The Issue The issue is whether Respondent was an employee engaged in the construction industry and required to obtain workers' compensation insurance while working on the roof of the Myakka Animal Clinic and, if so, what penalty should be imposed.
Findings Of Fact On August 24, 1998, Petitioner's investigator observed Respondent working on the roof of the Myakka Animal Clinic in Venice, Florida. At the time, Respondent was regularly employed by Paradise Roofing, Inc., where he had an exemption from workers' compensation insurance coverage. He has never previously been guilty of a violation of the workers' compensation laws. The contract price was $800. However, the evidence is conflicting as to the identity of the party that entered into the contract with the Myakka Animal Clinic. The veterinarian testified that her understanding of the agreement was that Respondent was to do the work, but, if any problems arose, he was not alone, and she could go to Paradise Roofing, Inc., to ensure that the labor and materials were satisfactory. Although there are other indications in the record that Respondent may have been working on his own on this job, there is sufficient conflict in the evidence that Petitioner has failed to prove that Respondent was doing the job as a self- employed person, rather than an exempt employee of Paradise Roofing, Inc. Respondent's understanding of the contractual relationship carries less weight than the veterinarian's understanding of this relationship.
Recommendation It is RECOMMENDED that the Division of Workers' Compensation enter a final order dismissing the Notice and Penalty Assessment Order and any related stop work order. DONE AND ENTERED this 2nd day of April, 1999, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 1999. COPIES FURNISHED: Edward A. Dion, General Counsel Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Mary Hooks, Secretary Department of Labor and Employment Security 303 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Louise T. Sadler, Senior Attorney Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Eric Kristiansen 3750 Aba Lane North Port, Florida 34287
The Issue Whether Respondent, G and G General Contracting, Inc., failed to comply with the coverage requirements of the Workers’ Compensation Law, chapter 440, Florida Statutes, by not obtaining workers’ compensation insurance for its employees, and, if so, what penalty should be assessed against Respondent pursuant to section 440.107, Florida Statutes (2014).
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of the Workers’ Compensation Law that employers secure the payment of workers’ compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. G and G General Contracting, Inc. (Respondent or G and G), is a domestic business corporation organized on July 5, 2013, pursuant to the laws of the State of New York. Respondent’s primary business address is 88 Lincoln Avenue, Ardsley, New York. Gino Uli is Respondent’s President. Respondent is not a Florida corporation. On December 4, 2014, the Department’s investigator, Aysia Elliott, conducted a random workers’ compensation compliance check at a worksite in Naples, Florida. Ms. Elliott observed seven men at the worksite engaged in interior and exterior painting of a newly-constructed residence. The residence was but one in a large residential subdivision under construction. The central issue in this case, and one that is fiercely contested, is whether the painters Ms. Elliott observed at the worksite were employees of G and G. In response to her verbal inquiries to the painters on site, Ms. Elliott testified that the workers first identified Pacific Construction as their employer. Ms. Elliott attempted to contact Pacific Construction, but her calls to that company were not returned. Ms. Elliott testified that upon her further inquiry, one of the painters, Leonardo Gudiel, stated he was an employee of G and G. At this point, Ms. Elliott was unsure which company to investigate for workers’ compensation coverage for the painters at the worksite. The permit sign at the worksite identified Minto Communities as the general contractor. Ms. Elliott contacted Minto Communities via telephone to determine the name of the company to which painting had been subcontracted. At hearing, Ms. Elliott was unable to recall the names of any of the companies identified by Minto Communities as subcontractors for the job. Ms. Elliott did recall that at least two subcontractors were identified by Minto. Mr. Gudiel gave Ms. Elliott a telephone number for a man named “Edison,” alleged to be the foreman. Ms. Elliott called Edison, and testified that he informed her he was on another call and would have to call her back. Edison did not return Ms. Elliott’s call. Ms. Elliott next received a phone call from Mr. Uli. Ms. Elliott testified that, during that phone conversation, Mr. Uli identified the painters at the worksite as employees of his company, G and G. Mr. Uli denied having ever told Ms. Elliott the painters were his employees. Mr. Uli provided Ms. Elliott with the certificate of insurance demonstrating workers’ compensation insurance coverage for employees of G and G. Mr. Uli told Ms. Elliott he would be in Florida in a few days and would meet with Ms. Elliott in person. Ms. Elliott verified the existence of G and G through the State of New York Division of Corporations’ website. Ms. Elliott then verified, through the Department’s Coverage and Compliance Automated System, that G and G had no workers’ compensation coverage in Florida, nor any exemption from coverage requirements for any of its corporate officers. Ms. Elliott also contacted the New York insurance carrier identified by Mr. Uli and confirmed that the carrier did not cover any G and G employees in Florida. On December 8, 2014, Ms. Elliott reviewed the results of her December 4, 2014, workers’ compensation investigation with Maria Seidler, the Ft. Myers district Supervisor. A determination was made that sufficient evidence and information existed to issue a Stop-Work Order against G and G for failure to provide workers’ compensation insurance, as required by chapter 440. Ms. Elliott met with Mr. Uli on December 8, 2014. Ms. Elliott personally served Mr. Uli with a Stop-Work Order for the construction site in Naples and a request for specified business records on which to base the penalty calculation. Mr. Uli did not provide any records to the Department in response to the records request. The Department’s penalty auditor, Lyna Ty, was assigned to calculate the penalty to be assessed against G and G for failure to secure workers’ compensation insurance during the penalty period. The penalty period was for the two years prior to the date the Stop-Work Order was issued: December 9, 2012 to December 8, 2014. Having no employer records from G and G, Mr. Ty imputed the statewide average weekly wage as Respondent’s payroll for the seven painters at the worksite on December 4, 2014. Mr. Ty calculated a penalty of two times the workers’ compensation insurance premium that would have applied to the purchase of insurance for those specific employees during the penalty period. § 440.107(7)(e), Fla. Stat. Mr. Ty assigned NCCI code 5474, which is the classification code for painting contractors according to the SCOPES manual adopted by the Department for imputing wages associated with various occupations. On January 9, 2015, the Department issued an Amended Order of Penalty Assessment against G and G in the amount of $254,697.38 However, because G and G was not formed until July 5, 2013, the original penalty calculation was based on an incorrect penalty period. Mr. Ty recalculated the penalty based on a penalty period from July 5, 2013 through December 8, 2014. On May 26, 2015, the Department issued a Second Amended Order of Penalty Assessment against G and G in the amount of $185,354.68. Mr. Uli’s testimony provided no more clarity than Ms. Elliott’s as to the identity of the employer for the painters at the worksite on December 4, 2014. Mr. Uli previously lived in Florida for seven years and was engaged in “restaurant business.” Mr. Uli met Leonardo Gudiel, a contractor, while he was living in Florida. While living in Florida, Mr. Uli also met James Cartisano, the purported owner of Facility Construction. When Mr. Uli relocated to New York, he stayed in touch with Mr. Gudiel. According to Mr. Uli, he planned to give to Mr. Gudiel any work G and G obtained in Florida and asked Mr. Gudiel to “be registered as a vendor with [him].” Mr. Uli testified that Mr. Cartisano