STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

ALLSTATE CUSTOM CONTRACTING, INC.,

Respondent.

/

Case No. 17-4949

RECOMMENDED ORDER

On December 6, 2017, Administrative Law Judge Yolonda Green of the Division of Administrative Hearings (“Division”), conducted a final hearing in this case by video teleconference with sites in Orlando and Tallahassee, Florida.

APPEARANCES

For Petitioner: Christina Pumphrey, Esquire

Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-4229

For Respondent: Edgar Ezelle, pro se

Allstate Custom Contracting, Inc. 8217 Firetower Road

Jacksonville, Florida 32210 STATEMENT OF THE ISSUES

Whether Respondent violated chapter 440, Florida Statutes (2016), by failing to secure payment of workers’ compensation

coverage, as alleged in the Stop-Work Order for Specific Worksite Only (“SWO”) and Amended Order of Penalty Assessment (“AOPA”); and, if so, whether Petitioner correctly calculated the proposed penalty assessment against Respondent.

PRELIMINARY STATEMENT

On June 16, 2017, Petitioner, Department of Financial Services, Division of Workers’ Compensation (“Department” or “Petitioner”), issued an SWO, alleging that Respondent, Allstate Custom Contracting, Inc. (“Allstate” or “Respondent”), failed to secure workers’ compensation for its subcontractors in violation of sections 440.10(1), 440.107(2), and 440.38(1), Florida Statutes (2016). The SWO directed Respondent to cease business operations until the Department issues an order releasing the SWO for the specific worksite located at 3050 Reedy Creek Boulevard.

Respondent disputed the Department’s authority to issue the SWO and requested a formal hearing. On September 1, 2017, Petitioner referred this matter to the Division for assignment to an administrative law judge. The undersigned issued a notice scheduling the formal hearing for November 2, 2017. On

October 6, 2017, Petitioner filed a Motion for Continuance, which the undersigned granted. The case was rescheduled for December 6, 2017.

On November 17, 2017, Petitioner filed a Motion for Leave to Amend Order of Penalty Assessment, which the undersigned granted.

On December 6, 2017, the undersigned conducted the final hearing, as scheduled. At the hearing, the Department presented the testimony of two witnesses: Kirk Glover, a Department investigator and Eunika Jackson, a Department penalty auditor.

The Department’s Exhibits 1 through 6, and 8 through 10 were admitted without objection and Exhibit 7 was admitted over objection. Respondent presented the testimony of Edgar Ezelle, owner of Allstate. Respondent offered no exhibits.

The Department ordered a copy of the hearing transcript.

The one-volume Transcript was filed with the Division on December 27, 2017. On January 8, 2018, Petitioner timely filed a Proposed Recommended Order, which has been considered in the preparation of this Recommended Order. Respondent did not file a post-hearing submittal.

Unless otherwise indicated, all references to statutes are to Florida Statutes (2016), which was the law in effect at the time of the alleged acts.

FINDINGS OF FACT

Background

1. The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that

   
   

   employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla.

   Stat.

   
   

2. The Department is the agency responsible for conducting random inspections of jobsites and investigating complaints concerning potential violations of workers’ compensation rules.

3. Allstate is a corporation engaged in business in the State of Florida. Allstate was organized on May 23, 2005. Edgar A. Ezelle is the president and registered owner of Allstate. The address of record for Allstate is 8217 Firetower Road, Jacksonville, Florida 32210.

4. In March 2017, Respondent was hired as the general contractor to renovate a hotel at a jobsite located at 3050 Reedy Creek Boulevard. When Respondent accepted the project, Prestige Handyworkers, LLC (“Prestige”), a

   subcontractor, was working on the jobsite. Although Prestige was hired by the previous general contractor, Respondent continued to work with Prestige.

5. On June 15, 2017, the Department’s investigator, Kirk Glover, conducted a routine visit to the jobsite to conduct a compliance investigation.

6. Mr. Glover observed six individuals performing construction-related work at the site. Mr. Glover conducted an

   
   

   interview of the individuals and took notes during the course of his interviews. Mr. Glover identified the individuals as:

   Luis Miguel Paz; Joseph A. Pizzuli; Roger Penley, Jr.; Georgios Rapanakis; Stavros Georgios Rapanakis; and Joseph Youngs.

7. The six individuals were employed by subcontractor Prestige to perform work on behalf of Allstate. Luis Miguel Paz, Joseph A. Pizzuli, and Roger Penley, Jr., were engaged in painting work; Georgios Rapanakis and Stavros Georgios Rapanakis were supervising the other workers; and Joseph Youngs was engaged in cleanup of the construction site. The workers did not testify at the final hearing.

