The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of August, 2005.
Findings Of Fact Respondent James Seay, who had worked as a teacher in Suwannee County for many years, was out sick first with a stomach virus and then with recurring head pain for the entire school week of March 4-8, 1991. He visited physicians on March 5, 7 and 8, and took three prescribed medicines. Mr. Seay telephoned the morning of March 4, 1992, and told Sonja Suber, a secretary who was "the designated person at the school," (T.48) responsible for obtaining substitute teachers and maintaining sick leave records, that he was ill and would not be in that day. The parties agree that respondent was on sick leave through March 8, 1991. On the evening of March 4, 1991, he telephoned Nancy Roberts, director of elementary education for the Suwanee County School District and principal of Douglass Center. When Mr.Seay told her he would not be in the following day, she cancelled an observation she had scheduled for his benefit. The next day or the day after Sonya Suber telephoned respondent to relay Ms. Roberts' advice that a meeting scheduled for March 11, 1991, had been cancelled. On Saturday, March 9, 1991, Mr. Seay telephoned Ms. Suber and said "that he would be coming Monday to the school but he would not report to the classroom." T. 29. He had earlier expressed to Ms. Roberts discomfort "with the students that were assigned" (T. 46) to him. On Monday, March 11, 1991, at 7:53 o'clock in the morning, he appeared as promised and signed in at Suwanee County School District's Douglass Center. After greeting Sonya Suber, he went to the teachers' lounge. He did not give any indication that he was unwell or make any request for leave. Ms. Roberts saw Mr. Seay reading a newspaper in the lounge. She asked him to accompany her to her office, where she "let him know that he was a teacher assigned to the Alternative Program at the Douglass Center and what his responsibilities were . . . working with the students there." T.50. Respondent handed Ms. Roberts one of his attorney's cards, and told her "that there was nothing [she] could do to make him go in that classroom and that he was not going to that classroom," (T.50) and asked her "to stop harassing him." Id. After Mr. Seay's return to the teachers' lounge, Ms. Roberts gave an account of events to Mr. Charles F. Blalock, Jr., petitioner here. Petitioner's Exhibit No. 2. The following morning Mr. Seay signed in at the Douglass Center at ten before eight, Petitioner's Exhibit No. 1, but he again went to the teachers' lounge rather than to his assigned classroom. Again he told nobody he was ill, and asked nobody for sick leave. Ms. Roberts twice asked him to go to his classroom. When she told him his failure to teach the class he had been assigned "could be construed as insubordination on his part," (T.53) he asked her to clarify what she meant by insubordination and, with her permission, made a tape recording of her answer. Petitioner's Exhibit No. 3. He refused to go to his classroom. On Wednesday, March 13, 1991, Mr. Blalock wrote a letter to Mr. Seay advising him that he was suspended with pay, and that, as superintendent, he would recommend suspension without pay and ultimately dismissal at the next regular meeting of the School Board. Petitioner's Exhibit No. 4. When Ms. Roberts telephoned Thursday morning with word that Mr. Seay was at Douglass Center, Mr. Blalock went himself to speak to Mr. Seay. Twice he personally directed Mr. Seay to go to his classroom and get to work. Confronted with Mr. Seay's silent refusal, Mr. Blalock handed him the letter of suspension, dated the day before. When the School Board met, heard what had transpired, and listened to a presentation by Mr. Seay's lawyer, it decided that Mr. Seay should have a physical examination and be examined by a psychiatrist. At the school board meeting, nobody suggested that respondent was on sick leave at any time after March 8, 1991. In keeping with the collectively bargained agreement between the School Board and teachers like Mr. Seay under continuing contract with the School Board, Petitioner's Exhibit No. 6, petitioner demanded that respondent go for medical and psychiatric examinations, by letter dated April 10, 1991. Petitioner's Exhibit No. 7. A second, follow-up letter reiterating the demand, dated April 29, 1991, Petitioner's Exhibit No. 9, reached Mr. Seay by registered mail. As of the time of the hearing, Mr. Seay had not complied with the Board's demand that he submit to a physical examination and be examined by a psychiatrist.
Recommendation It is, therefore, RECOMMENDED: That petitioner terminate respondent's employment. DONE and ENTERED this 3rd day of December, 1992, at Tallahassee, Florida. ROBERT T. BENTON, II, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of December, 1992. APPENDIX FOR NO. 91-6046 Petitioner's proposed findings of fact Nos. 1-11 and 13-20 have been adopted, in substance, insofar as material. Petitioner's proposed finding of fact No. 12 pertains to immaterial matters. With respect to petitioner's proposed finding of fact No. 21, respondent apparently also took the position that he had been on sick leave in the unemployment compensation case. Petitioner's proposed findings of fact Nos. 22 and 23 pertain to subordinate matters. Respondent's proposed findings of fact Nos. 1-3, 5-8 and 19 have been adopted in substance, insofar as material. Respondent's proposed findings of fact Nos. 4, 9-12, 21 and 24 pertain to subordinate matters. Respondent's proposed findings of fact Nos. 13 and 15 are immaterial since respondent never requested sick leave. Respondent's proposed findings of fact Nos. 14, 16, 17 and 18 have been rejected as unsupported by the weight of the evidence. With respect to respondent's proposed finding of fact No. 20, Ms. Roberts' testimony in that regard is unrebutted. With respect to respondent's proposed finding of fact No. 22, there is no disagreement. Respondent's proposed finding of fact No. 23 pertains to an immaterial matter. COPIES FURNISHED: Honorable Betty Castor Commissioner of Education The Capitol Tallahassee, FL 32399-0400 Charles Blalock, Superintendent Suwanee County School Board 224 W. Parshley Street Live Oak, FL 32060 J. Victor Africano, Esquire Post Office Box 1450 Live Oak, FL 32060 Linsey Moore, Esquire 50 East 2nd Street Jacksonville, FL 32206
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 Petitioner failed to obtain workers’ compensation insurance meeting the requirements of Chapter 440, Florida Statutes, and, if so, the penalty that should be imposed.
