STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION, Petitioner, vs. Case Nos. 17 0879 17 1558 ROYAL ROOFING AND RESTORATION, INC., Respondent. _______________________________/ RECOMMENDED ORDER A duly noticed hearing was held in th ese case s on September 14, 2017, in Tallahassee, Florida, before Administrative Law Judge Suzanne Van Wyk. APPEARANCES For Petitioner: Leon Melnicoff, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 4229 For Respondent: Gary Lee Printy, Esquire Gary Lee Printy , Attorney at Law 1804 Miccosukee Commons Drive, Suite 200 Tallahassee, Florida 32308 S TATEMENT OF THE ISSUE S Whether Royal Roofing and Restoration, Inc. (Respondent or Royal Roofing), failed to secure workersÓ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of WorkersÓ Co mpensation (Petitioner or Department), correctly calculated the penalty to be assessed against Respondent. PRELIMINARY STATEMENT On May 4 and June 8, 2016, the Department served Respondent with Stop Work Orders and Orders of Penalty Assessment, pursuant to chapter 440, Florida Statutes, for failing to secure workersÓ compensation for its employees, arising from two separate inspections. On August 22, 2016, after review of records received from Respondent, the Department issued an Amended Order of Penalty A ssessment in the first case, assessing Respondent a penalty of $30,112.34. On August 23, 2016 , the Department issued an Amended Order of Penalty Assessment in the second case, assessing Respondent a penalty of $76,209.64. On September 29, 2016, Respondent filed separate requests for hearing to dispute the Stop Work Order and Amended Order of Penalty Assessment in both cases. On February 9, 2017, Petitioner referred the first case to the Division of Administrative Hearings (Division) for assignment of an A dministrative Law Judge to conduct a final hearing in the matter. That case was assigned DOAH Case No. 17 0879. On March 15, 2017, Petitioner referred the second case, which was assigned DOAH Case No. 17 1558. The final hearing in DOAH Case No. 17 0879 wa s originally scheduled for April 6, 2017, but was continued following the referral of DOAH Case No. 17 1558 and the partiesÓ request to consolidate the cases. The cases were consolidated on March 21, 2017, and scheduled for final hearing on May 31, 2017. The final hearing was subsequently continued twice, once at the request of Petitioner, and again by joint request of the parties to analyze large volumes of data in an effort to further reduce the penalty to be assessed. The final hearing was rescheduled to September 14, 2017. Following records review and the deposition of RespondentÓs President , Petitioner requested, and was granted, leave to file a Second Amended Order of Penalty Assessment in both cases. On August 30, 2017, Petitioner filed a Second A mended Order of Penalty Assessment in DOAH Case No. 17 0879, reducing the penalty to $19,115.84, and in DOAH Case No. 17 1558, reducing the penalty to $60,072.96. The final hearing commenced as rescheduled on September 14, 2017. At the final hearing, Peti tioner presented the testimony of Ginger Chalker; Jesse Holman, Department Compliance Investigator; Donald Hurst, Department Compliance Facilitator; and Eunika Jackson, Department Penalty Auditor. PetitionerÓs Exhibits P1 through P35, were admitted into e vidence. Respondent offered the testimony of Traci Fisher, RespondentÓs President , and introduced RespondentÓs Exhibits R24 through R32, which were admitted into evidence. A one volume Transcript of the proceedings was filed on October 4, 2017. Petition er timely filed a Proposed Recommended Order, which has been considered by the undersigned in preparing this Recommended Order. Respondent requested, and was granted, an extension of time until November 6, 2017, to submit a proposed recommended order; how ever, as of the date of this Recommended Order, Respondent ha s not made any post hearing filing. Unless otherwise indicated, all references to the Florida Statutes herein are to the 2016 version. FINDING S OF FACT 1. Petitioner is the state agency charged with enforcing the requirement of chapter 440, that Florida employers secure workersÓ compensation c overage for their employees. § 440.107(3), Fla. Stat. 2. Respondent is a Florida for profit corporation organized on July 28, 2015, and engaged in the bu siness of roofing and storm damage restoration. The company was formed, and initially conducted business, in Tallahassee, Florida, but expanded to the Panama City area in 2016. 3. Traci Fisher is RespondentÓs President and Registered Agent, with a mailin g address of 1004 Kenilworth, Tallahassee, Florida 32312. DOAH Case No. 17 0879 4. On May 4, 2016, Department Compliance Investigator Jesse Holman, conducted a routine workersÓ compensation compliance inspection at 374 Brown Place in Crestview, Florida. Mr. Holman observed four men removing shingles from the roof of a residential structure at that address. 