STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' COMPENSATION,

Petitioner,

vs.

MARVIN'S ELECTRIC SERVICE, INC.,

Respondent.

/

Case No. 15-2121

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case on June 23, 2015, before Lawrence P. Stevenson, a duly-designated Administrative Law Judge of the Division of Administrative Hearings, via video teleconference at sites in Pensacola and

Tallahassee, Florida.

APPEARANCES

For Petitioner: Trevor S. Suter, Esquire

Department of Financial Services Division of Workers' Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229

For Respondent: Marvin Mobley, pro se

Marvin's Electric Service, Inc. 2647 Stefani Road

Cantonment, Florida 32533-8330

STATEMENT OF THE ISSUE

At issue in this proceeding is whether the Respondent, Marvin's Electric Service, Inc. ("Marvin's Electric"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes (2014), by not obtaining workers' compensation insurance for its employees, and, if so, whether the Petitioner, Department of Financial Services, Division of Workers' Compensation ("Department"), properly assessed a penalty against the Respondent pursuant to section 440.107.

PRELIMINARY STATEMENT

Pursuant to the Workers' Compensation Law, chapter 440, the Department seeks to enforce the statutory requirement that employers secure the payment of workers' compensation for their employees.

On November 18, 2014, the Department issued a "Stop-Work Order" alleging that Marvin's Electric failed to abide by the coverage requirements of the Workers' Compensation Law on that date. The order directed Marvin's Electric to cease business operations and pay a penalty equal to two times the amount Marvin's Electric would have paid in premium to secure workers' compensation during periods within the preceding two years when it failed to do so, or $1,000, whichever is greater, pursuant to section 440.107(7)(d). The Department also requested business

records from Marvin's Electric in order to determine the exact amount of the penalty.

Marvin's Electric provided some business records to the Department. On February 3, 2015, the Department issued an "Amended Order of Penalty Assessment" that ordered Marvin's Electric to pay a penalty of $1,381.58, pursuant to section 440.107(7)(d).

Marvin Mobley, the president and sole proprietor of Marvin's Electric, disputed the Department's penalty calculation and requested an administrative hearing. On February 23, 2015, Respondent filed a letter with the Department requesting a hearing. On April 16, 2015, the Department forwarded the request of Marvin's Electric to the Division of Administrative Hearings ("DOAH"). The hearing was scheduled for June 23, 2015, on which date it was convened and completed.

Shortly before the hearing date, the Department filed a "Second Amended Order of Penalty Assessment" based upon a further review of the business records of Marvin's Electric. The Second Amended Order of Penalty Assessment reduced the penalty assessment to $1,373.56. Without objection, the undersigned ordered the hearing to go forward based on the Second Amended Order of Penalty Assessment.

At the hearing, the Department presented the testimony of its investigator, Kali King, and of its penalty audit manager,

Anita Proano. The Department's Exhibits 1, 2, 4 through 10,

and 12 were admitted into evidence. Marvin's Electric presented the testimony of its president, Marvin Mobley. Composite Exhibit 1 of Marvin's Electric was admitted into evidence.

The one-volume Transcript of the final hearing was filed at DOAH on July 14, 2015. The Department timely filed a proposed recommended order on July 24, 2015. Marvin Mobley filed a handwritten letter summarizing the position of Marvin's Electric on August 3, 2015. The Department did not object to the timing of Mr. Mobley's filing, which has therefore been accepted and considered in the writing of this Recommended Order.

Unless otherwise stated, all statutory references are to the 2014 edition of the Florida Statutes.

FINDINGS OF FACT

Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made:

1. The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat.

2. Marvin's Electric is a corporation based in Cantonment, Florida. The Division of Corporations' "Sunbiz" website

   
   

   indicates that Marvin's Electric was first incorporated on December 15, 2003, and remained an active corporation until September 23, 2011, when it was administratively dissolved for failure to file an Annual Report. The corporation continued to hold itself out as eligible to do business throughout the period relevant to this proceeding. Sunbiz records indicate that the corporation filed new articles of incorporation on April 9, 2015, and is currently an active corporation. The principal office of Marvin's Electric is at 2647 Stefani Road in Cantonment.

3. Marvin's Electric is solely owned and operated by Marvin Mobley. It has no regular employees aside from Mr. Mobley. Marvin's Electric was actively engaged in performing electrical work during the two-year audit period from November 19, 2012, through November 18, 2014.