contacted him in New York and told him that he had been engaged by Minto Communities (Minto) to paint a model home in a new residential neighborhood under construction in Naples, Florida. Presumably, if Mr. Cartisano’s work was satisfactory to Minto, Facility Construction would be hired for the larger job. According to Mr. Uli, he referred Mr. Cartisano to Mr. Gudiel to supply painters for the job. Mr. Uli described himself as the “middle man.” Upon inquiry from the undersigned as to how Mr. Uli or G and G construction would profit from his position as the middle man, Mr. Uli stated, “No arrangement as per se on paper, Judge, but this is on – on [Mr. Cartisano’s] word to me; that if you get me the right guys down there that can do this for me, I’ll take care of you.”1/ On December 4, 2014, when Ms. Elliott conducted her random worksite inspection, Mr. Uli received a telephone call from Mr. Gudiel informing him that Ms. Elliott was onsite asking questions about workers’ compensation insurance. According to Mr. Uli, he called Mr. Cartisano, who “did not want to deal with this.”2/ Mr. Uli explained that he telephoned Ms. Elliott on December 4, 2014, to explain that the guys onsite were painting a model home for Minto, and if Minto was satisfied, Facility Construction would get the overall job (estimated at 700 houses). At hearing, Mr. Uli strongly denied that he told Ms. Elliott the workers were his employees, either on the phone on December 4, 2014, or when he met with her in person on December 8, 2014. The evidence, or lack thereof, leaves the undersigned with many unresolved questions: Why would Facility Construction contact a contractor in New York to provide painters for a job in Florida? Why did Mr. Uli supply Ms. Elliott with a copy of his certificate of insurance for workers’ compensation insurance in New York? Moreover, if the painters were not his employees, why did Mr. Uli travel to Florida from New York and meet with Ms. Elliott? From the evidence as a whole, it can be inferred that Mr. Uli had a significant interest in the work being done at the Naples worksite on December 4, 2014. However, it cannot be inferred that G and G was the employer of the painters at the worksite. That fact must be proven by the Department.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order dismissing the Stop-Work Order and Second Amended Penalty Assessment against Respondent, G and G Contracting, Inc., for its failure to secure and maintain required workers’ compensation insurance for its employees. DONE AND ENTERED this 13th day of November, 2015, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 2015. 1/ T.83:12-15.
The Issue The issue in this case is whether Respondent, Ocala Exterior Solutions, Inc., failed to properly maintain workers' compensation insurance coverage for its employees, and, if so, what penalty should be assessed.
Findings Of Fact The Department is the state agency responsible for ensuring that all employers maintain workers' compensation insurance for themselves and their employees. It is the duty of the Department to make random inspections of job sites and to answer complaints concerning potential violations of workers' compensation rules. This case arose as a result of a random inspection. Respondent is a business created by Johnny Busciglio on or about October 16, 2012. At all times relevant hereto, Respondent was duly licensed to do business in the State of Florida. Its business address is 140 Southwest 74th Lane, Ocala, Florida 34476. On May 22, 2015, the Department’s investigator, William Pangrass, made a random site visit to a construction site located at a residence at 9189 Southwest 60th Terrace Road, Ocala, Florida. He saw two men installing soffit as part of the construction which was going on. Pangrass remembers the men identifying themselves as Derek McVey and Frank Deil. When Pangrass inquired as to their employer, the two men were initially not certain for whom they were working. One of the men made a telephone call and then told Pangrass they were employees of Sauer & Sons. Interestingly, Respondent said the two men on-site that day were McVey and a man named James Van Brunt. Pangrass contacted Sauer & Sons and were told that neither McVey nor Deil (or Van Brunt) were employees of that company. He was told by a representative of Sauer & Sons that the men were in fact employees of Respondent. Pangrass then verified that Respondent was a current, viable company and checked whether the company had workers’ compensation insurance coverage for its employees. He found that Respondent had a workers’ compensation insurance policy for a short time in 2014. Two of Respondent’s employees, however, did have exemptions from coverage. Those two were Johnny Busciglio and Anthony Wayne. Based on his findings, Pangrass issued a SWO which he posted at the work site he had visited. He posted the SWO on the permit board in front of the job site on May 26, 2015. On May 29, he served a Request for Production of Business Records on Respondent, seeking information concerning Respondent’s business for purposes of calculating a penalty for failure to have workers’ compensation insurance in place. Respondent emailed the requested business records to Pangrass. The Department requested additional records and clarification concerning some of the records which had been provided. Busciglio made a good faith effort to respond to each of the Department’s requests. After review of Respondent’s business records, the Department calculated a penalty and issued an amended OPA. That amended OPA was issued on September 8 and served on Busciglio (as agent for Respondent) on October 1, 2015. The amount of the penalty in the amended OPA was $9,896.32. Within a few days after receiving the amended Order, Busciglio obtained workers’ compensation insurance for his employees, paid a down payment of $1,000 to the Department, and Respondent was released to resume its work. The penalty in the amended OPA was based upon information obtained from Busciglio concerning Respondent. Using the bank records supplied by Busciglio, the Department determined that Respondent had the following employees: Eric McVey, Frank Dorneden, Jeff Burns, Jordan Anchondo, Anthony Wayne, Nikki Smith, Johnny Busciglio, and Jason Bridge. Their wages were used by the Department to calculate the penalty. The penalty was calculated by the Department as follows: The business was assigned class code 5645, construction on residential dwellings; The period of non-compliance was set at two years; The gross payroll amount for that two-year period was established at $30,905.14; The gross payroll amount was divided by 100, resulting in the sum of $309.05; The approved manual rate, i.e., the amount the employer would have paid if insurance was in place, was assigned for each employee; The gross payroll was multiplied by the manual rate; And the penalty amount was established, taking the figure in (f), above, and multiplying by two. Busciglio established by credible testimony, unrefuted by the Department, that Nikki Smith was a person from whom he bought tools; she was never an employee of Respondent. The same was true for the person listed as Jason Bridge (although his real name may have been Jason Woolridge). As for Eric McVey, he worked for Frank Dorneden, who paid McVey directly. There were no payroll records or checks from Respondent provided to the Department which were attributable to McVey. Dorneden had begun working for Respondent on December 22, 2014. On May 22, 2015, he was asked by Busciglio to visit the work site; he found McVey working there and Deil/Van Brunt was also on the site. Neither the Department nor Respondent offered any further explanation about Deil/Van Brunt, nor did the Department attribute any penalty to Van Brunt as a putative employee. His status in this matter is a mystery. When the penalties associated with McVey, Smith, and Bride are subtracted from the calculation, the amount of the penalty would be $9,454.22.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services requiring Respondent, Ocala Exterior Solutions, Inc., to pay the sum of $9,454.22. DONE AND ORDERED this 20th day of November, 2015, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of November, 2015.
The Issue The issues in this case are whether Respondent violated chapter 440, Florida Statutes (2014),1/ by failing to secure the payment of workers' compensation coverage as alleged in the Stop-work Order and 2nd Amended Order of Penalty Assessment, and if so, the amount of the penalty that should be assessed.
