STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

RIVER CITY ROOFING SHEET METAL, INC.,

Respondent.

)

)

)

)

)

) Case No. 10-10445

)

)

)

)

)

)

)

RECOMMENDED ORDER

A hearing was held pursuant to notice, before Barbara J. Staros, Administrative Law Judge with the Division of Administrative Hearings, on February 11, 2011, via video- teleconference in Jacksonville and Tallahassee, Florida.

APPEARANCES

For Petitioner: Jamila Georgette Gooden, Esquire

Department of Financial Services Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399

For Respondent: No appearance

STATEMENT OF THE ISSUE

The issue is whether Respondent complied with the requirements of the Workers' Compensation Law and, if not, what is the appropriate penalty?

PRELIMINARY STATEMENT

On August 18, 2010, the Department of Financial Services, Division of Workers' Compensation (Division) issued a Stop-Work Order and Order of Penalty Assessment to Respondent, River City Roofing Sheet Metal, Inc. On September 10, 2010, the Division issued an Amended Order of Penalty Assessment in the amount of

$116,240.82. Respondent contested the Stop-Work Order and Amended Penalty Assessment, and requested an administrative hearing. The matter was forwarded to the Division of Administrative Hearings on or about November 30, 2010.

A Notice of Hearing was issued scheduling the hearing for February 11, 2011. On February 10, 2011, the Division filed a Motion to Amend Order of Penalty Assessment. The Motion to Amend Order of Penalty Assessment sought to reduce the Order of Penalty Assessment to $71,028.94. The hearing commenced as scheduled on February 11, 2011.

At the commencement of the hearing, the Division's attorney entered her appearance, but no appearance was made on behalf of Respondent. The hearing was recessed until 10:00 a.m. to give a representative of Respondent an opportunity to appear, but no appearance was made on behalf of Respondent. The Motion to Amend Order of Penalty Assessment was granted, and the case proceeded under the Second Amended Order of Penalty Assessment.

At hearing, Petitioner presented the testimony of Michael Robinson and Cathe Ferguson. Petitioner offered Exhibits numbered 1 through 10, which were admitted into evidence. A one-volume Transcript was filed on March 1, 2011. Petitioner timely filed a Proposed Recommended Order which has been considered in the preparation of this Recommended Order.

Respondent did not file any post-hearing submission.

References to statutes are to Florida Statutes (2010) unless otherwise noted.

FINDINGS OF FACT

1. The Division is charged with the regulation of workers' compensation insurance in the State of Florida.

2. Respondent, River City Roofing Sheet Metal, Inc. (River City Roofing), is a Florida corporation located in Jacksonville, Florida, and is engaged in the construction industry.

3. Michael Robinson is an insurance analyst/compliance investigator employed by the Division. His duties include making site visits at locations where work is being conducted and determining whether the employers in the state are in compliance with the requirements of the workers' compensation law and related rules.

4. On August 17, 2010, Mr. Robinson visited a residential job site at 4206 Katanga Drive, Jacksonville, Florida, and observed five individuals reroofing the property at the site.

   
   

5. Mr. Robinson called up to the workers and asked them to come down from the roof so that he could speak to them. One of the workers identified himself as David Hannans, and informed Mr. Robinson that he and the others were employees of River City Roofing. Mr. Robinson proceeded to get the names of the other workers. However, during this time, one of the men wandered away and left the worksite without speaking to Mr. Robinson.

   Mr. Robinson inquired about the name of the worker who left the worksite, and was informed his name was "Shorty."

6. During his conversation with Mr. Hannans, Mr. Robinson also learned that the worksite supervisor, Gary Pittman, had been at the worksite but left to go to the store. Mr. Robinson confirmed with Mr. Hannans that the men at the worksite, including Mr. Hannans, were employees of River City Roofing.

7. Mr. Robinson inquired about the owner of the business and learned the owner is Robert Olszanowski. Mr. Robinson then called Mr. Olszanowski. According to Mr. Robinson,

   Mr. Olszanowski verified that three of the men at the worksite were his employees, but claimed not to know the other two men.

8. Mr. Robinson advised Mr. Olszanowski to contact

   
   

   Mr. Pittman to find out who the other two men were. During a follow-up telephone call with Mr. Olszanowski, Mr. Robinson was told that one of the individuals was a friend of Mr. Hannans and the other was a man from the neighborhood. According to

   
   

   Mr. Robinson, Mr. Olszanowski informed him that he was unaware of the other two men.

9. Mr. Robinson then inquired about what type of workers' compensation coverage had been procured and learned that

   Mr. Olszanowski held an exemption and used Phoenix Resources, Inc., a staffing company, to cover his employees.

