vs. )
Respondent. )
Case No. 06-0731
This cause came on for formal hearing before Robert S. Cohen, Administrative Law Judge with the Division of Administrative Hearings, on May 2, 2006, in Tallahassee, Florida.
For Petitioner: Colin M. Roopnarine, Esquire
Simpro Homes, Inc.
The issue is whether Respondent, Simpro Homes, Inc., conducted business operations in the State of Florida without
obtaining workers’ compensation coverage meeting the requirements of Chapter 440, Florida Statutes, and, if so, whether the penalty in the amount of $326,861.58, was properly assessed by Petitioner, State of Florida, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes, and Florida Administrative
Code Chapter 69L.
Petitioner issued a Stop-Work Order and Order of Penalty Assessment against Respondent, ordering Respondent to stop work and cease all business operations in Florida. Petitioner then requested business records from Respondent, which were inadequate and caused Respondent to impute and assess a penalty of $327,969.47 against Respondent. Prior to the final hearing in this matter, Petitioner moved for leave to amend the penalty assessment to $326,861.58. The motion was granted, and the latter penalty amount became that which Petitioner seeks to impose upon Respondent.
At the hearing, Petitioner presented the testimony of Allen DiMaria, and offered Exhibit Nos. 1 through 12, all of which were admitted into evidence. Respondent presented the testimony of Hans Prosser, president of Respondent, and offered
Exhibit No. 1, was not admitted into evidence. Respondent thereafter proffered Exhibit No. 1, and the Administrative Law
Judge agreed to take the matter under advisement after hearing argument of the parties concerning the admissibility of the document.
A Transcript was filed on May 18, 2006. Petitioner filed Proposed Findings of Fact and Conclusions of Law on June 15, 2006. Respondent made no post-hearing submissions.
Petitioner 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.
Insurers are required by law to report all workers’ compensation policies to Petitioner.
Respondent is a corporation domiciled in Georgia.
Respondent is engaged in the business of framing, which is a construction activity, pursuant to Chapter 440, Florida Statutes, and Florida Administrative Code Rule 69L-6.
On August 10, 2005, Petitioner's investigator, Allen DiMaria, visited 4307 Edgewater Drive, Jacksonville, Florida, on a random site visit, and interviewed a number of workers at the work site.
Mr. DiMaria documented his investigation in the narrative of his Initial Investigative Report. Based upon these
field interviews, Petitioner determined that the workers were employed by Respondent.
Mr. DiMaria asked the superintendent on site whether Respondent had provided him with a certificate of liability insurance indicating workers’ compensation coverage, and was informed that Respondent had provided one. Mr. DiMaria was subsequently provided with the Certificate of Insurance by the general contractor on the work site.
Mr. DiMaria also obtained a copy of Respondent’s workers’ compensation insurance policy which had a policy period of October 30, 2004, to October 30, 2005. The policy and the information contained in the Certificate of Insurance were consistent.
Subsequent to the site visit, Mr. DiMaria continued the investigation of Respondent utilizing the Department’s Compliance and Coverage Automated System (“CCAS”) database that contains information on all workers' compensation insurance policy information from the carrier to an insured, and determined that Respondent did not have a State of Florida workers' compensation insurance policy.
Petitioner, which maintains a database of all workers’ compensation exemptions in the State of Florida, also did not find any current, valid exemptions for Respondent.
The St. Paul Travelers insurance policy held by Respondent at the time of Petitioner's site visit on August 10, 2005, did not contain an endorsement which utilizes Florida class codes, rates, rules, and manuals that comply with Chapter 440, Florida Statutes, and the Florida Insurance Code, satisfy the standard. Specifically, the insurance policy did not have Florida listed as a covered state under Section 3A. There is also no evidence that Respondent secured Section 3C coverage for Florida.
The premium was based on a rate that was not the Florida premium rate and on a class code that was not indicative of the actual work being performed by Respondent. The policy shows that Respondent was insured for operations under National Council on Compensation Insurance (NCCI) class code 5645 at a premium utilizing Georgia premium rates.
Class code 5645 refers to framing of one- or two- family homes. Mr. DiMaria utilized class code 5651 in his review of Respondent because Respondent was framing a dwelling that consisted of more than a two-family dwelling, pursuant to Florida Administrative Code Rule 69L-6.021(1).
On August 11, 2006, after consulting with his supervisor, Mr. DiMaria issued and served on Respondent a stop- work order and order of penalty assessment for failure to comply with the requirements of Chapter 440, Florida Statutes, and more
specifically on the grounds that Respondent did not secure the payment of workers’ compensation based on Florida class codes, rates, rules, and manuals.
