vs. ) CASE NO. 89-4402
Respondent. )
on October 31, 1989 in Tallahassee, Florida, before Ella Jane P. Davis, a duly assigned Hearing Officer of the Division of Administrative Hearings.
For Petitioner: Strickland Electric Co. of Tallahassee, Inc.
E. Thomas Brushwood, Esquire Brushwood and Gruver, P.A. Post Office Box 10117
Susan B. Kirkland, General Counsel, and Alma Gonzalez-Neimeiser, Staff Attorney Department of General Services
Whether or not Petitioner is eligible for recertification as a Minority Business Enterprise (MBE) pursuant to Section 288.703(1) F.S. and Rule 13- 8.005(4)(c) F.A.C.
Petitioner presented the oral testimony of J. Kinson Cook, Lee Stepina, Ima Jean Strickland, and Bobby Strickland. Respondent presented the oral testimony of Marsha Nims and Ray
Bryant. By deposition (Respondent's Exhibit 1), Respondent also presented the testimony of Ima Jean Strickland.
The testimony of Ronald Fraser, John Garrett Hemanes, Kenneth Cushing, Charlie James, Donald Metcalf and Thomas J. Strickland was presented by deposition. (Joint Exhibits 16-21).
The Prehearing Stipulation of the parties was admitted as Hearing Officer's Exhibit 1 and has been utilized to the extent appropriate in preparation of this Recommended Order.
Petitioner's and Respondent's Joint Exhibits 1-21 were admitted into evidence. Respondent's Exhibit 1, supra., was admitted into evidence.
Official recognition was taken of the Final and Recommended Orders in Dees, Inc. v. Department of General Services, DOAH Case No. 87-0515, and Falcon Mechanical, Inc. v.
Department of General Services, DOAH Case No. 87-1950, and of the Recommended Order in Strickland Electric of Tallahassee, Inc. v. Department of General Services, DOAH Case No. 86-2963.
At the time of formal hearing, Respondent DGS had pending a Notion to Dismiss that portion of the Petition
attacking the constitutionality of Chapter 288, Part V, F.S. In the interests of preserving the clearest possible record, that issue was taken under advisement for resolution within this Recommended Order.
Petitioner is a corporation formed in 1972, whose majority stockholder and president is Ima Jean Strickland, a minority person.
The parties have stipulated that Petitioner
corporation has in the past and continues to meet all eligibility criteria for MBE certification except for the number of permanent, full-time employees, which statutory component is the sole focus of the dispute in this cause. Eligibility for recertification in this regard depends on whether or not Petitioner continues to employ "25 or fewer permanent full-time employees."
Petitioner engages in the provision of electrical work for commercial and residential construction and in electrical services for business and residential customers.
Approximately ten percent of its business is the service work for residential and business customers and residential construction. The remainder of its business consists of new construction.
On its recertification application, Petitioner
claimed to have only eight permanent full-time employees and at the time of formal hearing, testimony of its witnesses acknowledged only 9-10 permanent full-time employees. Petitioner considers an employee to be "permanent full-time" only when that employee has been with the company for at least five years. Only after an employee has been with Petitioner for five years does Petitioner pay the premiums on that employee's health insurance
and give that employee a paid annual one week's vacation. (See Finding of Fact No. 8, infra.) By Petitioner's interpretation, a
"permanent employee" is a different category-than a "full-time employee." In Petitioner's parlance, "full-time" refers to how many hours the specific employee works per week; whereas,
"permanent" refers to an employee with a long-standing relationship with the Petitioner and who has attained full benefits. As of the date of formal hearing, only ten of Petitioner's employees were vested its profit and pension plan. (See Findings of Fact Nos. 46-47, infra.)
Petitioner's hiring goals and employment practices emphasize long-term employment. Such policies benefit Petitioner by the retention of accessible, qualified labor in an industry with consistently high employee turnover.
