vs. ) CASE NO. 93-0871
Respondent. )
Pursuant to notice, final hearing in the above-styled case was held in Tampa, Florida, on November 10, 1993, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.
The parties were represented at the hearing as follows: For Petitioner: H. Richard Benchimol
Benchimol, Hoft, and Strouse P.A.
For Respondent: Michael A. Mone
The issue in this case is whether Petitioner and its controlling person are entitled to licenses as, respectively, an employee leasing company and a controlling person of an employee leasing company.
By joint application filed July 13, 1992, Petitioner and its controlling person, Susan J. Haggerty, requested licensure as, respectively, an employee leasing company and a controlling person of an employee leasing company. After demanding and receiving additional application material, Respondent entered an order December 18, 1992, denying the application for licensure as an employee leasing company. Respondent never acted on the portion of the joint application concerning Ms. Haggerty. Petitioner requested a formal hearing.
At the hearing, Petitioner called two witnesses and offered into evidence five exhibits. Respondent called no witnesses and offered no exhibits into evidence. The parties jointly offered into evidence 12 exhibits. All exhibits were admitted.
Neither party ordered a transcript. Petitioner filed a proposed recommended order, and rulings on the proposed findings are in the appendix.
Petitioner has operated as an employee leasing company since November, 1989. Susan J. Haggerty is the president and controlling person of Petitioner.
An employee leasing company assumes from the employer many of the administrative responsibilities normally associated with employment. The employee leasing company replaces the original employer by employing the employees and leasing them back to their original employer. For each leased employee, the employee leasing company assumes responsibility for workers compensation, employee benefit plans, unemployment compensation, withholding, and social security payments.
The former employer enters into an agreement with the employee leasing company under which it pays a set amount to lease its former employees. The amount includes the leasing company's markup and all of the costs projected to be associated with the employee, including compensation and the items described in the preceding paragraph. In the case of Petitioner, the fee is not subject to readjustment, even if one of the items, such as workers compensation, later proves to be higher than projected.
Due to the enactment of new legislation regulating employee leasing companies, on July 13, 1992, Petitioner and Ms. Haggerty filed with Respondent a joint application for licensure. Petitioner and Ms. Haggerty had been operating in their respective roles for at least six months prior to January 1, 1992, which qualifies them for licensure under the "grandfathering-in" provisions cited in the Conclusions of Law.
Following receipt of the joint application on July 13, 199, Respondent informed Petitioner, by letter dated July 20, 1992, that the application was missing various items. The letter requested, among other things, financial statements for the two preceding years, including a corrected statement for 1991 and a certification that there had been no material adverse changes in financial statements since the date of the last statement. The portion of the application of the controlling person also required various items, such as fingerprints.
The letter advised that the missing material must be supplied by August 5, 1992, if Respondent were to be able to issue the licenses by the statutory deadline of October 1, 1992.
By letter dated July 30, 1992, Petitioner supplied additional information in response to the July 20 letter.
By letter dated August 7, 1992, Respondent informed Petitioner that various deficiencies continued to exist. Among other things, the letter states that the 1991 financial statement must conform to generally accepted accounting principles, include a statement of cash flows, and describe loan receivables by footnote. Also, the letter asserts that the 1991 financial statement shows a tangible accounting net worth deficiency of about $109,000 when adjusted for loan receivables to controlling persons.
By letter dated September 25, 1992, Petitioner submitted a financial statement dated August, 1992, containing footnotes describing loan receivables. By letter dated October 19, 1992, Petitioner references a letter dated October 8, 1992, from Respondent and encloses documentation concerning Ms. Haggerty's personal finances. In the October 19 letter, Ms. Haggerty promises that she will attend Respondent's November 2 meeting to answer questions regarding her previous employment.
The letters dated July 20 and August 7 from Respondent are the only formal notification of deficiencies, errors, or omissions given Petitioner within the time permitted by statute.
Consistent with its practice, Respondent considered the joint application to be separate applications of the employee leasing company and the controlling person. Consistent with Respondent's practice, it would, if appropriate, grant a license to a controlling person without granting a license to the employee leasing company with which she is associated.
Respondent's first meeting at which it considered Petitioner's application was October 5, 1992. Ms. Haggerty and an attorney were in attendance. Although Board members wanted information as to where Ms. Haggerty had previously worked, they would not let her speak.
At Respondent's November 2 meeting, Board members developed a long list of information that they wanted in order to consider the application. Petitioner's attorney, who was in attendance, asked that they memorialize their demands in a letter.
When Respondent took up Petitioner's application at the December 8 meeting, Ms. Haggerty was not in attendance. Warned by its counsel that the statutory time limit had expired on the application so that the applicants were deemed licensed, Respondent elected to take no action as to Ms. Haggerty's controlling person application and to deny Petitioner's application.