4. Kali King is a Department compliance investigator assigned to Escambia County. Ms. King testified that her job includes driving around the county conducting random compliance investigations and investigating referrals made to her office by members of the public. On November 18, 2014, Ms. King drove to a residence off Pale Moon Drive in Pensacola to investigate a public referral made against a different business entity that happened to be working on the same single-family residence as Mr. Mobley. Ms. King testified that when she arrived at the residence, she saw Mr. Mobley

   
   

   and two other workers on the site before she ever spoke to the employees of the business she was there to investigate.

5. Mr. Mobley and the two other men were digging a shallow trench from the home to a shed on the back of the property. The homeowner told Ms. King that Mr. Mobley was installing electricity in the shed.

6. Ms. King approached the three men and identified herself.

   
   

   She asked who was in charge, who hired them, and whether they were working as a business. Mr. Mobley replied that he was in charge, he had been hired by the homeowner, and he was working in the name of his business, Marvin's Electric.

7. Ms. King asked how he was providing workers' compensation insurance for his business. Mr. Mobley answered that he had an exemption for himself and that he did not have insurance for the other two workers because they were not employees of his business. One of the men was his foster child who was working for Mr. Mobley in exchange for room and board. The other man was returning a favor to Mr. Mobley, who had helped the man with some construction work on his property in Alabama. The other men confirmed Mr. Mobley's story when Ms. King separately interviewed them.

8. Ms. King went inside the house to speak with the contractor she had been sent out to investigate, then she returned to her vehicle to perform computer research on Marvin's Electric. She consulted the Sunbiz website for information about the company

   
   

   and its officers. Her search confirmed that Marvin's Electric was an inactive Florida corporation, having been administratively dissolved for failure to file an Annual Report in 2011. Marvin Mobley was listed as its registered agent and as president of the corporation. No other corporate officers were listed.

9. Ms. King also checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Marvin's Electric had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Marvin's Electric had no active workers' compensation insurance coverage for its employees and that no insurance had ever been reported to the state for Marvin's Electric. There was no evidence that Marvin's Electric used an employee leasing service. Mr. Mobley had, in the past, elected an exemption as an officer of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012, but the exemption had expired as of the date of the investigation.

10. Based on his jobsite interviews with the employees and Mr. Mobley, and her Sunbiz and CCAS computer searches, Ms. King concluded that as of November 18, 2014, Marvin's Electric had

    
    

    three employees working in the construction industry and that the company had failed to procure workers' compensation coverage for these employees in violation of chapter 440. Ms. King, consequently, issued a Stop-Work Order that she personally served on Mr. Mobley on November 18, 2014.

11. Also on November 18, 2014, Ms. King served Marvin's Electric with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers' compensation insurance coverage, and other business records to enable the Department to determine the appropriate penalty owed by Marvin's Electric.

12. Ms. King testified that Mr. Mobley provided records in response to the Request for Production. The records were scanned into the Department's internal auditing system, and the file was placed into a queue to be assigned to a penalty calculator, who reviews the records and calculates the penalty imposed on the business. Ms. King could not recall the name of the person assigned to calculate the penalty in this case.

    
    

13. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the

    two-year period preceding the Stop-Work Order, which in this case was the period from November 19, 2012, through November 18, 2014.

    § 440.107(7)(d), Fla. Stat. Because Mr. Mobley had no payroll records for the two men who worked for him on November 18, 2014, the penalty calculator lacked sufficient business records to determine the company's actual gross payroll on that date.

14. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer's actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/

15. In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications ("Scopes Manual") published by the National Council on Compensation Insurance ("NCCI"). The Scopes Manual has been adopted by reference in rule 69L-6.021. Classification codes are four-digit codes

    
    

    assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L- 6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . 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."

16. Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5190, titled "Electrical Wiring—-Within Buildings & Drivers," which "applies to the installation of electrical wiring systems within buildings." The corresponding rule provision is rule 69L-6.021(2)(u). The penalty calculator used the approved manual rates corresponding to Class Code 5190 for the periods of non-compliance to calculate the penalty.

17. On February 3, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $1,381.58, based upon Mr. Mobley's actual wages during the penalty period, plus an imputation of wages for the date of November 18, 2014, for

    Mr. Mobley and the two men who were working for him on that date. After Mr. Mobley clarified that one item treated as payroll by the Department was actually a refund to a customer, the Department on June 10, 2015, was able to issue a Second Amended Order of Penalty Assessment in the amount of $1,373.56, based on

    
    

    the mixture of actual payroll information and imputation referenced above.

