The Issue This is a license discipline case in which the Petitioner seeks to take disciplinary action against the Respondent on the basis of allegations of misconduct set forth in a four-count Administrative Complaint. The Administrative Complaint charges the Respondent with violation of the following statutory provisions: Sections 489.129(1)(g), 489.129(1)(h)2, 489.129(1)(k), and 489.129(1)(n), Florida Statutes (1996 Supp.).
Findings Of Fact The Respondent, Allen Fader, is, and has been at all times material, a licensed Certified General Contractor, having been issued license number CG C007504 by the State of Florida. At all times material, the Respondent was licensed to contract as an individual. The Respondent, by virtue of his license, advertised construction services for Gold Coast Construction Services, Inc., during 1997. The Respondent presented a business card, with the name of Gold Coast Construction Services, Inc., to Ruby M. Shepherd, a customer, in April of 1997. On April 14, 1997, the Respondent, doing business as Gold Coast Construction Services, Inc., contracted with Ruby M. Shepherd to enclose a patio and to install hurricane shutters at Ms. Shepherd's residence located at 12325 Northwest 19th Avenue, Miami, Florida. The contract was conditioned on Ms. Shepherd being able to obtain financing to pay for the construction described in the contract. The exact amount Ms. Shepherd was required to pay under the original April 14, 1997, contract cannot be determined from the evidence in this case.4 The Respondent assisted Ms. Shepherd in obtaining a loan for the financing of the construction work described in the contract. It took several months to obtain a loan. Ultimately, through the efforts of the Respondent, and of a person engaged by the Respondent to help obtain a loan, Ms. Shepherd received a loan through Town and Country Title Guaranty and Escrow. The check from Town and Country Title Guaranty and Escrow was in the amount of twelve thousand nine hundred seventy-nine dollars and fifteen cents ($12,979.15). The check was made payable to Ms. Shepherd and to Gold Coast Construction Services, Inc. At the request of the man who helped obtain the loan, Ms. Shepherd endorsed the loan check and agreed for the check to be delivered to the Respondent. The Respondent, doing business as Gold Coast Construction Services, Inc., negotiated the loan check and received all of the proceeds in the amount of twelve thousand nine hundred seventy-nine dollars and fifteen cents ($12,979.15). The Respondent received the proceeds of the loan on or about September 12, 1997. The Respondent did not take any action on Ms. Shepherd's construction project until November 14, 1997. On that day, the Respondent placed an order for the material for the hurricane shutters on Ms. Shepherd's project. Nothing more was done on Ms. Shepherd's project for quite some time. Towards the end of February of 1998, the Respondent had some health problems, which caused him to be unable to work for several weeks. Eventually, the Respondent attempted to pick up the shutter materials he had ordered for Ms. Shepherd's project. As a result of the delay, those materials had been returned to stock and had been sold to someone else. The Respondent ordered the materials again. Eventually, in June of 1998, the Respondent had the shutter materials delivered to Ms. Shepherd's residence, and began the process of installing the hurricane shutters. In the meantime, from September of 1997 until January of 1998, the Respondent did not contact Ms. Shepherd. During this period of time, Ms. Shepherd called the Respondent's office numerous times and left numerous messages asking the Respondent to return her calls. From September of 1997 until January of 1998, the Respondent did not return any of Ms. Shepherd's calls. In January of 1998, Ms. Shepherd was finally able to speak with the Respondent. From January of 1998 until the installation work began in June of 1998, Ms. Shepherd spoke to the Respondent on numerous occasions in an effort to find out when the Respondent was going to begin work or return the money he had been paid. During this period of time, the Respondent repeatedly made false assurances to Ms. Shepherd that the work would be performed within two weeks. On or about June 12, 1998, the Respondent obtained a building permit for Ms. Shepherd's project from the Miami-Dade Department of Planning, Development, and Regulation. Installation of the hurricane shutters began that same week. The installation process was delayed because some of the materials did not fit and had to be returned to the manufacturer for modifications. Following the modifications, the installation process resumed. After a few more days, the Respondent told Ms. Shepherd the hurricane shutter work was finished and that he was not going to do the patio construction work, because the loan Ms. Shepherd had received was not enough money to pay for both projects. After the Respondent told Ms. Shepherd that the installation of the hurricane shutters was complete, the Respondent never did any further work on Ms. Shepherd's construction project. The hurricane shutters installed at Ms. Shepherd's property by the Respondent were not installed correctly. Several of the hurricane shutters will not open and close properly. Several of the hurricane shutters are insufficiently fastened. A necessary shutter over the storage room door was never installed. The problems with the subject hurricane shutters can be corrected. The cost of the corrections necessary to make the shutters operate properly and to fasten them securely is approximately one thousand dollars ($1,000). The Respondent never called for an inspection of the installation of the hurricane shutters at Ms. Shepherd's residence. In their present condition, those hurricane shutters will not pass inspection, because they were installed improperly. If corrections are made, those hurricane shutters will pass inspection. By reason of the facts stated in paragraphs 12 and 13 above, the Respondent failed to properly and fully complete the hurricane shutter portion of the contracted work. The Respondent never did any work on the patio portion of the contracted work. At some point in time between September of 1997 and June of 1998, Ms. Shepherd and the Respondent agreed to a modification of their original contract due to the fact that the proceeds of the loan obtained by Ms. Shepherd were insufficient to pay for both the hurricane shutters and the enclosure of the patio. The essence of their modified agreement (which was never reduced to writing) was that the Respondent would not do the patio enclosure portion of the contracted work; the Respondent would do the hurricane shutter portion of the contracted work; the Respondent would be paid for the hurricane shutter portion of the contracted work; and any remaining balance of the loan proceeds that had been paid to the Respondent would be paid back to Ms. Shepherd. Implicit, but apparently unstated, in this modified agreement, was the notion that the Respondent would charge a fair price for the hurricane shutter portion of the contracted work. A fair price for the hurricane shutter portion of the contracted work at Ms. Shepherd's residence, including all materials, labor, overhead, and profit, would be approximately four thousand dollars ($4,000).5 The price of four thousand dollars presupposes properly installed hurricane shutters that will pass inspection. As previously mentioned, it will cost approximately one thousand dollars ($1,000) to make the corrections to the subject hurricane shutters which are necessary for the shutters to function properly and pass inspection. Accordingly, the fair value of the work performed by the Respondent at Ms. Shepherd's residence is three thousand dollars ($3,000). Ms. Shepherd has paid $12,979.15 to the Respondent, doing business as Gold Coast Construction Services, Inc. The fair value of the work performed by the Respondent at Ms. Shepherd's residence is $3,000. Therefore, the Respondent has been paid $9,979.15 more than he is entitled to keep. As of the date of the final hearing, the Respondent has not paid back any money to Ms. Shepherd.
Recommendation On the basis of the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be issued in this case concluding that the Respondent is guilty of the violations charged in each of the four counts of the Administrative Complaint, and imposing the following penalties: For the violation of Section 489.129(1)(g), Florida Statutes (1996 Supp.), an administrative fine in the amount of $100.00. For the violation of Section 489.129(1)(k), Florida Statutes (1996 Supp.), an administrative fine in the amount of $2,000.00. For the violation of Section 489.129(1)(n), Florida Statutes (1996 Supp.), an administrative fine in the amount of $1,000.00. For the violation of Section 489.129(1)(h), Florida Statutes (1996 Supp.), an administrative fine in the amount of $1,500.00, and placement of the Respondent on probation for a period of one year. It is further RECOMMENDED that the final order require the Respondent to pay restitution to Ms. Shepherd in the amount of $9,979.15, and to pay costs of investigation and prosecution in the amount of $266.55. DONE AND ENTERED this 9th day of September, 1999, in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of September, 1999.
The Issue Whether the Respondent owes a penalty of $43,718.07 for failing to obtain workers' compensation insurance coverage, as set forth in the 2nd Amended Order of Penalty Assessment dated February 1, 2010.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of section 440.107, Florida Statutes, that employers in Florida secure workers' compensation insurance coverage for their employees pursuant to Chapter 440, Florida Statutes. § 440.107(3), Fla. Stat. At the times pertinent to this proceeding, Mr. Lumbert was a resident of Palm Beach Gardens, Florida. Mr. Lumbert did not have steady work at the times pertinent to this proceeding, but, rather, worked as a laborer/handyman, doing odd jobs on construction projects when he could find them. At the times material to this proceeding, Mr. Lumbert had no state, county, or municipal license to work in any field related to construction work. On the morning of September 30, 2009, while Mr. Lumbert was driving around looking for construction sites where he might get masonry work, he came upon a construction site located at 9979 Southeast Osprey Pointe Drive in Hobe Sound, Florida. Mr. Lumbert stopped at the site and observed two or three men working on a concrete slab at the site. At some point, William McNally arrived at the construction site. Mr. Lumbert and Mr. McNally, who were acquainted with each other through their relatives, hoped to find work on the construction project, and they waited together at the site for the general contractor. Douglas Baumgarten arrived at the Hobe Sound construction site sometime between 9:30 a.m. and 10:30 a.m. on September 30, 2009.2 Mr. Baumgarten was employed by Martin County, Florida, as a contractor licensing investigator, and he was responsible for driving around Martin County, looking for construction sites and ensuring that all permits and licenses were in order. When Mr. Baumgarten arrived at the site, he observed two men in hard hats working around the concrete slab and two men standing at the front of the construction site, near stacks of loose concrete block. The men who were working on the slab left when Mr. Baumgarten came on the site, before he could get their names or any information about their employer. Mr. Baumgarten contacted Andrew Lodeeson, the owner and sole employee of Agusta Green LLC ("Agusta Green"), which was the general contractor responsible for the Hobe Sound project. Mr. Baumgarten told Mr. Lodeeson to come to the worksite. The Hobe Sound construction project involved construction of a guest house attached to an existing private residence; it was Agusta Green's first construction job. Mr. Lodeeson, who had previously been a building inspector for the town of Jupiter, Florida, had given the building plans to a friend of his, and this friend had arranged for some of the subcontractors that were to perform work on the construction project. It was Mr. Lodeeson's understanding that a company named Saloscar and Associates ("Saloscar") had a Subcontractor Agreement with Agusta Green, executed on or about