STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

WILBYS HOME REPAIRS, LLC,

Respondent.

/

Case No. 15-0661

RECOMMENDED ORDER

On May 6, 2015, Administrative Law Judge Lisa Shearer Nelson conducted a disputed-fact hearing pursuant to section 120.57(1), Florida Statutes (2014), by video teleconference with sites in Jacksonville and Tallahassee, Florida.

APPEARANCES

For Petitioner: Trevor Suter, Esquire

Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-4229

For Respondent: Michael Wilbur

Wilby’s Home Repairs, LLC 5376 Shirley Avenue

Jacksonville, Florida 32210 STATEMENT OF THE ISSUE

The issue to be determined is whether Respondent, Wilby’s Home Repairs, LLC, failed to secure the payment of workers’

compensation coverage for its employees, and if so, what penalty

is owed.

PRELIMINARY STATEMENT

On October 2, 2014, Petitioner, the Division of Workers’ Compensation (Petitioner or the Division), issued a Stop-Work Order to Respondent, Wilby’s Home Repairs. On October 17, 2014, an Amended Order of Penalty Assessment was issued, assessing a penalty of $21,583.48. Respondent requested a hearing pursuant to section 120.57(1) on November 14, 2014, and on February 9, 2015, the case was referred to the Division of Administrative Hearings for assignment of an administrative law judge.

The case was initially assigned to Administrative Law Judge June C. McKinney, who issued a Notice of Hearing on February 19, 2015, and scheduled the case to be heard May 6, 2015. On

March 20, 2015, the case was transferred to the undersigned and the case proceeded as scheduled.

On the day of hearing, both parties timely appeared but for reasons not known to the parties, the court reporter did not.

After a delay for the purpose of securing the court reporter’s presence, which was unsuccessful, the Division opted to proceed by recording the hearing using a tape recorder. The recording was then filed with the Division on May 18, 2015, and provided to Respondent in lieu of a transcript.

At hearing, Petitioner presented the testimony of Ann Johnson, investigator for workers’ compensation compliance; and Anita Proano, penalty audit manager for the Division.

Petitioner’s Exhibits 1-9 were admitted into evidence. Michael Wilbur testified on behalf of Respondent but presented no exhibits. Petitioner filed a Proposed Recommended Order on May 28, 2015. To date, Respondent has not filed a proposed

recommended order. Petitioner’s post-hearing submittal has been considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Department of Financial Services, Division of Workers’ Compensation, is the state agency charged with the enforcement of the requirement in chapter 440, Florida Statutes, that employers in Florida secure workers’ compensation coverage for their employees as required by section 440.107(3).

2. At all times relevant to this case, Respondent was a company engaged in the construction industry. Its principal office was located at 2641 University Boulevard North, H115, Jacksonville, Florida 32211.

3. On or about October 2, 2014, Ann Johnson, a compliance investigator for the Division, observed two people doing patch/repair work using a ladder on the outside of a home at 2322 Myra Street in Jacksonville, Florida. She approached and spoke to both men, who identified themselves as Michael Wilbur

   
   

   and Robert Nelson and stated that they worked for Wilby’s Home Repairs. When Ms. Johnson asked for proof of workers’ compensation coverage, Mr. Wilbur could not provide it but thought both gentlemen had exemptions. Mr. Wilbur thought that his accountant who had prepared the paperwork for filing with the Division of Corporations for his company had also completed the applications for exemptions for workers’ compensation coverage.

   However, no applications for exemptions had been filed.

   
   

4. Investigator Johnson consulted the Division of Corporations website to determine the identity of Respondent’s corporate officers and found that Mr. Wilbur and Mr. Nelson were the listed officers. She then consulted the Division’s Coverage and Compliance Automated System (“CCAS”) for proof of workers’ compensation coverage and for any exemptions associated with Respondent. Investigator Johnson’s research revealed that Respondent did not have a workers’ compensation policy or an employee-leasing policy, and further, there were no exemptions for its corporate officers on file.

5. Based on this information, Investigator Johnson consulted with her supervisor, who provided authorization for the issuance of a Stop-Work Order. She then issued a Stop-Work Order and personally served it on Mr. Wilbur on October 2, 2014.

   At the same time, she issued and served a Request for Production of Business Records for Penalty Assessment Calculation (BRR).

