STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF FINANCIAL ) SERVICES, DIVISION OF WORKERS' ) COMPENSATION, )
)
Petitioner, )
)
vs. )
)
JEREMY BUTZLER, )
)
Respondent. )
Case No. 04-1021
)
RECOMMENDED ORDER
Pursuant to notice, Administrative Law Judge Lawrence P. Stevenson conducted the administrative hearing in this proceeding on behalf of the Division of Administrative Hearings on May 28 and November 4, 2004, by video teleconference between Fort Myers and Tallahassee, Florida.
APPEARANCES
For Petitioner: Colin M. Roopnarine, Esquire
Department of Financial Services Division of Workers' Compensation
200 East Gaines Street Tallahassee, Florida 32399-4229
For Respondent: Ann Poe Angel, Esquire
Angel & Angel, P.A.
1617 Hendry Street, Suite 405 Fort Myers, Florida 33901-2951
STATEMENT OF THE ISSUES
The issues are whether Respondent was required to obtain workers' compensation coverage for himself pursuant to Section 440.107, Florida Statutes (2002), during the penalty period designated in the Amended Order of Penalty Assessment; and, if so, whether Petitioner should impose a penalty against Respondent in the amount of $120,467.88.
PRELIMINARY STATEMENT
On February 9, 2004, Petitioner, the Department of Financial Services, Division of Workers' Compensation (the "Department"), issued a Stop Work Order and Order of Penalty Assessment No. 04-044-D7 alleging that Respondent failed to comply with the requirements of the Workers' Compensation Law. The Order required Respondent to cease business operations and assessed a penalty of $1,000.00 pursuant to Subsection 440.107(7)(d), Florida Statutes (2002). On February 19, 2004, the Department issued a "First Amended Stop Work and Penalty Assessment Order," increasing the assessed penalty to
$132,027.64 pursuant to Subsection 440.107(7)(d), Florida Statutes (2002).
On March 1, 2004, Respondent filed a Petition for Review of Stop Work and Penalty Assessment Order, which the Department forwarded to the Division of Administrative Hearings ("DOAH") on March 22, 2004, for the assignment of an Administrative Law
Judge and the conduct of a formal administrative hearing. The case was scheduled for hearing on May 28, 2004, via video teleconference in Fort Myers and Tallahassee, Florida. After a continuance, the hearing was completed on November 4, 2004.
On May 25, 2004, the Department filed a Motion to Amend Stop Work and Penalty Assessment Order. The motion requested approval to amend the charges as set forth in an Amended Order of Penalty Assessment (the "Order" at issue in this case). The proposed amendment reduced the penalty to $120,467.88 by changing the workers' compensation premium rate. At the outset of the hearing on May 28, 2004, the motion was granted ore tenus, without objection.
At the hearing, the Department presented the testimony of its investigator, Eric Duncan. The Department's Exhibits 1 through 7 were admitted into evidence. Respondent testified on his own behalf. Respondent's Exhibits 1 through 3 were admitted into evidence. At the hearing, counsel for Respondent was instructed to file Respondent's exhibits, but did not do so. As a courtesy, the Department supplied DOAH with copies of Respondent's Exhibits 2 and 3. Respondent's Exhibit 1 was never provided to DOAH.
The final volume of the Transcript of the final hearing was filed on December 8, 2004. By Order dated December 2, 2004, the parties' request for a 20-day period after filing of the
Transcript in order to file their proposed recommended orders was granted. The Department timely filed its Proposed Recommended Order on December 22, 2004. On December 28, 2004, Respondent filed a motion for extension of time in which to file his proposed recommended order, citing as grounds the medical condition of Respondent's counsel. The motion was granted, and Respondent was given until January 18, 2005, to file a proposed recommended order. Two further motions for extension followed. Respondent ultimately filed a Proposed Recommended Order on January 27, 2005. Due to the disparity in filing dates, the Department was granted a period of ten days in which to file a reply to Respondent's Proposed Recommended Order. The Department did not file a reply. Both Proposed Recommended Orders have been considered in the preparation of this
Recommended Order.
FINDINGS OF FACT
The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. § 440.107, Fla. Stat. (2002).
On February 9, 2004, while conducting a random site inspection, Department investigator, Eric Duncan, observed three men performing construction work in the form of carpentry and house-framing at 720 Southwest 10th Street, Cape Coral, Florida.