September 3, 2009, to do slab and masonry work on the Hobe Sound project. Mr. Lodeeson met Mr. Lumbert and Mr. McNally for the first time on the morning of September 30, 3009, when he arrived at the construction site after having been summoned by Mr. Baumgarten. Mr. Lodeeson assumed that Mr. Lumbert and Mr. McNally worked for Saloscar, and he related this information to Mr. Baumgarten.3 Mr. Baumgarten reviewed the Martin County records and found no records showing that Saloscar, Mr. Lumbert, or Mr. McNally were registered or certified to act as contractors in Martin County. Based on his belief that Mr. Lumbert was a subcontractor for Saloscar, Mr. Baumgarten issued Martin County Licensing Citations to Saloscar, Mr. Lumbert, and Mr. McNally.4 In addition to contacting Mr. Lodeeson from the Hobe Sound construction site, Mr. Baumgarten contacted Kathleen Petracco, an investigator the Division, and advised her that he had stopped work on the Hobe Sound construction site; that he had initiated a licensure investigation; that he was concerned about a company named Saloscar; and that "these people" worked for Saloscar.5 Ms. Petracco proceeded to the site and initiated an investigation to determine whether the persons at the site had workers' compensation insurance coverage. Ms. Petracco estimated that she arrived approximately 15 minutes after Mr. Baumgarten had called her. On her way to the site, she ran a check on Saloscar and found that the company had workers' compensation insurance coverage, but she wanted to be sure that the workers at the site were employees of Saloscar. When she arrived, Ms. Petracco looked over the site and saw two men, whom she later identified as Mr. Lumbert and Mr. McNally, moving blocks around. Ms. Petracco also saw some buckets of mortar on the site. Ms. Petracco approached a man who was watching Mr. Lumbert and Mr. McNally, and he identified himself as Mr. Lodeeson. After she checked her database to confirm that Mr. Lodeeson had the appropriate workers' compensation insurance coverage, Ms. Petracco asked Mr. Lodeeson if Mr. Lumbert and Mr. McNally were his employees; Mr. Lodeeson stated that they were not. Based on the information provided by Mr. Baumgarten, Ms. Petracco assumed that Mr. Lumbert was a subcontractor of Saloscar and that Mr. McNally was his employee. Mr. Lumbert was not, however, an employee or subcontractor of Saloscar, a fact that was confirmed by a colleague of Ms. Petracco, who contacted Saloscar at around noon on September 30, 2009, and learned that Mr. Lumbert had no affiliation with that company. And, as Ms. Petracco later learned, Mr. McNally was not Mr. Lumbert's employee. Rather, Ms. Petracco learned that, on September 30, 2009, Mr. Lumbert and Mr. McNally were employed by Edward McKenna, Inc. ("McKenna"), a licensed contractor who had both workers' compensation and liability insurance coverage. McKenna became involved with the Hobe Sound construction project on September 30, 2009. At some point after Mr. Baumgarten arrived at the construction site but before Ms. Petracco arrived, Mr. Lumbert telephoned Mr. McKenna, whom Mr. Lumbert knew through his brother. Because there were no workmen doing the masonry work at the site, Mr. Lumbert told Mr. McKenna that he had found a masonry job and asked if McKenna wanted to take the job and hire Mr. Lumbert and Mr. McNally as employees to do the work. Mr. McKenna wanted the job, and he agreed to hire Mr. Lumbert and Mr. McNally as employees and to provide them with workers' compensation insurance coverage under his policy. Mr. McKenna telephoned Mr. Lodeeson after he talked with Mr. Lumbert. Mr. Lodeeson needed someone to do the masonry work, and, since no one from Saloscar was on site doing this work, Mr. McKenna and Mr. Lodeeson reached an oral agreement that McKenna would take the masonry job for the amount specified in the subcontract with Saloscar. Mr. McKenna and Mr. Lodeeson also agreed that Mr. Lumbert and Mr. McNally would do the work. Even though Mr. Lodeeson and Mr. McKenna had reached an oral agreement on September 30, 2009, the terms of the agreement between Agusta Green and McKenna were memorialized in the Subcontractor Agreement executed on October 1, 2009. At that time, McKenna provided Mr. Lodeeson with all the documents necessary to show he had both liability and workers' compensation insurance to cover his employees working on the Hobe Sound construction project. When Ms. Petracco interviewed Mr. Lumbert on the morning of September 30, 2009, he identified himself as an employee of McKenna. Ms. Petracco confirmed in a telephone call to Mr. McKenna on September 30, 2009, that McKenna was the subcontractor for the masonry work on the Hobe Sound construction project and that Mr. Lumbert and Mr. McNally were going to do the work as employees of McKenna. Ms. Petracco, nonetheless, concluded that Mr. Lumbert and Mr. McNally were not employed by McKenna at the time she arrived at the construction site and began her investigation. Based on this conclusion, Ms. Petracco decided to treat Mr. Lumbert as a subcontractor on the Hobe Sound construction project and Mr. McNally as his employee. Ms. Petracco confirmed that Mr. Lumbert did not have workers' compensation insurance coverage, and she issued a Stop Work Order on September 30, 2009, directing Mr. Lumbert to stop working on all construction projects in Florida.6 The Stop Work Order was posted at the Hobe Sound construction site on October 1, 2009. Ms. Petracco also issued a request for Mr. Lumbert's business records extending from October 1, 2006, to September 30, 2009, and she delivered the Stop Work Order and records request to Mr. Lumbert on October 23, 2009. Mr. Lumbert did not respond to Ms. Petracco's records request within the time specified, and Ms. Petracco calculated a penalty assessment against Mr. Lumbert in the approximate amount of $87,000.00 for his failure to secure workers' compensation insurance coverage for himself and Mr. McNally.7 In the absence of business records, Ms. Petracco used imputed income for Mr. Lumbert and Mr. McNally during the three-year period specified in the records request to calculate the penalty assessment.8 After further investigation, Ms. Petracco was unable to confirm that Mr. McNally was employed by Mr. Lumbert during the period covered by the records request. As a result, she amended her calculation of the penalty to be assessed against Mr. Lumbert and removed the wages imputed to Mr. McNally from the calculation. As a result, Ms. Petracco re-calculated the penalty assessment against Mr. Lumbert, and the assessment was reduced to $43,718.07. Mr. Lumbert eventually provided Ms. Petracco with records of his personal bank account for the period extending from January 2009 to November 2009. Ms. Petracco found that these records showed minimal deposits and withdrawals. She concluded that these bank records did not constitute credible business records and refused to use them for purposes of calculating the penalty assessment against Mr. Lumbert. On February 1, 2010, Ms. Petracco issued a 2nd Amended Order of Penalty Assessment in the amount of $43,718.07. This penalty assessment was based on income imputed to Mr. Lumbert for the period extending from October 1, 2006 through September 30, 2009. In or about June 2010, Mr. Lumbert provided Ms. Petracco with the password to his personal bank account that was in force from April 2007 to October 2009. Ms. Petracco accessed this bank account and reviewed all of the bank's records. She concluded that these records did not satisfy the request for business records, first, because they did not cover the period from October 2006 through May 2007 and, second, because she concluded that they were not credible business records, apparently because of the minimal deposits and withdrawals from the accounts. Because Ms. Petracco did not consider the additional bank records provided by Mr. Lumbert to be credible business records, she did not alter her calculation in the 2nd Amended Order of Penalty Assessment of the penalty to be assessed against Mr. Lumbert for the period extending from October 1, 2006 through September 30, 2009. The amount of imputed payroll used by Ms. Petracco in her calculations was derived from the statewide average weekly wage. Once she had determined the amount of payroll to impute to Mr. Lumbert, Ms. Petracco determined the premium that Mr. Lumbert would have paid for workers' compensation insurance coverage for the period extending from October 1, 2006, through September 30, 2009, by dividing the amount of gross payroll imputed to Mr. Lumbert by 100, and multiplying the result by the approved manual rate for the type of work she attributed to Mr. Lumbert. Approved manual rates are determined by reference to classification codes assigned to various types of work. These classification codes are found in the SCOPES Manual published by the National Council on Compensation Insurance, Inc. ("SCOPES Manual"), and detailed descriptions are provided for the work included within each classification code. Because Ms. Petracco observed Mr. Lumbert and Mr. McNally moving concrete blocks and saw a bucket of mortar at the at the Hobe Sound construction site, she concluded that Mr. Lumbert was doing masonry work. Ms. Petracco chose, however, to use classification code 5213 to determine the approved manual rates applicable to Mr. Lumbert for the period extending from October 1, 2006, to September 30, 2009. According to the October 2005 edition of the SCOPES Manual, which was the edition used by Ms. Petracco, classification code 5213 was assigned to "Concrete Construction NOC," which is described in the SCOPES Manual as follows: "Code 5213 applies to all commercial types of concrete building construction, self-bearing floors, foundations, piers, culverts, silos, grain elevators, etc., and includes making and erecting forms, placing reinforcing steel and stripping forms." See also Fla. Admin. Code R. 69L-6.021(1)(u)(Florida adopts SCOPES Manual classification 5213 for Concrete Construction NOC.). Masonry work is not included in classification code 5213. The SCOPES Manual assigns classification code 5022 to masonry operations. See also Fla. Admin. Code R. 69L- 6.021(1)(i)(Florida adopts SCOPES Manual classification 5022 for Masonry Work NOC.). Summary The Division has failed to present any evidence that would support the imposition of a penalty against Mr. Lumbert for failure to obtain workers' compensation insurance coverage, as set forth in the 2nd Amended Order of Penalty Assessment. The Division presented no evidence establishing that Mr. Lumbert was an employer required to obtain workers' compensation insurance coverage for himself: The Division failed to present evidence to support findings of fact that Mr. Lumbert owned and operated a business; that he was an independent contractor; that he was a subcontractor for Saloscar or for McKenna9; that Mr. McNally was his employee; or that he was being paid for moving concrete blocks at the Hobe Sound construction site prior to becoming an employee of McKenna on the morning of September 30, 2009. Even if the Division had presented sufficient evidence to establish that Mr. Lumbert was an employer/employee required to obtain workers' compensation insurance coverage, the penalty calculation that the Division included in its 2nd Amended Order of Penalty Assessment is fatally flawed because it is based on the incorrect classification code. Ms. Petracco testified that she observed Mr. Lumbert doing work at the Hobe Sound construction site that she described as masonry work. Masonry work is not included in the SCOPES Manual classification code 5213, and even if it were, the Hobe Sound construction project was residential, while classification code 5213 applies only to commercial construction.
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 dismissing the Stop Work Order and the 2nd Amended Order of Penalty Assessment entered against James S. Lumbert. DONE AND ENTERED this 23rd day of February, 2011, in Tallahassee, Leon County, Florida. S Patricia M. Hart Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of February, 2011.
The Issue Whether Respondent, Tony Williams Drywall and Plastering, Inc., failed to comply with the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees and, if so, what penalty should be assessed against Respondent pursuant to section 440.107.