Findings Of Fact Olender is a Delaware corporation that is registered to do business in Florida and engaged in the business of construction. Primarily, Olender frames the walls of structures and installs siding, windows and moisture barriers to such structures. Such activities are construction activities under the Florida’s workers’ compensation law. See Ch. 440, Fla. Stat., and Fla. Admin. Code R. 69L-6. On June 22, 2006, an investigator for the Department visited the Alta Westgate Apartment complex construction project, located at 6872 Alta Westgate Drive, Orlando, Florida. The visit was prompted by a “confidential tip” received by the Department from Tyler Balsinger, a former employee of Petitioner. The Alta Westgate complex is owned by Alta Westgate, LLC. The general contractor responsible for the construction of the complex was W.P. South Builders. The overall project manager for the general contractor was Robert Beliveau. The on-site representative for the general contractor was Danny Campbell. Mr. Campbell provided the Department’s investigator with a list of subcontractors on the project worksite. The list reflected that the subcontractor for framing was Olender and that John Olender was the person in charge of the company’s work at the project site. Among other things, the contract also included the installation of a moisture barrier, generally known as Tyvek, on the framed structures. Because of the nature of construction work, it is not unusual to have several subcontractors on a construction worksite at the same time. It is unlikely that Olender was the only subcontractor working on the day the Department’s investigator visited the Alta Westgate project. The subcontract required that Olender secure the payment of workers’ compensation on its employees. The evidence was not clear regarding whether the general contractor, under its subcontract with Olender, would provide workers’ compensation insurance on the employees of Olender’s subcontractors. However, the evidence was clear that J.P. Builders did not secure such workers’ compensation insurance on the employees of Olender’s subcontractors. Mr. Campbell also provided the certificate of insurance for Petitioner. The certificate reflected that Modern Business Associates, Inc. (MBA), an employee leasing company, provided workers’ compensation for Olender’s leased employees. See § 468.520, Fla. Stat. MBA entered into a client service agreement with Olender. Under the agreement, Olender would lease employees from MBA and MBA would provide payroll services and workers’ compensation coverage for the employees it leased to Petitioner. The agreement terminated on August 30, 2006. MBA’s Client Service Agreement with Petitioner states on p. 3: Insurance Coverage. MBA is responsible for providing Workers’ Compensation coverage to workers employed by MBA and assigned to Client, in compliance with applicable law, and as specified in the Proposal. Workers performing services for Client not covered by this Agreement and not on MBA’s payroll shall not be covered by the workers’ compensation insurance. Client understands, agrees, and acknowledges that MBA shall not cover any workers with workers’ compensation coverage who has not completed and submitted to MBA an employment application and tri- fold, and which applicant has not been reviewed and approved for hire by MBA. (emphasis supplied) Other than information necessary to supply its services, MBA was not aware of any specific project or projects on which Olender was working when it leased employees from MBA. John Olender and Ruben Rojo were two employees that Olender leased from MBA and for whom MBA provided workers’ compensation insurance. The workers’ compensation policy complied with Florida’s workers’ compensation requirements. After speaking with Mr. Campbell, the Department’s investigator, who is fluent in Spanish, walked around the complex’s worksite. She did not have a hardhat on. She eventually saw about 10 to 12 workers on the third floor of one of the buildings under construction (Building 8 or 9). The Department’s investigator could not say if they were framing. At some point, John Olender, the company’s project superintendent, saw the Department’s investigator, noticed she did not have any safety equipment on, and went to meet her. The investigator yelled to the workers on the third floor and showed her Department badge or identification. She was speaking Spanish to them. The workers ran in an effort to avoid the Department’s investigator. Mr. Olender, who does not speak or understand Spanish, sent for Ruben Rojo. Mr. Rojo is the assistant superintendent for Olender and works under John Olender. He is fluent in Spanish. He does not hire employees for Olender, but oversees the work being performed under Olender’s subcontracts. The Department’s investigator continued to attempt to explain to the workers that she was not interested in their immigration status, but was there to make sure they were covered by workers’ compensation insurance. At least some of the workers came down to talk to her. Mr. Rojo thought the investigator was asking about the workers’ immigration status and told them that they did not have to talk to her. However, apparently some workers very reluctantly gave her limited information. The workers who talked to her were Pedro Antonio Mendez, Jaco Sarmentio, Juan Cardenas, Alvaro Don Juan Diaz, Jose Varela Orellana, Nesto Suarez Ventura, Miguel Martinez Diaz, Jose Perez Renaldo and Antonio Hernandez. She did not obtain any addresses, phone numbers or other identifying information from the employees. The evidence did not show whether these individuals gave the Department’s investigator the correct information. Importantly, they did not tell her who their employer was or what duties they were performing. None of these individuals testified at the hearing. John Olender did not recognize these workers. Mr. Rojo told the investigator that Olender subcontracted the framing portion of its contract to “T-Bo”. T-Bo was also known as Primitivo Torres. In his deposition testimony, Mr. Torres did not recognize these workers’ names. He also thought that most of the workers he employed for his framing subcontract with Olender were illegal immigrants. Mr. Torres was unclear in his testimony regarding his status with Olender. He did indicate that he worked in both Orlando and Tampa. Apparently, at times, he was an employee and at other times he was a subcontractor. He was listed as a leased employee under MBA’s contract with Olender. The evidence suggests, but does not prove, that Mr. Torres was a person who supplied immigrant workers to construction sites. In Orlando, Mr. Torres lived in an apartment complex in the Rosemond area with his employees. The rent was sometimes paid by Olender and then deducted from the remuneration paid to Mr. Torres. Mr. Torres paid his employees from the money he received under his subcontract with Olender. Mr. Torres also testified that when the Department’s investigator contacted him in June 2006, to discuss workers’ compensation insurance, he told her that he neither secured the payment of workers’ compensation for himself nor for the other workers in both Tampa and Orlando. Donna Knoblauch, who oversaw Olender’s main office, received a faxed copy of a certificate of workers’ compensation insurance from Mr. Torres. However, the faxed certificate was an illegible copy of what appeared to be a certificate of liability insurance issued by a company in Texas. The certificate does not have a legible “sent date,” a legible workers’ compensation policy number, legible dates of coverage, a legible producer name, or any information indicating that coverage includes the State of Florida. The document is insufficient to demonstrate that Mr. Torres provided workers’ compensation coverage for his employees that worked under his subcontract with Olender. John Olender testified that Mr. Torres utilized, at most, 20 framers for the construction at Alta Westgate. Mr. Torres corroborates that number and indicates that various people worked in crews of around five. On the other hand, Danny Campbell testified that Olender had approximately 20 workers when the project started, increased to approximately 75 people performing framing duties on the worksite and decreased to about 20 workers by the time the Department’s investigator visited the worksite. Mr. Campbell testified that on January 22, 2006, he believed that Olender had approximately five individuals for the punch-out group, three–to-five cleaners, a forklift operator, approximately two individuals installing the Tyvek moisture- barrier paper, two individuals performing window installation and approximately 15–to-20 individuals installing siding at the worksite. No other testimony supports the number of workers Mr. Campbell believed to be at the jobsite on June 22. On balance, the best evidence of the approximate number of workers was that of Mr. Olender and Mr. Torres. However, these figures were only estimates of the actual number which may have been less than 20 workers. In any event, the employment of these 12 workers on the third floor was not demonstrated by the evidence. Their names did not appear on the list of employees leased by Olender from MBA and were otherwise, unknown to the Mr. Olender, Rojo and Torres. While at the jobsite, the Department’s investigator also spoke with Victor Ibarra. Mr. Ibarra drove a forklift and indicated that he worked for Olender. Again, no address or other identifying information was supplied to the investigator. Later, the investigator spoke with a woman who purported to be Mr. Ibarra’s wife. There was no information on the forklift indicating that it belonged to Olender and Olender denies employing a person named Victor Ibarra. Mr. Campbell testified in his deposition that Olender had forklifts on the jobsite. However, he did not testify that the forklift Victor Ibarra drove on June 22, 2006, was owned by Olender. Likewise, Mr. Campbell did not testify that Mr. Ibarra was an employee of Olender. Mr. Ibarra’s name did not appear on the list of leased employees provided by MBA. The Department's investigator included Mr. Ibarra as an employee of Olender based on Mr. Ibarra’s statements. However, the evidence presented by the Department is not sufficient to establish that Mr. Ibarra was an employee of Olender, since Mr. Ibarra did not testify at the hearing. Mr. Campbell’s testimony