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 issue is whether Respondent was an employee engaged in the construction industry and required to obtain workers' compensation insurance while working on the roof of the Myakka Animal Clinic and, if so, what penalty should be imposed.
Findings Of Fact On August 24, 1998, Petitioner's investigator observed Respondent working on the roof of the Myakka Animal Clinic in Venice, Florida. At the time, Respondent was regularly employed by Paradise Roofing, Inc., where he had an exemption from workers' compensation insurance coverage. He has never previously been guilty of a violation of the workers' compensation laws. The contract price was $800. However, the evidence is conflicting as to the identity of the party that entered into the contract with the Myakka Animal Clinic. The veterinarian testified that her understanding of the agreement was that Respondent was to do the work, but, if any problems arose, he was not alone, and she could go to Paradise Roofing, Inc., to ensure that the labor and materials were satisfactory. Although there are other indications in the record that Respondent may have been working on his own on this job, there is sufficient conflict in the evidence that Petitioner has failed to prove that Respondent was doing the job as a self- employed person, rather than an exempt employee of Paradise Roofing, Inc. Respondent's understanding of the contractual relationship carries less weight than the veterinarian's understanding of this relationship.
Recommendation It is RECOMMENDED that the Division of Workers' Compensation enter a final order dismissing the Notice and Penalty Assessment Order and any related stop work order. DONE AND ENTERED this 2nd day of April, 1999, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 2nd day of April, 1999. COPIES FURNISHED: Edward A. Dion, General Counsel Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Mary Hooks, Secretary Department of Labor and Employment Security 303 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Louise T. Sadler, Senior Attorney Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Eric Kristiansen 3750 Aba Lane North Port, Florida 34287
The Issue The issue is whether the Stop-Work Order and the Third Amended Order of Penalty Assessment entered by Petitioner on July 25, 2013, and August 13, 2013, respectively, should be upheld.
Findings Of Fact The Department is the state agency tasked with the responsibility of enforcing the requirement of section 440.107(3), Florida Statutes, that employers in Florida secure the payment of workers' compensation for their employees. Respondent, Mad Dog Marketing Group, Inc., is a corporation organized under chapter 607, Florida Statutes, and was registered with the Florida Department of State, Division of Corporations, throughout the period of July 26, 2010, to July 25, 2013. At all times relevant to this proceeding, Respondent was engaged in the operation of a hardware store business with three locations in Florida. On July 25, 2013, based upon an anonymous referral, Tracey Gilbert, the Department's compliance investigator, commenced a workers' compensation compliance investigation of Respondent by visiting the job site, an appliance parts store at 730 West Brandon Boulevard, Brandon, Florida, and interviewing Sharon Belcher. According to Ms. Gilbert, Ms. Belcher informed her that she had 11 employees at the time of the site visit and that she did not have workers' compensation coverage for them. Ms. Belcher showed Ms. Gilbert an application for workers' compensation insurance and said she had not taken action with it since the company wanted a $10,000 premium. She also showed Ms. Gilbert some OSHA and workplace posters, but not the typical "broken arm poster" that describes workers' compensation coverage for a place of business. Ms. Belcher then gave Ms. Gilbert a list of Respondent's 11 current employees. On her laptop computer, Ms. Gilbert consulted the Department's Coverage and Compliance Automated System (CCAS) database to determine whether Respondent had secured workers' compensation coverage or an exemption from the requirements for coverage for its employees. CCAS is the database Ms. Gilbert routinely consults during the course of her investigations. She determined from CCAS that Respondent neither had workers' compensation coverage for her employees nor had received an exemption from such coverage from the Department. Ms. Belcher's recollection of her meeting with Ms. Gilbert differs from Ms. Gilbert's. Ms. Belcher recalled that she had applied for insurance with ADP on July 11, 2013, received the "broken arm poster," and believed she was covered at the time Ms. Belcher conducted her investigation. She offered an exhibit showing photographs of posters (but not the "broken arm poster") on the office bulletin board. She also offered an exhibit she testified was the UPS label from the tube containing the "broken arm poster." No photograph of the "broken arm poster" was produced as an exhibit. Ms. Gilbert did not contact ADP to verify whether Respondent had coverage on the date of her site visit to the Brandon store. Ms. Gilbert issued a Stop-Work Order to Respondent and a concurrent Request for Production of Business Records for Penalty Assessment Calculation at 11:20 a.m. on July 25, 2013. Ms. Belcher first submitted an application for workers' compensation coverage on July 11, 2013, but coverage was not bound on that date. Ms. Belcher submitted the paperwork to bind her insurance coverage on the afternoon of July 25, 2013, according to Mark Cristillo, an employee of ADP Insurance. Mr. Cristillo testified that he had made several attempts during the month of July 2013 to obtain the signed documents from Ms. Belcher, including an attempt as late as July 23, 2013, at 11:45 a.m. Ms. Belcher told Mr. Cristillo at that time that she had not reviewed the quote package. At 11:20 a.m., the time Ms. Gilbert's issued the Stop-Work Order on July 25, 2013, Ms. Belcher had not bound her insurance coverage. When she submitted the payment with the signed documents to ADP later that afternoon, the coverage was bound effective 12:01 a.m. on July 25, 2013. The records produced by Ms. Belcher were given to Chad Mason, one of the Department's penalty auditors, to calculate the penalty. He reviewed the records and determined the amount of gross payroll paid to Respondent's employees during the three- year penalty period preceding the investigation during which Respondent was not in compliance with the workers' compensation coverage requirements. Using Respondent's bi-weekly payroll chart, Respondent's Florida Department of Revenue UCT-6 reports, and the classification codes for each employee, Mr. Mason calculated a Third Amended Order of Penalty Assessment of $42,251.43, based upon what Respondent would have paid in workers' compensation premiums had it been in compliance with Florida's Workers' Compensation Law. The order was issued on October 24, 2013. Mr. Mason determined that the appropriate codes for Respondent's employees were 8010 and 8810, which are hardware store employees and general clerical employees, respectively. These codes were 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 NCCI, the National Council on Compensation Insurance, Inc., the nation's most authoritative data collecting and disseminating organization for workers' compensation. The parties stipulated prior to hearing that all of the individuals listed on