5. Mr. Holman first interviewed a worker who identified himself as Dustin Hansel and reported that he and the other three workers on site were a ne w crew for Respondent, the permit for the job had not yet been pulled, and the workers were not aware of the rate of pay for the job. 6. Mr. Hansel telephoned RespondentÓs sales manager, Dillon Robinson, who then spoke directly with Mr. Holman via teleph one. 7. Mr. Robinson informed Mr. Holman that Respondent obtained workersÓ compensation coverage through Payroll Management Inc. (PMI), an employee leasing company. 8. Mr. Holman identified the three remaining workers at the job site as Milton Trice, Wi nston Perrotta, and Kerrigan Ireland. 9. Mr. Holman contacted PMI and secured a copy of RespondentÓs then active employee roster. None of the workers at the job site, including Mr. Hansel, were included on RespondentÓs employee roster. 10. Upon inquiry, Mr. Holman was informed that PMI had no pending employee applications for Respondent. 11. Mr. Holman consulted the DepartmentÓs Coverag e Compliance Automated System (CCAS ) and found Respondent had no workersÓ compensation insurance policy and no active e xemptions. 12. During Mr. HolmanÓs onsite investigation, the workers left the job site. 13. Mr. Holman could not immediately reach Ms. Fisher, but did speak with her husband, Tim Fisher. Mr. Fisher informed Mr. Holman that the crew was on their way to the PMI Fort Walton office to be enrolled on RespondentÓs employee roster. 14. On May 5, 2016, based on his investigation, and after consultation with his supervisor, Mr. Holman issued Respondent S top W ork O rder (SWO) 16 148 1A, along with a Business Rec ords Request (BRR) for records covering the audit period of July 27, 2015 through May 4, 2016. 15. Later that day, Mr. Holman spoke to Ms. Fisher, who informed him the crew did not have permission to begin the work on that date, as she had not yet pulled the permit for the reroof. Ms. Fisher further explained that the crewmembers had been instructed to complete applications with PMI prior to departing Tallahassee for Crestview. Ms. Fisher confirmed the crewmembers were completing applications at PMI For t Walton that same day. 16. Mr. Holman met with Ms. Fisher the following day and personally served SWO 16 148 1A. Ms. Fisher delivered to Mr. Holman an updated employee roster from PMI which included Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter d ocumenting Mrice was not employed by Respondent; and a $1000 check as downpayment on the penalty. 17. Respondent initially submitted business records in response to the BRR on May 23 and 25, 2017. DOAH Case No. 17 1558 18. On June 8, 2016 , Mr. Holm an conducted a random workersÓ compensation compliance inspection at 532 Rising Star Drive in Crestview. The single family home at that address was undergoing renovations and Mr. Holman observed three men on the roof removing shingles. 19. None of the m en on the roof spoke English, but a fourth man, who identified himself as Jose Manuel Mejia, appeared and stated he worked for Respondent, and that all the workers onsite were pa i d through PMI at a rate of $10.00 per hour. Mr. Mejia admitted that one of t he workerÓs onsite, Emelio Lopez, was not enrolled with PMI and explained that Mr. Mejia brought him to the worksite that day because he knew Mr. Lopez to be a good worker. 20. The remaining workers onsite were identified as Juan Mencho and Ramon Gonzale z, both from Atlanta, Georgia. Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho. 21. Mr. Mejia stated that he and his crews also received reimbursement checks directly from Respondent for gas, rentals, materials, and the like. 22. Mr. H olman contacted PMI, who produced RespondentÓs then active employee roster. Mr. Mejia and Mr. Mencho were on the roster, but neither Mr. Gonzalez nor Mr. Lopez was included. 23. Mr. Holman next contacted Ms. Fisher, who identified Mr. Mejia as a subcont ractor, but was not familiar with any of the other men Mr. Holman encountered at the worksite. 24. Mr. Holman consulted via telephone with his supervisor, who instructed him to issue an SWO to Respondent for failing to secure workersÓ compensation covera ge for its employees. Mr. Holman issued SWO 16 198 1A by posting the worksite on June 8, 201 6 . Department Facilitator Don Hurst, personally served Ms. Fisher with SWO 16 198 1A in Tallahassee that same day. SWO 16 148 1A Penalty Calculation 1/ 25. Depa rtment Penalty Auditor Eunika Jackson, was assigned to calculate the penalties associated with the SWOs issued to Respondent. 26. On June 8, 2016, Ms. Jackson began calculating the penalty associated with SWO 16 148 1A. Ms. Jackson reviewed the document s submitted by Respondent in response to the BRR. The documents included RespondentÓs Wells Fargo bank statements, check images, and PMI payroll register for the audit period. 2/ 27. Based on a review of the records, Ms. Jackson identified the following individuals as RespondentÓs employees because they received direct payment from Respondent at times during the audit period: Davi d Rosinsky, Dylan Robinson, Jar od Bell, Tommy Miller, and David Shields. 