The Issue Whether Petitioner, Brian’s Painting and Wall Papering, Inc., conducted operations in the State of Florida without obtaining workers’ compensation coverage, meeting the requirements of Chapter 440, Florida Statutes (2007),1 in violation of Subsection 440.107(2), Florida Statutes. If so, what penalty should be assessed by Respondent, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes, and Florida Administrative Code Chapter 69L.
Findings Of Fact Respondent is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees. § 440.107, Fla. Stat. Petitioner is a corporation domiciled in Florida and engaged in the construction industry, providing painting and wallpapering services to private residences in Florida. On December 4, 2007, Investigator Ira Bender conducted a random workers’ compensation compliance check of a new home construction site located at 4009 Twenty-second Street, Southwest, in Lehigh Acres, Florida. Investigator Bender observed two men painting. He later identified the two men as Larry Zoelner and Brian Zack, who were later determined to be Petitioner’s employees. Investigator Bender continued the investigation of Petitioner, utilizing the Respondent’s Compliance and Coverage Automated System (“CCAS”) database that contained all workers’ compensation insurance policy information from the carrier to an insured and lists all the workers’ compensation exemptions in the State of Florida. Based on his search of CCAS, Investigator Bender determined that for the period, December 3, 2004, through December 4, 2007 (“assessed penalty period”), Petitioner did not have a State of Florida workers’ compensation insurance policy or a valid, current exemption for any of Petitioner’s employees, including Zoelner and Zack. Based on his search of CCAS, he also determined that Petitioner did not have a State of Florida workers’ compensation insurance policy or a valid, current exemption for Brian Galvin, Petitioner’s owner and operator, for the assessed penalty period. Galvin admitted that he did not have an exemption prior to December 4, 2007. Section 440.05, Florida Statutes, allows a corporate officer to apply for a construction certificate exemption from workers’ compensation benefits or compensation. Only the named individual on the application is exempt from carrying workers’ compensation insurance coverage. Petitioner was not in possession of a current, valid construction industry exemption for its corporate officer, Galvin, during the three-year search period. To be eligible for the exemption in the construction industry, an employer must pay a $50 processing fee and file a “notice of election to be exempt” application with Respondent for each corporate officer and have that application processed and approved by it. 7. Subsections 440.107(3) and 440.107(7)(a), Florida Statutes, authorized Respondent to issue SWOs to employers unable to provide proof of workers’ compensation coverage, including proof of a current, valid workers’ compensation exemption. Failure to provide such proof is deemed “an immediate serious danger to public health, safety, or welfare . . .” § 440.107(7)(a), Fla. Stat. Based on the lack of worker’s compensation coverage and a current, valid workers’ compensation exemption for its employees, including Galvin, Respondent issued a SWO on Petitioner on December 4, 2007. The SWO ordered Petitioner to cease all business operations for all worksites in the State of Florida. On the day the SWO was issued, Investigator Bender also served Petitioner with a “Request for Production of Business Records for Penalty Assessment Calculation,” for the purpose of enabling Respondent to determine a penalty under Subsection 440.107(7), Florida Statutes. Pursuant to Florida Administrative Code Rule 69L-6.015, Investigator Bender requested business records from Petitioner for the assessed penalty period. The requested records included payroll documents, copies of certificates of exemptions, employee leasing records, and other business records. Investigator Bender was satisfied that the records produced by Petitioner were an adequate response to the business records request. Based on Investigator Bender’s review of the business records, he determined that Galvin was dually-employed during the assessed period. Dual employment occurs when an employee is paid remuneration by two different employers. Galvin was simultaneously employed by SouthEast Personnel Leasing, Inc., as a painter and by Petitioner as its chief operating officer. In calculating the assessed penalty, Investigator Bender only took into account Petitioner’s payroll. It was determined that the payroll from the leasing company demonstrated secured payment of workers’ compensation coverage for the two painters and for Galvin, when he was operating as a painter. Pursuant to Florida Administrative Code Rule 69L- 6.035, Investigator Bender included “dividends” paid by Petitioner to Galvin during the assessed penalty period, in calculating Petitioner’s total payroll amount used in the calculation of the assessed penalty. Galvin argued that dividends paid to him by Petitioner should be excluded from the calculation. However, the dividends that Petitioner paid to Galvin constituted unsecured payment for workers’ compensation coverage, in violation of Chapter 440, Florida Statutes, and the Florida Insurance Code. Through the use of the produced records, Respondent calculated a penalty for the assessed period. The Amended Order, which assessed a penalty of $45,363.76, was issued and served to Petitioner on December 13, 2007. Based on business records Investigator Bender received from SouthEast Personnel Leasing, Inc., on December 17, 2007, Investigator Bender determined that the classification code assigned for Galvin should be changed from 5474 to 5606. Classification code 5474 represented the designation for a painter while classification code 5606 represented the designation for a manager. In the course of his investigation, Investigator Bender also deleted Charlie Galvin after he determined Charlie Galvin was not Petitioner’s employee. Investigator Bender assigned the new class code to the type of work performed by Galvin while working as a manger for Petitioner, utilizing the SCOPES Manual. He multiplied the class code’s assigned approved manual rate with the payroll per $100, and then multiplied all by 1.5. Consequently, the 2nd Amended Order, which was issued and served to Petitioner on December 18, 2007, assessed a penalty in the amount of $19,943.08. The recalculated penalty, as calculated, was consistent with the method in which the investigator had calculated the previous penalties.