   
   

   The requested documents were for the purpose of determining Respondent’s payroll from May 16, 2014 (the date the company was formed according to the Division of Corporations website) to October 2, 2014 (the date of the random inspection). They consisted of payroll documents, such as time sheets or cards, attendance records, check stubs, and payroll summaries; account documents, such as check journals and statements; disbursements records; workers’ compensation coverage documents, such as copies of policies, declaration pages, and certificates of workers’ compensation; documents related to any exemptions held; documents reflecting the identity of each subcontractor and the relationship thereto, including any and all payments to subcontractors; and documentation of subcontractors’ workers’ compensation coverage.

6. On October 3, 2014, Mr. Wilbur came into the Division office in Jacksonville and filled out the applications for exemptions, and those were processed. Mr. Wilbur submitted a cashier’s check for $1,000 and Respondent was released from the Stop-Work Order. He also brought in some records in response to the BRR. Those records consisted of letters, notations, and copies of checks made out to Robert Nelson or Mike Wilbur from Grant-Dooley Rental.

   
   

7. The records were scanned and provided to the penalty auditing team to calculate an appropriate penalty according to the statutory formula.

8. Penalty audit supervisor Anita Proano reviewed the business records provided by Respondent, but could not, from those records, properly identify the amount of gross payroll paid to Respondent’s employees on which workers’ compensation premiums had not been paid. Ms. Proano determined that Respondent had not been in compliance with coverage requirements from May 16, 2014, to October 2, 2014.

9. The business records provided by Respondent were not sufficient for the Department to calculate a penalty for Respondent’s period of noncompliance with the coverage requirements of chapter 440. The auditor assigned to the case then calculated a penalty based upon imputed payroll pursuant to the procedures required by section 440.107(7)(e) and Florida Administrative Code Rule 69L-6.208.

10. Had the documents submitted by Respondent been adequate, then the Division would have used those documents to calculate Respondent’s payroll. The checks provided by Respondent to the Division consisted of checks made out to Robert Nelson and Michael Wilbur, individually, spanning from approximately May 9, 2014, through October 2014, from Grant- Dooley Rental. Mr. Wilbur testified that the only job Respondent

    
    

    handled during this period was the family home on Myra Street, and he and Mr. Nelson were paid directly by the homeowner rather than having payments made to Wilby’s Home Repair as an entity.

    Unfortunately, these direct payments are not the type of records contemplated by the Division’s rules regarding appropriate documentation of payroll.

11. On October 17, 2014, the Division issued an Amended Order of Penalty Assessment to Respondent, which was served on Respondent on October 20, 2014. The penalty assessed for noncompliance was $21,583.48.

12. The penalty assessment calculation is based upon the classification codes listed in the Scopes® Manual, which have been adopted through the rulemaking process through rules 68L-

    6.021 and 69L-6.031. Classification codes are codes assigned to different occupations by the National Council on Compensation Insurance, Inc. (NCCI), to assist in the calculation of workers’ compensation insurance premiums.

13. Auditor Proano used classification code 5645 (carpentry) for both employees. Code 5645 is the correct code for the type of work observed by Ms. Johnson during her inspection.

14. Using this classification code, Ms. Proano used the corresponding approved manual rates for that classification and the period of non-compliance.

    
    

15. The average weekly wage as established by the Department of Economic Opportunity for the relevant period is

    $827.08. Ms. Proano used that amount and multiplied it by 2 for the number of days of noncompliance. Based on that calculation, she came up with a gross payroll amount of $66,166.40, which she divided by 100. Ms. Proano then multiplied that amount by the manual approved rate ($16.31), times two to reach the amount of penalty to be imposed. All of the penalty calculations are in accordance with the Division’s Penalty Calculation Worksheet.

16. The Department has demonstrated by clear and convincing evidence that Respondent employed Robert Nelson and Michael Wilbur on October 2, 2014, and that Respondent was engaged in the construction business for the period of May 16, 2014, through October 2, 2014, without proper workers’ compensation coverage for that period.

17. The Department also demonstrated by clear and convincing evidence that the documents submitted by Respondent, which may indeed be all of the documentation Respondent possessed, were not sufficient to establish Respondent’s payroll, thus necessitating imputation of payroll. Finally, the Department proved by clear and convincing evidence that the required penalty for the period of noncompliance is $21,583.48.

    
    

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action in accordance with sections 120.569 and 120.57(1), Florida Statutes (2014).