does not corroborate the hearsay statements of Mr. Ibarra since the testimony does not indicate the forklift Mr. Ibarra drove belonged to Olender or to another subcontractor on the project. After talking to Mr. Ibarra, the Department’s investigator met Rosa Barden, Martha Alvarado and Ismael Ortiz, who were applying a moisture barrier paper known as “Tyvek” to a building at the construction site. The three individuals told the investigator that that they had been hired by Mr. Rojo on behalf of Olender and had only worked for about a day. The investigator included these three individuals as employees of Olender. No addresses or other contact information was obtained by the investigator. None of these individuals testified at the hearing. Mr. Rojo testified that he did not know the three individuals on the “paper crew” and did not hire them. None of the three individuals were listed as leased employees with MBA. However, Olender’s subcontract clearly lists the application of Tyvek as a part of its contract. Additionally, the payment information supplied by the general contractor shows that Olender was paid for Tyvek application on all the buildings in the complex. Unlike Mr. Ibarro’s testimony, the contract and payment evidence independently corroborates the otherwise hearsay statements of these three individuals and Olender should have provided workers compensation insurance on them. There was no evidence that Olender provided such workers’ compensation insurance; such failure violates Chapter 440, Florida Statutes. See §§ 440.10(1)(g) and 440.38(7), Fla. Stat., and Fla. Admin. Code R. 69L-6.019. In total, the Department’s inspector met with John Olender for approximately one hour discussing the work performed by Olender and the employees retained by Olender. During this meeting, Mr. Olender, identified members of a “punch-out” crew who had worked on the project. The punch-out crew repaired any defects in framing prior to inspection. The names supplied by Mr. Olender were Juan Gonzalez, Miguel, Sal, William, WI Gerardo (noted as El Guardo in the third Amended Order of Penalty assessment), Pedro, Jacobo and Boso. Mr. Olender did not know their last names. The evidence did not show the period of time that the punch-out crew would have been working at the project site. Presumably, they would have begun some time after the initial building was framed. The Department’s investigator did not personally see the punch-out crew at the project. Mr. Olender also informed the Department’s investigator that he did not handle matters concerning workers’ compensation insurance and that she would have to contact the Company’s main office in Missouri. He provided the number for the office. He also gave the investigator the number for Michael Olender, the president of the company and the number for Mr. Torres. The investigator issued a Workers’ Compensation Request for Production of Business Records to Olender. She left the Request with John Olender. The request for records asked for certain categories of Olender’s business records for the period of January 22, 2004 to June 22, 2004. Of importance here, the Department requested records in categories 1, 4, 5 and 6. In general, category 1 covers all payroll records, including checks and check stubs, time sheets, attendance records and cash payment records. Categories 4, 5 and 6 cover all records that relate to subcontractors, including their identity, contract, payment thereof, workers compensation coverage for all the subcontractor’s employees, and/ or the employees’ exemption status. These records are required to be maintained by a company doing business in Florida. Mr. Campbell testified that some members of the punch- out crew often approached him about whether he had paid Olender so that they in turn could be paid. Again, none of these individuals testified at the hearing. However, given the admissions of Olender’s employee and Mr. Campbell’s testimony, the evidence supports the conclusion that the eight individuals on the punch-out crew were employed by Olender. None of these employees were leased employees and therefore, were not covered by the workers’ compensation policy provided by MBA. There was no evidence that Olender secured any workers' compensation insurance on these eight employees. Such failure violates Chapter 440, Florida Statutes. See §§ 440.10(1)(g) and 440.38(7), Fla. Stat., and Fla. Admin. Code R. 69L-6.019. The Department’s investigator contacted Ms. Knoblauch while she was on her way to a medical appointment. The investigator requested Olender’s proof of workers’ compensation insurance. Ms. Knoblauch told the investigator that she was not at the office where the records were kept, but on the way to a medical appointment. She said she would be returning to the office after the appointment. The investigator said she needed the records immediately. Ms. Knoblauch offered to skip her appointment and requested time to turn around and return to the office. The investigator refused to permit her the time to return to the office. At some point, MBA supplied the Department’s investigator with a list of Olender’s leased employees. The list did not contain any of the names she had gathered during her visit to the worksite. Within a few hours from the beginning of the investigation, the Department's investigator issued a Stop Work Order and an Order of Penalty Assessment on June 22, 2006. The Order was served via certified mail on Michael Olender and Olender’s legal counsel. The Stop Work Order required that Olender "cease all business operations in this state" and advised that a penalty of $1,000.00 per day would be imposed if Olender were to conduct any business in violation of the Stop Work Order. Additionally, along with the Order, the Department issued and served on Petitioner via certified mail a Division of Workers’ Compensation Request for Production of Business Records for Penalty Calculation, requesting records for a period of three years. The request, made pursuant to Section 440.107(7), Florida Statutes, asked the employer to produce, for the preceding three years, documents that reflected payroll, proof of insurance, workers’ compensation audit reports, identity, duration, contracts, invoices and check stubs reflecting payment to subcontractors, proof of workers’ compensation coverage for those subcontractors, employee leasing company information, temporary labor service information, and any certificate of workers’ compensation exemption. The request asked for the same type of records that had been requested earlier. Neither request for records was specific to a particular construction job that Olender may have performed work on. The investigator informed Mr. Campbell that Petitioner was being issued a Stop-Work Order and gave him a copy of the Order. Mr. Campbell faxed the Order to Olender’s office in Missouri. The Department’s investigator also checked the Department’s Coverage and Compliance Automated System (“CCAS”) database. The system tracks workers' compensation insurance policy information provided by workers’ compensation carriers on an insured employer. The database did not contain an entry that reflected a current State of Florida workers' compensation insurance policy for Olender. The database did reference that Olender had a stop-work order served on it on July 12, 2002, which had been lifted on July 31, 2002, with payment of the penalty. Florida law requires that employers maintain a variety of business records involving their business. See § 440.107(5), Fla. Stat., and Fla. Admin. Code R. 69L-6.015. The Rule is limited to records regarding a business’ employees and any payout by the employer to any person. In this case, under the Rule, the only records Olender was required to maintain related to its employees and its subcontractor, Mr. Torres. There was no evidence regarding any other subcontractors Olender may have contracted with. The only records supplied by Olender to the Department were the records from MBA that included workers’ compensation information and W-2 forms for Olender’s leased employees, the illegible proof of insurance for Mr. Torres and copies of checks from Olender to Mr. Torres for the subcontract. Those records reflected that John Olender, Ruben Rojo and Primitivo Torres were leased employees and covered by workers’ compensation insurance under Olender’s contract with MBA. Olender supplied no records regarding workers’ compensation coverage for the eight employees who were members of the punch- out crew, the three workers who were members of the paper crew or the 12 workers who were on the third floor. When an employer fails to provide requested business records that the statute requires it to maintain, the Department is required to impute the employer's payroll using "the statewide average weekly wage as defined in Section 440.12(2)." § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028. The penalty for failure to secure the workers' compensation insurance coverage required by Florida law is 1.5 times the premium that would have been charged for such coverage for each employee identified by the Department. The premium is calculated by applying the approved manual rate for workers' compensation insurance coverage for each employee to each $100.00 of the gross payroll for each employee. In this case, the Department, after several amended assessments, imputed the payroll for Olender for the period beginning January 22, 2004, Petitioner’s date of incorporation, and ending June 26, 2006. Included in the calculation were the eight individuals on the punch-out crew identified by John Olender, the 12 employees who were working on the third floor, the forklift driver Victor Ibarra, and the three individuals on the paper crew. In calculating the premium for workers' compensation insurance coverage, the Department's investigator used the risk classifications and definitions of the National Council of Compensation Insurance, Inc. ("NCCI") SCOPES Manual. The appropriate code for Olender’s employees was classification code 5561 which covers framing of multiple family dwellings. The gross payroll imputed to each of the 27 employees was $683.00 per week. The Department then utilized the imputed payroll for same employees for the years 2004 and 2005. The Department’s calculation resulted in an assessed penalty of $1,205,535.40. However, the evidence establishes that Olender had 11 direct employees rather than 27 employees during the period of the Alta Westgate contract. Olender’s performance under that contract began on April 3, 2006. Other than the period of time involved with the Alta Westgate project, there was no evidence regarding the period of time Olender conducted business in Florida that would require it to comply with Florida law. The date of incorporation of Olender is insufficient to demonstrate that Olender engaged in any business in Florida that would require it to comply with Florida’s workers’ compensation law. Therefore, the penalty calculation must be modified to reflect only those eleven employees for the time period Olender performed under its contract on the Alta Westgate project.