Findings Of Fact 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. Tony Williams Drywall and Plastering, Inc., (Respondent or Williams Drywall) is a corporation based in Tallahassee, Florida, first incorporated on August 18, 1999. Williams Drywall is engaged in the construction industry, operating as a drywall installation and repair business with a principal office located at 8513 Raquel Lane in Tallahassee. Tony Williams is the sole owner, registered agent and president of Williams Drywall. On or about October 30, 2014, Williams Drywall was hired by Bill Davis, a general contractor, to make drywall repairs at 2069 North Monroe Street in Tallahassee (the job site). Williams Drywall hired Viper Enterprises, LLC, (Viper) for the job. Viper is a company owned and operated by Joseph Johnson, whom Mr. Williams described as a friend. Mr. Williams deemed the job as simple and expected to pay Viper about $200. On October 30, 2014, Department Investigator Betty Fuentes arrived at the job site and encountered Mr. Johnson. Ms. Fuentes inquired regarding Mr. Johnson’s workers’ compensation compliance.1/ Although Mr. Johnson, as corporate officer of Viper, had been exempt from the requirement to obtain workers’ compensation insurance, pursuant to section 440.05(3), Florida Statutes, the exemption expired after September 10, 2014. As of October 30, 2014, Mr. Johnson had not effectively renewed his exemption. Mr. Johnson called Mr. Williams from the job site on October 30, 2014, to inform Mr. Williams of the events that transpired at the job site. Through this telephone call, Mr. Williams learned that Ms. Fuentes had issued a stop-work order at the job site. Mr. Williams also spoke with Ms. Fuentes by phone from the job site on October 30, 2014, and Ms. Fuentes asked Mr. Williams for his corporate records as part of her investigation. Mr. Williams met directly with Ms. Fuentes in the late afternoon of October 30, 2014. During the meeting, Ms. Fuentes hand-delivered to Mr. Williams a Stop Work Order for Specific Worksite Only (Stop Work Order). The Stop Work Order required Williams Drywall to cease all business operations at the job site for failure to secure workers’ compensation insurance coverage for its employees. The Stop Work Order included an Order of Penalty Assessment in the amount of two times the amount Williams Drywall would have paid in premium when applying the approval manual wage rates to Williams Drywall’s employee payroll during periods for which it failed to secure payment of workers’ compensation insurance within the preceding two-year period. During the meeting, Mr. Williams provided to Ms. Fuentes corporate records and workers’ compensation information for Williams Drywall. Ms. Fuentes also requested from Mr. Williams payroll records for the preceding two-year period. Mr. Williams disputed that his payroll records for the preceding two-year period were relevant. Mr. Williams testified that he offered to provide his payroll records for the two-week time period during which Mr. Johnson’s exemption had lapsed. Mr. Williams insisted that the October 30, 2014, drywall job was the only job for which he hired Mr. Johnson between September 11, 2014, and October 30, 2014. Mr. Williams did not provide any payroll records for Williams Drywall to Ms. Fuentes or any other representative of the Department. Andrew Moskowitz was assigned to calculate the appropriate penalty to be assessed against Williams Drywall by the Department. Penalties for workers’ compensation insurance violations are based on doubling the amount of evaded insurance premiums for periods during which the employer failed to secure workers’ compensation coverage within the two-year period preceding the Stop Work Order. § 440.107(7)(d), Fla. Stat. The applicable period of noncompliance for Williams Drywall was September 11, 2014, the date Mr. Johnson’s exemption lapsed, through October 30, 2014, the date the Stop Work Order was issued. 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.2/ In the penalty assessment calculation, Mr. Moskowitz 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 Florida Administrative Code 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.” Mr. Moskowitz applied NCCI Class Code 5480, titled “Plastering NOC [Not Otherwise Classified] and Drivers,” which applies to specialty contractors engaged in interior plastering. Mr. Moskowitz used the approved manual rates corresponding to Class Code 5840 for the period of non-compliance to calculate the penalty. On December 14, 2014, the Department issued an Amended Order of Penalty Assessment in the amount of $2,105.50, based upon an imputation of wages to Mr. Johnson, the only employee of Williams Drywall known to the Department for the period of noncompliance. The evidence produced at the hearing established that Mr. Moskowitz utilized the correct class codes, average weekly wages, and manual rates in his calculation of the Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Williams Drywall was in violation of the workers' compensation coverage requirements of chapter 440. Joseph Johnson was an employee of Williams Drywall performing services in the construction industry without valid workers’ compensation insurance coverage. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated by Mr. Moskowitz, through the use of the approved manual rates and the penalty calculation worksheet adopted by the Department in Florida Administrative Code Rule 69L-6.027.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $2,105.50 against Tony Williams Drywall and Plastering, Inc. DONE AND ENTERED this 3rd day of June, 2015, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK 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 3rd day of June, 2015.
Findings Of Fact Respondent is Reinecke Insurance Agents, Incorporated, doing business as Dealers Association Plan. Respondent is also known as the Reinecke Agency, Inc., doing business as Dealers Association Plan. Respondent began business on March 1, 1978. At all times material hereto, Respondent has held a certificate of authority, issued by Petitioner, authorizing Respondent to engage in business as an administrator. Alarm Association of Florida, Inc. The Alarm Association of Florida, Inc. (Alarm) is a trade association that was incorporated on July 12, 1976, as a Florida not-for-profit corporation. Alarm was organized to provide an opportunity for its members to exchange ideas and share information concerning trade practices, business conditions, technical developments, and related subjects concerning the electrical protection industry. Alarm has two primary types of membership. Regular Membership is open to any individual, partnership, firm, or corporation engaged in the business of installing or providing alarm service in the electrical protection field for one year preceding the application. Associate Membership is open to any individual, partnership, firm, or corporation that is not engaged directly in the electrical protection business, but may supply goods or services to Regular Members. Officers and directors of Alarm are selected by the voting members, which are limited to Regular Members. About 25% of Alarm's membership consists of nonvoting members. Sometime prior to November 1, 1985, a representative or representatives of Alarm requested Respondent to make a presentation concerning an employee benefit plan that Alarm was considering establishing. Alarm had previously formed a committee to investigate the feasibility of sponsoring such a plan, which its members could join. Alarm thereafter decided to sponsor an employee benefit plan and use Respondent as the plan administrator. Respondent prepared or caused to be prepared the necessary documents. These documents included a trust agreement between various persons, as trustees (Alarm Trustees), and Alarm (Alarm Trust or Alarm Trust Agreement); the Alarm Association of Florida Health and Welfare Benefit Plan (Alarm Plan); and the Administrator Agreement between Alarm and Respondent. Each document was executed and delivered on November 1, 1985. The Alarm Trust Agreement states that the Alarm Trust is to be funded by the contributions made by the members of the Alarm Plan and the Alarm Trust funds are to be maintained as a reserve against claims by Alarm Plan participants. The Alarm Trust Agreement provides that Alarm may remove an Alarm Trustee at anytime and replace an Alarm Trustee who has resigned or been removed. The Alarm Trust Agreement states that the Alarm Plan Administrator, which was designated as Respondent, shall administer the day-to-day operations of the Alarm Trust, inter alia, to pay claims, provide "consulting and actuarial services necessary for the continuing successful operation of the [Alarm] Plan," and establish procedures for "Employee Contributions." "Employees" are "all qualified members of [Alarm] and their employees. The Administrator Agreement, which is authorized by the Alarm Trust Agreement, authorizes Respondent to use the Alarm Trust funds to review and pay claims and pay premiums on policies purchased by the Alarm Plan or Alarm Trustees. Among its various "powers and duties," Respondent is to demand monthly from the Alarm Trustees such funds "prudently required" for the payment of claims; do all things prudent for the daily administration activity of the Alarm Trust; make or cause to be made such reports, and file such information with appropriate public authorities, as may be required by the Trust by applicable laws; and negotiate and purchase such excess insurance or reinsurance as Respondent and the Alarm Trustees deem appropriate to compensate the Alarm Plan participants if claims exceed Alarm Trust assets. The Administrator Agreement states that Respondent is to receive 20% of the monthly contributions as its administrative fee. The Alarm Plan provides a detailed statement of the available benefits and various administrative matters, including claim procedures. In general, the Alarm Plan covers a wide range of medical, accident, and dental expenses. In capital letters on the first page, the Alarm Plan states: This is a self-funded, trade association member employee benefit plan established under Public Law 93-406 [Employee Retirement Income Security Act ("ERISA")], available only to qualified participating employers and their qualified employee participants. It is not available for individual coverage . . . The Alarm Trust Agreement likewise states that it "shall be interpreted in a manner consistent with its being . . . a welfare Benefit Plan pursuant to . . . ERISA . . ." Each Alarm member enrolled in the Alarm Plan makes a monthly contribution, which is paid to Respondent. The contribution is equal to the number of employees of the enrollee who have elected to participate in the Alarm Plan multiplied by the contribution rate. The Alarm Trustees set the contribution rate based upon the advice of Respondent. On at least one occasion, the Alarm Trustees increased the rate upon the advice of Respondent. At all times, the Alarm Trustees and Respondent have intended to keep the Alarm Plan and Alarm Trust actuarially sound. When Respondent first began business, it employed an actuarial service to set contribution rates. After a few years, Respondent terminated the service and thereafter recommended rate increases or initial rates for the various plans that it administered only as the need became apparent. Respondent uses the contributions to pay claims that it has received. As long as Respondent has determined that the claims are valid, the Alarm Trustees do not review the claims. The Alarm Trustees consider a claim only when a participant appeals a rejected claim. Respondent also uses the contributions to pay itself its 20% administrative fee and any reinsurance premiums due third-party insurers. Respondent pays any remaining funds to the Alarm Trustees, who hold such fund in the Alarm Trust as reserves against future claims. The Alarm Trust is liable for all claims. If the valid claims presented to Respondent exceed the contributions received for that month, the Alarm Trust provides the difference. However, the Alarm Trustees have reinsurance under which third- party insurers are liable to pay any claim in excess of $25,000, but not more than $1,000,000. Since the Alarm Plan has been adopted, Respondent and Alarm have solicited enrollees, such as by direct mail. In the case of new enrollees that are not already members of Alarm, Respondent may take an Alarm Plan application and Alarm membership application at the same time. In April, 1988, Alarm comprised 425-450 members. A couple of years ago, Alarm had only about 65 members. About 85 members have enrolled in the Alarm Plan. These enrollees are all employers. About 300 employees participate in the Alarm Plan. All of these employees are employed by enrolled employers. The record fails to disclose whether all of the enrollees are voting members of Alarm. Petitioner's Exhibit Number 11 lists the names of the enrollees. It appears from the names of the businesses that all, or nearly all, of them qualify for voting membership in Alarm. On advice of counsel, the Alarm Plan has never obtained a certificate of authority pursuant to the Act. Neither Respondent, Alarm, the Alarm Trustees, or the Alarm Plan has ever attempted to comply with any provision of the Act, based on the position that ERISA preempts the Act. The Alarm Plan is not fully insured and has no exemption from the Secretary of Labor. Professional Wrecker Operators of Florida, Inc. The Professional Wrecker Operators of Florida, Inc. (Wrecker) is a trade association that was incorporated on May 18, 1977, as a Florida not-for- profit corporation. Wrecker was organized to serve as a clearinghouse of trade information for its members, inform its members of applicable laws and legislative bodies of its members' views, and provide its members with an opportunity to learn about and assist each other. Wrecker has two classes of membership: active, which is limited to professional