28. Ms. Jackson determined periods of non complianc e for these employees based on the dates they received payments from Respondent and were not covered for workersÓ compensation via PMI employment roster, separate policy, or corporate officer exemption. 29. Ms. Jackson deemed payments to each of the indi viduals as gross payroll for purposes of calculating the penalty. 30. Based upon Ms. FisherÓs deposition testimony, Ms. Jackson assigned National Council on Compensation Insurance (NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class code 5474, Pain ting, to Mr. Rosinsky; NCCI class code 8742, Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810, clerical office employee, to Mr. Shields. 31. Utilizing the statutory formula for penalty calculation, Ms. Jackson calculated a total penalty of $ 191.28 associated with these five Ðemployees.Ñ 32. Ms. Jackson next calculated the penalty for Dustin Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta, th e workers identified at the job site as employees on May 4, 2016. 33. The Department ma intains that the business records submitted by Respondent were insufficient to determine RespondentÓs payroll to these Ðemployees,Ñ thus, Ms. Jackson used the statutory formula to impute payroll to these workers. 34. Ms. Jackson calculated a penalty of $ 14,970.12 against Respondent for failure to secure payment of workersÓ compensation insurance for each of these four ÐemployeesÑ during the audit period. The total pen alty associated with these four ÐemployeesÑ is $59,880.48. 35. Ms. Jackson calculated a total penalty of $60,072.96 to be imposed against Respondent in connection with SWO 16 148 1A. Business Records 36. In compliance with the DepartmentÓs BRR, Respondent submitted additional business records on several occasions March 21, May 3 and 31 , June 7, and August 15 and 24, 2017 in order to establish its complete payroll for the audit period. While the Department admits that the final documents submitted do establish RespondentÓs complete payroll, the Department did not issue amended penalty assessment based on those records in either case. The Department maintains Respondent did not timely submit records, pursuant to Florida Administrative Code Rule 69L 6.028(4), which allows an employer 20 business days after service of the first amended or der of penalty assessment to submit sufficient records to establish payroll. 37. All business records submitted by Respondent were admitted in evidence and included as part of the record. The undersigned is not limited to the record before the Departmen t at the time the amended penalty assessments were imposed, but must determine a recommendation in a de novo proceeding. The undersigned has relied upon the complete record in arriving at the decision in this case. Penalty Calculation for Ireland, Trice , and Perrotta 38. For purposes of workersÓ compensation insurance coverage, an ÐemployeeÑ is Ðany person who receives remuneration from an employerÑ for work or services performed under a contract. § 440.02(15)(a), Fla. Stat. 39. Respondent did not iss ue a single check to Mr. Ireland, Mrice, or Mr. Perrotta during the audit period. 40. Mr. Ireland, Mrice, and Mr. Perrotta are not included on any PMI leasing roster included in the record for the audit period. 41. The uncontroverted evidence, in cluding the credible and unrefuted testimony of each person with knowledge, established that Mr. Ireland, Mrice, and Mr. Perrotta were newly hired for the job in Crestview on May 4, 2016, and began working that day prior to submitting applications at P MI , despite Ms. FisherÓs directions otherwise. 42. Petitioner did not prove that either Mr. Ireland, Mr. Trice, or Mr. Perrotta was RespondentÓs employee at any time during the audit period. 43. Petitioner did not correctly calculate the penalty of $44,9 11.26 against Respondent for failure to secure workersÓ compensation insurance for Mr. Ireland, Mrice, and Mr. Perrotta during the audit period. Penalty Calculation for Hansel 44. Ms. Fisher testified that Mr. Hansel has owned several businesses with which Respondent has conducted business over the years. 45. Originally, Mr. Hansel owned a dumpster rental business, now owned by his father. Mr. Hansel also owned an independe nt landscaping company with which Respondent occasionally transacted busines s. 46. When Respondent expanded business into the Panama City area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise new crews in the area. The job on May 4, 2016, was his first roofing job. 47. A review of RespondentÓs records reveals Responden t issued the following checks to Mr. Hansel during the audit period: December 4, 2015 , in the amount of $360, $300 of which was for Ðdumpster rentalÑ and the remaining $60 for ÐsodÑ; May 4, 2016 , in the amount of $200 for Ðsod repairÑ; May 6, 2016 , in the amount of $925 as reimbur sement for travel expenses; May 9, 2016 , in the amount of $ 1,011.50 (with no memo); and May 21, 2016 , in the amount of $100 for Ð7845 Preservation.Ñ 48. Mr. Hansel was included on RespondentÓs PMI leasing roster beginning on May 13, 2016. 