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order: Finding that Olender Construction Co., Inc., failed to have Florida workers' compensation insurance coverage for 11 of its employees, in violation of Sections 440.10(1)(a) and 440.38(1), Florida Statutes; and Recalculating the penalty against Olender. DONE AND ENTERED this 14th day of March, 2008, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 2008. COPIES FURNISHED: Colin M. Roopnarine, Esquire Department of Financial Services, Division of Workers Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 Jeremy T. Springhart, Esquire Broad and Cassel 390 North Orange Avenue, Suite 1500 Orlando, Florida 32801 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues are whether Respondent failed to secure the payment of workers' compensation insurance, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the agency charged with enforcing the provisions of Chapter 440, Florida Statutes. Respondent is a Florida limited-liability company, organized in 2004. Salvador Rivera is one of the company's managers/officers. On or about February 27, 2009, Respondent secured workers' compensation insurance for its employees. The carrier was Guarantee Insurance Co. In a Notice of Termination of Workers' Compensation Insurance dated August 10, 2009, Guarantee Insurance Co. advised Petitioner and Respondent that Respondent's workers' compensation insurance would be cancelled on August 25, 2009. Guarantee Insurance Co. issued the notice because Respondent had not paid its insurance premium. Some time after receiving the notice from its insurer, Respondent received a check from Brantley Custom Homes. Mr. Rivera deposited the check into Respondent's bank account. Mr. Rivera then wrote a check to Guarantee Insurance Co. for the workers' compensation insurance premium. Mark Piazza is one of Petitioner's compliance investigators. On September 25, 2009, Mr. Piazza conducted a routine compliance check in the Southwood subdivision of Tallahassee, Florida. During the compliance check, Mr. Piazza noticed a new home under construction. He saw two men, Gilberto Torres and Saturino Gonzalez, doing carpentry work at the building site. Under the Scopes Manual, carpentry is identified as construction work under the class code 5645. During an interview with the two men, Mr. Piazza learned that they were employed by Respondent. Mr. Rivera confirmed by telephone that Respondent employed the two men. Mr. Rivera believed that Respondent had workers' compensation coverage on September 25, 2009. Mr. Rivera was not aware that the check from Brantley Custom Homes had bounced, resulting in insufficient funds for Respondent's bank to pay Respondent's check to Guarantee Insurance Co. Mr. Piazza then contacted Respondent's local insurance agent and checked Petitioner's Coverage and Compliance Automated System (CCAS) database to verify Mr. Rivera's claim that Respondent had workers' compensation insurance. Mr. Piazza subsequently correctly concluded that Respondent's insurance policy had been cancelled on August 25, 2009, due to the failure to pay the premium. On September 25, 2009, Mr. Piazza served Respondent with a Stop-work Order and Order of Penalty Assessment. The penalty assessment was 1.5 times the amount of the insurance premium that Respondent should have paid from August 25, 2009, to September 24, 2009. After receiving the Stop-work Order on September 25, 2009, Brantley Custom Homes gave Respondent another check. Mr. Rivera then sent Guarantee Insurance Co. a second check to cover the premium with the understanding that there would be no lapse in coverage. On September 28, 2009, Guarantee Insurance Co. provided Respondent with a notice of Reinstatement or Withdrawal of Policy Termination. The notice states as follows: Our Notice of Termination, filed with the insured and the Department of Labor and Employment Security effective 8/25/2009 and or dated 8/10/2009, is hereby voided and coverage remains in effect for the employer identified below. There is no evidence to show whether Respondent had to sign a no-loss affidavit and submit it to Guarantee Insurance Co. before the insurer would reinstate the policy with no lapse. Such an affidavit usually states that the insured had no claims during the uninsured period, On September 29, 2009, Mr. Piazza served a second copy of the Stop-work Order and Order of Penalty Assessment on Respondent. At that time, Mr. Piazza also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Respondent subsequently provided Petitioner with the records. On October 6, 2009, Mr. Piazza served Respondent with an Amended Order of Penalty Assessment. The assessed penalty was $3,566.27. The assessed penalty was based on Respondent's business records showing the following: (a) Respondent's total payroll from August 25, 2009, through September 24, 2009, was $15,280.00; (b) the total workers' compensation premium that Respondent should have paid for its employees during the relevant time period was $2,377.56; and (c) multiplying $2,377.56 by the statutory factor of 1.5 results in a penalty assessment in the amount of $3,566.37. On October 6, 2009, Petitioner and Respondent entered into a Payment Agreement Schedule for Periodic Payment of Penalty. Respondent gave Petitioner $1,000 as a down payment on the assessed penalty. The balance of the penalty is to be paid in 60 monthly payments in the amount of $42.77 per month, with the exception of the last payment in the amount of $42.64 on November 1, 2014. On October 6, 2009, Petitioner issued an Order of Conditional Release from Stop-work Order. The conditional release states that it will be in place until Respondent pays the assessed penalty in full.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, issue a final order affirming the Stop- work Order and Amended Order of Penalty Assessment in the amount of $3,566.37. DONE AND ENTERED this 19th day of March, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 2010. COPIES FURNISHED: Salvador Rivera Rivera Construction of North Florida, LLC 931 Rosemary Terrace Tallahassee, Florida 32303 Paige Billings Shoemaker, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399
The Issue The issues in this case are whether SDPhotonics, LLC (Respondent), failed to provide workers' compensation coverage; and, if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107, Florida Statutes. Section 440.107 mandates, in relevant part, that employers in Florida must secure workers’ compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, Respondent was a limited liability company, organized under the laws of the State of Florida, with its principal office currently located at 4304 Scorpius Street, UCF High Technology Incubator, Orlando, Florida. Dennis Deppe is the founder and CEO of SDPhotonics, LLC, which is a research and development company. Respondent is a non-construction type entity. Mr. Marquez is an insurance analysist II/investigator for the Department in the central part of the state. He has 12 years of experience in this position. His duties include making sure that businesses comply with the workers’ compensation laws of Florida. In order to perform his duties, Mr. Marquez has several methods to check for particular workers’ compensation coverage. Initially, Mr. Marquez may check the Division of Corporations website, “Sunbiz.org,” to obtain the name of the corporation; its federal identification number; the mailing and principle address(es), the registered agent; and corporate officer information. With this information, Mr. Marquez may check Petitioner’s internal database called: coverage and compliance automated system (CCAS). Using a corporate name, Mr. Marquez could check CCAS to see whether a corporation has workers’ compensation coverage. Insurance companies are also required to submit workers’ compensation coverage information, and Mr. Marquez could check that registry. Corporate officers may request an exemption from workers’ compensation coverage; however, the officer must apply for the exemption. Mr. Marquez could check that registry as well. In mid-December 2015, Mr. Marquez was assigned to check on Respondent’s workers’ compensation coverage. Mr. Marquez checked Petitioner’s CCAS system and determined that Respondent did not have a workers’ compensation policy or any active exemptions for its officers. On December 16, 2015, Mr. Marquez went to Respondent’s physical location and discovered that no one was present. He left a business card with a written request for someone to contact him. On December 17, 2015, Dr. Deppe contacted Mr. Marquez via telephone. Mr. Marquez identified himself and explained the reason for the call to Dr. Deppe. As was his custom, Mr. Marquez requested the name of Respondent’s workers’ compensation insurance carrier, the policy number and the effective date of the coverage. Dr. Deppe thought there was coverage through Paychex,3/ but he was unable to provide the requested information. Dr. Deppe stated he would look into it and return the call. On December 18, 2016, Mr. Marquez spoke with Dr. Deppe again. During that conversation, Dr. Deppe confirmed that Respondent did not have workers’ compensation coverage, but that he was working to have it by the end of the day. Later that same morning, Mr. Marquez met with Dr. Deppe and again requested the name of Respondent’s workers’ compensation insurance carrier, the policy number and the effective date of the coverage. Dr. Deppe was unable to provide the requested information, although he did provide the name of his insurance agent. Additionally, Dr. Deppe provided the names of Respondent’s five employees: James Beadsworth, Jason Leshin, Nick Cox, Jeremy Leshin, and Dennis Deppe. Mr. Marquez then stepped outside to his vehicle, and via his computer consulted the CCAS database to determine whether Respondent had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees. At that time, Mr. Marquez determined that Respondent did not have any current workers’ compensation coverage for its employees and Respondent did not have an exemption from such coverage from the Department. Mr. Marquez telephoned his supervisor, Robert Cerrone, who authorized the service of a Stop-Work Order along with a Request for Production of Business Records (Request) on Dr. Deppe on December 18, 2015. Both were served on Respondent at approximately 11:30 a.m. on December 18, 2015. The following Monday, Dr. Deppe presented to Petitioner’s Orlando field office, paid $1,000.00 towards the penalty and provided proof of coverage with the Hartford Casualty Insurance Company. Ms. Proano confirmed that the appropriate classification code for Respondent’s CEO was 8810 (for a clerical position) and for Respondent’s employees was 4511 (for “analytical laboratories, including laboratory, outside employees, collectors of samples”). 