STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF LABOR AND ) EMPLOYMENT SECURITY, DIVISION ) OF WORKERS’ COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 98-2495

) TOM DYBALSKI ENTERPRISES, ) INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings, conducted the final hearing in Fort Myers, Florida, on July 16, 1998.

APPEARANCES

For Petitioner: Louise T. Sadler

Senior Attorney Division of Labor and

Employment Security

Suite 307, Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

For Respondent: A. Brent McPeek

Attorney

3986 South Tamiami Trail Venice, Florida 34293

STATEMENT OF THE ISSUE

The issue is whether two persons were employees or independent contractors of Respondent, pursuant to Chapter 440, Florida Statutes, and, if employees, an additional issue

is the penalty that Petitioner should impose against Respondent for his failure to obtain workers’ compensation coverage for the two employees.

PRELIMINARY STATEMENT

By Notice and Penalty Assessment Order issued April 10, 1998, Petitioner advised Respondent that it was assessing a penalty of $25,736.70, pursuant to Section 440.107(3), Florida Statutes. The form contains two alternative explanations for the notice, but Petitioner failed to check either of them.

The applicable alternative addresses employees engaged in the “construction industry” and states that the recipient of the notice has one or more employees.

By Stop Work Order served April 7, 1998, Petitioner alleged that Respondent had failed to obtain workers’ compensation insurance for all of its employees working at a job site located at 2242 Otter Creek Lane in Sarasota.

Respondent demanded a formal hearing.

At the hearing, Petitioner called four witnesses and offered into evidence eight exhibits. Respondent called no witnesses and offered into evidence one exhibit. All exhibits were admitted except Petitioner Exhibit Number 1.

The court reporter filed the transcript on July 30, 1998.

FINDINGS OF FACT

1. At the time in question, Respondent was in the business of erecting enclosures for swimming pools. On most

   of these jobs, Respondent served as a subcontractor of Commercial Residential Construction.

2. On April 7, 1998, Respondent was providing labor and materials, as a subcontractor to Commercial Residential Construction, on a screened-enclosure job located at 2242 Otter Creek Lane in Sarasota. Commercial Residential Construction supplied the aluminum and screen used for this job.

3. For this job, Respondent hired two individuals who had worked for Commercial Residential Construction or other independent contractors in the construction business. Respondent did not have workers’ compensation coverage for the two individuals working with him on this job.

4. Respondent’s agreement with these two persons was to pay them, on a weekly basis, a specified percentage of the total price that Respondent was to receive for the work. If the contractor refused to pay Respondent due to unsatisfactory work, then Respondent would not pay the two individuals.

5. The two individuals had to supply their own tools. Sometimes they transported themselves to the job site; sometimes, as a matter of convenience, Tom Dybalski, the owner of Respondent, transported them or was transported by them.

6. The two individuals did not testify. Petitioner called Mr. Dybalski as a witness; otherwise, Petitioner’s witnesses consisted exclusively of staff and investigators.

   However, these witnesses were unable to establish the statements of the two putative employees because of hearsay.

7. The findings of fact contained in this recommended order are derived from Mr. Dybalski’s testimony or admissions made to one of Petitioner’s investigators. However, the administrative law judge has not relied on hearsay testimony, which is admissible under the exception for admissions against interest, that Mr. Dyblaski admitted that the two individuals were employees. Mr. Dyblaski is an aluminum contractor, not an attorney, and his “concession” concerning a complex matter, especially given his obvious ignorance of the applicable legal criteria, is not entitled to any weight.

8. Admissible evidence does not establish whether the two individuals had exemptions from workers’ compensation. Mr. Dybalski testified that he did not know whether they did. The two individuals did not testify, so it is impossible to determine from this source whether they had exemptions.

9. The record is similarly devoid of competent evidence establishing Respondent’s contention that the two individuals were employees of Commercial Residential Construction while working on the subject job.

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction over the subject matter. Section 120.57(1),

    Florida Statutes. (All references to Sections are to Florida Statutes.)

11. Section 440.10(1)(a) provides that every employer must obtain workers’ compensation coverage for its employees. The sole issue in this case is whether the two individuals were employees or independent contractors.

12. Section 440.02(13)(d)1 provides that “employee” does not include “independent contractor” if

    1. The independent contractor maintains a separate business with his own facility, truck, equipment, materials, or similar accommodations;

    2. The independent contractor holds or has applied 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 requirements;

    3. The independent contractor performs or agrees to perform specific services or work for specific amounts of money and controls the means of performing the services or work;

    4. The independent contractor incurs the principal expenses related to the service or work that he performs or agrees to perform;

    5. The independent contractor is responsible for the satisfactory completion of work or services that he performs or agrees to perform and is or could be held liable for a failure to complete the work or services;

    6. The independent contractor receives compensation for work or services performed for a commission or on a per-job or competitive-bid basis and not on any other basis;

    7. The independent contractor may realize a profit or suffer a loss in connection with performing work or services;

    8. The independent contractor has continuing or recurring business liabilities or obligations; and

    9. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures.

1. Section 440.10(1)(g) provides that a person is conclusively presumed to be an independent contractor if he provides his general contractor with an affidavit attesting that he meets all of the requirements of Section 440.13(d) and either a valid certificate of workers’ compensation insurance or a valid certificate of exemption issued by Petitioner.

2. The burden of proof is on Petitioner, which seeks to impose a fine against Respondent. The standard of proof is a preponderance of the evidence. Although violations of Chapter 440 can result in a substantial fine, which may even render an employer insolvent, the employer nonetheless does not have a license or property interest at stake so as to raise the standard of proof to clear and convincing evidence.

