vs. )
Respondent. )
Case No. 13-0605
On April 26, 2013, a duly-noticed hearing was held in Tallahassee before F. Scott Boyd, an administrative law judge assigned by the Division of Administrative Hearings.
The issue in this case is whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation, as alleged in the
Stop-Work Order and 3rd Amended Order of Penalty Assessment, and, if so, what penalty is appropriate.
Petitioner received a referral notice that Respondent did not have workers’ compensation insurance in effect. Following investigation and site inspection, Petitioner hand-delivered a Stop-Work Order and Penalty Assessment to Respondent on January 30, 2013. On February 4, 2013, Petitioner requested an administrative hearing. An Amended Order of Penalty Assessment was delivered by e-mail on February 6, 2013. The matter was referred to the Division of Administrative Hearings for
assignment of an administrative law judge on February 18, 2013. An unopposed Motion to Amend Order of Penalty Assessment was granted on April 19, 2013, and the case proceeded to hearing on the 2nd Amended Order of Penalty Assessment.
Pursuant to notice, the final hearing was conducted on April 26, 2013. Petitioner presented the testimony of three witnesses: Mr. Jonas Hall, Compliance Investigator; Mr. Eric Ruzzo, Penalty Auditor; and Mr. Carmen Calabrese, co-owner of Po’ Boys. Petitioner offered 15 exhibits, which were admitted without objection. Respondent presented the testimony of
Mr. Calabrese and Mr. Jon Sweede, co-owners of Po’ Boys. Respondent offered a “Narrative” of the case that had been prepared by Mr. Hall and other employees of Petitioner, which
was admitted without objection. A Stipulation of Facts agreed to by the parties was accepted at the hearing, and those facts are included among the Findings of Fact set forth below.
With agreement of the parties at hearing, a 3rd Amended Order of Penalty Assessment was authorized to be late-filed, reflecting new calculations made by Petitioner based upon Respondent’s submission at hearing of additional employee work records covering the period from January 23 through January 30, 2013. The 3rd Amended Order of Penalty Assessment was filed on May 7, 2013.
The one-volume Transcript was filed on May 10, 2013.
Respondent timely filed a Proposed Recommended Order on May 20, 2013, which was considered.
Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation for their employees and corporate officers.
Respondent, Po’ Boys, Inc. (Po’ Boys), is a Florida corporation engaged in business operations as a restaurant in the State of Florida from January 31, 2010, through January 30, 2013.
Respondent employed more than four non-exempt employees during the periods January 31 through February 24, 2010; June 8 through September 3, 2010; and July 11, 2012, through
January 30, 2013.
Respondent was an "employer" as defined in chapter 440, Florida Statutes, throughout the penalty period.
All of the individuals listed on the Penalty Worksheet of the 2nd Amended Order of Penalty Assessment were "employees" (as that term is defined in section 440.02(l5)(a), Florida Statutes) of Respondent during the periods of noncompliance listed on the penalty worksheets.
None of the employees listed on the Penalty Worksheet can be classified as independent contractors, as defined in section 440.02, Florida Statutes.
Mr. Jonas Hall is a workers’ compensation compliance officer who has worked for Petitioner for about four years. He has been involved with between 200 and 300 cases.
On the morning of January 30, 2013, Mr. Hall received a “referral” report that Po’ Boys was not securing the payment of workers’ compensation for its employees. Po’ Boys operates three “traditional” restaurants in Tallahassee, which provide wait-service to their customers.
Mr. Hall checked the Florida Department of State’s “Sunbiz” website, which gave him information on Po’ Boys’ legal
structure, corporate officers, and principal location. He also checked workers’ compensation information for Po’ Boys, Inc., by accessing the Coverage and Compliance Automated System (CCAS) maintained by the Department. It indicated that Po’ Boys’ last coverage, which had become effective on February 6, 2012, had ended on July 11, 2012. He determined that active workers’ compensation exemptions were on file for four individuals, including Mr. Carmen Calabrese and Mr. Jon Sweede, co-owners of Po’ Boys. Information in the CCAS is submitted by insurance companies and the National Council on Compensation Insurance (NCCI).