the penalty worksheet of the Amended Order of Penalty Assessment were "employees" in the state of Florida of Respondent during the periods of non-compliance listed on the penalty worksheets. However, Respondent claimed that some of the employees were out-of-state and not subject to Florida law. Ms. Belcher testified that, as of July 25, 2013, three of its employees, Fred Hasselman, Douglas Strickland, and Josh Hyers, were employees of the Tennessee store and not subject to a Florida penalty. Mr. Hyers was a Florida employee prior to July 1, according to Ms. Belcher. However, all three of the employees were listed on the Florida Department of Revenue's 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. Mr. Mason reasonably relied upon the UCT-6 filings for the relevant time period to calculate Respondent's gross payroll in Florida. No evidence was produced to show them listed as Tennessee employees on that state's comparable tax form or any official document from outside Florida. The logical assumption is that they are Florida employees under the law. Accepting all the employees disclosed by Respondent as Florida employees led Mr. Mason to make his calculations of the penalty assessment using the appropriate codes from the Scopes Manual for hardware store and general clerical workers, 8010 and 8810. All the named employees on the Third Amended Order of Penalty Assessment were paid by Respondent in the amounts indicated on the penalty worksheet that accompanies that assessment during the penalty period of July 26, 2010, through July 25, 2013. Even though small discrepancies came up at the hearing regarding the classifications of some of Respondent's employees, the parties had stipulated to the accuracy of the classifications of those employees so those numbers will be accepted for purposes of this decision. Based upon the testimony at the hearing and the pre-hearing stipulations of the parties, the penalty assessment in the amount of $42,251.43 is accurate. Mr. Mason correctly applied the methodology for determining the amount of coverage required, determining that the appropriate premium for the three- year period would have been $28,167.50. When multiplied by the factor used to calculate the penalty, 1.5 times the premium, the total amount due is $42,251.43. The Department has proven by clear and convincing evidence that at the time the Stop-Work Order was issued and served on Respondent on the morning of July 25, 2013, Respondent had not secured workers' compensation coverage for its employees as required by chapter 440. On two occasions, August 2 and August 21, 2013, Ms. Gilbert returned to Respondent's Brandon location after the Stop-Work Order had been issued. The first was to serve the Amended Order of Penalty Assessment and the second was to serve the Second Amended Order of Penalty Assessment. On both occasions, the business was open in violation of the Stop-Work Order. A business under a Stop-Work Order may elect to enter into a payment plan after a ten percent down payment to keep the business open while a challenge to DOAH is under way. Respondent had not entered into such a plan. Therefore, the Department seeks $1,000 penalty for each of the days Ms. Gilbert visited the Brandon store and saw it open for business. This total additional penalty of $2,000 could have been greater had the Department further investigated whether the business remained open on other days after the Stop-Work Order had been imposed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order upholding the Stop-Work Order and Third Amended Order of Penalty Assessment, and assess a penalty in the amount of $42,251.43. It is further RECOMMENDED that the Department fine Respondent an additional $1,000 per day for the two days Respondent did not comply with the Stop-Work Order, resulting in a total penalty of $44,251.43. DONE AND ENTERED this 20th day of December, 2013, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of December, 2013. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Kristian Eiler Dunn, Esquire Dickens and Dunn, P.L. 517 East College Avenue Tallahassee, Florida 32301 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390
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 issues presented are (1) whether Respondent properly secured the payment of workers’ compensation insurance coverage and, if not, what penalty is warranted for such failure; and (2) whether Respondent conducted business operations in violation of a stop-work order and, if so, what penalty is warranted for such violation.
Findings Of Fact Respondent is a corporation domiciled in Georgia and engaged in the business of electrical work, which is a construction activity. On July 2, 2004, Petitioner's investigator Katina Johnson visited 6347 Collins Road, Jacksonville, Florida, on a random job site visit. Investigator Johnson inquired of Respondent's superintendent at the job site whether Respondent had secured the payment of workers’ compensation coverage. She was informed that Respondent had done so and was subsequently provided with a Certificate of Liability Insurance from Respondent’s agent in Georgia, the Cowart Insurance Agency, Inc. Investigator Johnson also obtained a copy of Respondent’s workers’ compensation insurance policy which had a policy period of September 23, 2003, to September 23, 2004. The policy and the information contained in the Certificate of Liability Insurance were not consistent. Keith Cowart, Respondent’s insurance underwriter in Georgia, testified in deposition that the certificate of insurance is not correct because it conflicts with Respondent’s workers’ compensation policy, 01-WC-975384-20, which does not have a Florida endorsement. Subsequent to the site visit, Investigator Johnson continued the investigation of Respondent utilizing the Department’s Coverage and Compliance Automated System (“CCAS”) database that contains information to show proof of coverage. She determined that Respondent did not have a Florida workers' compensation insurance policy. Johnson also checked the National Council for Compensation Insurance (“NCCI”) database and further confirmed that Respondent did not have a workers’ compensation insurance policy for the State of Florida. Petitioner also maintains a database of all workers’ compensation exemptions in the State of Florida. In consulting that database, Johnson did not find any current, valid exemptions for Respondent. Florida law requires that an employer who has employees engaged in work in Florida must obtain a Florida workers’ compensation policy or endorsement for such employees utilizing Florida class codes, rates, rules, and manuals to be in compliance. Further, any policy or endorsement used by an employer to prove the fact of workers' compensation coverage for employees engaged in Florida work must be issued by an insurer that holds a valid certificate of authority in the State of Florida. The insurance policy held by Respondent did not satisfy these standards. First, Respondent's policy was written by Cowart Insurance Agency, a Georgia agency which was not authorized to write insurance in Florida. Second, the premium was based on a rate that was less than the Florida premium rate; the policy schedule of operations page shows that Safeco Business Insurance insured Respondent for operations under class codes utilizing Georgia premium rates. On July 6, 2004, Investigator Johnson received a copy of another insurance policy declaration page from the