Recommendation Based on the Findings of Fact and Conclusions of Law, it RECOMMENDED that Petitioner enter a final order, as follows: Petitioner failed to secure workers’ compensation coverage for its employees, including its corporate officer, as required by statute; and Petitioner be assessed a penalty of $19,943.08. DONE AND ENTERED this 22nd day of May, 2008 in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 22nd day of May, 2008
The Issue The issues are whether Respondent violated Chapter 440, Florida Statutes (2009), by failing to secure the payment of workers' compensation, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that Florida employers secure the payment of workers' compensation for the benefit of their employees. See § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation providing pharmacy services. Respondent has business locations at 842 West Plymouth Avenue, Deland, Florida, and 112 East First Avenue, Pierson, Florida. Respondent's Pierson business site sells a small amount of food like bubble gum and other sundries. Activities at the Pierson location include filling prescriptions, compounding and blending drugs, and dispensing drugs or medicine to walk-in customers and patients. The patients are referred from a health care clinic known as Northeast Florida Health Services (NEFHS). The patients are federally qualified as indigent pursuant to a federal poverty calculation. Respondent's Deland location deals solely with prescription drug transactions to indigent patients who are referred by NEFHS. The Deland business site is very small and has no walk-in customers or food or other sundries for sale. At the end of the month, Respondent sends a bill to NEFHS for the prescriptions dispensed by Respondent at both locations. NEFHS than reimburses Respondent for its services. Respondent pays its employees at both locations out of a single checking account. Only one tax identification number is used for both business locations. On October 27, 2009, Hector Beauchamp, one of Petitioner's workers' compensation compliance investigators, received a referral, indicating that Respondent was operating without workers' compensation insurance coverage for its employees. After receiving the referral, Mr. Beauchamp used the website of the Department of State, Division of Corporations, to obtain Respondent's federal employer identification number. The Department of State website showed that Respondent became Pierson Community Pharmacy, Inc., on March 3, 2005. The website also indicated that Respondent had two corporate officers, John Eidt and Hanan Francis. Next, Mr. Beauchamp contacted Samantha Nixon, one of Petitioner’s penalty calculators, to research Respondent's unemployment compensation tax information on the Department of Revenue's website. Ms. Nixon's research revealed that Respondent employed in excess of four employees for each quarter in the past three years. Mr. Beauchamp also consulted Petitioner's Coverage and Compliance Automated System (CCAS) database. The CCAS database lists the workers' compensation insurance policy information for Florida employers together with any workers' compensation exemptions for corporate officers. The CCAS database accurately revealed that Respondent had no workers' compensation insurance policy in place for its employees and no workers' compensation exemptions for either Mr. Eidt or Ms. Francis as corporate officers. This was true from October 29, 2006, through October 28, 2009. Additionally, the CCAS database did not reveal any utilization of employee leasing by Respondent. Mr. Beauchamp also researched the National Council on Compensation Insurance, Inc. (NCCI) on-line database. Using Respondent's name and federal employer identification number, the database showed no record of a Florida workers' compensation insurance policy for Respondent. On October 28, 2009, Mr. Beauchamp visited both of Respondent's business locations. At the Pierson location, Mr. Beauchamp observed five individuals working behind a Plexiglas partition filling prescriptions. Mr. Beauchamp spoke with Mr. and Mrs. Francis. They confirmed that Respondent did not have workers' compensation insurance in place. Mr. Beauchamp then issued and served a Stop-Work Order. He also issued and served a records request. On October 29, 2010, Respondent provided Petitioner with the following records: (a) corporate tax records for 2007 and 2008; (b) a workers' compensation insurance application submitted after the issuance of the Stop-Work Order; and (c) payroll summaries for October 2006 through October 2009. The records confirmed that Respondent had employed more than four employees for the prior three years. On October 30, 2009, Petitioner issued and served the Amended Order of Penalty Assessment. That order was followed by the Second Amended Order of Penalty Assessment on March 15, 2010. Ms. Nixon calculated the gross payroll for Respondent's employees for the relevant time period. The gross payroll amounts for Ms. Francis from January 1, 2008, through December 31, 2008, and April 1, 2009, through June 30, 2009, were limited to the average weekly wage in effect at the time the Stop-Work Order was issued, multiplied by 1.5 for those periods pursuant to Florida Administrative Code Rule 69L- 6.035(2). As a corporate officer, Ms. Francis' actual earnings were in excess of these amounts. However, Florida Administrative Code Rule 69L-6.035(2) limits the amount of a corporate officer's income upon which workers' compensation penalties may be assessed to 1.5 times the average weekly wage in effect at the time a Stop-Work Order is issued or actual earnings, whichever is less. Using the classification codes in the NCCI Scopes® Manual, Petitioner accurately assigned the occupation classification code 8045, which corresponds to "Store: Drug Retail." Classification code 8045 is "applicable to store locations where the employer's books of accounts reflect at least 40 percent gross receipts in prescription sales and less than 50 percent gross receipts in the service of food." Prescription sales intended for the patients of health care facilities are included even though the facility is billed instead of the individual patient. Ms. Nixon then divided the payroll for each year by 100 and multiplied that figure by the approved manual rates adopted by the Florida Office of Insurance Regulation for 2006, 2007, 2008, and 2009 for classification code 8045. That product was then multiplied by 1.5 to find the penalty for the period for the three-year period. The total penalty is $13,996.60.
Recommendation Based on the foregoing Findings of Facts and Conclusion of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop- Work Order and Second Amended order of Penalty Assessment in the amount of $13,996.60. DONE AND ENTERED this 26th day of April, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD 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 26th day of April, 2010. COPIES FURNISHED: John C. Eidt Pierson Community Pharmacy Inc. 112 East 1st Avenue Pierson, Florida 32180 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CRP, FP Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues in this case are: whether Petitioners have standing to challenge the agency statements in the Division of Workers' Compensation Bulletin No. 234; whether the agency statements in Bulletin No. 234 constitute a "rule" as defined by Subsection 120.52 (15), Florida Statutes; and, if yes, whether the Department violated Subsection 120.54(1), Florida Statutes, by not adopting the statements in accordance with the rulemaking procedures.
Findings Of Fact Prior to the 2002 legislative session, pursuant to Sections 440.02 and 440.05, Florida Statutes (2001), certain persons in the construction industry could elect to be exempt from the provisions of Chapter 440, Florida Statutes (2001). Pursuant to Section 440.05(3), Florida Statutes (2001), upon receipt of proper notice and documentation, the Department issued certificates of exemptions to persons seeking the Workers' Compensation exemption, unless the Department determined that the information contained in the notice was invalid. Between July 1, 2000, and June 30, 2002, approximately 130,000 construction-related exemptions were active. Pursuant to Subsection 440.05(6), Florida Statutes (2001), a construction industry certificate of election to be exempt is valid for a period of two years after the effective date on the certificate, unless the certificate was properly revoked. Prior to July 1, 2002, the certificates of exemption were issued pursuant to Subsection 440.05(3), Florida Statutes (2001). These certificates of exemptions were applicable without regard to the value or cost of any particular building project on which the exemption holder may be working. During the 2002 legislative session, the Florida Legislature enacted Section 5, Chapter 2002-236, Laws of Florida. Portions of this law amended Section 440.02(14), Florida Statutes. These amendments ("2002 Amendments") state, in relevant part, the following: (14)(b) "Employee" includes any person who is an officer of a corporation and who performs services for remuneration for such corporation within this state, whether or not such services are continuous. Any officer of a corporation may elect to be exempted from this chapter by filing written notice of the election with the division as provided in Section 440.05. As to officers of a corporation who are actively engaged in the construction industry, no more than three officers may elect to be exempt from this chapter by filing written notice of the election with the division as provided in s. 440.05. However, any exemption obtained by a corporate officer of a corporation actively engaged in the construction industry is not applicable with respect to any commercial building project estimated to be valued at $250,000 or greater. An officer of a corporation who elects to be exempt from this chapter by filing a written notice of the election with the division as provided in s. 440.05 is not an employee. Services are presumed to have been rendered to the corporation if the officer is compensated by other than dividends upon shares of stock of the corporation which the officer owns. 1. "Employee" includes a sole proprietor or a partner who devotes full time to proprietorship or partnership and, except as provided in this paragraph, elects to be included in the definition of employee by filing notice thereof as provided in s. 440.05. Partners or sole proprietors actively engaged in the construction industry are considered employees unless they elect to be excluded from the definition of employee by filing written notice of the election with the division as provided in s. 440.05. However, no more than three partners in a partnership that is actively engaged in the construction industry may elect to be excluded. A sole proprietor or partner who is actively engaged in the construction industry and who elects to be exempt from this chapter by filing a written notice of the election with the division as provided in s. 440.05 is not an employee. For purposes of this chapter, an independent contractor is an employee unless he or she meets all of the conditions set forth in subparagraph (d)1. 