STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MONCRIEF BAIL BONDS, INC., )

)

Petitioner, )

)

vs. )

)

DEPARTMENT OF FINANCIAL ) SERVICES, DIVISION OF WORKERS' ) COMPENSATION, )

)

Respondent. )

Case No. 06-3297

)

RECOMMENDED ORDER

Pursuant to notice, this case was heard before Daniel M. Kilbride, Administrative Law Judge of the Division of Administrative Hearings, on October 23, 2006, in Tallahassee, Florida.

APPEARANCES

For Petitioner: W. Rogers Turner, Jr., Esquire

Hurley, Rogner, Miller, Cox, Waranch & Westcott, P.A.

1560 Orange Avenue, Suite 500 Winter Park, Florida 32789

For Respondent: Colin M. Roopnarine, Esquire

Department of Financial Services Division of Workers' Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229

STATEMENT OF THE ISSUES

Whether Petitioner, Moncrief Bail Bonds, Inc., conducted business operations in the State of Florida without obtaining

workers' compensation coverage, meeting the requirements of Chapter 440, Florida Statutes (2005), in violation of Subsection 440.107(2), Florida Statutes (2002 through 2005).

If so, what penalty should be assessed by Respondent, Department of Financial Services, Division of Workers' Compensation, pursuant to Section 440.107, Florida Statutes (2005),1 and Florida Administrative Code Rule, Chapter 69L.

PRELIMINARY STATEMENT

On August 3, 2005, Respondent issued and served a Stop-Work Order (SWO) and Order of Penalty Assessment, number 05-177-D4, to Petitioner alleging that Petitioner failed to abide by the requirements of the Workers' Compensation Law. The SWO required Petitioner to cease all business operations. Respondent then requested business records from Petitioner, which when reviewed, caused Respondent to assess a penalty against Petitioner. An Amended Order of Penalty Assessment (Amended Order) was issued and served on Petitioner on August 4, 2005, which assessed a penalty in the amount of $51,499.34. The SWO requiring Petitioner to cease all business operations remained in effect with the issuance of the Amended Order. Petitioner timely requested an administrative hearing, and on September 1, 2006, Respondent filed the petition and other documents with the Division of Administrative Hearings. The petition raised the issue of whether the penalty is excessive. The petition was not

amended prior to the final hearing, although Petitioner attempted to do so at the final hearing with its "Motion to Set Aside or Modify Addition [sic] Penalty of FSS [sic] 440.107(7)(d)." The motion was denied.

The final hearing took place on October 23, 2006.

Petitioner was represented by its president who moved for a continuance. Following argument on the motion, the motion was denied. Respondent presented the testimony of one witness, Investigator Robert Cerrone. Petitioner presented the testimony of one witness, Mr. David Mollison. Respondent's Exhibits numbered 1 through 16, with the exclusion of Exhibits numbered

13 and 15, were offered and received into evidence.

Petitioner's Exhibit 1 was offered and received into evidence. The parties were directed to file proposed findings of fact and conclusions of law within ten days of the filing of the transcript. A one-volume Transcript of the hearing was filed with the Division of Administrative Hearings on November 14, 2006.

Subsequent to the final hearing, Petitioner retained counsel, W. Rogers Turner, Jr., Esquire, who filed a Notice of Appearance and a Motion to Stay Proceedings on November 10, 2006. The Motion to Stay Proceedings was granted insofar as it extended the time for filing proposed recommended orders to December 8, 2006.

Petitioner and Respondent each timely filed its Proposed Recommended Order on December 8, 2006. On the same date, Petitioner filed a Motion to Accept New Evidence/Motion to Continue. Respondent filed a Response in Opposition to Motion to Accept New Evidence and a Motion to Strike Petitioner's proposed recommended order in its entirety. Upon due consideration, Petitioner's Motion to Accept New Evidence/Motion to Continue is denied. Respondent's Motion to Strike Petitioner's proposed recommended order in its entirety is denied, in part. It is granted insofar as Petitioner's proposed findings of fact rely on the submission of Affidavits (attached to the Motion to Accept New Evidence/Motion to Continue) by persons who did not appear at the formal hearing, testify under oath, and undergo cross-examination. Otherwise, the parties submittals have been given consideration in the preparation of this Recommended Order.