Cowart Insurance Agency for Respondent that still did not have Florida listed as a covered state under Section 3A. In fact, none of Respondent’s workers’ compensation policies had a Florida endorsement with Florida listed in Section 3A. On July 7, 2004, after consulting with her supervisor, Investigator Johnson issued and served on Respondent a stop-work order and order of penalty assessment for failure to comply with the requirements of Chapter 440, Florida Statutes, specifically for failure to secure the payment of workers’ compensation based on Florida class codes, rates, rules and manuals. After the issuance of the stop-work order, Respondent produced a certificate of insurance with a Florida endorsement that would allegedly confer workers’ compensation coverage retroactively for Respondent. Such retroactive coverage does not satisfy Respondent’s obligation. Employers on job sites in Florida are required to maintain business records that enable Petitioner to determine whether the employer is in compliance with the workers' compensation law. Investigator Johnson issued to Respondent a request for the production of business records on July 7, 2004. The request asked the employer to produce, for the preceding three years, documents that reflected payroll and proof of insurance. Respondent produced payroll records for a number of employees. On August 2, 2004, Investigator Johnson issued a second business records request to Respondent because she noticed that the names of the workers that she interviewed during her site visit were not the same as the list of employees submitted by Respondent. Respondent failed to produce the requested records. When an employer fails to provide requested business records which the statute requires it to maintain and to make available to the Department, effective October 1, 2003, the Department is authorized by Section 440.107(7)(e), Florida Statutes, to impute that employer's payroll using the statewide average weekly wage multiplied by l.5. Petitioner therefore imputed Respondent's payroll for the entire period for which the requested business records were not produced. From the payroll records provided by Respondent, and through imputation of payroll from October 1, 2003, the Department calculated a penalty for the time period of July 7, 2001, through July 7, 2004, by assigning a class code to the type of work utilizing the SCOPES Manual. The Amended Order of Penalty Assessment which assessed a penalty of $115,456.14 was served on Respondent through its attorney on September 27, 2004. The Department issued and served on Respondent a second Amended Order of Penalty Assessment on November 10, 2004, with the penalty imputed back three years to July 7, 2001. The Department assessed a penalty of $100 per day for each day prior to October 1, 2003, for a total of $216,794.50. On April 28, 2005, the Department issued to Respondent a third Amended Order of Penalty Assessment with an assessed penalty of $63,871.02. The reduction in the amount of penalty was due to the Department’s determination that it did not have the authority at the time to impute the $100 per day penalty prior to October 1, 2003. On July 7, 2005, Respondent entered into a Payment Agreement Schedule for Periodic Payment of Penalty and was issued an Order of Conditional Release from Stop-Work Order by the Department. Respondent made a down payment of ten percent of the assessed penalty; provided proof of compliance with Chapter 440, Florida Statutes, by obtaining a Florida endorsement on its workers’ compensation insurance policy; and agreed to pay the remaining penalty in sixty equal monthly payment installments. Respondent has since defaulted on those payments. Section 440.107(7)(c), Florida Statutes, requires the Department to assess a penalty of $1,000 per day for each day that the employer conducts business operations in violation of a stop-work order. Several months after issuing the stop-work order, Investigator Johnson was informed that Respondent was conducting business operations in Miami in violation thereof. She obtained documentation that showed Respondent was performing electrical work as part of a contract it entered into with KVC Constructors, Inc., on August 4, 2004. Investigator Johnson obtained the daily sign-in sheets of KVC Constructors, Inc., that indicated the names of each entity that performed work on the job site for each particular day. She determined from the records that Respondent had worked 187 days in violation of the stop-work order prior to entering into the Payment Agreement Schedule and obtaining the Order of Conditional Release from the Department. On October 7, 2005, the Department issued to Respondent a fourth Amended Order of Penalty Assessment which assessed a penalty of $250,871.02. That amount was comprised of the $63,871.02 from the third Amended Order plus $187,000 for the 187 days of violation of the stop-work order.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order imposing a penalty against Respondent in the amount of $250,871.02 minus the amount of payments previously made by Respondent to the Department. DONE AND ENTERED this 8th day of June, 2006, in Tallahassee, Leon County, Florida. S LINDA M. RIGOT 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 8th day of June, 2006. COPIES FURNISHED: Colin M. Roopnarine, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 H.R. Electric, Inc. c/o Mr. Jeremy Hershberger 5512 Main Street Flowery Branch, Georgia 30542 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos Muñiz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues in this case are whether Respondent, Customs Logistics Services, Inc., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency charged with enforcing the requirement in chapter 440 that employers in Florida secure workers' compensation coverage for their employees. At all times relevant to this proceeding, Respondent was a corporation registered to do business in Florida. Respondent is a family-owned-and-operated customs brokerage service with its principal office located at 6940 Northwest 12th Street, Miami, Florida 33126. At the time of the inspection giving rise to this proceeding, Respondent employed seven or eight employees.2/ The Compliance Inspection On September 29, 2014, Petitioner's compliance inspector, Hector Fluriach, conducted an onsite inspection at Respondent's principal office to determine whether Respondent was in compliance with the workers' compensation coverage requirements established in chapter 440. At that time, Respondent's co-owners, Astrid Escalona and Carlos Henoa, told Fluriach that Respondent employed six employees and two corporate officers, and also paid two family members who did not work at the principal office. Upon inquiry, Escalona and Henoa informed Fluriach that Respondent did not have workers' compensation insurance coverage for its employees. Using Petitioner's Coverage and Compliance Automated System ("CCAS") and the National Council for Compensation Insurance ("NCCI") insurance coverage verification system, Fluriach confirmed that Respondent had not obtained workers' compensation insurance coverage for its employees, and that it was not in compliance with chapter 440 during certain periods within the two years preceding the inspection. Under the NCCI basic occupational classification system and Scopes Manual, six of Respondent's employees are classified as clerical (Code 8810), and one is classified as a driver (Code 7380). None