2. Notwithstanding the provisions of subparagraph 1., the term "employee" includes a sole proprietor or partner actively engaged in the construction industry with respect to any commercial building project estimated to be valued at $250,000 or greater. Any exemption obtained is not applicable, with respect to work performed at such a commercial building project. "Employee" does not include: 1. An independent contractor, if: * * * Notwithstanding the provisions of this paragraph or any other provision of this chapter, with respect to any commercial building project estimated to be valued at $250,000 or greater, a person who is actively engaged in the construction industry is not an independent contractor and is either an employer or an employee who may not be exempt from the coverage requirements of this chapter. * * * (Amendments are underlined.) The above-quoted 2002 amendments became effective on July 1, 2002. After the legislature enacted Chapter 2002-236, Laws of Florida, but prior to its effective date, the Department issued Bulletin No. 234 ("Bulletin No. 234" or "Bulletin"), which states in relevant part the following: TO: All Exemption Holders FROM: Annemarie Craft, Interim WC Administrator DATE: June 20, 2002 SUBJECT: Law Changes Regarding Exemptions On July 31, 2002, important changes in the workers' compensation law regarding exemptions take effect. This Bulletin is intended to notify you of some of those changes. Exemption holders working on a commercial building project valued at $250,000 or greater must purchase workers' compensation coverage, or be covered under a valid Florida Workers Compensation policy. The changes apply to you if you are: A corporate officer of a corporation that is actively engaged in the construction industry; A sole proprietor or partner who is actively engaged in the construction industry; or A person who is actively engaged in the construction industry as an independent contractor. Beginning July 1, 2002, if you are a corporate officer of a corporation that is actively engaged in the construction industry, or a sole proprietor or partner who is actively engaged in the construction industry, then your exemption will not apply to any work performed at a commercial building project valued at $250,000 or greater. If you work at a commercial building project valued at $250,000 or greater, then you must secure workers' compensation coverage in accordance with s. 440.38. The value of the project is the value of the entire project and not merely the value of a part, such as the amount attributed to a particular subcontract. This applies to projects in existence on July 1, 2002, as well as projects to be started on or after July 1, 2002. * * * 5. If you are a sole proprietor, partner, or corporate officer, you are permitted to maintain a certificate of election to be exempt issued pursuant to s. 440.05, F.S., while actively working on a commercial building project valued at $250,000 or greater; however, that exemption is not applicable with respect to work performed at a commercial building project valued at $250,000 or greater. In summary, Bulletin No. 234 states unequivocally the Department's practice which limits the use of exemption certificates for workers' compensation insurance. According to the Bulletin, beginning July 2, 2002, "exemption holders working on a commercial building project valued at $250,000 or greater must purchase workers' compensation coverage, or be covered under a valid Florida Workers' Compensation policy." Next, the Bulletin states that, beginning July 1, 2002, "if you are a corporate officer of a corporation that is actively engaged in the construction industry, or a sole proprietor or partner engaged in the construction industry, then your exemption will not apply to any work performed at a commercial building project valued at $250,00 or greater." Finally, the Bulletin provides that, "this applies to projects in existence on July 2002, as well as projects to be started on or after July 1, 2002." The Department contends that the Bulletin is only for informational and notification purposes and that it merely paraphrases the provisions of Section 5, Chapter 2002-236, Laws of Florida. Furthermore, the Department asserts that the Bulletin was never intended to create any obligations or requirements that the Department will enforce in any action that the Department engages in regarding the applicability of exemptions. Based on the Department's belief that Bulletin No. 234 was only for the purpose of notifying all exemption holders of changes in the law, the Department did not adopt the Bulletin in accordance with rulemaking procedures in Section 120.54, Florida Statutes. Notwithstanding the Department's argument in paragraph 11, as reflected within the four corners of the Bulletin, exemption holders actively engaged in the construction industry working on commercial building projects valued at $250,000 or greater after July 1, 2002, must be covered by workers' compensation insurance, pursuant to the requirements of Chapter 440, Florida Statutes (2002), regardless of when the exemption certificates were obtained. Contrary to the Department's view, the agency statements in Bulletin No. 234 adversely affect the rights of some exemption holders and require compliance with the provisions contained therein. Implicit in the terms of the Bulletin is that an exemption holder who fails to comply with its terms, will be subject to enforcement actions under Chapter 440, Florida Statutes. The extrinsic evidence presented by the Department, that it will not take such action in reliance of the Bulletin, is not controlling. The Florida Home Builders' Association ("FHBA") is a Florida corporation, comprised of approximately 15,000 members. Of those members, approximately 5,000 to 6,000 are builder members that are actively engaged in the construction of housing or other developments. Hundreds of the builder members are involved in commercial construction activities. The remaining members are associate members comprised of industries, trades, and services that do business with the builder members. Associate members who are construction subcontractors are engaged in commercial building activities. Most commercial construction projects that are new construction (as opposed to renovations) which FHBA members work on exceed $250,000 in value. FHBA members who are providing services at commercial building projects with a value over $250,000 have a reasonable expectation that they will continue to provide such services in the future. Over 2500 member companies of FHBA have active workers' compensation exemption certificates for at least one employee each, issued, prior to July 1, 2002, pursuant to Section 440.05, Florida Statutes (2001). These members are involved in commercial building projects estimated to be valued at $250,000 or greater and which started prior to July 1, 2002. Several dozen FHBA members affected by the limitations on the exemptions stated in Bulletin No. 234 have contacted the FHBA for advice. FBHA members who are contractors, whose exemptions are limited based on Bulletin No. 234, must attempt to secure workers' compensation insurance. Subcontractors to these members whose exemptions are limited must obtain insurance. To the extent the subcontractor has workers' compensation insurance obligations under existing contracts, either the subcontractor, the prime contractor or the owner of the project must absorb the cost of workers' compensation insurance premiums. The possibility also exists that the subcontractor may be forced off the job if he does not obtain the insurance and/or the cost of premiums cannot be accounted for. The FHBA lobbies the Florida Legislature and executive agencies on issues that effect the construction industry, including workers' compensation insurance. The Florida Associated General Contractors' Council ("A.G.C. Council") is a Florida corporation which has approximately 2,000 members. Of these members, approximately 800 are contractors and subcontractors actively engaged in the construction industry in Florida. The remaining members are involved in construction-related businesses. The approximately 800 A.G.C. Council members engaged in construction activities are all commercial builders. Most of the projects on which they work on are valued at over $250,000. Of the approximately 800 A.G.C. Council members engaged in construction, 48 have active exemption certificates for from one to three employees each. Approximately twenty to thirty A.G.C. Council members who worked on commercial projects valued at over $250,000 and who were under prime contracts before July 1, 2002, have contacted the A.G.C. Council's office in response to Bulletin No. 234. These subcontractors were concerned that they would have to obtain workers' compensation insurance at costs that were not anticipated when they signed their contracts. The general contractors who called the A.G.C. Council Office were concerned because they had subcontractors who were going to have to obtain insurance and the general contractors were being asked to cover the costs. In some cases, subcontractors were unable to obtain insurance and the general contractor had to remove them from the job, which created an increased cost to the contractor by having to find a replacement subcontractor. The A.G.C. Council represents its members before the Florida Legislature on a number of issues of interest to the construction industry, including codes, licensing, and workers' compensation insurance. Moreover, the A.G.C. Council represents its members in administrative and judicial proceedings. The Parrish Group is a Florida corporation which provides construction, design/build, development, and realty services to its clients. It has a number of subsidiary companies which also provide construction, development, and real estate services. The companies are all commonly owned and the finances are combined and reported on a single financial statement. The Parrish Group is involved commercial construction projects, most of which have a value of over $250,000, and it intends to continue developing such commercial projects. The Parrish Group uses subcontractors for all of its construction activities, including site construction, foundation, structure, build-out, and internal build-outs. The Parrish Group has relationships with 40 to 50 subcontractors and generally uses approximately 30 of these subcontractors on any given project. The Parrish Group does not have a valid exemption, but six of the Parrish Group's regular subcontractors, including Mark Madonia, d/b/a Chop's Acoustical Ceilings, hold active exemption certificates issued prior to July 1, 2002, pursuant to Subsection 440.05(3), Florida Statutes (2001). The Parrish Group's subcontractors who held active exemption certificates issued prior to July 1, 2002, if required to obtain workers' compensation insurance, would try to pass the cost of premiums to the primary contractor, a Parrish Group subsidiary, Parrish Builders. If the subcontractor is successful in passing the cost to the primary contractor, the primary contractor would try to pass the costs on to the owner, i.e., the Parrish Group. If the subcontractor were