Findings Of Fact The Parties Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the requirement in chapter 440 that employers in the state of Florida secure the payment of workers' compensation insurance covering their employees. Respondent, Bargain Bob's Carpets, Inc., is a corporation registered to do business in Florida. Its principal business address is 3954 Byron Drive, Riviera Beach, Florida. The Compliance Investigation As the result of an anonymous referral, Petitioner's compliance investigator, Peter Sileo, investigated Respondent to determine whether it had secured workers' compensation coverage for its employees as required by chapter 440. Before Sileo visited Respondent's business location, he checked the State of Florida Coverage and Compliance Automated System ("CCAS") computer database, which contains information regarding workers' compensation insurance policies that have been obtained by employers. The CCAS database showed no record of any workers' compensation policies covering Respondent's employees having been issued. On Sileo's first visit to Respondent's business location, he observed a man loading carpeting into a van. Upon being questioned, the man identified himself as Gary Persad. He told Sileo that he was a carpet installation subcontractor for Respondent. Sileo checked CCAS and determined that Persad was covered by workers' compensation insurance. On January 23, 2015, Sileo again visited Respondent's business location, which is a warehouse housing large rolls of carpeting and other flooring materials. There, Sileo met John Charles, an owner and corporate officer of Respondent. Charles claimed that he did not know that Respondent was required to have workers' compensation coverage for its employees. Charles told Sileo that Respondent sold flooring but did not install it and that all installation was performed by subcontractors. At the time of the inspection, Sileo determined that Respondent employed five employees: Charles and Calideen, each of whom own more than ten percent of Respondent's business; Alex Stark; Peter Phelps; and Anthony Frenchak. Sileo served a Stop-work Order, ordering Respondent to cease all business operations in the state pending demonstrating compliance with the workers' compensation coverage requirement. Sileo also served a Request for Production of Business Records for Penalty Assessment Calculation. Respondent subsequently demonstrated compliance with the workers' compensation coverage requirement, and Petitioner lifted the Stop-work Order.2/ Respondent also produced business records consisting of spreadsheets showing quarterly payroll, transaction listings, affidavits, insurance coverage documents, and other records. The Penalty Assessment Eric Ruzzo, a penalty auditor with Petitioner, used these records to calculate the penalty to be assessed against Respondent. The $31,061.68 penalty is reflected in the 2nd Amended Order of Penalty Assessment, issued April 23, 2015, that is the subject of this proceeding. To calculate the applicable penalty, Petitioner determines the employer's gross payroll for the two-year period preceding the noncompliance determination——the so-called "penalty period"——from a review of the employer's business records. For days during the penalty period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the penalty period commenced on January 24, 2013, and ended on January 23, 2015, the day on which the compliance inspection was conducted, and Respondent was determined to not be in compliance with the workers' compensation coverage requirement. Initially, Respondent produced payroll records that did not identify the subcontractors Respondent hired to install the carpeting. Ruzzo identified the subcontractors using Respondent's transaction records. Respondent subsequently provided information, including affidavits and certificates of exemption regarding the subcontractors it had hired during the penalty period. At all times during the penalty period, Respondent employed four or more non-construction employees, including Charles and Calideen.3/ Based on the business records produced, Ruzzo compiled a list of the persons, including the subcontractors and non-construction employees who were on Respondent's payroll, but not covered by workers' compensation insurance during the penalty period. This list of employees and the penalty computation for each is set forth on the Penalty Calculation Worksheet attached to the 2nd Amended Order of Penalty Assessment. Using the National Council on Compensation Insurance ("NCCI") workers' compensation insurance occupation class codes set forth in the NCCI Scopes Manual, Ruzzo determined the occupation class code applicable to each employee listed on the Penalty Calculation Worksheet. Respondent's subcontractors were classified in NCCI class code 5478, which is the class code for the flooring installation industry. This is consistent with Florida's construction industry class code rule, Florida Administrative Code Rule 69L-6.021(2)(kk), which identifies the installation of carpet and other floor covering as NCCI class code 5478. Alex Stark, Amber Krembs, Jacquelyn Skwarek, and Monica Stahl were classified in NCCI class code 8018, which applies to workers engaged in selling merchandise, including carpeting and linoleum, at the wholesale level. Calideen, Frenchak, and Phelps were classified in NCCI class code 8742, which applies to outside salespersons primarily engaged in sales off of the employer's premises. Charles was classified in NCCI class code 8810, which applies to clerical office employees. Ruzzo then determined the period of Respondent's noncompliance for each employee listed on the Penalty Calculation Worksheet. For each of these employees, Ruzzo determined the gross payroll paid to that employee for the period during which Respondent was noncompliant, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupation class code. This calculation yielded the workers' compensation coverage premium for that specific employee for which Respondent was noncompliant during the penalty period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. Respondent did not provide records covering Charles, Calideen, Stark, Frenchak, or Phelps for the period between January 1, 2015, and January 23, 2015. For this period, Ruzzo imputed the gross payroll for each of these employees using the statewide average weekly wage as defined in section 440.12(2),4/ multiplied by two. Ruzzo then performed the same computations discussed above to determine the penalty amount to be imposed for Respondent's failure to provide workers' compensation for those employees during this time period. Ruzzo added the penalty determined for each employee using actual gross payroll and imputed payroll, as applicable, to arrive at the total penalty assessment amount of $31,061.68. Respondent's Defense Respondent is engaged in the retail sale of various types of flooring, such as carpeting, and hires subcontractors to install the flooring. The evidence did not establish that Respondent engaged in wholesale sales of flooring. Charles testified that Respondent had attempted to operate its business as a "cash and carry" operation in which Respondent would sell the flooring to retail customers, who would take the purchased flooring from Respondent's premises and would be solely responsible for securing their own installation services. In Charles' words, "[t]hat didn't work. The public demanded that we provide them, as part of the sale, installers—— I might be saying it wrong legally, but they demanded that it all be done in one shot." Thus, Respondent began hiring subcontractors to do the installation work. Charles explained that Respondent makes retail sales of flooring to customers, either on Respondent's premises or at the customer's premises through its outside sales people. The flooring is then cut from the roll on Respondent's premises and placed in the installer's vehicle. The installer transports the purchased flooring to, and installs it at, the customer's premises. Charles estimated that Respondent currently does approximately five percent of its business as "cash and carry" sales, and the remaining 95 percent consists of sales requiring installation. Charles testified that he and Calideen, as corporate officers of Respondent, previously had obtained exemptions from the workers' compensation coverage requirements for themselves; however, they were unaware that the exemptions had to be renewed, so their exemptions had expired. As of the date of the 2nd Amended Order of Penalty Assessment, neither Charles nor Calideen possessed valid certificates of exemption from the workers' compensation coverage requirement. Charles testified that Respondent always had tried to operate in compliance with the law. He was of the view that because he and Calideen were exempt from the worker's compensation coverage requirement, Respondent effectively employed only three employees——one fewer than the workers' compensation coverage requirement threshold of four employees applicable to non-construction industry businesses. Charles and Calideen testified that when Respondent initially hired subcontractors, they required copies of their insurance policies, including proof of workers' compensation coverage or exemption therefrom. Calideen testified that thereafter, he and Charles assumed that the subcontractors were in compliance with the workers' compensation laws, and they did not know that they needed to obtain updated certificates of workers' compensation exemption or coverage from the subcontractors. On that basis, Charles asserted that Respondent should not be required to "babysit" its