The Issue The issue is whether Respondent is subject to assessed penalties as set forth in the Amended Stop Work and Penalty Assessment Order dated March 11, 2003.
Findings Of Fact Petitioner is the agency charged with enforcing statutory requirements that employers secure the payment of workers' compensation for their employees. Respondent is a Florida corporation, Federal Employer Identification No. 592489849, located in Ocala, Florida, that provides livestock transportation services. Henry Hayes Hudson, III, is Respondent's president. Martha Hudson is Respondent's vice president. Henry and Martha Hudson are Respondent's only officers and shareholders. On or about March 3, 2003, Petitioner received a complaint alleging that Respondent did not carry workers' compensation coverage. That same day, Petitioner's investigator, William Pangrass, conducted a compliance inspection at Respondent's principal place of business, 5879 West County Road 326, Ocala, Florida. During the investigation, Mr. Pangrass interviewed Martha Hudson and Respondent's bookkeeper, Kelly Hadsock. The investigation revealed that Respondent had no proof of workers' compensation for the prior three years. Petitioner personally served Respondent with a Stop Work and Penalty Assessment Order, No. 03-191-D1, on March 3, 2003. The Order required Respondent to cease all business activities. The Order also assessed the minimum statutory penalty in the amount of $100.00 under Section 440.107(5) and $1,000.00 under Section 440.107(7)(b). Martha Hudson refused to sign the Order. Next, Petitioner personally served a Request for Business Owner Affidavit and Production of Business Records on March 3, 2003. Martha Hudson also refused to sign this document. Respondent subsequently provided Petitioner with copies of its payroll records. The records included Respondent's payroll from March 3, 2000, through March 3, 2003. For all or part of that period, Respondent employed 52 individuals. Petitioner used the payroll records to calculate the penalty assessment for the three-year period of time that Respondent did not provide its employees with workers' compensation. On March 11, 2003, Petitioner issued the Amended Stop Work and Penalty Assessment Order, No. 03-191-D1-2. The Amended Order required Respondent to cease all business operations and to pay a penalty in the amount of $109,500.00, pursuant to Section 440.107(5), and a penalty in the amount of $325,045.57, pursuant to Section 440.107(7)(a). The total assessed penalty was $434,545.57. In a telephone conference on July 11, 2003, the parties stipulated that Respondent had no workers' compensation coverage for the period of time at issue here. They also stipulated that the only remaining issue involved the accuracy of the assessed penalty. During the hearing, Petitioner presented competent evidence to support the accuracy of the assessed penalty. More importantly, Respondent stipulated to the accuracy of the assessed penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order affirming the Amended Stop Work Penalty Assessment Order and directing Respondent to pay a penalty in the amount of $434,545.57. DONE AND ENTERED this 10th day of November, 2003, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 2003. COPIES FURNISHED: Larry Collins, Esquire 202 South Magnolia, Suite 3 Ocala, Florida 34474 Eric Lloyd, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2016), by failing to secure the payment of workers' compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Respondent sells roof coating and provides installation services in the Bradenton, Florida, area. The Investigation On April 20, 2015, the Department received a public referral that Respondent was operating without a roofing license or workers' compensation coverage. The case was assigned by the Department to Compliance Investigator Germaine Green ("Green"). Green first checked the Florida Department of State, Division of Corporations, Sunbiz website to verify Respondent's status as an active corporation. Green then checked the Department's Coverage and Compliance Automated System ("CCAS") to see whether Respondent had a workers' compensation policy or any exemptions. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. 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. Green's CCAS search revealed that Respondent had no coverage or exemptions during the relevant period. Because Green was not aware of any specific job site at which Respondent was working, she issued a Business Records Request ("BRR") No. 1 to Respondent seeking records for an audit period of January 1, 2015, through April 29, 2015, to determine compliance. Respondent provided payroll records and bank statements. Respondent's president, Felecia Bly ("Bly"), contacted Green and described the nature of the business as a roof coating business that sells a sealant that coats roofs to seal leaks and extend their longevity. Bly explained that Respondent used commissioned salesmen to review the county assessor's website to determine the square footage of a residence. The salesman then contacted property owners to determine whether they experienced leaks and offered the product and installation. The salesmen did not go on the roofs. Respondent considered its salesmen independent contractors to whom they issued IRS Forms 1099. Respondent used subcontractors to perform the installations. According to Respondent, these workers had their own businesses or exemptions. Respondent also used the services of part-time workers for a short period that addressed and sent post cards marketing Respondent's business. Based on her conversation with Bly, Green determined that the business should be categorized as "roofing," which is classified as National Council on Compensation Insurance ("NCCI") class code 5551 and is considered a type of construction activity under Florida Administrative Code Rule 69L-6.021(2)(cc). Green also determined Respondent was non-compliant with the obligation to secure workers' compensation coverage for its workers. The corporate officers did not have exemptions, and several individuals, identified as sales and roofing subcontractors, did not have their own businesses or exemptions and, therefore, were employees. Petitioner did not issue a Stop-work Order because Respondent came into compliance on June 22, 2015, by securing exemptions for the corporate officers. Petitioner issued a BRR No. 5 for additional records from July 1, 2013, through June 21, 2015, to make a penalty calculation for the two-year period of non-compliance. Penalty Calculation The Department assigned Penalty Auditor Christopher Richardson ("Richardson") to calculate the penalty assessed against Respondent. Richardson reviewed the business records produced by Respondent and properly identified the amount of gross payroll paid to Respondent's workers on which workers' compensation premiums had not been paid. Richardson researched Respondent's corporate officers and Respondent's subcontractors to determine those periods when they were not compliant with chapter 440 during the audit period. Richardson determined that Respondent was not compliant for the period of June 22, 2013, through June 21, 2015. Respondent's compliant subcontractors (those with their own workers' compensation insurance or exemptions) were not included in the penalty. The business records ultimately produced by Respondent were sufficient for Richardson to calculate a penalty for the entire audit period. The initial OPA was in the amount of $257,321.16. After receiving and reviewing additional records supplied by Respondent, an