Mr. Hall drove to the College Avenue location of Po’ Boys to conduct a site visit, but it did not appear open because there were no vehicles present and the lights were off.
Mr. Hall proceeded to the West Pensacola Street location. There were vehicles present and he saw an individual who appeared to be arranging chairs on the patio.
Mr. Hall introduced himself and explained what he was doing there, and was then referred to Mr. Carmen Calabrese, the manager. It was about 10:00 a.m. Payroll records indicate that employees reported for work between 10:00 and 11:00 and that the restaurant was open to serve lunch and dinner. Mr. Calabrese took Mr. Hall to a “Broken Arm” poster which had a workers’ compensation sticker on the bottom. The sticker contained a
workers’ compensation policy number and periods of coverage, as well as contact information for Zenith Insurance Company.
Mr. Hall contacted Zenith Insurance Company, and they confirmed that coverage had not been in effect since July 11, 2012.
In response to Mr. Hall’s questions, Mr. Calabrese indicated that Po’ Boys had between 50 and 60 employees working at its three locations. Mr. Calabrese told Mr. Hall that he had no knowledge that coverage was not in effect and that Mr. Hall would have to talk to Mr. Sweede, who handled the workers’ compensation for the business. Mr. Calabrese was a credible witness.
Mr. Hall called Mr. Sweede, who in turn told Mr. Hall to contact Mr. Wade Shapiro, his insurance agent for providing workers’ compensation coverage. Mr. Sweede then called
Mr. Shapiro as soon as he completed his telephone call with Mr. Hall.
When Mr. Hall later telephoned Mr. Shapiro,
Mr. Shapiro confirmed that Po’ Boys had no policy in effect, but said that he was in the process of obtaining coverage for them.
Mr. Hall contacted his supervisor, Ms. Michelle Newcomer, who provided him with a Stop-Work Order Number.
Mr. Hall served the Stop-Work Order and Order of Penalty Assessment on Mr. Calabrese, along with a Request for
Production of Business Records for Penalty Assessment Calculation, at about 11:15 a.m. Although some records indicated that the Stop-Work Order was served at 10:30, other records and the testimony of the witnesses that it was served at 11:15 were more credible.
Mr. Sweede testified that he was unaware until January 30, 2013, that his workers’ compensation coverage was not in effect. He testified that the Electronic Funds Transfer payment “came back” in July, but that he had been unaware of this. He testified, “I must not have found the paperwork, must not have looked at the envelopes, take all the heat for that in this business.”
Mr. Sweede testified that he later learned Mr. Shapiro was not only aware that Po’ Boys’ coverage was not in effect, but that he had already been working to get Po’ Boys new coverage before Mr. Sweede telephoned him on January 30, 2013, all without the knowledge or authorization of Mr. Sweede.
Mr. Sweede entered into an agreement to obtain workers’ compensation coverage for Po’ Boys sometime on
January 30, 2013. Several documents were required, at least one with a notary’s signature. Mr. Sweede signed a letter stating that there had been no workers’ compensation claims since his previous coverage had been canceled on July 11, 2012, joined the Florida United Businesses Association (FUBA), filled out an
application for coverage, and made a down payment from the Po’ Boys bank account to the (FUBA sponsored) Florida Citrus, Business, and Industries Fund. Under the terms of the agreement, coverage was made effective retroactively to
12:01 a.m. on January 30, 2013.
Mr. Sweede testified that Mr. Shapiro notified him, although he could not remember exactly how, that workers’ compensation coverage was obtained for Po’ Boys at around 11:00 a.m. on January 30, 2013, about 15 minutes before the Stop-Work Order was served.
Mr. Sweede’s testimony as to how he came to be satisfied that his coverage at Zenith was actually not in effect, determined how and why it had been canceled, decided to obtain insurance elsewhere, and arranged for people in at least three different locations to prepare and execute all of the required documents in approximately 45 minutes, from about 10:15 a.m. until 11:00 a.m., was unclear. The transcript reflects the following exchange:
Q: Okay. So this is another –- this is something else. Obviously when Wade Shapiro came by you brought this check, right, and then he also had you sign these documents?