wrecker operators, and associate, which extends to "affiliated industry persons and companies in sympathy with [Wrecker's] precepts." Only active members may vote. Sometime prior to November 26, 1984, a representative or representatives of Wrecker requested Respondent to make a presentation concerning the possibility of Wrecker sponsoring an employee benefit plan. Wrecker thereafter decided to sponsor a plan and use Respondent as the plan administrator. Respondent prepared or caused to be prepared the necessary documents. These documents included a trust agreement between various persons, as trustees (Wrecker Trustees), and Wrecker (Wrecker Trust or Wrecker Trust Agreement); the Professional Wrecker Operators of Florida Health and Welfare Benefit Plan (Wrecker Plan); and the Administrator Agreement between Wrecker and Respondent. Each document was executed and delivered on November 26, 1984. Except for the deletion of Paragraph 8.2 in the Alarm Trust Agreement, the Wrecker Trust Agreement and Alarm Trust Agreement are identical in all material respects. The provisions of the Wrecker Administrator Agreement and Alarm Administrator Agreement are identical in all material respects. The Wrecker Plan and Alarm Plan are identical in all material respects. The facts set forth in paragraphs 12-16 above with respect to Alarm were identical with respect to Wrecker and are incorporated by reference herein. As of October 30, 1987, the Wrecker Plan had 89 enrollees. About 400 employees participated in the Wrecker Plan. At least five of the enrollees in the Wrecker Plan were not members of Wrecker. The Wrecker Plan never obtained a certificate of authority pursuant to the Act. The Wrecker Plan was not fully insured and had no exemption from the Secretary of Labor. Because the organizational documents of Wrecker offered membership to entities outside of the wrecking trade, Respondent believed that the Wrecker Plan was required to obtain a certificate of authority under the Act because the Wrecker Plan, unlike the Alarm Plan, did not qualify for an ERISA exemption from the Act. On May 22, 1986, Respondent filed with Petitioner an application for a certificate of approval under the Act for the Wrecker Plan. A representative of Petitioner informed Respondent that the approval would be denied unless a certified audit and actuarial report on the plan and trust were submitted. When this information was not thereafter provided, Petitioner's representative advised Respondent that a withdrawal of the application would look better than a denial, which was imminent. Respondent consequently withdrew the application by letter dated February 24, 1987, and never resubmitted the application. Respondent provided the Wrecker Trustees with monthly reports of contributions, claims, and other information pertaining to the current financial condition of the Wrecker Plan and Wrecker Trust. This report contained a category labeled "claims overpaid," which reflected the amount of claims for which no funds were available. At least one of the Wrecker Trustees misunderstood the category as monies that had been paid erroneously in excess of the amount of claims. On or about January 10, 1988, the Wrecker Trustees met with Respondent and were informed that the deficit in the Wrecker Plan and Wrecker Trust approximated $47,000. On January 22, 1988, Wrecker and the Wrecker Trustees received a letter from Respondent containing a one-page statement on Respondent's letterhead styled, "Estimated [Wrecker] Losses." Containing six entries, this statement disclosed $128,153.38 of "[e]stimated claims not paid at closing of the trust by the trustee's [sic]." The statement did not indicate the trust closing date, effective date, or the date through which the unreported claims were projected. Pursuant to a Consent Order dated March 29, 1988, incorporating a Settlement Stipulation For Consent Order entered into by the Wrecker Trustees and Petitioner, the Wrecker Plan ceased operations on February 29, 1988, and, although admitting no violation of the Act, paid an administrative fine of $5,000. A certified audit through that date discloses a deficit in the Wrecker Plan and Wrecker Trust of about $168,000. Florida Automobile Dismantlers and Recyclers Association The Florida Automobile Dismantlers and Recyclers Association (Dismantlers) is a trade association that sponsors the Florida Auto Dismantlers and Recyclers Association Health and Welfare Benefit Plan (Dismantlers Plan). On September 23, 1981, Dismantlers and Respondent entered into an Administrator Agreement and Dismantlers and various trustees, including M. L. Vaughn, the president of Respondent, entered into a trust agreement (Dismantlers Trust Agreement or Dismantlers Trust) with respect to the Dismantlers Plan. The Dismantlers Plan documents, which were provided by Respondent, are substantially identical to the Alarm Plan and Wrecker Plan documents. On or about October 3, 1983, Respondent, as administrator of the Dismantlers Plan, filed with Petitioner an application for a certificate of authority for the Dismantlers Plan under the Act, which became effective on October 1, 1983. Petitioner issued the certificate of authority. Respondent handles contributions and claims for the Dismantlers Plan in the manner described above for the Alarm Plan and Wrecker Plan. As the Dismantlers Plan administrator, Respondent is obligated to file with Petitioner such reports and documents as are required under the Act. Consequently, Respondent has filed with Petitioner annual statements of the Dismantlers Plan for each fiscal year ending from 1983 through 1987. An annual statement consists of three legal-size pages containing 19 questions, of which only three questions require answers that typically change each year. These questions request the number of employers enrolled in the plan, the number of participants participating in the plan, and the amount of funds handled by the plan and trust each year. The annual statement requires a copy of the most recent financial statement for the plan and trust. At the bottom of the annual statement, the person signing swears that he or she is familiar with the Act. At least two of the annual statements filed for the Dismantlers Plan from 1983 through 1987 were signed by Mr. Vaughn, as president of Respondent. The fiscal year of the Dismantlers Plan and Dismantlers Trust ends on January 31. On December 7, 1987, Respondent filed the Dismantlers Plan's annual statement for the fiscal year ending on January 31, 1987. The financial statements attached to the annual statement disclosed less than $10,000 available to pay claims, annual additions of $479,240, and annual deductions of $470,400. Mr. Vaughn testified that the 1987 annual statement of the Dismantlers Plan was filed late due to the presence in Respondent's offices of Petitioner's auditors for five months. Florida Independent Automobile Dealers Association The Florida Independent Automobile Dealers Association (Independent) is a trade association that sponsors the Florida Independent Automobile Dealers Association Health and Welfare Benefit Plan (Independent Plan). On September 20, 1983, Independent and Respondent entered into an Administrator Agreement. On July 18, 1978, Independent and Various trustees entered into a trust agreement (Independent Trust Agreement or Independent Trust), which, although naming a different initial administrator, was witnessed by a principal of Respondent. The Independent Plan documents, which were provided by Respondent, are substantially identical to the Alarm Plan and Wrecker Plan documents. On or about September 29, 1983, Respondent, as administrator of the Independent Plan, filed with Petitioner an application for a certificate of authority for the Independent Plan under the Act. Petitioner issued the certificate of authority. Respondent handles contributions and claims for the Independent Plan in the manner described above for the Alarm Plan and Wrecker Plan. As the Independent Plan administrator, Respondent is obligated to file with Petitioner such reports and documents as are required under the Act. Consequently, Respondent has filed with Petitioner annual statements of the Independent Plan for each fiscal year ending from 1983 through 1987. The fiscal year of the Independent Plan and Independent Trust ends on the last day of February. On December 7, 1987, Respondent filed the Independent Plan annual statement for the fiscal year ending on February 28, 1987. The financial statements attached to the 1987 annual statement disclosed a deficit of $289,552 available to pay claims, annual additions of about 2.8 million, and annual deductions of about $2.62 million. Attached to the 1987 annual statement is a one-page letter, signed by a trustee, stating that a rate increase of 14.3%, effective January, 1987, had produced additional funds of $270,395 and a second rate increase of 14.3%, effective October, 1987, would produce additional funds--over an unstated period of time--of $309,062, which would produce an Independent Trust surplus--at an unstated point in time-- of $118,483. Mr. Vaughn testified that the 1987 annual statement of the Independent Plan was filed late due to the presence in Respondent's offices of Petitioner's auditors for five months. Florida RV Trade Association The Florida RV Trade Association (RV) is a trade association that sponsored the Florida RV Trade Association Health and Welfare Benefit Plan (RV Plan). On September 1, 1983, RV and various trustees (RV Trustees) entered into a trust agreement (RV Trust Agreement or RV Trust). The RV Trust Agreement named Respondent as the administrator of the RV Plan. The RV Trust Agreement and RV Plan, which were provided by Respondent, are substantially identical to the Alarm Plan and Wrecker Plan documents. On or about October 6, 1983, Respondent, as administrator of the RV Plan, filed with Petitioner an application for a certificate of authority for the RV Plan under the Act. Petitioner issued the certificate of authority. Respondent handled contributions and claims for the RV Plan in the manner described above for the Alarm Plan and Wrecker Plan. As the RV Plan administrator, Respondent was obligated to file with Petitioner such reports and documents as are required under the Act. Respondent's obligations extended to ensuring that the security or surety bond required by the Act, if available, was obtained timely and posted with Petitioner. Respondent regularly obtained the surety bonds for plans holding a certificate of authority under the Act, which included the Dismantlers Plan and Independent Plan, through Dealers Insurance Company. Dealers Insurance Company and Respondent share the same telephone number, although they use different post office boxes. Mr. Vaughn is also president of Dealers Insurance Company, of which he is part owner. Glenna Bryan is the office manager of Respondent and office manager and vice president of Dealers Insurance Company. Although operating under a certificate of authority, the RV Plan never posted with Petitioner the security or surety bond required by the Act prior to 1987. By letter dated July 25, 1986, to the RV Trustees, Mr. Vaughn, on behalf of Respondent, stated, as he had at a meeting with the RV Trustees in April, 1986, that the only option available to restore financial soundness to the RV Trust was to merge the RV Plan and RV Trust into another plan and trust. In 1986 or early 1987, Petitioner demanded that the RV Plan post the security or surety bond required by the Act. Respondent obtained from Dealers Insurance Company a surety bond in the required amount of $100,000. The bond was duly signed on February 2, 1987, by Ms. Bryan for Dealers Insurance Company, which served as the surety on the bond. The surety bond was delivered to Respondent. Ms. Bryan, as office manager of Respondent, mailed the bond to the RV Trustees with a cover letter dated February 17, 1987. The letter stated that the bond had been "issued on behalf of the State of Florida [and] is a M.E.W.A. bond that will be posted with the State. . .." The letter requested that, after the RV Trustee had signed the bond as principal, he return it to Respondent. The RV Trustee duly executed the bond, but, instead of returning it to Respondent, he sent it to the RV attorney, who sent it to Petitioner together with a cover letter dated March 9, 1987. On March 9, 1987, RV paid the premium for the bond by check in the amount of $1,000 and payable to Dealers Underwriting Service. RV delivered the check to Mr. Vaughn. Dealers Underwriting Service, of which Mr. Vaughn is secretary and treasurer, promptly deposited the check. The premium has never been refunded to RV. The bond was delivered to Petitioner without the prior specific knowledge of Respondent or Dealers Insurance Company. By letter dated June 3, 1987, Dealers Insurance Company informed Petitioner that the bond was cancelled as of August 5, 1987. Dealers Insurance Company has also taken the position that the bond was never properly delivered and null and void ab initio. Dealers Insurance Company has thus refused to honor any claims or demands under the bond. Dealers Insurance Company had completed its underwriting prior to signing the bond and delivering it to Respondent. The only purposes of having the original bond returned to Respondent were to obtain a copy of a fully executed bond and ensure that it was properly filled in and filed. Dealers Insurance Company cancelled the bond because of the RV Trust's insolvency and imminent dissolution, which Dealers Insurance Company discovered due to the knowledge gained by Mr. Vaughn and Ms. Bryan in their capacity as employees of Respondent and in the course of their administration of the RV Plan. By order of Leon County Circuit Court entered July 20, 1987, the RV Plan and RV Trust were voluntarily transferred by the RV Trustees to Petitioner for liquidation on the grounds of financial insolvency. Petitioner has unsuccessfully demanded payment under the bond from Dealers Insurance Company.