Amended OPA was issued in the amount of $51,089.52. After a deposition of Bly's assistant, Sueann Rafalski ("Rafalski"), who provided additional details regarding those individuals and businesses identified in the Amended OPA, a 2nd Amended OPA was issued on July 18, 2016, in the amount of $43,542.16. During the hearing, Respondent disputed a few items that the Department subsequently voluntarily removed in the 3rd Amended OPA. The Department's Motion for Leave to Amend Order of Penalty Assessment was granted on September 29, 2016. Respondent disputed the inclusion of referral fees to Hicks and Campbell, a customer reimbursement payment to Robert Nyilas, payment to House Medic for work done on the Bly's home, and a loan repayment to the Bly's son, Brian Bly. The Department correctly removed any penalties associated with Hicks, Campbell, Robert Nyilas, House Medic, and Brian Bly. The Department also removed $14,200.00 from the penalty that Respondent disputed as repayments toward a $150,000.00 loan from its corporate officers. Respondent continues to dispute the penalty calculation for all others identified in the 3rd Amended OPA, except for the inclusion of the payment to Unexpected Blessings. For the penalty assessment calculation, Richardson consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department of Financial Services through rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist the calculation of workers' compensation insurance premiums. Richardson assigned the class codes based on information provided by Bly. Richardson then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. Richardson 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. Penalty for the Blys Respondent admits that during the audit period, the business did not carry workers' compensation insurance coverage, and its corporate officers, Glenn and Felecia Bly ("the Blys"), did not have workers' compensation exemptions. Because neither Mr. nor Mrs. Bly was engaged in the application of the roofing materials, the Department correctly assigned class code 8742, for sales and marketing, to them. However, the Department miscalculated the gross income of the Blys. Respondent provided check stubs and its accountant's itemization of payments to the Blys, which constituted repayment of loans from Respondent to the Blys. No evidence to the contrary was presented to indicate these sums were anything other than loan repayments. The Department erroneously included these sums in its calculation of gross payroll to the Blys. Although the Department made a $14,000.00 deduction from gross income for the Blys during this period as "loan repayments," no explanation was provided regarding how this sum was ascertained and why the Department disregarded the information of Respondent's accountant showing repayments during the relevant period in the amount of $19,200.00. The Department obviously accepted the testimony of Bly that, in fact, a portion of what the Department previously concluded was gross income to the Blys, was rather repayments for loans made to Respondent. Accordingly, in the absence of any evidence by the Department of how it parceled out which portion of money paid to the Blys constituted wages and which portion was loan repayments, the Department failed to demonstrate clearly and conclusively that the penalty associated with payments to the Blys is accurate.2/ Penalty for Postcard Mailers Three women, Meghan Saulino, Kimberly Kalley, and Stacy Boettner, were identified by Bly as independent contractors she hired to address and mail postcards for Respondent. According to Bly and Rafalski, these workers were college students who did the work at home, on their own time, and were paid by the job. This arrangement did not last long because the women did not like the work, and the task was transferred to Minuteman, a printing and copying business. These women are included in the Second Amended OPA and are assigned class code 8742 for sales and marketing. Respondent contends they should not be included because they were not employees. No evidence was presented to refute that these three women were merely casual workers whose duties (addressing and mailing postcards) were not in the course of the trade, business, profession, or occupation of Respondent (selling and installing roof coating). Accordingly, the amount included in the penalty for their work, $78.18, should be excluded from the 3rd Amended OPA. Penalty for Commissioned Salesmen Respondent contends that its commissioned sales people are all independent contractors who performed jobs for others. These salespeople included Kevin Kalley, Robert Patton, Gino Barone, Scott De Alessandro, Scott Black, and Tim Paige. However, no evidence was presented of the independent contractor agreements for these individuals, certificates of exemption for them for the penalty period, or evidence that these individuals owned their own businesses. As such, the Department was correct in including the amounts received by the salespeople as gross income for purposes of the penalty calculations. Penalty for Roof Coating Installers Respondent similarly argues that its roof coating installers were independent contractors. The roof coating installers included Bill Boettner, owner of Unexpected Blessings who did not have an exemption during the penalty period, and his business, Unexpected Blessings. Again, no evidence was presented of certificates of exemption for the penalty period or evidence that Unexpected Blessings had coverage. As such, the Department was correct in including the amounts received by the roof coating installers as gross income for purposes of the penalty calculations. Penalty for Other Independent Contractors Respondent argues that Rafalski and Bobby McGranahan ("McGranahan") should not be included in the penalty calculation because they were independent contractors not directly associated with Respondent's business. Rafalski was hired by Bly to help with personal errands and to respond to the audit which serves as a basis for this action. McGranahan is alleged to have run errands for the roof coating installers and acted as a handyman for Respondent before becoming a salesperson for Respondent. It is undisputed that Rafalski and McGranahan performed duties directly related to Respondent's business. Although Rafalski testified at her deposition that she considered herself an independent contractor, it was clear she worked on-site and was the individual most familiar with Respondent's business operations and internal accounting practices. McGranahan's duties, of shopping for supplies for the roofing installers, and then selling for Respondent, were directly related to Respondent's business. No evidence was presented demonstrating that either Rafalski or McGranahan owned their own business or had an exemption. Accordingly, they were properly included in the Department's 3rd Amended OPA.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order assessing a penalty against Respondent in the amount of $34,552.20. DONE AND ENTERED this 12th day of October, 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 12th day of October, 2016.
The Issue The issue to be resolved in this proceeding concerns whether the Respondent was operating its business without workers' compensation coverage for employees in violation of the below-referenced provisions of Chapter 440, Florida Statutes, whether it continued its business operations in violation of a Stop Work Order issued August 11, 2005, in purported violation of Section 440.107(7)(a), Florida Statutes (2005), and what, if any, penalty is warranted.