8. Mr. Glover then contacted Allstate president, Edward Ezelle, who confirmed he was the general contractor for the jobsite and that he retained Prestige as the subcontractor for the site.

9. Mr. Glover conducted a search of the Department’s Coverage and Compliance Automated System (“CCAS”), which revealed that Respondent did not have active workers’ compensation coverage for Prestige or its employees.

10. Prestige did not have workers’ compensation coverage for its employees.

11. The search of CCAS revealed that Mr. Ezelle had an active workers’ compensation coverage exemption, effective July 27, 2015, through July 26, 2017.

    
    

12. Based on the results of his investigation, on June 16, 2017, Mr. Glover issued an SWO to Allstate for failure to maintain workers’ compensation coverage for its employees.

13. On June 19, 2017, Mr. Glover hand-served a Request for Production of Business Records for Penalty Assessment Calculations (“Records Request”).

14. The Records Request directed Respondent to produce business records for the time period of June 16, 2015, through June 15, 2017. Respondent did not provide any business records to the Department.

15. Mr. Ezelle testified that Allstate did not conduct business in Florida for the period of September 2016 through March 2017. While the undersigned has no reason to doubt

    Mr. Ezelle’s testimony that his business was not active during that time period, Respondent failed to produce records in response to the Records Request to support his testimony.

    Penalty Assessment

    
    

16. To calculate the penalty assessment, the Department uses a two-year auditing period looking back from the date of the SWO, June 16, 2017, also known as the look-back period.

17. Generally, the Department uses business records to calculate the penalty assessment. If the employer does not produce records sufficient to determine payroll for employees, the Department uses the imputed payroll to assess the penalty as

    
    

    required by section 440.107(7)(e) and Florida Administrative Code Rule 69L-6.028.

18. Eunika Jackson, a Department penalty auditor, was assigned to calculate the penalty assessment for Respondent. Based upon Mr. Glover’s observations at the jobsite on June 16, 2017, Ms. Jackson assigned National Council on Compensation Insurance (“NCCI”) classification code 5474 to calculate the penalty. Classification code 5474 applies to work involving painting.

19. Ms. Jackson applied the approved manual rates for classification 5474 for each of the six individuals working on the jobsite. The application of the rates was utilized by the methodology specified in section 440.107(7)(d)1. and rule 69L-

    6.027 to determine the penalty assessment.

    
    

20. The manual rate applied in this case was $11.05 for the period of June 16, 2015, through December 31, 2015; and

    $11.02 for the period of January 1, 2016, through June 15, 2017.

    
    

21. The statewide average weekly wage, effective January 1, 2017, was used to calculate the penalty assessment.

22. Georgios Rapanakis and Starvos Georgios Rapanakis had a workers’ compensation exemption for the period of June 16, 2015, through June 10, 2016. However, they were not covered by an exemption from June 11, 2016, through June 15, 2017.

    
    

23. Although Mr. Ezelle has an exemption, his exemption was not in effect for a short period of July 19, 2015, through July 26, 2015.

24. None of the other employees had an exemption.

    
    

25. Based upon the Department’s calculation, the penalty assessment for the imputed payroll would be $153,908.20.

26. On November 17, 2017, the Department filed a Motion for Leave to Amend Order of Penalty Assessment (“Motion for Leave to Amend”). The Department sought leave from the undersigned to amend the penalty assessment. The Department, as a party, is not authorized to amend a penalty without leave from the undersigned after the matter was filed with the Division. See § 120.569(2)(a) and Fla. Admin. Code R. 28-106.202.

27. Despite the AOPA reflecting an issued date of July 14, 2017, the record supports a finding that the AOPA was issued November 17, 2017, the date the undersigned granted the Department’s Motion for Leave to Amend.

28. Thus, the Department issued the AOPA for the imputed payroll 105 business days after Respondent received the Records

    Request.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

30. The burden of proof in this matter is on the Department because it is asserting the affirmative of the issue. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

31. Because administrative fines are penal in nature, the Department has the burden of proving by clear and convincing evidence that Respondent violated the Workers’ Compensation Law during the relevant time period and that the penalty assessments are correct. Dep’t of Banking & Fin. v. Osborne Stern & Co.,

    670 So. 2d 932, 933-34 (Fla. 1996).

    
    

32. The Department is the agency responsible for enforcement of chapter 440. As the responsible agency, the Department must abide by the statutes and rules that govern it.

33. Pursuant to 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. Strict compliance with the Workers’ Compensation Law is required. See C&L Trucking v. Corbitt,

546 So. 2d 1185, 1186 (Fla. 5th DCA 1989).

1. Section 440.107(2) states that “‘securing the payment of workers’ compensation’ means obtaining coverage that meets the requirements of this chapter and the Florida Insurance Code.”

