The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 August, 2005.
The Issue The issues in this matter are whether Countrywide Siding and Windows, Inc., failed to secure workers compensation that meets the requirements of Chapter 440, Florida Statutes, and, if so was correctly assessed a penalty for violating, the workers’ compensation laws of Florida.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation for the benefit of their employees. § 440.107, Fla. Stat. (2009). Respondent is a corporation domiciled in Florida and engaged in the construction industry. On February 13, 2009, Petitioner’s investigator, Carl Woodall, stopped to spot check a house in the Cabrille Lane area of Panama City, Florida, where he saw workers installing siding. Petitioner’s investigator is the only employee for Petitioner who investigated and developed the substantive evidence in this case. Other employees, who have no direct knowledge of the underlying facts, calculated the amounts of the proposed penalties. Mr. Woodall inquired of the workers and ascertained that they worked for Respondent. The investigator then contacted the Respondent to determine whether Respondent had secured or obtained workers’ compensation insurance under Florida’s workers’ compensation law. Respondent’s representative indicated that it maintained workers’ compensation insurance through Employee Leasing Service (ELS), an employee-leasing company. There is no dispute that in February 2009, Respondent leased its workers from ELS and that under the lease agreement, ELS provided workers’ compensation coverage to Respondent and its leased workers. Other evidence suggested that in past years, Respondent had leased its workers from other employee-leasing companies. The evidence was not specific as to who those companies were. The evidence, while not specific, also suggested that Respondent paid its leased employees bonuses and sometimes loaned them money.1/ In general, employee-leasing agreements provide clerical duties to client companies including tax deduction and workers’ compensation, in exchange for a fee. Client companies’ workers who are registered with the leasing company are employees of the leasing company, not the client company. In this case, the specific contract between ELS and Respondent was not introduced into evidence. Likewise, neither the contract nor the proof of coverage between ELS and its workers’ compensation insurer was introduced into evidence and it is unknown who the actual workers’ compensation insurer was or is. Therefore, there is no credible evidence regarding the specific terms of the contract between ELS, Respondent or the workers’ compensation insurer. Importantly, there is no evidence regarding any fee arrangement between ELS and Respondent showing that workers’ compensation coverage was provided based on payroll or that direct payments to Respondent’s workers constituted payroll under the terms of the lease contract for which workers’ compensation had not been secured. Petitioner’s investigator telephoned ELS and learned from some person (purportedly Ellen Clark) that it did have an employee-leasing contract with Respondent and did maintain workers’ compensation on Respondent’s workers. The investigator was also told that ELS intended to or had cancelled its employee-leasing contract with Respondent effective either February 14 or 15, 2009. No one from ELS testified at the hearing and the substance of the above conversation, as with all the testimony about purported ELS statements, constitutes hearsay that was not corroborated by other credible evidence in the record. As such, the substance of these conversations is not found as facts, other than to establish that Petitioner’s investigator had a conversation with a person purporting to Represent ELS. However, on February 14, 2010, the investigator did not take any action against Respondent since he felt Respondent was in compliance with Florida’s workers’ compensation law. On February 17, 2009, Mr. Woodall again returned to the Cabrille Lane area and observed Respondent’s workers installing siding on a house. One of the workers, Mike Moore, revealed to Mr. Woodall that he was a subcontractor of Respondent, but that the other worker, Ryan Grantham, was Respondent’s employee. The subcontractor was in compliance with Florida’s workers’ compensation laws. In order to find out if the other worker was covered by workers’ compensation insurance, Mr. Woodall met with Ronnie Creed, Respondent’s owner and officer, who was exempt under Florida’s workers’ compensation law. Mr. Creed was unaware of Respondent’s workers’ compensation status but put Mr. Woodall in contact with his wife, India Creed, who was also exempt from Florida’s workers’ compensation law. Ms. Creed told Mr. Woodall that Respondent had received a letter from ELS that day, purportedly notifying it that ELS intended to cancel or had cancelled its employee-leasing contract with Respondent. The letter was not introduced into evidence and it is unclear whether the letter discussed the workers’ compensation insurance coverage ELS maintained on its employees that it leased to Respondent. Again, no one from ELS or its workers’ compensation insurer testified at the hearing regarding its lease or which workers were covered under the lease. The record is devoid of any evidence that these employees were no longer employed by ELS and, more importantly, not covered by ELS’s workers’ compensation coverage on February 17, 2009.2/ Mr. Woodall also checked the Department’s Coverage and Compliance Automated System (CCAS) database. CCAS is a database that maintains information on business entities in Florida and whether they have secured workers’ compensation and /or whether exemptions from workers’ compensation have been granted to eligible company officers. CCAS did not reflect that Respondent had a workers’ compensation insurance policy in place. However, the investigator did not check to see if ELS or another employee-leasing company had such a policy. Similarly, the investigator did not investigate the terms of those contracts and whether those contracts considered any bonuses or loans paid by Petitioner to its employees to be payroll, and if it was, whether any workers’ compensation coverage was dependent on such payments being reported to these companies. As such, the information in that system is hearsay which may or may not indicate a need to investigate further. Moreover, CCAS is simply a database of information reported by others and maintained by the Petitioner. Its reliability is questionable in this case given the multiple contractual entities involved in the provision of workers’ compensation to Respondent and the lack of any direct evidence from those contractual entities. Therefore, the fact that CCAS did not reflect that Respondent had workers’ compensation insurance is not given weight in this Order and is neither clear nor convincing evidence demonstrating that Respondent failed to secure workers’ compensation insurance on February 17, 2009, or for prior years. Based on his belief that Respondent had not secured workers’ compensation on its workers, Mr. Woodall issued a Stop- Work