vs.
Respondent.
Case No. 16-0762
Pursuant to notice to all parties, a final administrative hearing was held in this matter before R. Bruce McKibben, Administrative Law Judge for the Division of Administrative Hearings (DOAH), via video teleconference with sites in Tallahassee and Daytona Beach, Florida, on April 8, 2016.
For Petitioner: Tabitha G. Harnage, Esquire
For Respondent: Eric I. Kachnycz, pro se
The issue in this case is whether Respondent, Eric Kachnycz, LLC d/b/a Done Right Irrigation and Lighting (“Done Right”), should have a penalty assessed against it by Petitioner, Department of Financial Services, Division of Workers’ Compensation (the “Department”), and, if so, the amount of such penalty or assessment.
On or about January 14, 2016, the Department issued a Stop- Work Order (“SWO”) and Order of Penalty Assessment, requiring Done Right to immediately cease all business activities based upon the Department’s finding that Done Right was operating without valid workers’ compensation insurance coverage. Done Right timely filed a request for a formal administrative hearing. At the final hearing conducted in this matter, the Department called three witnesses: Kent Howe, compliance investigator; Kevin Sterling, operations and management consultant; and Anita Proano, bureau of compliance employee.
The Department’s Exhibits 1 through 10 were admitted into evidence. Mr. Kachnycz testified on behalf of Respondent but did not offer any other evidence.
The parties were allowed, by rule, to submit proposed recommended orders to the undersigned administrative law judge within 10 days of the filing of the transcript at DOAH.
The transcript was filed on May 2, 2016. The Department’s proposed recommended order was filed on May 12, 2016. Done Right did not timely file a proposed recommended order.
The Department is the State agency responsible for, inter alia, ensuring that all businesses operating in this State have workers’ compensation insurance coverage.
Done Right is a duly-formed and validly-existing limited liability company in the State of Florida. It was formed on July 27, 2004, for the purpose of conducting any and all lawful business. At the time of its formation, Eric Kachnycz was the only listed manager or managing member of the company. His address was listed as 9 Twin River Drive, Ormond Beach, Florida. The registered agent for the company was listed as Betty C. Kachnycz, at the same address. In 2011, Daniel Dupuis was added as a managing member of the company. His address was listed as a post office box in Ormond Beach, Florida. By way of a document filed with the Secretary of State, Division of Corporations, on March 1, 2016, Daniel Dupuis was withdrawn as a managing member of the company.
On January 14, 2016, Kent Howe, a compliance investigator with the Department, conducted an investigation at
316 Ocean Dunes Road in Daytona Beach, Florida. Upon arrival at the site at around 11:00 a.m., Mr. Howe noted the presence of a
large white truck and work trailer parked in front of the residence. The truck and trailer were imprinted with the name and contact information for Done Right. Mr. Howe saw a person (later identified as Daniel Dupuis) engaged in repair work on a sprinkler or irrigation system in the front yard of the residence. After about ten minutes observing Mr. Dupuis,
Mr. Howe approached and asked him for whom he worked.
Mr. Dupuis responded that he worked for Done Right and that Mr. Kachnycz owned and operated the business.
There was another person at the job site who Mr. Dupuis identified as the owner of the residence. That person, with whom Mr. Howe did not converse, was observed walking into and out of the house and, just before Mr. Howe left the site at 1:00 p.m., was seen using a shovel to back-fill some of the irrigation ditches that had been dug.1/
Mr. Howe tracked down and called Mr. Kachnycz to inquire as to the existence of workers’ compensation insurance for his employees, including Mr. Dupuis. Mr. Kachnycz said that the only two persons associated with Done Right, he and
Mr. Dupuis, had existing exemptions from workers’ compensation coverage. Further, Mr. Kachnycz said the he had personally applied for the exemptions himself.
Mr. Howe checked the Department’s compliance and coverage automated system (CCAS) to verify the exemptions.