One of the workers on the site was Respondent, Jeremy Butzler, a sole proprietor who had employed the other two workers.
Mr. Duncan interviewed Mr. Butzler at the
site and requested proof of workers' compensation coverage, which Mr. Butzler was unable to provide. Mr. Duncan then issued the first Stop Work and Penalty Assessment Order, directing
Mr. Butzler to cease work and pay a civil penalty of $1000.00.
Also on February 9, 2004, Mr. Duncan served Mr. Butzler with a "Request for Production of Business Records," seeking copies of business records to determine whether Mr. Butzler had secured workers' compensation coverage, whether he had a current valid workers' compensation exemption, and to determine any civil penalties that may be owed for failing to secure workers' compensation coverage. Mr. Butzler complied in a very limited way. Mr. Duncan testified that most of the documents provided by Mr. Butzler were records of electronic transfer of funds that did not identify their recipients. No company checkbook or ledger was produced.
After the penalty was calculated, the Department issued the First Amended Stop Work and Penalty Assessment Order, which increased the assessed penalty to $132,027.64. This assessment was later reduced to $120,467.88 after the Department corrected the workers' compensation premium rate it employed to calculate the penalty.
At the time the Stop Work Order was issued and pursuant to Subsection 440.107(5), Florida Statutes (2002), the Department had adopted Florida Administrative Code Rule
4L-6.015,1/ which stated, in relevant part:
In order for the Division to determine that an employer is in compliance with the provisions of Chapter 440, F.S., every business entity conducting business within the state of Florida shall maintain for the immediately preceding three year period true and accurate records. Such business records shall include original documentation of the following, or copies, when originals are not in the possession of or under the control of the business entity:
All workers’ compensation insurance policies of the business entity, and all endorsements, notices of cancellation, nonrenewal, or reinstatement of such policies.
* * *
Records indicating for every pay period a description of work performed and amount of pay or description of other remuneration paid or owed to each person by the business entity, such as time sheets, time cards, attendance records, earnings records, payroll summaries, payroll journals, ledgers or registers, daily logs or schedules, time and materials listings.
All contracts entered into with a professional employer organization (PEO) or employee leasing company, temporary labor company, payroll or business record keeping company. If such services are not pursuant to a written contract, written documentation including the name, business address, telephone number, and FEIN or social security number of all principals if an FEIN
is not held, of each such PEO, temporary labor company, payroll or business record keeping company; and
For every contract with a PEO: a payroll ledger for each pay period during the contract period identifying each worker by name, address, home telephone number, and social security number or documentation showing that the worker was eligible for employment in the United States during the contract for his/her services, and a description of work performed during each pay period by each worker, and the amount paid each pay period to each worker. A business entity may maintain such records or contract for their maintenance by the PEO to which the records pertain.
* * *
All check ledgers and bank statements for checking, savings, credit union, or any other bank accounts established by the business entity or on its behalf; and
All federal income tax forms prepared by or on behalf of the business and all State of Florida, Division of Unemployment Compensation UCT-6 forms and any other forms or reports prepared by the business or on its behalf for filing with the Florida Division of Unemployment Compensation.
During the period in question, Respondent was a "sole proprietor," as that term was defined in Subsection 440.02(25), Florida Statutes (2002):
"Sole proprietor" means a natural person who owns a form of business in which that person owns all the assets of the business and is solely liable for all the debts of the business.
Subsection 440.02(15)(c)1., Florida Statutes (2002), in effect during the penalty assessment period, stated, in relevant
part:
"Employee" includes a sole proprietor . . . Partners or sole proprietors actively engaged in the construction industry are considered
employees unless they elect to be excluded from the definition of employee by filing written notice of the election with the department as provided in s. 440.05 . . .
A sole proprietor or partner who is actively engaged in the construction industry and who elects to be exempt from this chapter by filing a written notice of the election with the department as provided in s. 440.05 is not an employee. (Emphasis added).
Section 440.05, Florida Statutes (2002), allowed an individual to apply for election to be exempt from workers' compensation benefits. Only the named individual on the application was exempt from carrying workers' compensation insurance coverage.
