The Issue Whether Respondent, Craftmaster Plastering and Stucco, Inc., failed to comply with the coverage requirements of the Workers’ Compensation Law, chapter 440, Florida Statutes; and, if so, what penalty should be assessed pursuant to section 440.107, Florida Statutes (2016).
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of the Workers’ Compensation Law that employers secure the payment of workers’ compensation coverage for their employees. § 440.107, Fla. Stat. (2017). Respondent is a Florida for-profit corporation organized on or about January 1, 2015, which was engaged in the construction industry in Florida at all times relevant hereto. According to the record evidence, Respondent was administratively dissolved on September 23, 2016. No evidence of reinstatement was introduced. According to the Secretary of State’s database, Rasheem Kincey is Respondent’s President, Mecca Kincey is its Vice President, and Ulysses Kincey is its Treasurer. On January 23, 2017, Ms. Loy received a telephone call from Department Compliance Investigator, Carl Woodall, who was onsite at a restaurant undergoing renovations at the intersection of U.S. Highway 98 and Kraft Avenue in Panama City, Florida (the worksite). Mr. Woodall reported his findings to Ms. Loy from a random workers’ compensation compliance check he had completed at the worksite. Based upon Mr. Woodall’s verbal report, Ms. Loy instructed Mr. Woodall to issue the subject Order. According to Ms. Loy, Mr. Woodall observed several workers at the worksite, interviewed them, and recorded notes on a field interview worksheet. Ms. Loy had no personal knowledge of any of the workers at the worksite, did not observe the activities of anyone at the worksite, and did not interview anyone at the worksite. Mr. Woodall did not testify at the final hearing. The Department did not introduce Mr. Woodall’s field interview worksheet into evidence. Ms. Loy reviewed the Coverage and Compliance Automated System (CCAS), which is maintained by the Department, and confirmed Respondent did not have a valid workers’ compensation insurance policy. Mr. Hatten was assigned to calculate the penalty to be imposed for Respondent’s alleged failure to secure workers’ compensation insurance coverage for its employees. From Mr. Woodall’s field interview worksheet, Mr. Hatten retrieved the names Rasheem Kincey, Mecca Kincey, Ulysees Kincey, Brandon White, Mark Kim Wilson, Jerome Bradley, and Brandon Samuel Kincey Smith, and entered those names on his penalty calculation worksheet as Respondent’s uninsured employees for the penalty audit period. In this case, the penalty audit period included the two years immediately preceding the date on which the Order was issued: January 23, 2015 through January 23, 2017. Respondent did not comply with Petitioner’s BRR; therefore, the Department did not have sufficient records to establish Respondent’s payroll during the penalty audit period. Mr. Hatten reviewed CCAS and confirmed that Mecca Kincey, Ulysses Kincey, and Rasheem Kincey had valid workers’ compensation exemptions effective from February 3, 4, and 5, 2015, respectively, through February 2, 3, and 4, 2017, respectively. Respondent’s officers did not have exemptions from workers’ compensation insurance requirements during the audit period between January 26, 2015, and February 2, 3, and 4, 2017, respectively. Mr. Hatten entered these timeframes on the penalty calculation worksheet as periods of non-compliance for the three corporate officers. Mr. Hatten further found Respondent had a workers’ compensation insurance policy effective February through July 2015. Mr. Hatten used this information to establish periods of non-compliance during the audit period. Based upon Mr. Woodall’s notes that he observed workers engaged in stucco application and repair at the worksite, Mr. Hatten assigned the classification code 5022, Masonry, for purposes of calculating the penalty. The classification code was derived from the Scopes Manual published by the National Council on Compensation Insurance (NCCI) and adopted by the Department by Florida Administrative Code Rule 69L-6.021. Mr. Hatten next applied the workers’ compensation insurance rates approved by the Department for workers’ compensation coverage by classification code to each worker during each period of non-compliance. Finally, because Respondent did not submit business records sufficient to establish its payroll during the audit period, Mr. Hatten assigned the statewide average weekly wage in order to calculate Respondent’s payroll to each “employee” and its corporate officers for the periods of non-compliance. Utilizing this imputed methodology, Mr. Hatten calculated a total penalty of $94,544.92 to be imposed on Respondent for failure to secure workers’ compensation insurance for its employees during the periods of non-compliance. The Department served Respondent with an Amended Order of Penalty Assessment on February 23, 2017, imposing the penalty of $94,544.92. Mr. Kincey testified on Respondent’s behalf. Mr. Kincey admitted that he, Ulysses Kincey, and Mecca Kincey were performing stucco work at the worksite on January 23, 2017. Mr. Kincey denied that any of the other individuals, purportedly identified at the worksite by Mr. Woodall, were his employees. As to the individuals named in the Amended Order of Penalty Assessment, Mr. Kincey testified that Jerome Bradley was a cook at the restaurant; Mark Kim Wilson was painting at the worksite, and Mr. Kincey assumed Mr. Wilson was hired by the restaurant owner, Jerry Steele; Brandon Samuel Kincey Smith was Mr. Kincey’s cousin, and he had no idea who had hired Mr. Kincey Smith or what he was doing at the worksite; and that he had never heard of Brandon White and could not identify Mr. White. The Department offered no non-hearsay evidence to rebut Mr. Kincey’s testimony. The record evidence is sufficient to support a finding that Rasheem Kincey, Mecca Kincey, and Ulysees Kincey were performing stucco work at the worksite on January 23, 2017, and were not covered by either workers’ compensation insurance or a valid exemption therefrom, for the periods of non-compliance identified in the penalty calculation worksheet. Mr. Hatton correctly applied the imputed methodology and correctly calculated a penalty of $1,259.64, for Respondent’s failure to obtain workers’ compensation coverage for the three corporate officers. The evidence is insufficient to support the remaining imputed penalty calculation applied to Respondent.
Recommendation Having considered 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 Respondent, Craftmaster Plastering and Stucco, Inc., failed to secure and maintain required workers’ compensation insurance for its employees, and impose a penalty of $1,259.64. DONE AND ENTERED this 13th day of November, 2017, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 2017. COPIES FURNISHED: Michael Joseph Gordon, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Rasheem Kincey Craftmaster Plastering and Stucco, Inc. 129 Nann Street Enterprise, Alabama 36330 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 Royal Roofing and Restoration, Inc. (Respondent or Royal Roofing), failed to secure workers’ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (Petitioner or Department), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement of chapter 440, that Florida employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation organized on July 28, 2015, and engaged in the business of roofing and storm damage restoration. The company was formed, and initially conducted business, in Tallahassee, Florida, but expanded to the Panama City area in 2016. Traci Fisher is Respondent’s President and Registered Agent, with a mailing address of 1004 Kenilworth, Tallahassee, Florida 32312. DOAH Case No. 17-0879 On May 4, 2016, Department Compliance Investigator Jesse Holman, conducted a routine workers’ compensation compliance inspection at 374 Brown Place in Crestview, Florida. Mr. Holman observed four men removing shingles from the roof of a residential structure at that address. Mr. Holman first interviewed a worker who identified himself as Dustin Hansel and reported that he and the other three workers on site were a new crew for Respondent, the permit for the job had not yet been pulled, and the workers were not aware of the rate of pay for the job. Mr. Hansel telephoned Respondent’s sales manager, Dillon Robinson, who then spoke directly with Mr. Holman via telephone. Mr. Robinson informed Mr. Holman that Respondent obtained workers’ compensation coverage through Payroll Management Inc. (PMI), an employee-leasing company. Mr. Holman identified the three remaining workers at the jobsite as Milton Trice, Winston Perrotta, and Kerrigan Ireland. Mr. Holman contacted PMI and secured a copy of Respondent’s then-active employee roster. None of the workers at the jobsite, including Mr. Hansel, were included on Respondent’s employee roster. Upon inquiry, Mr. Holman was informed that PMI had no pending employee applications for Respondent. Mr. Holman consulted the Department’s Coverage Compliance Automated System (CCAS) and found Respondent had no workers’ compensation insurance policy and no active exemptions. During Mr. Holman’s onsite investigation, the workers left the jobsite. Mr. Holman could not immediately reach Ms. Fisher, but did speak with her husband, Tim Fisher. Mr. Fisher informed Mr. Holman that the crew was on their way to the PMI Fort Walton office to be enrolled on Respondent’s employee roster. On May 5, 2016, based on his investigation, and after consultation with his supervisor, Mr. Holman issued Respondent Stop-Work Order (SWO) 16-148-1A, along with a Business Records Request (BRR) for records covering the audit period of July 27, 2015 through May 4, 2016. Later that day, Mr. Holman spoke to Ms. Fisher, who informed him the crew did not have permission to begin the work on that date, as she had not yet pulled the permit for the reroof. Ms. Fisher further explained that the crewmembers had been instructed to complete applications with PMI prior to departing Tallahassee for Crestview. Ms. Fisher confirmed the crewmembers were completing applications at PMI Fort Walton that same day. Mr. Holman met with Ms. Fisher the following day and personally served SWO 16-148-1A. Ms. Fisher delivered to Mr. Holman an updated employee roster from PMI which included Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter documenting Mr. Trice was not employed by Respondent; and a $1000 check as downpayment on the penalty. Respondent initially submitted business records in response to the BRR on May 23 and 25, 2017. DOAH Case No. 17-1558 On June 8, 2016, Mr. Holman conducted a random workers’ compensation compliance inspection at 532 Rising Star Drive in Crestview. The single-family home at that address was undergoing renovations and Mr. Holman observed three men on the roof removing shingles. None of the men on the roof spoke English, but a fourth man, who identified himself as Jose Manuel Mejia, appeared and stated he worked for Respondent, and that all the workers onsite were paid through PMI at a rate of $10.00 per hour. Mr. Mejia admitted that one of the worker’s onsite, Emelio Lopez, was not enrolled with PMI and explained that Mr. Mejia brought him to the worksite that day because he knew Mr. Lopez to be a good worker. The remaining workers onsite were identified as Juan Mencho and Ramon Gonzalez, both from Atlanta, Georgia. Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho. Mr. Mejia stated that he and his crews also received reimbursement checks directly from Respondent for gas, rentals, materials, and the like. Mr. Holman contacted PMI, who produced Respondent’s then-active employee roster. Mr. Mejia and Mr. Mencho were on the roster, but neither Mr. Gonzalez nor Mr. Lopez was included. Mr. Holman next contacted Ms. Fisher, who identified Mr. Mejia as a subcontractor, but was not familiar with any of the other men Mr. Holman encountered at the worksite. Mr. Holman consulted via telephone with his supervisor, who instructed him to issue an SWO to Respondent for failing to secure workers’ compensation coverage for its employees. Mr. Holman issued SWO 16-198-1A by posting the worksite on June 8, 2016. Department Facilitator Don Hurst, personally served Ms. Fisher with SWO 16-198-1A in Tallahassee that same day. SWO 16-148-1A Penalty Calculation1/ Department Penalty Auditor Eunika Jackson, was assigned to calculate the penalties associated with the SWOs issued to Respondent. On June 8, 2016, Ms. Jackson began calculating the penalty associated with SWO 16-148-1A. Ms. Jackson reviewed the documents submitted by Respondent in response to the BRR. The documents included Respondent’s Wells Fargo bank statements, check images, and PMI payroll register for the audit period.2/ Based on a review of the records, Ms. Jackson identified the following individuals as Respondent’s employees because they received direct payment from Respondent at times during the audit period: David Rosinsky, Dylan Robinson, Jarod Bell, Tommy Miller, and David Shields. Ms. Jackson determined periods of non-compliance for these employees based on the dates they received payments from Respondent and were not covered for workers’ compensation via PMI employment roster, separate policy, or corporate officer exemption. Ms. Jackson deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. Based upon Ms. Fisher’s deposition testimony, Ms. Jackson assigned National Council on Compensation Insurance (NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class code 5474, Painting, to Mr. Rosinsky; NCCI class code 8742, Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810, clerical office employee, to Mr. Shields. Utilizing the statutory formula for penalty calculation, Ms. Jackson calculated a total penalty of $191.28 associated with these five “employees.” Ms. Jackson next calculated the penalty for Dustin Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta, the workers identified at the jobsite as employees on May 4, 2016. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll to these “employees,” thus, Ms. Jackson used the statutory formula to impute payroll to these workers. Ms. Jackson calculated a penalty of $14,970.12 against Respondent for failure to secure payment of workers’ compensation insurance for each of these four “employees” during the audit period. The total penalty associated with these four “employees” is $59,880.48. Ms. Jackson calculated a total penalty of $60,072.96 to be imposed against Respondent in connection with SWO 16-148- 1A. Business Records In compliance with the Department’s BRR, Respondent submitted additional business records on several occasions-- March 21, May 3 and 31, June 7, and August 15 and 24, 2017--in order to establish its complete payroll for the audit period. While the Department admits that the final documents submitted do establish Respondent’s complete payroll, the Department did not issue amended penalty assessment based on those records in either case. The Department maintains Respondent did not timely submit records, pursuant to Florida Administrative Code Rule 69L-6.028(4), which allows an employer 20 business days after service of the first amended order of penalty assessment to submit sufficient records to establish payroll. All business records submitted by Respondent were admitted in evidence and included as part of the record. The undersigned is not limited to the record before the Department at the time the amended penalty assessments were imposed, but must determine a recommendation in a de novo proceeding. The undersigned has relied upon the complete record in arriving at the decision in this case. Penalty Calculation for Ireland, Trice, and Perrotta For purposes of workers’ compensation insurance coverage, an “employee” is “any person who receives remuneration from an employer” for work or services performed under a contract. § 440.02(15)(a), Fla. Stat. Respondent did not issue a single check to Mr. Ireland, Mr. Trice, or Mr. Perrotta during the audit period. Mr. Ireland, Mr. Trice, and Mr. Perrotta are not included on any PMI leasing roster included in the record for the audit period. The uncontroverted evidence, including the credible and unrefuted testimony of each person with knowledge, established that Mr. Ireland, Mr. Trice, and Mr. Perrotta were newly hired for the job in Crestview on May 4, 2016, and began working that day prior to submitting applications at PMI, despite Ms. Fisher’s directions otherwise. Petitioner did not prove that either Mr. Ireland, Mr. Trice, or Mr. Perrotta was Respondent’s employee at any time during the audit period. Petitioner did not correctly calculate the penalty of $44,911.26 against Respondent for failure to secure workers’ compensation insurance for Mr. Ireland, Mr. Trice, and Mr. Perrotta during the audit period. Penalty Calculation for Hansel Ms. Fisher testified that Mr. Hansel has owned several businesses with which Respondent has conducted business over the years. Originally, Mr. Hansel owned a dumpster rental business, now owned by his father. Mr. Hansel also owned an independent landscaping company with which Respondent occasionally transacted business. When Respondent expanded business into the Panama City area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise new crews in the area. The job on May 4, 2016, was his first roofing job. A review of Respondent’s records reveals Respondent issued the following checks to Mr. Hansel during the audit period: December 4, 2015, in the amount of $360, $300 of which was for “dumpster rental” and the remaining $60 for “sod”; May 4, 2016, in the amount of $200 for “sod repair”; May 6, 2016, in the amount of $925 as reimbursement for travel expenses; May 9, 2016, in the amount of $1,011.50 (with no memo); and May 21, 2016, in the amount of $100 for “7845 Preservation.” Mr. Hansel was included on Respondent’s PMI leasing roster beginning on May 13, 2016. Petitioner proved that Mr. Hansel was Respondent’s employee at times during the audit period. Petitioner did not prove that Respondent’s records were insufficient to determine payroll to Mr. Hansel during the audit period, which would have required an imputed penalty. Petitioner did not correctly calculate the penalty of $14,970.42 against Respondent for failure to secure workers’ compensation insurance coverage for Mr. Hansel during the audit period. Sod repair by Mr. Hansel is a service performed for Respondent during the audit period. Reimbursement of travel expenses is specifically included in the definition of payroll for purposes of calculating the penalty. See Fla. Admin. Code R. 69L- 6.035(1)(f) (“Expense reimbursements, including reimbursements for travel” are included as remuneration to employees “to the extent that the employer’s business records and receipts do not confirm that the expense incurred as a valid business expense.”). Dumpster rental is neither work performed on behalf of, nor service provided to, Respondent during the audit period. The correct uninsured payroll amount attributable to Mr. Hansel is $2,296.50. Petitioner correctly applied NCCI class code 5551, Roofing, to work performed by Mr. Hansel based on the observation of Mr. Holman at the worksite on May 4, 2016. With respect to Mr. Hansel’s services for sod and sod repair, Petitioner did not correctly apply NCCI class code 5551. Petitioner did not introduce competent substantial evidence of the applicable NCCI class code and premium amount for landscaping services performed during the audit period.3/ Uninsured payroll attributable to Mr. Hansel for roofing services during the audit period is $2,036.50. The approved manual rate for workers’ compensation insurance for NCCI class code 5551 during the period of non- compliance--May 9 and 21, 2016--is $18.60. The premium amount Respondent would have paid to provide workers’ compensation insurance for Mr. Hansel is $378.79 (One percent of Mr. Hansel’s gross payroll during the non-compliance period--$20.36--multiplied by $18.60). The penalty for Respondent’s failure to secure worker’s compensation coverage insurance for Mr. Hansel during the period of non-compliance is calculated as two times the amount Respondent would have paid in premium for the non- compliance period. The correct penalty for Respondent’s failure to maintain workers’ compensation coverage for Mr. Hansel during the period of non-compliance is $757.58. Penalty Calculation for Salesmen Independent contractors not engaged in the construction industry are not employees for purposes of enforcing workers’ compensation insurance requirements. See § 440.02(15)(d)1., Fla. Stat. Sales is a non-construction industry occupation. The Department calculated a penalty associated with payroll attributable to the following persons identified by Ms. Fisher as independent salesmen: Dylan Robinson, Kevin Miller, Marc Medley, Mike Rucker, Colby Fisher, David Jones, Jarod Bell, Matt Flynn, and Todd Zulauf. Section 440.02(15)(d)1. provides that an individual may be an independent contractor, rather than an employee, as follows: In order to meet the definition of independent contractor, at least four of the following criteria must be met: The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal regulations; The independent contractor receives compensation for services rendered or work performed and such compensation is paid to a business rather than to an individual; The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying business expenses or other expenses related to services rendered or work performed for compensation; The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or The independent contractor receives compensation for work or services rendered on a competitive-bid basis or completion of a task or a set of tasks as defined by a contractual agreement, unless such contractual agreement expressly states that an employment relationship exists. If four of the criteria listed in sub- subparagraph a. do not exist, an individual may still be presumed to be an independent contractor and not an employee based on full consideration of the nature of the individual situation with regard to satisfying any of the following conditions: The independent contractor performs or agrees to perform specific services or work for a specific amount of money and controls the means of performing the services or work. The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform. The independent contractor is responsible for the satisfactory completion of the work or services that he or she performs or agrees to perform. The independent contractor receives compensation for work or services performed for a commission or on a per-job basis and not on any other basis. The independent contractor may realize a profit or suffer a loss in connection with performing work or services. The independent contractor has continuing or recurring business liabilities or obligations. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures. Ms. Fisher testified that each of the above-named salesmen sold roofing jobs for her at various times during the audit period on a commission-only basis. The contractors inspect homeowner roofs, draft schematics, use their own equipment (e.g., drones), incur all of their own expenses, and handle the insurance filing for the homeowner’s insurance to pay on the claim. Ms. Fisher further testified that each of the salesmen also sells for other roofing contractors in the Tallahassee area. She pays the salesmen on a per-job basis. Ms. Fisher does not compensate the salesmen for the time involved in inspecting a roof, preparing schematics, or making the sale. Nor does Ms. Fisher reimburse the salesmen for travel to sales jobsites. Ms. Fisher’s testimony was credible, persuasive, and uncontroverted. Respondent introduced in evidence four “Independent Contractor Checklists” allegedly completed by Mr. Robinson, Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist follows the format of section 440.02(15)(d)1., listing the criteria set forth in subparagraphs a. and b. The forms indicate that they each meet all the criteria listed in subparagraph b.: they perform, or agree to perform services for a specific amount of money and control the means of performing the service; they incur the principal expenses related to the service performed; they are responsible for satisfactory completion of the services performed; they receive compensation for the services performed on a per-job or commission basis; they may realize a profit or suffer a loss in connection with performing the services; they have continuing and recurring business liabilities or obligations; and the success or failure of their business depends on the relationship of business receipts to expenditures.4/ In its Proposed Recommended Order, Petitioner conceded the nine men identified by Respondent as independent sales contractors “would not be considered