STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SHANNON L. STRENGTH, d/b/a ) S AND S HOME IMPROVEMENT, )

)

Petitioner, )

)

vs. )

)

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

)

Respondent. )

Case No. 07-0679

)

RECOMMENDED ORDER

This cause came on for formal hearing before Robert S. Cohen, Administrative Law Judge with the Division of Administrative Hearings, on August 30, 2007, in Pensacola, Florida.

APPEARANCES

For Petitioner: Shannon L. Strength, pro se

S & S Home Improvement 1407 Dexter Avenue

Pensacola, Florida 32507

For Respondent: Douglas D. Dolan, Esquire

Department of Financial Services Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

The issue is whether the Stop-Work Order and Order of Penalty Assessment entered by Respondent on December 1, 2006, and subsequently amended, should be upheld.

PRELIMINARY STATEMENT

On December 1, 2006, Respondent issued and served a Stop-Work Order and Order of Penalty Assessment (hereinafter "Order") on Petitioner, alleging that Petitioner was not in compliance with the coverage requirements of Chapter 440,

Florida Statutes, and the Insurance Code. Petitioner was ordered to cease all business operations. Respondent issued and served an Amended Order of Penalty Assessment (hereinafter "Amended Order") on Petitioner on December 8, 2006, assessing against Petitioner a penalty in the amount of $69,285.11 pursuant to Subsection 440.107(7)(d), Florida Statutes.

On December 21, 2006, Respondent received a petition from Petitioner challenging the Order and Amended Order and requesting a hearing on the matter. Petitioner's petition was not in substantial compliance with the requirements of Florida Administrative Code Rules 28-106.201(2) and 28-106.301(2), resulting in dismissal of the petition without prejudice in an Order of Dismissal without Prejudice issued on January 12, 2007.

On December 21, 2006, Respondent received Petitioner's Amended Petition, which challenged Respondent's issuance of the

Order and requested a formal hearing. Respondent forwarded the Amended Petition to the Division of Administrative Hearings on February 12, 2007.

An Initial Order was issued on February 12, 2007, assigning the case to the undersigned. Respondent filed a Response to Initial Order on February 16, 2007. On March 2, 2007, the administrative law judge issued a Notice of Hearing, notifying the parties that the hearing was to be held in Pensacola, Florida on April 12, 2007. The parties thereafter filed a Joint Motion for Continuance, and the undersigned set the final hearing for July 13, 2007.

After one last continuance of the final hearing, upon Respondent's request, was granted, on May 15, 2007, the administrative law judge issued a Notice of Hearing, notifying the parties that the final hearing would be held in Pensacola, Florida, on August 30, 2007.

On August 27, 2007, Respondent filed a Motion to Amend Order of Penalty Assessment, reducing Petitioner's fine to

$58,452.06, which was granted by the administrative law judge on the same day.

The final hearing was held in Pensacola, Florida, on August 30, 2007, before the undersigned.

Respondent presented the testimony of John Wheeler, Respondent's investigator, and Gregory Mills, Senior Management

Analyst I for the Department of Financial Services. Respondent identified 12 exhibits and introduced Exhibits 1 through 9

and 12, which were admitted into evidence. Petitioner presented the testimony of Shannon Strength and had one exhibit introduced and admitted.

A transcript of the hearing was filed with the Division of Administrative Hearings on September 26, 2007. The undersigned instructed the parties to file proposed recommended orders on or before ten days after the filing of the transcript. Respondent filed its Proposed Recommended Order on October 5, 2007.

Petitioner did not file a proposed recommended order.

References to statutes are to Florida Statutes (2006), unless otherwise noted.

FINDINGS OF FACT

1. Respondent is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of compensation for their employees, who suffer work-related injuries.

2. Petitioner, on December 1, 2006, was operating in the construction industry as a sole proprietor in Florida installing vinyl siding.

3. On December 1, 2006, Respondent's investigator, John Wheeler, investigated Petitioner for compliance with the Florida

   Workers' Compensation Law at 118 North Coyle Street, Pensacola, Florida (hereinafter "worksite"), during a random inspection.

4. On December 1, 2006, at the worksite, Respondent's investigator interviewed and recorded the names of two individuals applying vinyl siding to new residential construction as Shannon Strength and Don Perez.