Employers on job sites in Florida are required to keep business records that enable Respondent to determine whether the employer is in compliance with the workers' compensation law.
Mr. DiMaria issued a request for production of business records to Respondent on August 11, 2006. The request asked the employer to produce, for the preceding three years, documents that reflected payroll and proof of insurance. Respondent produced check stubs for a number of employees who were not on the investigated work site, and an affidavit that stated the employees on the work site were performing framing work for Respondent.
Respondent failed to produce the requested records for the employees working in Florida. Hans Prosser, Respondent's president, testified that he had provided the records to his attorney who was charged with reviewing the records and turning them over to Petitioner. Apparently, the attorney never delivered the records to Petitioner.
Once Respondent failed to provide the requested information, Petitioner imputed the payroll of the employees and calculated a penalty for the time period of August 11, 2002, through August 11, 2005. Mr. DiMaria assigned a class code to
the type of work performed by Respondent utilizing the SCOPES Manual, multiplied the class code’s assigned approved manual rate by the imputed payroll per one hundred dollars, and then multiplied that by 1.5. The payroll was imputed back to October 1, 2003. Pursuant to Florida Administrative Code Rule 69L-6.028(4), for the period prior to October 1, 2003, Petitioner assessed a penalty of $100 per day for each calendar day of noncompliance. The Amended Order of Penalty Assessment ("Amended Order") which assessed a penalty of $327,969.47, was served on Respondent on September 1, 2005.
The Department issued and served a second Amended Order of Penalty Assessment (“Second Amended Order”) with an assessed penalty of $326,861.58, via a Motion to Amend Order of Penalty Assessment to Respondent on January 6, 2006. The reduction was the result of an error in the calculation of the penalty in the Amended Order. The motion was granted by this Administrative Law Judge on March 20, 2006.
Respondent contends that it had been dissolved as a corporation on February 24, 2001, and was reinstated as a corporation on January 23, 2003, and thus should not be penalized for any time prior to that date. In support of this contention, Respondent offered into evidence a certified copy of a document entitled "Certificate of Reinstatement," demonstrating that Respondent had been administratively
dissolved on February 24, 2001, "for failure to comply with the requirements of Title 14 of the Official Code of Georgia Annotated." The document further explains that all taxes have been paid and that Respondent "may resume its business as if the administrative dissolution had never occurred." This document was not presented to counsel for Petitioner prior to the final hearing as required by the Order of Pre-hearing Instructions issued in this matter.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the parties to and the subject matter of these proceedings pursuant to Sections 120.569 and 120.57(1), Florida Statutes.
Since an administrative fine deprives the person fined of substantial rights in property, such fines are punitive in nature. Petitioner has the burden of proof in this case and must show by clear and convincing evidence that Respondent violated the Workers' Compensation Law during the relevant period and that the penalty assessments are correct. Accordingly, pursuant to the reasoning in Department of Banking and Finance, Division of Securities and Investor Protection v. Osborne Stern, Inc., 670 So. 2d 932 (Fla. 1996) and the Recommended Order, adopted in toto by Petitioner in Dept. of
Financial Services, Division of Workers' Compensation v. U & M Contractors, Inc., Case No. 04-3041 (DOAH April 27, 2005), it is
concluded that Petitioner bears the burden of proof herein by clear and convincing evidence. See also Triple M Enterprises
Inc., v. Department of Financial Services, Division of Workers' Compensation, Case No. 04-2524 (DOAH January 13, 2005).
Pursuant to Sections 440.10 and 440.38, Florida Statutes, every “employer” is required to secure the payment of workers’ compensation for the benefit of its employees, unless exempted or excluded under Chapter 440, Florida Statutes. Strict compliance with the Workers' Compensation Law is, therefore, required by the employer. See C&L Trucking v.
Corbitt, 546 So. 2d 1185, 1187 (Fla. 5th DCA 1989).
"Employer" is defined as "every person carrying on any employment. . . ." § 440.02(16), Fla. Stat. "Employment . . . means 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)2. Fla. Stat.
Section 440.107, Florida Statutes, provides, in part, as follows:
The Legislature finds that the failure of an employer to comply with the workers' compensation coverage requirements under this chapter poses an immediate danger to public health, safety, and welfare.