Order and Order of Penalty Assessment and a Request for Production of Business Records for Penalty Assessment Calculation to Respondent (Request) asking for Respondent’s business and financial records related to Respondent’s business and employee leasing for the last 3 years. The records were requested to construct Respondent’s alleged payroll and determine the employees of Respondent. There was no evidence that there was any inquiry into past employment leasing companies that Petitioner contracted with or the terms of those contracts. As with the contract with ELS, there was no inquiry into whether loans or bonuses or any other money paid by Respondent to its workers was considered payroll, required to be reported, or had any impact on workers’ compensation coverage that the leasing companies provided on the employees they leased to Respondent. Respondent complied with the Request and provided the requested business records to Petitioner. Mr. Woodall forwarded the financial records to Petitioner’s penalty calculator, Monica Moye. Beyond checking CCAS, Ms. Moye was not responsible for factually determining whether Respondent had properly secured workers’ compensation insurance during the period under review. Using Respondent’s financial records, Ms. Moye calculated a penalty to be assessed to Respondent based on class code 5645 for siding installation as established by the National Council on Compensation Insurance in the Scopes Manual. She also separated Respondent’s periods of alleged noncompliance based on periodically changing approved manual rates. Approved manual rates are set by the National Council on Compensation Insurance and represent the amounts employers would pay in workers’ compensation premiums for tasks performed by their employees. On March 13, 2009, Petitioner issued an Amended Order of Penalty Assessment, assessing a penalty of $159,002.46 to Respondent. Based on additional records submitted by Respondent, Petitioner recalculated the previously-assessed penalty and issued a 2nd Amended Order of Penalty Assessment to Respondent on June 9, 2009, reducing the assessed penalty to $130,914.99. Additionally, following the hearing, the Department revised the assessed penalty and issued a 3rd Amended Order of Penalty Assessment (3rd Amended Order) reducing the assessed penalty to $130,135.03.3/ The list of employees attached to the 3rd Amended Order of Penalty Assessment contains several incidents of imputed employment listed as “cash,” “unknown” or “Star H.” There is nothing in the record that supports a finding that these amounts were paid for employment purposes. However, the evidence did not establish that Petitioner did not secure workers’ compensation coverage and the issues regarding the correctness of the amount of penalty assessed against Respondent is not addressed in this Recommended Order. Since the evidence did not establish that Respondent failed to secure workers’ compensation, the Stop-work order should be cancelled and the 3rd Amended Order of Penalty Assessment dismissed.
Recommendation Based on the findings of fact and conclusions of law, it is RECOMMENDED that the Department of Financial Services enter a Final Order that Petitioner failed to establish by clear and convincing evidence that Petitioner failed to secure workers’ compensation to its employees and canceling the Stop Work Order and dismissing the 3rd Amended Order of Penalty Assessment. DONE AND ENTERED this 2nd day of April, 2010, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 2nd day of April, 2010.
The Issue The issues to determine in this matter are whether Respondent Alpha and Omega Builders of Jacksonville, Inc., failed to secure workers’ compensation coverage for its employees; and, if so, whether Petitioner Department of Financial Services, Division of Workers’ Compensation (Department), correctly calculated the penalty assessment it imposed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440 that employers in Florida secure workers’ compensation insurance coverage for their employees. See § 440.107(3), Fla. Stat. Respondent is a corporation located in Jacksonville, Florida, engaged in the roofing industry. Ms. Beckstrom, the Jacksonville supervisor for workers’ compensation compliance investigators, testified at the final hearing. Ms. Beckstrom largely read from the January 30, 2018, investigative report and narrative completed by Investigator Frank Odom, who did not testify at the final hearing.1/ Ms. Beckstrom did not perform the investigation of Respondent, but authorized Mr. Odom to do so. On January 30, 2018, Mr. Odom investigated the worksite at 5065 Soutel Drive, Jacksonville, Florida, which is the J. Fralin Funeral Home, a commercial business (the Soutel Drive site). Mr. Odom’s narrative stated, “[a]s I approached the site I observed 3 individuals on the roof installing shingles.” Much of the remaining portions of Mr. Odom’s narrative, which ultimately led to his determination that Respondent employed these three individuals without workers’ compensation insurance, is inadmissible hearsay. Although Ms. Beckstrom testified extensively on what Mr. Odom wrote in the investigative report and narrative, the undersigned cannot base findings of fact on inadmissible hearsay unless it explains or supplements other evidence. In contrast, Mr. Jessie, the owner of Respondent, testified at the final hearing that Mr. Odom contacted him the morning of January 30, 2018, by telephone. When Mr. Odom asked if Respondent had three individuals working on the Soutel Drive site, Mr. Jessie testified that he told Mr. Odom that these individuals were not supposed to be working.2/ Mr. Jessie stated that when he arrived at the Soutel Drive site after receiving the call from Mr. Odom, the three individuals had left. On cross-examination, Mr. Jessie did not recognize the names of Roberto Flores, Alex Alvarado, or Dagoberto Lopez, who Mr. Odom identified in the investigative report and narrative as the three individuals working on the roof at the Soutel Drive site. Mr. Jessie testified that he normally employs workers through an organization called Action Labor, who in turn secures the applicable workers’ compensation insurance for them. Mr. Jessie testified that he had arranged, through Action Labor, for three individuals to work on the Soutel Drive site, and that Action Labor had provided him a “ticket” for three individuals to work at the site. His testimony is credited. Although not crystal clear from his testimony, the undersigned understood Mr. Jessie to refer to Action Labor as an employee leasing company.3/ Mr. Jessie further testified that after meeting with Mr. Odom at the Soutel Drive site, he received a Stop-Work Order and Order of Penalty Assessment, as well as a Request for Production of Business Records for Penalty Assessment Calculation (Request for Production). The Request for Production requested several categories of business records from Respondent, for the time period of January 31, 2016, through January 30, 2018, to determine Respondent’s payroll during that time period (audit period). The Request for Production requested that Respondent provide all payroll documents, account