18. Ms. Proano persuasively testified that the administrative dissolution of the corporate status of Marvin's Electric had no bearing on the question of the company's responsibility to provide workers' compensation insurance for its employees or to establish an exemption. After dissolution, the company continued to hold itself out as a corporate entity prepared to do business and, in fact, accepted work and was paid as a corporation. Therefore, the Department investigated Marvin's Electric as a corporate entity. In any event, under the facts of this case, the penalty calculation would have been the same had the Department treated Mr. Mobley as a sole proprietor, rather than as the president of a corporate entity.

19. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Second Amended Order of Penalty Assessment.

20. The Department has demonstrated by clear and convincing evidence that Marvin's Electric was in violation of the workers' compensation coverage requirements of chapter 440. Justice Kirchhevel and Wayne Richardson were employees of Marvin's Electric on November 18, 2014, performing services in the construction industry without valid workers' compensation

    
    

    insurance coverage.2/ The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates, business records provided by Marvin's Electric, and the penalty calculation worksheet adopted by the Department in rule

    69L-6.027. Ms. Proano's recalculation of the penalty confirmed the correctness of the penalty calculator's work.

21. Marvin's Electric could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Mr. Mobley testified that he has always been the sole proprietor of Marvin's Electric and that he has never had to pay employees. The two men with him on November 18, 2014, were there because Mr. Mobley was in poor health and needed help digging the trench from the house to the shed. He testified that he never received notice from the Department that his exemption was expiring and that, in the midst of several major surgeries, he forgot that it was time to renew his exemption. Mr. Mobley's testimony was eloquent and credible, but the equitable considerations that he raised have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.

    
    

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2015).

23. Employers are required to secure payment of compensation for their employees. §§ 440.10(1)(a) and 440.38(1), Fla. Stat.

24. "Employer" is defined, in part, as "every person carrying on any employment." § 440.02(16), Fla. Stat. "Employment . . . means 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)(a) and (b)(2), Fla. Stat.

    
    

25. "Employee" is defined, in part, as "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." § 440.02(15)(a), Fla. Stat. Remuneration includes not only monetary payment but any "valuable consideration . . . intended by both employer and employee."

    § 440.02(15)(d)6., Fla. Stat. "Employee" also includes "any person who is an officer of a corporation and who performs

    
    

    services for remuneration for such corporation within this state." § 440.02(15)(b), Fla. Stat.

26. The Department has the burden of proof in this case and must show by clear and convincing evidence that the employer violated the Workers' Compensation Law and that the penalty assessments were correct under the law. See Dep't of Banking and Fin., Div. of Sec. and Investor Prot. v. Osborne Stern and Co.,

    670 So. 2d 932 (Fla. 1996); and Ferris v. Turlington, 510 So. 2d

    
    

    292 (Fla. 1987).

    
    

27. In Evans Packing Co. v. Department of Agriculture and

    
    

    Consumer Services, 550 So. 2d 112, 116, n.5 (Fla. 1st DCA 1989), the Court defined clear and convincing evidence as follows:

    [C]lear 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 evidence 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 the firm belief of conviction, without hesitancy, as to the truth of the allegations sought to be established.

    Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

    
    

28. Judge Sharp, in her dissenting opinion in Walker v.

    
    

    Florida Department of Business and Professional Regulation,

    
    

    705 So. 2d 652, 655 (Fla. 5th DCA 1998) (Sharp, J., dissenting), reviewed recent pronouncements on clear and convincing evidence:

    
    

    Clear and convincing evidence requires more proof than preponderance of evidence, but less than beyond a reasonable doubt. In re Inquiry Concerning a Judge re Graziano, 696 So. 2d 744 (Fla. 1997). It is an

    intermediate level of proof that entails both qualitative and quantative [sic] elements.

    In re Adoption of Baby E.A.W., 658 So. 2d 961, 967 (Fla. 1995), cert. denied, 516 U.S.

    1051, 116 S. Ct. 719, 133 L.Ed.2d 672 (1996).

    The sum total of evidence must be sufficient to convince the trier of fact without any hesitancy. Id. It must produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. Inquiry Concerning Davey, 645 So. 2d 398, 404 (Fla. 1994).