Recommendation Based on the foregoing, it is recommended that Petitioner enter a final order: Dismissing the first count of the Administrative Complaint; As to the second count, dismissing the portion thereof alleging thatRespondent violated Section 624.437, Florida Statutes; As to the second count, finding Respondent guilty of violating Sections 626.891(1)(b) and 626.891(2)(e), Florida Statutes, as to the latter, by virtue of a violation of Section 626.8805(4) Florida Statutes; As to the third count, dismissing the portion thereof alleging that Respondent violated Section 626.891(1)(b), Florida Statutes; As to the third count, finding Respondent guilty of violating Section 626.891(2)(e), Florida Statutes, by virtue of a violation of Section 626.8805(4), Florida Statutes; As to the fourth count, finding Respondent guilty of violating Sections 626.891(1)(b) and 626.891(2)(b), Florida Statutes, as to the latter, by virtue of a violation of Section 626.8805(4), Florida Statutes. As to the fifth count, dismissing the portion thereof alleging that Respondent violated Section 626.891(1)(b), Florida Statutes; and As to the fifth count, finding Respondent guilty of violating Section 626.891(2)(e), Florida Statutes, by virtue of a violation of Section 626.8805(4), Florida Statutes. Based on the foregoing, it is further recommended that the Final Order suspend the certificate of authority of Respondent, pursuant to Section 626.893, Florida Statutes, for a period of three months from the effective date of the Final Order, for violation of Section 626.891(1)(b), Florida Statutes, proven as to the second count; impose an administrative fine against Respondent in the total amount of $9000, representing $5000 for the willful violation of Section 626.891(1)(b), Florida Statutes, proven as to the fourth count, and $1000 for each of the four violations of Section 626.891(2)(e), Florida Statutes, proven as to the second, third, fourth, and fifth counts. Each of these violations is based on demonstrated incompetence, which, at least in this case, implies an ignorance that is inconsistent with a finding of willfulness. DONE and RECOMMENDED this 13th day of June, 1988, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of June, 1988. APPENDIX Treatment Accorded Petitioner's Proposed Findings Count One 1-4. Adopted. 5-6. Rejected as contrary to the greater weight of the evidence. 7. Adopted. 8-9. Rejected as unnecessary. 10-11. Adopted, except that Respondent did not solicit Alarm; it only furnished the documents. 12-13. Adopted in substance. 14-18. Adopted. 19-21. Rejected as unnecessary. 20. Adopted. 22. First two sentences adopted. Last sentence rejected as unnecessary. Third sentence rejected as unsupported by any evidence. 23-25. Adopted in substance, except that the certificate of authority issued to the other plans is irrelevant to whether the Alarm Plan required one. 26. Rejected as legal argument. While it is evident that Respondent recognized the legal significance of admitting that plans were MEWA's, it is likely that it did not weigh the legal significance of "operation and maintenance" in its Answer. Count Two 1-4,6. Adopted. 5. Adopted in substance. 7. Rejected as legal argument and contrary to greater weight of the evidence. 8-11. Adopted. Adopted in substance. Rejected as unnecessary. 14-16. Adopted, except that Respondent did not solicit Wrecker; it only furnished the documents. 17-18. Adopted in substance. 19-23. Adopted. 24. Rejected as unnecessary. 25-26. Adopted. 27-28. Adopted in substance, except that the certificate of authority issued to the other plans is irrelevant to whether the Wrecker Plan required one. 29. Rejected as legal argument. Counts Three and Four All proposed findings adopted or adopted in substance. Count Five All proposed findings adopted or adopted in substance, except that 9,11, and 19 are rejected as unnecessary. Adopted. Rejected as against the greater weight of the evidence and unnecessary. 3-4. Rejected as unnecessary. 5-9,11. Rejected as legal argument. 10 and 13. Adopted. 12. Adopted in substance. 14 and 15. Rejected as argument and, in the case of 15, unnecessary. Rejected as unnecessary, except that M. L. Vaughn is President of the surety. Rejected as legal argument and against the greater weight of the evidence. COPIES FURNISHED: R. Terry Butler, Esquire Department of Insurance 413-B Larson Building Tallahassee, Florida 32399-8300 Geoffrey B. Dobson, Esquire Meredith & Dobson, P.A. 77 Bridge Street St. Augustine, Florida 32804-1957 Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 =================================================================
The Issue Whether Respondent failed to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes, and, if so, the appropriate penalty.
Findings Of Fact Petitioner is the state agency responsible for enforcing the Florida Workers' Compensation Law, chapter 440, Florida Statutes, including those provisions that require employers to secure and maintain payment of workers’ compensation insurance for their employees who may suffer work- related injuries. Respondent is a Florida limited-liability company, having been organized on May 2, 2007. Mike Hawryluk has been the sole manager of the company. The company is engaged in roofing in the construction industry. When Respondent was established, a checking account was opened in the company name. Respondent maintained workers’ compensation insurance from June 1, 2007, until June 1, 2009. Mr. Hawryluk filed a notice of election to be exempt from the provisions of chapter 440. That exemption became effective on November 2, 2007. Mr. Hawryluk held three construction licenses: a general contractor license, #CGC1517558; a building contractor license, #CBC1254280; and a roofing contractor license, #CCC1328252. A general contractor is “a contractor whose services are unlimited as to the type of work which he or she may do, who may contract for any activity requiring licensure under this part, and who may perform any work requiring licensure under this part.” § 489.105(3)(a), Fla. Stat. A building contractor is “a contractor whose services are limited to construction of commercial buildings and single- dwelling or multiple-dwelling residential buildings, which do not exceed three stories in height, and accessory use structures in connection therewith or a contractor whose services are limited to remodeling, repair, or improvement of any size building if the services do not affect the structural members of the building.” § 489.105(3)(e), Fla. Stat. A roofing contractor is “a contractor whose services are unlimited in the roofing trade.” § 489.105(3)(e), Fla. Stat. Due to declines in the economy, Respondent became insolvent in 2010, and the company went inactive. Respondent did not take formal steps to end its existence, but stopped filing annual reports. On September 23, 2011, Respondent was administratively dissolved by the Department of State, Division of Corporations for failing to file an annual report. No business was conducted by Respondent after the date of dissolution, until its reinstatement as discussed herein. In conjunction with the dissolution of the company, Mr. Hawryluk allowed his workers’ compensation owner’s exemption to expire on November 1, 2011. Mr. Hawryluk continued to use the CBC Roofing Company bank account as a personal bank account. That decision was made as a matter of personal convenience, and does not demonstrate that Respondent continued to either conduct business or engage its defunct corporate existence in any way. As the economy improved, and as his alternative job of selling internet domain names failed to pan out, Mr. Hawryluk decided to re-enter the construction business. The Division produced a series of building permits issued by Volusia County to Mr. Hawryluk under any of his three construction licenses, or to other companies under his control. The permits were obtained by Mr. Etheredge on June 10, 2015, in preparation for the final hearing. The permits were as follows: Applicant Parcel Address Permit Type Last Activity Mike Hawryluk 21 Julie Dr., Ormond Beach Residential 03/29/2010 Mike Hawryluk 54 Palm Dr., Ormond Beach Re-roof repair 04/08/2010 Mike Hawryluk 1712 Derbyshire Rd., Holly Hill Re-roof replace 05/15/2012 Mike Hawryluk 3 John Bulow Cir., Ormond Beach Re-roof 05/06/2014 CBC Roofing Co. Mike Hawryluk Mike Hawryluk 36 Seabreeze Dr., Ormond Beach Roof/combination 05/29/2014 Mike Hawryluk 80 Carol Rd., Ormond Beach Re-roof replace 05/29/2014 Mike Hawryluk 3070 Whisper Blvd., DeLand Re-roof repair 06/13/2014 Mike Hawryluk 3070 Whisper Blvd., DeLand Re-roof replace 06/20/2014 Mike Hawryluk 1313 Fairway Ave., Ormond Beach Re-roof replace 07/11/2014 Mike Hawryluk 225 Seminole Dr., Ormond Beach Re-roof replace 09/09/2014 Bruce A. Fizell 10 Dunes Cir., Ormond Beach Roofing 02/20/2015 Mike Hawryluk Subcontractor Mike Hawryluk 2577 John Anderson Dr., Ormond Beach Re-roof replace 03/12/2015 Mike Hawryluk 3296 Relay Rd., Ormond Beach Re-roof 03/18/2015 CBC Roofing Co. Mike Hawryluk Mike Hawryluk 309 Navajo Dr., Ormond Beach Re-roof replace 04/17/2015 There were no permits issued for the period from January 13, 2013 to November 8, 2013, the period during which Respondent was legally dissolved, and during which Respondent was not engaged in construction contracting.1/ The evidence in this case, including the permit record, provides clear and convincing evidence that Respondent was not conducting business, and was thus not an “employer” during the period from January 13, 2013 to November 8, 2013. Respondent was reinstated on November 8, 2013, and has remained active since. On November 13, 2013, Mr. Hawryluk reinstated his workers’ compensation owner’s exemption. On January 12, 2015, Petitioner's investigator, Robert Etheredge, conducted an inspection at a residential construction site at 225 Seminole Drive, Ormond Beach, Florida. He observed three people removing siding from the residence, identified as William Evans, Thomas Vance, and Marcos Proveda. There were two trucks parked at the site, one of which had a CBC Roofing sign affixed. Mr. Hawryluk was also at the site. Mr. Hawryluk stated that the three employees had been there for approximately one hour, and were being paid at a rate of $8.00 per hour. Mr. Etheredge asked Mr. Hawryluk for evidence that Respondent’s employees were covered by workers’ compensation insurance. There was none. Mr. Etheredge reviewed the Compliance and Coverage Automated System (CCAS), which is the statewide database for workers’ compensation information, to confirm Respondent’s status in the workers’ compensation system. Using the CCAS, Mr. Etheredge confirmed that Respondent had no workers’ compensation coverage on file for any employee of the company. He further noted that Mr. Hawryluk held an exemption from workers’ compensation for the period from November 13, 2013 to November 13, 2015. Mr. Etheredge also accessed the Florida Division of Corporations website to ascertain Respondent’s corporate status. He noted that Respondent had previously been dissolved, and then reinstated on November 8, 2013. After having gathered the information necessary to determine Respondent’s status, Mr. Etheredge contacted his supervisor and received authorization to issue a Stop-Work Order and Order of Penalty Assessment. The Stop-Work Order required Respondent to cease all business operations statewide. The Order of Penalty Assessment assessed a penalty, pursuant to section 440.107(7)(d), “[e]qual 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 has failed to secure the payment of compensation within the preceding 2-year period.” The consolidated order was hand- delivered to Mr. Hawryluk, on behalf of Respondent, at 11:45 a.m. on January 12, 2015. The Stop-Work Order and the Order of Penalty Assessment, as amended, named CBC Roofing Company Mike Hawryluk, LLC, as the employer. The Stop-Work Order and the Order of Penalty Assessment, as amended, did not name Mr. Hawryluk as having violated the workers’ compensation law, either individually or “doing-business-as” CBC Roofing Company Mike Hawryluk, LLC. The Stop-Work Order was accompanied by a Request for Production of Business Records for Penalty Assessment Calculation, which required Respondent to “produce business records for examination and copying, for the period of 01/13/2013 through 01/12/2015.” On January 14, 2015, Respondent advised the Division, by letter, that it had terminated the three employees observed at the construction site, with the three having been paid a total of $25.50. In response to the Request for Production of Business Records, Respondent produced all records that it had for the period during which it was conducting business prior to January 1, 2015, consisting of bank records for the period of November 13, 2013 through December 31, 2014. Respondent did not produce records for the period from January 1, 2015 through January 12, 2015. The records provided for the period of November 13, 2013 through December 31, 2014, were sufficient to allow the Division to determine that there was no violation of workers’ compensation for that period. Thus, the Second Amended Order of Penalty Assessment did not calculate or assess penalties for that period. There were no business records produced for the period from January 13, 2013 to November 13, 2013, because Respondent was defunct, and business records did not and could not exist. Although section 440.107(7)(e) requires salaries of employees to be imputed for a period of the previous two years, Mr. Etheredge testified that Petitioner’s construction of the law has resulted in the situation in which: Sometimes I come across companies that only started six months ago. We do not go back further, that wouldn't make any sense. We only go to the inception of the company or two years, whichever happens to be greater. THE COURT: All right. And had the company started on November of 2013, would these records have been sufficient, the records provided to you been sufficient to calculate a penalty without the information? THE WITNESS: If there was also an accompanying record to indicate that the company actually started November 2013, then that would have been adequate, correct. Petitioner’s application of the law applies with equal force in this case, in which the evidence demonstrates conclusively that, for all practical purposes, Respondent “started” on November 8, 2013, after a period of dissolution and inactivity. In that regard, it makes no more sense to impute wages for non-existent employees while a company is defunct and demonstrably inactive than it does to impute wages for non-existent employees before a company is in existence.2/ The records were reviewed by Petitioner’s penalty auditor, Lyna Ty. Mr. Ty determined that the records were insufficient to establish the compensation paid to Respondent’s employees for the periods from January 13, 2013 to November 13, 2013, and from January 1, 2015 to January 12, 2015. Therefore, pursuant to section 440.107(7)(e), salaries were imputed for each of the three employees, and for Mr. Hawryluk for the period before the reactivation of his owner’s exemption, based on the statewide average weekly wage for the period for which “inadequate” records were provided. Mr. Ty used the “Scopes Manual” published by the National Council on Compensation Insurance to ascertain the classification of Respondent’s business, based upon the nature of the goods and services it provided. Mr. Ty originally determined that Respondent’s construction business fell within Class Code 5551 - Roofing. During the course of this proceeding, the Division determined that the more accurate Scopes Manual classification code for Respondent’s business was Class Code 5645, Carpentry - Construction of Residential Dwellings Not Exceeding Three Stories in Height. The calculations described herein are those that applied the correct class code, and which resulted in the 2nd Amended Order of Penalty Assessment that forms the basis for this proceeding. The salaries of Respondent’s three employees, as employees of a class code 5645 business, were imputed as though they worked full-time for Respondent from January 13, 2013 to November 13, 2013, and from January 1, 2015 to January 12, 2015, the periods for which “inadequate” records were provided. In addition, salary was imputed to Mr. Hawryluk for the period from January 13, 2013 to November 13, 2013, since his exemption had expired, and had not yet been reinstated. Since the records provided for the period of November 13, 2013 through December 31, 2014, were sufficient to demonstrate that Respondent did not fail to secure the payment of compensation, salaries were not imputed by the Division for that period. The imputed wages were then multiplied by two, pursuant to section 440.107(7)(e), resulting in a total imputed gross payroll of $292,385.44. The penalty for Respondent’s failure to maintain workers’ compensation insurance for its employees is calculated as “2 times the amount Respondent 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 National Council on Compensation Insurance periodically issues a schedule of workers’ compensation rates per $100 in salary, which varies based on the Scopes Manual classification of the business. The workers’ compensation insurance premium was calculated by multiplying one percent of the $292,385.44 imputed gross payroll ($2,923.85) by the approved manual rate (which varied from $15.71 to $15.91, depending on the quarter), which resulted in a calculated premium of $46,162.35. The penalty was determined by multiplying the calculated premium by two, resulting in the final penalty of $92,324.70. On June 10, 2015, the Division prepared its 2nd Amended Order of Penalty Assessment assessing a monetary penalty in that amount against Respondent. The overwhelming weight of the evidence in this case demonstrates that Respondent ceased operation as a business engaged in construction contracting no later than September 23, 2011, and took no further action to conduct business until it filed for reinstatement on November 8, 2013. The Division failed to establish that Respondent was an “employer” for workers’ compensation purposes from January 13, 2013 to November 8, 2013. Respondent was not, during that period, “carrying on any employment” and, during the period of dissolution, had no employees. The Division established that Respondent was an "employer" for workers' compensation purposes beginning on November 8, 2013, because it was engaged in the construction industry and had one or more employees working for the company. Applying imputed wages in accordance with the formula described above, the penalty for the period from November 8, 2013 through November 12, 2013, is calculated by first applying the average weekly wage of $841.57 for each of the four employees, including Mr. Hawryluk, for a period of one week (though there is absolutely no evidence that the three employees observed on January 12, 2015, were employees from November 8, 2013 to November 12, 2013), which comes to $3,366.28.3/ Multiplying $3,366.28 by two, pursuant to section 440.107(7)(e), equals a gross payroll for the period of $6,732.56. One percent of the gross payroll ($67.33) times the approved manual rate for that quarter ($15.71) produces a premium amount of $1,057.75. That amount times two, pursuant to section 440.107(7)(d)1., results in a penalty of $2,115.50. The penalty correctly established in the 2nd Amended Order of Penalty Assessment Penalty Calculation Worksheet for the period from January 1, 2015 to January 12, 2015, is $2,754.36. The appropriate penalty for the full lawful period of imputation is $4,869.86.