5. Utilizing the Scopes Manual published by the National Council on Compensation Insurance and adopted by Florida Administrative Code Rule 69L-6.021 as guidance, Respondent's investigator determined that installation of vinyl siding is within the construction industry and assigned the occupation code 5645 to the Petitioner's activities.

6. Respondent's investigator determined that Mr. Strength had hired Mr. Perez to assist Mr. Strength in applying vinyl siding.

7. Respondent's investigator determined that while

   
   

   Mr. Perez had a valid certificate of election to be exempt from the securing the payment of workers' compensation, Mr. Strength admitted that although he had had a certificate of election to be exempt from the workers' compensation laws, he was aware that it had expired.

8. Using the Department of Financial Services' Coverage and Compliance Automated System, Respondent's investigator was unable to locate a valid certificate of election to be exempt

   from the requirement of securing the payment of workers' compensation for Petitioner.

9. Using the Department of Financial Services' Coverage and Compliance Automated System, Respondent's investigator was unable to locate proof of securing the payment of workers' compensation by Petitioner.

10. On December 1, 2006, Respondent's investigator issued a Stop-Work Order and Order of Penalty Assessment to Petitioner for failure to meet the requirements of Chapter 440, Florida Statutes, and the Florida Insurance Code, ordering Petitioner to cease all business operations and assessing a penalty of $1000.00 against Petitioner pursuant to

    Subsection 440.107(7)(d), Florida Statutes.

    
    

11. On December 1, 2006, Respondent's Investigator issued to Petitioner a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation (hereinafter, "Request").

12. Petitioner responded to the Request and provided Respondent's Investigator with the requested records on December 8, 2007.

13. On December 8, 2006, Respondent issued an Amended Order of Penalty Assessment assessing a penalty of $69,285.11 against Petitioner, based on Petitioner's business records.

14. On August 22, 2007, Respondent issued a Second Amended Order of Penalty Assessment reducing Petitioner's penalty to

    $58,452.06.

    
    

15. Petitioner was issued a Construction Industry Certificate of Exemption from Florida Workers' Compensation Law on February 4, 1995, which Petitioner characterized as a lifetime exemption and which was attached to his Petition for hearing.

16. Respondent's witness, Gregory Mills, testified that pursuant to legislative change of Chapter 440, Florida Statutes, all lifetime exemptions in the construction industry expired on December 31, 1999.

17. Respondent sent a notice to lifetime exemption holders that all lifetime exemptions would expire on December 31, 1999.

18. Mr. Mills testified that pursuant to the legislative change of Chapter 440, Florida Statutes, members of all business models, except corporations and limited liability companies, were excluded from eligibility for a certificate of election to be exempt from the requirement of securing the payment of workers' compensation, and all such exemptions would expire on December 31, 2003.

19. Petitioner's last certificate of election to be exempt was issued on July 12, 2003.

20. Mr. Mills testified that notice was mailed to the last known address of construction industry certificate of election to be exempt holders on September 25, 2003, informing them of the expiration.

21. Pursuant to Respondent's Exhibit 5, Petitioner applied for, was granted, and possessed valid certificates of election to be exempt from the securing of workers' compensation until the expiration of all such exemptions on December 31, 2003.

22. Respondent's investigator issued a Second Amended Order of Penalty Assessment on August 22, 2007, recalculating Petitioner's penalty based solely on Petitioner's payroll and assessing a new penalty of $58,452.06.

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. §§ 120.569 and 120.57(1), Fla. Stat.

24. 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 assessments are correct. Department of Banking and Finance Division of Securities and Investor Protection v. Osborne Stern and Co., 670 So. 2d 932 (Fla. 1996).

25. 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).

26. Pursuant to Subsection 440.107(3)(g), Florida Statutes, "The department shall enforce workers' compensation coverage requirements . . . the department shall have the power to: Issue stop-work orders, penalty assessment orders, and any other orders necessary for the administration of this section." Respondent is the state agency responsible for enforcing Petitioner's violation of workers' compensation coverage requirements.

27. Pursuant to Subsection 440.02(16), Florida Statutes, the law defines "employer" as ". . . every person carrying on any employment "

28. The Workers' Compensation Law requires employers to secure the payment of compensation for their employees.

    §§ 440.10(1)(a) and 440.38(1), Fla. Stat.