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(7)(a) 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 or to produce the required business records under subsection (5) within 5 business days after receipt of the written request of the department, 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 within 72 hours. The order shall take effect when served upon the employer or, for a particular employer work site, when served at that work site. In addition to serving a stop-work order at a particular work site which shall be effective immediately, the department shall immediately proceed with service upon the employer which shall be effective upon all employer work sites in the state for which the employer is not in compliance. A stop-work order may be served with regard to an employer's work site by posting a copy of the stop-work order in a conspicuous location at the work site. The order shall remain in effect until the department issues an order releasing the stop-work order upon a finding that the employer has come into compliance with the coverage requirements of this chapter and has paid any penalty assessed under this section. The department may require an employer who is found to have failed to comply with coverage requirements of s.
440.38 to file with the department, as a condition of release from a stop-work order, periodic reports of a probationary period that shall not exceed 2 years that demonstrate the employer's continued
compliance with this chapter. The department shall by rule specify the reports required and the time for filing under this subsection.
Section 440.38, Florida Statutes, states, in part:
Every employer shall secure the payment of compensation under this chapter:
By insuring and keeping insured the payment of such compensation with any stock company or mutual company or association or exchange, authorized to do business in the state;
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(7) Any employer who meets the requirements of subsection (1) through a policy of insurance issued outside of this state must at all times, with respect to all employees working in this state, maintain the required coverage under a Florida endorsement using Florida rates and rules pursuant to payroll reporting that accurately reflects the work performed in this state by such employees.
Section 440.10(1), Florida Statutes (2003, effective January 1, 2004) and (2004), provides:
(1)(a) Every employer coming within the provisions of this chapter shall be liable for, and shall secure, the payment to his or her employees, or any physician, surgeon, or pharmacist providing services under the provisions of s. 440.13, of the compensation payable under ss. 440.13, 440.15, and
440.16. Any contractor or subcontractor who engages in any public or private construction in the state shall secure and maintain compensation for his or her employees under this chapter as provided in s. 440.38.
Section 440.02(15), Florida Statutes (2003, effective January 1, 2004) and (2004) was subsequently amended by the Legislature, and now provides, in pertinent part:
(a) 'Employee' means any person who receives remuneration from an employer for the performance of any work or service while engaged in any employment under any appointment or contract for hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed. . . .
An employer who elects to secure the payment of workers' compensation by obtaining a commercial insurance policy must assure that the policy comports with Florida law. In pertinent part the statutes and rules germane to the issue in this case specify as follows:
Subject to s. 440.38, any employer who has employees engaged in work in this state shall obtain a Florida policy or endorsement for such employees which utilizes Florida class codes, rates, rules, and manuals that are in compliance with and approved under the provisions of this chapter and the Florida Insurance Code.
See § 440.10(1)(g), Fla. Stat. It is immaterial that another state’s rates may be higher than Florida’s. There is nothing in the statute to suggest that the intent of the Legislature was for this section to be applicable only when a state’s rates are higher than Florida’s.
At the time the Stop-Work Order was issued, and pursuant to Section 440.107(5), Florida Statutes, Petitioner had
in effect Florida Administrative Code Rule 69L-6.015, which states, 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.
Florida Administrative Code Rule 69L-6.019(3)(4) provides as follows:
In order to comply with Section 440.10(1)(g) and 440.38(7), Florida Statutes, for any workers' compensation policy or endorsement presented by an employer as proof of workers' compensation coverage for employees engaged in work in this state:
The policy information page (NCCI Form #WC00 00 001A) must list 'Florida' in item
3.A. and use Florida approved classification codes, rates, and estimated payroll in
item 4.
The policy information page endorsement (NCCI Form #WC89 06 00 B) must list 'Florida' in item 3.A. and use Florida approved classification codes, rates, and estimated payroll in item 4.
A workers' compensation policy that lists 'Florida' in item 3.C. of the policy information page (NCCI Form #WC 00 01 A) does not meet the requirements of Sections 440.10(1)(g) and 440.38(7), F.S., and is not valid proof of workers' compensation coverage for employees engaged in work in this state.
When an employer fails to provide requested business records that the statutes requires it to maintain, and to make such records available to the Department within 45 days of the request, the Department, effective October 1, 2003, is authorized to impute that employer's payroll using "the statewide average weekly wage as defined in Section 440.12(2), multiplied by l.5." § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028. Petitioner thus imputed the payroll for the entire period for which the requested business records were not produced.
The above findings of fact reveal that Respondent did not have an endorsement that listed Florida in item 3.A., and thus does not comport with the above-quoted legal requirements. Respondent did not have a Florida endorsement listing Florida in item 3.A of the policy produced during the period of
non-compliance specified in this case, which was August 11, 2002, through August 11, 2005.