Petitioner's employees normally work 7:30 a.m. to
4:00 p.m. When possible, such employees are allowed to make up the hours when they have been absent without pay and where a job/project has been closed for a hcffliday
All of Petitioner's employees are subject to a 90- day probationary period during which they are observed for
performance and attendance. Petitioner encourages new employees to attend its apprenticeship program at Lively Vo-Tech. If the employee gets past the 90-day probationary period, his employment continues until he voluntarily terminates the employment relationship or until Petitioner terminates his employment due to his failure to perform adequately. If residential jobs/ construction projects are not awarded to Petitioner, the employee may not be able to work but would be encouraged to return to Petitioner when work again becomes available.
All Petitioner's employees are eligible to
participate at their own expense in the company-sponsored group health plan after 90 days of employment. When an employee can become eligible to join the group medical insurance plan at his own expense is tied to the probationary period. When the company pays an employee's group health plan premiums is tied to his attaining "permanent" status at the five years' employment stage.
DGS duly promulgated Rule 13-8.005(4) (c) F.A.C. in November 1988 in order to establish uniform review of MBE
applicants on the "25 or fewer permanent full-time employees" statutory criterion contained in Section 288.703(1) F.S.
In applying Rule 13-8.005(4)(c), DGS considers the number of permanent full-time employees that the applicant acknowledges to be permanent and full-time and the number of positions the applicant needs to actually carry out its work. However, DGS does not add these two figures because it wishes to avoid "doublecounting" positions. This agency policy/procedure/ interpretation of the rule has been consistently applied to all MBE applicants since the rule has been in effect and was applied to this Petitioner.
In determining the number of employees Petitioner actually needs to carry out its business, DGS considered its annual gross receipts, the number of supervisory positions that are used, and the quantity of work it performs. The rule permits this latitude.
In determining the number of permanent full-time
employees who are employed by the Petitioner, DGS reviewed its Florida State Unemployment Compensation reports, payroll ledgers,
financial statements, listing of projects, and listing of managerial supervisory employees.
In practice, DGS considers "permanent" to mean the number of positions that an employer uses on a regular and predictable basis to carry out its work.
In practice, DGS personnel make a distinction
between "full-time" and "permanent" employees. In evaluating the Petitioner, DGS evaluated two criteria: 1) the continuum or permanency, that is, the regularity and predictability with which a position appears, and 2) the length of service given by that position in a particular quarter--12 to 13 weeks being the cutoff
for the count. Only when those two elements are met simultaneously does DGS count a position for purposes of applying
Rule 13-8.005(4)(c) F.S. The agency does this as a result of two final orders addressing the number of employees for MBE certification. See, Dees, Inc. and Falcon Mechanical, Inc., supra.
Contractors determine the number of people they need to do a project by reviewing the specific plans and specifications for each job/project. In preparing bids,
contractors determine how much work is involved in a given job and how long it is going to take to accomplish it.
It is DGS' experience that contractors will know how many employees they need to hire for any particular
job/project/contract and that the number of employees needed will
be represented on the contractors' Florida Employer's Quarterly Wage and Tax Reports (unemployment compensation tax reports)
Petitioner's reports, like those of every other applicant, list all employees who worked for the company during each 13-week period, regardless of duration of employment.
Bobby Strickland, Petitioner corporation's minority qualifying person's husband, is qualified to determine the number of employees Petitioner needs on each job. He has held a master electrician's license for 18 years and has been involved in the electrical contracting business for 31 years. He currently determines the amount and cost of materials involved and the number of employees required to complete each contract by reviewing the plans. In submitting Petitioner's bids, he has taken into account how many persons he will need to carry out each contract, understanding that some employees on any given job on any given day may not report for work. The rule does not require that DGS make a determination of how many employees are needed to perform each job/project/contract on the basis of such plans, and DGS does not review any plans, does not assess the complexity of any contract, and does not substitute its judgment call for that of the contractor applicant on that basis. Rather, it reviews documents prepared by the contractors indicating actual number of employees used and revenues generated. See also, Finding of Fact 29, infra.