3. The record does not establish that the two individuals had exemption certificates, so Respondent is not entitled to the benefit of the conclusive presumption that they were independent contractors. Respondent bears the burden of showing entitlement to this conclusive presumption because it enjoys the benefit that the presumption confers.

4. Section 440.02(13)(d)1 establishes nine criteria to determine if an individual is an employee or independent

   contractor. To qualify as an independent contractor, an individual must meet all nine criteria. The Legislature recognized that this is a departure from the balancing approach present in other statutory schemes, such as federal tax law and labor law, or under the common law: the flush language of Section 440.02(13)(d)1 applies the common law test for independent contractors to individuals in certain classes of employment.

5. In cases not involving the conclusive presumption concerning employment status, the question arises as to which party has the burden of proof or burden of going forward with the evidence on the issue of the employment status of the two individuals. In other words, the question is whether Petitioner must prove that the two individuals are employees and not independent contractors or whether Respondent should have to prove that they are independent contractors and not employees.

6. The facts concerning an individual’s employment status are more available to the employer than to Petitioner, so as to suggest that the burden of going forward with the evidence as to employment status should be on Respondent. Imposing the burden of going forward with the evidence as to the employment-status issue would also relieve Petitioner of the difficult burden of proving a negative--i.e., that the individuals are not independent contractors.

7. However, imposing upon Respondent the burden of going forward with the evidence on the employment-status issue effectively shifts the entire burden of proof to Respondent, at least in cases such as the present where the sole issue is the employment status of the two individuals. The purpose of placing the burden of proof on Petitioner is to relieve Respondent of the burden of proof that it is not guilty of the violation with which it is charged. Moreover, the burden imposed upon Petitioner is not great because, in cases governed by the statutory criteria, Petitioner must merely show that the putative employees failed to meet any one of the nine criteria.

8. Thus, Petitioner must prove that the two individuals are not independent contractors, rather than require Respondent to prove that they are. Absent a showing that the two individuals failed any one of the nine statutory tests, Respondent prevails.

9. As to the first criterion, the two individuals used their own tools. Apparently, either of them sometimes transported Mr. Dybalski in one of their trucks, and sometimes Mr. Dybalski sometimes transported them in his truck, but, in all cases, this was merely a matter of personal convenience. Although it is not clear that each of the two individuals maintained a separate business, Petitioner has failed to show that they did not, especially given the evidence concerning

   the use of their own tools and the disjunctive listing of indicators of a separate business—i.e., “own work facility, truck, equipment, materials, or similar accommodations.”

10. As to the second criterion, there is no evidence whether either of the two individuals obtained a federal identification number or was excused from this obligation.

11. As to the third criterion, the record indicates that each individual agreed to perform specific work for a specific amount of money, but the record is undeveloped concerning who controlled the means of performing the services or work.

12. As to the fourth criterion, the record does not indicate who incurred the principal expenses related to the service or work. Commercial Residential Construction supplied the screen and aluminum. The record does not indicate who supplied the fittings and hardware necessary to complete the work.

13. As to the fifth criterion, the two individuals were responsible, at least as to Respondent, for the satisfactory completion of the work or services. The record indicates that Respondent would only pay them for the work that they performed, but does not indicate if Respondent, or any other party, could hold the two individuals liable for a failure to complete the work or services.

14. As to the sixth criterion, the two individuals received compensation on a per-job basis.

15. As to the seventh criterion, the record precludes any possible inference that the two individuals could suffer a loss in connection with their arrangement with Respondent. They received a percentage of the fixed price that Respondent was to receive. A third party supplied the major materials. There is no way that the two individuals could have suffered a loss on the job.

16. As to the eighth criterion, the record precludes any possible inference that the two individuals could have continuing or recurring business liabilities or obligations.

17. As to the ninth criterion, the record precludes any possible inference that the success or failure of the business of the two individuals depends on the relationship of their business receipts to expenditures.

18. Section 440.107(3) provides that, in addition to any stop-work order or other relief, Petitioner may assess an employer failing to obtain workers’ compensation coverage a penalty in the amount of double the amount that the employer “would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer’s payroll during the preceding 3-year period” or, if greater, $1000. The $1000 penalty described in the statute is not based on the number of employees or separate instances of failure to obtain workers’ compensation coverage.

19. Petitioner has introduced evidence of payments that Respondent made to several individuals, including the two individuals that are involved in this case. However, the record does not establish that these individuals were not independent contractors at the time of the receipt of these sums. Although Petitioner established that the payments made for the Otter Creek job should be included in calculating the penalty, it is impossible to separate these payments from other payments, as to which Petitioner has failed to show an illegal failure to obtain workers’ compensation. Under these circumstances, the proper penalty is $1000.

RECOMMENDATION

It is

RECOMMENDED that the Division of Workers’ Compensation enter a final order finding Respondent guilty of failing to

obtain workers’ compensation coverage to two employees and imposing a penalty in the amount of $1000.

DONE AND ENTERED this 9th day of September, 1998, in Tallahassee, Leon County, Florida.

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 9th day of September, 1998.

COPIES FURNISHED:

Louise T. Sadler Senior Attorney Division of Labor and

Employment Security

Suite 307, Hartman Building 2012 Capital Circle, Southeast

Tallahassee, Florida 32399-2189

A. Brent McPeek Attorney

3986 South Tamiami Trail Venice, Florida 34293

Edward A. Dion, General Counsel

Department of Labor and Employment Security

307 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

Douglas L. Jamerson, Secretary

Department of Labor and Employment Security

307 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

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 must be filed with the agency that will issue the final order in this case.

Docket for Case No: 98-002495

Orders for Case No: 98-002495