Findings Of Fact The Department of Financial Services, Division of Workers' Compensation (Department) is an agency of the State of Florida charged with enforcing the statutory requirements requiring employers to secure the payment of workers' compensation benefits by obtaining insurance coverage therefor for employees, as mandated by Section 440.107, Florida Statutes (2005). The Respondent, Krashco, Inc., d/b/a J. Krash's Sports Bar (Krashco, Inc.) is a Florida corporation domiciled in Panama City, Florida. On August 11, 2005, it was engaged in the business of operating J. Krash's Sports Bar at 1508 Calhoun Avenue in Panama City, Florida. Patricia Krossman is a Workers' Compensation Investigator for the Department. She conducts investigations into all types of business to verify that they have required workers' compensation insurance coverage or are statutorily exempt. She visited J. Krash's Sports, Bar accompanied by her supervisor, William Dorney, and another investigator on August 11, 2005. J. Krash's Sports Bar is a business owned by the Respondent Krashco, Inc. Upon entering the bar, Ms. Krossman, observed several customers and a bartender. She inquired of the bartender whether the owner was present. She was then introduced to Mr. Matthew McDonough who identified himself as the accountant for Krashco, Inc. Mr. Dorney was present and witnessed this encounter with Mr. McDonough. Mr. Krossman interviewed Mr. McDonough who stated that he handled all the business for Krashco, Inc., and that Krashco, Inc., had one full-time employee and six hourly employees. Mr. McDonough provided the names of those employees to Ms. Krossman and told her that Krashco, Inc., had no workers' compensation insurance policy to cover those employees. This revelation was corroborated by Mr. Dorney who was also present. Mr. McDonough identified Ms. Janis Kay Porter-Krasno as the sole officer of the corporation, Krashco, Inc. He provided the telephone number for Ms. Krasno and Investigator Krossman telephoned Ms. Krasno. She confirmed the number and the names of the employees of Krashco, Inc., and J. Krash's Sports Bar. She also confirmed that Krashco, Inc., had no workers' compensation coverage. In accordance with Chapter 440, Florida Statutes, insurance carriers report to the Department the issuance to businesses of workers' compensation insurance policies. The Department issues workers' compensation insurance exemptions also. The Department maintains an electronic database of employer coverage and exemptions in its Coverage and Compliance Automated System (CCAS), which allows investigators to determine whether an employer has secured workers' compensation insurance coverage or whether that employer has an exemption from coverage. This database is used in the normal course of the Department's investigations. Ms. Krossman utilized the CCAS data base in the subject investigation. This database confirmed that the Respondent had no workers' compensation coverage and no exemption from coverage from any officer of the Respondent corporation at the time of the investigation. (See Department exhibits three and four in evidence). The Department has a policy or statutory interpretation which it carries out, concerning its duties under Section 440.107(7)(a), Florida Statutes (2005), requiring that if an employer who is required to secure payment of workers' compensation benefits has failed to do so, that failure is deemed an immediate serious danger to public health safety or welfare and results in the issuance of a "Stop Work Order" by the Department. In view of her investigation as described, Investigator Krossman determined that the Respondent was in violation of the workers' compensation law. This was because it employed more than four individuals, for whom the Respondent was required to secure the payment of workers' compensation and yet had no workers' compensation for any of its employees. Investigator Krossman's supervisor, Mr. Dorney, reviewed the results of Ms. Korssman's investigation and agreed with her and authorized her to issue a Stop Work Order to the Respondent due to its failure to comply with the relevant requirements of Chapter 440, Florida Statutes. Indeed, the Respondent ultimately stipulated its liability for the charge that it violated Section 440.107(7), Florida Statutes (2005), by not securing the payment of workers' compensation for the employees in question. The Stop Work Order was served on Krashco, Inc., on August 11, 2005, alerting that employer in accordance with Section 440.107(7)(d), Florida Statutes (2005), that a penalty would be assessed and that the penalty might be amended based on further information obtained, including the production of business records by the employer. The Stop Work Order also advised that if the employer conducted any business operations in violation of the Stop Work Order that a penalty of $1,000.00 per day of violation would be assessed. Under the mandate of Section 440.107(5), Florida Statutes (2005), and Florida Administrative Code Rule 69L-6.015, Florida employers are required to maintain business records that enable the Department to determine whether an employer is complying with the workers' compensation law. On August 11, 2005, Ms. Krossman issued and hand served on Krashco, Inc., a written request for production of business records for purposes of a penalty assessment calculation. On September 14 and 19, 2005, the Respondent's accountant provided business records to the Department. After reviewing those business records, Investigator Krossman again consulted with her supervisor Mr. Dorney, who authorized her to issue an Amended Order of Penalty Assessment. The Amended Order of Penalty Assessment is the Department's Exhibit 9 in evidence. The Amended Order was issued and served on Respondent on September 26, 2005, and assessed a total penalty of $49,979.79 under the authority of Section 440.107(7)(d)1. and (c), Florida Statutes (2005). The penalty calculations pertaining to each of the employees listed appeared in a three page worksheet attached and incorporated as part of Department's exhibit nine in evidence. Investigator Krossman selected the appropriate NCCI class code for Krashco Inc.'s business, and its corresponding premium rate, in order to apply that to each employee's wages. The Department relies on these premium rates and the classification codes for these purposes in the normal course of its regulation of such matters.1/ Ultimately, at hearing, the Respondent stipulated that it did not dispute the charge in the Amended Order and does not dispute the accuracy of the penalty calculation.2/ In light of the requirements of Section 440.107(7)(d)1., Florida Statutes (2005), Investigator Krossman calculated the penalty for the period of non-compliance back to September 1, 2002, pursuant to the three year "reach back standard" in the statute. The premium which had thus been evaded which the Respondent would have paid had it secured workers' compensation insurance was thus shown to be $7,986.43. The statutorily provided penalty on that amount of evaded premium multiplied by the statutory standard of 1.5 times resulted in a penalty amount of $11,979.79. Respondent also stipulated at the hearing that it had violated the Stop Work Order issued on August 11, 2005, by continuing to conduct its business operations of J. Krash's Sports Bar through September 19, 2005. This engendered an additional penalty as provided in Section 440.107(7)(a) and (c), Florida Statutes (2005). Investigator Krossman calculated the additional penalty at $1,000.00 per day of violation time from August 12, 2005 through September 19, 2005, at $38,000.00. This results in a total aggregate assessed penalty, pursuant to the Amended Order, of $49,979.79. The business of Respondent Krashco, Inc., is J. Krash's Sports Bar. Its principal place of business is 1508 Calhoun Avenue, Panama City, Florida 32405. Section 440.107(7)(a), Florida Statutes (2005), requires