The number of employees Petitioner needs on each
job depends in part on the quantity of work subcontracted out. Petitioner contracts out certain portions of its construction contracts. All witnesses concur that it is reasonable to count the subcontractors as independent contractors and not as
employees. Subcontractors and their employees do not appear on Petitioner's payroll as its own employees and there has been no demonstration that they appear on any of the other forms/ documentation listed in Rule 13-8.005(4)(c) F.A.C.
The number of employees and the names of the employees whom Petitioner had on its payroll for any given quarter is reflected in its Florida Employer Quarterly Wage and Tax Reports (unemployment compensation reports).
During 1986, 1987, 1988 and the first three quarters of 1989, Petitioner reported the following number of employees on its Florida Employer's Quarterly Wage and Tax Reports:
MONTH QUARTER 1986 1987 1988 1989
January |
| 39 | 44 | 51 | 6 |
February |
| 39 | 32 | 55 | 64 |
March | 1st | 40 | 39 | 55 | 53 |
April |
| 39 | 62 | 56 | 51 |
May |
| 43 | 67 | 57 | 58 |
June | 2nd | 46 | 65 | 57 | 49 |
July |
| 46 | 67 | 61 | 46 |
August |
| 46 | 57 | 73 | 40 |
September | 3rd | 43 | 54 | 66 | 44 |
October |
| 45 | 53 | 57 |
|
November |
| 49 | 50 | 60 |
|
December | 4th | 45 | 46 | 60 |
|
The total number of employees on Petitioner's payroll fluctuated from a high of 73 to a low of 32 between the
quarters ending 3/31/86 and 9/30/89.
In the last three years, Petitioner employed a total of 273 different persons. Two hundred thirty-three of
these 273 persons worked less than one year. Stated differently, in that period, at least 40 persons were employed by Petitioner for a duration of one or more years.
On October 9, 1989, Petitioner employed 36 people, which it admittedly needed to keep its business going in terms of the construction projects it had at the time. By the date of the formal hearing, Petitioner had increased the number of its employees to 38; 22 field workers were spread among five construction jobs, plus two service staff employees, two warehouse staff employees, and three office/clerical staff employees. The balance may be supervisory staff.
Of the 38 employees paid by Petitioner's
October 24, 1989 payroll, nine had been employed more than three consecutive years.
At no time between the quarter ending 3/31/86 and the quarter ending 9/30/89 did Petitioner employ fewer than 26
employees who were working from 12-13 weeks in any quarter. The least number of employees working full-time for a minimum of 12 weeks in any particular quarter for the quarters ending 3/31/86 through 9/30/89 was 26, and the largest number was 49.
Twenty-six employees, excluding Bobby and Ima Jean
Strickland, who were listed on Petitioner's unemployment tax report for the quarter ending 3/31/87 also appeared on the
unemployment tax report for the quarter ending 12/31/87.
Thirty employees, excluding Bobby and Ima Jean Strickland, who were listed on Petitioner's unemployment tax report for the quarter ending 3/31/88 also appeared on the unemployment tax report for the quarter ending 12/31/88.
Thirty employees were listed on Petitioner's
payroll for the quarter ending 3/31/89 who were also listed on the payroll as of 10/31/89.
In determining the number of employees that an MBE applicant needs to carry out its business, DGS also considers the number of projects the applicant enters into and the quantity of work performed because it is DGS' experience in investigating businesses in the construction industry that the greater the number of contracts an applicant has, the greater its revenues and the greater the number of employees an applicant will need to carry out its business. The rule permits this latitude. Bobby Strickland conceded that the amount of work and the number of employees the Petitioner needs fluctuates with the number of contracts it has and the amount of work required under those contracts at any given time. According to J. Kinson Cook, however, gross revenue is not determinative of the number of employees required to complete a contract. J. Kinson Cook, Inc., a general construction firm, has 12 "permanent full-time employees," as Mr. Cook personally defines that term, and its contracts total an average of $20 million per year. However,
J. Kinson Cook, Inc. is not a certified MBE, and Mr. Cook's opinion as an expert in the construction field was not rendered
on the basis and criteria established by Rule 13-8.005(4) (c) F.A.C.