employees of Respondent” because the “salesmen would seem to meet the majority of [the] requirements [of section 440.02(15)(d)1.b.].” Respondent issued Dylan Robinson, Mark Medley, Colby Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Jarod Bell, David Jones, and Todd Zulauf an IRS FORM 1099-MISC for income paid during the 2016 tax year. Respondent did not prove by clear and convincing evidence that the above-named salesmen were Respondent’s employees during the audit period. For SWO 16-148-1A, Respondent did not correctly calculate the penalty because Respondent included a penalty associated with Petitioner’s failure to provide workers’ compensation insurance coverage for Dylan Robinson and Jarod Bell. Penalty in the amount of $20.70 associated with Dylan Robinson and Jarod Bell should not be included in the total penalty. The correct penalty amount for SWO 16-148-1A, based on records submitted by Respondent on or before March 20, 2016, is $929.16. Draft Revised Second Amended Order of Penalty Assessment The additional records submitted by Respondent revealed payments made to persons during the audit period who were not included in the Department’s Second Amended Order of Penalty Assessment. The Department and Respondent disagreed at hearing whether the payments qualified as payroll. At hearing, Petitioner submitted a draft revised second amended penalty calculation for SWO 16-148-1A based on all records received from Respondent. The revised penalty is in the amount of $61,453.50. Ms. Jackson populated the spreadsheet with the name of every individual to whom a check was written on Respondent’s business bank account during the audit period, removing only those payments to individuals and entities which, to Petitioner’s knowledge, were not Respondent’s employees. Respondent’s calculations in the revised penalty suffer from some of the same errors as in the second amended penalty calculation--they include individuals Petitioner did not prove were Respondent’s employees, as well as payments which were not uninsured payroll. For the reasons explained herein, Petitioner did not prove that salesmen David Jones, Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer, and Colby Fisher were Respondent’s employees during the audit period. Respondent did not accurately calculate the penalty associated with those persons. Respondent made payments to David Shields during the audit period, which the Department argues should be included as payroll. The Department included payments to Mr. Shields in its draft revised second amended order of penalty assessment and assigned NCCI class code “8810” for clerical work. Mr. Shields is a licensed professional roofing contractor who acts as “qualifier” for Respondent’s business. A qualifier is a licensed professional who certifies plans for permit applications submitted by another business. Respondent pays Mr. Shields a flat fee per permit application qualified by him. The record evidence does not support a finding that Mr. Shields provides clerical services to Respondent. Mr. Shields provides some sort of professional services to Respondent, and is likely an independent contractor providing his own materials and supplies, maintaining his own business accounts, and liable for his own business success. Assuming Mr. Shields were Respondent’s employee, the Department introduced no evidence of an appropriate NCCI class code for Mr. Shields’ services. The Department did not prove that payments to Mr. Shields should be included as Respondent’s uninsured payroll during the audit period. Respondent paid Susan Swain a total of $258 during the audit period for clerical work. Ms. Fisher maintained Ms. Swain’s work was casual at first, and the payments reflect a time when she worked on-again, off-again, handling the paperwork for restoration insurance claims. Later, Ms. Swain came to work for Respondent full-time and was added to the PMI leasing roster. Section 440.02(15)(d)5. provides that a person “whose employment is both casual and not in the course of the trade, business, profession or occupation of the employer” is not an employee. The statute defines “casual” employment as work that is anticipated to be completed in 10 working days or less and at a total labor cost of less than $500. See § 440.02(5), Fla. Stat. In its Proposed Recommended Order, the Department argues Ms. Swain’s wages should be included as payroll because the “testimony regarding Ms. Swain does not suggest that she was employed for less than 10 days[.]” However, it was the Department’s burden to prove that Ms. Swain was a statutory employee. The Department did not prove that Ms. Swain’s wages should be included within Respondent’s uninsured payroll. The largest portion of the penalty assessed by the Department, as well as in the draft revised second amended penalty assessment, against Respondent is in connection with various roofers who were employed by Respondent at times during the audit period. Each of the roofers was included on Respondent’s PMI leasing roster, but received checks directly from Respondent in addition to PMI payroll checks. The Department included all the direct payments to those roofers as payroll for purposes of calculating a penalty in this case. As Ms. Fisher explained, the company bids a reroof on a per job basis--usually a per square foot price. Ms. Fisher adds each roofing contractor’s name to the PMI leasing roster to ensure that each roofer is covered by workers’ compensation insurance for the duration of the job. When the job is completed (which is a matter of just a few days), the contractor reports to Ms. Fisher what amount of the contract price was spent on materials, supplies, or other non-labor costs. Ms. Fisher cuts a check to the contractor for that amount and authorizes PMI to issue payroll checks for the “labor cost” (the difference between the contract price and the non-labor costs). Ms. Fisher refers to this process as “back-charging” the contractors for their materials, maintenance, tools, and other non-labor costs. The Department is correct that the direct payments are payroll to the roofing contractors. See Fla. Admin. Code R. 69L-6.035(1)(b) and (h) (remuneration includes “payments, including cash payments, made to employees by or on behalf of the employer” and “payments or allowances made by or on behalf of the employer for tools or equipment used by employees in their work or operations for the employer.”). The Department would be correct to include these payments in the penalty calculation if they represented uninsured payroll. However, the evidence supports a finding that the direct payments to the roofing contractors were made for the same jobs on which Respondent secured workers’ compensation coverage through PMI. The roofing contractors were covered for workers’ compensation throughout the job, even though they may have received partial payment for the job outside of the PMI payroll checks.5/ The direct payments were not for separate reroofs on which the roofers were not otherwise insured. The Department did not correctly calculate penalties associated with the following roofing contractors: Donald Tontigh, Joseph Howard, Keith Mills, Aaron Kilpatrick, Gustavo Tobias, Jose Mejia, and Tommy Miller. Ms. Fisher also received cash payments from Respondent during the audit period. These payments were made in addition to her payroll through PMI. Ms. Fisher described these payments as “cash tickets,” which were paid outside of her PMI payroll to reimburse her for investments made in the company. For purposes of calculating the penalty in this case, these “cash tickets” are clearly payroll, as that term is to be calculated pursuant to rule 69L-6.035. Similar to the issue with the roofing contractors, the question is whether the payments represent uninsured payroll. Ms. Fisher did not hold a corporate officer exemption at any time relevant hereto. Ms. Fisher testified that she was covered through PMI payroll leasing. In contrast to the roofing contractors, Ms. Fisher’s direct payments do not directly coincide with any particular job or specific time frame during which Ms. Fisher was covered for workers’ compensation insurance through PMI. The evidence was insufficient to determine that the amounts were insured payroll. The Department properly calculated a penalty associated with payroll attributable to Ms. Fisher. Respondent made one payment of $75 to Donald Martin during the audit period. The Department calculated a penalty of $27.90 associated with this payment to Mr. Martin. Ms. Fisher explained that Mr. Martin was a down-on-his-luck guy who came by the office one day complaining that Mr. Hansel owed him some money. Ms. Fisher offered to put him on a roofing crew and wrote him the $75 check to help him out. Ms. Fisher’s testimony was both credible and unrefuted. Mr. Martin was never hired by Respondent, put on any roofing crew, or added to the PMI leasing roster. Mr. Martin was not Respondent’s employee because he did not receive remuneration for the “performance of any work or service while engaged in any employment under any appointment or contract for hire” with Respondent. § 440.02(15)(a), Fla. Stat. Cale Dierking works for Respondent full-time in a clerical position. During the audit period, Respondent paid Mr. Dierking directly by check for $1,306.14. This payment was made outside of Mr. Dierking’s PMI payroll checks. Ms. Fisher testified that she paid Mr. Dierking directly on one occasion when “PMI’s payroll got stuck in Memphis, I believe it was a snow-in situation where payroll checks didn’t come.” Rather than ask her employee to go without a timely paycheck, she advanced his payroll. Ms. Fisher’s testimony was both credible and unrefuted. The payment to Mr. Dierking is clearly payroll. However, Mr. Dierking was covered for workers’ compensation through PMI for the period during which the check was issued. Thus, there is no evidence that it was uninsured payroll. The Department did not correctly calculate a penalty associated with payments to Mr. Dierking. The correct penalty to be assessed against Respondent for failure to secure workers’ compensation coverage for its employees during the audit period in connection with SWO 16-148- 1A is $770.60. Penalty Calculation for SWO 16-198-1A Ms. Jackson calculated a total penalty against Respondent in connection with SWO 16-198-1A in the amount of $19,115.84, as reflected in the Second Amended Order of Penalty Assessment. The Department correctly imputed penalty against Respondent in the amount of $91.68 each for uninsured payroll to Mr. Gonzalez and Mr. Lopez. The evidence supported a finding that these workers were Respondent’s statutory employees on June 8, 2016, and were not enrolled on the PMI leasing roster. The Department did not correctly calculate the penalty associated with salesmen Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, and Todd Zulauf. The Department did not correctly calculate the penalty associated with roofing contractors Abraham Martinez- Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina-Agustin, Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy Miller. The Department did not correctly calculate the penalty against Respondent associated with Mr. Shields, Respondent’s qualifier. Based on a review of Respondent’s complete “untimely” records, the Department discovered direct payments made to additional employees not included on the Second Amended Order of Penalty Assessment. Respondent made a direct payment to Ethan Burch in the amount of $602.50 during the audit period. Ethan Burch is one of Respondent’s full-time clerical employees. The evidence is insufficient to determine whether the payment of $602.50 was insured or uninsured payroll. As such, the Department did not prove it correctly calculated the penalty associated with Mr. Burch. Respondent also made a direct payment to Chelsea Hansel in the amount of $965 during the audit period. Ms. Hansel is another clerical employee. Ms. Hansel’s PMI enrollment was delayed due to some background investigation. Respondent paid Ms. Hansel for work she completed prior to enrollment. The direct payment to Ms. Hansel constitutes uninsured payroll. The Department correctly calculated the penalty associated with the payment to Chelsea Hansel. The correct penalty amount to be imposed against Respondent for failure to secure payment of workers’ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel) during the audit period in connection with SWO 16-198-1A is $187.80.