documents, disbursements, workers’ compensation coverage, temporary labor service and day labor service records, subcontractors, and documentation of subcontractors’ workers’ compensation insurance coverage. At the final hearing, Ms. Murcia, the Department’s penalty auditor, testified that because Respondent had not timely provided sufficient records in response to the Request for Production, the Department issued the Amended Order. Ms. Murcia testified that the Department received some records requested pursuant to the Request for Production in February 2019 (which was well after the response deadline of 10 business days), but that they were incomplete and thus not sufficient to calculate a penalty. Because Respondent failed to provide sufficient records in response to the Request for Production, the Department calculated the Amended Order based on a completely imputed payroll. Ms. Murcia explained that the Department calculates a gross payroll for an employer (who provides insufficient records) at the statewide average weekly wage multiplied by 1.5 for each employee for the period requested for the calculation of the penalty. Based on this imputation calculation, the Amended Order imposed a penalty in the amount of $166,791.18. The evidence presented at the final hearing was insufficient to establish that the three individuals observed at the Soutel Drive site on January 30, 2018, were Respondent’s employees or subcontractors on that day or at any time during the audit period. The evidence presented at the final hearing established that Respondent failed to timely present sufficient records pursuant to the Request for Production.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, the undersigned recommends that the Department enter a final order dismissing the Stop-Work Order and Order of Penalty Assessment, and the Amended Order of Penalty Assessment, against Respondent. DONE AND ENTERED this 3rd day of April, 2019, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER III 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 April, 2019.
The Issue Whether Petitioner, Department of Financial Services, Division of Workers’ Compensation (“Division”), properly issued a Stop-Work Order and 4th Amended Penalty Assessment against Respondent, Best Affordable Contractors, LLC (“Respondent”), for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact On July 31, 2020, the parties filed a Joint Pre-hearing Stipulation, by which the parties stipulated to the facts set forth in the following paragraphs 2 through 17. Stipulated Findings The Division is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees and corporate officers. Respondent was engaged in business operations in Florida during the entire period of January 4, 2017, through January 3, 2019. On January 3, 2019, the Division’s investigator, Deryck Gallegos, commenced a workers’ compensation compliance investigation at Respondent’s work site at 1203 Dancy St., Jacksonville, Florida 32205. On January 3, 2019, Respondent had a paid subcontractor, Terry Wayne Lyons, Sr., performing roofing work at 1203 Dancy St., Jacksonville, Florida 32205. On January 3, 2019, Respondent’s subcontractor, Terry Wayne Lyons, Sr., had five paid employees performing roofing work at 1203 Dancy St., Jacksonville, Florida 32205: Terry Wayne Lyons, Sr.; Jahru Li-Ly Campbell; Kevin Lee Hagan; Terry Wayne Lyons, Jr.; and Jonathan Wayne McCall. On January 3, 2019, Respondent’s subcontractor, Terry Wayne Lyons, Sr., had no workers’ compensation exemptions and no workers’ compensation insurance coverage. On January 3, 2019, Respondent had no workers’ compensation exemptions and no workers’ compensation insurance coverage. On January 3, 2019, the Division issued a Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment to Respondent. The Division served the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment on Respondent by personal service on January 4, 2019. The Division served a Request for Production of Business Records for Penalty Assessment Calculation on Respondent on January 4, 2019. On February 1, 2019, the Division issued an Amended Order of Penalty Assessment to Respondent. The Division served the Amended Order of Penalty Assessment on Respondent on February 7, 2019. The Amended Order of Penalty Assessment imposed a penalty of $353,349.72. On June 3, 2020, the Division issued a 2nd Amended Order of Penalty Assessment to Respondent. The Division served the 2nd Amended Order of Penalty Assessment on Respondent on June 11, 2020. The 2nd Amended Order of Penalty Assessment imposed a penalty of $68,705.29. On July 30, 2020, the Division served a 3rd Amended Order of Penalty Assessment to Respondent. The 3rd Amended Order of Penalty Assessment imposed a penalty of $46,805.02. Throughout the penalty period, Respondent was an “employer” in the state of Florida, as that term is defined in section 440.02(16). Respondent did not obtain exemptions from workers’ compensation insurance coverage requirements for the entries listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment as “Employer’s Payroll” during the penalty period. Respondent did not secure the payment of workers’ compensation insurance coverage, nor did others secure the payment of workers’ compensation insurance coverage, for the entries listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment as “Employer’s Payroll” during the periods of non-compliance listed on the penalty worksheet. The manual rates, class codes, and gross payroll identified on the penalty worksheet of the 3rd Amended Order of Penalty Assessment are correct to the extent a penalty is due. Evidentiary Findings Based on business records received from Respondent, the Division has recalculated the assessed penalty. The proposed penalty has been reduced to $27,553.78. Respondent has paid $1,000.00 for the release of the Stop Work Order, leaving a remaining penalty of $26,553.78. In determining the penalty, the Division reviewed Respondent’s business and financial records for a period of two years, from January 4, 2017, through January 3, 2019. Respondent was cooperative and forthcoming with the Division in providing its business and financial records. Penalties are calculated first by establishing the nature of the work being performed by employees. That is done by comparing the work to descriptions provided in the National Council of Compensation Insurance (NCCI) SCOPES® Manual. As relevant to this proceeding, the work being performed by persons who were employees of Respondent was as described in SCOPES® Manual class codes 5551 (Roofing - All Kinds & Drivers); 8227 (Construction or Erection Permanent Yard); 5213 (Concrete Construction NOC); and 8810 (Clerical Office Employees NOC). Workers’ compensation insurance premium rates are established based on the risk of injury associated with a particular class code. The greater the risk of injury, the greater the premium rate to insure that risk. Work such as roofing entails a significant risk of injury, and the approved manual rate is thus very high. Office and clerical work entails a very low risk of injury, and the approved manual rate is correspondingly