49. Petitioner proved that Mr. Hansel was RespondentÓs employee at times during the audit period. 50. Petitioner did not prove that RespondentÓs records were insufficient to determine payroll to Mr. Hansel during the audit period, which would h ave required an imputed penalty. 51. Petitioner did not correctly calculate the penalty of $14,970.42 against Respondent for failure to secure workersÓ compensation insurance coverage for Mr. Hansel during the audit period. 52. Sod repair by Mr. Hansel i s a service performed for Respondent during the audit period. 53. Reimbursement of travel expenses is specifically included in the definition of payroll for purposes of calculating the penalty. See Fla. Admin. Code R. 69L 6.035(1)(f) (ÐExpense reimbursem ents, including reimbursements for travelÑ are included as remuneration to employees Ðto the extent that the employerÓs business records and receipts do not confirm that the expense incurred as a valid business expense.Ñ) . 54. Dumpster rental is neither w ork performed on behalf of, nor service provided to, Respondent during the audit period. 55. The correct uninsured payroll amount attributable to Mr. Hansel is $2,296.50. 56. Petitioner correctly applied NCCI class code 5551, Roofing, to work performed b y Mr. Hansel based on the observation of Mr. Holman at the worksite on May 4, 2016. 57. With respect to Mr. HanselÓs services for sod and sod repair, Petitioner did not correctly apply NCCI class code 5551. 58. Petitioner did not introduce competent subs tantial evidence of the applicable NCCI class code and premium amount for landscaping services performed during the audit period. 3/ 59. Uninsured payroll attributable to Mr. Hansel for roofing services during the audit period is $2,036.50. 60 . The approv ed manual rate for workersÓ compensation insurance for NCCI class code 5551 during the period of non compliance May 9 and 21, 2016 is $ 18.60. 61 . The premium amount Respondent would have paid to provide workersÓ compensation insurance for Mr. Hansel is $378.79 (One percent of Mr. HanselÓs gross payroll during the non compliance period $20.36 multiplied by $ 18.60). 62 . The penalty for RespondentÓs failure to secure workerÓs compensation coverage insurance for Mr. Hansel during the period of non complia nce is calculated as two times the amount Respondent would have paid in premium for the non compliance period. 63. The correct penalty for RespondentÓs failure to maintain workersÓ compensation coverage for Mr. Hansel during the period of non compliance i s $757.58. Penalty Calculation for Salesmen 64. Independent contractors not engaged in the construction industry are not employees for purposes of enforcing workersÓ compensation insurance requirements. See § 440.02(15)(d)1., Fla. Stat. 65. Sales is a n on construction industry occupation. 66. The Department calculated a penalty associated with payroll attributable to the following persons identified by Ms. Fisher as independent salesmen: Dylan Robinson, Kevin Miller, Marc Medley, Mike Rucke r, Colby Fis her, David Jones, Ja rod Bell, Matt Flynn, and Todd Zulauf. 67. Section 440.02(15)(d)1. provides that an individual may be an independent contractor, rather than an employee, as follows: a. In order to meet the definition of independent contractor, at l east four of the following criteria must be met: (I) The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; (II) The independent contractor holds or has applie d for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal regulations; (III) The independent contractor receives co mpensation for services rendered or work performed and such compensation is paid to a business rather than to an individual; (IV) The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying busines s expenses or other expenses related to services rendered or work performed for compensation; (V) The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or (VI) The independent contractor receives compensation for work or services rendered on a competitive bid basis or completion of a task or a set of tasks as defined by a contractual agr eement, unless such contractual agreement expressly states that an employment relationship exists. b. If four of the criteria listed in sub subparagraph a. do not exist, an individual may still be presumed to be an independent contractor and not an emplo yee based on full consideration of the nature of the individual situation with regard to satisfying any of the following conditions: (I) The independent contractor performs or agrees to perform specific services or work for a specific amount of money and controls the means of performing the services or work. (II) The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform. (III) The independent contractor is responsible for the s atisfactory completion of the work or services that he or she performs or agrees to perform. (IV) The independent contractor receives compensation for work or services performed for a commission or on a per job basis and not on any other basis. ( V) The independent contractor may realize a profit or suffer a loss in connection with performing work or services. (VI) The independent contractor has continuing or recurring business liabilities or obligations. (VII) The success or failure of the independen t contractorÓs business depends on the relationship of business receipts to expenditures. 