of Respondent's employees is classified as employed within the construction industry. As a private entity employing four or more employees in a non-construction industry occupation, Respondent was required under chapter 440 to provide workers' compensation coverage for its employees. Respondent's corporate officers were eligible under section 440.05 to elect to be exempt from the workers' compensation coverage requirements of chapter 440; however, none had elected to be exempt. Fluriach issued Stop-Work Order No. 14-329-D5 ("Stop- Work Order"), personally served it on Respondent, and explained it to Escalona. The Stop-Work Order included an Order of Penalty Assessment, ordering assessment of a penalty against Respondent in an amount equal to two times the amount Respondent would have paid in workers' compensation coverage premiums when applying the approved manual rates to Respondent's payroll during the periods for which it had failed to secure workers' compensation coverage during the preceding two years (for convenience, hereafter referred to as the "look-back period"). Fluriach also served a business records request, requesting Respondent to provide specified business records3/ for Petitioner's use in determining the penalty. In a series of submittals, Respondent provided the requested business records to Petitioner. The evidence showed that during the two-year look- back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, and none of its corporate officers were exempt from the workers' compensation coverage requirement. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Petitioner's Computation of Penalty Amount To calculate the applicable penalty, Petitioner must determine, from a review of the employer's business records, the employer's gross payroll for the two-year look-back period. For days during the look-back period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the look-back period for purposes of calculating the applicable penalty commenced on September 30, 2012, and ended on September 29, 2014, the day on which the compliance inspection was conducted. Respondent's business records revealed that Respondent had fewer than four employees between January 1 and March 31, 2013, so Respondent was not required to have workers' compensation coverage for that period. Thus, Petitioner did not assess a penalty against Respondent for that period. For the rest of the look-back period, Respondent employed four or more employees, so was required to obtain workers' compensation coverage for those employees for that portion of the period. Respondent provided business records sufficient for Petitioner to determine Respondent's gross payroll for all but September 30, 2012. For that day, Petitioner imputed Respondent's gross payroll using Florida's statewide average weekly wage. On the basis of Respondent's business records submittals, Petitioner's auditor, Eric Ruzzo, recalculated the penalty to be assessed against Respondent. Petitioner issued an Amended Order of Penalty Assessment on October 17, 2014, imposing a total penalty of $5,617.04. On November 7, 2014, following receipt of additional records, Petitioner issued a Second Amended Order of Penalty Assessment, reducing the penalty to $3,982.52. Finally, after receiving more records, Petitioner issued a Third Amended Order of Penalty Assessment on January 12, 2015, further reducing the penalty to $3,205.70. Each of these penalty assessments was served on Respondent. Petitioner seeks to impose a $3,205.70 penalty against Respondent in this proceeding. In calculating the penalty, Ruzzo examined three-month (i.e., quarterly) periods within the two-year look-back period. Ruzzo identified the occupational class code applicable to each of Respondent's employees. As stated above, all but one of Respondent's employees were classified as clerical, and one of Respondent's employees was classified as a driver. For each employee, Ruzzo determined the gross payroll paid to that employee for the specific quarter in which Respondent was non-compliant during the look-back period, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupational class code. This calculation yielded the workers' compensation coverage premium for that specific employee for the specific quarter for which Respondent was non- compliant during the look-back period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. As previously noted, Respondent did not provide gross payroll records covering September 30, 2012; thus, for that day, Ruzzo imputed the gross payroll for each of Respondent's employees using the statewide average weekly wage as defined in section 440.12(2)4/ multiplied by two. Ruzzo then performed the same computations to yield the penalty amount to be imposed for Respondent's failure to provide workers' compensation on September 30, 2012. Ruzzo then added each penalty amount determined for each employee using actual gross payroll and imputed payroll, to yield the total penalty amount of $5,286.70. Because Respondent had not previously been issued a stop-work order, pursuant to section 440.107(7)(d)1., Petitioner applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $2,081.00. This was subtracted from the calculated penalty of $5,286.70, yielding a total penalty of $3,205.70. Respondent's Defense At the final hearing, Escalona testified that she and the other co-owners of Respondent always have attempted to fully comply with every law applicable to Respondent's business, and have never had compliance problems. She testified that neither she nor the other co-owners of Respondent realized that Respondent was required to have workers' compensation coverage for its employees, and they did not intentionally violate the law. Petitioner apparently mailed a memorandum regarding verifying workers' compensation coverage requirements to businesses in the area before it conducted compliance inspections. The memorandum was dated October 8, 2014, and Escalona testified Respondent received it on October 13, 2014, approximately two weeks after the compliance inspection that Fluriach conducted. Escalona asserted that had Respondent received the memorandum before the compliance inspection was conducted, she would have called Petitioner to determine if Respondent needed to obtain workers' compensation coverage, would have asked how to obtain it, and would have obtained coverage for its employees and exemptions for its corporate officers. Escalona testified that the $3,205.70 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact Petitioner has shown, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the Stop-Work Order, by failing to secure workers' compensation coverage for its employees. Petitioner has shown, by clear and convincing evidence, that the $3,205.70 penalty proposed to be assessed against Respondent pursuant to the Third Amended Penalty Assessment is the correct amount of the penalty to be assessed in this proceeding.
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 determining that Respondent, Customs Logistics Services, Inc., violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $3,205.70. DONE AND ENTERED this 11th day of August, 2015, in Tallahassee, Leon County, Florida S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2015.
The Issue The issue in this case is whether Respondent, Ocala Exterior Solutions, Inc., failed to properly maintain workers' compensation insurance coverage for its employees, and, if so, what penalty should be assessed.
