STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS’ COMPENSATION,

Petitioner,

vs.

DECK KING CORP.,

Respondent.

/

Case No. 16-0009

RECOMMENDED ORDER

A final hearing was held in this matter before Robert S. Cohen, Administrative Law Judge with the Division of Administrative Hearings (DOAH), on March 10, 2016, by video teleconference at sites located in Miami and Tallahassee,

Florida.

APPEARANCES

For Petitioner: Tabitha G. Harnage, Esquire

Leon Melnicoff, Esquire Department of Financial Services

200 East Gaines Street Tallahassee, Florida 32399-4229

For Respondent: No Appearance

STATEMENT OF THE ISSUE

The issues are whether Respondent, Deck King Corp., failed to secure workers’ compensation coverage for its employees, and, if so, whether the Department of Financial Services, Division of

Workers’ Compensation (“Department”) correctly calculated the penalty assessment imposed against Respondent.

PRELIMINARY STATEMENT

This proceeding arose from the requirement that employers must secure workers’ compensation insurance for their employees. On June 29, 2015, the Department served a Stop-Work Order and Order of Penalty Assessment (“Stop-Work Order”) on Respondent for failing to secure workers’ compensation for the benefit of its employees as required by chapter 440, Florida Statutes. On October 30, 2015, Respondent filed its Petition for Hearing, disputing the Department’s classification of its work, stating that Derek Barnick and Tom Barnick, two officers of the company were exempt from the coverage requirement, and stating that Respondent was not required to secure workers’ compensation coverage for the period at issue. An Amended Petition for Hearing was filed that same day, adding the statements that Respondent did not have “employees” during the relevant time period and that Fausto Lopez was not an officer, employee, or connected in any capacity during the relevant time period. On January 6, 2016, the matter was referred to DOAH and assigned to the undersigned. On October 9, 2015, the Department served an Amended Order of Penalty Assessment on Respondent assessing a penalty of $148,923.16.

At the hearing, Petitioner presented the testimony of Scarlett Aldana, a district compliance investigator supervisor, and Eunika Jackson, a penalty auditor, and offered seven exhibits, all of which were admitted into evidence. Respondent’s prior attorney, Kevin R. Gallagher, Esquire, withdrew from the case on behalf of Respondent and stated in his Motion to Withdraw as Attorney of Record that neither Derek nor Tom Barnick, the two principal officers of Respondent, would participate in the hearing. True to his word, neither of the two Barnicks participated in the hearing, gave a reason for their

non-participation, nor attempted in any fashion to defend Respondent against the penalty assessment sought to be imposed by the Department.

No transcript of the proceedings was ordered, and the undersigned informed counsel for the Department that he would prepare a recommended order in this matter without the need for a proposed recommended order from the Department.

References to statutes are to Florida Statutes (2015), unless otherwise noted.

FINDINGS OF FACT

1. The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of its employees.

   
   

2. Respondent was a business providing services in the construction industry with its principal office located at 2200 Northwest 22nd Court, Miami, Florida 33142.

3. On June 29, 2015, Marilyn Victores, the Department’s compliance investigator, observed Ivan Lopez Avila and Robert Jordan performing construction work on a job site at 150 South Hibiscus Drive, Miami Beach, Florida 33139. She learned from the individuals working that they were performing the job on behalf of Respondent, Deck King Corp.

4. After gathering the information at the job site,

   
   

   Ms. Victores spoke with her supervisor, Ms. Scarlett Aldana, and an investigation was performed. The Division of Corporations’ website was consulted to determine, among other things, the identity of Respondent’s corporate officers. Mses. Victores and Aldana learned that Respondent had three corporate officers and directors listed, Derek Barnick, Thomas Barnick, and Fausto Lopez. They also learned that the corporation was “active.”

5. Ms. Victores consulted the Department’s Coverage and Compliance Automated System (“CCAS”) for proof of workers’ compensation coverage and for any exemptions associated with Respondent.

6. An exemption is a method whereby a corporate officer can be relieved of the responsibility of the requirements of

   chapter 440, Florida Statutes, pursuant to section 440.05.

   
   

7. CCAS is the Department’s internal database that contains workers’ compensation insurance policy and exemption information. Insurance providers are required to report insurance coverage information to the Department which is then inputted into CCAS.

8. Ms. Victores’ CCAS search revealed that Respondent did not have a workers’ compensation policy or an employee leasing policy. Additionally, she discovered that no active exemptions were associated with Respondent.

9. Based upon the information she gathered, Ms. Victores issued and served Respondent with a Stop-Work Order on June 29, 2015. Ms. King simultaneously issued and served Respondent a Request for Production of Business Records for Penalty Assessment Calculation (the “Request for Production”). The Request for Production sought documents to enable the Department to determine Respondent’s payroll for the time period of June 30, 2013, through June 29, 2015.

10. In response to the Request for Production, Respondent provided the Department only bank statements.

11. Ms. Eunika Jackson, a penalty auditor with the Department, was assigned to calculate the penalty to be assessed against Respondent.

12. Ms. Jackson believed the business records produced by Respondent were insufficient to calculate a penalty for the entire audit period as they did not specify payroll or payments

    
    

    made to employees other than two specific checks, which were credited against the penalty ultimately assessed against Respondent.

13. Based upon Ms. Jackson’s calculations, on October 9, 2015, the Department issued an Amended Order of Penalty Assessment to Respondent which was served on Respondent on that date. The Amended Order of Penalty Assessment imposed a penalty of $148,923.16.

