eServed)

Michael W. Thompson

Thompson Enterprises of Jacksonville, LLC 7600 Bailey Body Road

Jacksonville, Florida 32216

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: 16-005085

Orders for Case No: 16-005085