subcontractors to ensure that they are in compliance with the workers' compensation law. Respondent thus asserts that it should not be responsible for securing workers' compensation coverage for subcontractors whose workers' compensation policies or exemptions had expired during the penalty period. The undisputed evidence establishes that Charles' employment entails clerical work. Calideen testified, credibly, that Stark's employment duties entail selling flooring on Respondent's business premises, and that he does not engage in sales off the premises. Calideen testified, credibly, that Frenchak and Phelps primarily are engaged in outside sales off of Respondent's premises. Calideen testified, credibly, that he performs clerical duties rather than sales duties. Calideen and Charles both testified, credibly, that employees Krembs, Skwarek, and Stahl performed computer-related duties for Respondent, such as entering business information into Respondent's computer databases, and that they did not work on Respondent's business premises. Calideen testified, credibly, that subcontractor Mike Smith was hired on a one-time basis to paint parking place stripes at the newly-repaved parking lot behind Respondent's business premises. Findings of Ultimate Fact The credible, persuasive evidence establishes that Respondent is engaged in the retail sale of carpeting and other flooring materials and that Respondent itself does not install the flooring. The credible, persuasive evidence establishes, and the parties stipulated, that Respondent is not a member of the construction industry. The credible, persuasive evidence establishes that at all times during the penalty period, Respondent employed more than four employees who were engaged in non-construction employment. Accordingly, Respondent was required to secure workers' compensation coverage for its employees, including Charles and Calideen, whose previously-issued certificates of exemption had expired and were not in effect during the penalty period. The undisputed evidence establishes that at certain times during the penalty period, Respondent employed subcontractors who performed floor installation. The evidence clearly establishes that the subcontractors, in installing the flooring, perform a service that is integral to Respondent's business and that they work specifically at Respondent's direction for each particular installation job. Even though Respondent is not classified as a member of the construction industry, it nonetheless is a "statutory employer" of its subcontractors, who are members of the construction industry. Thus, Respondent is responsible for securing workers' compensation coverage for its subcontractors who failed to secure an exemption or coverage for themselves.5/ The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to flooring installation subcontractors for which Respondent was noncompliant during the penalty period. However, the unrebutted evidence establishes that subcontractor Mike Smith was hired on a one-time basis to paint parking lot stripes in Respondent's parking lot. Thus, Petitioner's classification of Smith in NCCI class code 5478—— which is a construction industry code that applies to workers engaged in flooring installation——obviously is incorrect, and no evidence was presented showing the correct NCCI class code in which Smith should be classified. Accordingly, Smith should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to Respondent's noncompliance with respect to Charles, Frenchak, and Phelps during the penalty period. The credible, persuasive evidence establishes that Stark is engaged in retail sales on Respondent's business premises. However, in calculating the penalty, Petitioner classified Stark in NCCI class code 8018, which applies to salespersons engaged in selling merchandise at the wholesale level, rather than at the retail level. Thus, Petitioner incorrectly classified Stark in NCCI class code 8018. There is no evidence in the record identifying the correct NCCI class code in which Stark should be classified. Accordingly, Stark should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Calideen performs clerical employment duties and does not perform sales duties, so he should be classified in NCCI class code 8810, rather than in class code 8742. Accordingly, Petitioner should recalculate the portion of the penalty attributable to Respondent's noncompliance for Calideen using NCCI class code 8810. The credible, persuasive evidence establishes that Krembs, Skwarek, and Stahl are not employed as salespersons at the wholesale level. Thus, Petitioner incorrectly classified these employees in NCCI class code 8018. In its Proposed Recommended Order, Petitioner contends that because Respondent disputes the classification of these employees in class code 8018, Respondent is responsible for identifying the correct applicable class code, which it has not done. This position disregards that in this proceeding, Petitioner bears the burden of proof, by clear and convincing evidence, to show that its proposed penalty assessment against Respondent is accurate. Thus, Petitioner——not Respondent——is responsible for correctly identifying the NCCI class codes applicable to Respondent's employees. Here, the credible, persuasive evidence establishes that in calculating the penalty, Petitioner incorrectly classified Krembs, Skwarek, and Stahl in class code 8018,6/ and no evidence was presented showing the correct NCCI class code applicable to these employees. Accordingly, Krembs, Skwarek, and Stahl should not be included in Petitioner's calculation of the penalty to be assessed against Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Department of Financial Services, Division of Workers' Compensation, issue a final order amending the penalty to be assessed against Respondent as follows: Subtracting the penalty assessed for subcontractor Mike Smith, as shown on the Penalty Calculation Worksheet; and Subtracting the penalties assessed for Respondent's alleged noncompliance with respect to employees Amber Krembs, Jacquelyn Skwarek, and Monica Stahl, as shown on the Penalty Calculation Worksheet; and Reclassifying employee Andy Calideen in NCCI class code 8810 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Calideen using this class code; and Reclassifying employee Alexander Stark in NCCI class code 5784 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Stark using this class code. DONE AND ENTERED this 22 day of January, 2016, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22 day of January, 2016.
The Issue The issue is whether Petitioner properly issued a Stop-Work Order and Amended Order of Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to section 440.107. At all times relevant to this proceeding, Grandview was a corporation registered to do business in Florida. Grandview is a bread and breakfast and was an active company during the two-year audit period from August 22, 2015, through August 21, 2017. On July 19, 2017,1/ Respondent met with a Henderson Insurance agent and learned that Respondent was not in compliance with the workers' compensation requirements. Grandview immediately requested bids to obtain insurance, but did not purchase a policy because it was decided that it was "not the right time." On August 21, 2017, Robert Feehrer ("investigator" or "Feehrer"), compliance investigator for the Division, started an investigation of Grandview. Feehrer discovered that Grandview did not have any workers' compensation policies, employee leasing agreements, or exemptions on file with the National Council on Compensation Insurance. That same day the Division issued Grandview a Stop-Work Order for Respondent's failure to secure the required workers' compensation insurance coverage. Petitioner also served Grandview with a Request for Production of Business Records for Penalty Assessment Calculation ("Request") asking for documentation to enable the Division to evaluate the payroll for the audit period of August 22, 2015, through August 21, 2017, and to determine Respondent's compliance with the Workers' Compensation Law of Florida. Grandview responded timely and provided sufficient business records in response to the Division's Request. Eunika Jackson ("auditor" or "Jackson"), penalty auditor for the Division, was assigned to Grandview's investigation. Jackson reviewed the business records produced by Grandview. Jackson concluded her audit by properly calculating the workers' compensation amount owed by Grandview for the audit period using the Class Code 9052 for lodging facilities. Jackson applied the approved manual rates and methodology specified in section 440.107(7)(d). Grandview had at least four employees2/ during the audit period and did not have any exemptions from workers' compensation insurance coverage requirements during the audit period. Initially, Jackson calculated Grandview's penalty amount as being over $25,000.00. After Grandview timely provided sufficient business records in response to the Request, Jackson correctly applied the penalty reduction credit to the calculation and concluded Grandview owed a reduced penalty amount of $13,755.55. On November 27, 2017, Respondent was served with the Amended Order of Penalty Assessment totaling $13,755.55. On December 18, 2017, Respondent challenged the penalty assessment and requested a formal hearing.
Recommendation Based on the forgoing 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 $13,755.55. DONE AND ENTERED this 30th day of October, 2018, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY 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 30th day of October, 2018.
