The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2017), by failing to secure the payment of workers’ compensation coverage as alleged in the Stop-Work Order and Second Amended Order of Penalty Assessment and, if so, what penalty is appropriate.1/
Findings Of Fact The Department is the state agency responsible for the enforcement of the workers’ compensation insurance coverage requirements established in chapter 440. On September 14, 2017, Investigator Murvin conducted a random workers’ compensation compliance check at a residential construction site at 8256 Lake James Drive in Lakeland, Florida. During the course of the compliance check, Investigator Murvin observed two individuals--Donald Steven Paul, Jr. and Dean Wayne Paul--painting the home. It is undisputed that Respondent had been subcontracted to perform painting services at this site; and that these two individuals were, at the time of Investigator Murvin’s visit, employed by Respondent. After speaking to Donald and Dean Paul, Investigator Murvin used the Department’s database to verify that Respondent did not have workers’ compensation insurance coverage, nor did Donald or Dean Paul have an exemption from the coverage requirements. Donald Paul admitted to Investigator Murvin at the hearing that he did not have workers’ compensation coverage for himself or Dean Paul. Donald Paul explained that he believed that his incorporation with the state and securing of liability insurance provided compliance of all insurance requirements. Based on the information provided by Dean and Donald Paul, and from the database, Investigator Murvin issued a SWO to Respondent on the same day as the site visit. A Request for Production of Business Records was also issued to Respondent. In response to the request for documentation, Respondent provided bank statements that indicated the business began in August 1, 2016. The bank statements also established that there was money being deposited and being paid out, but there was no indication what the money was for or how it was allocated. In other words, there was no way to discern whether the money paid out of the bank account was for employee salaries or other business expenses. In support of its Second Amended Order of Penalty Assessment, the Department prepared a penalty calculation worksheet showing a total penalty owed of $2,090.14. At the hearing, Respondent did not challenge the accuracy or method of calculating the assessed penalty, but only asserted that it believed it had the appropriate coverage and that the penalty was “too high.” Based on the evidence, it is clear Respondent provides construction services and has at least one employee; therefore, it was required to secure workers’ compensation insurance. The Department established by clear and convincing evidence that Respondent failed to secure the payment of workers’ compensation as required by chapter 440. The Department has established through the records submitted and testimony of Auditor Murcia, the appropriate penalty for Respondent’s failure to obtain workers’ compensation coverage is $2,090.14 for the audit period of August 1, 2016, to August 14, 2017.
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 finding that Respondent, Donald Steven Paul d/b/a/ D. P. Painting of Lakeland, violated the provisions of chapter 440 by failing to secure the payment of workers’ compensation and assessing against Respondent a penalty in the amount of $2,090.14. DONE AND ENTERED this 20th day of April, 2018, in Tallahassee, Leon County, Florida. S HETAL DESAI 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 April, 2018.
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 is the state agency responsible for, inter alia, monitoring businesses within the state to ensure that such businesses are providing the requisite workers' compensation insurance coverage for all employees. The Division's headquarters are located in Tallahassee, Florida, but its investigators are spread throughout the state in order to more effectively monitor businesses. Respondent is a construction company that has been operating in excess of 30 years. It is a small company and usually only has a few employees at any given time. The company is located in Charlotte Harbor, Florida. Workers' compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. Workers' compensation coverage may be secured via three non-mutually exclusive methods: 1) The purchase of a workers' compensation insurance policy; 2) Arranging for the payment of wages and workers' compensation coverage through an employee leasing company; or 3) Applying for and receiving a certificate of exemption from workers' compensation coverage, if certain statutorily-mandated criteria are met. On January 8, 2009, Ira Bender, investigator for the Division, was doing on-site inspections in Port Charlotte, Florida. Bender stopped at the site on Edgewater Drive where new construction was underway at a YMCA. Bender observed a man (later identified as Thomas Woodall) sweeping the floor. Bender questioned Woodall and was told that Woodall worked for Respondent. When asked about his workers' compensation insurance coverage, Woodall advised that his insurance was maintained through Frank Crum Leasing Company ("Crum"). Bender called Crum and found that although Woodall had been carried as an employee of Respondent in the past, he had been released from coverage. The reason for his release was that his employment had been terminated for lack of business. Bender called Respondent to inquire about workers' compensation coverage. He was told that Respondent did not realize Woodall had been dropped from the Crum insurance coverage and that he would be reinstated immediately. In fact, coverage was restarted on that same day. Based on his finding that an employee had been working without coverage, Bender called his supervisor and provided his findings. The supervisor authorized issuance of a SWO based on the findings. The SWO was served on Respondent via hand- delivery at 11:45 a.m., on January 8, 2009. The SWO was also posted at the work site. The Division then requested business records from Respondent in order to determine whether there were any violations. If there were violations, then the Division would ascertain the amount of penalty to assess. Respondent cooperated and submitted the business records, as requested. After review of the business records, the Division issued its first Amended Order of Penalty Assessment ("Order") on January 14, 2009. The process employed by the Division was to locate all uncovered employees, i.e., those working without workers' compensation insurance for any period of time. The employees were then assigned a class code from the National Council on Compensation Insurance (NCCI) publication. Each trade or type of employment is assigned a code which sets the rate to be applied to an individual depending on the type of work he/she is performing. The Division assigned codes to the employees, determined how much the employee had been paid during the period of non-coverage, assigned the rate to the gross pay, and calculated the insurance premium needed to cover the worker for the time in question. A penalty of 1.5 times the premium was then assigned. The Order assessed a total penalty of $21,165.98 against Respondent. Respondent objected to the amount and refused to sign it due to errors contained in the Penalty Worksheet attached to the Order. Signing the Order would have allowed Respondent to return to work, but he refused to sign because he knew it was not correct. Pursuant to discussions between the parties and "additional records received," the Division issued a second Order on January 16, 2009, assessing a penalty of $6,501.27. Respondent believed that the Division was still in error and provided yet additional information--some verbal--to the Division. A third Order was issued on January 21, 2009, reducing the penalty to $3,309.56. However, Respondent still believed the penalty worksheet contained errors. Again, Respondent refused to sign and provided additional information to the Division. The Division issued a fourth Order on January 28, 2009, assessing a penalty of $2,822.24. That Order had an error concerning the spelling of an employee's name, but the penalty amount was correct. Respondent would not sign the fourth Order, because he did not believe he had intentionally violated any statute or rule concerning workers' compensation coverage for his employees. A corrected (fifth amended) Order was ultimately issued on May 19, 2009.1 The fifth Order asserts the amount of penalty now in dispute, which is the same amount appearing in the fourth amended Order. Respondent signed the fifth Order and entered into a payment plan for payment of the penalty, paying a down payment of $1,000 and monthly payments of $30 until paid in full. Respondent takes great offense to the fact that the penalty assessments were not faxed to him more quickly. He maintains that he had every intention to resolve this matter as quickly as possible, but the Division delayed and dragged out the process. The penalty worksheet attached to the fifth Order listed nine "Employee Names" that are subject to the penalty assessment. Each will be discussed below. The first "employee" is listed as "Cash" and is assigned Class Code 5403. This "employee" represents checks found in Respondent's records with the payee listed as "cash- casual labor" totaling $2,178.00 in gross payroll. Code 5403 was assigned because that is the code used by Crum for Respondent's general business. The manual rate for Code 5403 is $24.74. A penalty of $808.26 was assessed for that employee. The second employee is Jacob Prewitt. Prewitt was assigned Class Code 5221, due to the word "driveway" appearing on a check issued to him. Driveway work falls under a lower approved manual rate ($10.37) than general construction. The gross payroll amount was $1,960, and the penalty assigned to Prewitt was $304.88. The third employee is Woodall, assigned a Class Code of 5606, with a manual rate of $3.84. That code is used for supervisors and is, again, not as dangerous an occupation as general construction. The gross payroll for this entry was $1,008, and the penalty assessed for Woodall was $58.07. Cash is the fourth employee and has been covered in the discussion in paragraph 16, above. Barry Lawrence is the fifth employee; he is assigned Class Code 5437 as a cabinet maker/installer with a manual rate of $13.01. Lawrence had a Verification Letter issued by the Division indicating he was exempt from workers' compensation coverage. However, that exemption was limited to cabinet- making. By installing the cabinets, Lawrence performed work outside his exemption status. The gross payroll for his work was $6,200, and the penalty assessed for Lawrence was $1,209.33. Respondent was completely unaware that the exemption letter did not cover installation and had, in fact, always allowed cabinet- makers to install the cabinets as well. Brunderman Builders is listed as the sixth employee. It is assigned Class Code 5403 with a manual rate of $14.39. The gross payroll for this entry was $550, resulting in a penalty assessment of $118.73. The seventh employee is Jorge Gonzolas, assigned Class Code 5403, the general contracting code. Gonzolas was the employee of a contractor who was subcontracting with Respondent. The contractor died unexpectedly, and Gonzolas was left without payment for the work he had performed. Respondent generously decided to pay Gonzolas for his work, thereby, effectively making Gonzolas a de facto employee. The amount paid Gonzolas was $599.00; the penalty assessed for Gonzolas was $129.30. Woodall is again listed as employee number eight, this time with Class Code 5610, reflecting casual labor he did on one date that his insurance was not in place. The payroll amount for this work was $37.50. The penalty assessed for Woodall was $4.02. The ninth employee was Julio Garcia, assigned Class Code 8742 for outside sales, with a manual rate of $.64. The payroll amount for Garcia was $1,300. His penalty assessment amount was $12.48. Garcia was another one of the deceased subcontractor's employees that Respondent volunteered to pay for work Garcia had performed. The total payroll at issue for Respondent was $14,477.50. The total premium for that amount of payroll would have been $1,881.48, and the penalty assessed was $2,822.84. This is a fairly insignificant portion of Respondent's $5.5 million annual payroll. Respondent did not intentionally attempt to avoid the payment of workers' compensation insurance for its employees. There is no pattern of avoidance or indication that non-payment was Respondent's goal. Rather, there are plausible and reasonable explanations about the unpaid premiums. For Woodall, Respondent believed he was still covered through the Crum policy. For Gonzolas and Garcia, Respondent was simply attempting to be a nice guy. For Prewitt, the employee's exemption had unknowingly lapsed. For Lawrence, Respondent relied upon a Verification Letter from the state, but misinterpreted its scope. The Division, on the other hand, only pursued Respondent based on an actual finding of non-coverage. But for Woodall's presence at a work site doing manual labor (sweeping the floor), the Division would not have looked at Respondent's records. There is no indication the Division acted other than in strict accordance to its governing rules.
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, upholding the assessment of a penalty of $2,822.24 against Respondent, Brunderman Building Company, Inc. DONE AND ENTERED this 9th day of October, 2009, in Tallahassee, Leon County, Florida. 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 9th day of October, 2009.
The Issue Whether Respondent, Forgue General Contracting, Inc., violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation coverage; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing workers’ compensation coverage requirements in Florida, including the requirement that employers secure the payment of workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Respondent operates a construction company in Florida, and Respondent has been in business since 2004. On October 31, 2018, Margaret Cavazos, a compliance investigator with the Department, conducted a random workers’ compensation check at a worksite located at 1172 East State Road 434 in Winter Springs, Florida. The worksite is a two-story commercial building with five individual storefronts. Investigator Cavazos arrived at the worksite at 8:30 a.m. There, she observed four individuals who she believed were preparing the exterior of the building for painting. One person was covering a window with tape and brown construction paper. Two more individuals were standing in the bucket of a boom lift approximately 15 feet above the ground next to the building. They appeared to be placing blue tape over a sign of one of the businesses in the building. A fourth person was positioned by a truck supervising the activity. Investigator Cavazos further noticed that several of the business names had already been covered with construction paper and tape. Investigator Cavazos approached the person standing by the truck and introduced herself. He identified himself as Jose Luis Chachel. Mr. Chachel informed Investigator Cavazos that he and the other three individuals at the worksite were working for a company called RC Painting Services, Inc. (“RC Painting”). Mr. Chachel further stated that they were preparing the building to be painted. The other three individuals at the worksite identified themselves to Investigator Cavazos as Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Investigator Cavazos watched the four individuals work at the jobsite for about an hour, then they departed. Investigator Cavazos, however, did not obtain any information from Mr. Chachel or the other individuals concerning how long they had worked for RC Painting, when they had arrived at the jobsite, their rate of pay, or whether RC Painting had actually paid them for their work. At the final hearing, Investigator Cavazos testified that her duties for the Department include inspecting businesses and worksites to determine whether a business has obtained the required workers’ compensation insurance coverage. Investigator Cavazos explained that a business that performs construction- related work must have workers’ compensation coverage. Therefore, Investigator Cavazos believed that, prior to beginning the painting activities, RC Painting should have secured sufficient workers’ compensation coverage for all four individuals identified at the worksite. After learning the name of the business that arranged for the presence of the four individuals at the jobsite, Investigator Cavazos consulted the Department’s Coverage and Compliance Automated System (“CCAS”) database for information on RC Painting. CCAS is a Department database that tracks workers’ compensation insurance coverage. CCAS contains coverage data from insurance carriers, as well as any workers’ compensation exemptions on file with the Department. Insurance providers are required to report coverage and cancellation information, which the Department uses to update CCAS. CCAS had no record that RC Painting carried any workers’ compensation coverage for the four individuals Investigator Cavazos observed at the worksite. While reviewing CCAS, Inspector Cavazos also noted that the Department did not have on file any request from RC Painting for an “exemption” from workers’ compensation coverage. An exemption is a method by which a business’s corporate officer may exempt him or herself from the requirements of chapter 440. See § 440.05, Fla. Stat. CCAS also revealed to Investigator Cavazos that on the date of her inspection, RC Painting had an active employee leasing agreement with SouthEast Personnel Leasing (“SouthEast Leasing”), an employee staffing company. At the final hearing, Inspector Cavazos explained that a business is not required to obtain workers’ compensation insurance for its employees if coverage is properly provided by or through an employee leasing company’s workers’ compensation policy. However, in order for an employee leasing company to become responsible for the workers’ compensation coverage of a particular employee, the business seeking coverage for that employee must ensure that the employee submits an application to the leasing company. Thereafter, if (and only if) the leasing company accepts the application, the leasing company becomes accountable for the workers’ compensation insurance coverage for that employee. Investigator Cavazos contacted SouthEast Leasing. SouthEast Leasing provided Investigator Cavazos an active roster of employees it leased to RC Painting. However, neither Mr. Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, nor Jenny Araque were listed on this roster. Therefore, Investigator Cavazos concluded that none of the four individuals she identified at the worksite were covered by workers’ compensation insurance under RC Painting’s leasing arrangement with SouthEast Leasing on October 31, 2018. After determining that neither CCAS nor SouthEast Leasing recorded any workers’ compensation coverage for the persons at the worksite, Investigator Cavazos contacted RC Painting’s owner, Roberto Chavez. (Mr. Chachel provided Investigator Cavazos with his phone number during her inspection.) Investigator Cavazos testified that, during their phone call, Mr. Chavez confirmed that the four individuals worked for him. Mr. Chavez further informed Investigator Cavazos that RC Painting had been hired by Respondent to paint the building. At that point, Investigator Cavazos called Respondent to inquire about workers’ compensation coverage for Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Investigator Cavazos spoke with one of Respondent’s employees, Anthony Gonzalez. Mr. Gonzalez confirmed that Respondent engaged RC Painting to paint the building. Continuing to search for active workers’ compensation coverage, Investigator Cavazos discovered that Respondent also had an employee leasing agreement with SouthEast Leasing. Investigator Cavazos reviewed SouthEast Leasing’s roster which recorded only two covered employees for Respondent, Anthony Gonzalez and Edward Forgue (Respondent’s president). As with RC Painting’s leasing agreement, Respondent’s leasing agreement with SouthEast Leasing did not cover Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, or Jenny Araque on October 31, 2018. As detailed below, under section 440.10(1), a contractor is liable for, and is required to secure, workers’ compensation coverage for all employees of a subcontractor to whom the contractor sublets work. (Section 440.10(1)(c) also directs the contractor to require a subcontractor to provide evidence of workers’ compensation insurance.) Therefore, as a contractor hiring a subcontractor for construction work, Respondent was required to exercise due diligence to ensure that all RC Painting’s employees who were painting the building were covered by workers’ compensation insurance. On October 31, 2018, based on her findings, Investigator Cavazos issued a Stop-Work Order to RC painting. Later that day, Mr. Chavez ventured to the Department’s local office to determine how his business could be released from the Stop-Work Order. There, he met with district supervisor, Salma Qureshi. Ms. Qureshi informed Mr. Chavez that, in order for his company to return to work, he needed to pay a $1,000 fine and complete an Affirmation. She explained to Mr. Chavez that on the Affirmation, he was to describe how RC Painting intended to come into full compliance with workers’ compensation coverage requirements. Mr. Chavez had, in fact, brought with him a cashier’s check for $1,000. (The amount was included on the Stop-Work Order.) Mr. Chavez then completed an Affirmation before Ms. Qureshi. On the Affirmation, Mr. Chavez wrote the names of the four individuals Investigator Cavazos identified at the jobsite. Next to each name, Mr. Chavez wrote “$20.” Below the names, he wrote “I am terminating.” Mr. Chavez then signed and dated the Affirmation. At the final hearing, Ms. Qureshi expressed that Mr. Chavez told her that he was going to pay each of the four individuals $20 for the day’s work they performed on October 31, 2018, and then he was terminating them. In addition to issuing the Stop-Work Order to RC Painting, on October 31, 2018, Investigator Cavazos issued a Stop-Work Order for Specific Worksite Only to Respondent, which was served on November 2, 2018. Investigator Cavazos also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Through this document, the Department requested several categories of business records from Respondent for the period of November 1, 2016, through October 31, 2018. The requested documents pertained to: employer identification, payroll documents, account documents, disbursements, workers’ compensation coverage, professional employer organization records, temporary labor service, exemptions, subcontractor records, and subcontractors’ workers’ compensation coverage. Based on Investigator Cavazos’s investigation, the Department determined that Respondent failed to secure adequate workers’ compensation coverage for its employees. Therefore, the Department proceeded to calculate a penalty based on Respondent’s lack of compliance with chapter 440. The Penalty Calculation: Nathaniel Hatten, the penalty auditor who determined the penalty the Department seeks to impose on Respondent, testified regarding his computation. Mr. Hatten explained that the penalty essentially consists of the “avoided” premium amount, or the actual premium the employer would have paid in workers’ compensation insurance for the uncovered employees, multiplied by two. To calculate the appropriate penalty for Respondent’s failure to secure workers’ compensation coverage, the Department first ascertained Respondent’s period of non-compliance. To determine this time frame, the Department referred to Florida Administrative Code Rule 69L-6.028(2), which directs that: The employer’s time period or periods of non-compliance means the time period(s) within the two years preceding the date the stop-work order was issued to the employer within which the employer failed to secure the payment of compensation pursuant to chapter 440, F.S., and must be either the same time period as set forth in the business records request for the calculation of penalty or an alternative time period or period(s) as determined by the Department, whichever is less. The employer may provide the Department with records from other sources, including, but not limited to, the Department of State, Division of Corporations, the Department of Business and Professional Regulation, licensing offices, and building permitting offices to show an alternative time period or period(s) of non- compliance. Based on these instructions, the Department deduced that Respondent’s period of non-compliance ran from November 1, 2016, through October 31, 2018, which was the two-year period preceding the date of the Stop-Work Order. (This two-year period was also the time for which the Department requested business records from Respondent.) After determining Respondent’s period of non- compliance, the Department then calculated the monetary penalty it should impose upon Respondent. In accordance with section 440.107(7)(d)1., the Department must assess against an employer: a penalty equal to 2 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 2-year period or $1,000, whichever is greater. Therefore, the Department reviewed the business records Respondent provided to ascertain the amount of Respondent’s payroll during the two-year period of non-compliance. In response to the Department’s request for documents, Respondent produced its client leasing agreement with SouthEast Leasing. This leasing agreement, however, only covered Mr. Forgue and Mr. Gonzalez. Further, the leasing agreement was only in effect from February 7, 2018, through October 30, 2018, for Mr. Forgue and February 21, 2018, through October 30, 2018 for Mr. Gonzalez. No evidence establishes that Respondent made any other payments for workers’ compensation insurance coverage outside of the SouthEast Leasing agreement. Consequently, the evidence in the record establishes that Respondent had no workers’ compensation coverage for any of its employees, officers, or subcontractor employees from November 1, 2016, through February 6, 2018. And, only Mr. Forgue and Mr. Gonzalez were covered from February 2018 through October 30, 2018. Further, Respondent did not provide any payroll information to the Department per its request for business records. Consequently, the documentation was not comprehensive enough for the Department to determine all the wages Respondent paid to its employees, or the work they performed for the period of November 1, 2016, through October 31, 2018. Therefore, the Department determined that Respondent did not provide business records sufficient for it to calculate Respondent’s complete payroll or the actual employee wages it paid over the two-year period of non-compliance. Accordingly, the Department exercised its option to “impute” Respondent’s weekly payroll from November 1, 2016, through October 31, 2018. To calculate Respondent’s imputed weekly payroll, section 440.107(7)(e) directs that the gross payroll for an employer who