68. Ms. Fisher testified that each of the above named salesmen sold roofing jobs for her at various times during the audit period on a commission only basis. The c ontractors inspect homeowner roofs, draft schematics, use their own equipment (e.g., drones), incur all of their own expenses, and handle the insurance filing for the homeownerÓs insurance to pay on the claim. 69. Ms. Fisher further testified that each of the salesmen also sells for other roofing contractors in the Tallahassee area. She pays the salesmen on a per job basis. Ms. Fisher does not compensate the salesmen for the time involved in inspecting a roof, preparing schematics, or making the sale. N or does Ms. Fisher reimburse the salesmen for travel to sales jobsites. 70. Ms. FisherÓs testimony was credible, persuasive, and uncontroverted. 71. Respondent introduced in evidence four ÐIndependent Contractor ChecklistsÑ allegedly completed by Mr. Rob inson, Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist follows the format of section 440.02(15)(d)1., listing the criteria set forth in subparagraphs a. and b. The forms indicate that they each meet all the criteria listed in subparagraph b.: they perform, or agree to perform services for a specific amount of money and control the means of performing the service; they incur the principal expenses related to the service performed; they are responsible for satisfactory completion of the services performed; they receive compensation for the services performed on a per job or commission basis; they may realize a profit or suffer a loss in connection with performing the services; they have continuing and recurring business liabilities or obligations ; and the success or failure of their business depends on the relationship of business receipts to expenditures. 4/ 72. In its Proposed Recommended Order, Petitioner conceded the nine men identified by Respondent as independent sales contractors Ðwould not be considered employees of RespondentÑ because the Ðsalesmen would seem to meet the majority of [the] requirements [of section 440.02(15)(d)1.b.].Ñ 73. Respondent issued Dylan Robinson, Mark Medley, Colby Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Ja rod Bell, David Jones, and Todd Zulauf an IRS FORM 1099 MISC for income paid during the 2016 tax year. 74. Respondent did not prove by clear and convincing evidence that the above named salesmen were RespondentÓs employees during the audit period. 75. Fo r SWO 16 148 1A, Respondent did not correctly calculate the penalty because Respondent included a penalty associated with PetitionerÓs failure to provide workersÓ compensation insurance coverage for Dylan Robinson and Jarod Bell. 76. Penalty in the amount of $20.70 associated with Dylan Robinson and Jarod Bell should not be included in the total penalty. 77. The correct penalty amount for SWO 16 148 1A, based on records submitted by Respondent on or before March 20, 2016, is $929.16. Draft Revised Second Amended Order of Penalty Assessment 78. The additional records submitted by Respondent revealed payments made to persons during the audit period who were not included in the Department Ós Second Amended Order of Penalty Assessment. The Department and Resp ondent disagreed at hearing whether the payments qualified as payroll. 79. At hearing, Petitioner submitted a draft revised second amended penalty calculation for SWO 16 148 1A based on all records received from Respondent. The revised penalty is in the amount of $61,453.50. 80. Ms. Jackson populated the spreadsheet with the name of every individual to whom a check was written on RespondentÓs business bank account during the audit period, removing only those payments to individuals and entities which, t o PetitionerÓs knowledge, were not RespondentÓs employees. 81. RespondentÓs calculations in the revis ed penalty suffer from some of the same errors as in the second amended penalty calculation they include individuals Petitioner did not prove were Respon dentÓs employees , as well as payments which were not uninsured payroll. 82. For the reasons explained herein, Petitioner did not prove that salesmen David Jones, Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer, and Colby Fisher were RespondentÓs employees during the audit period. 83. Respondent did not accurately calculate the penalty associated with those persons. 84. Respondent made payments to David Shields during the audit period, which the Department argue s should be included as payroll. The Department included payments to Mr. Shields in its draft revised second amended order of penalty assessment and assigned NCCI class code Ð8810Ñ for clerical work. 85. Mr. Shields is a licensed professional roofing con tractor who acts as ÐqualifierÑ for RespondentÓs business. A qualifier is a licensed professional who certifies plans for permit applications submitted by another business. 