The Issue The issues in this case are whether Professional Staffing and Payroll Services, LLC, failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes (2014), and, if so, the penalty that should be imposed.
Findings Of Fact Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation insurance coverage for their employees, pursuant to chapter 440, Florida Statutes. Respondent, Professional Staffing and Payroll Services, LLC, is a registered Florida limited liability company. At all times relevant to this proceeding, its business address was 1400 Colonial Boulevard, Suite 260, Fort Myers, Florida. Respondent actively engaged in business during the period from February 1, 2015, to June 17, 2015. On June 2, 2015, Petitioner's compliance investigator, Jack Gumph, conducted a workers' compensation compliance investigation at a worksite located at 8530 Palacio Terrace North, Lot 67, Hacienda Lakes, Naples, Florida. At the worksite, Gumph observed five workers nailing down plywood on the trusses of the roof of a house under construction. One of the workers, Fernando Fernandez, identified himself as the job foreman. Mr. Fernandez and the other four workers were employed by J.S. Valdez, Inc. ("JSV"). These workers were engaged in carpentry work installing plywood. This type of carpentry work is classified as National Council on Compensation Insurance ("NCCI") class code 5403 and is considered a type of construction activity under Florida Administrative Code Rule 69L-6.021(2)(cc). The evidence established that JSV was a client company of Global Staffing Services, LLC ("GSS"), and that GSS supplied the workers to JSV. The evidence further established that all five workers Gumph observed at the Palacio Terrace jobsite were employees of GSS. Using the State of Florida's Coverage and Compliance Automated System ("CCAS") computer database, Gumph determined that JSV did not have workers' compensation insurance covering any of its employees, and that GSS had workers' compensation coverage only for two secretarial/clerical employees. Through research in the Florida Department of State, Division of Corporations Sunbiz database ("Sunbiz"), Gumph discovered that GSS was part of three related——as Gumph characterized it, "commingled"——business entities; these entities were GSS, Global Staffing Payroll, LLC ("GSP"), and Professional Staffing and Payroll Services, LLC, the named Respondent in this case. Ivan Hernandez was shown in Sunbiz as being the managing member of GSS and GSP. At that time, the managing member of Respondent was shown as being Martha Coloma. Gumph suspected that Respondent was leasing construction workers, who are engaged in hazardous work, through a staffing company that was characterized as a secretarial/clerical business (NCCI code 8810)——a substantially less hazardous occupation. The effect of classifying of these business as "secretarial/clerical" is that a much lower workers' compensation premium rate applies.2/ Gumph prepared requests for production of business records ("RPBR") for each of the related business entities and visited the business address listed in Sunbiz for GSS to personally serve them on Hernandez. The business was located in a strip mall that housed various types of businesses. As he was entering the business, he noted that the name shown at the entrance was "Professional Staffing." The business manager explained that GSS was opened in 2013, and that on February 1, 2015, the business name had been changed to Professional Staffing and Payroll Services——the named Respondent in this proceeding. Upon inquiry, Gumph was told that Hernandez was "out of state." Almost as soon as he left Respondent's business office, Gumph received a call from Hernandez, who confirmed that he was the owner and chief executive officer of both GSS and Respondent. Gumph scheduled an appointment with Hernandez for June 16, 2015. However, Hernandez did not keep that appointment or call Gumph back to reschedule the appointment. It was obvious to Gumph that Hernandez was avoiding him. In researching the Sunbiz records for Respondent, Gumph also noted that on June 16, 2015, the managing member's name had been changed from Martha Coloma to Ivan Hernandez. He also rechecked the CCAS and NCCI databases for Respondent and noted that only a few days before, a workers' compensation policy had been issued for Respondent. The policy listed the business as "secretarial/clerical" and had a total exposure of $143,000 to cover four secretarial/clerical employees. He also noted that GSS had a workers' compensation policy that was effective from August 15, 2014, to August 15, 2015, and that this policy did not cover any additional insured entities, so its coverage did not extend to Respondent or its employees. Gumph contacted Martha Coloma, who was employed by All Florida Financial Services, LLC, a payroll preparation and bookkeeping firm. Coloma told Gumph that in January 2015, Hernandez had asked her to amend the Sunbiz records for Respondent to be shown as Respondent's managing member. Coloma also told Gumph that Hernandez requested that she find a Professional Employer Organization ("PEO") leasing company that would secure workers' compensation coverage for approximately 40 to 50 of his employees who were engaged in construction work.3/ Coloma was unsuccessful, so Hernandez directed her to obtain another policy for secretarial/clerical employees. She obtained the policy covering the four secretarial/clerical employees. Thereafter, Gumph spoke directly with Hernandez, who confirmed that he employed 40 to 50 construction workers. He told Gumph that he had tried to obtain a policy but had been unable to do so. On June 17, 2015, Gumph issued a Stop-Work Order and Order of Penalty Assessment to Respondent, and also served a RPBR on Respondent. In response, Respondent provided business records consisting of bank statements from a Regions Bank account covering the period from February 1, 2015, to February 28, 2015. Respondent did not provide any copies of checks written during this period. Respondent also provided business records consisting of bank statements and copies of checks from a Fifth Third Bank payroll account for Respondent for the period of March 1, 2015, through June 17, 2015. The evidence establishes that between February 1, 2015, and June 12, 2015, Respondent employed 437 employees—— the great majority of whom worked in construction jobs——for whom Respondent failed to secure workers' compensation insurance coverage. For the period between June 13, 2015, and June 17, 2015, Respondent secured workers' compensation coverage for four secretarial/clerical employees. Based on the business records provided, Lynne Murcia, Petitioner's penalty auditor, calculated the penalty to be assessed against Respondent. Pursuant to section 440.107(7)(d)1., the penalty for failing to secure workers' compensation is equal to two times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during the period for which the employer failed to secure coverage during the two-year period preceding issuance of the Stop-Work Order. Here, because Respondent became a business entity on or about February 1, 2015, the penalty period applicable to this proceeding commenced on February 1, 2015, and ran through June 17, 2015, the date on which the Stop-Work Order and Penalty Assessment were served on Respondent.4/ Respondent did not obtain any exemptions from the workers' compensation coverage requirement for the period between February 1, 2015, and June 17, 2015. The business records Respondent provided in response to the RPBR were not sufficient to enable Petitioner to calculate Respondent's payroll for the period commencing on February 1, 2015, and ending on February 28, 2015. Accordingly, Petitioner imputed the gross payroll for Respondent's employees identified in the taxable wage report for the period covering February 1, 2015, through February 28, 2015, the statewide average weekly wage effective at the time of the Stop-Work Order, multiplied by two. The imputed wages for these employees over this period amounted to $2,544,907.68. For the period commencing on March 1, 2015, and ending on June 17, 2015, Respondent provided records sufficient to enable Petitioner to determine Respondent's actual gross payroll. For this period, Respondent's gross payroll amounted to $1,202,781.88. The evidence shows that for the period from February 1, 2015, through June 12, 2015, Respondent failed to secure workers' compensation coverage for any of its employees. On June 13, 2015, Respondent secured workers' compensation covering four secretarial/clerical employees. This coverage did not extend to Respondent's employees engaged in work other than secretarial/clerical work. For the period from June 13, 2015, to June 17, 2015, Respondent's gross payroll was calculated as $22,507.37. In calculating the applicable penalty, Respondent received a credit of $923.98 for the premium paid on the policy secured on June 12, 2015. This amount was deducted from the penalty owed. In calculating the penalty, Murcia determined the NCCI class code applicable to each employee according to his or her job, and applied the pertinent approved NCCI rates to determine the amount of the evaded premium for each employee. Pursuant to this method, Murcia calculated a total penalty of $645,019.36, which was reflected in the Amended Order of Penalty Assessment. In sum, Petitioner demonstrated, by clear and convincing evidence, that Respondent failed to secure workers' compensation coverage for its employees, in violation of chapter 440. The clear and convincing evidence further establishes that Petitioner correctly calculated a penalty of $645,019.36 to be assessed against Respondent pursuant to sections 440.107(7)(d)1. and 440.107(7)(e) and rule 69L-6.028.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent Professional Staffing and Payroll Services, LLC, violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage and imposing a penalty of $645,019.36. DONE AND ENTERED this 10th day of February, 2016, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 2016.