Respondent's order concerning Petitioner, which was entered December 18, 1992, states that the application is denied due to the failure to submit a completed application for licensure, reflect all liabilities in the financial statements, disclose a disputed workers compensation premium in the financial statements, comply with the statute requiring the payment of workers compensation premiums, comply with Section 468.525(3)(c) and (d) regarding tangible accounting net worth and positive working capital, and comply with Section 468.531(1)(d) regarding providing Respondent with false or forged evidence of the purpose of obtaining a license. The final order also predicates the denial of the application on a misrepresentation of fact regarding the issue of disputed premiums.
By stipulation, the parties have identified the specific issues for denial of the corporate application as the failure to identify and account for workers compensation premiums owed Hartford Insurance Company and the treatment of "related party items" in the financial statements.
The application form contains an affidavit regarding workers compensation. A portion of the affidavit attests: "I further certify that . .
. all premiums due as of this date have been fully paid to all Worker's Compensation insurance carriers except for disputed premiums listed below:". The form contains blanks for the name of any carriers and the disputed amounts.
Signing the affidavit as president of Petitioner, Ms. Haggerty left blank the above-described portion of the application form, thereby attesting that there were no disputed workers compensation premiums. As of July 13, 1992, this representation was accurate and complete.
As is typical with workers compensation, the carrier performs annual audits to determine if any premium arrearages exist. Petitioner's fiscal year- end with Hartford was November. The audit for fiscal year-end 1991 was not yet completed by July, 1992. It was only at the end of August, 1992, that Ms. Haggerty or anyone else at Petitioner learned that Hartford would be asserting a premium arrearage.
After Hartford completed the audit and claimed an arrearage, Petitioner's auditor asserted that at least a portion of the arrearage, which was in the form of a surcharge, was unlawful. Ms. Haggerty fully discussed the matter with Petitioner's independent professional consultants. Petitioner's outside accountant ascertained the appropriate amount to be reserved for the contingent liability. In accordance with generally accepted accounting principles, the accountant prepared the August, 1992, financial statement, in which the appropriate amount for the liability is recorded among other current liabilities totalling $265,450 and the contingent liability is discussed in a footnote.
Tangible accounting net worth is calculated by taking the total assets, exclusive of intangible assets such as goodwill, and reducing the total adjusted assets by the total liabilities. The August, 1992, financial statement reveals total assets of $439,462 without any intangible assets. Reduced by the total liabilities of $388,426, the financial statement discloses a tangible accounting net worth of $51,036.
Positive working capital, or net working capital, is calculated by taking current assets and reducing them by current liabilities. Current assets include cash, inventories, receivables to be paid within one year, work in progress, and related-party receivables to be paid within one year. The August, 1992, financial statement reveals current assets of $417,566 and current liabilities of $384,990, for a positive working capital of $32,566.
The August, 1992, financial statement discloses a related-party item of a promissory note from Ms. Haggerty to the corporation in the amount of
$68,867. The note was a demand note, which, under generally accepted accounting principles, is treated as a current asset and is properly includible in determining positive working capital. Likewise, the note is properly includible in determining tangible accounting net worth. In fact, Ms. Haggerty repaid
$40,000 in October, 1992, and, by year end, the corporation cancelled the remaining balance of the note in compensation for sums due to Ms. Haggerty.
Ms. Haggerty is of good moral character and meets all other requirements for licensure as a controlling person.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes.)
The Department of Business and Professional Regulation is authorized to license, upon certification of Respondent, employee leasing companies and their controlling persons. Section 468.527(1).
Section 468.526 provides:
Commencing October 1, 1992, no employee leasing company or controlling person shall engage in business from offices in this state or enter into any contractual relationship with a client company relating to business conducted by the client company in this state without first obtaining a license thereof from the department.
Section 468.524(5) provides:
Any applicant that, upon January 1, 1992, has been operating in this state as an employee leasing company or controlling person for at least 6 months shall automatically qualify for a license. . . . However, if the applicant is an employee leasing company it shall, as a condition of licensure, submit evidence satisfactory to the Board that the applicant satisfies the requirements of
subsection 2 and s. 468.525(1)(b) and (2). ...
Section 468.524(2) states:
The Board may require information and certifications necessary to determine that the applicant is of good moral character and
meets other licensure requirements of this Act.
By stipulation, the parties have agreed that "other licensure requirements of this Act" means that the applicant must show a tangible accounting net worth and positive working capital. By stipulation, the parties have agreed that Respondent has interpreted the statutes to require that a grandfathered employee leasing company demonstrate only a positive tangible accounting net worth, not a tangible accounting net worth of at least $50,000.
Relevant portions of Section 468.525 provide:
Each controlling person licensed by the [D]epartment [of Business and Professional Regulation] shall:
(b) Be of good moral character.
(2)(a) As used in this Act, "good moral character" means a personal history of honesty, trustworthiness, fairness, a good reputation for fair dealings, and respect for the rights of others and for the laws of this state and nation. A thorough background investigation of the individual's good moral character shall be instituted by the department. . . .