19. Chapter 440 is known as the “Workers’ Compensation Law.” § 440.01, Fla. Stat.

20. In this case, the Department is seeking an administrative fine. Accordingly, the Department bears the burden of proof and must establish its case by clear and convincing evidence. Dep't of Banking and Fin. v. Osborne Stern & Co., 670 So. 2d 932, 935 (Fla. 1996); Ferris v. Turlington, 510

    So. 2d 291 (Fla. 1987).

    
    

21. Clear and convincing evidence “requires more proof than a ‘preponderance of the evidence’ but less than ‘beyond and to the exclusion of a reasonable doubt.’” In re Graziano,

    696 So. 2d 744, 753 (Fla. 1997). As stated by the Florida Supreme Court:

    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 lacking in confusion as to the facts in issue. The evidence must be of such a 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 Henson, 913 So. 2d 579, 590 (Fla. 2005)(quoting Slomowitz v.

    
    

    Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983)). “Although this standard of proof may be met where the evidence is in conflict, it seems to preclude evidence that is ambiguous.” Westinghouse Elect. Corp. v. Shuler Bros., 590 So. 2d 986, 989 (Fla. 1991).

22. To meet this burden, the Department must demonstrate that Respondent was required to comply with the Workers' Compensation Law, that Respondent failed to comply with the requirements of the Workers' Compensation Law, and that the penalty assessed by the Department is appropriate.

23. Employment is defined in section 440.02(17)(a) as "any service performed by an employee for the person employing him or her" and includes "with respect to the construction industry, all private employment in which one or more employees are employed by the same employer." § 440.02(17)(b)2., Fla. Stat.

24. An employee is defined in pertinent part as "any person who receives remuneration from an employer for the performance of any work or service while engaged in any employment."

    § 440.02(15)(a), Fla. Stat.

    
    

25. Every employer is required to secure the payment of workers' compensation coverage for the benefit of its employees, unless exempted or excluded under chapter 440. In order to enforce this requirement, the Department is authorized to examine the records of an employer to determine whether it is in

    
    

    compliance, and to assess a penalty equal to "2 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during the periods for which it failed to secure payments of workers' compensation . . . within the preceding 2-year period or $1,000, whichever is greater." § 440.107(7)(d), Fla. Stat.

26. Section 440.107(7)(e) also provides that when an employer does not provide business records that are sufficient to enable the Department to determine the employer’s payroll for the period requested for the calculation of the penalty, then in order to calculate the penalty, “the imputed weekly payroll for each employee, corporate officer, sole proprietor, or partner shall be the statewide average weekly wage as defined in section 440.12(2) multiplied by 2.” Section 440.12(2) identifies the statewide average weekly wage as the “average weekly wage paid by employers . . . as reported to the Department of Economic Opportunity . . . reported annually to the Legislature.”

27. Sadly, the records submitted in this case are not sufficient to establish the payroll for Respondent during the relevant period. Imputing payroll appears to result in a payroll amount far in excess of what Respondent may have earned as a company during that period. However, it was Respondent’s responsibility to keep sufficient records of its payroll, and it did not do so.

    
    

28. Mr. Nelson and Mr. Wilbur were both corporate officers as that term is defined in section 440.02(9), and as such could have filed for an exemption from the coverage requirements of chapter 440. The evidence shows that, once they realized that they did not have exemptions, both men applied for and received them. However, it is also clear from the evidence that during the operative period, neither gentleman had an exemption, and exemptions cannot be applied retroactively.

29. In a case such as this one where no valid exemptions were in place during the relevant period and insufficient documentation exists to establish payroll, the Department’s calculation of a penalty using imputed payroll is required, and the penalty assessed is consistent with the governing statutory requirements.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a final order finding that Wilby’s Home Repairs, LLC, failed to secure the payment of workers’ compensation insurance coverage for its employees with respect to Robert Nelson and Michael Wilbur, in violation of section 440.107, Florida Statutes, and imposing a penalty of

$21,583.48.

DONE AND ENTERED this 10th day of June, 2015, in Tallahassee, Leon County, Florida.

S

LISA SHEARER NELSON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 2015.

COPIES FURNISHED:

Trevor S. Suter, Esquire Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed)

Mike Wilbur

5376 Shirley Avenue

Jacksonville, Florida 32210

Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)

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: 15-000661

Orders for Case No: 15-000661