The Issue The issues are whether Respondent conducted business operations in Florida without obtaining workers’ compensation coverage that met the requirements of Chapter 440, Florida Statutes (2009), for its employees, and if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency that is responsible for enforcing Chapter 440, Florida Statutes, which requires employers to secure the payment of workers’ compensation for the benefit of their employees. Respondent is a Louisville, Kentucky-based corporation that is engaged in the construction, maintenance, and painting of elevated water tanks. Respondent has a second fabrication facility located in Newnan, Georgia. Respondent’s work constitutes construction. On March 4, 2010, Petitioner’s investigator, Lawrence F. Eaton, observed Respondent’s employees working on a water tower in Pace, Florida. While visiting the worksite, one of Respondent’s employees stated that he did not have any information regarding if and how the men were covered by workers’ compensation. The employee gave Mr. Eaton a telephone number for Respondent. Next, Mr. Eaton consulted the Kentucky Secretary of State website to find information concerning the corporate status of Respondent. The website indicated that Respondent was incorporated in 1892 and that it had three corporate officers. Mr. Eaton then consulted Petitioner’s Coverage and Compliance Automated System (CCAS) database. CCAS contains workers’ compensation policy information for each employer that has a Florida policy and information relative to workers’ compensation exemptions that have been applied for and issued to individuals by Petitioner. Mr. Eaton was unable to find any indication on CCAS that Respondent had secured workers’ compensation coverage by purchasing a Florida policy. CCAS also provided no evidence that Respondent had entered into an arrangement with an employee leasing company to provide workers’ compensation coverage to its employees. Additionally, CCAS did not show that Respondent had obtained exemptions for its corporate officers. Mr. Eaton subsequently spoke with one of Respondent’s representatives. Mr. Eaton was informed that Respondent was self-insured for workers’ compensation in Kentucky. Mr. Eaton also learned that Respondent had another workers’ compensation policy. Respondent’s representative indicated that she would send Mr. Eaton the policy paperwork. When he received the paperwork from Petitioner, Mr. Eaton determined that the insurance coverage did not comply with the requirements of Florida’s workers’ compensation law. The paperwork included an excess policy of workers’ compensation and a Georgia workers’ compensation policy. On March 5, 2010, Mr. Eaton issued a Stop-Work Order and Order of Penalty Assessment against Respondent. Specifically, the Stop-Work Order states that Respondent was not in compliance with Chapter 440, Florida Statutes, because Respondent failed to obtain workers’ compensation coverage for its employees. On March 5, 2010, Mr. Eaton issued a Request for Production of Business Records for Penalty Assessment Calculation to Respondent. On March 8, 2010, Respondent provided Mr. Eaton with additional workers’ compensation policy information. The information included the declarations page for Chartis Company Policy No. WC 005-73-7942. The Chartis policy is a Workers’ Compensation and Employers Liability Policy. In Item 3A, the policy lists the states that are covered, in Part One of the policy, pursuant to each state’s workers’ compensation law. Georgia is named as a covered state in Item 3A. In Item 3C, the Chartis policy lists the states that are covered, in Part Three of the policy, as "other states insurance." Florida is listed only in Item 3C. Item 4 of the Chartis policy states that "[t]he premium of this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit." In response to the request for business records, Respondent provided Petitioner with payroll information for work it had performed in Florida between September 2007 and February 2010. After receiving this information, Respondent’s Penalty Calculator, Robert McAullife, calculated a penalty. Because Respondent had not provided all of the requested business records, Mr. McAullife imputed Respondent’s payroll for a portion of the relevant time period. In calculating the penalty, Mr. McAullife first sought to determine the amount of premium that Respondent would have paid had it been properly insured for the relevant three-year period. Mr. McAullife assigned a class code for each of Respondent’s employees, reflecting the work they performed. Mr. McAullife then took 1/100th of the payroll and multiplied that figure by the approved manual rate applicable to each class code. Mr. McAullife then took the previously obtained product and multiplied it by 1.5 to find a penalty in the amount of $122,242.23. This penalty is based on Respondent having $382,146.90 in Florida payroll that would have required $81,494.66 in workers’ compensation premium. There are no errors in Mr. McAullife’s penalty calculation. Mr. Eaton issued an Amended Order of Penalty Assessment on March 23, 2010. On March 24, 2010, Respondent and Petitioner entered into a Payment Agreement Schedule for Periodic Payment of Penalty that required ten percent of the penalty to be paid in advance and the remainder to be paid in 60 interest-free monthly payments. Respondent also produced a policy that provided coverage in compliance with Florida law with an effective date of March 12, 2010. As a result, Petitioner issued an Order of Conditional Release, permitting Respondent to return to work. During the hearing, Respondent presented evidence that it is a registered self-insured company in Kentucky for the first $500,000.00 of workers’ compensation. Additionally, Respondent has excess insurance for any workers’ compensation claims that exceed the $500,000.00 threshold. Because it is self-insured in Kentucky, Respondent must purchase letters of credit on an annual basis. Respondent paid the following for its recent letters of credit: (a) 2007, $26,755.54; (b) 2008, $32,438.48; (c) 2009, $33,626.38; and (d) 2010 to date, $8,931.39. The State of Kentucky assesses qualified self-insureds a six and one half percent tax based on an annual simulated premium. The amount of the simulated premium represents what a qualified self-insured would pay for a "first dollar" policy of workers’ compensation insurance. Respondent’s recent simulated premiums are as follows: (a) 2007, $453.440.00; (b) 2008, $480,637.00; (c) 2009, $623,940.00; and (d) 2010, $1,006,243.00. Respondent also maintains a "high dollar" deductible policy of insurance that provides workers’ compensation coverage for its Georgia employees. Respondent’s Georgia policy, Chartis Company Policy No. WC 005-73-7942, which includes Florida as part of "all other states" in Item 3C of the declarations page, also requires the payment of premiums. Respondent recently paid the following premiums for this insurance: (a) 2007, $124,736.78; (b) 2008, $125,950.08; and (c) 2009, $64,465.28. The premiums paid by Respondent for the Chartis Company Policy No. WC 005-73-7942 are not based on Florida rates. From 2007 to 2010, Respondent provided workers’ compensation benefits for at least four different workers that were injured while performing work for Respondent in Florida. The workers’ compensation benefits paid by Respondent on these claims totaled $147,958.25.