In 1986, Petitioner had 32 commercial construction contracts totalling $4,760,539. In 1987, Petitioner had 10 commercial construction contracts totalling $814,593.90. In 1988 Petitioner had 16 commercial construction contracts totalling
$2,143,412. As of the date of formal hearing in 1989, Petitioner had 13 commercial construction contracts as follows:
Dittmand Chemistry $ 8,295
Sugar Creek Theatres 150,000
Village Green 12,961
Sewage Pumping Stations 155,986
Koger-Osborne Building 182,000
Wal-Mart 187,000
Mayo Building 29,000
FSU-Sports Complex 925,000 Kentucky Fried Chicken n/a Hartsfield Elementary School 190,000
Victoria's Secret 13,700 John Wurst n/a
$1,853,942
Some of the contracts listed for 1986-1989 include projects that have extended (will extend) into later years.
Beyond construction income which has been reviewed supra., Petitioner also performs residential and commercial service work, the income from which was $354,076.56 in 1986;
$268,718.42 in 1987; and $375,157.94 in 1988. Petitioner projects its income produced from service work in 1989 to be
$200,000.
Petitioner's residential service work includes the electrical work on the construction of new homes. On October 9, 1989 Petitioner had eight residential construction projects.
Petitioner does repeat business in its commercial service work and in the construction of new homes (residential service work).
Petitioner's gross receipts were $4,193,064 in the fiscal year ending July 1, 1989 and $2,150,289 in the fiscal year ending July 1, 1988. Petitioner's gross revenues for the fiscal year ending in July 1987 were $2,156,722. Petitioner projects its gross revenues for the fiscal year ending July 1990 will be between 2.5 and 3.0 million.
Petitioner has nine supervisory employees: six construction foremen, one warehouse supervisor, one office supervisor (Ima Jean Strickland), and one field supervisor (Bobby Strickland). Petitioner conceded that each supervisor must have at least one subordinate to supervise, but it is also clear that the number of persons supervised fluctuates with the skill of the workers and the complexity of the jobs in progress.
As of the date of hearing, foreman Ronald Fraser
was supervising nine employees on the Wal-Mart project. At the time of his deposition, October 12, 1989, he was supervising eight employees on that project. He supervised approximately twenty-five employees on the Department of Education Building and anticipated that he would supervise 10 employees on the Hartsfield School project.
As of the date of hearing, foreman Kenneth Cushing was supervising four employees on the Koger Center project.
Ima Jean Strickland regularly supervises the two office employees.
At the time of his October 12, 1989 deposition, foreman Charlie James was supervising three employees, which is the average number of employees he supervises.
As of she date of his October 12, 1989 deposition, foreman Donald Metcalf was supervising five employees redoing the fire alarms at Florida State University. On an average,
Mr. Metcalf supervises 4-5 employees.
Foreman John Garrett Hemanes normally supervises one employee, on average.
As of the date of formal hearing, Bobby Strickland
was responsible for supervising all of the field employees. His
is a higher level of supervision than that of the respective construction foremen and their chain of command often passes
through him. Therefore, his position should be counted only once.
Thomas J. Strickland, a/k/a Jeffrey Strickland, supervises one employee. He is the warehouse supervisor.
None of Petitioner's employees are eligible for paid sick leave; however, all employees may take unpaid sick leave with Bobby Strickland's approval.
Petitioner's employees are eligible to participate
in an employer-sponsored profit sharing plan after six months of employment. Vesting in the pension plan is determined by federal regulation, not company policy.
After an employee has been with the company for 12 months of continuous service, the employee can benefit from
profit sharing in the form of a cash bonus. Additionally, an employee who has not had an accident during a 12-month period is
entitled to a safety bonus.
During the years 1986-1989, Petitioner's contracts have primarily been in Leon County and the surrounding area, and therefore, it has been able to circulate staff from project to project for its own advantage. By so doing, Petitioner encourages good employees to stay with Petitioner longer.