provides insufficient business records is imputed at the statewide average weekly wage, multiplied by 1.5, for each employee who worked during the period requested for the penalty calculation. Therefore, the Department obtained the statewide average weekly wage effective at the time of the Stop- Work Order ($917.00)2/ for each identified employee, corporate officer, and subcontractor, then multiplied that number by 1.5. See § 440.107(7)(e), Fla. Stat.; and Fla. Admin. Code R. 69L- 6.028(3)(a). The Department imputed the payroll for all four individuals Investigator Cavazos observed at the worksite on October 31, 2018 (Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque), for all periods of non- compliance (November 1, 2016 through October 31, 2018). No evidence established that these individuals were covered under a workers’ compensation policy either through Respondent, RC Painting, or SouthEast Leasing. The Department also included Mr. Forgue for a period of non-compliance from January 22, 2018, through February 8, 2018. The Department imputed his payroll during this period of time explaining that Respondent did not have an active workers’ compensation exemption on file for Mr. Forgue. Neither was he covered by SouthEast Leasing’s policy during this brief timeframe. Therefore, Respondent was required to carry workers’ compensation for Mr. Forgue from January 22, 2018, through February 8, 2018. See Fla. Admin. Code R. 69L-6.028(3)(b). To calculate a penalty based on the imputed payroll, the Department assigned Respondent’s employees the highest rated workers’ compensation classification code. The classification code is based on either the business records submitted or the investigator’s observation of the employees’ activities. In this case, the business records Respondent provided to the Department were not sufficient to categorize the exact type of work that the identified workers performed for Respondent over the two-year period of non-compliance. However, during her investigation of the jobsite on October 31, 2018, Investigator Cavazos observed the four employees engaging in activities associated with “painting.” According to the Scopes Manual issued by the National Council on Compensation Insurance, Inc. (“NCCI”), class code 5475 is applied to “painting contractors engaged in painting.”3/ Consequently, the Department used class code 5474 for all Respondent’s employees and corporate officer for the penalty period. See Fla. Admin. Code R. 69L-6.028(3)(b) and 69L- 6.021(2)(jj)(painting is classified as “construction activity”). Therefore, to calculate the premium amount for the workers’ compensation insurance Respondent should have paid for its “employees” (Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque) and officer (Mr. Forgue), the Department applied the manual rates corresponding to class code 5474. Thereafter, based on: 1) the total periods of non- compliance, 2) Respondent’s calculated payroll for the periods of non-compliance, and 3) the estimated premium for workers’ compensation insurance, the Department issued the Amended Order of Penalty Assessment (“Penalty Assessment”) on November 30, 2018, which was served on Respondent on February 28, 2019. The Penalty Assessment seeks to impose a penalty of $129,089.60 against Respondent. At the final hearing, Respondent argued that the individuals Investigator Cavazos identified at the worksite on October 31, 2018, were never hired by Respondent’s subcontractor, RC Painting. Therefore, they are not “employees” under chapter 440, and Respondent is not an “employer” for purposes of securing workers’ compensation coverage. Consequently, Respondent argues that the penalty the Department seeks to assess against Respondent is not warranted. Mr. Chavez testified at the final hearing for Respondent describing his employment relationship with Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Initially, Mr. Chavez confirmed that Respondent hired RC Painting to paint the exterior of the shopping plaza. Regarding the four individuals Investigator Cavazos identified at the jobsite, however, Mr. Chavez denied that they were “employees” of RC Painting on October 31, 2018. Mr. Chavez explained that he used SouthEast Leasing to “hire” his employees. Mr. Chavez asserted that before he puts someone to work, he requires them to complete an employment application with SouthEast Leasing. Only after SouthEast Leasing approved the employee would he allow the individual to work on a job. In this matter, Mr. Chavez denied that he had ever worked with Mr. Chachel before, or ever met the other three individuals that Mr. Chachel brought with him to the jobsite. Mr. Chavez maintained that he called Mr. Chachel on the evening of October 30, 2018, about the prospective painting job. He then asked Mr. Chachel to bring two other workers and meet him at the jobsite the following morning. Mr. Chavez testified that he instructed Mr. Chachel that he would need to send information to SouthEast Leasing before anyone actually started working on the project. Mr. Chavez further contended that he did not have any discussion with Mr. Chachel about wages or the rate of pay for the job. He declared that he never commits to paying any prospective employee before ascertaining what type of skills they possess. Mr. Chavez explained that, “anyone can tell you, ‘I’ve been painting all of my life,’ and they show up and don’t know how to paint, or they don’t know how to do anything.” In response to Inspector Cavazos’s testimony, Mr. Chavez exclaimed that he never told her that the four individuals were his “employees.” He merely relayed that they were “with” him. Mr. Chavez also insisted that he never authorized Mr. Chachel or his crew to start preparing the building for painting prior to meeting with him. Mr. Chavez further relayed that Respondent provided the boom lift for the job. But, he never instructed Mr. Chachel to begin using it. Mr. Chavez arrived at the shopping plaza around 9:30 a.m. However, by that time Investigator Cavazos had issued the Stop- Work Order, and only Mr. Chachel remained at the scene. Regarding the Affirmation he completed at the Department’s district office, Mr. Chavez testified that, other than Mr. Chachel, he did not know the names of individuals who Investigator Cavazos identified at the jobsite. He asserted that he wrote their names on the Affirmation only after Ms. Qureshi spelled them out for him on a sticky note. Mr. Chavez further professed that he only penned “$20” by each name because Ms. Qureshi told him that the Department would not release him from the Stop-Work Order until he added the wages he paid to each individual. Mr. Chavez claimed that Ms. Qureshi specifically instructed him to insert a number by each employee. Mr. Chavez declared that he felt like he had no choice but to include “$20” on the Affirmation if he wanted to return to work. In actuality, however, Mr. Chavez insisted that he did not pay Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, or Jenny Araque anything for their activities on October 31, 2018. Ms. Qureshi testified for the Department on rebuttal. She credibly voiced that she did not write out the names of the four “employees” for Mr. Chavez to list on his Affirmation. Neither did she suggest a wage amount for their work, or force Mr. Chavez to write that he “terminated” them. On the contrary, Ms. Qureshi attested, clearly and without hesitation, that Mr. Chavez independently completed his sworn Affirmation, and he did not ask for her assistance with the specific information he wrote down. Ms. Qureshi persuasively stated that Mr. Chavez knew the names of Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque when he composed the Affirmation. Further, Mr. Chavez expressly told her that he was going to pay the four individuals $20 for the day, and that he was terminating them. The competent substantial evidence in the record establishes that Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque were “employees” of RC Painting under section 440.02(15) on October 31, 2018. Based on this finding, the Department demonstrated, by clear and convincing evidence, that Respondent failed to secure workers’ compensation insurance coverage or a workers’ compensation exemption for four employees for the period of November 1, 2016, through October 31, 2018, as well as its corporate officer from January 22, 2018, through February 8, 2018. Accordingly, the Department met its burden of proving that Respondent violated chapter 440 and should be penalized.
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, Forgue General Contracting, Inc., violated the requirement in chapter 440 to secure workers’ compensation coverage, and imposing a total penalty of $129,089.60. DONE AND ENTERED this 18th day of October, 2019, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER 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 October, 2019.
The Issue Did Respondent, John McCary General Contractor, Inc. (McCary), fail to secure workers’ compensation insurance for employees as required by chapter 440, Florida Statutes (2016)?1/ If so, what is the appropriate penalty?