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 Caldwell Tanks, Inc., failed to comply with Chapter 440, Florida Statutes, and imposing a penalty in the amount of $122,224.22. DONE AND ENTERED this 8th day of December, 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 8th day of December, 2010. COPIES FURNISHED: Claude M. Harden, III, Esquire Carr Allison 305 South Gadsden Street Tallahassee, Florida 32301 Jamila Georgette Gooden, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, 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 32399-0390 Honorable Alex Sink Chief Financial Officer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0390
The Issue Whether Petitioner, Department of Financial Services, Division of Workers’ Compensation (“Division”), properly issued a Stop-Work Order and 4th Amended Penalty Assessment against Respondent, Best Affordable Contractors, LLC (“Respondent”), for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact On July 31, 2020, the parties filed a Joint Pre-hearing Stipulation, by which the parties stipulated to the facts set forth in the following paragraphs 2 through 17. Stipulated Findings The Division is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees and corporate officers. Respondent was engaged in business operations in Florida during the entire period of January 4, 2017, through January 3, 2019. On January 3, 2019, the Division’s investigator, Deryck Gallegos, commenced a workers’ compensation compliance investigation at Respondent’s work site at 1203 Dancy St., Jacksonville, Florida 32205. On January 3, 2019, Respondent had a paid subcontractor, Terry Wayne Lyons, Sr., performing roofing work at 1203 Dancy St., Jacksonville, Florida 32205. On January 3, 2019, Respondent’s subcontractor, Terry Wayne Lyons, Sr., had five paid employees performing roofing work at 1203 Dancy St., Jacksonville, Florida 32205: Terry Wayne Lyons, Sr.; Jahru Li-Ly Campbell; Kevin Lee Hagan; Terry Wayne Lyons, Jr.; and Jonathan Wayne McCall. On January 3, 2019, Respondent’s subcontractor, Terry Wayne Lyons, Sr., had no workers’ compensation exemptions and no workers’ compensation insurance coverage. On January 3, 2019, Respondent had no workers’ compensation exemptions and no workers’ compensation insurance coverage. On January 3, 2019, the Division issued a Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment to Respondent. The Division served the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment on Respondent by personal service on January 4, 2019. The Division served a Request for Production of Business Records for Penalty Assessment Calculation on Respondent on January 4, 2019. On February 1, 2019, the Division issued an Amended Order of Penalty Assessment to Respondent. The Division served the Amended Order of Penalty Assessment on Respondent on February 7, 2019. The Amended Order of Penalty Assessment imposed a penalty of $353,349.72. On June 3, 2020, the Division issued a 2nd Amended Order of Penalty Assessment to Respondent. The Division served the 2nd Amended Order of Penalty Assessment on Respondent on June 11, 2020. The 2nd Amended Order of Penalty Assessment imposed a penalty of $68,705.29. On July 30, 2020, the Division served a 3rd Amended Order of Penalty Assessment to Respondent. The 3rd Amended Order of Penalty Assessment imposed a penalty of $46,805.02. Throughout the penalty period, Respondent was an “employer” in the state of Florida, as that term is defined in section 440.02(16). Respondent did not obtain exemptions from workers’ compensation insurance coverage requirements for the entries listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment as “Employer’s Payroll” during the penalty period. Respondent did not secure the payment of workers’ compensation insurance coverage, nor did others secure the payment of workers’ compensation insurance coverage, for the entries listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment as “Employer’s Payroll” during the periods of non-compliance listed on the penalty worksheet. The manual rates, class codes, and gross payroll identified on the penalty worksheet of the 3rd Amended Order of Penalty Assessment are correct to the extent a penalty is due. Evidentiary Findings Based on business records received from Respondent, the Division has recalculated the assessed penalty. The proposed penalty has been reduced to $27,553.78. Respondent has paid $1,000.00 for the release of the Stop Work Order, leaving a remaining penalty of $26,553.78. In determining the penalty, the Division reviewed Respondent’s business and financial records for a period of two years, from January 4, 2017, through January 3, 2019. Respondent was cooperative and forthcoming with the Division in providing its business and financial records. Penalties are calculated first by establishing the nature of the work being performed by employees. That is done by comparing the work to descriptions provided in the National Council of Compensation Insurance (NCCI) SCOPES® Manual. As relevant to this proceeding, the work being performed by persons who were employees of Respondent was as described in SCOPES® Manual class codes 5551 (Roofing - All Kinds & Drivers); 8227 (Construction or Erection Permanent Yard); 5213 (Concrete Construction NOC); and 8810 (Clerical Office Employees NOC). Workers’ compensation insurance premium rates are established based on the risk of injury associated with a particular class code. The greater the risk of injury, the greater the premium rate to insure that risk. Work such as roofing entails a significant risk of injury, and the approved manual rate is thus very high. Office and clerical work entails a very low risk of injury, and the approved manual rate is correspondingly very low. When work is performed but it is not specifically identified, e.g., laborer, the highest rated classification code for the business being audited is assigned to the employee. In this case, the highest rated classification code applicable to Respondent is class code 5551, for roofing. The 4th Amended Order of Penalty Assessment reveals payroll for individuals engaged in work described in class codes as follows: Anthony Wright - class code 5551 Donnell Eugene Johnson - class code 5551 Edward Tipton - class code 8227 Eugene Monts - class code 5213 James Dunlap - class code 5551 James Walters - class code 5551 Jorel Golden - class code 5551 Kelvin Morrison - class code 5551 Matthew Robinson - class code 5551 Vincent Marino - class code 8810 Jahru Li-Ly Campbell - class code 5551 Kevin Lee Hagan - class code 5551 Jonathan Wayne McCall - class code 5551 Terry Lyons, Jr. - class code 5551 Terry Lyons, Sr. - class code 5551 Mr. Lyons, Sr., was retained by Respondent as a subcontractor. Mr. Lyons, Sr., previously held an exemption from workers’ compensation as an officer of his company, but it had expired on December 27, 2017. Mr. Lyons, Sr., was working at the 1203 Dancy Street worksite on January 3, 2019. The evidence was sufficient to establish that Mr. Lyons, Sr., was appropriately assigned as class code 5551. His exemption was accepted up to its date of expiration, so the period applicable to the penalty calculation for Mr. Lyons, Sr., was from December 28, 2017, to January 3, 2019. Mr. Lyons, Sr.’s employees who were working at the 1203 Dancy Street worksite on January 3, 2019, were Mr. Campbell, Mr. Hagan, Mr. McCall, and Mr. Lyons, Jr. The evidence was sufficient to establish that they were employees of Respondent’s uninsured subcontractor, and that they were appropriately assigned as class code 5551. Mr. Wright and Mr. Robinson were listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- roofing.” Respondent was not able to demonstrate that they were covered by workers’ compensation. The evidence was sufficient to establish that Mr. Wright and Mr. Robinson were appropriately included in the penalty calculation, and that they were appropriately assigned as class code 5551. Mr. Johnson, Mr. Dunlap, and Mr. Morrison were listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- laborer.” Respondent was not able to demonstrate that they were covered by workers’ compensation. The evidence was sufficient to establish that Mr. Johnson, Mr. Dunlap, and Mr. Morrison were appropriately included in the penalty calculation, and that they were appropriately assigned as the highest rated classification code applicable to Respondent, class code 5551. Mr. Tipton was listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- handyman, yard work/clean up, truck detail.” Mr. Monts was listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- laborer.” Ms. Murcia