Section 468.525(3) provides:
Each employee leasing company licensed by the department shall have a registered agent for service of process in this state. In addition, each licensed employee leasing company shall comply with the following requirements:
The employment relationship with workers provided by the employee leasing company to the client company shall be established by written agreement . . ..
An applicant for an initial employee leasing company license shall have a tangible accounting net worth of not less than $50,000.
An applicant for renewal of an
employee leasing company license shall have a tangible accounting net worth or shall have guaranties, letters of credit, or other security acceptable to the board in sufficient amounts to offset any
deficiency. . . .
Each employee leasing company shall maintain positive working capital, as determined in accordance with generally accepted accounting principles. In determining the amount of working capital, a licensee shall include adequate reserves for all plans of self-insurance or partial self- insurance for claims incurred but not paid and for claims incurred by not reported.
Section 468.529(1) provides that an employee leasing company is responsible for providing workers compensation benefits under Chapter 440.
Section 468.531(1)(d) prohibits any person or entity from giving "false or forged evidence to the board or a member thereof for the purpose of obtaining a license."
Section 120.60(2) states:
When an application for a license is made as required by law, the agency shall conduct the proceedings required with reasonable dispatch and with due regard to the rights and privileges of all affected parties or aggrieved persons. Within 30 days after receipt of an application for license, the agency shall examine the application, notify the applicant of any apparent errors or omissions, and request any additional information the agency is permitted by law to require. Failure to correct an error or omission or to supply additional information shall not be grounds for denial of the license unless the agency timely notified the
applicant within this 30-day period. . . .
Every application for license shall be approved or denied within 90 days after receipt of the original application or receipt of the timely requested additional information or correction of errors or omissions unless a shorter period of time for agency action is provided by law. The 90- day or shorter time period will be tolled by the initiation of a proceeding under s.
120.57 and will resume 10 days after the recommended order is submitted to the agency and the parties. Any application for a license which is not approved or denied within the 90-day or shorter time period, within 15 days after conclusion of a public hearing held on the application, or within 45 days after the recommended order is submitted to the agency and the parties, whichever is latest, shall be deemed approved; and, subject to the satisfactory completion of an examination, if required as a prerequisite to licensure, the license shall be issued. ...
Each agency, upon issuing or denying a license, shall state with particularity the grounds or basis for the issuance or denial of the license . . .. . . .
Petitioner has the burden of proving entitlement to licensure. Department of Transportation v. J. W. C. Company, Inc., 396 So. 2d 778 (Fla. 1st DCA 1981).
Petitioner has proved that it and its controlling person have satisfied all requirements to licensure under Section 468.524(5).
It is unnecessary to decide whether a controlling person with six months' experience is automatically entitled to a license. Assuming that Ms. Haggerty, who possesses the requisite experience, is subject to any licensing requirements, she has met them.
As for the corporate applicant, it has shown that it has a positive tangible accounting net worth and positive working capital. The evidence shows that Petitioner properly reported the shareholder advances to Ms. Haggerty and that these receivables qualify as current assets under generally accepted accounting principles. Likewise, the evidence shows that Petitioner properly reported in its August, 1992, financial statement and timely disclosed on its application the dispute with Hartford concerning workers compensation premiums. Once the contingent liability was identified, Petitioner promptly filed the financial statement, which was part of the application.
Based on the foregoing, it is unnecessary to determine whether Ms. haggerty or the corporate applicant is entitled to licensure by default, pursuant to Section 120.60(2).
RECOMMENDED that the Board of Employee Leasing Companies certify for licensure to the Department of Business and Professional Regulation Suncoast Resource Management, Inc. as an employee leasing company and Susan J. Haggerty as a controlling person of an employee leasing company.
ENTERED on December 9, 1993, in Tallahassee, Florida.
ROBERT E. MEALE
Filed with the Clerk of the Division of Administrative Hearings on December 9, 1993.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-871
Treatment Accorded Proposed Findings of Petitioner 1-2: adopted or adopted in substance.
3-4: rejected as irrelevant.
5-7: adopted or adopted in substance. 8-13: rejected as legal argument.
14-16: adopted or adopted in substance. 17-19: rejected as legal argument.
20-41: adopted or adopted in substance. 42: rejected as subordinate.
43: rejected as unnecessary.
44-47: rejected as not finding of fact. 48-50: rejected as unnecessary.
51-63, 70-79, and 82-92: rejected as irrelevant, repetitious, subordinate, and unnecessary.
64-69: adopted.
80-81: adopted.
Board of Employee Leasing Companies 1940 North Monroe Street Tallahassee, Florida 32399-0767
H. Richard Benchimol
Benchimol, Hoft, and Strouse P.A. One Urban Centre
Michael A. Mone
All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