Findings Of Fact The Division is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation insurance for the benefit of their employees. § 440.107(3), Fla. Stat. McCary is a roofing contractor owned and operated by John McCary. It is in the construction industry. On November 18, 2016, Mr. Howe, a compliance investigator for the Division, visited a house where McCary was tearing off the roof. Mr. Howe recorded the names of each employee. He conducted an investigation that included speaking to Mr. McCary, re-interviewing the employees, checking with the employee leasing company that McCary used, and checking the Davison database of insured individuals. Mr. Howe could not find a record of workers’ compensation coverage for at least one employee. This triggered further investigation that resulted in Mr. Howe issuing a Stop-Work Order to McCary on November 18, 2016, for failure to secure workers’ compensation insurance in violation of sections 440.10(1), 440.38(1) and 440.107(2). After that, the Division followed its usual practice of requesting documents, reviewing its databases, soliciting information and explanations from the employer, and analyzing the information and documents obtained. Division Exhibit 9 shows that the Division asked McCary for business records on November 21, 2016, and that McCary did not provide them until December 12, 2016. The Division’s investigation and analysis resulted in the evidence admitted in this proceeding. The evidence proved the allegations of the Division’s Third Amended Order of Penalty Assessment, including its attached Penalty Calculation Worksheet. McCary did not comply with workers’ compensation insurance coverage requirements for the period May 1 through November 18, 2016. During that period, McCary employed Arcenio Rosado, Domingo Esteves, Javier Restrepo, Jose Alfredo Fuentes, Carlos Toledo, Edwin Valle, Kelly Alvarez, Kyle Shiro, Claudia Florez, and Nelson Geovany Melgar Rodenzo and that they performed work for it. McCary would have paid $4,744.06 in insurance premiums to provide workers’ compensation coverage for these employees during that period. During that period, McCary also used the services of two subcontractors, Star Debris Removal and E C Roofing, LLC. These subcontractors did not have workers’ compensation insurance for their employees during the May 1 through November 18, 2016, period. Premiums to provide coverage to the employees of the two subcontractors who worked on McCary’s projects would have totaled $100,771.09. From May 1 to November 18, 2016, McCary made cash payments of $195,856.02 that its documents could not confirm to be for a valid business expense. Florida Administrative Code Rule 69L-6.035(1)(k) requires that 80 percent of that amount be deemed wages or salaries paid employees when calculating the premiums used to determine the ultimate penalty. Eighty percent of McCary’s unaccounted-for cash payments is $156,684.82. That amount is legally deemed to be a payroll expense. McCary would have paid $29,143.38 to provide coverage for the employees represented by the cash payments. Altogether, McCary would have paid $134,658.53 to provide workers’ compensation coverage to the uncovered employees represented by the actual and deemed payroll during the May 1 to November 18, 2016, period.
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 John McCary General Contractor, Inc., failed to secure payment of required workers’ compensation insurance coverage from May 1 to November 18, 2016, in violation of section 440.107, Florida Statutes, and imposing a penalty of $269,317.06, reduced by $1,000.00. DONE AND ENTERED this 17th day of July, 2018, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 2018.
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 are whether Respondent had workers' compensation insurance coverage for the relevant time period as required by Sections 440.10(1)(a) and 440.38(1), Florida Statutes, and if not, what penalty should be imposed.
Findings Of Fact Petitioner is the agency responsible for enforcing the requirement that employers secure the payment of workers' compensation insurance for their employees. Respondent is a Florida corporation, incorporated on October 3, 2001. Paul Gilbert is Respondent's only officer and the corporation's managing member. Zurich-American Insurance Group (Zurich) issued a workers' compensation and employer's liability insurance policy (Policy No. WC 3617144) to Mitchell Construction Company (Mitchell) in October 1999. Zurich also provided Mitchell with general liability and business automobile insurance. At that time, Paul Gilbert was the risk manager for Mitchell, which was a large commercial contractor doing business in several states. Mitchell's offices were located in Vidalia, Georgia. In October 2000, Zurich renewed Mitchell's workers' compensation policy (Policy No. WC 3617144-01) for the period October 1, 2000 through October 1, 2001. The original and renewed policies listed other combinable entities as named insureds. Mitchell owned at least 51 percent of its combinable companies, one of which was Wood-Hopkins Contracting Company of Georgia, LLC. The company was also registered in Florida as Wood-Hopkins Contracting Company, LLC. The company was located in Jacksonville, Florida, with a mailing address in Vidalia, Georgia. The type of workers' compensation insurance that Zurich provided to Mitchell was known as a rolling contractor- controlled insurance policy (CCIP). It had endorsements for large deductible reimbursements for paid losses and a set monthly premium based in part on the projected payroll and experience rating modifiers for Mitchell and its combinable entities. The CCIP also covered subcontractors that had a contract with Mitchell for such coverage. The CCIP was renewable on an annual basis. Zurich did not need to re-underwrite the policy each year because the policy was created using three-year parameters. Additionally, Zurich had the option of auditing Mitchell's operations to determine whether there was a substantial change in the business. Palmer and Cay of Georgia (Palmer and Cay) was the producer and the broker of record for Mitchell's original and renewed CCIP. Stephen McMillan, an associate with Palmer and Cay at its offices in Savannah, Georgia, was the insurance agent that helped Mr. Gilbert negotiate and service Mitchell's CCIP with Zurich. In the Fall of 2001, Mr. Gilbert and Mr. McMillan contacted Zurich about renewing Mitchell's CCIP for the period October 1, 2001 through October 1, 2002. In a meeting with Zurich's representatives at its offices in Atlanta, Georgia, Mr. Gilbert advised Zurich that a company bearing the Wood-Hopkins name was going to complete Mitchell's then on-going projects. Zurich's employees believed Mr. Gilbert was referring to Wood- Hopkins Contracting Company, LLC. During the trip to Atlanta, Mr. Gilbert told Mr. McMillan that he was attempting to form a new company. However, Mr. Gilbert did not make it clear in the meeting with the Zurich representatives that he intended to incorporate Respondent, an independent company with a similar name to Wood- Hopkins Contracting Company, LLC, but unrelated to Mitchell. After the meeting in the Fall of 2001, Zurich was unaware that Mitchell and its combinable entities were or soon would be out of business as a general contracting group. Zurich's employees mistakenly believed that Mr. Gilbert continued to work for Mitchell. Mr. Gilbert resigned his position with Mitchell on September 1, 2001. After he incorporated Respondent, it purchased the assets of Mitchell and Wood-Hopkins Contracting Company, LLC, and hired about 100 of Mitchell's employees. Respondent planned to complete Mitchell's on-going projects and then operate primarily as a marine and civil contractor. Respondent was a new company, smaller than Mitchell, with a different risk exposure. Mr. Gilbert provided Zurich's underwriters with the payroll projections and other information necessary to renew Mitchell's CCIP. The data related to Mitchell's on-going projects and loss history as well as Respondent's planned projects. Zurich subsequently issued Policy No. WC 3617144-02 for the period October 1, 2001 through October 1, 2002. The policy designated Mitchell as the primary named insured and Wood-Hopkins Contracting Company, LLC, as one of the combinable entities and an additional named insured. The policy listed Palmer and Cay as the broker of record. The policy did not list Respondent as a named insured. Mr. Gilbert did not receive a copy of the policy until March 2002. However, Mr. Gilbert learned that Zurich had not added Respondent as a named insured to Mitchell's