The Department maintains a database of all workers' compensation exemptions in the State of Florida. Mr. Duncan's review of this database revealed that, although Respondent had a valid workers' compensation exemption from November 18, 1999, to November 15, 2001, there were no
exemptions for Respondent for 2002, the year constituting the penalty period in this case. At the hearing, Respondent admitted that he did not obtain an exemption for the year 2002.
Mr. Duncan's investigation also revealed that Respondent did not have workers compensation insurance coverage during the year 2002.
During the investigation, Respondent informed Mr. Duncan that he had contracted with an employee leasing company, Southeast Personnel Services, Inc., that was
responsible for paying the salaries of and providing workers' compensation insurance coverage for Respondent and his workers.
Pursuant to Subsection 468.520(5), Florida Statutes (2002),2/ an employee leasing company is a business entity engaged in employee leasing. "Employee leasing" is an arrangement whereby a leasing company assigns its employees to a client and allocates the direction of, and control over, the leased employees between the leasing company and the client.
§ 68.520(4), Fla. Stat. (2002). When the employee leasing company accepts a client, the client becomes an employee of the leasing company.
An employee leasing company is the employer of the leased employees and is responsible for providing workers' compensation pursuant to Chapter 440, Florida Statutes (2002).
§ 468.529(1), Fla. Stat. (2002). Additionally, an employee leasing company assumes responsibility for the payment of wages to the leased employees without regard to payments by the client and for the payment of payroll taxes and collection of taxes
from the payroll of leased employees. § 468.525(4)(b) and (c), Fla. Stat. (2002).
At the hearing, Respondent demonstrated that he had workers' compensation coverage as an employee of the employee leasing company. However, the Department did not utilize any payments made through the leasing company in its penalty calculation. The evidence demonstrated that Respondent received compensation directly from Holiday Builders, Inc., in the amount of $185,006.50, and Gatco Construction, in the amount of
$10,590.00. These amounts, totaling $195,596.50, were utilized by the Department to calculate Respondent's penalty.
Mr. Duncan explained that in order for workers' compensation coverage to apply through the employee leasing company, companies such as Gatco Construction would have to make payments to the leasing company, not directly to Respondent. The leasing company would then pay a salary to Respondent, as its employee, and Respondent would be covered by the employee leasing company's workers' compensation insurance. Payments made directly to Respondent would not be secured by the workers' compensation coverage obtained through the employee leasing company.
Respondent claimed that the Division utilized the incorrect gross income amount in calculating the penalty. To support this claim, Respondent attempted to introduce what he
claimed was his personal income tax return for the year 2002. Respondent claimed this return had been prepared and filed by his bookkeeper some time in February 2004, subsequent to the Department's investigation. However, the return produced at hearing was unsigned and indicated that it had been self- prepared by Respondent. Respondent could not recall the bookkeeper's name without prodding from his counsel. Respondent offered no proof that this return had ever been completed or filed with the Internal Revenue Service. The purported 2002 tax return was not admitted into evidence, and Respondent's testimony as to the information contained on the return is not reliable.
The Department correctly calculated the penalty assessment based on the money paid to Respondent as a sole proprietor "employee" who failed to file for a workers' compensation exemption for the year 2002. The Department calculated the total penalty based on Respondent's gross payroll, the class code assigned to Respondent utilizing the SCOPES Manual (a standard classification tool published by the National Council on Compensation Insurance), and the statutory guidelines in Subsection 440.107(7), Florida Statutes (2002). Based on that calculation, the correct penalty assessment in this case is $120,467.88.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this proceeding. §§ 120.57(1) and 120.565, Fla. Stat. (2004).
Pursuant to Sections 440.10 and 440.38, Florida Statutes (2002), every "employer" is required to secure the payment of workers' compensation for the benefit of its employees unless exempted or excluded under Chapter 400, Florida Statutes (2002).
"Employer" is defined, in part, as "every person carrying on any employment . . . ." § 440.02(16), Fla. Stat. (2002). "Employment" is "any service performed by an employee for the purpose of employing him or her" and "with respect to the construction industry, [includes] all private employment in which one or more employees are employed by the same employer."
§ 440.02(17)(a) and (b), Fla. Stat. (2002).
The term "employee" is defined in Subsection 440.02(15)(c)1., Florida Statutes (2002), which provides, in pertinent part, the following:
"Employee" includes a sole proprietor . . . Partners or sole proprietors actively engaged in the construction industry are considered
employees unless they elect to be excluded from the definition of employee by filing written notice of the election with the department as provided in s. 440.05 . . .