86. Respondent pays Mr. Shields a flat fee per permit application qualified by hi m. 87. The record evidence does not support a finding that Mr. Shields provides clerical services to Respondent. Mr. Shields provides some sort of professional services to Respondent, and is likely an independent contractor providing his own materials an d supplies, maintaining his own business accounts, and liable for his own business success. 88. Assuming Mr. Shields were RespondentÓs employee, the Department introduced no evidence of an appropriate NCCI class code for Mr. ShieldsÓ services. 89. The Department did not prove that payments to Mr. Shields should be included as RespondentÓs uninsured payroll during the audit period. 90. Respondent paid Susan Swain a total of $258 during the audit period for clerical work. Ms. Fisher maintained Ms. Swain Ós work was casual at first, and the payments reflect a time when she worked on again, off again, handling the paperwork for restoration insurance claims. Later, Ms. Swain came to work for Respondent full time and was added to the PMI leasing roster. 91. Section 440.02(15)(d)5. provides that a person Ðwhose employment is both casual and not in the course of the trade, business, profession or occupation of the employerÑ is not an employee. The statute defines ÐcasualÑ employment as work that is anticipate d to be completed in 10 working days or less and at a total labor cost of less than $500. See § 440.02(5), Fla. Stat. 92. In its Proposed Recommended Order, the Department argues Ms. SwainÓs wages should be included as payroll because the Ðtestimony rega rding Ms. Swain does not suggest that she was employed for less than 10 days[.]Ñ However, it was the DepartmentÓs burden to prove that Ms. Swain was a statutory employee. 93. The Department did not prove that Ms. SwainÓs wages should be included within R espondentÓs uninsured payroll. 94. The largest portion of the penalty assessed by the Department, as well as in the draft revised second amended penalty assessment, against Respondent is in connection with various roofers who were employed by Respondent a t times during the audit period. 95. Each of the roofers was included on RespondentÓs PMI leasing roster, but received checks directly from Respondent in addition to PMI payroll checks. The Department included all the direct payments to those roofers a s payroll for purposes of calculating a penalty in this case. 96. As Ms. Fisher explained, the company bids a reroof on a per job basis usually a per square foot price. Ms. Fisher adds each roofing contractorÓs name to the PMI leasing roster to ensure t hat each roofer is covered by workersÓ compensation insurance for the duration of the job. When the job is completed (which is a matter of just a few days), the contractor reports to Ms. Fisher what amount of the contract price was spent on materials, sup plies, or other non labor costs. Ms. Fisher cuts a check to the contractor for that amount and authorizes PMI to issue payroll checks for the Ðlabor costÑ (the difference between the contract price and the non labor costs ). Ms. Fisher refers to this proc ess as Ðback chargingÑ the contractors for their materials, maintenance, tools, and other non labor costs. 97. The Department is correct that the direct payments are payroll to the roofing contractors. See Fla. Admin. Code R. 69L 6.035(1)(b) and (h) (rem uneration includes Ðpayments, including cash payments, made to employees by or on behalf of the employerÑ and Ðpayments or allowances made by or on behalf of the employer for tools or equipment used by employees in their work or operations for the employer .Ñ) . 98. The Department would be correct to include these payments in the penalty calculation if they represented uninsured payroll. However, the evidence supports a finding that the direct payments to the roofing contractors were made for the same jobs on which Respondent secured workersÓ compensation coverage through PMI. The roofing contractors were covered for workersÓ compensation throughout the job, even though they may have received partial payment for the job outside of the PMI payroll checks. 5/ 99. The direct payments were not for separate reroofs on which the roofers were not otherwise insured. 100. The Department did not correctly calculate penalties associated with the following roofing contractors: Donald Tontigh, Joseph Howard, Keith Mi lls, Aaron Kilpatrick, Gustavo Tobias, Jose Mejia, and Tommy Miller. 101. Ms. Fisher also received cash payments from Respondent during the audit period. These payments were made in addition to her payroll through PMI. 102. Ms. Fisher described these pa yments as Ðcash tickets , Ñ which were paid outside of her PMI payroll to reimburse her for investments made in the company. 103. For purposes of calculating the penalty in this case, these Ðcash ticketsÑ are clearly payroll, as that term is to be calculate d pursuant to rule 69L 6.035. 104. Similar to the issue with the roofing contractors, the question is whether the payments represent uninsured payroll. 