CCIP at least by February 2002. After learning that Zurich had not named Respondent as an insured, Mr. Gilbert continued to operate Respondent as if it had workers' compensation insurance. He was convinced that Respondent's assumption of Mitchell's business presented no additional risk exposure to Zurich. In fact, Mr. Gilbert had a history of spending sufficient funds on safety to reduce a company's loss ratio by half. Additionally, Respondent had suffered no workers' compensation losses. For these reasons, Mr. Gilbert hoped to persuade Zurich to add Respondent retrospectively as a named insured on Mitchell's CCIP policy. Towards the end of 2001 or the beginning of 2002, Zurich learned that Mitchell was going out of business or was no longer in business. Michael Esposito, Mitchell's account manager at Zurich, began to realize that something was wrong when Zurich received a premium payment for Mitchell's CCIP drawn on Respondent's bank account. At that time, Mitchell was behind in making deductible and premium payments to Zurich. Mitchell also was behind in paying Palmer and Cay its fees. On or about January 2, 2002, Mr. Gilbert signed one of Respondent's checks made payable to Palmer and Cay in the amount of $28,740.23. The check included a premium payment in the amount of $3,818.00 for October 2001 workers' compensation insurance. Mr. Gilbert wrote the check pursuant to a Palmer and Cay invoice addressed to The Mitchell Group. The record indicates that Respondent sent its check to Palmer and Cay's lockbox in Atlanta, Georgia, and that it was cashed. By letter dated February 7, 2002, Palmer and Cay advised Mitchell that it resigned as broker of record for The Mitchell Group. The most persuasive evidence indicates that Palmer and Cay resigned due to a dispute with Respondent over fees, not premium payments. By the end of February 2002, Mr. Esposito became aware that Mr. Gilbert wanted Zurich to continue Mitchell's CCIP with Respondent, a totally new company, listed as a named insured. Mr. Esposito then told Mr. Gilbert that Respondent would have to pay Mitchell's past-due premiums and provide Zurich with the necessary information to re-underwrite the policy, reflecting the change in ownership and operations. There is no persuasive evidence that Palmer and Cay or Mr. Gilbert ever provided Zurich with this information. Despite its resignation as broker of record for Mitchell's CCIP, Palmer and Cay agreed to continue servicing the policies until Zurich advised otherwise. For example, on or about February 22, 2002, Mr. Gilbert asked Palmer and Cay to add Respondent as a named insured, along with Wood-Hopkins Contracting Company, LLC, to Mitchell's railroad protection policies. Palmer and Cay referred this request to Zurich. Effective February 26, 2002, Zurich issued a Notice of Cancellation for Mitchell's Policy No. WC 3617144-02. The notice indicates that the policy was cancelled due to nonpayment of premium. About that time, Mr. Gilbert began trying to find a replacement for Palmer and Cay as broker of record. Willis of Florida, an affiliate of Willis of North America, Inc. (Willis), is an insurance broker with offices located in Tampa, Florida. Robert Allen is an insurance agent associated with Willis of Florida. Mr. Allen and Mr. Gilbert had a social and business relationship for many years prior to the time frame at issue here. Toward the end of February 2002, Mr. Allen and Mr. Gilbert had a telephone conference with Mr. Esposito. During that conversation, Mr. Allen indicated that his company was not interested in becoming the broker of record for Mitchell. However, Mr. Allen agreed that, in order to assist Zurich, Willis would issue Certificates of Liability Insurance for Respondent. At that time, Mr. Allen was under the impression that Respondent was a named insured under the Mitchell CCIP. As authorized by Zurich, Palmer and Cay issued three Certificates of Liability Insurance to the Florida Department of Transportation on March 4, 2002. The certificates indicate that Zurich provided commercial general liability and railroad protection insurance for CSX Transportation, Inc., Norfolk Southern Corporation, and Florida East Coast Railway as the named insureds. The certificates state that Wood-Hopkins Contracting Company, LLC, and Respondent were the contractors. Palmer and Cay issued these certificates for the Beaver Street viaduct bridge replacement in Jacksonville, Florida, a project begun by Wood-Hopkins Contracting Company, LLC, during the time that Palmer and Cay was acting as Mitchell's broker of record. On or about March 6, 2002, Mr. Gilbert signed one of Respondent's checks made payable directly to Zurich in the amount of $24,848.00. The check included premium payments in the amount of $3,818.00 for Policy No. WC 3617144-02 for the months of February and March 2002. The record indicates that this check was sent to Zurich's lockbox in Chicago, Illinois, and that it was cashed. On or about March 7, 2002, Zurich reinstated Policy No. WC 3617144-02 without lapse of coverage. The Notice of Reinstatement indicates that Mitchell was the named insured and that Palmer and Cay was the broker of record. On or about March 20, 2002, Zurich sent Mitchell a Notice of Cancellation. The notice states that Mitchell's Policy No. WC 3617144-02 would be cancelled effective June 8, 2002, due to a material change in exposures. Mr. Gilbert did not receive a copy of this cancellation notice. Mr. Gilbert and Mr. Allen did not learn about the cancellation until November 2002. On or about April 17, 2002, Mr. Gilbert signed one of Respondent's checks made payable directly to Zurich in the amount of $12,424.00. The check included a premium payment in the amount of $3,818.00 for Policy No. WC 3617144-02 for the month of April 2002. The record indicates that this check was sent to Zurich's Illinois lockbox and cashed. On April 25, 2002, Willis issued a Certificate of Liability Insurance to American Home Assurance with Respondent as the named insured. The certificate indicates that Zurich provided commercial general liability, automobile liability, and workers' compensation insurance for Respondent on the Beaver Street viaduct bridge replacement project with American Home Assurance and the Florida Department of Transportation as additional named insureds with respect to the general liability coverage. Mr. Allen signed this certificate. On May 6, 2002, Willis issued a Certificate of Liability Insurance to the University of Georgia Athletic Association with Respondent as the named insured. The certificate indicates that Zurich provided commercial general liability, automobile liability, and workers' compensation insurance for Respondent on an academic achievement center project. Mr. Allen signed this certificate. On or about June 13, 2002, Mr. Gilbert signed one of Respondent's checks made payable directly to Zurich in the amount of $12,424.00. The check included a premium payment in the amount of $3,818.00 for Policy No. WC 3617144-02 for the month of May 2002. The record indicates that this check was sent to Zurich's Illinois lockbox and cashed. On July 18, 2002, Willis issued a Certificate of Liability Insurance to Crowley Maritime Corporation with Respondent as the named insured. The certificate indicates that Zurich provided general liability, automobile liability, and workers' compensation insurance to Respondent for a barge loading ramp concrete removal and replacement in Jacksonville, Florida, and that Crowley Maritime Corporation was an additional named insured with respect to general liability coverage. Mr. Allen did not know the policy was cancelled when he signed this certificate. On August 12, 2002, Willis issued a Certificate of Liability Insurance to Martin K. Eby Construction Company with Respondent as the named insured. The certificate indicates that Zurich provided general liability, automobile liability, and workers' compensation insurance for Respondent on the Wonderwood Expressway channel excavation with the Jacksonville Transit Authority and J. E. Sverdrup (Engineer) as additional named insureds as to general liability coverage. Mr. Allen did not know the policy was cancelled when he signed this certificate. On or about August 15, 2002, Mr. Gilbert signed one of Respondent's checks made payable directly to Zurich in the amount of $12,424.00. The check included a premium payment in the amount of $3,818.00 for Policy No. WC 3617144-02 for the month of June 2002. The record indicates that this check was sent to Zurich's Illinois lockbox and cashed. On or about October 1, 2002, Mr. Gilbert signed one of Respondent's checks made payable directly