a cessation of all business operations by an employer when a Stop Work Order is issued by that employer by the Department. The Stop Work Order "shall remain in effect until the Department issues an order releasing the Stop Work Order upon a finding that the employer has come into compliance with the coverage requirements of this Chapter and has paid any penalty assessed under this section."3/ Krashco, Inc., has never paid any part of the assessed penalty pursuant to the Amended Order or the Second Amended Order filed later. The Department has never issued an Order of Release from the Stop Work Order. Nevertheless, the Respondent Krashco, Inc., after September 19, 2005, continued the business operations of J. Krash's Sports Bar. Officers of corporations may elect an exemption from coverage under the workers' compensation law as an employee (see Section 440.05). This exemption is effective, however, only for the corporation listed in the eligible officer's Notice of Election to be Exempt and which is paying that officer's salary or wages. Three new corporations were formed whereby the previous employees of Krashco, Inc., d/b/a J. Krash's Sports Bar became officers of Krashco, Inc., and those three new corporations. This is because Krashco, Inc., needed people to operate the bar on its behalf to buy goods and services to sell and dispense at its business, J. Krash's Sports Bar. Krashco, Inc.'s former employees became officers of these three newly created corporations and two of the former employees became officers of the Respondent Krashco, Inc. Krashco, Inc., d/b/a J. Krash's Sports Bar verbally contracted with these new officers of the new corporations to perform the same services for its business, J. Krash's Sports Bar, that those same individuals had been performing before becoming officers of these corporations, performing security, catering, and bartending services. Krashco, Inc.'s, principals were of the belief that it was necessary to secure the services in this manner in order to continue the operation of its business, without employees, so that it would no longer be required to have workers' compensation coverage for them. After August 11, 2005, and through most of the remainder of 2005, Ms. Janis Krasno, the President of Krashco, Inc., continued to pay these new officers, the former employees, directly with checks drawn on Krashco Inc.'s account and made payable to the individual officers as payees (not to their corporation) for the same services they had performed for the benefit of J. Krash's Sports Bar.4/ Keith Larson, an employee of Krashco, Inc., became an officer of the original Krashco, Inc., as well as Crashco, Inc., one of the three newly created corporations. Keith Larson elected an exemption from Chapter 440 as an officer of Krashco, Inc. Larson's election of exemption with Krashco, Inc., however, did not become effective until November 2, 2005. Consequently, Keith Larson continued to be paid by Krashco, Inc., as an employee through at least November 1, 2005. Six other Krashco, Inc., employees were granted exemptions (as officers of the other corporations) by the Petitioner from the requirement of workers' compensation coverage, which were all effective on August 22, 2005. This reduced the number of employees of record to less than the compliment of four (or more) for which coverage is required. This would seem, under only these circumstances, to represent the expiration of liability by the Respondent for failure to secure payment of workers' compensation and to also be the date the Stop Work Order should be rescinded and further penalties tolled. The fact is, however, that Ms. Krasno and the Respondent, Krashco, Inc., as found below, continued to pay these "former employees" with Krashco, Inc., checks made to them individually (not to their corporations), for the same job duties, until December 15, 2005. Thus they continued to function as employees of the Respondent, Krashco, Inc., until that date. After that date they were paid by a new corporation, Crashco, Inc. Ms. Janis Krasno, President of Krashco, Inc., continued to operate and run J. Krash's Sports Bar as an officer of and on behalf of Krashco, Inc., through April 28, 2006. This included payment of Krashco's expenses occasioned in the operation of the business. Ms. Krasno, President of Krashco, Inc., wrote checks through December 15, 2005, drawn on Krashco, Inc.'s bank account to pay for Krashco, Inc.'s business operation expenses, all of which were for the benefit of operating J. Krash's Sports Bar. Ms. Krasno as President of Krashco, Inc., issued checks through December 15, 2005, drawn on that corporation's account to pay the individual officers of the three new corporations which had been formed, and of Krashco, Inc., for those officers' bartending, security, and catering services, all of which were performed to continue and perpetuate the operation of J. Krash's Sports Bar. Ms. Krasno issued checks through December 15, 2005, on Krashco, Inc.'s account, to promote sales, by the promotion of upcoming activities to be held at the bar, or to purchase goods for sale at J. Krash's Sports Bar, from various vendors, for non-alcoholic drinks, restaurant supplies, food and other goods for parties. Such payments were also used to pay vendors such as Goldring Gulf Distributing Company and other distributors for alcoholic beverages to be sold in the operation of J. Krash's Sports Bar, and for incidental expenses. From August 12, 2005 through December 15, 2005, and through April 28, 2006, J. Krash's Sports Bar was generally open for business seven days a week from 2:00 p.m. to 4:00 a.m. Since September 19, 2005 through April 28, 2006, Ms. Krasno still controlled the management and operations of Krashco, Inc., d/b/a J. Krash's Sports Bar. On December 21, 2005, however, Krashco, Inc.'s, president, Ms. Krasno, who also became president of Crashco, Inc., began issuing checks drawn on the bank account of Crashco, Inc., to pay for expenses occasioned in the operation of the Respondent's business J. Krash's Sports Bar. These were payments to the same officers she had been paying since September 19, 2005, for their bartending, security, and catering services, as well as to essentially the same vendors for purchases of alcoholic beverages, etc. for sale at J. Krash's Sports Bar. Through the date of the final hearing Ms. Krasno, with checks drawn on the account of Crashco, Inc., purchased alcoholic beverages on behalf of Krashco, Inc., the holder of liquor license BEV1301819, in order to continue the business operations of Krashco, Inc., d/b/a J. Krash's Sports Bar. After December 21, 2005 and through April 28, 2006, income of sales at J. Krash's Sports Bar was deposited in Crashco, Inc.'s account. After entry of the Amended Order on September 26, 2005, the Respondent timely filed its request for a formal proceeding on October 14, 2005. This rendered the initial agency action to be non-final, to await the outcome of this de novo, proceeding.
Recommendation Having considered the foregoing findings of fact, the 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, under the Amended Order of Penalty Assessment, the Second Amended Order of Penalty Assessment and the Stop-Work Order, a penalty in the total amount of $136,979.80, together with an additional assessment for failure to secure coverage for the period of September 19, 2005 through December 15, 2005, in the manner provided in Subsection 440.107(7)(d)1., Florida Statutes (2005). DONE AND ENTERED this 8th day of January, 2007, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of January, 2007.
The Issue Whether Respondent violated chapter 440, Florida Statutes (2017), by failing to secure payment of workers’ compensation coverage, as alleged in the Stop-Work Order (“SWO”) and Amended Order of Penalty Assessment (“Amended Penalty Assessment”); and, if so, whether Petitioner correctly calculated the proposed penalty assessment against Respondent.