    
    

29. Section 440.02(8) defines "construction industry" as "for-profit activities involving any building, clearing, filling, excavation, or substantial improvement in the size or use of any structure or the appearance of any land." Section 440.02(8) further provides "[t]he division may, by rule, establish standard industrial classification codes and definitions thereof which meet the criteria of the term 'construction industry' as set forth in this section." The activities of Marvin's Electric in installing an electrical line from the house to a shed at the residential worksite for payment constituted construction under the Department's statutorily authorized rules. Fla. Admin. Code R. 69L-6.021(2)(dd).

30. The Department established by clear and convincing evidence that Marvin's Electric was an "employer" for workers' compensation purposes because it was engaged in the construction

    
    

    industry during the period of November 19, 2012, through November 18, 2014 and employed one or more employees during that period. §§ 440.02(16)(a) and (17)(b)2., Fla. Stat.

31. Section 440.107(7)(a) provides in relevant 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. If the department makes such a determination, the department shall issue a stop-work order within 72 hours.

    
    

    Thus, the Department's Stop-Work Order was mandated by statute.

    
    

32. As to the computation and assessment of penalties, section 440.107(7)(d)1. provides in relevant part:

    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 2 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 2-year period or

    $1,000, whichever is greater.

    
    

33. The penalty calculator and Ms. Proano properly utilized the penalty worksheet mandated by rule 69L-6.027 and the procedure set forth in section 440.107(7)(d)1. to calculate the

    
    

    penalty owed by Marvin's Electric as a result of its failure to comply with the coverage requirements of chapter 440.

34. The Department has proven by clear and convincing evidence that it correctly calculated and issued the penalty of

    $1,373.56 in the Second Amended Order of Penalty Assessment.

    
    

35. Mr. Mobley was a credible and sympathetic witness. The undersigned did not question his testimony as to his miscommunications with the Department, his health difficulties, and the financial hardship that the penalty in this case will cause. However, the Legislature has not seen fit to provide a "hardship exemption" to the requirements of chapter 440 and the undersigned lacks the authority to create an equitable exception. See Dep't of Ins. & Treasurer v. Bankers Ins. Co., 694 So. 2d 70,

71 (Fla. 1st DCA 1997) ("[A]gencies are creatures of statute.

Their legitimate regulatory realm is no more and no less than what the Legislature prescribes by law.").

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore,

RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation,

assessing a penalty of $1,373.56 against Marvin's Electric Service, Inc.

DONE AND ENTERED this 19th day of August, 2015, in Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

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 19th day of August, 2015.

ENDNOTES

1/ Section 440.12(2) defines "statewide average weekly wage" as "the average weekly wage paid by employers subject to the Florida Reemployment Assistance Program Law as reported to the Department of Economic Opportunity for the four calendar quarters ending each June 30, which average weekly wage shall be determined by the Department of Economic Opportunity on or before November 30 of each year and shall be used in determining the maximum weekly compensation rate with respect to injuries occurring in the calendar year immediately following." The Department entered into evidence a letter dated November 18, 2013, signed by Tom Clendenning, workforce services director of the Department of Economic Opportunity, stating that the average weekly wage paid by Florida employers subject to the Florida Reemployment Assistance Program Law was $827.08, based upon the four calendar quarters ending June 30, 2013. This was the figure used by the Department to calculate the imputed wages in this case.

2/ The fact that these men did not receive monetary compensation does not place them outside the statutory definition of an "employee." Section 440.02(15)(a) defines "employee" as:

1. ny 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, and includes, but is not limited to, aliens and minors.

The term "remuneration" is undefined in chapter 440. However, section 440.02(15)(d)6. provides that a "volunteer" in private employment is not an employee and further provides: "A person who does not receive monetary remuneration for services is presumed to be a volunteer unless there is substantial evidence that a valuable consideration was intended by both employer and employee." In the instant case, the undisputed evidence established that "a valuable consideration" was intended by both Mr. Mobley and his helpers for the work performed on November 18, 2014.

COPIES FURNISHED:

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

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

Marvin Mobley

Marvin's Electric Service, Inc. 2647 Stefani Road

Cantonment, Florida 32533-8330

Trevor S. Suter, Esquire Department of Financial Services Division of Workers' Compensation

200 East Gaines Street Tallahassee, Florida 32399-4229 (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: 15-002121

Orders for Case No: 15-002121