A: I really couldn’t tell you. I couldn’t tell you which way, you know, I mean, obviously, you know, like I said, I was stressed. I got him the check. Whether he ran the check up, brought this stuff back, I probably couldn’t –- I can’t remember which
chronology it was. It was, you know, a pretty stressful morning. But I know it was all fast, fortunately.
Although it does not contain a jurat or notarial certificate,1/ the application for insurance does contain the signature and stamp of a notary public beneath the signatures of Mr. Sweede and Mr. Shapiro. All signatures on the document are followed by a handwritten notation of “1-30-13” in the space provided for a date. The signature and seal provide credible evidence that the document was signed sometime on January 30, 2013.
Regardless of the time when coverage became effective, there is clear and convincing evidence in this case that Petitioner had no information reasonably available to it indicating that Respondent had obtained workers’ compensation coverage in the last minutes before the Stop-Work Order was issued. Respondent concedes it did not have coverage at the time of Mr. Hall’s site inspection, and does not claim that when coverage was obtained, it notified Petitioner, or even attempted to do so.
Mr. Hall wrote a “Narrative” in a Department database on the afternoon of January 30, 2013, describing the events of the morning. Although Respondent demonstrated that the description was “modified” several days later on on February 5, 2013, the Department put on no evidence to explain what was
modified, or why. The testimony of witnesses that Mr. Hall served the Stop-Work Order at 11:15 a.m. was deemed more credible under all of the circumstances than the notation in the Narrative that it was served at 10:30 a.m.
Respondent executed a Payment Agreement Schedule for Periodic Payment of Penalty and was issued an Order of Conditional Release from the Stop-Work Order on February 6, 2013.
Po’ Boys failed to secure the payment of workers’ compensation for its employees from January 31 through February 24, 2010; June 8 through September 3, 2010; and
July 11, 2012, through January 29, 2013. It obtained coverage
sometime on January 30, 2013.
Respondent would have paid an amount less than
$11,565.68 in premiums for those periods during which it failed to secure the payment of workers’ compensation, because that figure should be reduced by the premium paid for coverage on January 30, 2013.
Payroll records submitted by Po’ Boys indicate several employees were paid for varying hours after 11:15 a.m. on January 30, 2013.
The parties stipulated that the Department has assigned the appropriate class code and manual rates to Respondent's employees from the NCCI SCOPES Manual.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this proceeding pursuant to sections 120.569 and 120.57(1), Florida Statutes (2012).2/
Petitioner has the responsibility to enforce the requirement that employers secure the payment of workers’ compensation for the benefit of employees as required by chapter 440, Florida Statutes.
Petitioner seeks to penalize Respondents for failure to secure the payment of workers' compensation pursuant to section 440.107(7).
Petitioner has the burden of proof to show, by clear and convincing evidence, that Respondent committed the violation alleged in the Administrative Complaint. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).
The clear and convincing standard of proof has been described by the Florida Supreme Court as follows:
Clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the
truth of the allegations sought to be established.
In re Davey, 645 So. 2d 398, 404 (Fla. 1994) (quoting Slomowitz
v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983)).
Section 440.10(1)(a) provides in relevant part:
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.
Under section 440.02(16)(a), an “employer” includes every person carrying on any employment, and under section (17), employment includes all private employments in which four or more employees are employed by the same employer. It was stipulated that Respondent employed more than four non-exempt employees during the relevant periods. Respondent is an employer for purposes of the workers’ compensation law.
It is undisputed that there were significant gaps in Respondent’s workers’ compensation coverage. With respect to the most recent six-month gap, Mr. Sweede testified that the premiums had been returned, but that he had been unaware that this had happened.
Respondent failed to secure the payment of workers’ compensation during the periods January 31 through February 24,
2010; June 8 through September 3, 2010; and July 11, 2012,
through January 29, 2013.
Respondent argues that the Stop-Work Order and Penalty Assessment should not be imposed based upon the testimony of Respondent’s witness that coverage was obtained at 11:00 a.m. on January 30, 2013, about 15 minutes before the Stop-Work Order was served.