FINDINGS OF FACT

1. Respondent 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.

2. Petitioner is a corporation domiciled in Florida, and engaged in the business of issuing bail bonds.

3. On August 3, 2005, Respondent's investigator, Robert Cerrone, visited Petitioner's office location at 3910 South John Young Parkway, Orlando, Florida, on a referral from his supervisor. He interviewed a number of persons at the office site. Cerrone documented his investigation in the narrative of his Initial Investigative Report. Based upon these field interviews, Respondent determined that the workers were employed by Petitioner.

4. Cerrone contacted Petitioner's president, Russell Bruce Moncrief, and inquired whether Petitioner had secured the payment of workers' compensation, to which Moncrief responded that he had never secured the payment of workers' compensation for his business.

5. Subsequent to the site visit, it was determined that Petitioner did not have a State of Florida workers' compensation insurance policy to provide workers' compensation coverage for any of its workers.

6. Florida law requires that an employer who has four or more employees, engaged in non-construction work in Florida, obtain a Florida workers' compensation policy.

7. Petitioner was an employer, with four or more employees, all of whom were paid remuneration, during all times material to the instant case.

8. Florida Administrative Code Rule 69L-6.019(2) requires that in order for an employer to comply with Subsections 440.10(1)(g) and 440.38(7), Florida Statutes, any policy or endorsement used by an employer to prove coverage of workers' compensation for employees engaged in Florida work, must be issued by an insurer that holds a valid certificate of authority in the State of Florida.

9. Chapter 440, Florida Statutes, allows an individual to apply for an election to be exempt from workers' compensation benefits. Only the named individual on the application is exempt from carrying workers' compensation insurance coverage.

10. During the relevant time period, there were no current, valid exemptions for Petitioner.

11. Subsections 440.107(3) and 440.107(7)(a), Florida Statutes, authorize Respondent to issue Stop-Work Orders to employers unable to provide proof of workers' compensation coverage. Failure to provide such proof is deemed "an immediate serious danger to public health, safety, or welfare "

1. On August 3, 2005, Respondent issued and served on Petitioner a SWO and Order of Penalty Assessment for failing to obtain coverage that meets the requirements of Chapter 440, Florida Statutes, and the Insurance Code, Chapter 624, Florida Statutes. Also at that time, Cerrone issued a Request for Production of Business Records for Penalty Assessment to

   Petitioner, seeking business records for the period August 3, 2002, through August 3, 2005.

2. Employers conducting business in Florida are required to keep business records that enable Respondent to determine whether the employer is in compliance with the workers' compensation law.

3. Petitioner complied with the records request and provided Respondent with the requested payroll records for the time period between August 3, 2002, and August 3, 2005.

4. Utilizing the records provided, and applying the statutorily mandated penalty calculation methodology, the penalty for Respondent was calculated by assigning a class code to the type of work conducted by the employees, utilizing the manual approved by rule. The approved manual rate was multiplied by the wages paid to the employee per one hundred dollars, and the product therof was then multiplying by 1.5. The Amended Order, which assessed a penalty of $51,499.34, was personally served on Petitioner on August 4, 2005.

5. On August 12, 2005, Petitioner entered into a Payment Agreement Schedule for Periodic Payment of Penalty, and was issued an Order of Conditional Release from the SWO by Respondent. Petitioner made a down payment of ten percent of the assessed penalty, provided proof of compliance with Chapter 440, Florida Statutes, by obtaining six exemptions for officers

   of the corporation, and agreed to pay the remaining penalty in

   
   

   60 equal monthly installments.

   
   

6. The entities listed on the Amended Order penalty worksheet were Petitioner's employees, during the relevant period, and none had valid workers' compensation exemptions or workers' compensation coverage.

7. At the hearing, Petitioner attempted to provide an alternative class code for the calculation of the penalty that significantly reduced his penalty. Petitioner alleged that his workers were misclassified by Respondent as Class Code 7720, police officers and drivers, when in fact they should have been classified under Class Code 8810, clerical office employees.