unable to obtain the workers' compensation insurance, the primary contractor would have the subcontractor removed from the job. Alternatively, the prime contractor could retain the subcontractor as an employee, in which case the primary contractor would have to bear the cost of the additional insurance under its policy. These increased costs would not have been accounted for in the prime contract, if that contract was in effect prior to July 1, 2002. Mark Madonia is one of Parrish Group's regular subcontractors. When faced with the prospect of having to obtain workers' compensation insurance, Mr. Madonia sought a change order from Parrish Builders. The Parrish Group, as owner, agreed to the change order and bore the additional costs. When the Parrish Group's subcontractors, who had certificates of exemption, made bids used in prime contracts that were effective before July 1, 2002, the cost of workers' compensation insurance was not included in the bid. Mark Madonia, d/b/a Chop's Acoustical Ceilings, is a sole proprietor who installs ceiling grade systems. Mr. Madonia provides these services as a subcontractor to the Parrish Group and other developers. Mr. Madonia works primarily on commercial building projects, most of which are valued at over $250,000. Mr. Madonia expects to continue to work on commercial building projects valued at over $250,000 in the future. Mr. Madonia is a member of FHBA and has a valid workers' compensation exemption certificate that was issued prior to July 1, 2002. Mr. Madonia has had an exemption since 1994 and his current certificate is in effect until May 25, 2003. Prior to July 1, 2002, Mr. Madonia had not obtained workers' compensation insurance because of his exemption. When Mr. Madonia received Bulletin No. 234 on or about July 12 through 14, 2002, he attempted to obtain workers' compensation insurance. Three companies denied him coverage because he did not have a sufficient number of employees. Mr. Madonia risked being removed from jobs had he not obtained the workers' compensation coverage required by the Bulletin. Mr. Madonia eventually contracted with an employee leasing company. In order to do so, he had to make his subcontractors his employees. The cost of the employee leasing service, including workers' compensation coverage is $27.00 per $100.00 of payroll. Mr. Madonia could have been responsible for these costs, although in this case, the Parrish Group agreed to absorb the extra costs. If a valid workers' compensation insurance exemption is limited and no longer applies to commercial construction projects with a value of $250,000 or more, the general contractor for such projects will require that the affected persons provide proof of coverage or they cannot lawfully be allowed on the job site. In the event a subcontractor with an exemption needs to obtain insurance, the subcontractor would have to obtain workers' compensation insurance. If the primary contract has already been signed by the owner and the general contractor, then the costs of the job have already been set. The subcontractor may absorb the costs or, alternatively, the subcontractor could attempt to pass the additional costs of insurance premiums to the general contractor. The general contractor could then try to pass the additional costs on to the owner. In any event, either the subcontractor, the general contractor, or the owner will have to absorb the unanticipated costs of workers' compensation insurance.
The Issue The issue is whether Petitioner violated Chapter 440, Florida Statutes, by not having workers' compensation insurance coverage, and if so, whether the Agency's calculation was proper and accurate based on the methods used to establish the payroll for Petitioner and the resulting penalty.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to Section 440.107, Florida Statutes. All Florida is a corporation operating as a land clearing and tree trimming or tree debris removal business in Florida. Alan McPherson is the sole owner and president of All Florida. On August 30, 2007, as a result of an anonymous tip, Denise McNeal, a workers' compensation investigator for the Division went to a land clearing site at 4441 Club Estates Drive in Naples, Florida, where an All Florida crew of workers was clearing the land using heavy equipment, to determine whether the workers had workers' compensation coverage. She interviewed approximately 11 employees who were working at the site. Ms. McNeal made inquiry into the employment relationships of these workers and attempted to determine whether the workers on the site were covered by appropriate workers' compensation insurance. After Ms. McNeal had been at the site for approximately an hour, Mr. McPherson arrived. Mr. McPherson indicated that All Florida had workers' compensation insurance through AMS Leasing. Ms. McNeal conducted a search in the Coverage and Compliance Automated System (CCAS), a database that reliably reveals whether or not there is coverage by a workers' compensation policy of insurance. The search revealed that All Florida did not have its own workers' compensation insurance and AMS was not covering the workers either. All Florida had failed to fax the employee information to AMS to start the coverage for the employees. Based on the information Ms. McNeal had at the time, and after consulting with her supervisor, Ms. McNeal issued SWO number 07-269-D7 to All Florida and a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Business Records"). The Division's request asked All Florida to produce business records for the period of August 30, 2004, through August 30, 2007, including payroll records, tax returns, proof of insurance, and certificates of exemption. The Request for Business Records listed specific records that All Florida should provide the Division so that the Division could determine the workers paid by All Florida during the preceding three years. The Request for Business Records notes that the requested records must be produced within five business days of receipt. All Florida did not respond to the Division's Request for Business Records on time. On or about September 25, 2007, All Florida produced its first set of documents. At that time, Ms. McNeal did not calculate the penalty amount and deemed the records insufficient to calculate penalty. On October 1, 2007, All Florida produced a second set of business records. Ms. McNeal reviewed the records produced by All Florida and calculated a penalty of $466,262.62 for failure to obtain workers' compensation coverage. The next day, Mr. McPherson provided additional business records and Ms. McNeal recalculated the penalty again. The new penalty amount was $324,080.01 and Ms. McNeal personally served All Florida with the penalty assessment. On October 2, 2007, All Florida entered into an agreement with the Division, which consisted of putting ten percent of the penalty amount down, demonstrating proof of coverage, and agreeing upon a conditional payment plan. After reaching the agreement, All Florida was conditionally released from the SWO and permitted to resume operations because it had cured all its violations. Subsequently, All Florida provided the Division additional business records. The Division calculated a third amended penalty assessment on October 17, 2007, in the amount of $300,450.24. On November 28, 2007, Ms. McNeal had to recalculate the third amended penalty amount because she discovered an error in her use of class code 5606. She recalculated the penalty amount with the proper class code 6217, changed Alan McPherson's earnings to "payroll/premium cap" and added remuneration for Dana McPherson. The other proper class codes Ms. McNeil used in her calculations were 8742 and 8810. In Ms. McNeal's calculations, she used the business records submitted by All Florida and figured the gross payroll for the period she found to be the period of noncompliance, in the case of each assumed employee, and divided that amount by She multiplied that figure by the approved manual rate (risk of injury) for each claimed employee. This figure was multiplied by 1.5 in order to obtain the penalty for failure to obtain workers' compensation coverage for each employee. The figures for each employee used in the calculation were added and resulted in the total penalty assessment of $281.903.32, which was the ultimate sum reported in the 4th Amended Order of Penalty Assessment at issue in this case. Ms. McNeal used the correct calculation methods to determine the assessed penalty. Ms. McNeal's calculations for the 4th Amended Penalty amount were accomplished in accordance with the requirements of Subsection 440.107(7), Florida Statutes, and Florida Administrative Code Rule 69L-6.035. All Florida submitted Account QuickReport business records detailing the checks cut from the business to individuals, the amounts, dates, and a brief description. Ms. McNeal used the records to calculate payroll for the 4th Amended Order of Penalty Assessment. She correctly excluded the check if the memo description listed the payment was for something other than payroll, if the check was written to a company name, or if the check was written to a subcontractor that had an exemption. Ms. McNeal included the payment by All Florida to each individual whose name was highlighted in blue as set forth in Petitioner's exhibit 8 (hereinafter referred to as "highlighted subcontractors") as payroll in her calculation of penalty.2 Dana McPherson’s $540,000.00 was also included in the gross payroll calculations. Mr. McPherson conducted All Florida business by contracting with municipalities to get jobs. Then, All Florida would give the work from the contract to individuals and companies with their own equipment and employees to perform and complete the job for the contract. All Florida hired the highlighted subcontractors by oral contracts and did not have time to check the highlighted subcontractors' statuses because the company was inundated with contract work, on a tight schedule, and wanted to get the jobs started as soon as possible. There was a great demand for debris clearing due to the consecutive hurricanes and their devastation, which provided All Florida numerous land clearing contract opportunities. Prior to Florida Administrative Code Rule 69L-6.035 becoming effective, the Division determined payroll by reviewing the actual business records that were provided by the employer. If the actual cost of the payroll and materials or equipment rental were separated, the Division would only utilize the amount identified as payroll for payroll. If the payroll was not separated out, the whole amount was used as payroll in the calculation of penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation enter a final order: Finding that All Florida violated Chapter 440, Florida Statutes, by failing to secure the payment of workers' compensation coverage for its employees; Finding that a penalty be imposed for the violation; and Calculating the penalty amount using the law that was in effect at the time the violation took place. DONE AND ENTERED this 16th day of June, 2008, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY 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 16th day of June, 2008.