Findings Of Fact The Department is the state agency responsible for ensuring that all employers maintain workers' compensation insurance for themselves and their employees. It is the duty of the Department to make random inspections of job sites and to answer complaints concerning potential violations of workers' compensation rules. This case arose as a result of a random inspection. Respondent is a business created by Johnny Busciglio on or about October 16, 2012. At all times relevant hereto, Respondent was duly licensed to do business in the State of Florida. Its business address is 140 Southwest 74th Lane, Ocala, Florida 34476. On May 22, 2015, the Department’s investigator, William Pangrass, made a random site visit to a construction site located at a residence at 9189 Southwest 60th Terrace Road, Ocala, Florida. He saw two men installing soffit as part of the construction which was going on. Pangrass remembers the men identifying themselves as Derek McVey and Frank Deil. When Pangrass inquired as to their employer, the two men were initially not certain for whom they were working. One of the men made a telephone call and then told Pangrass they were employees of Sauer & Sons. Interestingly, Respondent said the two men on-site that day were McVey and a man named James Van Brunt. Pangrass contacted Sauer & Sons and were told that neither McVey nor Deil (or Van Brunt) were employees of that company. He was told by a representative of Sauer & Sons that the men were in fact employees of Respondent. Pangrass then verified that Respondent was a current, viable company and checked whether the company had workers’ compensation insurance coverage for its employees. He found that Respondent had a workers’ compensation insurance policy for a short time in 2014. Two of Respondent’s employees, however, did have exemptions from coverage. Those two were Johnny Busciglio and Anthony Wayne. Based on his findings, Pangrass issued a SWO which he posted at the work site he had visited. He posted the SWO on the permit board in front of the job site on May 26, 2015. On May 29, he served a Request for Production of Business Records on Respondent, seeking information concerning Respondent’s business for purposes of calculating a penalty for failure to have workers’ compensation insurance in place. Respondent emailed the requested business records to Pangrass. The Department requested additional records and clarification concerning some of the records which had been provided. Busciglio made a good faith effort to respond to each of the Department’s requests. After review of Respondent’s business records, the Department calculated a penalty and issued an amended OPA. That amended OPA was issued on September 8 and served on Busciglio (as agent for Respondent) on October 1, 2015. The amount of the penalty in the amended OPA was $9,896.32. Within a few days after receiving the amended Order, Busciglio obtained workers’ compensation insurance for his employees, paid a down payment of $1,000 to the Department, and Respondent was released to resume its work. The penalty in the amended OPA was based upon information obtained from Busciglio concerning Respondent. Using the bank records supplied by Busciglio, the Department determined that Respondent had the following employees: Eric McVey, Frank Dorneden, Jeff Burns, Jordan Anchondo, Anthony Wayne, Nikki Smith, Johnny Busciglio, and Jason Bridge. Their wages were used by the Department to calculate the penalty. The penalty was calculated by the Department as follows: The business was assigned class code 5645, construction on residential dwellings; The period of non-compliance was set at two years; The gross payroll amount for that two-year period was established at $30,905.14; The gross payroll amount was divided by 100, resulting in the sum of $309.05; The approved manual rate, i.e., the amount the employer would have paid if insurance was in place, was assigned for each employee; The gross payroll was multiplied by the manual rate; And the penalty amount was established, taking the figure in (f), above, and multiplying by two. Busciglio established by credible testimony, unrefuted by the Department, that Nikki Smith was a person from whom he bought tools; she was never an employee of Respondent. The same was true for the person listed as Jason Bridge (although his real name may have been Jason Woolridge). As for Eric McVey, he worked for Frank Dorneden, who paid McVey directly. There were no payroll records or checks from Respondent provided to the Department which were attributable to McVey. Dorneden had begun working for Respondent on December 22, 2014. On May 22, 2015, he was asked by Busciglio to visit the work site; he found McVey working there and Deil/Van Brunt was also on the site. Neither the Department nor Respondent offered any further explanation about Deil/Van Brunt, nor did the Department attribute any penalty to Van Brunt as a putative employee. His status in this matter is a mystery. When the penalties associated with McVey, Smith, and Bride are subtracted from the calculation, the amount of the penalty would be $9,454.22.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services requiring Respondent, Ocala Exterior Solutions, Inc., to pay the sum of $9,454.22. DONE AND ORDERED this 20th day of November, 2015, 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 20th day of November, 2015.
The Issue The issues in this case are: (1) whether Respondent, PFR Services Corp., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes (2017)2/; and (2) if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation insurance covering their employees, pursuant to chapter 440. Respondent is a Florida corporation. At all times relevant to this proceeding, its business address was 8040 Northwest 95th Street, Hialeah, Florida. The evidence establishes that Respondent was actively engaged in business during the two-year audit period, from October 17, 2015, through October 16, 2017, pertinent to this proceeding.3/ The Compliance Investigation On October 16, 2017, Petitioner's compliance investigator, Cesar Tolentino, conducted a workers' compensation compliance investigation at a business located at 8040 Northwest 95th Street, Hialeah, Florida. The business was being operated as a restaurant, to which National Council on Compensation Insurance ("NCCI") class code 9082 applies. Tolentino observed Maria Morales, Gabriela Nava, and Geraldine Rodriquez performing waitressing job duties and Rafael Briceno performing chef job duties. The evidence established that these four persons were employed by Respondent. Additionally, the evidence established that corporate officers Rosanna Gutierrez and Mary Pineda were employed by Respondent.4/ The evidence established that neither had elected to be exempt from the workers' compensation coverage requirement. In sum, the evidence established that Respondent employed six employees, none of whom were independent contractors, and none of whom were exempt from the workers' compensation coverage requirement. Tolentino conducted a search of Petitioner's Coverage and Compensation Compliance Automated System, which consists of a database of workers' compensation insurance coverage policies issued for businesses in Florida, and all elections of exemptions filed by corporate officers of businesses in Florida. Tolentino's search revealed that Respondent had never purchased workers' compensation coverage for its employees; that its corporate officers had not elected to be exempt from the workers' compensation coverage requirement; and that Respondent did not lease employees from an employee leasing company. Gutierrez acknowledged that Respondent had not purchased workers' compensation coverage for its employees, and told Tolentino that she did not know it was required. Based on Tolentino's investigation, on October 16, 2017, Petitioner served Stop-Work Order No. 17-384 ("Stop-Work Order") on Respondent. At the time Tolentino served the Stop-Work Order, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner a receipt of the amount paid to activate the policy within 28 days of issuance of the Stop-Work Order, Respondent's penalty would be reduced by the amount paid to activate the policy. On October 16, 2017, Petitioner, through Tolentino, also served on Respondent a Request for Production of Business Records for Penalty Assessment Calculation ("Business Records Request"), requesting Respondent provide several categories of business records covering the two-year audit period from October 16, 2015, to October 16, 2017. Specifically, Petitioner requested