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, Division of Workers’ Compensation, finding that Royal Roofing and Restoration, Inc., violated the workers’ compensation insurance law and, in DOAH Case No. 17-0879, assessing a penalty of $770.60; and in DOAH Case No. 17-1558, assessing a penalty of $187.80. DONE AND ENTERED this 24th day of January, 2018, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 2018.
The Issue The issues are whether, under section 440.107, Florida Statutes, Petitioner may calculate a penalty assessment for a failure to secure the payment of workers' compensation for one day as though the failure persisted over two years and whether Petitioner may calculate a penalty assessment based on double the statewide average weekly wage (AWW) when the lone uncovered employee earned $10 per hour.
Findings Of Fact Respondent was incorporated in 2008 by Ineido Soler, Sr., and his son, Ineido Soler, Jr. Since the corporation began operations, the wife of Mr. Soler, Jr., Idalmis Pedrero, has served as the office manager of this family-owned company. At all material times, Respondent has contracted with a personnel leasing company to handle employee matters, such as securing the payment of workers' compensation. Ms. Pedrero's responsibilities include informing the employee leasing company of new hires, so the company can obtain workers' compensation coverage, which typically starts the day following notification. On the afternoon of November 22, 2015, Mr. Soler, Jr., telephoned his wife and told her that he and his father had hired, at the rate of $10 per hour, a new employee, Geony Borrego Lee, who would start work the following morning. Customarily, Ms. Pedrero would immediately inform the employee leasing company. However, Ms. Pedrero was working at home because, six days earlier, she had delivered a baby by caesarian section, and she was still recuperating and tending to her newborn. A fatigued Ms. Pedrero did not notify the employee leasing company that day of the new hire. Late the next morning, Ms. Pedrero was awakened by a call from her husband, who asked her if she had faxed the necessary information to the employee leasing company. Ms. Pedrero admitted that she had not done so, but would do so right away. She faxed the information immediately, so that the employee leasing company could add Mr. Lee to the workers' compensation policy, effective the next day, November 24. Uncovered for November 23, Mr. Lee joined three other employees of Respondent and performed roofing work at a worksite. Late in the afternoon of November 23, one of Petitioner's investigators conducted a random inspection of Respondent's worksite and determined that Respondent had secured the payment of workers' compensation for the three other employees, but not for Mr. Lee. The investigator issued an SWO on the day of the inspection, November 23. The SWO contains three parts. First, the SWO orders Respondent to cease work anywhere in the state of Florida. Second, the SWO includes an Order of Penalty Assessment, which does not contain a specific penalty, but instead sets forth the formula by which Petitioner determines the amount of the penalty to assess. Tracking the statute discussed below, the formula included in the SWO is two times the premium that the employer would have paid when applying approved manual rates to the employer's payroll "during periods for which it has failed to secure the payment of compensation within the preceding 2-year period." Third, the SWO includes a Notice of Rights, which advises Respondent that it may request a chapter 120 hearing. On November 24, Petitioner released the SWO after Respondent had secured the payment of workers' compensation for Mr. Lee. On November 25, the investigator hand delivered to Respondent a Request for Production of Business Records for Penalty Assessment Calculation (Request). The Request covers November 24, 2013, through November 23, 2015, and demands records in eight categories: identification of employer, occupational licenses, payroll documents, account documents, disbursements, contracts for work, identification of subcontractors, and documentation of subcontractors' workers' compensation coverage. The Request identifies "payroll documents" as: all documents that reflect the payroll of the employer . . . including . . . time sheets, time cards, attendance records, earning records, check stubs and payroll summaries for both individual employees and aggregate records; [and] federal income tax documents and other documents reflecting the . . . remuneration paid or payable to each employee . . . . The Request adds: The employer may present for consideration in lieu of the requested records, proof of compliance with F.S. 440 by a workers' compensation policy or coverage through employee leasing for all periods of this request where such coverage existed. If the proof of compliance is verified by the Department the requested records for that time period will not be required. The Request warns: If the employer fails to provide the required business records sufficient to enable the . . . Division of Workers' Compensation to determine the employer's payroll for the period requested for the calculation of the penalty provided in section 440.107(7)(d), F.S., the imputed weekly payroll for each employee shall be the statewide average weekly wage as defined in section 440.12(2), F.S., multiplied by 2. The Department shall impute the employer's payroll at any time after ten, but before the expiration of twenty eight business days after receipt by the employer of [the Request]. (FAC 69L-6.028) . . . . On December 11, 2015, Respondent provided the following documents to Petitioner: itemized invoices, including for workers' compensation premiums, from the employee leasing company to Respondent and checks confirming payment, but the invoices and checks are from December 2011; an employee leasing agreement signed by Respondent on August 1, 2014, and signed by the employee leasing company on August 5, 2014; an employee leasing application for Mr. Lee dated November 23, 2015, showing his date of birth as November 20, 1996, his hourly pay as $10, and his hire date as November 23, 2015; and an employee census dated December 1, 2015, showing, for each employee, a date of hire and, if applicable, date of termination. Partially compliant with the Request, this production omitted any documentation of workers' compensation coverage prior to August 1, 2014, and any documentation of payroll except for Mr. Lee's rate of pay. On December 14, 2015, Respondent filed with Petitioner its request for a chapter 120 hearing. On December 30, 2016, Petitioner issued an Amended Order of Penalty Assessment (Amended Assessment), which proposes to assess a penalty of $63,434.48. On the same date, Petitioner transmitted the file to DOAH. Petitioner issued a Second Amended Order of Penalty Assessment on February 16, 2016, which is mentioned in, but not attached to, the Prehearing Stipulation that was filed on April 26, 2016, but the second amended assessment reportedly leaves the assessed penalty unchanged from the Amended Assessment. In determining the penalty assessment, Petitioner assigned class code 5551 from the National Council on Compensation Insurance because Mr. Lee was performing roofing work; determined that the entire two-year period covered in the Request was applicable; identified the AWW as $841.57 based on information provided by the Florida Department of Economic Opportunity for all employers subject to the Florida Reemployment Assistance Program Law, sections 443.01 et seq., Florida Statutes, for the four calendar quarters ending June 30, 2014; applied the appropriate manual rates for class code 5551 to $841.57, doubled, and divided the result by 100--all of which yielded a result of $31,717.24, which, doubled, results in a total penalty assessment of $63,434.48. There is no dispute that the classification code for Mr. Lee is code 5551, the AWW is $841.57, and the manual rates are 18.03 as of July 1, 2013, 18.62 as of January 1, 2014, and 17.48 as of January 1, 2015. Because Petitioner determined that Respondent had failed to provide sufficient evidence of its payroll, Petitioner calculated the penalty assessment by using the AWW of $841.57, doubled, instead of Mr. Lee's actual rate of $10 per hour. Petitioner's calculations are mathematically correct. For the 5.27 weeks of 2013, the penalty assessment is $3198.58 based on multiplying the AWW, doubled, by the manual rate of 18.03 divided by 100 multiplied by 2 and multiplied by 5.27. For the 52 weeks of 2014, the penalty assessment is $32,593.67 based on multiplying the AWW, doubled, by the manual rate of 18.62 divided by 100 multiplied by 2 and multiplied by 52. For the 46.44 weeks of 2015, the penalty assessment is $27,326.48 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 46.44. Adding these sums yields a total penalty assessment of $63,118.73, which approximates Petitioner's penalty assessment calculation of $63,434.48. (Mistranscription of difficult-to- read manual rates or a different rule for handling partial weeks may account for the small difference.) Respondent challenges two factors in the imputation formula: the two-year period of noncompliance for Mr. Lee instead of one day's noncompliance and the AWW, doubled, instead of Mr. Lee's $10 per hour rate of pay. Underscoring the differences between the two-year period of noncompliance and double the AWW and the actual period of noncompliance and Mr. Lee's real pay rate, at the start of the two-year period, Mr. Lee was three days past his 16th birthday and residing in Cuba, and Mr. Lee continues to earn $10 per hour as of the date of the hearing. The impact of Petitioner's use of the two-year period of noncompliance and double the AWW is significant. If the calculation were based on a single day, rather than two years, the assessed penalty would be less than the statutory minimum of $1000, which is described below, even if double the AWW were used. One day is 0.14 weeks, so the penalty assessment would be $82.38 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 0.14. If the calculation were based on the entire two years, rather than a single day, the assessed penalty would be about one-quarter of the proposed assessed penalty, if Mr. Lee's actual weekly rate of pay were used instead of double the AWW. Substituting $400 for twice the AWW in the calculations set forth in paragraph 15 above, the penalty would be $760.14 for 2013, $7746.92 for 2014, and $6494.17 for 2015 for a total of $15,001.23. Explaining why Petitioner treated