The Issue The issues are whether Respondent conducted business operations in Florida without obtaining workers’ compensation coverage that met the requirements of Chapter 440, Florida Statutes (2009), for its employees, and if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency that is responsible for enforcing Chapter 440, Florida Statutes, which requires employers to secure the payment of workers’ compensation for the benefit of their employees. Respondent is a Louisville, Kentucky-based corporation that is engaged in the construction, maintenance, and painting of elevated water tanks. Respondent has a second fabrication facility located in Newnan, Georgia. Respondent’s work constitutes construction. On March 4, 2010, Petitioner’s investigator, Lawrence F. Eaton, observed Respondent’s employees working on a water tower in Pace, Florida. While visiting the worksite, one of Respondent’s employees stated that he did not have any information regarding if and how the men were covered by workers’ compensation. The employee gave Mr. Eaton a telephone number for Respondent. Next, Mr. Eaton consulted the Kentucky Secretary of State website to find information concerning the corporate status of Respondent. The website indicated that Respondent was incorporated in 1892 and that it had three corporate officers. Mr. Eaton then consulted Petitioner’s Coverage and Compliance Automated System (CCAS) database. CCAS contains workers’ compensation policy information for each employer that has a Florida policy and information relative to workers’ compensation exemptions that have been applied for and issued to individuals by Petitioner. Mr. Eaton was unable to find any indication on CCAS that Respondent had secured workers’ compensation coverage by purchasing a Florida policy. CCAS also provided no evidence that Respondent had entered into an arrangement with an employee leasing company to provide workers’ compensation coverage to its employees. Additionally, CCAS did not show that Respondent had obtained exemptions for its corporate officers. Mr. Eaton subsequently spoke with one of Respondent’s representatives. Mr. Eaton was informed that Respondent was self-insured for workers’ compensation in Kentucky. Mr. Eaton also learned that Respondent had another workers’ compensation policy. Respondent’s representative indicated that she would send Mr. Eaton the policy paperwork. When he received the paperwork from Petitioner, Mr. Eaton determined that the insurance coverage did not comply with the requirements of Florida’s workers’ compensation law. The paperwork included an excess policy of workers’ compensation and a Georgia workers’ compensation policy. On March 5, 2010, Mr. Eaton issued a Stop-Work Order and Order of Penalty Assessment against Respondent. Specifically, the Stop-Work Order states that Respondent was not in compliance with Chapter 440, Florida Statutes, because Respondent failed to obtain workers’ compensation coverage for its employees. On March 5, 2010, Mr. Eaton issued a Request for Production of Business Records for Penalty Assessment Calculation to Respondent. On March 8, 2010, Respondent provided Mr. Eaton with additional workers’ compensation policy information. The information included the declarations page for Chartis Company Policy No. WC 005-73-7942. The Chartis policy is a Workers’ Compensation and Employers Liability Policy. In Item 3A, the policy lists the states that are covered, in Part One of the policy, pursuant to each state’s workers’ compensation law. Georgia is named as a covered state in Item 3A. In Item 3C, the Chartis policy lists the states that are covered, in Part Three of the policy, as "other states insurance." Florida is listed only in Item 3C. Item 4 of the Chartis policy states that "[t]he premium of this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit." In response to the request for business records, Respondent provided Petitioner with payroll information for work it had performed in Florida between September 2007 and February 2010. After receiving this information, Respondent’s Penalty Calculator, Robert McAullife, calculated a penalty. Because Respondent had not provided all of the requested business records, Mr. McAullife imputed Respondent’s payroll for a portion of the relevant time period. In calculating the penalty, Mr. McAullife first sought to determine the amount of premium that Respondent would have paid had it been properly insured for the relevant three-year period. Mr. McAullife assigned a class code for each of Respondent’s employees, reflecting the work they performed. Mr. McAullife then took 1/100th of the payroll and multiplied that figure by the approved manual rate applicable to each class code. Mr. McAullife then took the previously obtained product and multiplied it by 1.5 to find a penalty in the amount of $122,242.23. This penalty is based on Respondent having $382,146.90 in Florida payroll that would have required $81,494.66 in workers’ compensation premium. There are no errors in Mr. McAullife’s penalty calculation. Mr. Eaton issued an Amended Order of Penalty Assessment on March 23, 2010. On March 24, 2010, Respondent and Petitioner entered into a Payment Agreement Schedule for Periodic Payment of Penalty that required ten percent of the penalty to be paid in advance and the remainder to be paid in 60 interest-free monthly payments. Respondent also produced a policy that provided coverage in compliance with Florida law with an effective date of March 12, 2010. As a result, Petitioner issued an Order of Conditional Release, permitting Respondent to return to work. During the hearing, Respondent presented evidence that it is a registered self-insured company in Kentucky for the first $500,000.00 of workers’ compensation. Additionally, Respondent has excess insurance for any workers’ compensation claims that exceed the $500,000.00 threshold. Because it is self-insured in Kentucky, Respondent must purchase letters of credit on an annual basis. Respondent paid the following for its recent letters of credit: (a) 2007, $26,755.54; (b) 2008, $32,438.48; (c) 2009, $33,626.38; and (d) 2010 to date, $8,931.39. The State of Kentucky assesses qualified self-insureds a six and one half percent tax based on an annual simulated premium. The amount of the simulated premium represents what a qualified self-insured would pay for a "first dollar" policy of workers’ compensation insurance. Respondent’s recent simulated premiums are as follows: (a) 2007, $453.440.00; (b) 2008, $480,637.00; (c) 2009, $623,940.00; and (d) 2010, $1,006,243.00. Respondent also maintains a "high dollar" deductible policy of insurance that provides workers’ compensation coverage for its Georgia employees. Respondent’s Georgia policy, Chartis Company Policy No. WC 005-73-7942, which includes Florida as part of "all other states" in Item 3C of the declarations page, also requires the payment of premiums. Respondent recently paid the following premiums for this insurance: (a) 2007, $124,736.78; (b) 2008, $125,950.08; and (c) 2009, $64,465.28. The premiums paid by Respondent for the Chartis Company Policy No. WC 005-73-7942 are not based on Florida rates. From 2007 to 2010, Respondent provided workers’ compensation benefits for at least four different workers that were injured while performing work for Respondent in Florida. The workers’ compensation benefits paid by Respondent on these claims totaled $147,958.25.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, enter a final order, finding that Caldwell Tanks, Inc., failed to comply with Chapter 440, Florida Statutes, and imposing a penalty in the amount of $122,224.22. DONE AND ENTERED this 8th day of December, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD 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 8th day of December, 2010. COPIES FURNISHED: Claude M. Harden, III, Esquire Carr Allison 305 South Gadsden Street Tallahassee, Florida 32301 Jamila Georgette Gooden, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0390
The Issue The issue in the case is whether the Department of Labor and Employment Security (Department), in implementing a workforce reduction that resulted in layoffs and demotions for employees, should have adopted by rulemaking, policies related to compensation reductions that occurred during the workforce reduction.