testified that Mr. Marino provided information that Mr. Monts did concrete work, rather than roofing. Respondent was not able to demonstrate that they were covered by workers’ compensation. Mr. Marino indicated that Mr. Tipton and Mr. Monts should have been identified as his personal expenses, performing work at his home. However, they were identified in Respondent’s records as subcontract labor, and the payments to them were reported on Respondent’s 2017 income tax return as business expenses. They each received multiple payments over an extended period. The evidence was sufficient to establish that Mr. Tipton and Mr. Monts were employees of Respondent. The evidence was sufficient to establish that Mr. Tipton was appropriately assigned as class code 8227, and that Mr. Monts was appropriately assigned as class code 5213. Nonetheless, payments to the two were reduced by 20 percent to account for expenditures for materials, with the remaining 80 percent constituting payroll. Fla. Admin. Code R. 69L-6.035(1)(i). Mr. Marino was not an on-site employee of Respondent, but rather performed administration and clerical functions for Respondent. Mr. Marino previously had workers’ compensation, but it had been cancelled on February 28, 2015. The evidence was sufficient to establish that Mr. Marino was appropriately assigned as class code 8810. Mr. Marino obtained an exemption from workers’ compensation as an officer of Respondent on January 4, 2019. The evidence established that James Walters performed repairs to Respondent’s truck. The evidence was not clear and convincing that Mr. Walters was an employee of Respondent. Jorel Golden was identified solely as the payee on a single check image. He did not appear on Respondent’s Profit & Loss Detail Sheet, and there was no evidence as to why Mr. Golden was being paid. The evidence was not clear and convincing that Mr. Golden was an employee of Respondent. The salaries of the employees were calculated based on Respondent’s business records. The total gross payroll amounted to $170,139.07. Except for the amount of payments to Mr. Walters and Mr. Golden, that figure is supported by clear and convincing evidence. The penalty for Respondent’s failure to maintain workers’ compensation insurance for its employees is calculated as 2.0 times the amount Respondent would have paid in premiums for the preceding two-year period. The NCCI periodically issues a schedule of workers’ compensation rates per $100 in salary, which varies based on the SCOPES® Manual classification of the business. The NCCI submits the rates to the Florida Office of Insurance Regulation, which approves the rates to be applied to the calculation of premiums in Florida. The workers’ compensation insurance premium was calculated by multiplying one percent of the gross payroll ($17,013.91) by the approved manual rate for each quarter (which varied depending on the quarterly rate), which resulted in a calculated premium of $18,369.19. Clear and convincing evidence supports a finding that the Division applied the correct rates in calculating the premium. The penalty was determined by multiplying the calculated premium by 2.0, resulting in a final penalty of $36,738.38. In recognition of Respondent’s cooperation in the investigation and the timely submission of its business records, the Division applied a 25 percent reduction in the penalty ($9,184.60), resulting in a total penalty of $27,553.78. The evidence established that the Division gave every benefit of the doubt to Respondent to reduce the penalty, and its effect on Respondent, to the extent allowed within the confines of the law and the records provided.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a final order assessing a penalty of $27,553.78, against Respondent, Best Affordable Contractors, LLC, for its failure to secure and maintain required workers’ compensation insurance for its employees and subcontracted labor, subject to recalculation as provided herein, and subject to Respondent’s previous payment of $1,000.00. DONE AND ENTERED this 15th day of September, 2020, in Tallahassee, Leon County, Florida. S E. GARY EARLY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of September, 2020. COPIES FURNISHED: Vincent Marino Best Affordable Contractors, LLC 1348 Clements Woods Lane Jacksonville, Florida 32211 (eServed) Leon Melnicoff, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue Whether Respondent, Randall Lee Southerland, conducted operations in the construction industry in the State of Florida without obtaining workers’ compensation coverage, meeting the requirements of Chapter 440, Florida Statutes (2007),1 in violation of Subsection 440.107(2), Florida Statutes. If so, what penalty should be assessed by Petitioner, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes (2007), and Florida Administrative Code Chapter 69L.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees. § 440.107, Fla. Stat. Respondent is a sole proprietor, allegedly engaged in the construction industry, providing tile and grouting services and carpet removal to private residences in Florida. On November 30, 2007, Eric Duncan and Alison Pasternak, both of whom are workers’ compensation investigators for Petitioner, were conducting random compliance checks in Lee County. Investigator Duncan noticed two men working outside of a residence in Cape Coral, one using a power saw and the other mixing a substance in a bucket. Investigators Duncan and Pasternak decided to conduct a compliance check of these two men to ensure they were workers’ compensation coverage compliant. The two men identified themselves as Randall Lee Southerland and Tim Weaver. Weaver produced his Exemption Certificate for workers’ compensation coverage. No further action was taken in regards to that investigation. Southerland was observed mixing the substance, which was later determined to be tiling grout. Southerland did not have a workers’ compensation insurance policy, a coverage exemption certificate, nor was he employed via a leasing agency. After consulting with his supervisor, Investigator Duncan issued SWO No. 07-364-D7 to Respondent along with a Business Records Request for the time-period of December 1, 2004, through November 30, 2007. Respondent provided records to Petitioner shortly thereafter, and, subsequently, a penalty assessment was calculated. The calculations of Respondent’s gross payroll was necessary since it was alleged that he worked in the construction field of tiling. Respondent disputes this classification and argues that grouting is separate from the installation of tiles and is not a classification within the construction field. Therefore, neither a workers’ compensation insurance policy, nor an exception is required. The National Counsel on Compensation Insurance (NCCI) established a codification of construction employment activities; all of which have been adopted by Petitioner and are commonly referred to as “class codes.” The NCCI class code for tiling is “5348.” It is undisputed that Respondent was doing the grout- work for the newly installed tiles. It is further undisputed that the definition of tiling, per the NCCI class code “5348,” included the finishing, setting, and installation of tiles. It was also established that loose tiles, merely laying on the floor, are not finished, nor set, until the grout is laid. Pursuant to Section 440.107, Florida Statutes, the calculation of the penalty was completed on a penalty calculation worksheet. The worksheet was completed by examining the records received from Respondent and calculating the gross payroll that was paid to him. The penalty was later amended to reflect additional records provided through discovery, the evidence of the payment for the November 30, 2007, job consisting of a $500.00 check from the real estate agent. The Amended Order assessed a penalty of $1,168.68, which is the applicable amount of the premium evaded and includes the 50 percent penalty for the time period of December 1, 2004, through November 30, 2007.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order: Finding that Respondent failed to secure the payment of workers’ compensation coverage for the sole proprietor, Randall Lee Southerland, in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent, in the amount of $1,168.68, which is equal to 1.5 times the evaded premium based on the payroll records provided by Respondent and the applicable approved manual rate and classification code. DONE AND ENTERED this 3rd day of June, 2008, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 3rd day of June, 2008.