one day of noncompliance as two years of noncompliance, one of Petitioner's witnesses referred to Mr. Lee as a "placeholder" because the real focus of the imputation formula is the employer. The same witness characterized the imputation formula as a "legal fiction," implying that the formula obviously and, in this case, dramatically departs from the much-smaller penalty that would result from calculating exactly how much premium that Respondent avoided by not covering the modestly paid Mr. Lee on his first day of work. Regardless of how Petitioner characterizes the imputation formula, the statutory mandate, as discussed below, is to determine the "periods" during which Respondent failed to secure workers' compensation insurance within the two-year period covered by the Request. The focus is necessarily on the employee found by the investigator to be uncovered and any other uncovered employees. Petitioner must calculate a penalty based on how long the employee found by the investigator on his inspection has been uncovered, determining how many other employees, if any, in the preceding two years have been uncovered, and calculating a penalty based on how long they were uncovered. There is evidence of one or two gaps in coverage during the relevant two years, but Petitioner has failed to prove such gaps by clear and convincing evidence. One of Petitioner's witnesses testified to a gap of one month "probably" from late January to late February 2015. This witness relied on Petitioner Exhibit 2, but it is completely illegible. Ms. Pedrero testified that Respondent had workers' compensation coverage since 2011, except for a gap, which she thought had occurred prior to August 2014, which is the start date of the current policy. This conflicting evidence does not establish by clear and convincing evidence any gap, and, even if a gap had been proved, no evidence establishes the number of uncovered employees, if any, during such a gap, nor would such a gap justify enlarging the period of noncompliance for Mr. Lee. Ms. Pedrero testified that her mother-in-law, Teresa Marquez cleaned the office and warehouse on an occasional basis, last having worked sometime in 2015. Respondent never secured workers' compensation coverage for Ms. Marquez, but she did no roofing work and appears to have been a casual worker, so her periods of employment during the two-year period covered by the Request would not constitute additional periods for which Respondent failed to secure workers' compensation insurance. Based on the foregoing, Petitioner has proved by clear and convincing evidence only a single day of noncompliance, November 23, concerning one employee, Mr. Lee, within the relevant two-year period for the purpose of calculating the penalty assessment. Likewise, Petitioner has proved by clear and convincing evidence a rate of pay of only $10 per hour for the purpose of calculating the penalty assessment. At no time has Respondent provided payroll records of all its employees for November 23, 2015. Respondent Exhibit E covers payroll for Respondent's employees for a two-week period commencing shortly after November 23, 2015. But the evidence establishes that Mr. Lee's rate of pay was $80 for the day, which, as discussed below, rebuts the statutory presumption of double the AWW.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order determining that Respondent has failed to secure the payment of workers' compensation for one employee for one day within the two-year period covered by the Request and imposing an administrative penalty of $1000. DONE AND ENTERED this 19th day of July, 2016, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 19th day of July, 2016. COPIES FURNISHED: Jonathan Anthony Martin, Esquire Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Daniel R. Vega, Esquire Robert Paul Washington, Esquire Taylor Espino Vega & Touron, P.A. 2555 Ponce De Leon Boulevard, Suite 220 Coral Gables, Florida 33134 (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 The issues in this case are whether Respondent, Doherty Home Repair, Inc., failed to obtain workers’ compensation coverage that meets the requirements of chapter 440, Florida statutes (2017); and, if so, whether the penalty assessed in the 2nd Amended Order of Penalty Assessment was properly calculated.
Findings Of Fact Based on the evidence and stipulated facts, the undersigned makes the following Findings of Fact: Respondent was actively involved in business operations in the state of Florida during the period of January 22, 2014, through January 21, 2016, inclusively. Respondent received the Stop-Work Order and Order of Penalty Assessment from the Department on January 21, 2016. Respondent received the Request for Production of Business Records for Penalty Assessment Calculation from the Department on February 10, 2016. Respondent was an "employer," as defined in chapter 440, throughout the penalty period. Respondent received the Amended Order of Penalty Assessment from the Department on March 10, 2016. Respondent received the 2nd Amended Order of Penalty Assessment from the Department on July 5, 2016. All of the individuals listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment were "employees" of Respondent during the periods of noncompliance listed on the penalty worksheet of the Amended Order of Penalty Assessment. None of the individuals listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment had a valid Florida workers’ compensation coverage exemption at any time during the periods of noncompliance listed on the penalty worksheet of the Amended Order of Penalty Assessment. Respondent did not secure the payment of workers’ compensation insurance coverage, nor have others secured the payment of workers’ compensation insurance coverage, for any of the individuals named on the penalty worksheet of the 2nd Amended Order of Penalty Assessment during the periods of noncompliance listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment. None of the individuals listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment were "independent contractors" hired by Respondent for any portion of the periods of noncompliance listed on the penalty worksheet. Wages or salaries were paid by Respondent to its employees listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment, whether continuously or not, during the corresponding periods of noncompliance listed on the penalty worksheet of the 2nd Amended Order of Penalty Assessment. The Request for Production of Business Records for Penalty Assessment Calculation was served on Respondent on April 2, 2016. Respondent failed to provide all of the required business records for the period requested in the Request for Production of Business Records for Penalty Assessment Calculation. The employees on the penalty worksheet of the 2nd Amended Order of Penalty Assessment are classified under the correct class codes, as defined by the National Council on Compensation Insurance, Inc. ("NCCI"), "Scopes® Manual." The approved manual rates used on the penalty worksheet of the 2nd Amended Order of Penalty Assessment, as defined by the NCCI Scopes® Manual, are the correct manual rates for the corresponding periods of noncompliance listed on the penalty worksheets. Doherty Home Repair, Inc., is Respondent’s correct legal name. The Department is the state agency charged with the responsibility to investigate and enforce the workers’ compensation insurance coverage laws in the state under chapter 440 and to ensure that employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a private company providing general construction and home repair services. It maintained its primary business records on a computer during the relevant time periods. Ryan Doherty testified that his work computers were stolen during a "break in" at his office. 2/ However, he had possession of the computers containing most of his business records, for one to one and one-half months after the date the original Stop-Work Order was issued. Respondent did provide 2014 tax and other business records to the Department for purposes of (1) investigating alleged violations of the workers’ compensation insurance coverage laws and (2) calculating a penalty. Byron Fichs Active Electric3/ was included in the records provided by Respondent as an employee, for purposes of a penalty calculation. The period of noncompliance was January 23, 2014, through December 31, 2014. Pet. Ex. 6, p. 19. Gross payroll for the audit period for Byron Fichs Active Electric was determined based upon records provided by Respondent and totaled $4,342.27. Pet. Ex. 6, p. 19. Information contained in Respondent’s U.S. Income Tax Return for 2014 indicated that Respondent paid a total of $640,100.00 in labor-related expenses for 2014. Pet. Ex. 10, p. 62. That amount was broken down into essentially two categories in 2014--Subcontractors and Specific employees. Subcontractors: $535,980.00 of the labor-related expenses was for sub-contractors. Pet. Ex. 10, p. 62. Specific Employees: $104,120.00 of the total labor- expenses ($640,100.00) was attributable to specific employees. Pet. Ex. 10, p. 66, Overflow Statement. However, only $503,674.364/ was included by the Department as Gross Payroll for subcontractors in 2014 on the worksheet for purposes of a penalty calculation. Pet. Ex. 6, p. 19. Tax records for 2014 indicated payments totaling $104,120.00 were made to Seth Anthony, Shawn Bronson, Joseph Horucth, Mark Lucas, John Concepcion, Jordan Beene, James Stift, and Jerry Brunnell. Pet. Ex. 10, p. 66. Due to the payments indicated on the tax and business records, the individuals listed above were included as employees for purposes of penalty calculation. Pet. Ex. 6, p. 19. The amounts in the 2014 tax records were prorated to determine gross payroll for each individual for purposes of penalty calculation. The period of noncompliance for each person was January 23, 2014, through December 31, 2014. Pet. Ex. 6, p. 19. Mr. Doherty was listed as an employee for purposes of penalty calculation. The gross wage attributed to Mr. Doherty in 2014 was based upon the average weekly wage ("AWW"), since the records based on income were more than the AWW. Pet. Ex. 6, p. 19. Mr. Doherty’s period of noncompliance during the year 2014 was April 19, 2014, through December 31, 2014. Pet. Ex. 6, p. 19. Significantly, payroll for the remainder of the penalty audit period (January 1, 2015, through December 31, 2015, and January 1, 2016, through January 21, 2016) was imputed by the Department because it properly determined that Respondent did not provide adequate business records