10. Mr. Robinson contacted Phoenix Resources and was informed that River City Roofing was a client and as of August 17, 2010, had four individuals on the payroll: Gary Pittman, Miguel Hernandez Lopez, Ancelmo Perez Fernandez, and Simon Aguilar Sanchez. Mr. Robinson requested written

    confirmation of this and received an e-mail communication from Phoenix Resources which provided written confirmation. David Hannans and "Shorty" were not listed.

11. Mr. Robinson inquired as to whether Phoenix Resources carried workers' compensation coverage on the listed individuals, and learned that those listed employees were covered under a policy procured from Business Personnel Solutions. Mr. Robinson contacted Business personnel Solutions and verified that there was a policy that covered those employees of Phoenix Resources.

12. Mr. Robinson again contacted Phoenix Resources and inquired as to whether it had received any new applications from

    
    

    River City Roofing, and learned that it had not received any new applications.

13. Mr. Robinson then consulted the Department of State, Division of Corporations website, to find information concerning the corporate status of River City Roofing. He verified from the website that River City Roofing is an active corporation and that Robert Olszanowski is the Chief Executive Officer.

14. Mr. Robinson then consulted the Division's Coverage and Compliance Automated System (CCAS) database, which is routinely used by the Department and contains both the workers' compensation policy information for each employer that has a Florida policy, as well as all information concerning workers' compensation exemptions that have been applied for and issued to individuals by the Department. Mr. Robinson learned that Respondent previously had a policy that expired on August 25, 2008, and confirmed that Mr. Olszanowski held an exemption.

15. Based upon his investigative findings, Mr. Robinson concluded that Mr. Hannans and "Shorty" were employees of River City Roofing who were not covered by a workers' compensation policy or a valid exemption in violation of chapter 440, Florida Statutes.

16. On August 18, 2010, Mr. Robinson issued Stop-Work Order No. 10-253-D1 to Respondent and issued a Request for Production of Business Records for Penalty Assessment

    
    

    Calculation. Both were personally served by Mr. Robinson on

    
    

    Mr. Olszanowski. The Request for Production of Business Records requested records for the time period August 26, 2008 through August 18, 2010. Respondent did not produce business records as requested.

17. Cathe Ferguson is a Penalty Calculator for the Division. She reviews business records such as payroll, bank statements, and copies of checks, and calculates the amount of penalty for non-compliance with workers' compensation laws. As required by Chapter 440, Ms. Ferguson imputed Respondent's payroll as a result of Respondent's failure to provide business records.

18. Mr. Robinson then issued and served by certified mail an Amended Order of Penalty Assessment to Respondent in the amount of $116,240.82.

19. Subsequent to this and subsequent to Respondent's request for an administrative hearing, Ms. Ferguson determined there was an internal error and amended the penalty amount downward. On February 7, 2011, Mr. Robinson issued a second Amended Order of Penalty Assessment in the amount of $71,028.94.

20. In calculating the penalty for failure to comply with chapter 440, Ms. Ferguson first sought to determine the amount of premium that Respondent would have paid had Respondent obtained the proper workers' compensation insurance in place for

    
    

    the period of August 26, 2008 through August 17, 2010. In determining the premium that Respondent avoided by not obtaining workers' compensation insurance coverage for all of its employees, Ms. Ferguson utilized a penalty worksheet.

    Ms. Ferguson identified the individual employees of Respondent not covered by a workers' compensation policy or an exemption and listed them on the penalty worksheet.

21. For each individual listed on the penalty worksheet, Ms. Ferguson assigned a class code reflecting the work done by each employee as observed by Mr. Robinson (i.e., the class code for roofing). The amount of the penalty was imputed using the Average Weekly Wage as determined by the Agency for Workforce Innovation, across the entire period of non-compliance.

    Ms. Ferguson imputed the penalty because Respondent did not produce business records from which the Division could have calculated the gross payroll from the employees in question.

22. Ms. Ferguson then took 1/100th of the payroll and multiplied that figure by the approved manual rate applicable to the applicable class code, as adopted by the Office of Insurance Regulation.

23. Ms. Ferguson then took the previously obtained product and multiplied it by 1.5 to determine the penalty for the period of August 26, 2008 through August 17, 2010, the time period requested in the business records request. Based upon her

    
    

    calculations, Ms. Ferguson determined the appropriate penalty to be assessed against Respondent to be $71,028.94.

24. Respondent disputed portions of the penalty worksheet attached to the Amended Order of Penalty Assessment, which gave rise to this proceeding. Specifically, Respondent wrote the word "Dispute" next to David Hannans and "Shorty's" names for all time periods on the penalty worksheet except for the time period July 1, 2010 through August 17, 2010, next to which Respondent wrote "not disputed". Thus, in its request for hearing, Respondent did not dispute that Hannans and "Shorty" were employees of Respondent; rather, Respondent disputed that they were employees during most of the periods of time listed on the penalty worksheet.