105. Ms. Fisher did not hold a corporate officer exemption at any time relevant hereto. Ms. Fishe r testified that she was covered through PMI payroll leasing. 106. In contrast to the roofing contractors, Ms. FisherÓs direct payments do not directly coincide with any particular job or specific time frame during which Ms. Fisher was covered for workers Ó compensation insurance through PMI. The evidence was insufficient to determine that the amounts were insured payroll. 107. The Department properly calculated a penalty associated with payroll attributable to Ms. Fisher. 108. Respondent made one paymen t of $75 to Donald Martin during the audit period. The Dep artment calculated a penalty of $27.90 associated with t his payment to Mr. Martin. Ms. Fisher explained that Mr. Martin was a down on his luck guy who came by the office one day complaining that M r. Hansel owed him some money. Ms. Fisher offered to put him on a roofing crew and wrote him the $75 check to help him out. 109. Ms. FisherÓs testimony was both credible and unrefuted. 110. Mr. Martin was never hired by Respondent, put on any roofing cr ew, or added to the PMI leasing roster. 111. Mr. Martin was not RespondentÓs employee because he did not receive remuneration for the Ðperformance of any work or service while engaged in any employment under any appointment or contract for hireÑ with Resp ondent. § 440.02(15)(a), Fla. Stat. 112. Cale Dierking works for Respondent full time in a clerical position. During the audit period, Respondent paid Mr. Dierking directly by check for $1,306.14. This payment was made outside of Mr. DierkingÓs PMI pay roll checks. 113. Ms. Fisher testified that she paid Mr. Dierking directly on one occasion when ÐPMIÓs payroll got stuck in Memphis, I believe it was a snow in situation where payroll checks didnÓt come.Ñ Rather than ask her employee to go without a time ly paycheck, she advanced his payroll. 114. Ms. FisherÓs testimony was both credible and unrefuted. 115. The payment to Mr. Dierking is clearly payroll. However, Mr. Dierking was covered for workersÓ compensation through PMI for the period during which the check was issued. Thus, there is no evidence that it was uninsured payroll. 116. The Department did not correctly calculate a penalty associated with payments to Mr. Dierking. 117. The correct penalty to be assessed against Respondent for failure to secure workersÓ compensation coverage for its employees during the audit period in connection with SWO 16 148 1A is $770.60. Penalty Calculation for SWO 16 198 1A 118. Ms. Jackson calculated a total penalty against Respondent in connection with SWO 16 19 8 1A in the amount of $19,115.84, as reflected in the Second Amended Order of Penalty Assessment. 119. The Department correctly imputed penalty against Respondent in the amount of $91.68 each for uninsured payroll to Mr. Gonzalez and Mr. Lopez. The evide nce supported a finding that these workers were Responden tÓs statutory employees on June 8, 2016, and were not enrolled on the PMI leasing roster. 120. The Department did not correctly calculate the penalty associated with salesmen Dylan Robinson, Jarod B ell, Kevin Miller, Mark Medley, Matt Flynn , and Todd Zulauf. 121. The Department did not correctly calculate the penalty associated with roofing contractors Abraham Martinez Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina Agustin, Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy Miller. 122. The Department did not correctly calculate the penalty against Respondent associated with Mr. Shields, RespondentÓs qualifier. 123. Based on a review of RespondentÓs complete ÐuntimelyÑ records, the Department discovered direct payments made to additional employees not included on the Second Amended Order of Penalty Assessment. 124. Respondent made a direct payment to Ethan Burch in the amount of $602.50 during the audit period. 125. Ethan Burch is one of RespondentÓs full time clerical employees. The evidence is insufficient to determine whether the payment of $602.50 was insured or uninsured payroll. As such, the Department did not prove it correctly calculated the penalty associated with Mr. Burch. 126. Respondent also made a direct payment to Chelsea Hansel in the amount of $965 during the audit period. Ms. Hansel is another clerical employee. Ms. Hansel Ós PMI enrollment was delayed due to some background investigation. Respondent paid M s. Hansel for work she completed prior to enrollment. 127. The direct payment to Ms. Hansel constitutes uninsured payroll. 128. The Department correctly calculated the penalty associated with the payment to Chelsea Hansel . 129. The correct penalty amoun t to be imposed against Respondent for failure to secure payment of workersÓ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel ) during the audit period in connection with SWO 16 198 1A is $187.80. CONCLUSIONS OF LAW 130. The Div ision of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. See §§ 120.569 and 120.57(1), Fla. Stat. 131. Employers are required to secure payment of workersÓ compensation for their employees unless exem pted or excluded. See §§ 440.10(1)(a) and 440.38(1), Fla. Stat. 132. ÐEmployerÑ includes Ðevery person carrying on any employment.