Petitioner proved by clear and convincing evidence that Respondent had no workers’ compensation coverage at the time Mr. Hall began his investigation, about 10:00 a.m. on the morning of January 30, 2013, and had had none for nearly six months before that date. Petitioner proved by clear and convincing evidence that the Stop-Work Order was served shortly thereafter, at 11:15 a.m.
Though Respondent was not completely convincing in its efforts to prove that coverage was obtained by 11:00 a.m. on January 30, 2013, it did not have the burden to do so. While the paperwork to effect coverage was apparently completed sometime on January 30, 2013, Petitioner presented no evidence to show the time at which this was done. There was clear and convincing evidence only that there was no coverage in effect up until 11:00 a.m., based upon Respondent’s admission.
Respondent argues that the Stop-Work Order should have been served on Mr. Sweede at the College Avenue location.
However, Mr. Calabrese was an owner of the corporation, as
Mr. Hall knew, and it was perfectly appropriate for Mr. Hall to serve the Stop-Work Order on Mr. Calabrese at the West Pensacola Street location, where the site visit had been conducted.
Respondent argues that if the Stop-Work Order was in fact issued 15 minutes after coverage was obtained, even though the Department was unaware of it, the Stop-Work Order and Penalty Assessment would then be “nullified.” Respondent bases this contention on an administrative rule adopted by Petitioner under authority granted by section 440.107(9).
Florida Administrative Code Rule 69L-6.030, entitled “Penalties for Employers Currently in Compliance Previously Failing to Secure the Payment of Compensation,” provides in relevant part:
When an investigation commenced by the department pursuant to Section 440.107, F.S., reflects that, on the date the investigation commences, the employer is failing to secure the payment of workers’ compensation, is materially understating or concealing payroll, is materially understating or concealing employee duties so as to avoid proper classification for premium calculations, or is materially misrepresenting or concealing information pertinent to the computation and application of an experience rating modification factor, but the employer comes into compliance with the workers’ compensation coverage requirements prior to the issuance of a stop work order, such employer shall be assessed a penalty pursuant to
Section 440.107(7)(d)1., F.S., and a stop
work order will not be issued for such violations.
However, the rule’s direction to the Department that a Stop-Work Order “not be issued” necessarily requires that the Department be aware of the employer’s new compliance through its investigation or otherwise. There is clear and convincing evidence in this case that at the time the Stop-Work Order was issued, Petitioner had no such information.
Respondent argues that Mr. Hall should have concluded from Mr. Shapiro’s representation that he was “in the process” of obtaining coverage that compliance was imminent, but this argument is not persuasive. Mr. Hall might also have concluded from his experience that “the process” could drag on for weeks, during which time an employee could be injured, and that a Stop- Work Order was advisable to compel prompt compliance. The rule implicitly requires that the Department have knowledge of current coverage. It does not direct that no Stop-Work Order should be issued if the Department finds evidence that an employer is “in the process” of obtaining coverage. Even had Respondent in fact obtained coverage a few minutes before the Stop-Work Order was issued, as asserted, Respondent does not claim that it notified Petitioner, or even that it attempted to do so. The rule cannot reasonably be interpreted to require the Department to constantly re-check information it obtained only
minutes before to see if there has been any change. Such “re- confirmation” would itself take up more minutes, necessitating yet another update, ad infinitum. Interpreting the rule in such a pedantic fashion would effectively mean the Department could never issue a Stop-Work Order. The rule does not compel such an absurd result.
This case does not present a situation in which a substantial period of time had elapsed since the investigation was conducted. Nor does it present a situation where the Department knew, or should have known, that a Stop-Work Order was unnecessary because the employer had already come into compliance, but issued it anyway, with callous disregard for the severe consequences that often attend such an order. Petitioner is not required to re-open an investigation just to ensure that an employer has not obtained coverage in the previous 15 minutes.
Respondent similarly argues that by its terms, the workers’ compensation coverage obtained was effective at 12:01 a.m. on January 30, 2013, although the agreement was executed at a later time. Respondent maintains that coverage was therefore in effect hours before the Department’s visit.
But, Respondent’s belated action to obtain retroactive coverage in response to the Department’s determination of Respondent’s failure does not vitiate that determination or meet the
requirements of Florida’s workers’ compensation law. U.S.