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding pursuant to sections 120.569 and 120.57(1), Florida Statutes.

26. Administrative fines are penal in nature. Dept' of Banking & Fin., Div. of Sec. & Inv. Prot. v. Osborne Stern,

    Inc., 670 So. 2d 932 (Fla. 1996). Therefore, the Division bears the burden of proof herein by clear and convincing evidence.

    
    

27. Section 440.10(1), Florida Statutes, requires every employer coming within the provisions of chapter 440 to secure coverage under that chapter.

28. "[S]ecuring the payment of workers' compensation" means obtaining coverage that meets the requirements of chapter

    440 and the Florida Insurance Code. § 440.107(2), Fla. Stat.

    
    

29. Section 440.107 authorizes the Division to issue stop- work orders and penalty assessment orders in its enforcement of workers' compensation coverage requirements, and reads in pertinent part:

    (3) The department shall enforce workers' compensation coverage requirements, including the requirement that the employer secure the payment of workers' compensation, and the requirement that the employer provide the carrier with information to accurately determine payroll and correctly assign classification codes. In addition to any other powers under this chapter, the department shall have the power to:

    
    

    * * *

    
    

    (g) Issue stop-work orders, penalty assessment orders, and any other orders necessary for the administration of this section.

    
    

    * * *

    
    

    (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. . . .

    
    

    * * *

    
    

    1. 1. 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.

       
       

       * * *

       
       

    2. 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.

    
    

30. Florida Administrative Code Rule 69L-6.028 reads in pertinent part:

    1. In the event an employer fails to provide 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 impute payroll at any time after ten, but before the expiration of twenty business days after receipt by the employer of a written request to produce such business records.

       
       

    2. The employer's period of non-compliance shall be either the same as the time period requested in the business records request for the calculation of penalty or an alternative period of non-compliance as determined by the department, whichever is less. . . .

       
       

    3. When an employer fails to provide business records sufficient to enable the department to determine the employer's payroll for the time period requested in the business records request for purposes of calculating the penalty provided for in Section 440.107(7)(d), F.S., the imputed weekly payroll for each employee, corporate officer, sole proprietor or partner shall be calculated as follows:

       
       

       1. For each employee, other than corporate officers, identified by the department as an employee of such employer at any time during the period of the employer's non-compliance, the imputed weekly payroll for each week of the employer's non-compliance for each such employee shall be the statewide average weekly wage . . . that is in effect at the time the stop work order was issued to the employer, multiplied by 1.5. Employees include sole proprietors and partners in a partnership.

          
          

          * * *

          
          

          (d) The imputed weekly payroll for each employee, corporate officer, sole proprietor, or partner shall be assigned to the highest rated workers' compensation classification code for an employee based

          
          

          upon records or the investigator's physical observation of that employee's activities.

          
          

31. Respondent acknowledged in an attachment to its Election of Rights that Mr. Hannans and "Shorty" were employees for at least a period of time. See City of Deland v. Miller, 608 So. 2d 121 (Fla. 5th DCA 1992) (Admissions in pleadings are accepted as facts without the necessity of further proof.). By not presenting its business records as required by law to the Division, and by not availing itself of the opportunity to present evidence at the requested administrative hearing, Respondent offered no evidence to rebut Mr. Robinson's testimony that he observed five men working on the roof. Therefore, it is concluded that Respondent is an employer engaged in the construction industry which was not in compliance with the requirements of chapter 440 of securing workers' compensation insurance for all of its employees.

32. Because Respondent was out of compliance with the requirements of chapter 440 and failed to provide business records when requested, the Division properly imputed Respondent's payroll for the period of time for which business records had been requested. § 440.107(7), Fla. Stat.; Fla. Admin. Code R. 69L-6.028(3).

RECOMMENDATION

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

is,

RECOMMENDED:

That the Division of Workers' Compensation enter a Final

Order upholding the Second Amended Order of Penalty Assessment, assigning a penalty of $71,028.94, and the Stop-Work Order issued to Respondent on August 8, 2010.

DONE AND ENTERED this 29th day of March, 2011, in Tallahassee, Leon County, Florida.

S

BARBARA J. STAROS

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 29th day of March, 2011.

COPIES FURNISHED:

Jamila Georgette Gooden, Esquire Department of Financial Services

Division of Legal Services

200 East Gaines Street Tallahassee, Florida 32399

Robert L. Olszanowski

River City Roofing Sheet Metal, Inc. 10650 Haverford Road, Suite 2

Jacksonville, Florida 32218

Honorable Jeff Atwater Chief Financial Officer

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

P. J. Jameson, 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.

Docket for Case No: 10-010445

Orders for Case No: 10-010445