Ñ £ 440.02(16)(a), Fla. Stat. 133. ÐEmploymentÑ means Ðany service performed by an employee for the person employing him o r her.Ñ £ 440.02(17)(a), Fla. Stat. 134. Respondent is an ÐemployerÑ subject to the statutory requirement to provide workersÓ compensation insurance coverage for its employees. 135. Strict compliance with the WorkersÓ Compensation Law is required by the employer. See C&L Trucking v. Corbett , 546 So. 2d 1185, 1187 (Fla. 5th DCA 1989). 136. The Department has the burden of proof in this case and must show by clear and convincing evidence that the employer violated the WorkersÓ Compensation Law and that t he penalty assessments were correct under the Law. See DepÓt of Banking and Fin. v. Osborne Stern and Co. , 670 So. 2d 932 (Fla. 1996); and Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987). 137. In Evans Packing Co. v. Department of Agriculture and Consu mer Services , 550 So. 2d 112, 116 n.5 (Fla. 1st DCA 1989), the Court defined clear and convincing evidence as follows: [C]lear 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 or 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). 138. The Department proved by clear and convincing evidence that Respondent is an employer subject to the Work ersÓ Compensation statute. 139. For SWO 16 148 1A, the Department proved by clear and convincing evidence that Mr. Hansel and Ms. Fisher were RespondentÓs employees required to be covered by, or obtain an exemption from, workersÓ compensation insurance du ring the audit period, and that such coverage was not secured for specified periods of non compliance. 140. The Department did not demonstrate by clear and convincing evidence that it correctly calculated the penalty to be imposed under the law. 141. The correct penalty to be assessed against Respondent for failure to secure workersÓ compensation coverage for its employees during the audit period in connection with SWO 16 148 1A is $770.60. 142. For SWO 16 198 1A, the Department proved by clear and convi ncing evidence that M r. Lopez, Mr. Gonzalez, and Ms. Hansel were RespondentÓs employees required to be covered by, or obtain an exemption from, workersÓ compensation insurance during the audit period, and that such coverage was not secured for specified pe riods of non compliance. 143. The Department did not demonstrate by clear and convincing evidence that it correctly calculated the penalty to be imposed under the law. 144. The correct penalty amount to be imposed against Respondent for failure to secure payment of workersÓ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel ) during the audit period in connection with SWO 16 198 1A is $187.80. RECOMMENDATION Based on the foregoing Findings of Fact and Conclusions of Law, it is REC OMMENDED that a final order be entered by the Department of Financial Services, Division of WorkersÓ Compensation, finding that Royal Roofing and Restoration, Inc., violated the workersÓ compensation insurance law and, in DOAH Case No. 17 0879, assessing a penalty of $770.60; and in DOAH Case No. 17 1558, assessing a penalty of $187.80. DONE AND ENTERED this 24th day of January , 2018 , in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK 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 24th day of January , 2018 . ENDNOTE S 1/ The penalties referred to herein are from the DepartmentÓs Second Amended Order of Penalty Assessment, which are the DepartmentÓs final calculations and the subject of the instant Petition. 2/ Ms. JacksonÓs calculations were also i nformed by the deposition testimony of Ms. Fisher taken on April 6, 2017. 3/ Department Exhibit 35 is a draft revised second amended penalty calculation spreadsheet prepared by Ms. Jackson based on records received from Respondent which were deemed by th e Department as Ðuntimely.Ñ For some of the payments issued to Mr. Hansel, Ms. Jackson assigned NCCI class code 0042, but she did not testify as to what type of work corresponded with that NCCI class code or from what source she obtained the NCCI class co de. 4/ While the checklists are pure hearsay, they were admissible to corroborate Ms. FisherÓs testimony regarding the nature of work performed by the salesmen and the payment arrangement between the salesmen and Respondent. See Fla. Admin. Code R. 28 1 06.213(3). 5/ While this payment method may have payroll tax implications, that issue is beyond the scope of the instant proceeding. COPIES FURNISHED: Traci Fisher Royal Roofing & Restoration, Inc. 616 North Bronough Street Tallahassee, Florida 32301 Gary Lee Printy, Esquire Gary Lee Printy, Attorney at Law Suite 200 1804 Miccosukee Commons Drive Tallahassee, Florida 32308 (eServed) Leon Melnicoff, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 4229 (eSe rved) 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 ex ceptions 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: 17-001558

Orders for Case No: 17-001558