very low. When work is performed but it is not specifically identified, e.g., laborer, the highest rated classification code for the business being audited is assigned to the employee. In this case, the highest rated classification code applicable to Respondent is class code 5551, for roofing. The 4th Amended Order of Penalty Assessment reveals payroll for individuals engaged in work described in class codes as follows: Anthony Wright - class code 5551 Donnell Eugene Johnson - class code 5551 Edward Tipton - class code 8227 Eugene Monts - class code 5213 James Dunlap - class code 5551 James Walters - class code 5551 Jorel Golden - class code 5551 Kelvin Morrison - class code 5551 Matthew Robinson - class code 5551 Vincent Marino - class code 8810 Jahru Li-Ly Campbell - class code 5551 Kevin Lee Hagan - class code 5551 Jonathan Wayne McCall - class code 5551 Terry Lyons, Jr. - class code 5551 Terry Lyons, Sr. - class code 5551 Mr. Lyons, Sr., was retained by Respondent as a subcontractor. Mr. Lyons, Sr., previously held an exemption from workers’ compensation as an officer of his company, but it had expired on December 27, 2017. Mr. Lyons, Sr., was working at the 1203 Dancy Street worksite on January 3, 2019. The evidence was sufficient to establish that Mr. Lyons, Sr., was appropriately assigned as class code 5551. His exemption was accepted up to its date of expiration, so the period applicable to the penalty calculation for Mr. Lyons, Sr., was from December 28, 2017, to January 3, 2019. Mr. Lyons, Sr.’s employees who were working at the 1203 Dancy Street worksite on January 3, 2019, were Mr. Campbell, Mr. Hagan, Mr. McCall, and Mr. Lyons, Jr. The evidence was sufficient to establish that they were employees of Respondent’s uninsured subcontractor, and that they were appropriately assigned as class code 5551. Mr. Wright and Mr. Robinson were listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- roofing.” Respondent was not able to demonstrate that they were covered by workers’ compensation. The evidence was sufficient to establish that Mr. Wright and Mr. Robinson were appropriately included in the penalty calculation, and that they were appropriately assigned as class code 5551. Mr. Johnson, Mr. Dunlap, and Mr. Morrison were listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- laborer.” Respondent was not able to demonstrate that they were covered by workers’ compensation. The evidence was sufficient to establish that Mr. Johnson, Mr. Dunlap, and Mr. Morrison were appropriately included in the penalty calculation, and that they were appropriately assigned as the highest rated classification code applicable to Respondent, class code 5551. Mr. Tipton was listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- handyman, yard work/clean up, truck detail.” Mr. Monts was listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- laborer.” Ms. Murcia testified that Mr. Marino provided information that Mr. Monts did concrete work, rather than roofing. Respondent was not able to demonstrate that they were covered by workers’ compensation. Mr. Marino indicated that Mr. Tipton and Mr. Monts should have been identified as his personal expenses, performing work at his home. However, they were identified in Respondent’s records as subcontract labor, and the payments to them were reported on Respondent’s 2017 income tax return as business expenses. They each received multiple payments over an extended period. The evidence was sufficient to establish that Mr. Tipton and Mr. Monts were employees of Respondent. The evidence was sufficient to establish that Mr. Tipton was appropriately assigned as class code 8227, and that Mr. Monts was appropriately assigned as class code 5213. Nonetheless, payments to the two were reduced by 20 percent to account for expenditures for materials, with the remaining 80 percent constituting payroll. Fla. Admin. Code R. 69L-6.035(1)(i). Mr. Marino was not an on-site employee of Respondent, but rather performed administration and clerical functions for Respondent. Mr. Marino previously had workers’ compensation, but it had been cancelled on February 28, 2015. The evidence was sufficient to establish that Mr. Marino was appropriately assigned as class code 8810. Mr. Marino obtained an exemption from workers’ compensation as an officer of Respondent on January 4, 2019. The evidence established that James Walters performed repairs to Respondent’s truck. The evidence was not clear and convincing that Mr. Walters was an employee of Respondent. Jorel Golden was identified solely as the payee on a single check image. He did not appear on Respondent’s Profit & Loss Detail Sheet, and there was no evidence as to why Mr. Golden was being paid. The evidence was not clear and convincing that Mr. Golden was an employee of Respondent. The salaries of the employees were calculated based on Respondent’s business records. The total gross payroll amounted to $170,139.07. Except for the amount of payments to Mr. Walters and Mr. Golden, that figure is supported by clear and convincing evidence. The penalty for Respondent’s failure to maintain workers’ compensation insurance for its employees is calculated as 2.0 times the amount Respondent would have paid in premiums for the preceding two-year period. The NCCI periodically issues a schedule of workers’ compensation rates per $100 in salary, which varies based on the SCOPES® Manual classification of the business. The NCCI submits the rates to the Florida Office of Insurance Regulation, which approves the rates to be applied to the calculation of premiums in Florida. The workers’ compensation insurance premium was calculated by multiplying one percent of the gross payroll ($17,013.91) by the approved manual rate for each quarter (which varied depending on the quarterly rate), which resulted in a calculated premium of $18,369.19. Clear and convincing evidence supports a finding that the Division applied the correct rates in calculating the premium. The penalty was determined by multiplying the calculated premium by 2.0, resulting in a final penalty of $36,738.38. In recognition of Respondent’s cooperation in the investigation and the timely submission of its business records, the Division applied a 25 percent reduction in the penalty ($9,184.60), resulting in a total penalty of $27,553.78. The evidence established that the Division gave every benefit of the doubt to Respondent to reduce the penalty, and its effect on Respondent, to the extent allowed within the confines of the law and the records provided.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a final order assessing a penalty of $27,553.78, against Respondent, Best Affordable Contractors, LLC, for its failure to secure and maintain required workers’ compensation insurance for its employees and subcontracted labor, subject to recalculation as provided herein, and subject to Respondent’s previous payment of $1,000.00. DONE AND ENTERED this 15th day of September, 2020, 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 15th day of September, 2020. COPIES FURNISHED: Vincent Marino Best Affordable Contractors, LLC 1348 Clements Woods Lane Jacksonville, Florida 32211 (eServed) Leon Melnicoff, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2017), by failing to secure the payment of workers’ compensation coverage as alleged in the Stop-Work Order and Second Amended Order of Penalty Assessment and, if so, what penalty is appropriate.1/