to determine Respondent’s actual payroll.5/ Pet. Ex. 6, pp. 19-20. The four employees that were found working on the job site on the day the Stop-Work Order was issued, as well as Mr. Doherty, a corporate officer, were included by the Department as employees for purposes of imputing payroll and calculating the penalty for the remainder of the audit period, January 1, 2015, through January 21, 2016. Pet. Ex. 6, p. 19. The four employees are identified in Respondent’s business records as Dave Mason, Dan, Erick, and Joe. Pet. Ex. 6, p. 19. Based upon the records provided for the period of January 23, 2014, through December 31, 2014, and the imputed payroll established for the period of January 1, 2015, through January 21, 2016, a penalty of $244,964.44 was calculated. Pet. Ex. 6, p. 19. As a result, a 2nd Amended Order of Penalty Assessment was issued assessing a total penalty of $244,964.44. Pet. Ex. 6, pp. 16-17. After the 2nd Amended Order of Penalty Assessment was issued, Respondent provided the Department with a "massive" amount of additional business records. The actual date of delivery of these additional records to the Department was not clear. Nonetheless, it was clear that it was on a date after the 2nd Amended Order of Penalty Assessment was issued. These business records, despite being voluminous, were incomplete, and the Department’s penalty auditor, if required, would have been unable to calculate or recalculate a penalty based on the records delivered by Respondent after the 2nd Amended Order of Penalty Assessment was issued. A large amount of timesheets for various workers were also received after the issuance of the 2nd Amended Order of Penalty Assessment, but again they were incomplete; and there were no wages associated with any of the timesheets, no hourly rates were stated, and no total amount paid to the employees for the week was listed.6/
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Financial Services, Division of Workers' Compensation, enter a final order finding that Respondent, Doherty Home Repair, Inc., violated the workers’ compensation laws by failing to secure and maintain required workers’ compensation insurance for its employees, and impose a penalty of $244,964.44. DONE AND ENTERED this 27th day of December, 2017, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE 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 December, 2017.
The Issue Whether KP Roofing Masters, LLC ("Respondent"), failed to secure the payment of workers' compensation coverage for its employees, and if so, whether the Department of Financial Services, Division of Workers' Compensation ("Department"), correctly calculated the penalty 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 coverage for their employees. § 440.107(3), Fla. Stat. Respondent was a business providing services in the construction industry. Its principal office is located at 7100 Northwest 12th Street, Suite 210, Miami, Florida 33126. The Investigation. On September 26, 2014, the Department's compliance investigator, Cabrera, observed two individuals performing roofing work on a house in Coral Gables, Florida. Investigator Cabrera interviewed the individuals, identified as Rodolfo Moscoso and Jairo Alvarado. Both men informed Cabrera that they worked for Respondent. Cabrera then checked the permit board located at the jobsite and confirmed that Respondent pulled the permit for the roofing work. After gathering the information at the jobsite, Cabrera consulted the Division of Corporations’ website to determine, inter alia, the identity of Respondent's corporate officers. Cabrera found that Jorge Cappelleti ("Cappelleti") was Respondent's sole corporate officer. Cabrera then consulted the Department's Coverage and Compliance Automated System ("CCAS") for proof of workers' compensation coverage and for exemptions associated with Respondent. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. (2014). CCAS is the Department's internal database that contains workers' compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Cabrera's CCAS search revealed that Respondent did not have a workers' compensation policy or an employee leasing policy. Cabrera additionally discovered that Cappelleti had a valid exemption. Cabrera then called Cappelleti who confirmed that the two men at the jobsite were his employees and that the employees were not covered by workers' compensation insurance. Based on the information gathered, on September 26, 2014, Cabrera issued Respondent a Stop-Work Order and Order of Penalty Assessment. On September 29, 2014, Cabrera served Respondent with the Stop-Work Order and Order of Penalty Assessment. Cabrera simultaneously served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation ("BRR"). The BRR requested documents that would enable the Department to determine Respondent's payroll for the time period of September 27, 2012, through September 26, 2014. In response to the BRR, Respondent ultimately provided the Department with bank statements, check details, a general ledger, and other records. Penalty Calculation. In October 2014, the Department assigned Penalty Auditor Ruzzo to calculate the penalty assessed against Respondent. Ruzzo reviewed the business records produced by Respondent and properly identified the amount of gross payroll paid to Respondent's employees on which workers' compensation premiums had not been paid. Ruzzo researched Respondent and Respondent's subcontractors to determine those periods when they were not compliant with chapter 440 during the audit period. Ruzzo determined that Respondent was not compliant for the period of September 27, 2012, through September 26, 2014. However, Respondent's corporate officer was not included in the penalty for the periods in which he had an exemption. Additionally, Respondent's compliant subcontractors were not included in the penalty. The business records ultimately produced by Respondent were sufficient for Ruzzo to calculate a penalty for the entire audit period, except for September 26, 2014. For that day, Ruzzo imputed the payroll. On June 2, 2015, based on Ruzzo's calculations, the Department issued a 4th Amended Order of Penalty Assessment to Respondent. On September 1, 2015, the 4th Amended Order of Penalty Assessment was served on Respondent. The 4th Amended Order of Penalty Assessment assessed a penalty of $68,525.42. For the penalty assessment calculation, Ruzzo consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department of Financial Services through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist in the calculation of workers' compensation insurance premiums. Ruzzo assigned the class codes based on information provided to him by Cappelleti. Ruzzo then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. Ruzzo applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)l. and rules 69L-6.027 and 69L-6.028 to determine the penalty. The Penalty Associated With Subcontractor Emerald. Respondent only disputes the portion of the penalty associated with its subcontractor, Emerald, in the amount of $8,434.86 for the period of non-compliance from January 1, 2014, through April 8, 2014. Section 440.10(1) provides in relevant part: In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment. A contractor shall require a subcontractor to provide evidence of workers’ compensation insurance. A subcontractor who is a corporation and has an officer who elects to be exempt as permitted under this chapter shall provide a copy of his or her certificate of exemption to the contractor. Noticeably absent from the statute is the time period within which this evidence of coverage must be provided to the contractor or the nature of the required evidence. Rule 69L-6.032(1) provides: In order for a contractor who is not securing the payment of compensation pursuant to Section 440.38(1)(a), F.S. to satisfy its obligation to obtain evidence of workers’ compensation insurance or a Certificate of Election to Be Exempt from a subcontractor pursuant to Section 440.10(1)(c), F.S., such contractor shall obtain and provide to the Department, when requested, the evidence specified in subsections (2), (3), (4) or (5) herein. (Emphasis added). Rule 69L-6.032 sets forth the contractor requirements for obtaining evidence that the subcontractor possesses workers' compensation insurance. If a subcontractor is a client company of a leasing company, such as Emerald, rule 69L-6.032(3) specifies that the evidence shall be a Certificate of Liability Insurance ("Certificate"). According to the deposition testimony of Cappelleti (Exhibit 11, offered into evidence by the Department), when Emerald began providing services to Respondent in January 2014, Emerald represented that its workers were covered by a policy through an employee leasing company. In fact, a Certificate, obtained by Respondent sometime before it was requested by the Department, indicates that Emerald had coverage for the period of January 1, 2014, through December 31, 2014. This period encompasses the period of time for which the Department now seeks to penalize Respondent. Although Respondent obtained proof of coverage from Emerald, this occurred after Emerald was paid by Respondent for work occurring between January 1, 2014, and April 8, 2014. Ruzzo checked the CCAS and found that the Certificate for Emerald was inaccurate. Emerald apparently did not join the leasing company insurance policy until April 9, 2014. Although a contractor does not have a duty to further investigate when presented with what appears to be a valid Certificate, Ruzzo's calculations penalized Respondent for the period of non-compliance of Emerald because Respondent did not seek the proof of coverage until after Emerald's workers were already on the job for Respondent. The Department has demonstrated by clear and convincing evidence that Respondent employed Mr. Moscoso and Mr. Alvarado on September 26, 2014; that Respondent was engaged in the construction industry in Florida during the period of September 27, 2012, to September 26, 2014; and that Respondent failed to carry workers' compensation insurance to cover its employees as required by Florida's Workers' Compensation Law from September 27, 2012, to September 26, 2014. The Department has demonstrated by clear and convincing evidence that Ruzzo correctly utilized the methodology specified in section 440.107(7)(d)l. However, the Department failed to show by clear and convincing evidence that a penalty for Emerald's period of non-compliance, in the amount of $8,434.86, should be included in the total penalty assessment of $68,525.42.