Further, there was no evidence presented that Respondent had secured such coverage prior to October 1, 2003, the effective date of Section 440.38(7), Florida Statutes. This does not excuse Respondent from securing the payment of workers’ compensation performed by his employees in Florida prior to October 1, 2003. Respondent failed to provide any records to Petitioner indicating that it had secured the payment of workers’ compensation coverage prior to October 30, 2004, which was the effective date of the St. Paul Travelers insurance policy.
Section 440.107(7)(d)1., Florida Statutes, states that an employer who fails to secure the payment of workers’ compensation is subject to:
A penalty equal to 1.5 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 3-year period or $1,000, whichever is greater.
It was clear at the hearing that the work being performed by Respondent was framing on a dwelling for more than two families. Respondent did not dispute this fact. Thus, the
penalty calculated utilizing the approved manual rate assigned to class code 5651 was properly assessed.
It is undisputed that Respondent failed to provide the records requested by Petitioner that would be used to calculate and assess a penalty to Respondent. The fact that Respondent testified that he provided those records to the attorney he employed at the time the records were requested by Petitioner does not excuse its failure to ensure that those records were actually received by Petitioner. Accordingly, under these circumstances, Petitioner is charged with assessing a penalty through imputation of the payroll. Pursuant to Section 440.107(7)(e), Florida Statutes, states:
When an employer fails to provide business records sufficient to enable the department to determine the employer's payroll for the period requested for the calculation of the penalty provided in paragraph (d), for penalty calculation purposes, the imputed weekly payroll for each employee, corporate officer, sole proprietor, or partner shall be the statewide average weekly wage as defined in s. 440.12(2) multiplied by 1.5.
Florida Administrative Code Rule 69L-6.028(4) states: Where periods of the employer’s non-
compliance occurred prior to October 1,
2003, and the employer fails to provide business records sufficient to enable the department to determine the employer’s payroll for periods of non-compliance prior to October 1, 2003, for purposes of calculating the penalty to be assessed against the employer for periods of non- compliance prior to October 1, 2003, the
department shall assess against the employer a penalty of $100 per day for each and every calendar day in the period of non-compliance occurring prior to October 1, 2003, the employer was not in compliance, pursuant to Section 440.107(5), F.S. (2002).
Therefore, pursuant to Florida Administrative Code Rule 69L-6.028(4), since Respondent did not provide records sufficient to compute payroll and any penalty, Petitioner correctly assessed a penalty of $100 per day for each calendar day of Respondent’s noncompliance prior to October 1, 2003. Pursuant to Section 440.107(5), Florida Statutes, Respondent's attempt to have the penalty waived for any period of noncompliance prior to January 23, 2003, due to the prior dissolution and subsequent reinstatement of its company, is not supported by the very exhibit it proffered at hearing. By the plain language of the Certificate of Reinstatement issued by the Georgia Secretary of State, "the corporation may resume its business as if the administrative dissolution had never occurred." Accordingly, any business conducted by Respondent, during the time the corporation had been administratively dissolved, is subject to the assessments and penalties set forth above.
Florida Administrative Code Rule 69L-6.028(3) states:
If subsequent to imputation of weekly payroll pursuant to subsection (2) herein, but before the expiration of forty-five calendar days from the receipt by the
employer of written request to produce business records, the employer provides business records sufficient for the department to determine the employer’s payroll for the period requested for the calculation of the penalty pursuant to Section 440.107(7)(e), F.S., the department shall recalculate the employer’s penalty to reflect the payroll information provided in such business records.
Respondent had 45 days to provide records to Petitioner in response to Petitioner’s records’ request, but admittedly failed to provide those records.
Petitioner satisfied its burden of proving, by clear and convincing evidence, that Respondent failed to secure the payment of workers’ compensation as that term is defined in Section 440.107(7)(2), Florida Statutes, and Petitioner correctly issued the Order and assessed the penalty prescribed in Section 440.107(7)(d) and (e), Florida Statutes, for such
failure.
Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Assessment Order assessing a penalty of $326,861.58.
DONE AND ENTERED this 4th day of August, 2006, in Tallahassee, Leon County, Florida.
ROBERT S. COHEN
Filed with the Clerk of the Division of Administrative Hearings this 4th day of August, 2006.
Colin M. Roopnarine, Esquire Department of Financial Services Division of Workers' Compensation
Hans Prosser Simpro Homes, Inc.
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
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.