8. Petitioner contends that the calculation of the penalty imposed is inaccurate. Specifically, six of Respondent's employees, although these individuals held bail bonds licenses, performed only clerical duties and did not go into the field to apprehend persons in violation of their bail bond or court order. Their rate of compensation was based on their experience and knowledge, rather than their job descriptions. Petitioner introduced evidence that the current workers' compensation policy, which exempts six employees, is less than the premium calculated by Respondent.

9. Class Code 7720, utilized by Respondent, is the most appropriate code for bail bondsmen regardless of whether their duties were mostly performed in the office.

10. Furthermore, all of the individuals on the penalty worksheet classified under Class Code 7720 possess surety agent (bail bond) licenses, and are thus able to function as bail bondsmen in their full capacity, including, but not limited to apprehending individuals.

11. At the final hearing, Petitioner provided information that six of its employees had obtained workers' compensation exemptions, four of which listed the employee's duties as "bail bondsman" and two as "clerical."

12. Petitioner also alleged that his workers were independent contractors, but did not provide evidence to support

    that assertion.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the subject matter to and the subject matter parties of these proceedings, pursuant to Section 120.569 and Subsection 120.57(1), Florida Statues (2006). The parties received adequate notice of the administrative hearing.

14. Respondent has the burden of proof in this case, and must show by clear and convincing evidence that Petitioner violated the Workers' Compensation Law during the relevant

    period, and that the penalty assessment is correct. Department of Banking and Finance Division of Securities and Investor

    Protection v. Osborne Stern and Co., 670 So. 2d 932 (Fla. 1996).

    
    

15. 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).

16. Subsection 440.10(1), Florida Statutes, provides in pertinent part:

    1. Every employer coming within the provisions of this chapter shall be liable for, and shall secure, the payment to his or her employees . . . of the compensation payable under the workers' compensation statute. . . .

       
       

17. The policy or endorsement for such employees must utilize Florida class codes, rates, rules, and manuals that are in compliance with the provisions of Chapter 440, Florida Statutes, as well as the Florida Insurance Code. See § 440.02(17)(b)(2), Fla. Stat.

18. "Employer" is defined as "every person carrying on any employment. . . . If the employer is a corporation, parties in

    actual control of the corporation including, but not limited to, the president, . . . are considered the employer. "

    § 440.02(16), Fla. Stat..

    
    

19. "Employment" is defined, in pertinent part as, "any service performed by an employee for the person employing him or her. All private employments in which four or more employees are employed by the same employer. . . . § 440.02(17)(b)(2), Fla. Stat.

20. "Employee" is defined in Subsection 440.02(15), Florida Statutes, in pertinent part:

    1. '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. . . .

       
       

       * * *

       
       

    2. "Employee" includes any person who is an officer of a corporation and who performs services for remuneration for such corporation within this state, whether or not such services are continuous.

       
       

21. Florida Administrative Code Rule 69L-6.015 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:

    
    

    * * *

    
    

    (1) All workers' compensation insurance policies of the business entity, and all endorsements, notices of cancellation, nonrenewal, or reinstatement of such policies.

    
    

    * * *

    
    

    1. 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.

       
       

       * * *

       
       

    2. 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

       
       

       * * *

       
       

       1. 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.

    
    

    * * *

    
    

    1. 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

       
       

       * * *

       
       

    2. 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.

    
    

22. The evidence was clear and convincing that Petitioner was an employer that was required to secure the payment of workers' compensation for its employees. Petitioner neither secured the payment of workers' compensation as required by statute, nor did any of Petitioner's employees possess any current, valid workers' compensation exemptions.

23. In 2002, during which a portion of Petitioner's penalty was calculated, Subsection 440.02(15)(d)(1), Florida Statutes (2002), listed the nine elements which had to be met before one could be classified as an independent contractor.

    The nine elements are listed in the conjunctive, meaning that all nine elements must be established for the exemption to apply. This interpretation is confirmed by Subsection 440.02(15)(c), Florida Statutes (2002), which at the time provided: "[f]or purposes of this chapter, an independent contractor is an employee unless he or she meets all of the conditions set forth in Subsection (d)(1)." In addition, there is precedent for this requirement. See, e.g., Department of Labor and Employment Security, Division of Workers' Compensation v. Genesis Plastering, Inc., DOAH Case No. 00-3749, (Recommended Order, dated April 27, 2001, paragraph 29), adopted in toto, Final Order (May 24, 2001).