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 assessing a penalty of $4,869.86 against Respondent, CBC Roofing Company Mike Hawryluk, LLC, for its failure to secure and maintain required workers’ compensation insurance for its employees for the periods of time set forth herein. DONE AND ENTERED this 11th day of September, 2015, in Tallahassee, Leon County, Florida. S E. GARY EARLY 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 11th day of September, 2015.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: At all times relevant hereto, Respondent was a certified residential contractor, holding license no. CR-C018860, issued by the State of Florida, Department of Professional Regulation, Construction Industry Licensing Board. Sometime prior to May, 1985, Respondent verbally contracted with Stavros Kountanis (Kountanis), owner of a commercial building located at 658 North Dixie Highway, New Smyrna Beach, Florida, to furnish labor and materials for work to be performed on the commercial building. The contracted work included installation of a sink, a toilet, a new back door, a dropped ceiling with light fixtures, partitioning off restrooms and covering a drain used as a grease trap with concrete. The contract price of the project, based on Respondent's calculation for labor and material, was $1,500.00 which Respondent received from Kountanis in the form of a loan. Respondent did not obtain a building, plumbing, or electrical permit for the work performed on the commercial building identified in paragraph 2 above and contracted for by the Respondent. At no time material to these proceedings was Respondent licensed other than as a certified residential contractor. Along with Respondent, Cardy Moten, Respondent's partner and Cardy Moten's helpers performed the work for which Respondent had contracted for with Kountanis. The limitations placed on Respondent's license by statute prohibited him from contracting for, or performing, the type work which he had contracted for and performed. At no time material to these proceedings was Cardy Moten or his helpers on the Kountanis job licensed to perform commercial contracting, plumbing contracting or electrical contracting. At all times material to these proceedings Sections 105.1 and 106.1, Standard Building Code, as adopted by the City of New Smyrna Beach, Florida were in full force and effect. Respondent's failure to obtain a permit to perform the work contracted for with Kountanis before performing the work was in violation of Section 106.1, Standard Building Code, as adopted by the City of New Smyrna Beach, Florida and Section 10-96, Building Regulations, New Smyrna Beach Code. Respondent was aware that Kountanis had not obtained a permit for the work which Respondent had contracted for with him. The work depicted in Petitioner's Exhibit No. 4A thru 4D was work that Respondent had contracted for and performed or performed by Cardy Moten and his helpers at Respondent's direction.
Recommendation Based upon the Findings of Fact and Conclusions of Law recited herein, it is RECOMMENDED that the Board enter a final order finding the Respondent guilty of the violations charged in the Administrative Complaint and for such violations it is RECOMMENDED that the Board suspend the Respondent's certified residential contractor's license for a period of one (1) year and assess the Respondent with an administrative fine of $500.00, stay the suspension and place the Respondent on probation for a period of one (1) year, provided the Respondent pays the $500.00 fine within ninety (90) days of the final order. Respondent's failure to pay the $500.00 fine within the time specified will result in his certified residential contractor's license being suspended for a period of one (1) year with the requirement that when the fine is paid and the suspension lifted, the Respondent must appear before the Board for reinstatement of his license. RESPECTFULLY submitted and entered this 25th day of November, 1986 in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of November, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-2638 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner 1. Adopted in Finding of Fact 1. 2. Adopted in Finding of Fact 2. 3. Adopted in Finding of Fact 3. 4. Adopted in Finding of Fact 4. 5. Adopted in Finding of Fact 7. 6. Adopted in Finding of Fact 4. 7. Adopted in Finding of Fact 5. 8. Adopted in Finding of Fact 8. 9. Adopted in Finding of Fact 6. Adopted in Finding of Fact 9. Adopted in Finding of Fact 10. Rejected as immaterial and irrelevant. Adopted in Finding of Fact 13. Rejected as immaterial and irrelevant. Rejected as immaterial and irrelevant. Adopted in Finding of Fact 13. Rulings on Proposed Findings of Fact Submitted by the Respondent Respondent did not submitted any Proposed Findings of Fact. COPIES FURNISHED: Mr. Fred L. Seely Executive Director Department of Professional Regulation Construction Industry Licensing Board Suite 504 111 East Coast Line Drive Jacksonville, Florida 32202 Fred Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Lagran Saunders, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Joseph Vernon Eubank Post Office Box 9269 Glenwood, Florida 32722
Findings Of Fact Respondents Murphy's and Lyons' are both engaged in the business of removing wrecked, disabled, stolen or abandoned motor vehicles on Florida highways. Pursuant to Section 321.051, Florida Statutes, Petitioners are eligible for, and participate in, the system established by the DHSMV for utilizing qualified, reputable wrecker operators for removal of wrecked or disabled vehicles from accident scenes or the removal of abandoned vehicles when the owner or operator is incapacitated, unavailable, or leaves the procurement of wrecker service to the officer at the scene (hereafter referred to as "FHP wrecker rotation system"). Respondents are each charged in an Administrative Complaint indicating that FHP intends to remove Respondents from each respective zone's wrecker rotation system list for Respondents' respective alleged failure, among other offenses, to comply with the "place of business" requirement of Rule 15B- 9.003(2), Florida Administrative Code, and the unpromulgated non-rule "policy" interpreting the term, "place of business" as used in that rule. Petitioners received such notice by hand-delivery of the respective Administrative Complaints dated July 22, 1987. The FHP wrecker rotation system includes designated zones and qualified wrecker operators within those zones. When a wrecker is needed to respond to an accident or to a motorist, FHP calls the wrecker at the top of the list and then rotates this wrecker down to the bottom of the list. By rotating each wrecker on the rotation list following dispatch by FHP, each participating wrecker service is afforded an equal opportunity to service a call. See Rule 15B- 9.003(3), Florida Administrative Code. In Palm Beach County, FHP designated six zones; twenty-two wrecker businesses have qualified to participate as rotation wreckers. These wrecker companies vary according to their size and operation; qualified wrecker operators include companies with as few as one or two wreckers to as many as thirty trucks. Murphy's Towing, Lyons' Auto Body, and Kauff's Towing are among those currently operating in Palm Beach County in one or more zones of the FHP wrecker rotation system. Petitioner Murphy's Towing has participated in the wrecker FHP rotation system for eight years. Murphy's Towing maintains approximately thirty trucks and operates in four zones in Palm Beach County. It maintains storage areas in each zone. As a result of its fleet of wreckers, Murphy's is able to use a roving patrol operation. When a call is received by Murphy's Towing from FHP, a central dispatcher operating 24 hours per day assigns a Murphy's truck which is patrolling in an assigned zone to respond to the call. In individual instances, this system may actually cut or increase response time within zones from what it might be if a truck were dispatched each time from a stationary place of business within the zone. Presently, wrecker services in Palm Beach County will dispatch the closest vehicle, regardless of the address of the wrecker truck or the location of the wrecker, even across zone lines. Murphy's operates in Zones 2, 3, 4 and 5, and has obtained an occupational license in each of those zones without difficulty concerning whether it maintains a place of business at these locations. The Administrative Complaint seeks to remove Murphy's from rotation lists for Zones 2, 4, and 5. Murphy's location in Zone 2 is part of an auto paint and body shop owned by another individual. The body shop has a phone, office space and personnel on duty from 9:00 a.m. to 4:00 p.m. These personnel are not on Murphy's payroll, but Murphy's has an understanding with the body shop owner that the body shop will answer for Murphy's and assist the public as necessary. Murphy's locations in Zones 4 and 5 are run in the same manner as his Zone 2 location. Murphy's does not own these locations but has an arrangement with the owner to use space at these locations. In Zones 2, 4 and 5, Murphy's informal arrangements do not include employment of personnel on the premises and do not regulate those persons' work hours or work performed. Although a telephone is on the premises, that business telephone number is not necessarily made available to the public. Murphy's maintains no offices, telephone service, wreckers, or personnel at any of these locations. Murphy's maintains trucks within each of the zones and requires the truck drivers to live in the zone they service so that the trucks remain in the zone. Murphy's uses a central dispatch system to receive incoming calls from FHP and the public. The central dispatch is manned 24 hours a day and contacts the trucks which are roving within their designated zone via radio to dispatch them to the accident scene. Murphy's tows vehicles to the storage location in the zone in which the vehicle is picked up unless the owner requests otherwise. The owner is given a card by the driver which has four phone numbers, including the central dispatch number on it, in order to assist the owner in retrieving the vehicle. When owners call Murphy's to pick up their vehicles, their call is received by central dispatch. Arrangements are made for a truck within the zone to meet the owner to release the vehicle. Alternatively, an employee of the property owner will assist the public with release of the vehicle. Murphy's has received no public complaints of untimely response to requests for release. Petitioner Lyons' Auto Body, Inc., has participated in the FHP wrecker rotation system for twenty years. Lyons' Auto Body, Inc. maintains seventeen trucks and operates in three zones in Palm Beach County. Lyons' Auto Body, Inc. also uses a central dispatch operation similar to that employed by Murphy's Towing. Lyons' operates in three zones and has obtained an occupational license in each of those zones. The Administrative Complaint seeks to remove Lyons' from the rotation lists for Zones 1 and 3. In Zone 1, Lyons' maintains a fenced storage yard, and in Zone 3, Lyons' maintains a fenced storage yard with an office and phone. Lyons' trucks are located in the respective zones and remain in the respective zones, unless they have a request to go outside to deliver a car. After hours, the trucks are taken to the respective driver's home and the drivers are required to live in their respective zones. When Lyons' tows for FHP, owners are given a card when the vehicle is picked up. If the owner is not present, the card is given to the FHP Trooper. There is a zone number on the card so the owner may make arrangements to release the vehicle. Lyons' has received no public complaints about release time response. Until FHP promulgated rules which took effect January 22, 1986, including the challenged Rule 15B-9.003(2), Florida Administrative Code, the general operation of the wrecker rotation system was governed by written guidelines and policies established by the local troop commanders, but these written guidelines apparently never embraced the term "place of business" nor defined it. (TR 67-69, 102). Since that date, however, there has been such a duly promulgated rule, Rule 15B-9.003(2), Florida Administrative Code, which provides: To be eligible for approval to tow in a particular zone, the wrecker operator's place of business must be located in that zone, except that if there are no qualified operators in a particular zone, the Division Director or his designee may designate qualified out of zone wrecker operators to be called in that zone. This rule was determined to be a valid exercise of legislatively delegated authority in the rule challenge case originally consolidated herewith. At the time of the promulgation of Rule 15-9.003(2), Florida Administrative Code, in January, 1986, "place of business," as the term is used in that rule, was not defined under Chapter 321, Florida Statutes or Chapter 15- 9, Florida Administrative Code. Because Lt. Col. Carmody believed "place of business" was already defined by common sense and thirty-two years of common FHP interpretation so as to already include a sign, office space, personnel on location in the zone, wreckers on location in the zone, and zone addresses and phone numbers painted on each wrecker, Lt. Col. Carmody did not feel that it was necessary to promulgate an additional rule defining "place of business." Instead, Lt. Col. Carmody gave his "common sense" definition orally when occasional inquiries were made. By letter dated January 19, 1987, Howard Kauff, Chairman of the Board of Palm Beach Services, Inc., d/b/a, Kauff's Towing in three FHP zones in Palm Beach County requested of FHP the definition of "place of business." His letter set out six criteria stating what he understood to be the definition of "place of business." Lt. Col. Carmody responded to Howard Kauff by memorandum dated February 5, 1987. Carmody sent a copy of that memorandum to Inspector William Clark, Bureau Chief in charge of Troop L and to Major William