    
    

29. Pursuant to Section 440.05, Florida Statutes, the Department may grant applications for certificates of election of exemption from the Workers' Compensation Law.

30. Pursuant to Subsection 440.05(6), Florida Statutes, "a construction industry certificate of election to be exempt which

    is issued in accordance with this section shall be valid for 2 years after the effective date stated thereon."

31. Pursuant to Subsection 440.02(15)(c)3., Florida Statutes, "employee" includes "A sole proprietor who engages in the construction industry "

32. Pursuant to Subsection 440.02(17)(a), Florida Statutes, "employment" is defined as ". . . with respect to the construction industry, all private employment in which one or more employees are employed by the same employer."

33. Pursuant to Subsection 440.02(8), Florida Statutes, Respondent "may, by rule, establish standard industrial classification codes and definitions thereof which meet the criteria of the term 'construction industry.'"

34. Respondent has adopted construction industry classification codes contained in the Basic Manual (Scopes Manual) published by the National Council on Compensation Insurance by Florida Administrative Code Rule 69L-6.021, which references Subsection 440.02(8), Florida Statutes, as specific authority and implementation. Florida Administrative Code Rule 69L-6.021 includes installation of vinyl siding as an activity within the construction industry. Fla. Admin. Code R. 69L- 6.021(1)(xx).

35. Pursuant to Subsection 440.107(2), Florida Statutes, "'securing the payment of workers' compensation' means obtaining

    coverage that meets the requirements of this chapter and the Florida Insurance Code."

36. Petitioner was an employer, engaged in employment in the construction industry as a sole proprietor, who received remuneration and, in this case, was not in compliance with Chapter 440, Florida Statutes, and was correctly assessed a penalty.

37. Respondent "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 $1000, whichever is greater." Respondent's investigator used this method of penalty calculation to arrive at Petitioner's final penalty amount. § 440.107(7)(d)1., Fla. Stat.

38. The method of penalty calculation described in Subsection 440.107(7)(d), Florida Statutes, is mandatory.

39. Section 440.05, Florida Statutes, was amended by Section 2, Chapter 98-174, Laws of Florida, effective January 1, 1999, and now includes the language that "Any person who has received from the division a construction industry certificate of election to be exempt which is in effect on December 31,

    1998, shall file a new notice of election to be exempt by the last day in his or her birth month following December 1, 1998." Department of Financial Services, Division of Workers' Compensation v. Clark Green, d/b/a Clark W. Green Painting, DOAH Case No. 05-3190 (Rec. Order par. 28) (adopted by Final Order February 14, 2007).

40. Petitioner's notice of election to be exempt issued February 4, 1995, expired December 31, 1998.

41. Pursuant to the legislative amendment of Section 440.05, Florida Statutes, enacted January 1, 2004,

    construction industry certificates of election to be exempt previously issued to sole proprietors expired December 31, 2003.

42. Operating as a sole proprietorship since January 1, 2004, Petitioner has been in violation of Section 440.05, Florida Statutes, for failure to comply with the requirements of Chapter 440, Florida Statutes.

43. Neither Chapter 440, Florida Statutes, nor the Florida Insurance Code contemplates any knowledge requirement as a factor which would excuse an employer's failure to secure the payment of workers' compensation.

44. Petitioner was unable to provide any proof that he is not subject to the applicable laws and rules of Respondent concerning the requirement that he secure workers' compensation insurance for his employees. Moreover, pursuant to the

statutory change discussed above, Petitioner could not have qualified for an exemption as a sole proprietor after

December 31, 2003. Finally, the method of assessing the penalty imposed by Respondent was performed correctly, and in accordance with the Florida statutes and Respondent's rules.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that Respondent enter a final order that adopts the Stop-Work Order and Amended Order of Penalty Assessment that assessed a penalty of $58,452.06.

DONE AND ENTERED this 21st day of November, 2007, in Tallahassee, Leon County, Florida.

S

ROBERT S. COHEN

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 21st day of November, 2007.

COPIES FURNISHED:

Shannon L. Strength

S & S Home Improvement 1407 Dexter Avenue

Pensacola, Florida 32507

Douglas D. Dolan, Esquire Department of Financial Services

Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399

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: 07-000679

Orders for Case No: 07-000679