that Respondent provide its payroll documents consisting of time sheets, time cards, attendance records, earnings records, check stubs, check images, and payroll summaries, as applicable. Petitioner also requested that Respondent provide, as applicable, its federal income tax documents; account documents, including business check journals and statements and cleared checks for all open or closed business accounts; cash and check disbursements records; workers' compensation coverage records; and independent contractor records. At the time Tolentino served the Business Records Request, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner the complete business records requested within ten business days, Respondent's penalty would be reduced by 25 percent. The evidence establishes that Respondent did not provide any business records within that time period, so is not entitled to receive that penalty reduction. On November 16, 2017, Petitioner issued an Amended Order of Penalty Assessment, assessing a total penalty of $35,262.32 against Respondent for having failed to secure workers' compensation coverage for its employees during the audit period. On December 14, 2017, Gutierrez met with Tolentino and, at that time, provided documentation to Petitioner showing that Respondent had acquired workers' compensation coverage for its employees, effective October 28, 2017, and had paid $3,966.00 for the policy. At the December 14, 2017, meeting, Gutierrez presented an envelope postmarked October 30, 2017, showing that Respondent had mailed Petitioner proof of having obtained the workers' compensation coverage within 28 days of the date the Stop-Work Order was issued; however, this mail was returned, so Petitioner did not receive such proof within 28 days. The evidence established that this mail was returned to Respondent on December 4, 2017——several days after the 28-day period had expired, and too late for Respondent to take additional steps to deliver to Petitioner the proof of its having purchased the workers' compensation policy.5/ Because Petitioner did not receive Respondent's proof of having purchased a workers' compensation policy within 28 days of issuance of the Stop-Work Order, it did not reduce the penalty imposed on Respondent by the amount that Respondent had paid for the premium. The evidence also establishes that at the December 14, 2017, meeting, Respondent tendered to Petitioner a cashier's check in the amount of $1,000.00. As a result of having received proof of workers' compensation coverage for Respondent's employees, Petitioner issued an Agreed Order of Conditional Release from Stop-Work Order ("Order of Conditional Release") on December 14, 2017, releasing Respondent from the Stop-Work Order. The Order of Conditional Release expressly recognized that Respondent "paid $1,000.00 as a down payment for a penalty calculated pursuant to F.S. 440.107(7)(d)1." Additionally, page 1 of 3 of the Penalty Calculation Worksheet attached to the Amended Order of Penalty Assessment admitted into evidence at the final hearing reflects that Respondent paid $1,000.00 toward the assessed penalty of $35,262.32. This document shows $34,262.32 as the "Balance Due." Calculation of Penalty to be Assessed Petitioner penalizes employers based on the amount of workers' compensation insurance premiums the employer has avoided paying. The amount of the evaded premium is determined by reviewing the employer's business records. In the Business Records Request served on October 16, 2017, Petitioner specifically requested that Respondent provide its payroll documents, federal income tax documents, disbursements records, workers' compensation coverage records, and other specified documents. When Gutierrez met with Tolentino on December 14, 2017, she provided some, but not all, of the business records that Petitioner had requested. Respondent subsequently provided additional business records to Petitioner, on the eve of the final hearing. Petitioner reviewed all of the business records that Respondent provided. However, these business records were incomplete because they did not include check images, as specifically required to be maintained and provided to Petitioner pursuant to Florida Administrative Code Rule 69L-6.015(6). Check images are required under Florida Administrative Code Rule 69L-6.015(6) because such images reveal the payees, which can help Petitioner identify the employees on the employer's payroll at any given time. This information is vital to determining whether the employer complied with the requirement to have workers' compensation coverage for all of its employees. Because Respondent did not provide the required check images, the records were insufficient to enable Petitioner to calculate Respondent's payroll for the audit period. Under section 440.107(7)(e), business records provided by the employer are insufficient to enable Petitioner to calculate the employer's payroll for the period for which the records are requested, Petitioner is authorized to impute the weekly payroll for each employee as constituting the statewide average weekly wage multiplied by 1.5. To calculate the amount of the penalty due using the imputed method, Petitioner imputes the gross payroll for each employee for each period during which that employee was not covered by required workers' compensation insurance. To facilitate calculation, Petitioner divides the gross payroll amount for each employee for the specific non-compliance period by 100.6/ Petitioner then multiplies this amount by the approved NCCI Scopes Manual rate——here, 2.34, which applies to restaurants——to determine the amount of the avoided premium for each employee for each non-compliance period. This premium amount is then multiplied by two to determine the penalty amount to be assessed for each employee not covered by required workers' compensation insurance for each specific period of non- compliance. Performing these calculations, Petitioner determined that a penalty in the amount of $35,262.32 should be assessed against Respondent for failing to provide workers' compensation insurance for its employees, as required by chapter 440, for the period from October 17, 2015, through October 16, 2017. As discussed above, on December 14, 2017, Respondent paid a down payment of $1,000.00 toward the penalty, and this was expressly recognized in the Stop-Work Order that was issued that same day. Thus, the amount of the penalty to be assessed against Respondent should be reduced by $1,000.00, to $34,262.32. As previously noted, this amount is identified on page 1 of 3 of the Amended Order of Penalty Assessment as the "Balance Due." As discussed in paragraphs 17 and 18, above, the evidence establishes that Respondent purchased a workers' compensation policy to cover its employees within 11 days of issuance of the Stop-Work Order, and mailed to Petitioner proof of having purchased such policy on October 30, 2017——well within the 28-day period for providing such proof. However, as discussed above, this mail was returned to Respondent on December 4, 2017——too late for Respondent to take additional steps to provide such proof to Petitioner within the 28-day period. There is no evidence in the record showing that failure of the mailed proof to be received by Petitioner was due to any fault on Respondent's part. Respondent's Defenses On behalf of Respondent, Gutierrez testified that Respondent did everything that Tolentino had told them to do. Respondent purchased workers' compensation insurance and provided proof to Petitioner that its employees were covered.7/ Gutierrez also testified that although Respondent's business was created in May 2013, it did not begin operating and, therefore, did not have any employees, until January 2016.8/ However, as previously noted, the persuasive evidence does not support this assertion.
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 determining that PFR Services Corp. violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage for its employees during the audit period, and imposing a penalty of $30,296.32. DONE AND ENTERED this 14th day of January, 2019, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS 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 14th day of January, 2019.
The Issue The issues are whether Respondent was required to obtain workers' compensation coverage for himself pursuant to Section 440.107, Florida Statutes (2002), during the penalty period designated in the Amended Order of Penalty Assessment; and, if so, whether Petitioner should impose a penalty against Respondent in the amount of $120,467.88.