Findings Of Fact Based on the oral and documentary evidence admitted at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: Background The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that requires employers to secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. The Department is also responsible for conducting random inspections of jobsites and investigating complaints concerning potential violations of workers’ compensation rules. At all times material to this matter, Native Cuts was a for-profit limited liability company engaged in business in the State of Florida. Native Cuts was organized as a business on January 19, 2010, and engaged in the business of construction and landscaping. Earl Lee, Jr. and Virginia Brown are Respondent’s managers. Earl Lee, Jr. is Respondent’s registered agent, with a mailing address of 316 North Lake Avenue, Leesburg, Florida 34748. Investigation On July 27, 2017, the Department’s investigator, Chuck Mays, conducted a random workers’ compensation compliance inspection at 27746 Cypress Glen Court, Yalaha, Florida 34797. At that time, Mr. Mays observed three men performing work. Mr. Mays testified that one man was observed operating a Bobcat utility vehicle (small tractor) to transport dirt from the front to the back of the structure, which was under construction. The two other men were removing debris, e.g., cut tree limbs, from the jobsite. Mr. Mays approached the man on the Bobcat and identified himself as an investigator. Mr. Mays began interviewing the Bobcat driver who reported that he and the other two workers at the jobsite were employees of Native Cuts, which the two men confirmed. Mr. Mays ultimately identified the three men at the jobsite as Rodolfo Ramirez, Mitchel Pike, and Dave Herrington. Based on his observations, Mr. Mays determined that the three men were performing construction-related work. Mr. Mays called Respondent’s manager, Mr. Lee, who identified the three men working at the jobsite as his employees. Mr. Mays asked Mr. Lee about the rate of pay and the length of employment for the employees and Mr. Lee referred Mr. Mays to Virginia Brown to obtain the information. Ms. Brown confirmed the three employees, and a fourth employee who was not present at the jobsite. Following the interviews on July 27, 2017, Mr. Mays researched the Division of Corporations system and established that Native Cuts was an active business. He then conducted a search of the Department’s Coverage Compliance Automated System (“CCAS”) and found Respondent did not have workers’ compensation coverage for its employees. Mr. Mays also conducted a further search of CCAS and discovered that Mr. Lee previously had an exemption, which expired on October 30, 2016. Based on his investigation and after consultation with his supervisor, Mr. Mays issued SWO No. 17-246-D4, and posted it at the jobsite. On July 28, 2017, Mr. Mays met with Ms. Brown at her home and personally served the SWO and Request for Production of Business Records for Penalty Assessment Calculation (“Business Records Request”). The Business Records Request directed Respondent to produce business records for the time period of July 28, 2015, through July 27, 2017 (“Audit Period”), within 10 business days from the receipt of the Business Records Request. On August 11, 2017, Respondent provided business records, including bank statements, checks, and receipts. The records were deemed sufficient to apply a 25-percent discount to Respondent for timely production of records. Penalty Calculation Generally, the Department uses business records to calculate the penalty assessment. Lynne Murcia, a Department penalty auditor, was assigned to review the calculation of the penalty assessment for Respondent. To calculate the penalty assessment, the Department uses a two-year auditing period looking back from the date of the SWO, July 27, 2017, also known as the look-back period. Penalties for workers' compensation insurance violations are based on doubling the amount of insurance premiums that would have been paid during the look-back period. § 440.107(7)(d), Fla. Stat. Ms. Murcia testified as to the process of penalty calculation. Ms. Murcia reviewed the business records submitted by Respondent, as well as notes, worksheets, and summaries from the original auditor.1/ Based on her review of the records, Ms. Murcia identified the individuals who received payments from Respondent as employees during the Audit Period. Ms. Murcia deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. 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 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." Based on Mr. Mays’ observations at the jobsite, the Department assigned either NCCI classification (“class”) code 0042, entitled “Landscaping, Gardening, & Drivers” or class code 9102, entitled “Lawn Maintenance-Commercial or Domestic & Drivers.” The class code 0042 “applies to work involving new landscaping installations whereas class code 9102 applies to work involving maintenance of existing landscaping and/or lawn maintenance.” Mr. Mays testified that class code 0042 is considered construction work, whereas class code 9102 is considered nonconstruction work for workers’ compensation purposes. Generally, if a business provides proper payroll records to support a division, the appropriate code and correlating rate would apply based on the work performed. If the payroll records are not maintained to support the division of the work performed between class code 0042 and class code 9102, the highest rate of the two classifications is applied to the employee. Ms. Murcia testified that class code 0042 and class code 9102 were applied to Native Cuts employees due to the mixed work performed (Landscaping and Lawn Maintenance) by Respondent. However, class code 9102 was applied to most of the employees. Utilizing the statutory formula for penalty calculation specified in section 440.107(7)(d)1. and rule 69L- 6.027, the total penalty was calculated based on periods of non- compliance for employees based on the dates they received payments from Respondent and were not covered for workers’ compensation. Since Mr. Lee’s exemption expired on October 30, 2016, the calculation for his work performed was limited to the period after the expiration of his exemption, November 1, 2016, through July 27, 2017. Regarding records designated as cash payments, the Department determined that the Native Cuts’ records and receipts did not validate the payroll and expenses that corresponded with the company’s cash withdrawals. Pursuant to rule 69L- 6.035(1)(k), the Department included 80 percent of cash withdrawals as wages or salaries to employees. Penalty Calculation for Imputed Payroll The Department determined the calculated penalty for Rudolfo Ramirez, David Harrington, and Mitchel Pike, the workers who were identified at the jobsite as employees on July 27, 2017. Mr. Lee was also included in the calculation of penalty for the imputed payroll. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll for these employees during the investigation period, thus, the Department used the statutory formula to impute payroll to these employees. The Department correctly assigned a class code of 0042 and calculated a penalty of $149.20 against Respondent for failure to secure payment of workers’ compensation insurance for each of these employees. The Department also calculated the penalty for Ms. Brown, who was not at the jobsite but participated in the investigation on July 27, 2017. The Department applied a classification code 9102 to Ms. Brown. However, the evidence presented at hearing demonstrated Ms. Brown maintained records for the business and was the person identified as maintaining the wage rate information for employees. The evidence of record does not support a finding that Ms. Brown provided any landscaping or construction services to Respondent. Ms. Brown’s work, at best, could be described as clerical work. The Department introduced no evidence of an appropriate NCCI class code for Ms. Brown. Thus, the Department did not prove by clear and convincing evidence that the imputed payroll related to Ms. Brown should be included for purposes of calculating the penalty. The Department did not prove by clear and convincing evidence that the penalty in the amount of $19.60 attributed to Ms. Brown should be included in the penalty assessment. Penalty Calculation for Uninsured Labor Ms. Murcia testified that the class code 0042 was applied to the general category of uninsured labor, as the work performed could not be determined from the payroll records. Thus, the highest rate, class code 0042, of the two classifications for work performed by Native Cuts, is applied to these individuals. The Department correctly calculated a penalty of $17,015.10 for these employees. Penalty Calculation for Remaining Employees In addition to the penalty calculated for the imputed payroll (excluding Ms. Brown) and uninsured labor, the Department applied the appropriate class code for the work performed and correctly calculated the penalty for Native Cut employees2/ in the amount of $52,350.10. Total Penalty Calculation Ms. Murcia calculated a total penalty of $69,534.34 against Respondent for failure to secure payment of workers’ compensation insurance for each of its employees during the audit period. The amount of the penalty should be reduced by the amount attributed to Ms. Brown in the amount of $19.60. Thus, the total penalty amount that should be assessed against Native Cuts is $69,514.40. Mr. Lee paid a $1,000.00 down payment for the penalty assessed.
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, assessing a penalty of $68,514.74 against Native Cuts Property Management, LLC. DONE AND ENTERED this 31st day of May, 2019, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN 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 31st day of May, 2019.
The Issue The issue is whether Respondent’s request for an administrative hearing was timely filed by virtue of the doctrine of equitable tolling.