to Zurich in the amount of $12,424.00. The check included a premium payment in the amount of $3,818.00 for Policy No. WC 3617144-02 for the month of September 2002. The record indicates that this check was sent to Zurich's lockbox in Illinois and cashed. In November 2002, Petitioner issued a Stop Work and Penalty Assessment Order for failing to secure workers' compensation insurance. In November and December 2002, Mr. Gilbert and Mr. Allen attempted to persuade Seth Hausman, Zurich's regional manager, to provide retroactive coverage for Respondent under the Mitchell workers' compensation policy, to reinstate the coverage, and to let the policy continue until it lapsed at expiration. Mr. Hausman concluded that Zurich could not assume the exposure without an underwriting evaluation. Mr. Hausman told Mr. Gilbert what information he had to provide in order for Zurich to conduct such an evaluation. In January 2003, Mr. Hausman advised Mr. Gilbert that Zurich had been unable to collect on a surety bond and that Mitchell owed Zurich approximately $750,000.00 in uncollected deductible payments. Mr. Hausman stated that in order to amend the workers' compensation policy to include Respondent as a named insured and to rescind the cancellation retroactively to allow the policy to run full term, Zurich would have to be paid for all outstanding balances. In that event, Zurich was willing to talk about extending workers' compensation coverage to Respondent as requested. When Petitioner issued the Stop Work and Penalty Assessment Order in November 2002, Respondent had about 20 employees. For the period October 1, 2001 through December 31, 2001, Respondent had the following amounts of payroll by class code: Class Code Payroll 5213 $126,739.96 5606 $170,615.31 5610 $5,391.51 6003 $5,777.00 6217 $62,691.54 7335 $73,434.08 8227 $135,572.71 8810 $27,503.88 41. For the period October 1, 2001 through December 31, 2001, the workers' compensation premium rates per $100.00 of payroll for each relevant Class Code class code were as follows: Premium Rates 5213 $33.02 5606 $4.76 5610 $18.08 6003 $62.53 6217 $14.27 7335 $25.97 8227 $9.80 8810 $0.59 For the period October 1, 2001 through December 31, 2001, the premium Respondent would have paid for workers' compensation coverage Class Code by class codes was as follows: Premium 5213 $41,849.53 5606 $8,121.29 5610 $974.79 6003 $3,612.36 6217 $8,946.08 7335 $19,070.83 8227 $13,286.13 8810 $162.27 For the period January 1, 2002 through November 5, 2002, Respondent had the following amounts of payroll by class code: Class Code Payroll 5213 $360,825.22 5403 $7,969.23 5606 $355,253.16 5610 $93,981.09 6003 $17,977.19 6217 $237,889.32 7335 $212,654.00 8227 $261,091.70 8810 $162,068.41 For the period January 1, 2002 through November 5, 2002, the workers' compensation premium rates per $100.00 of payroll for each relevant Class Code class code were as follows: Premium Rates 5213 $32.31 5403 $30.39 5606 $4.91 5610 $17.91 6003 $57.57 6217 $13.52 7335 $29.60 8227 $10.80 8810 $0.65 For the period January 1, 2002 through November 5, 2002, the premium Respondent would have paid for workers' compensation coverage by class codes was as follows: Class Code Premium 5213 $116,582.63 5403 $2,421.85 5606 $17,442.93 5610 $16,832.01 6003 $10,349.46 6217 $32,162.64 7335 $62,945.58 8227 $28,197.90 8810 $1,053.44 Respondent was out of compliance with the workers' compensation law for 398 calendar days between October 1, 2001 and November 5, 2002. Petitioner properly assessed penalty of $100.00 per day, totaling $39,800.00. Respondent would have paid a premium of $384,011.72 to secure workers' compensation insurance for its employees and owes a $39,800.00 penalty for the days it operated without coverage during the period October 1, 2001 through November 5, 2002. Accordingly, Respondent owes a total penalty in the amount of $423,811.72.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order affirming the Amended Stop Work Penalty Assessment Order and directing Respondent to pay a penalty in the amount of $423,811.72. DONE AND ENTERED this 10th day of November, 2003, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 2003.
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 in this proceeding are whether Respondent, Mark Dunlap, d/b/a Mark Dunlap Masonry of Central Florida, Inc., a dissolved Florida corporation, and Mark Dunlap Masonry of Central Florida, Inc. ("Respondent") failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees; and whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the workers' compensation law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107(3), Fla. Stat. Respondent operates a masonry business located in Paisley, and is therefore engaged in the construction industry. On January 8, 2010, Hector Beauchamp, the Department's investigator, received a referral alleging that Respondent was working at 1601 Tillery Drive in Deltona, in violation of the Workers' Compensation Law. Mr. Beauchamp visited the plans examiner for the City of Deltona, who confirmed that a building permit had been issued for the cited address. Mr. Beauchamp drove to 1601 Tillery Drive in Deltona, where he found four people behind the house building a block wall as part of an addition to the single-family house at that address. Mark Dunlap was on the site, and told Mr. Beauchamp that the four men worked for his business, Mark Dunlap Masonry of Central Florida, Inc. Mr. Dunlap subsequently identified the four persons working on the site as Wayne Sochocki, Kevin Copeland, Annie Blackburn, and David Allen Baxley. Mr. Beauchamp researched the database maintained by the Department of State, Division of Corporations (accessible at www.sunbiz.org) and learned that Mark Dunlap Masonry of Central Florida, Inc. had been administratively dissolved for failure to file an annual report on September 25, 2009. Mr. Beauchamp also learned that Mr. Dunlap had owned another Florida corporation, Mark Dunlap Masonry, Inc., that had been administratively dissolved for failure to file an annual report on September 16, 2005. According to the Division of Corporations' information, both Mark Dunlap Masonry of Central Florida, Inc., and Mark Dunlap Masonry, Inc., had the same Federal Employer Identification Number ("FEIN") of 030531755. Mr. Dunlap claimed to Mr. Beauchamp that he was himself exempted from carrying workers' compensation coverage, but admitted that he had not secured coverage for the four employees building the block wall at 1601 Tillery Drive. Mr. Beauchamp consulted the Department's Coverage and Compliance Automated System ("CCAS") database, which lists the workers' compensation insurance policy information for each business as provided by the insurance companies, as well as any workers' compensation exemptions for corporate officers. CCAS indicated that in previous years Respondent had secured workers' compensation insurance through a leasing arrangement with Employee Leasing Solutions ("ELS"). In an employee leasing arrangement, the leasing company hires an employer's workers and leases them back to the employer. The leasing company provides payroll services and workers' compensation insurance coverage to the leased employees in exchange for a fee paid by the employer. However, only those employees specifically placed in the leasing arrangement by the employer and accepted as employees by the leasing company are covered by the leasing company's workers' compensation insurance. Mr. Beauchamp's investigation confirmed that Respondent's workers' compensation coverage obtained through the leasing agreement with ELS had been terminated as of July 8, 2008. The CCAS database confirmed that Mr. Dunlap had an active exemption from the requirement to obtain workers' compensation coverage. It also confirmed that none of the four employees whom Mr. Beauchamp found building the block wall at 1601 Tillery Drive were exempt. Mr. Beauchamp concluded that Respondent had failed to secure workers' compensation insurance coverage that met the requirements of chapter 440. Mr. Beauchamp therefore issued an SWO to Respondent on January 8, 2010, and personally served the SWO on Mr. Dunlap on the same date. Also on January 8, 2010, Mr. Beauchamp served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation. The purpose of this request was to obtain the business records necessary to determine the appropriate penalty to be assessed against Respondent for violating the coverage requirements of chapter 440. Because section 440.107(7)(d)1. provides that the Department's assessment of a penalty covers the preceding three-year period, the request for production asked for Respondent's business records from January 9, 2007, through January 8, 2010. If an employer fails to produce business records sufficient to allow for the calculation of the appropriate penalty, the Department must calculate the applicable penalty by imputing the employer's payroll using the statewide average weekly wage for the type of work performed by the employee and multiplying that payroll by 1.5. The statewide average wage is derived by use of the occupation classification codes established by the proprietary Scopes Manual developed by the National Council on Compensation Insurance, Inc. ("NCCI"). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.031(6). For Respondent's employees, Mr. Beauchamp applied the occupation classification code 5022, for masonry. Fla. Admin. Code R. 69L- 6.031(6)(b)9. The Department's Amended Order, assessing an imputed penalty in the amount of $121,001.30 against Respondent, was issued on February 12, 2010, and served on Mr. Dunlap by process server on March 5, 2010. Following service of the Amended Order, Respondent supplied the Department with additional business records, including Respondent's payroll runs from ELS and W-2's for the year 2007. However, even these records were not sufficient to permit the Department to calculate a penalty based on Respondent's actual payroll. The additional business records produced by Respondent did show that Mark Dunlap Masonry, Inc., had a policy of workers' compensation insurance in place with Business First Insurance Company from September 9, 2004, through February 22, 2008. Mr. Beauchamp had not previously found this coverage because the FEIN number listed by the Division of Corporations for Mark Dunlap Masonry, Inc., was incorrect. The Department issued the Second Amended Order on August 18, 2010, lowering the penalty assessment to $64,315.28. Although the Business First Insurance Company policy had been issued to Mark Dunlap Masonry, Inc., and not to Respondent, the Department nonetheless concluded that the policy brought Respondent into compliance with chapter 440 until February 22, 2008, and adjusted the penalty assessment accordingly. Respondent's workers' compensation coverage through the leasing agreement with ELS became effective on March 20, 2008, and was terminated on July 7, 2008. Of the four workers whom Mr. Beauchamp found at the work site on January 8, 2010, only Wayne Sochocki was listed on the ELS employee roster. Thus, Respondent was in compliance with respect to Mr. Sochocki for the period from March 20, 2008, through July 7, 2008. However, the records indicate that Respondent was not in compliance through the ELS leasing agreement with respect to its employees Kevin Copeland, Annie Blackburn, or David Allen Baxley because they had never been tendered to ELS as leased employees. The Department correctly imputed the penalty against Respondent for the four employees found at the work site on January 8, 2010, for all periods of noncompliance. The Department correctly determined the period of noncompliance for Mr. Sochocki to run from July 8, 2008 to January 8, 2010, and for Mr. Copeland, Ms. Blackburn and Mr. Baxley to run from February 22, 2008, to January 8, 2010. The Department utilized the correct occupation classification code for the four employees. The Department correctly utilized the procedure set forth by section 440.107(7)(d) and (e), and the penalty calculation worksheet incorporated by reference into Florida Administrative Code Rule 69L-6.027(1), to calculate the penalty assessed against Respondent by the Second Amended Order.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $64,315.28 against Respondent. DONE AND ENTERED this 22nd day of March, 2011, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 2011. COPIES FURNISHED: Mark Dunlap Mark Dunlap Masonry, Inc. 45806 Lake Street Paisley, Florida 32767 Justin H. Faulkner, 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 P. K. Jameson, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Honorable Jeff Atwater Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399
The Issue Whether Respondent violated the following statutory provisions: Sections 626.561(1), 626.611(5), 626.611(7), 626.611(8), 626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(4), 626.621(6), 626.9521, and 626.9541(1)(o)1., Florida Statutes, and if so what discipline should be imposed.
Findings Of Fact Respondent, Gus Jones, Jr., is currently and was at all times relevant to this proceeding a licensed insurance agent in this state doing business under the name of A. Maples Insurance Agency. In August, 1990, Jesus Escalera, who had a roofing business, came to Respondent to obtain workers' compensation insurance. Mr. Escalera's insurance was placed through the National Counsel on Compensation Insurance (NCCI) which is a pool for assigned risk insurance. Mr. Escalera's policy was with Aetna with coverage effective through October 26, 1991. On August 16, 1991, Mr. Escalera came to Respondent to renew his workers' compensation insurance. Mr. Escalera gave Respondent $409.00, which represented a down payment of one-half the premium for one year's coverage. The remainder of the premium was to be financed with Financial Industries, Inc. Aetna had withdrawn from the original risk insurance pool, therefore it was necessary to submit a new application to NCCI for placement of insurance for Mr. Escalera. Respondent sent the application to NCCI in October, 1991. Mr. Escalera's insurance was placed with United States Fidelity and Guaranty Company (USF&G) on November 13, 1991. Respondent kept a supply of blank drafts from Financial Industries, Inc. at his office. Respondent sent a Financial Industries, Inc.'s draft to NCCI for Mr. Escalera's insurance with USF&G. Financial Industries stopped payment on the draft because they had decided to discontinue financing workers' compensation insurance. Respondent attempted to finance Mr. Escalera's insurance through Premium Assignment Company (Premium). Respondent sent a premium draft to NCCI, but Premium stopped payment on the draft for Respondent's failure to send a transmittal to Premium. Mr. Escalera had called Respondent three or four times asking for his payment book so that he could make the installment payments for the insurance. Respondent advised Mr. Escalera that the payment book was in the mail. USF&G performed an audit on Mr. Escalera's payroll and determined that Mr. Escalera owed $13,724.00 for earned premiums. In January, 1992, Respondent contacted Mr. Escalera and advised him that USF&G intended to cancel the insurance effective February 16, 1992. On February 3, 1992, Mr. Escalera went to see Respondent. Respondent explained that he could not get financing for Mr. Escalera and requested Mr. Escalera to pay the balance of the premium of $817.00. Mr. Escalera paid $409.00 to Respondent and received a receipt for that amount. Respondent sent USF&G a check for $817.00. The policy was reinstated with coverage effective December 13, 1991. USF&G gave notice dated March 13, 1992 that Mr. Escalera's policy would be terminated April 13, 1992 for non-payment. By letter dated April 16, 1992, USF&G returned Respondent his check due to the second cancellation. By letters dated June 2, 1992, USF&G advised Respondent that Mr. Escalera owed a earned premium of $13,724.00. The policy was terminated effective April 13, 1993, because Mr. Escalera had failed to pay the earned premium. In April or May, 1992, Respondent placed the retuned check from USF&G in his trust account. Respondent did not advise Mr. Escalera that the premium had been returned. According to Mr. Escalera, he did not know at the time of the hearing who had the money. On February 6, 1993, Respondent called David Peters, a representative of USF&G and asked Mr. Peters what to do with the $817. Respondent let the money remain in the trust account and awaited further instruction from Mr. Peters. After Respondent received the administrative complaint, he called USF&G and spoke with Marilyn Bailey who was now handling the account on behalf of USF&G. Based on his conversation with Ms. Bailey, Respondent sent USF&G a cashier's check for $817 dated May 18, 1993.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer issue a Final Order finding Respondent guilty of a violation of Sections 626.561(1) and 626.621(2) and that Respondent be assessed an administrative fine of $500 and be placed on probation for a period of one year subject to such terms and restrictions as the Department may apply. DONE AND ENTERED this 19th day of October, 1993, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 19th day of October, 1993.