Findings Of Fact In 1999, a funding shortfall at the Department of Labor and Employment Security resulted in implementation of a workforce reduction plan. Petitioners Altamese Thompson and Sue Ezell were employees of the Department with permanent status in the Career Service system and whose employment and compensation were substantially affected by the Department’s workforce reduction program. Petitioner Florida Public Employees Council 79, AFSCME, represented the employees on collective bargaining issues affected in the workforce reduction. AFSCME members’ employment and compensation were substantially affected by the Department’s workforce reduction program. The 1999 workforce reduction was not the Department’s first experience with employee layoffs. In previous reductions, Department policy, set forth in LES Manual 1101.1.1.1 (October 1, 1996) was to retain, at existing salaries, as many employees as funding permitted. The Department policy was not adopted as an administrative rule. When the Department began to consider the workforce reduction of mid-1999, the Department apparently decided to increase the number of retained employees by reducing the salaries of workers who accepted "voluntary" demotions in lieu of layoff. By issuance of a "Change Notice" to LES Manual 1101.1.1.1, dated May 14, 1999, the Department redefined voluntary demotion to include "demotions requested by associates in lieu of layoff during workforce reduction pursuant to Chapter 60K-17, F.A.C." The revision also set forth a formula by which the compensation paid to employees who accepted voluntary demotion in lieu of transfer would be reduced. The change in the Department policy was not adopted as an administrative rule. Chapter 60K-17, Florida Administrative Code, sets forth the rules applicable to reduction of Career Service employees through the layoff process. The rule essentially establishes what is generally identified as the "bumping" procedure utilized by state agencies when employee levels are reduced. Rule 60K-17.004(3)(j), Florida Administrative Code, states in part, "[w]ithin 7 calendar days after receiving the notice of layoff, the employee shall have the right to request a demotion or reassignment. " Rule 60K-17.004(3)(p), Florida Administrative Code, states that "[a]n employee who accepts a voluntary demotion in lieu of layoff and is subsequently promoted to a position in the same class in the same agency from which the employee is demoted in lieu of layoff, shall be promoted with permanent status." Chapter 60K-17, Florida Administrative Code, does not prohibit salary reductions implemented as part of a voluntary demotion. Rule 60K-4.007, Florida Administrative Code, governs "demotion appointments" in the career service system. The rule states that a "demotion appointment" includes assignment to a job class having a "lower maximum salary or having the same or higher maximum salary but a lower level of responsibility. Rule 60K-2.004, Florida Administrative Code, governs salary determinations upon appointment to employment. Rule 60K- 2.004(4), Florida Administrative Code, states, "[a]n employee who is given a demotion appointment in accordance with Chapter 60K-4, F.A.C., may be demoted with or without a reduction in base rate of pay. " Rule 60K-9.005, Florida Administrative Code, addresses a Career Service employee’s right to appeal employment actions to the Public Employees Relations Commission. Generally, an employee who has attained permanent status in the Career Service System can appeal employment actions to the Public Employees Relations Commission. However, Rule 60K-9.005(5)(c), Florida Administrative Code, states than "[a]n employee who receives a reduction in pay, a demotion, or a transfer shall waive all rights to appeal such action if the employee has signed a written statement that the action is voluntary." By certified letters dated May 24, 1999, Petitioners Thompson and Ezell were advised that "[d]ue to impending budget cuts" the Department was reducing the number of positions in the Department’s Division of Jobs and Benefits (where Petitioners Thompson and Ezell worked) and that "[r]egretfully, you will be adversely affected by this work force reduction on June 30, 1999, at the close of business." The May 24 letter included a form titled "STATEMENT OF CHOICE OF OPTIONS DUE TO LAYOFF SITUATION" which set forth available jobs and included an option allowing the employee to select a layoff rather than the job demotion. The form included a signature line that stated, "I understand that by selecting demotion as an option, I am requesting a voluntary demotion in lieu of layoff, and my pay upon such voluntary demotion will be subject to the newly revised Section 1101.1.1.1.9d of the LES Personnel Manual." The evidence fails to establish the content of Section 1101.1.1.1.9d of the revised LES Personnel Manual. The documents entered into evidence at the hearing are identified as 1101.1.1.1. There is no subsection 9d. Subsection (c)2.c. addresses pay upon voluntary demotion and states as follows: Associates requesting voluntary demotions must have their base rate of pay reduced by one-half (1/2) of the percentage/salary increase received upon promotion and/or reassignment. For example, if an associate received a 10 percent promotional increase, his/her base rate of pay must be reduced by 5 percent. Permanent career service associates who have not had a promotional increase will have their base rate reduced by 5 percent. The Division Director/Commission Chairman equivalent has authority to take final action provided, however, that any variations must be submitted to the Assistant Secretary of Administration for review prior to final action. This provision also applies to demotions to classes that are higher or lower than the classes held prior to promotion and/or reassignment. Ms. Thompson noted her preferences as to the available jobs positions and signed the form. Ms. Ezell noted her preferences as to the available jobs positions and signed the form, but wrote a notation on the form indicating her disagreement with the situation, in part stating, "I am not voluntarily requesting demotion. I have absolutely no other choice after 27 years. A pay reduction should not occur. " At hearing, both Ms. Thompson and Ms. Ezell suggested that being forced to accept a demotion and pay reduction in lieu of total layoff did not present an entirely voluntary choice. There is no evidence that the Department provided copies of the cited Personnel Manual revision directly to affected employees either before or after the May 24 letters were issued. There is no evidence that either Ms. Thompson or Ms. Ezell saw the revised Personnel Manual prior to signing the "STATEMENT OF CHOICE" forms. During the spring of 1999, the Division’s Director circulated a publication entitled "Friday Fax" to employees of the Department’s Division of Jobs and Benefits. The "Friday Fax" dated March 19, 1999 indicates that an employee demoted as part of the pending reduction in force would retain their current salary. This reflects the existing policy of the Department that had been applied in prior workforce reductions. There is no credible evidence that the Division Director was explicitly authorized to restate the Department policy in the March 19, 1999 Friday Fax. There is evidence that the Department executives were considering the possibility of salary reductions during the ongoing planning for the workforce reduction. By the following week, a new Division Director had been appointed. By April 2, 1999, publication of "Friday Fax" was suspended. A new publication "Just The Facts. . ." began to be issued by the Department’s Office of Communications and was circulated to agency personnel. On May 24, 1999, the same day that the workforce reduction letters were mailed to Petitioners Thompson and Ezell, an issue of "Just The Facts" was published which stated that demotions in lieu of layoff would incur salary reductions, and referenced the revised LES Personnel Manual section as "1101.1.1.1 9.d.(1)(6)(c)2.c."
The Issue The issues to be resolved in this proceeding concern whether the Petitioner corporation's workers' compensation insurance policy was in compliance with the provisions of Chapter 440, Florida Statutes, cited below, despite not having a specific Florida endorsement; whether the Department properly issued a Stop Work Order against the Petitioner and whether the proposed penalty of $240,927.55 was properly assessed.