   
   

2. Pursuant to section 440.107(3)(g):

   
   

   (3) The department shall enforce workers' compensation coverage requirements the department shall have the power to:

   
   

   * * *

   
   

   (g) Issue stop-work orders, penalty assessment orders, and any other orders necessary for the administration of this section.

   
   

3. Section 440.02(16)(a) defines “employer,” in part, as “every person carrying on any employment.” Further, “[i]f the employer is a corporation, parties in actual control of the corporation, including, but not limited to, the president, officers who exercise broad corporate powers, directors, and all shareholders who directly or indirectly own a controlling interest in the corporation, are considered the employer for the purposes of ss. 440.105, 440.106, and 440.107.”

4. The Workers' Compensation Law requires employers to secure the payment of compensation for their employees.

   §§ 440.10(1)(a) and 440.38(1), Fla. Stat.

   
   

5. Section 440.107(7)(a) states, in relevant part:

   
   

   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 required by this chapter . . . 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. If the department makes such a determination, the department shall issue a stop-work order within 72 hours.

   
   

6. Section 440.10(1)(b) provides:

   
   

   In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.

   
   

7. Section 440.10(1)(c) provides that “a contractor shall require a subcontractor to provide evidence of workers’ compensation.”

8. Rule 69L-6.015(9)(c) requires each contractor to maintain evidence of workers’ compensation insurance of every subcontractor.

9. Contractors are responsible for payment of workers’ compensation insurance for employees of subcontractors unless the subcontractor has secured payment or has an exemption.

   § 440.10(1)(b), Fla. Stat.

   
   

10. The Department is empowered to examine and copy the business records of any employer conducting business in Florida to determine whether it is in compliance with the Workers’

    
    

    Compensation Law. See § 440.107(3), Fla. Stat. Whenever the

    
    

    Department finds an employer who is required to have such coverage but fails to do so, such failure is deemed an immediate serious danger to the public health, safety, or welfare sufficient to justify service by the Department of an SWO on the employer, requiring the cessation of all business operations.

    See § 440.107(1), (7)(a), Fla. Stat.

    
    

11. Respondent was an employer who was required to maintain workers’ compensation insurance for the individuals working on its behalf.

12. The Department properly issued an SWO since the six individuals performing work on the jobsite on behalf of Allstate did not have workers’ compensation insurance for the required time periods.

13. As to penalties, section 440.107(7)(d)1. states:

    
    

    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.

    
    

14. Rule 69L-6.028 provides that:

    
    

    1. In the event an employer fails to provide business records sufficient for the department to determine the employer’s payroll for the time period requested in the business records request for the calculation of the penalty pursuant to Section 440.107(7)(e), F.S., the department shall impute the employer’s payroll at any time after ten, but before the expiration of twenty-eight business days after receipt by the employer of a written request to produce such business records.

       
       

15. The Department failed to impute Respondent’s payroll within the time period provided under rule 69L-6.028. Despite the Department’s contention that the AOPA was issued on July 14, 2017, the evidence in the record demonstrates that the AOPA was not issued until the Department filed its Motion to Amend the Order of Penalty Assessment on November 17, 2017, approximately

    105 business days after Respondent’s receipt of the written Request to Produce.

16. The Department proved by clear and convincing evidence that Respondent failed to provide the requested proof of insurance for Luis Miguel Paz; Joseph A. Pizzuli; Roger

    Penley, Jr.; and Joseph Youngs during the audit period. The Department demonstrated that Respondent failed to provide the requested proof of workers’ compensation insurance for Georgios Rapanakis and Stavros Georgios Rapanakis, for the period

    June 11, 2016, through June 15, 2017. Petitioner also proved

    
    

    that Respondent failed to maintain coverage for himself for the time period of July 19, 2015, through July 26, 2015, the time his exemption lapsed.

17. Petitioner did not prove by clear and convincing evidence that it imputed Respondent’s payroll within 20 business days of Respondent’s receipt of the Records Request.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order as follows:

1. finding that Respondent failed to secure and maintain workers’ compensation coverage for its subcontractors; and

2. dismissing the Amended Order of Penalty Assessment against Respondent.

DONE AND ENTERED this 26th day of January, 2018, in Tallahassee, Leon County, Florida.

S

YOLONDA Y. GREEN

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 26th day of January, 2018.

COPIES FURNISHED:

Christina Pumphrey, Esquire Department of Financial Services

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

Edgar Ezelle

Allstate Custom Contracting, Inc. 8217 Firetower Road

Jacksonville, Florida 32210

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: 17-004949

Orders for Case No: 17-004949