Findings Of Fact The Division is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees and corporate officers. § 440.107, Fla. Stat. Respondent is a Florida limited liability company engaged in the construction business. Its offices are located at 2474 Ambassador Avenue, Spring Hill, Florida. To enforce this requirement, the Division performs random inspections of job sites and investigates complaints concerning potential violations of workers’ compensation rules. On June 6, 2018, James Acaba, a Division compliance inspector, conducted a compliance investigation at a job site in Lutz, Florida. Mr. Acaba observed two individuals working at the job site: Respondent’s owner, Mr. Smith; and Mr. Smith’s step- son. Mr. Smith claimed he had an exemption for himself. Mr. Acaba ascertained that Mr. Smith’s exemption expired on January 19, 2017. Mr. Acaba determined that: Mr. Smith’s step-son was working for $12.00 an hour; had been working for Respondent for about a week; and did not have workers compensation coverage. On June 6, 2018, a Stop-Work Order and a Request for Production of Business Records for Penalty Assessment Calculation purposes were hand-served on Mr. Smith at the job site. The Stop-Work Order contained an Order of Penalty Assessment, which explained how a penalty is calculated, but gave no specific amount pending a review of Respondent’s financial records. Mr. Smith was advised to provide the requested business records within 10 business days or by June 16, 2019. Mr. Smith requested information on how to have the Stop- Work Order removed. Mr. Acaba explained to Mr. Smith several options available to him to have the Stop-Work Order released: obtain a workers’ compensation policy; engage an employee leasing company; or terminate the step-son’s employment. On June 14, 2018, Mr. Smith provided Mr. Acaba a letter reflecting Respondent’s “reduction in (its) workforce.” On June 15, 2018, Mr. Smith secured the reinstatement of his exemption to work for Respondent. However, Mr. Smith did not provide the requested business records. On November 10, 2018, the Division served an Amended Order of Penalty Assessment (Amended Order) at the address Mr. Smith provided during the June 6, 2018, job site encounter. This Amended Order provided the total penalty amount of $35,769.16. According to Mr. Smith, his girlfriend, Samantha Nigh, signed for the Amended Order on November 10, 2018, saw the large amount of the penalty assessment, and “decided not to show” it to Mr. Smith. Ms. Nigh did not testify during the hearing. The Amended Order contained a Notice of Rights, which stated that, if Respondent wished to contest the penalty, a petition seeking a hearing had to be filed with the Division within twenty-one calendar days of the Amended Order. It also stated that the petition “must be filed with Julie Jones, DFS Agency Clerk, Department of Financial Services, 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399- 0300.” The Amended Order included the following: FAILURE TO FILE A PETITION WIHTIN TWENTY-ONE(21) CALENDAR DAYS OF RECEIPT OF THIS AGENCY ACTION CONSTITUTES A WAIVER OF YOUR RIGHT TO ADMINISTRATIVE REVIEW OF THIS AGENCY ACTION. This meant that a petition had to be filed, and in the hands of the Agency Clerk no later than December 3, 2018. Although the actual due date was Saturday, December 1, 2018, Respondent could have filed the petition by the close of business on Monday, December 3, 2018. Florida Administrative Code Rule 18.106.103. Mr. Smith did not provide the date on which he became aware of the Amended Order. However, once he was aware of it, Mr. Smith knew the 21-day period to file a petition had expired, and admitted at hearing “it was already too late.” On December 14, 2018, 33 days after the Division served the Amended Order, and 11 days after the actual due date, the Division received Respondent’s hearing request. As a result of the late filing, the Division issued an Order to Show Cause (OTSC) on January 10, 2019. The OTSC required Respondent to show cause why the December 14, 2018, hearing request should not be dismissed as untimely. In the written response to the OTSC, Mr. Smith asserted that his brother, Edward Unger, “was only on the job site for the one day,” and Mr. Unger could “provide proof of employment elsewhere further (sic) showing he was not of our employment at the time.” Additionally, the response provided that “due to [an] emergency family situation where Byron Smith, owner, had to take a minor leave of absence to be with a close family member who had emergency open heart coronary bypass surgery. . ., the days and dates got scrambled with emotions clouding what needed to be done promptly.” The Division construed this conversation as possibly excusing the late filing and forwarded the matter to DOAH to resolve that narrow issue. During the hearing, Mr. Smith testified that his girlfriend, Ms. Nigh, prepared the OTSC response, but that his signature was on the document. Mr. Smith never clarified or corrected that Mr. Unger was his brother or step-son, and he merely reiterated the family problem and personal issues, without further detail or explanations, as his excuse. Lastly, Mr. Smith admitted that at the time Mr. Acaba observed the two working on June 6, 2018, he was breaking the rules, but “it was a huge penalty.” There is no credible evidence that Mr. Acaba gave Respondent’s owner, Mr. Smith any information that would cause him to miss the deadline for filing the petition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that that the Department of Financial Services, Division of Workers’ Compensation, enter a final order dismissing Respondent’s request for a hearing as untimely. DONE AND ENTERED this 31st day of May, 2019, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of May, 2019. COPIES FURNISHED: Mattie Birster, Esquire Department of Financial Services Office of the General Counsel 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Byron K. Smith, Jr. Smith's Interior Finishes, LLC 17829 Laura Lee Drive Shadyhills, Florida 34610 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue Whether Respondent has committed the acts alleged in the Stop Work Order and Order of Penalty Assessment and if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure workers' compensation insurance for the benefit of their employees. § 440.107, Fla. Stat. On August 11, 2006, Robert Lambert, the Jacksonville District Supervisor for the Division of Workers' Compensation, Bureau of Compliance, was contacted by Katina Johnson, an investigator for the Division.1/ Based on the information provided to him by Ms. Johnson, Mr. Lambert approved the issuance of a Stop Work Order against Capella Ventures, Inc. The investigator served a Stop Work Order and Order of Penalty Assessment, both by posting at the worksite and by hand delivery, on Capella Ventures. The Department investigator also issued a Request for Production of Business Records for Penalty Assessment, requesting records for a period of three years, from July 31, 2003. These records were requested in order to calculate the penalty required pursuant to Section 440.107, Florida Statutes, for not having workers' compensation insurance. The records were to be used in conjunction with the classification codes contained in the Basic Manual (Scopes Manual) published by the National Council on Compensation Insurance. Records were provided by Capella Ventures' counsel. Based on the records provided, an Amended Order of Penalty Assessment was prepared, assessing a penalty of $8,769.16. Mr. Peter King was, at all times material to this case, an officer of Capella Ventures, along with his father. His father is now deceased. Mr. King admitted that workers from Capella Ventures were assisting his father with a construction project on a home next to the home where they lived. He did not dispute that the workers were performing construction work and that the company had no workers' compensation coverage for them at the time. Nor did he dispute the amount of the penalty reflected in the Amended Order of Penalty Assessment. He contended that while his father performed the framing on the property, one of the two other employees did not have the skill to actually perform framing. The class code used by the Department to determine the appropriate penalty was 5645, which is used for carpentry operations on residential structures. Use of this code was appropriate. Capella Ventures filed for an address change in August of 2006, and voluntarily dissolved in January of 2008. No evidence was presented regarding what actions were taken by Capella Ventures with respect to the dissolution of the corporation. No evidence was presented regarding what, if any, distribution of assets was undertaken at the time of dissolution. No evidence was presented to indicate that any successor corporation or entity was formed upon the dissolution of Capella Ventures.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED: That a final order be entered finding that Respondent, Capella Ventures, Inc., violated Section 440.107, Florida Statutes, by failing to secure workers' compensation for its employees, and assessing a penalty of $8,769.16. DONE AND ENTERED this 10th day of September, 2008, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 10th day of September, 2008.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure payment of workers’ compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, the appropriate penalty.