24. For the portion of the penalty assessed for 2002, Petitioner alleges that some of its employees were actually independent contractors; then Petitioner has the burden of proving that its workers are independent contractors, not employees. This is so because the facts necessary to establish the exception are more readily obtained by Petitioner than Respondent and ordinarily the burden of proof is assigned to the party asserting the affirmative. Department of Labor and Employment Security, Division of Workers' Compensation v. Nelly, DOAH Case No. 00-1748, (Recommended Order, dated June 5, 2001) (Final Order, page 9, September 20, 2001) ("A claim that workers are independent contractors rather than employees is in the

    nature of an affirmative defense. Ordinarily the burden of proof is assigned to the party asserting the affirmative. The facts necessary to establish the exception are more readily obtained by the employer than the Division . . . Subsection 440.02(14)(d)(1) expresses no Legislative intent to assign the Division the difficult burden of proving the negative."), appeal

    dismissed, Fla. 1st DCA Case No. 1D01-4183, (June 5, 2002).

    
    

25. Effective January 1, 2004, the definition of "independent contractor" was amended in Subsection 440.02(15) (d)(1), Florida Statutes (2003), which altered the application of the aforementioned nine criteria and further added in Subsection 440.02(15)(d)(1)(c), Florida Statutes (2003), the following:

    Notwithstanding anything to the contrary in this subparagraph, an individual claiming to be an independent contractor has the burden of proving that he or she is an independent contractor for purposes of this chapter.

    
    

26. Petitioner failed to provide any such evidence and thus failed to prove that any of the entities listed on the Amended Order penalty worksheet were independent contractors.

27. Petitioner admittedly did not comply with the requirement in Subsection 440.10(1), Florida Statutes, by failing to "secure the payment of workers' compensation" as that term is defined in Subsection 440.107(2), Florida Statutes.

28. Subsection 440.107(7)(a), Florida Statutes, provides

    in part,

    
    

    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 . . . 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 . . . 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 issue an order of conditional release from a stop-work order to an employer upon a finding that the employer has complied with coverage requirements of this chapter and has agreed to remit periodic payments of the penalty pursuant to a payment agreement schedule with the department.

    (Emphasis added)

    
    

29. Respondent proved that the penalty assessed to Petitioner was calculated utilizing the statutorily mandated methodology outlined in Subsection 440.107(7)(d)(1).

30. Subsection 440.107(7)(d)(1), Florida Statutes, states,

    
    

    In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter 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.

    
    

31. Respondent proved that the class codes utilized in calculating Petitioner's penalty were appropriate for the scope of work that could be accomplished by each employee, especially those who possessed a valid bail bondsman license. The bail bondsman license holders, unlike the clerically classified employees, could at any time exercise their powers to apprehend individuals as part of the scope of their work.

32. Respondent thus satisfied its burden of proving that Petitioner failed to secure the payment of workers' compensation as that term is defined in Subsection 440.107(7)(2), Florida Statutes, and correctly assessed the penalty prescribed in Subsections 440.107(7)(c) and (d), Florida Statutes, for such

failure.

RECOMMENDATION

Based on the Findings of Fact and Conclusions of Law, it

is,

RECOMMENDED that Petitioner enter a Final Order, as follows:

1. Petitioner failed to secure worker's compensation coverage for its employees, as required by statute; and

2. Petitioner be assessed a penalty of $51,499.34.

DONE AND ENTERED this 16th day of February, 2007, in Tallahassee, Leon County, Florida.

S

DANIEL M. KILBRIDE

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 16th day of February, 2007.

ENDNOTE

1/ All references to Florida Statutes are to Florida Statutes (2005), unless otherwise indicated.

COPIES FURNISHED:

Colin M. Roopnarine, Esquire Department of Financial Services Division of Workers' Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229

W. Rogers Turner, Jr., Esquire Hurley, Rogner, Miller, Cox,

Waranch & Westcott, P.A.

1560 Orange Avenue, Suite 500 Winter Park, Florida 32789

Honorable Alex Sink Chief Financial Officer

Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300

Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307

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.

Docket for Case No: 06-003297

Orders for Case No: 06-003297