Findings Of Fact The Petitioner, American Coatings, Inc., is a commercial painting corporation based in Tennessee. It has been in business since 1994 in the State of Tennessee, and through a predecessor entity, since 1985. The Petitioner does business in other states, including the State of Florida, and in fact operates in approximately 14 states. It has done so since the year 2000. It has had no workers' compensation claims from any of its Florida work sites during the entire time it has operated in Florida. On February 19, 2008, the Petitioner was painting portions of the premises at "the Estates of Rockledge" in Rockledge, Florida. It had other operations in Florida in the three years prior to February 28, 2008. When the Petitioner applied for workers' compensation coverage in Tennessee, the Petitioner advised its broker and insurance carrier that it maintained operations in Florida. The workers' compensation carrier and agent provided certificates of workers' compensation insurance for the Petitioner's Florida operations which supported its good faith belief that it had valid workers' compensation insurance in Florida. Respondent presented no evidence that Mr. Carswell and the Petitioner have committed fraud, misrepresentation, or omission concerning the obtaining and maintaining of workers' compensation insurance coverage for its Florida operations. There was no attempt to conceal the fact that the Petitioner had insurable operations in Florida. For the three years prior to February 28, 2008, the Petitioner maintained a policy of workers' compensation insurance for all employees, including those employees that performed operations in Florida. A workers' compensation premium was paid for each employee in question for all periods in the three years preceding February 28, 2008. The Respondent is an Agency of the State of Florida responsible for enforcing the various statutory requirements of Chapter 440, Florida Statutes, including Sections 440.107 and 440.38, Florida Statutes (2007). Its authority includes Section 440.10(1)(a), Florida Statutes, which imposes upon all employers in Florida the obligation to secure the payment of workers' compensation. The Respondent is statutorily charged with the obligation to monitor employers operating in Florida, to ensure that statutory employers maintain appropriate workers' compensation coverage on employees. There is no dispute that the Petitioner, is an "employer" for purposes of Sections 440.02(16)(a) and 440.02(17)(b)2., Florida Statutes (2007). It was operating in the construction industry and regularly employed at least one person. Pursuant to the Division's statutory authority, Investigator Eugene Wyatt of the Department's Division of Workers' Compensation, Bureau of Compliance, visited the subject worksite in Brevard County, Florida, where an apartment complex was under construction. Mr. Wyatt inquired at the general contractor's headquarters trailer and was told that a painting subcontractor known as American Coatings was employing workers on the site. Using the Federal Employer Identification Number, Mr. Wyatt checked with the Department's Coverage and Compliance Automated System (CCAS) data base and learned that American Coatings, Inc. the Petitioner, which did business in Florida as A.C. Painting, Inc., did not have a record of a Florida workers' compensation coverage policy since December of 2003. Upon inquiry of the general contractor's supervisor at the job site, Mr. Wyatt learned that American Coatings, Inc., had furnished proof of insurance to the general contractor. It was shown as a certificate of liability insurance from American Coatings, in evidence as Department's Exhibit 17. Investigator Wyatt contacted the agent who had produced the Certificate of Insurance and asked if a Florida endorsement had been procured for that policy. He was told that the policy had a "an all states" endorsement. Mr. Wyatt then contacted the underwriter and was told that it was a policy for Tennessee and not for Florida (apparently Tennessee rates and codes applied). The investigator then contacted Benjamin Carswell, the President of the Petitioner. He informed him that in his view the company was not in compliance with the Florida requirement that workers' compensation policies covering Florida work and Florida employees be specifically endorsed for the State of Florida. He stated that he would issue a Stop Work Order, which he did on February 19, 2008. (SWO). The SWO was posted at the worksite and served personally on Mr. Carswell on February 21, 2008. After the Petitioner entered into an installment payment plan as to the penalty, the SWO was ended with an Order of Conditional Release, on February 28, 2008. The Petitioner sent a copy of consolidated insurance policy number WC8263193, by fax to Terrence Phillips, the chief of the Respondent's Orlando compliance office. The information page of this policy showed that only Tennessee was listed in item 3A of the policy. Item 3C stated that the policy was in effect in all other states, however, except for North Dakota, Ohio, Washington, West Virginia, and the states listed in item 3A. Item 4 listed various occupational classifications with their codes and the premium rates for each. The codes were for the State of Tennessee. The effect of these terms was that Florida was included in the category for "all other states." Florida Law requires that Florida be listed as a state in item 3A, and requires a policy to utilize Florida class codes, rates, rules, and manuals, in order for an employer to be compliant with workers' compensation coverage requirements of Chapter 440, Florida Statutes. Investigator Wyatt determined that compliance was deficient and that a penalty should be calculated and assessed. He therefore served a request for production of business records on Mr. Carswell on February 21, 2008. The business records were necessary to construct the payroll amounts and number of employees at issue, so that the penalty, based upon the Petitioner's Florida Payroll, could be calculated. Mr. Carswell believed in good faith, throughout all times pertinent to this matter that his company was compliant with Florida workers' compensation coverage requirements. After compliance was called into question, however, he also obtained an additional workers' compensation insurance policy, apparently obtained on or about February 20, 2008. It showed that coverage was effective, related back to May 1, 2007. Based upon this additional policy, the Petitioner provided Investigator Wyatt with an additional certificate of insurance for this policy. On March 6, 2008, Investigator Wyatt learned that the SWO was a duplicate and had to be substituted. A new SWO was issued as an amended SWO. A Second Amended Order of Penalty Assessment and an Amended Order of Conditional Release from SWO, under the second SWO number of 08-092-D4, was issued. Investigator Wyatt calculated the penalty by reviewing the business records supplied by the Petitioner and determining what each employee had been paid between February 23 and December 31, 2005; during all of 2006; during all of 2007 and between January 1, and February 22, 2008. Each employee's payroll, for each year or portion thereof, was divided by 100 and multiplied by an actuarial figure known as the "approved manual rate," which is related to the job duties the employee performed. In the case at hand, all the employees were engaged in commercial painting and, therefore, their classification codes were all 5474. Each trade, occupation or profession has a particular code assigned to it by the National Council on Compensation Insurance (NCCI) and each code has its own rate, the codes and rates being adopted in the Respondent Agency's Rules. The product of one one-hundredth of the gross payroll, and the approved manual rate, constitutes the "evaded premium." In effect this is the insurance premium the employer should have paid during the years it did not actually secure the appropriate payment of workers' compensation for its Florida Employees (proper Florida or Florida-endorsed coverage). Each employee's premium added together was then multiplied by the statutory factor of 1.5 in order to determine the total penalty amount the Respondent seeks to assess. The penalty amount herein was calculated using the correct Florida Approved Manual Rate and class codes. The Respondent established that its calculations indicated that, for the Florida employees of the Petitioner, based upon its Florida payrolls for the three year period in question, the total workers' compensation premium, under the Florida rate, would be in the amount of $160,618.15. Based upon that Florida workers' compensation premium amount, when multiplied by the statutory factor of 1.5 times that amount, the Respondent arrived at a total proposed assessed penalty of $240,927.55. The Petitioner established, through the testimony of Mr. Carswell that, for the time period at issue, for the Florida employees and payroll, the Petitioner had paid workers' compensation premiums of $111,682.21 for the coverage it had in effect. It acknowledges that this was not paid pursuant to Florida rates, rather it was based upon Tennessee rates. It is the position of the Petitioner that the difference in premiums. between the above Florida premium amount, and the premium that the Petitioner actually paid, was $48,935.94. The Petitioner maintains that this differential is what really should be determined to be the unpaid or "evaded" premium, based upon Florida rates, and, if that amount was multiplied by 1.5 then the total penalty actually due should be $73,403.91. An initial penalty payment of $24,092.76 has already been made by the Petitioner. Periodic penalty payments, assessed beginning March 2008, and continuing, have been paid in the amount of $36,139.40. The total penalty already paid by the Petitioner, as of the hearing date, is thus $60,232.16. The Petitioner contends that the actual penalty to be paid should be based upon the differential between the correct total premium due, when using the correct Florida manual rate, and the total premium actually paid by the Petitioner, which, when applied in the above-referenced calculation results in the penalty due of $73,402.91. This would then be reduced by $60,232.17, the amount already paid, for a total remaining amount due of $13,171.75, as of the hearing date.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, finding that the Petitioner failed to fully secure the payment of workers' compensation for its employees in the manner prescribed by the above-referenced authority and that a penalty in the amount of $73,402.91 is due, less a credit of $60,232.16 already paid, and with credit applied to the above amount for penalty payments made since January 28, 2009. DONE AND ENTERED this 5th day of May, 2009, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 5th day of May, 2009. COPIES FURNISHED: Robert L. Dietz, Esquire Zimmerman, Kiser & Sutcliffe, P.A. Post Office Box 3000 Orlando, Florida 32802 Thomas H. Duffy, Esquire Douglas D. Dolan, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Tracey Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in this case is whether a nolo contendere plea by Petitioner, Daniel Banks, to possession of a controlled substance (phenobarbital) in the State of Kansas in 2004 is a disqualifying offense under section 435.04, Florida Statutes. (Unless specifically stated otherwise herein, all references to Florida Statutes shall be to the 2015 version.)