Findings Of Fact The Department is the state agency responsible for the enforcement of the workers’ compensation insurance coverage requirements established in chapter 440. On September 14, 2017, Investigator Murvin conducted a random workers’ compensation compliance check at a residential construction site at 8256 Lake James Drive in Lakeland, Florida. During the course of the compliance check, Investigator Murvin observed two individuals--Donald Steven Paul, Jr. and Dean Wayne Paul--painting the home. It is undisputed that Respondent had been subcontracted to perform painting services at this site; and that these two individuals were, at the time of Investigator Murvin’s visit, employed by Respondent. After speaking to Donald and Dean Paul, Investigator Murvin used the Department’s database to verify that Respondent did not have workers’ compensation insurance coverage, nor did Donald or Dean Paul have an exemption from the coverage requirements. Donald Paul admitted to Investigator Murvin at the hearing that he did not have workers’ compensation coverage for himself or Dean Paul. Donald Paul explained that he believed that his incorporation with the state and securing of liability insurance provided compliance of all insurance requirements. Based on the information provided by Dean and Donald Paul, and from the database, Investigator Murvin issued a SWO to Respondent on the same day as the site visit. A Request for Production of Business Records was also issued to Respondent. In response to the request for documentation, Respondent provided bank statements that indicated the business began in August 1, 2016. The bank statements also established that there was money being deposited and being paid out, but there was no indication what the money was for or how it was allocated. In other words, there was no way to discern whether the money paid out of the bank account was for employee salaries or other business expenses. In support of its Second Amended Order of Penalty Assessment, the Department prepared a penalty calculation worksheet showing a total penalty owed of $2,090.14. At the hearing, Respondent did not challenge the accuracy or method of calculating the assessed penalty, but only asserted that it believed it had the appropriate coverage and that the penalty was “too high.” Based on the evidence, it is clear Respondent provides construction services and has at least one employee; therefore, it was required to secure workers’ compensation insurance. The Department established by clear and convincing evidence that Respondent failed to secure the payment of workers’ compensation as required by chapter 440. The Department has established through the records submitted and testimony of Auditor Murcia, the appropriate penalty for Respondent’s failure to obtain workers’ compensation coverage is $2,090.14 for the audit period of August 1, 2016, to August 14, 2017.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order finding that Respondent, Donald Steven Paul d/b/a/ D. P. Painting of Lakeland, violated the provisions of chapter 440 by failing to secure the payment of workers’ compensation and assessing against Respondent a penalty in the amount of $2,090.14. DONE AND ENTERED this 20th day of April, 2018, in Tallahassee, Leon County, Florida. S HETAL DESAI 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 20th day of April, 2018.
The Issue Did Respondent, John McCary General Contractor, Inc. (McCary), fail to secure workers’ compensation insurance for employees as required by chapter 440, Florida Statutes (2016)?1/ If so, what is the appropriate penalty?
Findings Of Fact The Division is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation insurance for the benefit of their employees. § 440.107(3), Fla. Stat. McCary is a roofing contractor owned and operated by John McCary. It is in the construction industry. On November 18, 2016, Mr. Howe, a compliance investigator for the Division, visited a house where McCary was tearing off the roof. Mr. Howe recorded the names of each employee. He conducted an investigation that included speaking to Mr. McCary, re-interviewing the employees, checking with the employee leasing company that McCary used, and checking the Davison database of insured individuals. Mr. Howe could not find a record of workers’ compensation coverage for at least one employee. This triggered further investigation that resulted in Mr. Howe issuing a Stop-Work Order to McCary on November 18, 2016, for failure to secure workers’ compensation insurance in violation of sections 440.10(1), 440.38(1) and 440.107(2). After that, the Division followed its usual practice of requesting documents, reviewing its databases, soliciting information and explanations from the employer, and analyzing the information and documents obtained. Division Exhibit 9 shows that the Division asked McCary for business records on November 21, 2016, and that McCary did not provide them until December 12, 2016. The Division’s investigation and analysis resulted in the evidence admitted in this proceeding. The evidence proved the allegations of the Division’s Third Amended Order of Penalty Assessment, including its attached Penalty Calculation Worksheet. McCary did not comply with workers’ compensation insurance coverage requirements for the period May 1 through November 18, 2016. During that period, McCary employed Arcenio Rosado, Domingo Esteves, Javier Restrepo, Jose Alfredo Fuentes, Carlos Toledo, Edwin Valle, Kelly Alvarez, Kyle Shiro, Claudia Florez, and Nelson Geovany Melgar Rodenzo and that they performed work for it. McCary would have paid $4,744.06 in insurance premiums to provide workers’ compensation coverage for these employees during that period. During that period, McCary also used the services of two subcontractors, Star Debris Removal and E C Roofing, LLC. These subcontractors did not have workers’ compensation insurance for their employees during the May 1 through November 18, 2016, period. Premiums to provide coverage to the employees of the two subcontractors who worked on McCary’s projects would have totaled $100,771.09. From May 1 to November 18, 2016, McCary made cash payments of $195,856.02 that its documents could not confirm to be for a valid business expense. Florida Administrative Code Rule 69L-6.035(1)(k) requires that 80 percent of that amount be deemed wages or salaries paid employees when calculating the premiums used to determine the ultimate penalty. Eighty percent of McCary’s unaccounted-for cash payments is $156,684.82. That amount is legally deemed to be a payroll expense. McCary would have paid $29,143.38 to provide coverage for the employees represented by the cash payments. Altogether, McCary would have paid $134,658.53 to provide workers’ compensation coverage to the uncovered employees represented by the actual and deemed payroll during the May 1 to November 18, 2016, period.