R. Driggers, Troop Commander, Troop L, for the purpose of enforcing Rule 15B-9.003(2) and correcting alleged violations, but he intended for the six criteria identified in his memorandum to have statewide effect. The six non-rule policy criteria incidental to Rule 15B-9.003(2), which were identified by Lt. Col. Carmody in his memorandum to Howard Kauff, and circulated to all of Troop L, were as follows: There must be a sign on the building that identifies it to the general public as a wrecker establishment; There must be office space; They must have personnel on duty at least from 9:00 a.m. to 4:00 p.m., Monday- Friday. There must be a phone at the place of business; Tow trucks must be stationed at the place of business; The tow trucks must have the zone address and phone numbers on them. The non-rule policy in Carmody's memorandum, which for the first time interpreted, in writing, the term "place of business," virtually adopts the criteria suggested in Mr. Kauff's letter, with only two exceptions. Lt. Col. Carmody did not disseminate a similar memorandum to all troop commanders throughout the State of Florida until January 8, 1988. (See Finding of Fact 28). Upon receiving Lt. Col. Carmody's response of February 5, 1987, Howard Kauff wrote Captain Hardin of Troop L, asking for removal of several wrecker operators, among them, Murphy's and Lyons', which operators Kauff had identified as allegedly failing to comply with the six "place of business" criteria specified by Lt. Col. Carmody. Lt. Wessels subsequently conducted an investigation to determine if any of the wrecker services identified by Howard Kauff were in fact in violation of Rule 15B-9.003(2), as interpreted by Lt. Col. Carmody's memorandum of February 5, 1987. For varied reasons, including not being able to locate some satellite business addresses, Lt. Wessels concluded that eight companies did not comply with the policy criteria and recommended their removal from the appropriate rotation list. Lt. Wessels inspected the locations of Murphy's Towing in Zone 2 (Juno Beach and Riviera Beach), Zone 4 (Lake Worth) and Zone 5 (Hypoluxo) on April 7, 1987. The inspections revealed a vacant lot at the Juno Beach location with a sign indicating "Dad Auto Broker, Inc." and a business identified as "Elite Paint and Body Shop" at the Riviera Beach location. Members of the Highway Patrol could not locate the Lake Worth and Hypoluxo addresses, but admittedly, no one phoned ahead for directions. No wreckers were present at the addresses found. Lt. Wessels also inspected the locations of Lyons' Auto Body in Zone 1 (Jupiter) and Zone 3 (West Palm). The inspections revealed a small fenced lot at the Jupiter location with a sign, "Lyons Auto Body, Inc." and the address and phone number, and a fenced lot with an unoccupied building which maintained a sign indicating the name, address, and phone number at Palm Beach. No wreckers were present at Jupiter. At least three wreckers were present at the Zone 3 (West Palm Beach) location, but no personnel were observed. Petitioners Murphy's Towing and Lyons' Auto Body, Inc. were included in the eight wrecker services identified by Lt. Wessels. Following Lt. Wessels' investigation, FHP issued to the eight wrecker companies Orders to Show Cause why they should not be removed from the appropriate rotation list. Three of the wrecker services complied with the "place of business" requirement. Wessels recommended that the remaining five, which included both Petitioners Murphy's and Lyons' be removed. Pursuant to Wessels' recommendations, the Department issued Administrative Complaints against the five wrecker operators. Three wrecker operators were removed from this respective list--two voluntarily and one by Order of the DHSMV. Murphy's has participated in the wrecker rotation system for eight years without any complaint, citation, or criticism for untimely response. Its main place of business and wreckers have been inspected each of the years immediately prior to service of the Order to Show Cause without any FHP comment on its failure to comply with the "place of business" rule or non-rule policy, despite Lt. Wessels' being aware of Murphy's multi-zone operation as early as May 16, 1986. The July 22, 1987, Administrative Complaints against the Petitioners enunciate only the non-rule policy as it had evolved up to February 5, 1987, and as set out in Finding of Fact 22 supra., not as it had evolved as of the January 8, 1988, statewide memorandum described in Finding of Fact 28 infra. Lyons' has participated in the wrecker rotation system for twenty years without any FHP concerns over untimely response. Its history of successful yearly inspections and no FHP comment concerning the "place of business" rule and non-rule policy has been identical to Murphy's for the last three years immediately preceding the Order to Show Cause. Murphy's and Lyons' are two of Kauff's largest competitors. Of the ten multi-zone wrecker operators in Palm Beach County, only Mr. Kauff's and one other met the criteria suggested by Kauff's letter and enforced by non-rule policy prior to the Orders to Show Cause. See Finding of Fact 25. Lt. Col. Carmody did not disseminate a memorandum covering the non- rule policy to all troop commanders throughout the State of Florida until January 8, 1988. He did circulate such a memorandum on that date, but only after his deposition had been taken in the instant and companion rule challenge case. At the time Lt. Col. Carmody corresponded with Howard Kauff on February 5, 1987, Palm Beach County was the only area, to his knowledge, which had experienced problems with the "place of business" interpretation because of the use of multiple zone wreckers. Lt. Col. Carmody had no knowledge of similar problems in any other area of the state at that time. Testimony of Carmody and Wessels at formal hearing confirmed this to also currently be the case. Specifically, there is affirmative evidence that FHP has experienced no similar use of wreckers in multiple zones in the Fort Myers area and no requests for interpretation of the rule from that area of the state or any other. Carmody's January 8, 1988, memorandum was intended to insure uniform application of the six "place of business" criteria which Carmody had previously assumed where generally known and applied throughout FHP. The January 8, 1988 statewide memorandum contained some further refinements and embellishments of the language contained in the earlier memorandum to Kauff and Troop L in Palm Beach County, but the only substantive changes were that for the fifth criterion, the wrecker operator was required to "maintain at least one tow truck at the place of business" and for the sixth criterion, the zone address and phone numbers must be "clearly visible to the public." The 1988 memorandum also contained the further directive that: I recommend that you correspond with each wrecker operator to give the wrecker service notice that the above criteria must be met for the wrecker to comply with the requirements of Rule 15B-9.003(2). Subsequent inspections by FHP personnel of wrecker service shall require compliance noted and the wrecker service given an opportunity to correct any deficiency. If the wrecker operator fails to correct any violation after notice by FHP personnel, Order to Show Cause should be issued to the wrecker service advising that noncompliance will result in the removal of the wrecker service from the rotation list. Following the issuance of the Order to Show Cause, the Office of General Counsel should be advised to take action to remove the wrecker service from the rotation list if the wrecker service has failed to comply with the place of business criteria. [Emphasis supplied, Exhibit P-4.] The non-rule policy appears then to have evolved at least by that point in time to clearly include written warnings prior to enforcing the criteria at a subsequent inspection. The parties have, however, stipulated that as to the six enumerated criteria, the language employed in February 1987, not January 1988, is the non-rule policy FHP is enforcing and intends to enforce. Other evidence suggests that it was always the Patrol's practice that warnings precede an Order to Show Cause. In January, 1988, FHP learned that Kauff's Towing did not maintain office personnel at its business location in Lake Worth, Zone 4 from 9:00 a.m. to 4:00 p.m., Monday through Friday. Kauff was verbally advised by FHP of the noncompliance. This notice was followed by written confirmation on January 20, 1988 and February 10, 1988. In response to this notice by FHP, Howard Kauff directed his terminal manager to provide personnel at the location during the required time period. Kauff was advised that noncompliance with the criteria would result of removal of Kauff's from the rotation list in Zone 4, Palm Beach County. At formal hearing, Lt. Col. Carmody stated that his memoranda did not address whether outside or inside storage must be available in a zone. In his opinion, FHP could not regulate that aspect due to prior Attorney General Opinion 85-60. He opined that a wrecker operator's using a central dispatch may be sufficient although the criteria he seeks to enforce requires a phone at each place of business. Lt. Wessels essentially concurred. Lt. Wessels was unsure how response time would be adversely affected if a truck were maintained in the assigned zone but there was not a building located in the assigned zone or if a tow truck were not physically located at the building location designated as a place of business in the zone but was either patrolling in the zone or parked elsewhere in the zone. Lt. Wessels was unable to testify whether ownership or rental of a building by an operator had significance with regard to the "place of business" rule or the six non-rule policy criteria. Lt. Wessels would accept, within the six criteria, an operator's use of a storage lot maintained by the lot's owner who was not an employee of the wrecker operator. However, it was not demonstrated that Lt. Wessels is in a policy making position for the agency, and his testimony as to the foregoing matters at best demonstrates some further confusion as to how the six interpretative non-rule policy criteria are to be applied on a case by case basis. It does not demonstrate that those six criteria have been applied to Petitioners in any unequal fashion, merely that application of the six criteria is best made on a case by case basis. In the course of discovery, Respondent agency denied the following Request for Admission, "2. Admit that the interpretation of the place of business requirement has not been equally applied to all wrecker operators in the State of Florida." The evidence as a whole does not demonstrate such unequal application of the promulgated rule or the non-rule policy to Respondents in this cause. Nor is the proof sufficient to establish such arbitrary application to Respondents so as to permit them to avoid the necessity for compliance. Apparently, as of the date of formal hearing, both rule and non-rule policy are being applied evenhandedly in Palm Beach County where violations have been documented. The testimony of Lt. Col. Carmody and Lt. Wessels demonstrates that no reports of violation have been made from other counties. Respondents did nothing to refute this testimony nor did they provide any evidence of multiple zone operators in other counties or zones outside of Palm Beach County who were systematically permitted to evade the rule and/or non-rule policy. The non-rule policy has been sufficiently explicated in the course of this proceeding so that it may be applied with reasonable precision. The agency's primary purpose behind the place of business non-rule policy, as is its purpose for Rule 15B-9.003(2) itself, is to insure prompt response time, which Lt. Col. Carmody and Lt. Wessels view as impacting on overall traffic safety. Specifically, the concerns of FHP are that without a sign on the place of business, the wrecker operator is difficult to locate. Lt. Wessels personal experience in being unable to locate certain operators during his subsequent investigation in preparation for the Administrative Complaints demonstrates this concern is valid. A sign assists the public in locating the wrecker service for retrieval of towed vehicles or personal property. It assists in accident investigation and reconstruction by providing quick access to the towed vehicle by insurance investigators/appraisers and by FHP. The office space requirement, the requirement of a telephone on the premises, and the requirement of the presence of office personnel during reasonably specified business hours encourages wrecker services to serve the public by receiving phone calls, permitting payment of towing bills or securing the release of vehicles or personal property, and assists in dispatching wreckers in timely response to FHP rotation call made by telephone. It was established that in Palm Beach County, at least, FHP rotation calls are, in fact, made by telephone. It is noted that these foregoing criteria relating to telephone contact are also consistent with unchallenged Rule 15B-9.003(8) and (9) and that the hours of 9:00 a.m. to 4:00 p.m. are considerably less for office personnel than the 24 hours per day "on call" status specified in Subparagraph (9). These foregoing requirements help to insure a reasonable response time, as does the requirement that the wrecker be stationed at the place of business within the zone. The requirement that the wrecker be stationed at the place of business within the zone also facilitates timely inspections of each vehicle by the FHP. Painting the name, address, and telephone number on each truck fosters accountability of the wrecker operators, insures the reasonable response time due to their presence within the zone, and it may be inferred from all other evidence that it discourages vehicle equipment from being moved from truck to truck. It is further noted that the truck sign requirement is also consistent with Section 715.07(2)(a)7, Florida Statutes, regulating the towing of vehicles from private property.