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, KP Roofing Masters, LLC, violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage, and imposing upon it a total penalty assessment of $60,090.56. DONE AND ENTERED this 2nd day of March, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 March, 2016.
The Issue The issues in this case are whether Respondent violated chapter 440, Florida Statutes (2014),1/ by failing to secure the payment of workers' compensation coverage as alleged in the Stop-work Order and 2nd Amended Order of Penalty Assessment, and if so, the amount of the penalty that should be assessed.
Findings Of Fact The Parties Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the requirement in chapter 440 that employers in the state of Florida secure the payment of workers' compensation insurance covering their employees. Respondent, Bargain Bob's Carpets, Inc., is a corporation registered to do business in Florida. Its principal business address is 3954 Byron Drive, Riviera Beach, Florida. The Compliance Investigation As the result of an anonymous referral, Petitioner's compliance investigator, Peter Sileo, investigated Respondent to determine whether it had secured workers' compensation coverage for its employees as required by chapter 440. Before Sileo visited Respondent's business location, he checked the State of Florida Coverage and Compliance Automated System ("CCAS") computer database, which contains information regarding workers' compensation insurance policies that have been obtained by employers. The CCAS database showed no record of any workers' compensation policies covering Respondent's employees having been issued. On Sileo's first visit to Respondent's business location, he observed a man loading carpeting into a van. Upon being questioned, the man identified himself as Gary Persad. He told Sileo that he was a carpet installation subcontractor for Respondent. Sileo checked CCAS and determined that Persad was covered by workers' compensation insurance. On January 23, 2015, Sileo again visited Respondent's business location, which is a warehouse housing large rolls of carpeting and other flooring materials. There, Sileo met John Charles, an owner and corporate officer of Respondent. Charles claimed that he did not know that Respondent was required to have workers' compensation coverage for its employees. Charles told Sileo that Respondent sold flooring but did not install it and that all installation was performed by subcontractors. At the time of the inspection, Sileo determined that Respondent employed five employees: Charles and Calideen, each of whom own more than ten percent of Respondent's business; Alex Stark; Peter Phelps; and Anthony Frenchak. Sileo served a Stop-work Order, ordering Respondent to cease all business operations in the state pending demonstrating compliance with the workers' compensation coverage requirement. Sileo also served a Request for Production of Business Records for Penalty Assessment Calculation. Respondent subsequently demonstrated compliance with the workers' compensation coverage requirement, and Petitioner lifted the Stop-work Order.2/ Respondent also produced business records consisting of spreadsheets showing quarterly payroll, transaction listings, affidavits, insurance coverage documents, and other records. The Penalty Assessment Eric Ruzzo, a penalty auditor with Petitioner, used these records to calculate the penalty to be assessed against Respondent. The $31,061.68 penalty is reflected in the 2nd Amended Order of Penalty Assessment, issued April 23, 2015, that is the subject of this proceeding. To calculate the applicable penalty, Petitioner determines the employer's gross payroll for the two-year period preceding the noncompliance determination——the so-called "penalty period"——from a review of the employer's business records. For days during the penalty 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 penalty period commenced on January 24, 2013, and ended on January 23, 2015, the day on which the compliance inspection was conducted, and Respondent was determined to not be in compliance with the workers' compensation coverage requirement. Initially, Respondent produced payroll records that did not identify the subcontractors Respondent hired to install the carpeting. Ruzzo identified the subcontractors using Respondent's transaction records. Respondent subsequently provided information, including affidavits and certificates of exemption regarding the subcontractors it had hired during the penalty period. At all times during the penalty period, Respondent employed four or more non-construction employees, including Charles and Calideen.3/ Based on the business records produced, Ruzzo compiled a list of the persons, including the subcontractors and non-construction employees who were on Respondent's payroll, but not covered by workers' compensation insurance during the penalty period. This list of employees and the penalty computation for each is set forth on the Penalty Calculation Worksheet attached to the 2nd Amended Order of Penalty Assessment. Using the National Council on Compensation Insurance ("NCCI") workers' compensation insurance occupation class codes set forth in the NCCI Scopes Manual, Ruzzo determined the occupation class code applicable to each employee listed on the Penalty Calculation Worksheet. Respondent's subcontractors were classified in NCCI class code 5478, which is the class code for the flooring installation industry. This is consistent with Florida's construction industry class code rule, Florida Administrative Code Rule 69L-6.021(2)(kk), which identifies the installation of carpet and other floor covering as NCCI class code 5478. Alex Stark, Amber Krembs, Jacquelyn Skwarek, and Monica Stahl were classified in NCCI class code 8018, which applies to workers engaged in selling merchandise, including carpeting and linoleum, at the wholesale level. Calideen, Frenchak, and Phelps were classified in NCCI class code 8742, which applies to outside salespersons primarily engaged in sales off of the employer's premises. Charles was classified in NCCI class code 8810, which applies to clerical office employees. Ruzzo then determined the period of Respondent's noncompliance for each employee listed on the Penalty Calculation Worksheet. For each of these employees, Ruzzo determined the gross payroll paid to that employee for the period during which Respondent was noncompliant, 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 occupation class code. This calculation yielded the workers' compensation coverage premium for that specific employee for which Respondent was noncompliant during the penalty 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. Respondent did not provide records covering Charles, Calideen, Stark, Frenchak, or Phelps for the period between January 1, 2015, and January 23, 2015. For this period, Ruzzo imputed the gross payroll for each of these employees using the statewide average weekly wage as defined in section 440.12(2),4/ multiplied by two. Ruzzo then performed the same computations discussed above to determine the penalty amount to be imposed for Respondent's failure to provide workers' compensation for those employees during this time period. Ruzzo added the penalty determined for each employee using actual gross payroll and imputed payroll, as applicable, to arrive at the total penalty assessment amount of $31,061.68. Respondent's Defense Respondent is engaged in the retail sale of various types of flooring, such as carpeting, and hires subcontractors to install the flooring. The evidence did not establish that Respondent engaged in wholesale sales of flooring. Charles testified that Respondent had attempted to operate its business as a "cash and carry" operation in which Respondent would sell the flooring to retail customers, who would take the purchased flooring from Respondent's premises and would be solely responsible for securing their own installation services. In Charles' words, "[t]hat didn't work. The public demanded that we provide them, as part of the sale, installers—— I might be saying it wrong legally, but they demanded that it all be done in one shot." Thus, Respondent began hiring subcontractors to do the installation work. Charles explained that Respondent makes retail sales of flooring to customers, either on Respondent's premises or at the customer's premises through its outside sales people. The flooring is then cut from the roll on Respondent's premises and placed in the installer's vehicle. The installer transports the purchased flooring to, and installs it at, the customer's premises. Charles estimated that Respondent currently does approximately five percent of its business as "cash and carry" sales, and the remaining 95 percent consists of sales requiring installation. Charles testified that he and Calideen, as corporate officers of Respondent, previously had obtained exemptions from the workers' compensation coverage requirements for themselves; however, they were unaware that the exemptions had to be renewed, so their exemptions had expired. As of the date of the 2nd Amended Order of Penalty Assessment, neither Charles nor Calideen possessed valid certificates of exemption from the workers' compensation coverage requirement. Charles testified that Respondent always had tried to operate in compliance with the law. He was of the view that because he and Calideen were exempt from the worker's compensation coverage requirement, Respondent effectively employed only three employees——one fewer than the workers' compensation coverage requirement threshold of four employees applicable to non-construction industry businesses. Charles and Calideen testified that when Respondent initially hired subcontractors, they required copies of their insurance policies, including proof of workers' compensation coverage or exemption therefrom. Calideen testified that thereafter, he and Charles assumed that the subcontractors were in compliance with the workers' compensation laws, and they did not know that they needed to obtain updated certificates of workers' compensation exemption or coverage from the subcontractors. On that basis, Charles asserted that Respondent should not be required to "babysit" its subcontractors to ensure that they are in compliance with the workers' compensation law. Respondent thus asserts that it should not be responsible for securing workers' compensation coverage for subcontractors whose workers' compensation policies or exemptions had expired during the penalty period. The undisputed evidence establishes that Charles' employment entails clerical work. Calideen testified, credibly, that Stark's employment duties entail selling flooring on Respondent's business premises, and that he does not engage in sales off the premises. Calideen testified, credibly, that Frenchak and Phelps primarily are engaged in outside sales off of Respondent's premises. Calideen testified, credibly, that he performs clerical duties rather than sales duties. Calideen and Charles both testified, credibly, that employees Krembs, Skwarek, and Stahl performed computer-related duties for Respondent, such as entering business information into Respondent's computer databases, and that they did not work on Respondent's business premises. Calideen testified, credibly, that subcontractor Mike Smith was hired on a one-time basis to paint parking place stripes at the newly-repaved parking lot behind Respondent's business premises. Findings of Ultimate Fact The credible, persuasive evidence establishes that Respondent is engaged in the retail sale of carpeting and other flooring materials and that Respondent itself does not install the flooring. The credible, persuasive evidence establishes, and the parties stipulated, that Respondent is not a member of the construction industry. The credible, persuasive evidence establishes that at all times during the penalty period, Respondent employed more than four employees who were engaged in non-construction employment. Accordingly, Respondent was required to secure workers' compensation coverage for