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 John McCary General Contractor, Inc., failed to secure payment of required workers’ compensation insurance coverage from May 1 to November 18, 2016, in violation of section 440.107, Florida Statutes, and imposing a penalty of $269,317.06, reduced by $1,000.00. DONE AND ENTERED this 17th day of July, 2018, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II 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 17th day of July, 2018.
The Issue The issues in this case are whether Respondent, Raul A. Correa, M.D. (Dr. Correa), failed to provide workers' compensation coverage, and if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107, Florida Statutes (2013). That section mandates, in relevant part, that employers in Florida secure workers’ compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, Dr. Correa was a Florida small business engaged in the practice of medicine, with his principal office located at 2505 Manatee Avenue West, Bradenton, Florida. Dr. Correa is not incorporated. On February 12, 2014, Ms. Green conducted an on-site workers’ compensation compliance investigation (compliance investigation) of Dr. Correa’s office. After identifying herself to the receptionist, Ms. Green met Dr. Correa and explained the reason for her presence, a compliance investigation. Dr. Correa telephoned his wife who handles his office management from their residence. Mrs. Correa immediately faxed a copy of the liability insurance policy to the office. However, that liability policy did not include workers’ compensation coverage. After a telephonic consultation with her supervisor, Ms. Green served a Request for Production of Business Records (Request) on Dr. Correa at 11:50 a.m. on February 12, 2014. This Request encompassed records from October 1, 2013, through February 12, 2014, for all of Dr. Correa’s payroll documents, account documents, disbursements, and workers’ compensation coverage policies. Ms. Green consulted the Department’s Coverage and Compliance Automated System (CCAS) database to determine whether Dr. Correa had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees. CCAS is a database Ms. Green consults during the course of her investigations. Ms. Green determined from CCAS that Dr. Correa did not have any current workers’ compensation coverage for his employees and he did not have an exemption from such coverage from the Department. The records reflected that Dr. Correa’s last active workers’ compensation coverage was in 2004. Dr. Correa obtained workers’ compensation coverage on February 20, 2014. Approximately one month later, Ms. Green served a Request for Production of Business Records for Penalty Assessment Calculation on Dr. Correa. Dr. Correa produced the requested records. These records were given to Lynne Murcia, one of the Department’s penalty auditors, to calculate the penalty. Ms. Murcia determined that the appropriate classification code for Dr. Correa’s employees was 8832, which incorporates physicians and clerical workers. This code was derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers’ compensation. The manual is produced by the National Council on Compensation Insurance, Inc., the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. Dr. Correa listed seven employees on the Florida Department of Revenue Unemployment Compensation Tax (UCT-6) form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida’s Unemployment Compensation Law. Ms. Murcia reasonably relied upon the UCT-6 filings for the relevant time period to calculate Dr. Correa’s gross payroll in Florida. Using Dr. Correa’s payroll chart, the UCT reports, and the classification codes for each employee, Ms. Murcia calculated the penalty assessment for the three-year penalty period preceding the investigation. This three-year period is the allocated time for reviewing coverage for those who do not have the appropriate workers’ compensation coverage. On April 9, 2014, Ms. Murcia determined the penalty to be $4,287.12. However, upon receipt of additional information regarding a former employee of Dr. Correa, an Amended Order of Penalty Assessment of $3,898.77 was issued on July 28, 2014. Dr. Correa’s position is that his practice is a small “mom and pop” operation. He employs members of his family to run the business side of his practice. His daughter, Antonia, works as Dr. Correa’s “doctor’s assistant.” She works at the various nursing homes that Dr. Correa services. Antonia believed that the nursing homes’ liability insurance would cover her, and she was not subject to workers’ compensation coverage. However, she was, in fact, paid by Dr. Correa. Dr. Correa’s daughter-in-law, Valeria, works from her home computer completing the medical billing for her father-in- law. She has been working in this capacity for approximately 14- 16 years, and it never occurred to her that she needed workers’ compensation coverage. She was paid by Dr. Correa. Dr. Correa’s brother-in-law, Mr. Collado, runs all the errands for the practice. He may go to the bank, take care of car maintenance, buy office supplies or fix things, all in support of Dr. Correa’s practice. Mr. Collado receives regular pay checks from Dr. Correa. Dr. Correa testified that his wife is his office manager and has been since he opened the practice in 1978. Mrs. Correa works from their home, in a small home office. She does all the paper work related to the practice. Dr. Correa firmly believed that he did not require workers’ compensation coverage because some of his employees were “independent contractors” or never worked in his office, but at other locations (individual homes, nursing homes, or just outside the office). Dr. Correa believed his insurance agent who did not think Dr. Correa needed the workers’ compensation coverage. Based upon the testimony and exhibits, the amended penalty assessment in the amount of $3,898.77 is accurate.