14. To make the penalty assessment determination,

    
    

    Ms. Jackson consulted the codes listed in the National Council on Compensation Insurance’s (NCCI) Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist in the calculation of workers’ compensation insurance premiums.

15. Based upon Ms. Victores’ description of the activities Respondent’s workers were performing and the descriptions listed in the NCCI Scopes® Manual, Ms. Jackson determined that the proper classification for employees of Respondent was 5403.

    Ms. Jackson then utilized the corresponding manual rates for that classification code and the related periods of the alleged non- compliance.

16. Based upon the information provided to her by

    
    

    Mses. Victores and Aldana, Ms. Jackson utilized the appropriate

    
    

    methodology specified in section 440.107(7)(d)1. and

    
    

    rules 69L-6.027 and 69L-6.028, to determine the penalty of

    
    

    $148,923.16.

    
    

17. The business records supplied by Respondent in response to the Department’s Request for Production consisted of two years’ worth of bank statements. No tax records, such as W-2s, W-4s, 1099s, or tax returns of Respondent, were provided to the Department to allow it to determine whether any of the workers were independent contractors, what salaries, if any, they were paid, or in any way to mitigate the penalty assessed by the Department. By not appearing at hearing or attempting to file any documents in explanation or mitigation of the penalty assessed against it, Respondent gave the Department nothing upon which to reach any conclusion of payroll other than through imputation.

18. Using the Penalty Calculation Worksheet, Ms. Jackson determined the penalty to be assessed against Respondent. She imputed the income for Derek Barnick, Thomas Barnick, Ivan Lopez Avila, Robert Lopez, and Fausto Lopez, and used actual records provided by Respondent to determine the income of an individual identified only as “Mili” who received $105 in April 2014. Working through the calculations called for by the worksheet included the class code, period(s) of non-compliance, gross payroll, a divisor of 100 which was then multiplied by the

    
    

    approved manual rate, and then multiplied by two to calculate the penalty. The result was a penalty assessment of $148,923.16.

19. By not appearing at hearing or offering any evidence to contradict the penalty assessed by the Department, Respondent waived its opportunity to prove the Department’s data used and calculations made were performed improperly.

20. The Department properly determined the penalty using the worksheet prescribed by its statutes and rules.

    CONCLUSIONS OF LAW

    
    

21. 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. (2015).

22. Because administrative fines are penal in nature, the Department has the burden of proving by clear and convincing evidence that Respondent violated the Workers’ Compensation Law during the relevant time period and that the penalty assessments are correct. Dep’t of Banking & Fin. v. Osborne Stern & Co., 670

    So. 2d 932, 933-34 (Fla. 1996).

    
    

23. The Department is the agency responsible for enforcement of chapter 440. As the responsible agency, the Department must abide by the statutes and rules that govern it.

24. Pursuant to sections 440.10, 440.107(2), and 440.38, every “employer” is required to secure the payment of workers’ compensation for the benefit of its employees unless exempted or

excluded under chapter 440. Strict compliance with the Workers’ Compensation Law is required. See C&L Trucking v. Corbitt, 546 So. 2d 1185, 1186 (Fla. 5th DCA 1989).

1. Section 440.107(2) states that “‘securing the payment of workers’ compensation’ means obtaining coverage that meets the requirements of this chapter and the Florida Insurance Code.”

2. Pursuant to section 440.107(3)(g), “The department shall enforce workers’ compensation coverage requirements” and “the department shall have the power to . . . [i]ssue stop-work orders, penalty assessment orders, and any other orders necessary for the administration of this section.”

3. Section 440.02(16)(a) defines “employer,” in part, as “every person carrying on any employment.” Further, “[i]f the employer is a corporation, parties in actual control of the corporation, including, but not limited to, the president, officers who exercise broad corporate powers, directors, and all shareholders who directly or indirectly own a controlling interest in the corporation, are considered the employer for the purposes of ss. 440.105, 440.106, and 440.107.”

4. 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.

   
   

5. Section 440.107(7)(a) states, 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.

   
   

6. The Department is empowered to examine and copy the business records of any employer conducting business in Florida to determine whether it is in compliance with the Workers’ Compensation Law. See § 440.107(3), Fla. Stat. Whenever the

   Department finds an employer who is required to have such coverage but fails to do so, such failure is deemed an immediate serious danger to the 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. See § 440.107(1) and (7)(a), Fla. Stat.

7. Section 440.107(7)(d)1. provides that:

   
   

   [T]he 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.

   
   

   The method of penalty calculation described in section 440.107(7)(d) is mandatory.

8. The clear and convincing standard of evidence has been described by the Florida Supreme Court 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 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 (1994)(quoting Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983)).

9. The Department proved by clear and convincing evidence that Respondent employed individuals in the construction industry without securing workers’ compensation insurance for them. Further, Respondent’s officers and directors did not have valid and active exemptions from workers’ compensation requirements to cover the period of the penalty assessment. Finally, by choosing not to participate in the hearing and offer any evidence to rebut the evidence produced by the Department, the entire penalty assessed by the Department is appropriate and warranted in this matter.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $148,923.16 against Respondent.

DONE AND ENTERED this 15th day of March, 2016, 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

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

Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2016.

COPIES FURNISHED:

Tabitha G. Harnage, Esquire Department of Financial Services

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

Deck King Corp.

2200 Northwest 22nd Court Miami, Florida 33142

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: 16-000009

Orders for Case No: 16-000009