He found that Mr. Kachnycz had a current exemption, but Mr. Dupuis’ exemption had expired on April 26, 2015,
approximately nine months previous. Exemptions have a two-year term once granted, but may be renewed on-line prior to their expiration. Mr. Kachnycz obtained an exemption in 2004 and has renewed it every two years thereafter. Mr. Dupuis obtained his first exemption in February 2011, but did not timely renew it before it expired two years later. He then obtained an exemption in April 2013, but it expired in 2015. He did not have an exemption in place on January 14, 2016, while working at the job site. He did, however, apply for an exemption just two days later, i.e., on January 16, 2016. After verifying the corporate information for Done Right and checking CCAS to see if any other insurance coverage was in place, Mr. Howe determined that Done Right was not in compliance with workers’ compensation insurance requirements.
The information gathered by Mr. Howe was presented to his area district manager, who approved the issuance of a stop work order. Mr. Howe prepared the SWO (along with a request for business records) and hand-delivered the documents to Mr. Dupuis at the job site. Mr. Howe attempted to serve the registered agent of Done Right, Betty C. Kachnycz, at her residence but
Mr. Kachnycz said she was working out of town at her job as a registered nurse. So, instead of hand-delivery, Mr. Howe sent a
copy of the SWO and request for business records to
Mrs. Kachnycz via certified mail. The documents were delivered and signed as accepted by Mrs. Kachnycz on January 23, 2016.
Subsequently, Mr. Howe had a conversation with
Mr. Kachnycz concerning the possibility of Mr. Kachnycz signing a Conditional Agreed Release from the SWO. A blank copy of that agreement was provided for Mr. Kachnycz’ review, but he never signed the agreement. Mr. Howe later had another conversation with Mr. Kachnycz during which the latter inquired about the “criminal” charges against him related to the SWO. Mr. Howe knew nothing of any criminal charges and no evidence of such was offered at final hearing. Mr. Howe had no further contact with Mr. Kachnycz.
Mr. Kachnycz ultimately asked for a formal administrative hearing to contest the SWO and penalty assessment, resulting in the instant case.
During the preparation phase prior to final hearing, the Department continued to attempt to obtain the business records for Done Right. The Department served interlocking discovery on Done Right to obtain the business records along with other information. Mr. Kachnycz, however, steadfastly refused to provide the records unless, in his words, “[the records are] not used against me in a court of law.” During his deposition in this matter, Mr. Kachnycz reiterated his demand
that his business records not be used against him in this proceeding, a clear indication of Mr. Kachnycz’ lack of understanding of the administrative process. There is no basis in law for such a demand by a party to an administrative proceeding. Mr. Kachnycz also invoked his Fifth Amendment rights and otherwise refused to answer questions posed to him during the deposition.2/
Review of an entity’s business records by the Department allows it to assess the amount of workers’ compensation insurance coverage for the business. A review also allows the Department to determine whether a penalty should be imposed at all. Had Done Right provided its business records in the instant case, it may have resolved the dispute without the necessity of a final administrative hearing. We shall never know.
Based upon the absence of business records for Done Right, the Department used its existing rule constructs to formulate the amount of the penalty to be assessed. Anita Proano, an employee in the Department’s bureau of compliance, established a penalty using standard guidelines.
Since Done Right did not provide business records for review, the imputed method was employed.3/ First, the payroll was calculated by using the average weekly wage in effect at the time of the issuance of the SWO and, per statute, multiplying
by two. Class Code 5183-–under the construction umbrella, but specifically including irrigation and lawn sprinkler systems-– was assigned to the work being done by Done Right. The period of non-compliance was set at September 3, 2015, through December 31, 2015, and January 1, 2016, through January 14, 2016. Those are the dates within the Department’s two-year audit period that Done Right was deemed to be out of compliance. The imputed gross payroll amount was $29,571.77 for the first period of non-compliance and $3,450.04 for the second period.
Those figures, divided by 100, resulted in the amounts of
$295.72 and $34.50, respectively. The approved manual rate set for the two periods was $5.46 and $5.11, reflecting the rates for Class Code 5183. The premium owed by the employer for the first period was calculated at $1,614.62 and the premium it should have paid for the second period was $176.30. Those amounts, multiplied by two, resulted in assessed penalties of
$3,229.24 and $352.60, for a total penalty of $3,581.84.