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, issue a final order upholding the Amended Order of Penalty Assessment, and assessing a penalty in the amount of $3,898.77. DONE AND ENTERED this 24th day of September, 2014, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK 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 24th day of September, 2014.
The Issue At issue in this proceeding is whether the Respondent, Brevard Management, LLC, (Brevard Management) failed to abide by the coverage requirements of the Workers' Compensation Law, Chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees; and whether Petitioner properly assessed a penalty against Respondent pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: 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. On July 31, 2008, Eugene Wyatt, an insurance analyst working for the Department, visited the River Palm Motel in Melbourne to investigate the workers' compensation insurance status of several contractors performing renovations on the property. The River Palm Motel is owned by Brevard Management, whose principal owner is Albert Segev. During his visit, Mr. Wyatt spoke to Michael Cole, the hotel's manager, regarding the workers' compensation coverage of the hotel itself. Mr. Cole told Mr. Wyatt that the hotel used Automatic Data Processing, Inc. (ADP), a third-party payroll services provider, to provide workers' compensation insurance coverage. Brevard Management began operating the River Palm Motel on June 18, 2008. On June 19, 2008, Brevard Management entered into an agreement with ADP for the provision of payroll services, including the filing of payroll taxes, using Easy Pay, ADP's proprietary payroll management service. On August 25, 2008, Mr. Wyatt received an anonymous referral alleging that the River Palm Motel was not carrying workers' compensation insurance for its employees. Later that day, Mr. Wyatt returned to the River Palm Motel, this time to investigate the workers' compensation status of the motel itself. Upon his arrival at the motel, Mr. Wyatt spoke with Mr. Cole, who disclosed that Brevard Management owned the motel. Mr. Wyatt conducted a search of the Division of Corporation's website and learned that Mr. Segev was the principal owner of Brevard Management. Mr. Cole provided Mr. Wyatt with invoices for the last payroll period for the River Palm Motel. The invoices indicated that the company had more than ten employees, which led Mr. Wyatt to conclude that the company was required to secure workers' compensation insurance. At his deposition, Mr. Cole confirmed that River Palm Motel had between ten and twelve employees on August 25, 2008. Mr. Cole believed that Brevard Management had secured workers' compensation insurance coverage through ADP. However, the payroll invoices that Mr. Cole provided to Mr. Wyatt showed no deductions for any insurance. Mr. Wyatt consulted the Department's Coverage and Compliance Automated System (CCAS) database, which lists the workers' compensation insurance policy information for each business as provided by the insurance companies, as well as any workers' compensation exemptions for corporate officers. CCAS indicated that Brevard Management had no workers' compensation insurance policy in place and no current, valid exemptions. Mr. Cole provided Mr. Wyatt with a copy of the June 19, 2008, payroll agreement between Brevard Management and ADP, which gave no indication that workers' compensation insurance was included. The evidence at the hearing established that ADP does not automatically provide workers' compensation insurance coverage to entities that enroll for its payroll services. ADP provides such insurance coverage, but only as part of a separate transaction. After receiving authorization from the acting supervisor in the Department's Orlando office, Mr. Wyatt issued the SWO to Brevard Management on August 25, 2008, and personally served it on Mr. Segev on August 26, 2008. On August 25, 2008, Mr. Wyatt gave Mr. Cole a request to produce business records, for the purpose of making a penalty assessment calculation. In response, Mr. Cole provided an employee roster from ADP showing the payroll entries for every Brevard Management employee from the opening of the motel in June 2008 through August 25, 2008. After Mr. Wyatt's visit, Mr. Cole contacted ADP and spoke to Elizabeth Bowen, a workers' compensation sales agent with ADP Insurance Services. Ms. Bowen faxed forms to Mr. Cole to complete in order to obtain a workers' compensation insurance policy. Mr. Cole completed the paperwork and obtained a workers' compensation insurance policy through NorGUARD Insurance Company, effective August 25, 2008. Mr. Cole testified that he believed in good faith that he had obtained workers' compensation insurance at the time he signed up for payroll services with ADP sales representative Clinton Stanley in June 2008. It was only Mr. Wyatt's investigation that alerted Mr. Cole to the fact that Brevard Management did not have the required coverage. Mr. Stanley recalled that Mr. Cole had requested workers' compensation insurance, recalled telling Mr. Cole that his request had to be routed to ADP's separate insurance division, and recalled having forwarded the request to the insurance division. Mr. Stanley had no explanation for why the insurance division did not follow up with Mr. Cole in June 2008. Because he never heard from Mr. Cole again, he assumed that Brevard Management had obtained the requested workers' compensation coverage. It is accepted that Mr. Cole believed that he had purchased the workers' compensation coverage as part of the ADP payroll services; however, the evidence established that Mr. Cole should reasonably have known that this was not the case. Nothing in the June 2008 contractual documentation with ADP indicated that Brevard Management had obtained workers' compensation insurance coverage, and the subsequent ADP payroll registers showed no deductions for workers' compensation insurance. Using the proprietary Scopes Manual developed by the National Council on Compensation Insurance, Inc. (NCCI), Mr. Wyatt assigned Brevard Management's employees the occupation classification code 9052, "Hotel: All Other Employees & Sales Persons, Drivers." This was the same code assigned by Ms. Bowen when she completed the policy paperwork for Brevard Management. Ms. Bowen described this classification as "all inclusive" with respect to hotel employees. Mr. Wyatt calculated an amended penalty based on the payroll records provided by Mr. Cole, from the date Brevard Management became an active limited liability company, June 3, 2008, to the date the SWO was issued, August 25, 2008. Mr. Wyatt divided the total payroll by 100, then multiplied that figure by NCCI's approved manual rate for insurance coverage in 2008 for classification code 9052. That product was then multiplied by 1.5 to arrive at the penalty for the stated period. The total penalty for all employees was $2,112.03. The Amended Order was served on Brevard Management on August 26, 2008, along with the SWO. On August 26, 2008, Mr. Wyatt met with Mr. Cole and Mr. Segev, who produced a copy of the application for workers' compensation insurance placed through NorGUARD Insurance Company and tendered a cashier's check for the full amount of the penalty. The SWO was released on the same day.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $2,112.03 against Brevard Management, LLC. DONE AND ENTERED this 17th day of April, 2009, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 2009. COPIES FURNISHED: Tracy Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Ben Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Albert Segev Brevard Management, LLC, d/b/a River Palm Hotel 420 South Harbor City Boulevard Melbourne, Florida 32901
The Issue The issue is whether Petitioner violated Chapter 440, Florida Statutes, by not having workers’ compensation insurance coverage, and if so, what penalty should be imposed.