In order to keep an ample amount of work going, Petitioner continuously reviews potential jobs and prepares and submits bids. On an average, Petitioner bids 3-4 contracts a month. Petitioner's decision to bid is affected by the amount of work in progress and whether or not it has adequate manpower. If it has more work than it can handle, Petitioner does not bid up more.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause, excluding Petitioner's request to determine the constitutionality of a statues. See, Section 120.57(1) F.S.
In its Petition, Petitioner alleged that Chapter
288, Part V, F.S. was unconstitutional. Respondent DGS filed a Motion to Dismiss that portion of the Petition for lack of jurisdiction. As indicated orally at formal hearing, that motion is well-taken. The Division of Administrative Hearings is without jurisdiction to determine the facial constitutionality of a statute. Key Haven v. Board of Trustees of the Internal
Improvement Trust Fund, 427 So.2d 153 (Fla. 1982), Department of Revenue v. Young American Builders, 330 So.2d 864 (Fla. 1st DCA
1976). Thus, Respondent's Motion to Dismiss that portion of the Petition For Formal Hearing which requests the Division of Administrative Hearings to determine the constitutionality of Chapter 288, Part V, F.S. should be granted.
It is undisputed that Petitioner meets all necessary MBE criteria except as regards whether or not it
employs 25 or fewer permanent full-time employees. This criteria is covered by Rule 13-8.005(4)(c) F.A.C. and applies to recertification. See, Rule 13-8.0062 F.A.C. Therefore, prior certifications of Petitioner are not controlling nor res judicata as to the issue of recertification in this proceeding.
Petitioner has challenged neither of the foregoing rules pursuant to Section 120.56 F.S. Therefore, these duly promulgated rules, together with the applicable statutes, govern this case, and Petitioner's lay and expert testimony on better or more accurate means of determining the number of "permanent full-time employees" is unpersuasive and in no way controlling.
Petitioner, as the party seeking recertification, bears the burden of proving entitlement thereto. See, Rule 28-
6.008 F.A.C. and Florida Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981). That is, Petitioner must affirmatively demonstrate it has fewer than 25 employees as defined by statute and rule.
The pertinent statutes and rules are as follows:
A "Minority Business Enterprise" (MBE) is defined by Section 288.703(2) F.S. (1987) as:
Any small business concern as defined in subsection (1) which is organized to engage in commercial transactions, which is
domiciled in Florida, and which is at least
51 percent owned by minority persons and whose management and daily operations are controlled by such persons.
A "Small Business" is defined by Section 288.703(l)
F.S. (1987) as:
[a]n independently owned and operated business concern which employs 25 or fewer permanent full-time employees, and which has a net worth of not more than $1 :illion. (Emphasis supplied)
Rule 13-8.005(4)(c) F.A.C. establishes certain factors to be considered in determining the number of employees in this language:
(4) To establish that it is a small business concern, the applicant shall:
provide documentation to demonstrate that it employees 25 or fewer permanent, full-time employees. The number of permanent, full-time employees shall be determined by adding the number of employees the applicant acknowledges to be permanent, full-time employees to the number of permanent positions the applicant needs to carry out its business. The number of permanent positions the applicant needs to carry out its business is based upon the guantity of work performed, the annual gross receipts of the business concern and the number of permanent, full-time supervisory employees of the business concern. In determining whether the applicant meets this criteria, the Department shall consider such documentation as:
Personnel records
Florida quarterly Unemployment Reports
Annual Federal Unemployment Report
Payroll ledgers (Emphasis supplied)
Whether or not the procedure DGS used in Petitioner's initial or recertification evaluation was performed correctly or incorrectly is not here on appeal. Since this is a de novo proceeding, pursuant to Section 120.57(l) F.S., how DGS evaluated this Petitioner initially is not controlling. See McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977).