Findings Of Fact The Department 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. (2002). On February 9, 2004, while conducting a random site inspection, Department investigator, Eric Duncan, observed three men performing construction work in the form of carpentry and house-framing at 720 Southwest 10th Street, Cape Coral, Florida. One of the workers on the site was Respondent, Jeremy Butzler, a sole proprietor who had employed the other two workers. Mr. Duncan interviewed Mr. Butzler at the site and requested proof of workers' compensation coverage, which Mr. Butzler was unable to provide. Mr. Duncan then issued the first Stop Work and Penalty Assessment Order, directing Mr. Butzler to cease work and pay a civil penalty of $1000.00. Also on February 9, 2004, Mr. Duncan served Mr. Butzler with a "Request for Production of Business Records," seeking copies of business records to determine whether Mr. Butzler had secured workers' compensation coverage, whether he had a current valid workers' compensation exemption, and to determine any civil penalties that may be owed for failing to secure workers' compensation coverage. Mr. Butzler complied in a very limited way. Mr. Duncan testified that most of the documents provided by Mr. Butzler were records of electronic transfer of funds that did not identify their recipients. No company checkbook or ledger was produced. After the penalty was calculated, the Department issued the First Amended Stop Work and Penalty Assessment Order, which increased the assessed penalty to $132,027.64. This assessment was later reduced to $120,467.88 after the Department corrected the workers' compensation premium rate it employed to calculate the penalty. At the time the Stop Work Order was issued and pursuant to Subsection 440.107(5), Florida Statutes (2002), the Department had adopted Florida Administrative Code Rule 4L-6.015,1/ which stated, in relevant part: In order for the Division to determine that an employer is in compliance with the provisions of Chapter 440, F.S., every business entity conducting business within the state of Florida shall maintain for the immediately preceding three year period true and accurate records. Such business records shall include original documentation of the following, or copies, when originals are not in the possession of or under the control of the business entity: All workers’ compensation insurance policies of the business entity, and all endorsements, notices of cancellation, nonrenewal, or reinstatement of such policies. * * * Records indicating for every pay period a description of work performed and amount of pay or description of other remuneration paid or owed to each person by the business entity, such as time sheets, time cards, attendance records, earnings records, payroll summaries, payroll journals, ledgers or registers, daily logs or schedules, time and materials listings. All contracts entered into with a professional employer organization (PEO) or employee leasing company, temporary labor company, payroll or business record keeping company. If such services are not pursuant to a written contract, written documentation including the name, business address, telephone number, and FEIN or social security number of all principals if an FEIN is not held, of each such PEO, temporary labor company, payroll or business record keeping company; and For every contract with a PEO: a payroll ledger for each pay period during the contract period identifying each worker by name, address, home telephone number, and social security number or documentation showing that the worker was eligible for employment in the United States during the contract for his/her services, and a description of work performed during each pay period by each worker, and the amount paid each pay period to each worker. A business entity may maintain such records or contract for their maintenance by the PEO to which the records pertain. * * * All check ledgers and bank statements for checking, savings, credit union, or any other bank accounts established by the business entity or on its behalf; and All federal income tax forms prepared by or on behalf of the business and all State of Florida, Division of Unemployment Compensation UCT-6 forms and any other forms or reports prepared by the business or on its behalf for filing with the Florida Division of Unemployment Compensation. During the period in question, Respondent was a "sole proprietor," as that term was defined in Subsection 440.02(25), Florida Statutes (2002): "Sole proprietor" means a natural person who owns a form of business in which that person owns all the assets of the business and is solely liable for all the debts of the business. Subsection 440.02(15)(c)1., Florida Statutes (2002), in effect during the penalty assessment period, stated, in relevant part: "Employee" includes a sole proprietor . . . 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 department as provided in s. 440.05 . . . 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 department as provided in s. 440.05 is not an employee. (Emphasis added). Section 440.05, Florida Statutes (2002), allowed an individual to apply for election to be exempt from workers' compensation benefits. Only the named individual on the application was exempt from carrying workers' compensation insurance coverage. The Department maintains a database of all workers' compensation exemptions in the State of Florida. Mr. Duncan's review of this database revealed that, although Respondent had a valid workers' compensation exemption from November 18, 1999, to November 15, 2001, there were no exemptions for Respondent for 2002, the year constituting the penalty period in this case. At the hearing, Respondent admitted that he did not obtain an exemption for the year 2002. Mr. Duncan's investigation also revealed that Respondent did not have workers compensation insurance coverage during the year 2002. During the investigation, Respondent informed Mr. Duncan that he had contracted with an employee leasing company, Southeast Personnel Services, Inc., that was responsible for paying the salaries of and providing workers' compensation insurance coverage for Respondent and his workers. Pursuant to Subsection 468.520(5), Florida Statutes (2002),2/ an employee leasing company is a business entity engaged in employee leasing. "Employee leasing" is an arrangement whereby a leasing company assigns its employees to a client and allocates the direction of, and control over, the leased employees between the leasing company and the client. § 68.520(4), Fla. Stat. (2002). When the employee leasing company accepts a client, the client becomes an employee of the leasing company. An employee leasing company is the employer of the leased employees and is responsible for providing workers' compensation pursuant to Chapter 440, Florida Statutes (2002). § 468.529(1), Fla. Stat. (2002). Additionally, an employee leasing company assumes responsibility for the payment of wages to the leased employees without regard to payments by the client and for the payment of payroll taxes and collection of taxes from the payroll of leased employees. § 468.525(4)(b) and (c), Fla. Stat. (2002). At the hearing, Respondent demonstrated that he had workers' compensation coverage as an employee of the employee leasing company. However, the Department did not utilize any payments made through the leasing company in its penalty calculation. The evidence demonstrated that Respondent received compensation directly from Holiday Builders, Inc., in the amount of $185,006.50, and Gatco Construction, in the amount of $10,590.00. These amounts, totaling $195,596.50, were utilized by the Department to calculate Respondent's penalty. Mr. Duncan explained that in order for workers' compensation coverage to apply through the employee leasing company, companies such as Gatco Construction would have to make payments to the leasing company, not directly to Respondent. The leasing company would then pay a salary to Respondent, as its employee, and Respondent would be covered by the employee leasing company's workers' compensation insurance. Payments made directly to Respondent would not be secured by the workers' compensation coverage obtained through the employee leasing company. Respondent claimed that the Division utilized the incorrect gross income amount in calculating the penalty. To support this claim, Respondent attempted to introduce what he claimed was his personal income tax return for the year 2002. Respondent claimed this return had been prepared and filed by his bookkeeper some time in February 2004, subsequent to the Department's investigation. However, the return produced at hearing was unsigned and indicated that it had been self- prepared by Respondent. Respondent could not recall the bookkeeper's name without prodding from his counsel. Respondent offered no proof that this return had ever been completed or filed with the Internal Revenue Service. The purported 2002 tax return was not admitted into evidence, and Respondent's testimony as to the information contained on the return is not reliable. The Department correctly calculated the penalty assessment based on the money paid to Respondent as a sole proprietor "employee" who failed to file for a workers' compensation exemption for the year 2002. The Department calculated the total penalty based on Respondent's gross payroll, the class code assigned to Respondent utilizing the SCOPES Manual (a standard classification tool published by the National Council on Compensation Insurance), and the statutory guidelines in Subsection 440.107(7), Florida Statutes (2002). Based on that calculation, the correct penalty assessment in this case is $120,467.88.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order confirming the Amended Stop Work Order and imposing a penalty in the amount of $120,467.88. DONE AND ENTERED this 5th day of May, 2005, 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 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, 2005.