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 the National Council on Compensation Insurance, Inc., the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. The corresponding approved manual rates for the classification codes 8810 and 4511 were applied using the methodology specified in section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027 to determine the appropriate penalty. Petitioner is statutorily authorized to use an audit period of two years from the issuance of the Stop-Work Order. Respondent employed less than four employees during 2013 and 2014, and did not have to have worker’s compensation cover. Petitioner only computed the penalty for 2015 because Respondent had five employees during that time. Petitioner has demonstrated by clear and convincing evidence that Respondent failed to secure workers’ compensation for its employees as required by chapter 440, Florida Statutes. Petitioner determined the appropriate penalty using section 440.107(7)(d)1. The amount of Respondent’s penalty, $6,092.10, is subject to a reduction of $3,843.23, which is the amount it paid to obtain the appropriate insurance. The amended penalty amount is $2,248.87.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the Amended Order of Penalty Assessment, and assess a penalty in the amount of $2,248.87.5/ DONE AND ENTERED this 22nd day of July, 2016, 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 22nd day of July, 2016.
The Issue Whether or not Respondent violated provisions of Chapter 626, Florida Statutes, as more specifically alleged in the Administrative Complaint dated August 9, 1991.
Findings Of Fact Petitioner, the Department of Insurance and Treasurer, is the regulatory agency which is authorized to, and regulates the insurance industry in the State of Florida. Respondent, Shirley Ann Cramer, during times material, was licensed by Petitioner as a Series 218 and 220 licensee (life and health and property and casualty insurance), respectively. On September 28, 1990, Petitioner entered a final order imposing a disciplinary suspension for a period of one year effective September 28, 1990 (Case No. 89-L-413RCB) of all licenses issued to Respondent. On October 13, 1990, Respondent's counsel, John Waller, advised Respondent that Petitioner had suspended her license and that he would appeal the matter if she desired, however he advised that to do so would require a substantial cash outlay. Waller suggested that they consider that option, and, to that end, Respondent scheduled an appointment to discuss whether or not an appeal would be feasible. Waller advised Respondent that she had until October 28, 1990, to file her appeal. Respondent received a copy of the final order on or about October 25, 1990. Respondent ordered a copy of that order from Petitioner, by Federal Express delivery. On the following day, October 26, 1990, Respondent filed a pro se notice of appeal and submitted the necessary filing fee of $250. Subsequent thereto, Respondent contacted another attorney who had been formerly employed by the Department of Professional Regulation, Drucilla Bell, and the possibilities of an appeal was discussed with Ms. Bell. During late December, a fee arrangement was agreed upon, and Respondent paid Bell a down payment of $2500 to initially file a brief and a motion to stay the suspension pending the outcome of the appeal. Motions to stay the suspension were filed, both with Petitioner and with the Second District Court of Appeal. On February 6, 1990, Petitioner entered an order denying a stay of the final order, and on February 8, 1990, Respondent's counsel, Bell, filed a Petition For Supersedeas response to the Petition In Opposition To Stay Pending Appeal in the Second District Court of Appeal wherein she requested a grant of her motion. On February 14, 1991, the Second District Court of Appeal denied Respondent's Petition For Supersedeas. On October 10, 1990, Respondent, based on a referral by an associate, Gary Bingham, contacted Kenneth Newsome, the owner of Apollo International Incorporated, d/b/a Alpha Metal Products, located in Clearwater, Florida (herein Apollo) for the purpose of obtaining workers' compensation insurance. To that end, on October 17, 1990, Respondent received a premium payment check from Apollo in the amount of $5547.22 for workers' compensation insurance. Respondent initiated efforts to place coverage for Apollo by working up a rate quote based on the Form 940's which were submitted by Apollo's bookkeeper. Apollo's check was returned for insufficient funds after being deposited in the account of Respondent's insurance agency, A.S.A.P. On or about November 28, 1990, Apollo provided Respondent another check in the amount of $3000 as a premium payment for Apollo's workers' compensation insurance. That check was also deposited in A.S.A.P.'s account which was a premium trust account for customer funds. On two occasions during December 1990, to wit, December 6 and December 27, the balance on that account went below $3000. After receiving the $3000 check as payment toward Apollo's insurance, Respondent advised Apollo's owner, Newsome, that an additional premium was due based on an audit of the most recent Form 940's by the issuing carrier, the Florida assigned risk plan, and Newsome complained about the payment of any additional premium monies. During this period of time, Respondent received two telephone calls from entities who needed verification that Apollo had in fact obtained workers' compensation insurance. Respondent took those calls and advised the inquirers that a procedure was in place to obtain that coverage for Apollo. On October 7, 1990, when Agent Bingham advised Respondent that Apollo needed assistance in obtaining workers' compensation insurance she was being visited by Horace Smith, an insurance producer who was making a routine call and trying to market new business. Mr. Smith is a marketing manager for Guardian Property and Casualty, TransFlorida Casualty Insurance Company. Mr. Smith is the holder of an 055 series administrative license. Smith has been licensed in Florida since 1946. Smith has known Respondent approximately 18 years. Smith visited with Respondent at the Apollo site to determine whether or not that risk would be a coverage that his company was interested in writing. Smith inspected Apollo's premises and indicated a possibility of writing the commercial auto and commercial fire and general liability for Apollo when the existing coverage expired. Throughout the course of events, Respondent was under the impression both from her counsels Waller and Bell, that she could continue writing business during the pendency of her appeal. Respondent did not engage in any further acts of transacting insurance business other than the Apollo workers' compensation account. Respondent's failure to place insurance for Apollo was based on Apollo's failure to pay the premiums due. Respondent returned the unused premium to Apollo, although there was a slight delay in doing so. In this regard, Respondent had made repeated requests to Apollo to submit the additional premium monies, and within a month after the last demand was made and when the premiums were not remitted, Apollo received a return premium payment from Respondent within 30 days. Respondent attempted to complete the application for the Apollo worker's compensation insurance coverage. To this end, she visited the site and used all the documentation necessary to prepare a quote which was based on the requisite payroll information supplied by Apollo. The Apollo transaction was initiated prior to Respondent's receipt of the Final Order suspending her licenses.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that: Petitioner enter a final order dismissing the Administrative Complaint filed herein. DONE AND ENTERED this 25th day of June, 1992, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of June, 1992. APPENDIX Rulings on Petitioner's proposed findings: Paragraph 1, adopted as modified, Paragraphs 1, 2, and 3, Recommended Order. Paragraph 2, Recommended Order. adopted as modified, Paragraph 4, Paragraph 6, Recommended Order. adopted as modified, Paragraph 6, Paragraph 8, Recommended Order. adopted as modified, Paragraph 9, Paragraph 9, rejected, contrary to the weight of evidence, Paragraphs 7, 11 and 18, Recommended Order. Paragraph 10, adopted as relevant, Paragraph 19, Recommended Order. Remainder rejected as contrary to the greater weight of evidence, Paragraphs 7, 11, 12, 14 and 18, Recommended Order. Paragraph 11, rejected, unnecessary. Rulings on Respondent's proposed findings: Respondent's proposed findings are accepted and are substantially incorporated in this Recommended Order. Proposed findings not found herein were deemed irrelevant and were unnecessary to resolve the issues posed. COPIES FURNISHED: David D. Hershel, Esquire Department of Insurance and Treasurer 412 Larson Building Tallahassee, FL 32399-0300 Peter C. Clement, Esquire 2650 Tampa Road, Suite A Palm Harbor, FL 34684 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Bill O'Neil General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, FL 32399-0300
The Issue The issue is whether Respondent failed to comply with provisions of the Workers? Compensation Law and implementing rules, and if so, what is the appropriate penalty.