Findings Of Fact Jurisdiction The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure workers’ compensation coverage for their employees and corporate officers, pursuant to section 440.107. Patrick Hoffman was the owner and sole corporate officer for American. At all times material to this proceeding, American sold materials for window screens, patio sliding doors, screws, and spline screening; and it provided window and screen installation services. Investigation On June 29, 2016, the Department commenced an investigation following the observation of Patrick Hoffman and Timothy Barnett (also known as Adam Barnett) performing window installation services at a residential property. Kent Howe, an investigator in the Department’s compliance division, conducted an investigation regarding American’s operation of its business without proper workers’ compensation coverage. On June 29, 2016, Mr. Howe personally served a Stop-Work Order requiring American to cease all business operations and Order of Penalty Assessment on Mr. Hoffman. On June 29, 2016, Mr. Howe also served Mr. Hoffman with a Request for Production of Business Records for Penalty Calculation, requesting records to enable the Department to calculate the appropriate penalty for the period of June 30, 2014, through June 29, 2016. On June 30, 2016, the Department issued a conditional release from the Stop-Work Order. The conditional release required Respondent to pay $1,000, and agree to pay the penalty assessment within 28 days after the penalty calculation. American paid the $1,000 payment but it disputed the calculated penalty amount. An employer is required to maintain workers’ compensation coverage for employees unless there is an exemption from coverage. In the construction industry, a company must maintain coverage if it employs one or more persons. In the non-construction industry, a company is required to maintain coverage if it employs three or more persons. A contractor serving as a corporate officer in the construction industry may obtain an exemption from coverage requirements. See § 440.05, Fla. Stat. A contractor must demonstrate compliance with the workers’ compensation requirements or produce a copy of an employee leasing agreement or exemption for each employee. If an employee is a subcontractor without their own workers’ compensation coverage or an exemption, the individual is considered an employee of the contractor. American did not dispute that Timothy Barnett and Roger Wilson were employees of the company. American also did not dispute that it did not have workers’ compensation coverage for the employees as required by chapter 440. As a corporate officer, Mr. Hoffman elected to be exempted from workers’ compensation coverage. Penalty Calculation The Department assigned Eunika Jackson, a Department penalty auditor, to calculate the appropriate penalty for American. Ms. Jackson conducts penalty audits for construction and non-construction employers. Ms. Jackson testified that workers’ compensation coverage penalties are calculated based on a statutory formula in which the auditor calculates two-times the amount of the insurance premium the employer would have paid for each employee over the two-year period preceding the Stop-Work Order. The two-year period is commonly referred to as the look-back period. The penalty calculation is based on the employer’s payroll, the classification code for the industry of operation during the audit period, and the manual rate assigned to that classification code. To determine the appropriate code, the auditor uses the classification code in the Scopes® Manual, which has been adopted by Petitioner through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Ms. Jackson used business records Mr. Hoffman provided to determine the appropriate industry code and the penalty amount for each employee. Ms. Jackson reviewed bank statements to determine the gross payroll paid to Mr. Wilson and Mr. Barnett during the two-year non-compliance period. The records demonstrated that Roger Wilson received payment during the period of June 30, 2014, through December 31, 2015. Timothy (Adam) Barnett received payment during the period of January 1, 2015, through June 29, 2016. Ms. Jackson determined that American operated in the construction industry and initially assigned each employee a classification code of 5102. On August 11, 2016, the Department issued the Amended Order that assessed a total penalty of $10,785.04. The Amended Order was personally served on Mr. Hoffman on August 16, 2016. In response to the Amended Order, Respondent disputed the classification code assigned to Mr. Wilson. Mr. Hoffman testified that Mr. Wilson did not perform construction work, but rather worked as a retail employee selling merchandise in the store front. Mr. Hoffman further testified that contractors purchased items at American for use in their businesses. Mr. Hoffman’s description of Mr. Wilson’s job responsibilities and description of merchandise sold at American clearly demonstrates that Mr. Wilson did not perform construction work. Ms. Jackson correctly determined that the classification code 8018, which applies to retail and wholesale salespersons, was the appropriate code for Mr. Wilson. The classification code change resulted in a manual rate reduction and a reduced assessment applied to Mr. Wilson. On November 18, 2016, the Department filed a Motion for Leave to Amend Order of Penalty Assessment, which the undersigned granted. The Second Amended Order reduced the penalty assessment to $6,818.00. During the hearing, American continued to dispute the calculation of the penalty for Mr. Hoffman because he maintained an exemption as a corporate officer. The Department ultimately agreed to remove Mr. Hoffman from the penalty assessment worksheet and reduced the penalty assessment to $6,764.96. At hearing, there was no dispute regarding the penalty assessment related to Mr. Barnett. However, Respondent argued in the post-hearing statement for the first time that Timothy Barnett had an exemption. There was no evidence to support Respondent’s assertion. Therefore, Ms. Jackson correctly included payment to Mr. Barnett as payroll for purposes of calculating the penalty. Regarding Mr. Wilson, Mr. Hoffman argued that Mr. Wilson had an exemption from workers’ compensation coverage when he began working for American.1/ However, Mr. Hoffman could not produce a copy of the exemption and Mr. Wilson was not present at the hearing for testimony. Ms. Jackson conducted research using the Coverage Compliance Automated System (“CCAS”), a database used by the Department to maintain information regarding workers’ compensation policies, employee leasing plans, and exemptions for employees. Ms. Jackson found no record of an exemption for Mr. Wilson in CCAS. While Ms. Jackson did not exhaust all efforts to locate an exemption for Mr. Wilson, it was American’s burden to produce evidence of an exemption. Mr. Hoffman’s testimony with nothing more was insufficient to demonstrate that Mr. Wilson had an exemption and as such, Ms. Jackson appropriately included payments to Mr. Wilson as payroll to calculate the penalty. The calculation of the penalty for Mr. Wilson in the amount of $2,784.58 is correct. However, the penalty calculation for Mr. Barnett is incorrect. The amount should be $3,872.27. Therefore, the amount of the penalty should be reduced to $6,656.85. Ultimate Findings of Fact American was actively involved in business operations within the construction industry during the audit period of June 30, 2014, through June 29, 2016. Based upon the description of American’s business and the duties performed, Mr. Wilson was properly classified with a code 8018. Ms. Jackson used the correct manual rates and methodology to determine the appropriate penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order determining that: Respondent, American Aluminum Concepts, Inc., violated the requirement in chapter 440, by failing to secure workers’ compensation coverage for its employees; and Imposing a total penalty assessment of $6,656.85. DONE AND ENTERED this 16th day of December, 2016, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN 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 16th day of December, 2016.