Findings Of Fact Petitioner operates a gas station and convenience store in Winter Garden. Mohammad Sultan is Petitioner’s owner and president. On November 2, 2006, Margaret Cavazos conducted an unannounced inspection of Petitioner’s store. Ms. Cavazos is a workers’ compensation compliance investigator employed by the Department. Petitioner had nine employees, including Mr. Sultan and his wife, on the date of Ms. Cavazos' inspection. Petitioner had more than four employees at all times over the three-year period preceding Ms. Cavazos' inspection. Petitioner did not have workers’ compensation insurance coverage at the time of Ms. Cavazos’ inspection, or at any point during the three years preceding the inspection. On November 2, 2006, the Department served a Stop-Work Order and Order of Penalty Assessment on Petitioner, and Ms. Cavazos requested payroll documents and other business records from Petitioner. On November 6, 2006, the Department served an Amended Order of Penalty Assessment,1 which imposed a penalty of $70,599.78 on Petitioner. The penalty was calculated by Ms. Cavazos, using the payroll information provided by Petitioner and the insurance premium rates published by the National Council on Compensation Insurance. The parties stipulated at the final hearing that the gross payroll attributed to Mr. Sultan for the period of January 1, 2006, through November 2, 2006, should have been $88,000, rather than the $104,000 reflected in the penalty worksheet prepared by Ms. Cavazos. The net effect of this $16,000 correction in the gross payroll attributed to Mr. Sultan is a reduction in the penalty to $68,922.18.2 On November 3, 2006, Mr. Sultan filed a notice election for exemption from the Workers’ Compensation Law. His wife did not file a similar election because she is not an officer of Petitioner. The election took effect on November 3, 2006. On November 6, 2006, Petitioner obtained workers’ compensation insurance coverage through American Home Insurance Company, and Petitioner also entered into a Payment Agreement Schedule for Periodic Payment of Penalty in which it agreed to pay the penalty imposed by the Department over a five-year period. On that same date, the Department issued an Order of Conditional Release from Stop-Work Order. Petitioner made the $7,954.30 “down payment” required by the Payment Agreement Schedule, and it has made all of the required monthly payments to date. The payments required by the Payment Agreement Schedule are $1,044.09 per month, which equates to approximately $12,500 per year. Petitioner was in compliance with the Workers’ Compensation Law at the time of the final hearing. Petitioner reported income of $54,358 on gross receipts in excess of $3.1 million in its 2005 tax return. Petitioner reported income of $41,728 in 2004, and a loss of $8,851 in 2003. Petitioner had total assets in excess of $750,000 (including $540,435 in cash) at the end of 2005, and even though Petitioner had a large line of credit with Amsouth Bank, its assets exceeded its liabilities by $99,041 at the end of 2005. Mr. Sultan has received significant compensation from Petitioner over the past four years, including 2003 when Petitioner reported a loss rather than a profit. He received a salary in excess of $104,000 in 2006, and he was paid $145,333 in 2005, $63,750 in 2004, and $66,833 in 2003. Mr. Sultan’s wife is also on Petitioner’s payroll. She was paid $23,333.40 in 2006, $25,000 in 2005, and $12,316.69 in 2004. Mr. Sultan characterized 2005 as an “exceptional year,” and he testified that his business has fallen off recently due to an increase in competition in the area. Todd Baldwin, Petitioner’s accountant, similarly testified that 2006 was not as good of a year as 2005, but no corroborating evidence on this issue (such as Petitioner’s 2006 tax return) was presented at the final hearing. Mr. Sultan testified that payment of the penalty imposed by the Department adversely affects his ability to run his business. The weight given to that testimony was significantly undercut by the tax returns and payroll documents that were received into evidence, which show Petitioner’s positive financial performance and the significant level of compensation paid to Mr. Sultan and his wife over the past several years. The effect of the workers’ compensation exemption elected by Mr. Sultan is that his salary will no longer be included in the calculation of the workers’ compensation insurance premiums paid by Petitioner. If his salary had not been included in Ms. Cavazos’ calculations, the penalty imposed on Petitioner would have been $40,671.36. Ms. Cavazos properly included Mr. Sultan’s salary in her penalty calculations because he was being paid by Petitioner and he did not file an election for exemption from the Workers' Compensation Law until after her inspection.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $68,922.18 on Petitioner to be paid in accordance with a modified payment schedule reflecting the reduced penalty and the payments made through the date of the final order. DONE AND ENTERED this 22nd day of August, 2007, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 August, 2007.