Findings Of Fact Petitioner is responsible for administering the Workers? Compensation Law in a manner which facilitates the self–execution of the system and the process of ensuring a prompt and cost-effective delivery of payments. Respondent National Union Fire Insurance Company of Pittsburgh, Pennsylvania, is a workers? compensation insurance carrier authorized to insure under the Workers? Compensation law. Chartis is a third-party administrator or servicing agent for Respondent. Respondent is substantially affected by Petitioner?s amended Notice of Imposition of Penalties. Under the authority of section 440.525, Petitioner reviewed Respondent?s workers? compensation benefit disbursement and claims handling practices in an audit performed March 14, 2011, through March 18, 2011. The audit addressed the timeliness and accuracy of workers? compensation payments, as well as other claims handling practices concerning certain claims files, for a five-year audit period from March 18, 2006, through March 18, 2011. Respondent paid $5,000.00 in penalties that were assessed for improper case management techniques in Petitioner?s original Notice of Imposition of Penalties. The parties had no disagreement as to this portion of the fine assessed. At issue is the remaining fine amount of $9,200.00 assessed for improper benefit disbursement practices, as set forth in the Petitioner?s Amended Notice of Imposition of Penalties, dated September 20, 2011, which incorporates the amended final audit report. This penalty reflected Petitioner?s determination that there were 152 late payments out of a total of 807 indemnity payments due to injured workers. The Respondent agreed that the number of indemnity payments reviewed during the audit totaled 807, but disputed the number of late indemnity payments. Respondent agreed that 25 payments related to workers? compensation claims files other than the file of R.D. were correctly identified as late by Petitioner. Respondent disputed the number of late payments made to R.D. There was testimony that Respondent had notification of R.D.?s permanent total disability on February 22, 1989. Other testimony stated that R.D. was accepted as permanently and totally disabled as of February 23, 1989. Any discrepancy between these dates was not at issue in the Department?s calculation of the biweekly payment schedule, as discussed below. R.D. is entitled to biweekly indemnity payments for permanent total disability, as well as supplemental permanent total benefits. No evidence was presented at hearing as to whether R.D.?s disability was immediate and continuous for eight calendar days or more after his injury, or in the alternative, if R.D.?s first 7 days of disability after his injury were nonconsecutive or delayed. Joint Exhibit J-6, the indemnity pay out ledger, provided information from Respondent?s records regarding payments made to R.D. It shows the amount of payment and “Trans Date” or transaction date for each payment. As a customary business practice, checks were mailed out one day after the transaction date, so the actual date of each payment is one day after the “Trans Date” shown. In addition, the records contain a column entitled “Service Date From-To” which associates a specific compensation period with the payment in that row. The “Service Date From-To” column is blank for all of the payments to R.D. beginning in 1988 until September of 1998. This column contains dates that Respondent considered to be the compensation period applicable to each payment from September of 1998 through the audit period. The indemnity pay out ledger also indicates that after Respondent was notified of R.D.?s permanent total disability in 1989, over 250 payments were made to R.D. until September of 1998. On average, this was about 28 payments per year or slightly more often than biweekly. Counsel for Petitioner elicited deposition testimony from Ms. Margorit Constantine, Complex Claim Director for Chartis, that Respondent?s records indicated that the initial permanent total disability payment covered 2-22-1989 through 3-7-1989, but this information was evidently not relied upon by Petitioner. Ms. Sharna Amos, Workers? Compensation Specialist at the Division, testified that the Division determines the specific biweekly time period applicable to a permanent total claim based upon the date the first payment went to the injured worker, even if this first payment is a retroactive payment covering an earlier time period. However, Petitioner presented no evidence that the biweekly payment schedule established by Ms. Amos for purposes of the audit of R.D.?s file coincided in any way with a biweekly schedule based upon the date the first installment of compensation for total disability was paid to him. In fact, as Ms. Amos testified, the biweekly payment schedule created for the audit was based upon dates being used by the Respondent for biweekly payments during the fall of 1998, the first payments for which the Respondent identified service dates. Ms. Amos testified at hearing that she established the biweekly payment schedule for the audit of R.D.'s file as follows: Um, based on the information that was provided to me, um, the pay history that was given to me, um, the first one with the, um, service dates of 9/2 to 9/15, August, all of the other payments were lump sum because they had gotten a new computer or something. Uh, so I started from that time period and ran the bi -– oh, sorry, on the right -– on this left side, I ran the biweekly periods from 9/2/1998 until -– I ran them all the way through, um, 7/9/2011. It was not made clear at hearing why Petitioner considered over 250 nearly biweekly payments that had been paid to R.D. for over nine years prior to September 1998 to be “lump sum” simply because the Respondent was unable to provide the service dates it associated with them. Petitioner has no rules defining “lump sum” in this context, and it is not clear what significance such a determination would have in the calculation of a payment schedule. Ms. Amos did testify that typically with permanent total disability claims the employee is “accepted permanent total” retroactively back to a given date and the biweekly payments are established after a lump sum payment covering the intervening period is made. However, no evidence was presented that R.D. was retroactively accepted as permanently totally disabled in 1998 and the first installment was made to him at that time as a lump sum payment; to the contrary, the evidence indicated he was accepted as permanently totally disabled in 1989. It appears rather that Ms. Amos established the biweekly period for purposes of the audit based on the service dates being used by Respondent in September of 1998 simply because these were the first “service dates” available. However, there was no evidence to show that the service dates being used by Respondent in September of 1998 bore any relationship to the first installment of compensation for total disability paid to R.D. In fact, the evidence would suggest no such connection. The payments made to R.D. prior to September were generally biweekly, but somewhat irregular. The payments made after September of 1998 were generally biweekly, but somewhat irregular. Consistent with Respondent?s interpretation of the statute, Respondent presented deposition testimony that while they generally tried to make biweekly payments, they made no attempt to strictly make the payments on the anniversary of the first installment, but would occasionally start new biweekly periods for various reasons. It is ironic that after basing the audit payment schedule on Respondent?s service dates in September of 1998 rather than on the date of the first installment as required by the statute, that Petitioner went on to categorically reject all of Respondent?s subsequent service dates as inconsistent with statutory requirements. It was similarly unclear as to why Petitioner concluded that Respondent?s acquisition of a new computer would have any effect on the determination of the applicable biweekly payment schedule, because payment data from before that time was available. As Ms. Constantine testified, some data on the indemnity pay out ledger was information entered earlier from check copies and “green cards” that were manual records. The Division used the biweekly payment schedule established by Ms. Amos to determine which payments were late. Had the Division begun its biweekly payment schedule on another date, it would have created a different schedule of due dates, and would then have determined that an entirely different number of payments to R.D. were