The Issue Whether Thompson Enterprises of Jacksonville, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers' compensation, as alleged in the Stop-Work Order and 2nd Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing workers' compensation coverage requirements applicable to employers under Florida law. Respondent is a Florida limited-liability company organized on October 25, 2011. The managing members listed on Respondent’s State of Florida Articles of Organization are Thomas Thompson, Michael Thompson, and Vicky Thompson. In May 2016, Department Compliance Investigator Ann Johnson was assigned to conduct a job site visit on Respondent’s business because its name appeared on the Department’s Bureau of Compliance’s “lead list.” The “lead list” is one of the Department’s databases listing employers that are potentially out of compliance with Florida's workers' compensation insurance requirements. Prior to the job site visit, Investigator Johnson reviewed the Division of Corporations website, www.sunbiz.org, and confirmed Respondent's address, managing members' names, and that Respondent was a current, active Florida company. Respondent’s website advertised towing, wrecker, mechanic, and body shop services. On May 6, 2016, Investigator Johnson visited Respondent's principal address located at 7600 Bailey Body Road, Jacksonville, Florida 32216. She noted a large commercial sign near Respondent’s address that advertised towing and wrecker services. During her visit, Investigator Johnson spoke with Vicky Thompson and Michael Thompson, both of whom advised that they were owners of Respondent. The Thompsons informed Investigator Johnson that Respondent had six employees, including the three listed as managers on Respondent’s Articles of Organization. When Investigator Johnson asked for proof of workers’ compensation coverage, Michael Thompson admitted that Respondent had no such coverage. Under Florida law, employers in the non-construction industry, such as Respondent, must secure workers' compensation insurance if "four or more employees are employed by the same employer." §§ 440.02(17)(b) and 440.107, Fla. Stat. On the same day as her site visit, Investigator Johnson confirmed Respondent’s lack of insurance with a search of the Department's internal database, Coverage and Compliance Automated System. At the time, Respondent had no active exemptions from the requirements of obtaining workers’ compensation for its three managing members. Based on her investigation, Investigator Johnson served Respondent with the Stop-Work Order and a Request for Production on May 6, 2016. Upon serving the documents, Investigator Johnson explained the effect and purpose of the documents and how Respondent could come into compliance. Respondent came into compliance that same day by paying a $1,000 down payment, reducing Respondent's workforce to three employees, applying for exemptions for its three managing members, and executing an agreed Order of conditional release with the Department. Respondent subsequently complied with the Department’s Request for Production. In June 2016, the Department assigned Penalty Auditor Eunika Jackson to review records obtained from Respondent and calculate the penalty to be assessed against Respondent. In accordance with applicable law, the Department's audit spanned the preceding two-year period, starting from the date of the Stop-Work Order. See § 440.107(7)(d)1., Fla. Stat. The audit period in this case was from May 7, 2014, through May 6, 2016. Based on information obtained during the investigation, Auditor Jackson assigned classification codes 7219, 8380, and 8810 to those identified as employees working for Respondent during the audit period. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance ("NCCI") to assist in the calculation of workers' compensation insurance premiums. Classification code 8810 applies to clerical office employees, code 7219 applies to trucking and "towing companies," and code 8380 applies to automobile service or repair centers. According to Respondent, it was out of compliance with the coverage requirements of chapter 440 for only "368 days" during the two-year audit period. Respondent's records, however, do not support this contention. Respondent provided a detailed "Employee Earnings Summary" for each employee stating the employee’s name, pay rate, and pay period. Respondent's payroll records reflect that Respondent employed "four or more employees" during the audit period. Throughout the two-year audit period, Respondent employed four or more employees with the following duties: Anna Lee, mechanic/bodywork; Cedric Blake, mechanic/bodywork; David Raynor, mechanic/bodywork; James Budner, mechanic/bodywork; Jason Leighty, mechanic; Kevin Croker, Jr., porter/detailer; Nicholas Conway, bodywork; Ralph Tenity, bodywork; Rebecca Thompson, secretary/office help; Stephen Collins, shop helper/porter; Todd Gatshore, tow truck driver/shop helper; and Williams Reeves, tow truck driver/shop helper. Evidence further demonstrated that, during the audit period, managing member Michael Thompson worked as a wrecker truckdriver, and worked with the Sheriff's Office to clear traffic accidents. He was assigned class code 7219 — tow truck driver. Managing member Vicky Thompson was given the clerical class code 8810 because she was observed working in the office during Investigator Johnson's site visit. Managing member Thomas Thompson was assigned the clerical class code 8810 based upon the fact that he occasionally does office work for the business. The corresponding approved manual rates for classification codes 8810, 7219, and 8380 were correctly applied to each employee for the related periods of non-compliance to determine the final penalty. In accordance with the Request for Production, Respondent provided the Department payroll summary reports, tax reports, and unemployment tax reports. The payroll summary reports and records provided by Respondent listed the payroll and duties for each employee. The gross payroll amounts for each employee reflected in the penalty in this case were derived from those documents. Upon receiving those reports and records, the Department correctly determined the gross payroll for Respondent's employees. On June 13, 2016, the Department served the Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,788.90. A portion of the first penalty was based on imputed payroll for Respondent’s three managing members. After service of the Amended Order of Penalty Assessment, Respondent provided additional records showing the payroll of its three managing members, and the 2nd Amended Order of Penalty Assessment was calculated after removing the imputed payroll. On August 22, 2016, the Department served the 2nd Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,112.44, which was correctly calculated in accordance with section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027(1). In sum, the clear and convincing evidence demonstrated that Respondent was a tow truck company engaged in the wrecker/tow truck and body shop mechanic industries in Florida during the periods of noncompliance; that Respondent failed to secure the payment of workers' compensation for its employees in violation of Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027(1) to determine the appropriate penalty of $33,112.44.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Thompson Enterprises of Jacksonville, LLC. DONE AND ENTERED this 27th day of April, 2017, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, 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 27th day of April, 2017.