Builders, L.P. v. Dep’t of Fin. Servs., Case No. 07-4428 (Fla. DOAH Jan. 14, 2009; Fla. DFS Feb. 23, 2009) (“back-dated” coverage not material because Florida law does not recognize retroactive compliance with workers’ compensation requirements); Dep’t of Fin. Servs. v. H.R. Elec., Case No. 04-2965 (Fla. DOAH Jun. 8, 2006; Fla. DFS Aug. 22, 2006)(retroactive coverage obtained after issuance of stop-work order does not satisfy employer’s obligation); Dep’t of Labor & Emp. Sec. v. E. Pers.
Servs., Inc., Case No. 99-2048 (Fla. DOAH Oct. 12, 1999; Fla. DLES Nov. 30, 1999) (obtaining coverage after compliance investigator visits site and determines no coverage in effect is no defense to stop-work order or penalty assessment).
The Stop-Work Order was served in accordance with section 440.107(7)(a) and rule 69L-6.030(1).
Rule 69L-6.030(1) is also quite clear that even if no Stop-Work Order is appropriate, penalty for failure to secure the payment of workers’ compensation shall still be assessed.
Notwithstanding the fact that “retroactive” coverage should not be considered in determining the appropriate penalty assessment, coverage was obtained at some point on January 30, 2013, and, as noted above, Petitioner failed to prove by clear and convincing evidence at what time that occurred. Respondent admits that no coverage was in place before 11:00 a.m., but
given that Po’ Boys was open for lunch and dinner, and that the first employees did not report until 10:00 a.m., this proof covered only a very small portion of the workday. Cf. Dep’t of
Fin. Servs. v. Abash Enters., Case No. 11-2275 (Fla. DOAH Jul. 22, 2011; Fla. DFS Aug. 30, 2011)(where no evidence presented as to time of day contract with employee leasing
company took effect, an employee who was covered by the contract was excluded from penalty calculation for that day).
Section 440.107(7)(d)1. provides:
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.
Florida Administrative Code Rule 69L-6.031(6), effective October 29, 2006, incorporates by reference the SCOPES Manual Classifications (October 2005) published by NCCI.
Rule 69L-6.031(6)(d)111 references classification code number 9082, covering restaurants not otherwise classified in
the Manual, a category which includes “traditional” restaurants providing wait-service, such as Respondent.
The parties stipulated that the Department assigned the appropriate classification codes and manual rates.3/
Petitioner’s 3rd Amended Order of Penalty Assessment calculated the premiums that Respondent would have paid for its payroll during the periods it failed to secure the payment of workers’ compensation in the three-year period to be a total of
$11,565.68. This amount should be reduced, however, by the premium paid for January 30, 2013.
Under section 440.107(7)(d)1., Petitioner shall assess a penalty equal to 1.5 times the workers’ compensation premium that would have been paid, or $1,000, whichever is greater. The 3rd Amended Order of Penalty Assessment calculated the penalty as $17,349.70, but this amount was based upon the inclusion of premiums for January 30, 2013, and therefore should be recalculated to reduce it by the amount attributable to that date.
That the Department of Financial Services, Division of Workers’ Compensation, enter a final order determining that Respondent, Po’ Boys, Inc., violated the requirement in chapter 440, Florida Statutes, that it secure workers'
compensation coverage for its employees, and imposing upon it a total penalty assessment of $17,349.70, reduced by the amount attributable to lack of coverage on January 30, 2013.
DONE AND ENTERED this 23rd day of May, 2013, in Tallahassee, Leon County, Florida.
F. SCOTT BOYD Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 23rd day of May, 2013.
1/ See section 117.05(4), Florida Statutes, requiring a notary public to complete a jurat or notarial certificate containing certain elements when notarizing a signature.
2/ All references to statutes and rules are to the versions in effect in January 2013, except as otherwise indicated. No relevant changes in applicable statutes or administrative rules were identified during the time of the alleged violations.
3/ Petitioner offered no citation to any rule incorporating applied manual rates. Florida Administrative Code Rule 69L- 6.031(6) incorporates the October 2005 SCOPES Manual without periodic updates to the manual rates established by NCCI.
Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services
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.