Findings Of Fact Banks is a 30-year old resident of Northglenn, Colorado. He is currently employed as the coordinator of integrated pest management for MJardin Management Company. Banks is also designated as the research and development director of San Felasco Nurseries, Inc. (“San Felasco”), an applicant to become designated as a low-THC cannabis dispensing organization by the State of Florida. See §§ 381.986, et seq, Fla. Stat. San Felasco filed an application identifying Banks and other owners or managers, all of whom were required to undergo a Level 2 background screening pursuant to section 435.04, Florida Statutes. After Banks’ background information was submitted to the Florida Department of Law Enforcement as part of San Felasco’s application, a Level 2 background screening was undertaken by that agency. By letter dated August 7, 2015, OCU notified Banks that they needed more information concerning his arrest on June 3, 2004, and subsequent plea of nolo contendere to the charge of possession of phenobarbital. In response, Banks had the Clerk of Court for Geary County, Kansas provide a document entitled “Journal Entry” in Case No. 04 CR 294. The Journal Entry is equivalent to a Final Judgment in a Florida criminal court. OCU then notified Banks, via letter dated November 23, 2015, that he had failed to pass his Level 2 background screening. San Felasco was also notified of Banks’ failure to pass, inasmuch as that failure would impact San Felasco’s pending application to be designated as a dispensing organization. Banks’ failure to pass the screening was due to the fact that his nolo contendere plea in Kansas was to a crime OCU deemed similar to a crime enumerated in section 435.04 as a disqualifying offense. The construction of the Kansas and Florida statutes are, indeed, similar. Kansas Statutes Annotated (K.S.A.) 65-4162(a)(1) states in pertinent part: Except as authorized by the uniform controlled substances act, it shall be unlawful for any person to possess or have under such person’s control: Any depressant designated in subsection (e) of K.S.A. 6504105, subsection (e) of K.S.A. 65-4109 or subsection (b) of K.S.A. 65-4111, and amendments thereto. 65-4111(b)(44) lists phenobarbital as one of the depressants designated as a controlled substance. By comparison, Section 893.13(6)(a), Florida Statutes, states in relevant part: A person may not be in actual or constructive possession of a controlled substance unless such person’s controlled substance was lawfully obtained from a practitioner or pursuant to a valid prescription. . . . The two statutes are different, however, in the penalties which will inure from violation of the statutes. Section 893.13(6)(a) states that: person who violates this provision commits a felony of the third degree . . . . K.S.A. 65-4162(b) contains the following penalty language: Except as otherwise provided, any person who violates this subsection shall be guilty of a class A nonperson misdemeanor. If any person has a prior conviction under this section, a conviction of a substantially similar offense from another jurisdiction . . . then such person shall be guilty of a drug severity level 4 felony. Thus, the crime in Florida is a felony; in Kansas it is a misdemeanor. Banks came to be in possession of phenobarbital while working at an animal hospital. He was a senior in high school at the time, just two months after reaching the age of 18 years. He stole the phenobarbital from the animal hospital and took it home for his own use. His father found the drugs, confronted Banks with them, and made Banks self-report his theft to the police department. The police notified the doctor at the animal hospital, but she refused to press charges against Banks. Nonetheless, on June 3, 2004, Banks was eventually charged with the crimes of theft of and possession of a controlled substance, to wit: phenobarbital. Both crimes in Kansas at that time were misdemeanors. Pursuant to advice from his attorney, Banks pled nolo contendere to the possession charge in exchange for dismissal of the charge for theft. He was given a suspended sentence, placed on 12 months’ probation and ordered to pay $115.00 in court costs. The theft charge would not have been a disqualifying offense in Florida. A fact taken into consideration by Banks before agreeing to the plea bargain was that the crime was only a misdemeanor. When he was arrested, and when he pled to the charge, Banks did not advise the police that he had previously been arrested and charged with possession of cannabis, a crime enumerated under the same statute (K.S.A. 65-4162) to which he was charged for possessing the phenobarbital. His prior arrest occurred in Riley County, Kansas, on May 7, 2004. He was charged with possession of a small amount of marijuana, possession of drug paraphernalia, and the purchase and consumption of alcohol by a minor. He received a suspended sentence, 12 months’ unsupervised probation, and paid a $250.00 fine in the Riley County matter. The crime was later expunged from Banks’ record. Under K.S.A. 65-4162, the existence of the prior charge just weeks before the Geary County possession of phenobarbital charge could have resulted in the Geary County crime being upgraded to a felony. However, for whatever reason, Banks’ Geary County violation was handled as a first offense and Banks was only found guilty of a misdemeanor.2/ The illegal possession of a controlled substance, in this case phenobarbital, is the similarity tying the Kansas and Florida statutes. In that respect, they are similar. However, the degree of penalty differs greatly between the two states’ laws, at least for a first offense. Following his arrest and nolo contendere plea in Geary County, Banks attempted to rehabilitate his life.3/ He entered college, attending the University of Northern Colorado in 2004 and 2005. He attended Kansas State University in 2005 and 2006. He then took time off from his formal studies to work in various jobs for a few years. He returned to college in 2009, attending and ultimately graduating magna cum laude from Colorado State University in 2012. He has since worked for various organizations in the fields of horticulture and agriculture. That experience led to his current position with San Felasco. There is no doubt Banks’ life following his arrest in 2004 has been successful and devoid of any further criminal activity. He has engaged in activities indicative of a stellar member of society. However, this proceeding is not an “exemption from disqualification” case. If it was, there is little doubt Banks would receive such an exemption based upon his obvious and documented rehabilitation from the 2004 crime. The issue in this case, however, is simply whether the arrest and conviction in Kansas was for a crime similar to a disqualifying offense in Florida and, if so, whether the crime constitutes a disqualifying offense.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Department of Health, Office of Compassionate Use, finding that Petitioner, Daniel Banks, does not have a disqualifying event in his Level 2 background screening.4/ DONE AND ENTERED this 26th day of February, 2016, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 26th day of February, 2016.