Recommendation Upon the foregoing findings of fact and conclusions of law it is recommended that the Department of Highway Safety and Motor Vehicles enter a final order providing: That unless Murphy's Towing establishes, in each respective zone, a place of business as defined by rule and non-rule policy, within 30 days from date of the final order, Murphy's shall be summarily removed from the FHP wrecker rotation lists for Zones 2, 4, and 5 in Palm Beach County. That unless Lyons' Auto Body establishes, in Zone 1, a place of business as defined by rule and non-rule policy, within 30 days from date of the final order, Lyons' shall be summarily removed from the FHP wrecker rotation list in Zone 1 in Palm Beach County. DONE and ORDERED this 22nd day of July, 1988, at Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of July, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-3962, 87-4011 The following constitute rulings upon the parties' respective proposed findings of fact (PFOF). Petitioner DHSMV Accepted in FOF 3. Accepted in FOF 4. 3-4. Accepted in FOF 24. 5-6. Accepted in FOF 18-22. 7-8. Subordinate and unnecessary. 9-10. Accepted in FOF 21, except as unnecessary. 11-12. Accepted as modified to conform to the competent substantial evidence as a whole 21-23, 32. Accepted in FOF 28. Accepted in FOF 23. 15-17. Accepted as modified to conform to the record in FOF 8, 11, 24. 18-19. Accepted in FOF 25. Accepted in FOF 26-27. Accepted in FOF 8, 12. Respondents Murphy and Lyons 1. Accepted in FOF 6. 2-3. Accepted in FOF 7. Accepted in FOF 9. Accepted in FOF 10. Accepted in FOF 11. Accepted in FOF 12. 8-15. Accepted in FOF 24, 26. 16-18. Accepted in FOF 24. 19-23. Accepted in FOF 13-17. 24-27. Accepted in FOF 26. 28-29. Accepted in FOF 18-20. 30-31. Accepted in FOF 21-22, 28. Accepted in FOF 18-22, 28. Accepted as to studies. Rejected as to the rest upon the greater weight of the evidence as a whole in FOF 18-22, 28. Accepted in FOF 32. 35-37 Subordinate and unnecessary. 38-39. Accepted in FOF 30. Accepted in FOF 28. Accepted in FOF 23. Accepted in FOF 27. Accepted as modified to conform to the record in FOF 27. Accepted in FOF 24. Accepted in FOF 29. 46-49. Accepted in FOF 30. 50. Rejected as set forth in the full FOF and Conclusions of Law. COPIES FURNISHED: Leonard R. Mellon, Executive Director Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0504 W. Evans, Esquire Judson Chapman, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0504 Mark T. Luttier, Esquire Michael S. Tammaro, Esquire Odette Marie Bendeck, Esquire 777 South Flagler Drive Suite 500 West Palm Beach, Florida 33014-6194 =================================================================
Findings Of Fact Upon consideration of the oral argument adduced at the hearing, the following relevant facts: In November of 1983, the Captiva Erosion Prevention District (CEPD) submitted an application from the DER to construct an experimental "on-site stabilization system along 650 feet of Captiva Erosion Prevention District. The application listed Petitioner Arthur Learned, president, Learned Engineering and Development, Inc. as authorized agent. Drawings attached to the application show a location plan, a site plan and a plat. Each drawing is on Learned Engineering and Development, Inc. letterhead and is signed by Arthur Learned. The application noted that the project was "ex* NOTE: The continuation of words on this paragraph line are unreadable as viewed in the original document on file in the Clerk's Office and therefore not available in this ACCESS document. judged harmful, can be undone." 3. A Joint U. S. Army Corps of Engineers Permit Application Appraisal was performed* NOTE: The continuation of this paragraph along with pages 3 and 4 of the original document on file in the Clerk's Office are not available therefore not included in this ACCESS document. limitations of authority of resident project representative." Petitioner notes in a letter to the CEPD that said duties are in addition to those normally provided by the Engineer as Owner's representative during construction. Among the listing of the duties of a Resident Project Representative (RPR) is a provision which states that through more extensive on-site observations of the Work in progress and field checks of materials and equipment by the RPR and assistants, ENGINEER shall endeavor to provide further protection for OWNER against defects and deficiencies in the Work; but the furnishing of such services will not make ENGINEER responsible for or give ENGINEER control over construction means, methods, techniques, sequences or procedures or for safety precautions or programs, or responsibility for CONTRACT0R's failure to perform the Work in accordance with the Contract Documents. At some point in February of 1986, the DER discovered that concrete had been used in a portion of the stabilizers. Petitioner met with the DER staff concerning this permit violation, and explained that concrete, rather than sand, was placed in the bags due to changed conditions. Petitioner was told that any change in design needed approval from the DER. By letter dated February 28, 1986, Petitioner requested a modification of the permit to include the substitution of concrete intersection as stabilizer tie-in and filler. The after-the-fact permit modification was granted by letter dated May 26, 1986, addressed to the petitioner. The modification allowed the use of concrete-filled bags to construct the most landward portion of the six permitted groins to a maximum length of 13 feet from the landward connection. It did not permit concrete bags beyond the 13 foot distance. On or about March 6, 1986, petitioner completed a Certificate of Substantial Completion for the Sand Core Filter Beach Stabilizers, indicating the date of substantial completion to be February 16, 1986. Prior to the modification authorized on May 26, 1986, the petitioner received a letter from DER dated March 24, 1986. This letter notified Mr. Learned that the permit did not authorize placement of concrete within the permitted sand bags, and that, in order to correct the outstanding violations, the concrete material must be removed from the sand bags. Petitioner was request to remove all sand bags that contained cement within fourteen days. Based upon DER's prior correspondence with petitioner Learned during the permitting process, as well as its investigation, on-site inspections, meetings, telephone conversations and a sworn affidavit from the Chairman of the CEPD regarding the CEPD's lack of knowledge of noncompliance with the conditions of a similar Department of Natural Resources' permit, DER staff believed that petitioner Learned (along with the contractor) was the responsible party in the decision to use concrete in the sand bags and that the CEPD relied upon the petitioner and the contractor to adhere to permit conditions. The DER did not review the contract documents regarding petitioner's services to the CEPD prior to instituting proceedings against the petitioner. On August 5, 1986, the DER issued a Notice of Violation and Orders for Corrective Action against Erosion Control Systems, Inc. and Learned Engineering and Development, Inc. The Findings of Fact contained therein recite that Learned Engineering and Development, Inc. and Erosion Control Systems, Inc. are the agent and contractor respectively for the CEPD. Violations of Chapter 403 were found and specific corrective actions were proposed. The corrective action to be taken was the removal of all concrete bags waterward of the 13 foot mark, the refilling of said bags with sand, the removal of any bags containing asphalt and the return of all disturbed areas to pre-removal conditions. Learned Engineering and Erosion Control Systems were also to make payment to the DER in the amount of $392.60 for expenses incurred in investigating the matter. On March 16, 1987, DER issued an Amended Notice of Violation and Orders for Corrective Action. This document named the Captiva Erosion Prevention District, Erosion Control Systems, Inc. and Learned Engineering and Development, Inc. as respondents, and noted that CEPD was the permittee, that petitioner Learned was the authorized agent on the project for CEPD and that Erosion Control Systems was the project contractor employed by CEPD. The Amended Notice is substantially similar to the initial Notice, but adds a further violation regarding the use of turbidity curtains during construction. It also adds a Count charging that Respondents Learned and Erosion Control conducted dredging and filling activities without a valid DER permit. The Orders for Corrective Action are identical to the initial Notice. DER subsequently resolved its dispute with the CEPD and, on March 11, 1988, filed a Notice of Voluntary Dismissal as to Erosion Control Systems and petitioner Learned Engineering. At the time of the initial Notice Of Violation and Orders for Corrective Action, petitioner was a for-profit corporation under the laws of Florida with its principal place of business in Venice, Florida. Due to financial difficulties caused, at least in part, by the DER's actions in the enforcement proceeding described above, Arthur Learned, President of Learned Engineering, closed the Florida office, semi-retired and moved to Georgia. Learned Engineering relocated to Georgia on January 1, 1987, and now has its principal place of business in Blairsville, Georgia. It does still maintain contacts in Florida and has recently performed other work in Florida. At all relevant times, Petitioner has had less than 25 employees and a net worth of less than $2,000,000.00. Petitioner incurred attorney's fees and costs in the amount of $5,127.07 in defense of the administrative proceedings described above.