The Issue The issue is whether The Department of Financial Services properly imposed a Stop Work Order and Amended Order of Penalty Assessment pursuant to the requirements of Chapter 440, Florida Statutes.
Findings Of Fact The Division is charged with the regulation of workers' compensation insurance in the State of Florida. Petitioner Kenny Nolan, d/b/a/ Great Southern Tree Service, is a sole proprietor located in Jacksonville, Florida, and is engaged in the business of cutting trees, which is not a construction activity. Michael Robinson is an investigator employed by the Division. His duties include making site visits at locations where work is being conducted and determining whether the employers in the state are in compliance with the requirements of the workers' compensation law and related rules. On June 6, 2006, Mr. Robinson visited a job site in a subdivision in Jacksonville, Florida, and observed five individuals at the residential work site. Mr. Robinson interviewed the individuals and, based upon these interviews, determined that four of the individuals worked for Mr. Nolan: Chad Pasanen, David Soloman, Michael Walton, and Eric Kane. None of these workers had a workers' compensation exemption. Mr. Robinson also completed a Field Interview Worksheet on June 6, 2006, when interviewing the four workers. Mr. Robinson wrote on the interview worksheet that Mr. Pasanen worked for Mr. Nolan for three weeks with a daily basis of pay and that Mr. Walton worked for Mr. Nolan for two weeks with a daily basis of pay. The interview worksheet has no entry for the length of time Mr. Solomon worked for Mr. Nolan but does indicate he was paid by the job. The portion of the interview worksheet regarding Mr. Kane is not in evidence. Mr. Robinson checked the database in the Coverage and Compliance Automated System and found no proof of coverage nor an exemption for Mr. Nolan. After conferring with his supervisor, Mr. Robinson issued a Stop-Work Order and Order of Penalty Assessment to Petitioner on June 6, 2006, along with a request for business records for the purpose of calculating a penalty for lack of coverage for the period June 6, 2003 through June 6, 2006. The request for business records instructed Mr. Nolan to produce business records within five days. Mr. Nolan did not produce business records as requested. On June 27, 2006, Mr. Robinson issued an Amended Order of Penalty Assessment to Petitioner for $272,948.96. Attached to the Amended Order of Penalty Assessment is a penalty worksheet with a list of names under the heading, "Employee Name," listing the names of Chad Pasanen, David Solomon, Michael Walton and Eric Kane. The amount of the penalty was imputed using the statewide weekly average wage that was in effect at the time of the issuance of the stop-work order. Through imputation of payroll for the four employees, the Department calculated a penalty for the time period of October 1, 2003 through June 6, 2006. Using rates from an approved manual, Mr. Robinson assigned a class code to the type of work performed by Petitioner and multiplied the approved manual rate with the imputed payroll per one hundred dollars, then multiplied all by 1.5. Penalties are calculated by determining the premium amount the employer would have paid based on his or her Florida payroll and multiplying by a factor of 1.5. The payroll was imputed back to October 1, 2003. For the period prior to October 1, 2003, Mr. Robinson assessed a penalty of $100 per day for each calendar day of noncompliance. The portion of the penalty attributable to the period June 6, 2003 through September 30, 2003, is $11,600.00. Respondent's Business Mr. Nolan started the business, Great Southern Tree Service, in February or March 2005, as a sole proprietor. Mr. Nolan was not in business prior to early 2005 and did not employ anyone in 2003 or 2004. At the inception of his tree trimming business, Mr. Nolan's brother worked for Mr. Nolan for two to three months until his brother's health rendered him unable to continue working for Mr. Nolan. Mr. Nolan subsequently worked with Christopher Wilcox until December 2005, when Mr. Wilcox was in an automobile accident and became unable to work. After Wilcox was injured in December 2005, Mr. Nolan did not have any employees for the remainder of the winter. Only Mr. Nolan's brother and Christopher Wilcox worked with Mr. Nolan in 2005. The nature of the tree trimming business is seasonal. Mr. Nolan obtained work sporadically. Typically, he had jobs two or three times a week. It is busiest in the spring and summer and slowest during the fall and winter months. In March 2006, Mr. Nolan was approached by David Solomon who was looking for work. Mr. Solomon worked for Mr. Nolan "maybe twice a week" and possibly three times a week when he was "lucky." Mr. Nolan worked exclusively for residential customers. He obtained business by knocking on doors and handing out business cards. When he was paid by his customers, he immediately paid the men who were helping him. He was usually paid in cash. In the instances when he was paid by a check, he would take his employees to the bank, where he would cash the check and pay off his workers. Eric Kane also began working for Nolan in March 2006. Like Mr. Soloman, he also worked two to three days a week for Mr. Nolan. Kane was at the jobsite on the day Mr. Robinson made the site visit, but was not working that day. He was sitting off to the side and was "just hanging out" with the other men. According to Mr. Kane, Mr. Robinson did not ask him any questions. In May 2006, a storm or small tornado hit an area of Jacksonville called Ortega. The resulting tree damage temporarily enabled Mr. Nolan to get more work. At that point, Mr. Nolan hired Chad Pasanen. Mr. Nolan estimates that Mr. Pasanen worked for him for about three weeks before the site visit by Mr. Robinson. Mr. Pasanen previously worked for Asplundh Tree Expert Company. One of his paycheck stubs establishes that he worked for Asplundh as late as April 8, 2006. Mr. Nolan also hired Michael Walton in May 2006. Mr. Walton previously worked for Seaborn Construction Company. A paycheck stub establishes that he worked for Seaborn as late as April 26, 2006. Mr. Walton sporadically worked for Mr. Nolan for about two weeks prior to the site visit. The Division did not count Mr. Nolan as an employee for purposes of calculating the penalty assessment.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it RECOMMENDED: That the Division of Workers' Compensation enter a Final Order rescinding the Amended Order of Penalty Assessment issued June 27, 2006, and the Stop Work Order issued to Petitioner on June 6, 2006. DONE AND ENTERED this 28th day of November, 2006, in Tallahassee, Leon County, Florida. S BARBARA J. STAROS 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 November, 2006.