its employees, including Charles and Calideen, whose previously-issued certificates of exemption had expired and were not in effect during the penalty period. The undisputed evidence establishes that at certain times during the penalty period, Respondent employed subcontractors who performed floor installation. The evidence clearly establishes that the subcontractors, in installing the flooring, perform a service that is integral to Respondent's business and that they work specifically at Respondent's direction for each particular installation job. Even though Respondent is not classified as a member of the construction industry, it nonetheless is a "statutory employer" of its subcontractors, who are members of the construction industry. Thus, Respondent is responsible for securing workers' compensation coverage for its subcontractors who failed to secure an exemption or coverage for themselves.5/ The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to flooring installation subcontractors for which Respondent was noncompliant during the penalty period. However, the unrebutted evidence establishes that subcontractor Mike Smith was hired on a one-time basis to paint parking lot stripes in Respondent's parking lot. Thus, Petitioner's classification of Smith in NCCI class code 5478—— which is a construction industry code that applies to workers engaged in flooring installation——obviously is incorrect, and no evidence was presented showing the correct NCCI class code in which Smith should be classified. Accordingly, Smith should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to Respondent's noncompliance with respect to Charles, Frenchak, and Phelps during the penalty period. The credible, persuasive evidence establishes that Stark is engaged in retail sales on Respondent's business premises. However, in calculating the penalty, Petitioner classified Stark in NCCI class code 8018, which applies to salespersons engaged in selling merchandise at the wholesale level, rather than at the retail level. Thus, Petitioner incorrectly classified Stark in NCCI class code 8018. There is no evidence in the record identifying the correct NCCI class code in which Stark should be classified. Accordingly, Stark should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Calideen performs clerical employment duties and does not perform sales duties, so he should be classified in NCCI class code 8810, rather than in class code 8742. Accordingly, Petitioner should recalculate the portion of the penalty attributable to Respondent's noncompliance for Calideen using NCCI class code 8810. The credible, persuasive evidence establishes that Krembs, Skwarek, and Stahl are not employed as salespersons at the wholesale level. Thus, Petitioner incorrectly classified these employees in NCCI class code 8018. In its Proposed Recommended Order, Petitioner contends that because Respondent disputes the classification of these employees in class code 8018, Respondent is responsible for identifying the correct applicable class code, which it has not done. This position disregards that in this proceeding, Petitioner bears the burden of proof, by clear and convincing evidence, to show that its proposed penalty assessment against Respondent is accurate. Thus, Petitioner——not Respondent——is responsible for correctly identifying the NCCI class codes applicable to Respondent's employees. Here, the credible, persuasive evidence establishes that in calculating the penalty, Petitioner incorrectly classified Krembs, Skwarek, and Stahl in class code 8018,6/ and no evidence was presented showing the correct NCCI class code applicable to these employees. Accordingly, Krembs, Skwarek, and Stahl should not be included in Petitioner's calculation of the penalty to be assessed against Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Department of Financial Services, Division of Workers' Compensation, issue a final order amending the penalty to be assessed against Respondent as follows: Subtracting the penalty assessed for subcontractor Mike Smith, as shown on the Penalty Calculation Worksheet; and Subtracting the penalties assessed for Respondent's alleged noncompliance with respect to employees Amber Krembs, Jacquelyn Skwarek, and Monica Stahl, as shown on the Penalty Calculation Worksheet; and Reclassifying employee Andy Calideen in NCCI class code 8810 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Calideen using this class code; and Reclassifying employee Alexander Stark in NCCI class code 5784 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Stark using this class code. DONE AND ENTERED this 22 day of January, 2016, 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 22 day of January, 2016.
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 At issue in this proceeding is whether the Respondent, Klenk Roofing, Inc. ("Klenk Roofing"), 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, if so, whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107.
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. Klenk Roofing is a corporation based in Daytona Beach. The Division of Corporations’ “Sunbiz” website indicates that Klenk Roofing was first incorporated on February 23, 2005, and remained an active corporation up to the date of the hearing. Klenk Roofing’s principal office is at 829 Pinewood Street in Daytona Beach. As the name indicates, Klenk Roofing’s primary business is the installation of new roofs and the repair of existing roofs. Klenk Roofing was actively engaged in roofing operations during the two-year audit period from July 24, 2012, through July 23, 2014. Kent Howe is a Department compliance investigator assigned to Volusia County. Mr. Howe testified that his job includes driving around the county conducting random compliance investigations of any construction sites he happens to see. On July 23, 2014, Mr. Howe was driving through a residential neighborhood when he saw a house under construction at 2027 Peninsula Drive in Daytona Beach. He saw a dumpster in the driveway with the name “Klenk Roofing” written on its side. Mr. Howe also saw a gray van with the name “Klenk Roofing” on the door. Mr. Howe saw three men working on the house. He spoke first with Vincent Ashton, who was collecting debris and placing it in the dumpster. Mr. Howe later spoke with Jonny Wheeler and Craig Saimes, both of whom were laying down adhesive tarpaper on the roof when Mr. Howe approached the site. All three men told Mr. Howe that they worked for Klenk Roofing and that the owner was Ronald Klenk. Mr. Ashton and Mr. Wheeler told Mr. Howe that they were each being paid $10 per hour. Mr. Saimes would not say how much he was being paid. After speaking with the three Klenk Roofing employees, Mr. Howe returned to his vehicle to perform computer research on Klenk Roofing. He first consulted the Sunbiz website for information about the company and its officers. His search confirmed that Klenk Roofing was an active Florida corporation and that Ronald Klenk was its registered agent. Ronald Klenk was listed as the president of the corporation and Kyle Klenk was listed as the vice president. Mr. Howe next checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Klenk Roofing had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Klenk Roofing had no active workers' compensation insurance coverage for its employees and that Ronald and Kyle Klenk had elected exemptions as officers of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012. Mr. Howe’s next step was to telephone Ronald Klenk to verify the employment of the three workers at the jobsite and to inquire as to the status of Klenk Roofing's workers' compensation insurance coverage. Mr. Klenk verified that Klenk Roofing employed Mr. Wheeler, Mr. Ashton, and Mr. Saimes. Mr. Klenk also informed Mr. Howe that Klenk Roofing did not have workers' compensation insurance coverage for the three employees. Based on his jobsite interviews with the employees, his interview with Mr. Klenk, and his Sunbiz and CCAS computer searches, Mr. Howe concluded that as of July 23, 2014, Klenk Roofing had three employees working in the construction industry and that the company had failed to procure workers’ compensation coverage for these employees in violation of chapter 440. Mr. Howe consequently issued a Stop-Work Order that he personally served on Mr. Klenk on July 23, 2014. Also on July 23, 2014, Mr. Howe served Klenk Roofing with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers compensation insurance coverage, and other business records to enable the Department to determine the appropriate penalty owed by Klenk Roofing. Anita Proano, penalty audit supervisor for the Department, was assigned to calculate the appropriate penalty to be assessed on Klenk Roofing. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two-year period preceding the Stop-Work Order, which, in this case was the period from July 24, 2012, through July 23, 2014. § 440.107(7)(d), Fla. Stat. At the time Ms. Proano was assigned, Klenk Roofing had not provided the Department with sufficient business records to enable Ms. Proano to determine the company’s actual gross payroll. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer’s actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that “[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers’ compensation classification code for an employee based upon records or the investigator’s physical observation of that employee’s activities.” Ms. Proano applied NCCI Class Code 5551, titled “Roofing — All Kinds and Drivers,” which “applies to the installation of new roofs and the repair of existing roofs.” The corresponding rule provision is rule 69L-6.021(2)(uu). Ms. Proano used the approved manual rates corresponding to Class Code 5551 for the periods of non-compliance to calculate the penalty. On September 17, 2014, the Department issued an Amended Order of Penalty Assessment in the amount of $214,335.58, based upon an imputation of wages for the employees known to the Department at that time. After Klenk Roofing provided further business records, the Department on December 16, 2014, was able to issue a Second Amended Order of Penalty Assessment in the amount of $87,159.20, based on a mixture of actual payroll information and imputation. The Department eventually received records sufficient to determine Klenk Roofing's payroll for the time period of July 24, 2012, through July 23, 2014. The additional records enabled Ms. Proano to calculate a Third Amended Order of Penalty Assessment in the amount of $19.818.04. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Third Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Klenk Roofing was in violation of the workers' compensation coverage requirements of chapter 440. Jonny Wheeler, Vincent Ashton, and Craig Saimes were employees of Klenk Roofing performing services in the construction industry without valid workers' compensation insurance coverage. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated by Ms. Proano, through the use of the approved manual rates, business records provided by Klenk Roofing, and the penalty calculation worksheet adopted by the Department in Florida Administrative Code Rule 69L-6.027. Klenk Roofing could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Ronald Klenk testified he was unable to obtain workers’ compensation coverage during the penalty period because it was prohibitively expensive to carry coverage for fewer than four employees. He stated that the insurers demanded a minimum of $1,500 per week in premiums, which wiped out his profits when the payroll was low. Mr. Klenk presented a sympathetic picture of a small business squeezed by high premiums, but such equitable considerations have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
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 $19,818.04 against Klenk Roofing, Inc. DONE AND ENTERED this 28th day of April, 2015, 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 28th day of April, 2015.
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 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.