late. As noted, Respondent paid its biweekly payments in a different manner. No evidence was presented that Respondent?s occasionally-adjusted biweekly periods for total disability payments were consistent with the date that the first installment of compensation had been paid to R.D., or what that date was. Respondent did not adhere to a fixed biweekly schedule, but did generally adhere to biweekly payments. Adjustments in payment due dates were made from time to time. For example, evidence indicated that adjustments were made at the beginning of a new calendar year or when errors were discovered, in which case a new biweekly pattern of payments would begin after the adjustment, without regard to the dates of any previous biweekly payments. This method, while not intrinsically unreasonable, is not consistent with the statute. It is reasonable that missing data, calendar changes, advance payments, or other irregularities in the payment of indemnity might create confusion in the construction of the proper payment schedule, or in the reconstruction of the proper payment schedule for purposes of an audit. The correct and consistent way to deal with such factors is not always addressed by statute. The Department has adopted no administrative rules on this subject. The statute?s requirement of a fixed biweekly schedule that cannot thereafter be changed is not followed by many who regularly administer these payments. Ms. Amos testified in deposition that many of her audits involve carriers who are making biweekly payments covering time periods that are misaligned with the proper schedule as determined by the Department, and that she is frequently asked to go back in time to identify for the carrier the date when the problem started. At another point, Ms. Amos noted that in dealing with payments at the end of a calendar year, “a lot of adjusters in the industry . . . would pay the injured workers 12/22/2006 to 12/31/2006 and then restart the clock, just pay those few days and then restart the clock in January, starting their next payment at January 1.” Mr. Bottjer, holder of workers? compensation and all lines adjusting licenses, and Compliance Reviewer for Chartis, testified in deposition that prior to the audit he was unaware that it was the Department?s position that a biweekly period could not be adjusted after a carrier “goofed” and had caught the injured worker up (and stated that he still does not agree that this is required by the statute). Ms. Constantine testified in deposition that she had never seen a bulletin, gone to a conference, or had any information indicating to her that biweekly payments could not be altered. R.D. was consistently overpaid in his permanent total disability and supplemental benefits, based upon errors unrelated to the issue in this hearing. Additionally, various adjustment payments were made to R.D. from time to time which included penalties and interest. R.D. has received all of the indemnity payments to which he was entitled during the period of the audit and has not been harmed by any late payments at issue here. Petitioner proved by clear and convincing evidence that 25 payments related to workers? compensation claims files other than the file of R.D. were paid late, as stipulated. This constitutes about 3.1 per cent of the 807 indemnity payments that were the subject of the audit. Petitioner proved by clear and convincing evidence the dates on which R.D. was paid his biweekly total disability payments during the audit period. Petitioner failed to prove by clear and convincing evidence the date that the first installment of compensation for total disability was paid to R.D. or the dates by which R.D.?s biweekly total disability payments needed to be paid to him. Petitioner failed to prove by clear and convincing evidence that Respondent was late in paying R.D. his total disability payments. Mr. Bottjer, Respondent?s witness, testified that he believed that “as many as 14” payments to R.D. might have been late. Mr. Bottjer based this conclusion on due dates that appear to bear no relation to the date of payment of the first installment of payments for total disability. Even if 14 additional late payments were added to the 25 late payments that were stipulated, the total number of late payments would be 39, or about 4.8 per cent of the 807 indemnity payments that were audited. Based upon the number of late payments proved by clear and convincing evidence, the timely payment performance standard during the period of the audit was in excess of 95 percent.
Recommendation Upon consideration of the above 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 paid 25 payments late during the audit period and imposing no fines for improper benefit disbursement practices. DONE AND ENTERED this 8th day of February, 2012, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of February, 2012.
The Issue The issue in this case is whether Respondent, Eric Kachnycz, LLC d/b/a Done Right Irrigation and Lighting (“Done Right”), should have a penalty assessed against it by Petitioner, Department of Financial Services, Division of Workers’ Compensation (the “Department”), and, if so, the amount of such penalty or assessment.
Findings Of Fact The Department is the State agency responsible for, inter alia, ensuring that all businesses operating in this State have workers’ compensation insurance coverage. Done Right is a duly-formed and validly-existing limited liability company in the State of Florida. It was formed on July 27, 2004, for the purpose of conducting any and all lawful business. At the time of its formation, Eric Kachnycz was the only listed manager or managing member of the company. His address was listed as 9 Twin River Drive, Ormond Beach, Florida. The registered agent for the company was listed as Betty C. Kachnycz, at the same address. In 2011, Daniel Dupuis was added as a managing member of the company. His address was listed as a post office box in Ormond Beach, Florida. By way of a document filed with the Secretary of State, Division of Corporations, on March 1, 2016, Daniel Dupuis was withdrawn as a managing member of the company. On January 14, 2016, Kent Howe, a compliance investigator with the Department, conducted an investigation at 316 Ocean Dunes Road in Daytona Beach, Florida. Upon arrival at the site at around 11:00 a.m., Mr. Howe noted the presence of a large white truck and work trailer parked in front of the residence. The truck and trailer were imprinted with the name and contact information for Done Right. Mr. Howe saw a person (later identified as Daniel Dupuis) engaged in repair work on a sprinkler or irrigation system in the front yard of the residence. After about ten minutes observing Mr. Dupuis, Mr. Howe approached and asked him for whom he worked. Mr. Dupuis responded that he worked for Done Right and that Mr. Kachnycz owned and operated the business. There was another person at the job site who Mr. Dupuis identified as the owner of the residence. That person, with whom Mr. Howe did not converse, was observed walking into and out of the house and, just before Mr. Howe left the site at 1:00 p.m., was seen using a shovel to back-fill some of the irrigation ditches that had been dug.1/ Mr. Howe tracked down and called Mr. Kachnycz to inquire as to the existence of workers’ compensation insurance for his employees, including Mr. Dupuis. Mr. Kachnycz said that the only two persons associated with Done Right, he and Mr. Dupuis, had existing exemptions from workers’ compensation coverage. Further, Mr. Kachnycz said the he had personally applied for the exemptions himself. Mr. Howe checked the Department’s compliance and coverage automated system (CCAS) to verify the exemptions. He found that Mr. Kachnycz had a current exemption, but Mr. Dupuis’ exemption had expired on April 26, 2015, approximately nine months previous. Exemptions have a two-year term once granted, but may be renewed on-line prior to their expiration. Mr. Kachnycz obtained an exemption in 2004 and has renewed it every two years thereafter. Mr. Dupuis obtained his first exemption in February 2011, but did not timely renew it before it expired two years later. He then obtained an exemption in April 2013, but it expired in 2015. He did not have an exemption in place on January 14, 2016, while working at the job site. He did, however, apply for an exemption just two days later, i.e., on January 16, 2016. After verifying the corporate information for Done Right and checking CCAS to see if any other insurance coverage was in place, Mr. Howe determined that Done Right was not in compliance with workers’ compensation