A sole proprietor or partner who is actively
engaged in the construction industry and who elects to be exempt from this chapter by filing a written notice of the election with the department as provided in s. 440.05 is not an employee.
Petitioner has the burden of proof in this
case. Petitioner must show by a preponderance of the evidence that Respondent violated the Workers' Compensation Law during the relevant period and that the penalty assessments are correct. Department of Labor and Employment Security, Div. of Workers’ Compensation v. Genesis Plastering, Inc., Case
No. 00-3749 (DOAH April 27, 2001) (adopted Final Order May 24, 2001); Department of Labor and Employment Security, Division of Workers' Compensation v. Bobby Cox, Sr., d/b/a C H Well Drilling, Case No. 99-3854 (DOAH March 20, 2000) (adopted in part by Final Order June 7, 2000); Department of Labor and
Employment Security, Division of Workers' Compensation v. Eastern Personnel Services, Inc., Case No. 99-2048 (DOAH
October 12, 1999) (adopted by Final Order Nov. 30, 1999), appeal dismissed, Case No. 1D99-4839 (Fla. 1st DCA 2000);
§ 120.57(1)(j), Fla. Stat. (2002).
The evidence established that Respondent was an employer within the meaning of Subsection 440.02(16), Florida Statutes (2002), during the period specified in the Order. The evidence further established that Respondent was an "employee" of his solely-owned business within the meaning of Subsection
440.02(15)(c)1., Florida Statutes (2002). Also, the evidence established that at times relevant to this case, Respondent did not hold a valid workers' compensation exemption and had not secured workers' compensation coverage except for that provided by his employee leasing company, which covered only those jobs for which Respondent received payment from the leasing company. The evidence established that in 1992, Respondent received
$195,596.50 in payments directly from construction companies. Pursuant to Sections 440.10 and 440.38. Florida Statutes (2002), Respondent was obligated to secure the payment of workers' compensation coverage for himself as an employee of his business.
Because the evidence established that Respondent failed to secure the payment of workers' compensation for himself as an employee of his sole proprietorship, the Department correctly assessed the penalty as prescribed in Section 440.107, Florida Statutes (2002).
Based on the foregoing Findings of Facts and Conclusions of Law, it is
RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order confirming the Amended Stop Work Order and imposing a penalty in the amount of $120,467.88.
DONE AND ENTERED this 5th day of May, 2005, in Tallahassee, Leon County, Florida.
S
LAWRENCE P. STEVENSON
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 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 5th day of May, 2005.
ENDNOTES
1/ This Rule, formerly Florida Administrative Code Rule
38F-6.015, took on the form quoted above in 2003. See Florida Administrative Weekly, Vol. 28, No. 49, pp. 5426-5427
(December 6, 2002) (proposed rule); Vol. 29, No. 12, p. 1311 (March 21, 2003) (rule adopted). The Rule was later extensively rewritten and renumbered as Florida Administrative Code Rule 69L-6.015. See Florida Administrative Weekly, Vol. 30, No. 44, pp. 4596-4599 (October 29, 2004)(proposed rule); Vol. 30,
No. 50, pp. 5156-5157 (December 10, 2004) (proposed rule
amended); Vol. 31, No. 2, p. 221 (January 14, 2005) (rule adopted).
2/ Though the 2002 edition of the Florida Statutes is cited, Section 468.520, Florida Statutes, has not been amended since 2000; thus, the cited definitions are current law.
COPIES FURNISHED:
Ann Poe Angel, Esquire Angel & Angel, P.A.
1617 Hendry Street, Suite 405 Fort Myers, Florida 33901-2951
Colin M. Roopnarine, Esquire Department of Financial Services Division of Workers' Compensation
200 East Gaines Street Tallahassee, Florida 32399-4229
Honorable Tom Gallagher Chief Financial Officer
Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Carlos G. Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
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.
| Issue Date | Document | Summary |
|---|---|---|
| Jul. 27, 2005 | Agency Final Order | |
| May 05, 2005 | Recommended Order | Under the current law, Respondent was required either to file for workers` compensation exemption or to carry coverage on himself as an employee of his sole proprietorship. He did not file either one and was liable for the penalty requested by Petitioner. |