Suffice it to say that to the degree DGS' interpretation of its rule avoids adding employees the applicant acknowledges to be permanent full-time employees to the number of permanent positions the applicant needs to carry out its business (See Finding of Fact No. 10, supra.), the "interpretation" is an abrogation or circumvention of Rule 13-8.005(4)(c) F.A.C. which clearly calls for such "doublecounting" of acknowledged employees and permanent positions needed. The rule clearly sets up bases by which "permanent positions" may be determined (based upon the quantity of work performed, the annual gross receipts of the business concern, and the number of permanent full-time supervisory employees of the business concern). These bases may be determined by such documentation as personnel records, Florida Quarterly Unemployment Reports, the Annual Federal Unemployment Report, and payroll ledgers. However, once the
number of "permanent positions" is determined by the foregoing methodology (documentary/evidentiary factors applied to the bases named), the rule also clearly requires that that number of "permanent positions" must be added to "the number the applicant acknowledges to be permanent, full-time employees." The agency's motivation in deviating from the rule formula requiring "doublecounting" of some positions may be to attain greater logic or fairness than the rule itself provides, but the result is contrary to law and cannot be condoned on the basis that agency interpretations of their own rules are entitled to great weight. If the agency perceives the rule has flaws, it should promulgate an amended rule. Neither the agency nor the undersigned may circumvent a duly promulgated rule. See, Boca Raton Artificial Kidney Center, Inc. v. HRS, 493 So.2d 1055 (Fla. 1st DCA 1986).
However, to the degree DGS has applied the latitude permissible under the rule to avoid counting "permanent positions" more than once, that methodology is appropriate.
Therefore, applying the clear language of the rule
to the evidence adduced at the de novo formal hearing, it is also clear that the number of permanent positions needed to carry out the Petitioner's business results in a minimum of 33 "permanent positions" as defined by rule, although the pattern for that number of needed positions may be higher. If that number of "permanent positions" is then added to the "number of employees the applicant acknowledges to be permanent, full-time employees" (be it 8, 9 or 10 at various dates), the number of permanent
full-time employees employed by Petitioner clearly exceeds the statutory maximum of twenty-five.
Petitioner's application must be denied whether
tested by the agency's policy test, which is contrary to the rule and which determined Petitioner to be employing more that 25 permanent full-time employees, or by the clear reading of the rule, which, as set out above, reaches the same result at a higher raw number. Likewise, without the rule, Petitioner's application would fail upon the theories enunciated in Dees, Inc. and Falcon Mechanical, Inc., supra.
The only theories Petitioner has put forth to
establish that it has fewer than 25 permanent full-time employees is that it and other contractors believe that a review of plans is preferable to assessing gross revenues in order to determine "needed" employees and that unilateral determination by each contractor of which employees are "permanent" is more appropriate than bases and evidentiary documentation which are clearly set forth in the duly promulgated rule. In the absence of a rule challenge, none of Petitioner's theories have any effect.
Upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of General Services enter a final order which:
ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building
APPENDIX TO RECOMMENDED ORDER CASE NO. 89-4402
The following constitute specific rulings pursuant to Section 120.59(2) F.S. upon the parties' respective proposed findings of fact (PFOF):
1, 4, 7-10 and 12-14 are accepted.
2, 3, 5-6 and 11-17 are accepted as modified to conform to record as a whole.
19 is rejected as immaterial and as legal argument in light of the duly promulgated rule.
20-23 are rejected as stated as immaterial since this is a de novo proceeding. See the COL. Some of this material has been incorporated in substance into the Recommended Order so as to demonstrate that application of the rule relies upon applicant- generated information after the applicant has assessed its own needs, and that such needs are not "second-guessed" by whoever applies the rule.
accepted.
4, 6-9, 19, 24-25, 37, 39, 45, 57-58 and 60-61 are accepted as modified to clarify the concept, and to eliminate unnecessary, subordinate or cumulative material and mere description of testimony or exhibits.
10 is rejected as unnecessary.
23 and 63 are accepted as modified to eliminate legal argumentation and to reconcile the testimony and evidence as a whole.
38 is rejected as unnecessary and unduly speculative.
E. Thomas Brushwood, Esquire Brushwood and Gruver, P.A. Post Office Box 10117
Susan B. Kirkland, General Counsel
Ronald W. Thomas Executive Director