Done Right presented no evidence to contest the amount of the penalty or the calculation thereof. Instead,
Mr. Kachnycz inquired of the Department’s witnesses whether they had signed loyalty oaths and, if so, if they remembered what was in the oath. He expressed his displeasure at the process for penalizing small businesses and invoked his Constitutional
rights (State and Federal), but provided no evidence germane to the issues of this case.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over this matter pursuant to sections 120.569 and 120.57(1), Florida Statutes. Unless otherwise stated specifically herein, all references to Florida Statutes will be to the 2015 version.
The burden of proof in matters such as this is on the Department because it is asserting the affirmative of the issue, i.e., that Done Right did not have workers’ compensation insurance in place for its employees or have a valid exemption in place. See Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).
The administrative fines being proposed by the Department are penal in nature. The standard of proof for such cases is clear and convincing evidence. See Dep’t of Banking
and Fin., Div. of Sec. and Investor Prot. v. Osborne Stern and
Co., 670 So. 2d 932 (Fla. 1996).
Clear and convincing evidence is an intermediate standard of proof which is more than the "preponderance of the evidence" standard used in most civil and administrative cases, but less than the "beyond a reasonable doubt" standard used in criminal cases. See State v. Graham, 240 So. 2d 486 (Fla. 2d
DCA 1970).
Further, clear and convincing evidence has been defined as evidence which:
[R]equires 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 (citations omitted).
Slomowitz v. Walker, 429 So. 2d 797, 800 (Fla. 1st DCA 1983).
Pursuant to sections 440.10 and 440.38, Florida Statutes, every employer is required to secure the payment of workers’ compensation for the benefit of its employees unless the employee is exempted or excluded under chapter 440. Strict compliance with the Workers' Compensation Law is required by the employer. See C&L Trucking v. Corbitt, 546 So. 2d 1185, 1187
(Fla. 5th DCA 1989). The Department met its burden in the present case, proving by clear and convincing evidence that Daniel Dupuis was engaged in work on behalf of Done Right, and there was no workers’ compensation insurance in place for him nor did Mr. Dupuis have a valid exemption in place.
The Department was unable to estimate the amount of penalty for Done Right’s failure to have workers’ compensation insurance in place as Done Right refused to produce its business
records. The Department therefore was required to impute the income and calculate a penalty in accordance with section 440.107.
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.
The Department properly issued a SWO upon finding that Respondent did not have the appropriate coverage.
As to penalties, section 440.107(7)(d)1. states:
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 the 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 payment of worker's compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater.
The penalty in this case was properly calculated by the Department and established at final hearing by clear and convincing evidence.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered assessing a penalty of $3,581.84 against Respondent, Eric Kachnycz, LLC, d/b/a Done Right Irrigation and Lighting.
DONE AND ENTERED this 18th day of May, 2016, in Tallahassee, Leon County, Florida.
R. BRUCE MCKIBBEN Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 18th day of May, 2016
1/ Mr. Kachnycz, in his case-in-chief, attempted to suggest that the person seen by Mr. Howe at the residence was in fact not the homeowner, but was a worker for some other company engaged in a project at the house. There is no credible evidence to support the suggestion and, even if it was a fact, is not relevant to the current matter.
2/ In his opening statement at final hearing, Mr. Kachnycz again asserted that he had rights under the U.S. and Florida Constitutions that would be violated if he was required to provide his business records. He was reminded by the undersigned that the rights he asserted had corresponding responsibilities, including compliance with laws and procedures.
3/ Initially, the calculation included penalties for both of Done Right’s employees, Mr. Kachnycz and Mr. Dupuis; however, when Mr. Kachnycz was found to have a valid waiver in place, the penalty was recalculated only for Mr. Dupuis.
Eric I. Kachnycz
Tabitha G. Harnage, Esquire Department of Financial Services
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.