insurance requirements. The information gathered by Mr. Howe was presented to his area district manager, who approved the issuance of a stop work order. Mr. Howe prepared the SWO (along with a request for business records) and hand-delivered the documents to Mr. Dupuis at the job site. Mr. Howe attempted to serve the registered agent of Done Right, Betty C. Kachnycz, at her residence but Mr. Kachnycz said she was working out of town at her job as a registered nurse. So, instead of hand-delivery, Mr. Howe sent a copy of the SWO and request for business records to Mrs. Kachnycz via certified mail. The documents were delivered and signed as accepted by Mrs. Kachnycz on January 23, 2016. Subsequently, Mr. Howe had a conversation with Mr. Kachnycz concerning the possibility of Mr. Kachnycz signing a Conditional Agreed Release from the SWO. A blank copy of that agreement was provided for Mr. Kachnycz’ review, but he never signed the agreement. Mr. Howe later had another conversation with Mr. Kachnycz during which the latter inquired about the “criminal” charges against him related to the SWO. Mr. Howe knew nothing of any criminal charges and no evidence of such was offered at final hearing. Mr. Howe had no further contact with Mr. Kachnycz. Mr. Kachnycz ultimately asked for a formal administrative hearing to contest the SWO and penalty assessment, resulting in the instant case. During the preparation phase prior to final hearing, the Department continued to attempt to obtain the business records for Done Right. The Department served interlocking discovery on Done Right to obtain the business records along with other information. Mr. Kachnycz, however, steadfastly refused to provide the records unless, in his words, “[the records are] not used against me in a court of law.” During his deposition in this matter, Mr. Kachnycz reiterated his demand that his business records not be used against him in this proceeding, a clear indication of Mr. Kachnycz’ lack of understanding of the administrative process. There is no basis in law for such a demand by a party to an administrative proceeding. Mr. Kachnycz also invoked his Fifth Amendment rights and otherwise refused to answer questions posed to him during the deposition.2/ Review of an entity’s business records by the Department allows it to assess the amount of workers’ compensation insurance coverage for the business. A review also allows the Department to determine whether a penalty should be imposed at all. Had Done Right provided its business records in the instant case, it may have resolved the dispute without the necessity of a final administrative hearing. We shall never know. Based upon the absence of business records for Done Right, the Department used its existing rule constructs to formulate the amount of the penalty to be assessed. Anita Proano, an employee in the Department’s bureau of compliance, established a penalty using standard guidelines. Since Done Right did not provide business records for review, the imputed method was employed.3/ First, the payroll was calculated by using the average weekly wage in effect at the time of the issuance of the SWO and, per statute, multiplying by two. Class Code 5183-–under the construction umbrella, but specifically including irrigation and lawn sprinkler systems-– was assigned to the work being done by Done Right. The period of non-compliance was set at September 3, 2015, through December 31, 2015, and January 1, 2016, through January 14, 2016. Those are the dates within the Department’s two-year audit period that Done Right was deemed to be out of compliance. The imputed gross payroll amount was $29,571.77 for the first period of non-compliance and $3,450.04 for the second period. Those figures, divided by 100, resulted in the amounts of $295.72 and $34.50, respectively. The approved manual rate set for the two periods was $5.46 and $5.11, reflecting the rates for Class Code 5183. The premium owed by the employer for the first period was calculated at $1,614.62 and the premium it should have paid for the second period was $176.30. Those amounts, multiplied by two, resulted in assessed penalties of $3,229.24 and $352.60, for a total penalty of $3,581.84. Done Right presented no evidence to contest the amount of the penalty or the calculation thereof. Instead, Mr. Kachnycz inquired of the Department’s witnesses whether they had signed loyalty oaths and, if so, if they remembered what was in the oath. He expressed his displeasure at the process for penalizing small businesses and invoked his Constitutional rights (State and Federal), but provided no evidence germane to the issues of this case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered assessing a penalty of $3,581.84 against Respondent, Eric Kachnycz, LLC, d/b/a Done Right Irrigation and Lighting. DONE AND ENTERED this 18th day of May, 2016, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of May, 2016
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees and, if so, what penalty should be assessed.
Findings Of Fact Petitioner, Department of Financial Services, Division of Workers' Compensation ("Division") is the state agency responsible for enforcing the requirement within the state that employers cover employees with workers' compensation insurance. § 440.107, Fla. Stat. (2009). Respondent, Jurgenson Trading Corporation, is owned, in part, by Julio Raudsett, and operates a "Subway" sandwich restaurant franchise in Hialeah, Florida. It is a family-owned business with a total of five employees, three of whom are related. Cesar Tolentino, an investigator for the Division, conducted a field interview of Raudsett, who admitted that he did not carry workers' compensation insurance. Tolentino checked the database in the Coverage and Compliance Automated System ("CCAS"), and there were no records showing workers' compensation coverage for the Subway employees, nor any notices of applicable exemptions. Martha Aguilar, Tolentino's supervisor authorized the issuance of a Stop-Work Order that was personally served on Raudsett by Tolentino by hand-delivery on April 17, 2009. At the same time, Tolentino served a Request for Production of Business Records for Penalty Assessment Calculation. Raudsett provided his business records, including payroll journals and unemployment tax returns. Based on Aguilar's review of the business records, the Division issued its Amended Order of Penalty Assessment ("Order") on June 8, 2009, with an assessed penalty of $19,873.79. Aguilar determined the amount of the penalty, using the following steps: (1) assigning each employee the National Council on Compensation Insurance (NCCI) class code that was applicable for restaurant workers; (2) determining how much the employee had been paid from April 2006 to April 2009 (the period of non-coverage); and (3) assigning the rate to the gross pay to calculate the insurance premium that should have been paid, then multiplying that by 1.5, as required by rule. The NCCI class codes for employees administrative staff as compared to restaurant workers are lower and, therefore, their workers' compensation insurance premiums would be lower. The business records available to Aguilar did not distinguish among employee's responsibilities. Absent that information, the penalty is, by law, calculated using the highest NCCI class code associated with that kind of business, and was correctly done in this case. Raudsett has entered into a payment plan with the Division. He objected only to that portion of the penalty that was based on his earnings, and those of his wife, Maribel Medina, who works part-time, and his father-in-law, Rolando Medina. He claims an exemption for the three of them as owners and managers of the corporation. Excluding their salaries and associated penalties, according to Joseph Cabanas, Respondent's accountant, would reduce the penalty by $10,267.67, to $9,606.12. Cabanas testified that Raudsett, an immigrant from Venezuela, was not aware of workers' compensation laws, and that was why the three owners/officers of the Respondent's corporation failed to file a Notice of Elections to be Exempt from coverage until after the Division's investigation began.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, that upholds the assessment of a penalty of $19,873.79. DONE AND ENTERED this 15th day of December, 2009, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of December, 2009. COPIES FURNISHED: Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Douglas D. Dolan, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Joseph Cabanas 10520 Northwest 26 Street, Suite C-201 Doral, Florida 33172
