Findings Of Fact 11. The factual allegations in the Stop-Work Order and Order of Penalty Assessment issued on February 18, 2010, and the 2"! Amended Order of Penalty Assessment issued on August 5, 2011, which are fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Jeff Atwater, Chief Financial Officer of the State of Florida, or his designee, having considered the record in this case, including the Stop- Work Order and Order of Penalty Assessment and the 2" Amended Order of Penalty Assessment served in Division of Workers’ Compensation Case No. 10-053-D4 and being otherwise fully advised in the premises, hereby finds that: 1. On February 18, 2010, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 10-053-D4 to McDonnell Painting, d/b/a Painting and Wallcovering by McDonnell (McDonnell). The Stop-Work Order and Order of Penalty Assessment included a Notice of rights wherein McDonnell was advised that any request for an administrative proceeding to challenge or contest the Stop-Work Order and Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Stop-Work Order and Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes. 2. On March 3, 2010, the Stop- Work Order and Order of Penalty Assessment was served via certified mail on McDonnell. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On February 19, 2010, the Department issued an Amended Order of Penalty Assessment to McDonnell in Case No. 10-053-D4. The Amended Order of Penalty Assessment assessed a total penalty of $10,058.88 against McDonnell. The Amended Order of Penalty Assessment included a Notice of Rights wherein McDonnell was advised that any request for an administrative proceeding to challenge or contest the Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes. 4. The Amended Order of Penalty Assessment was served on McDonnell by certified mail on February 25, 2010. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On March 15, 2010, McDonnell timely filed a Petition requesting a formal administrative hearing. The Petition failed to satisfy the requirements of Rule 28-106.2015(S), Florida Administrative Code, in that it did not contain a statement requesting an administrative hearing which identified those material facts in dispute, or in the alternative a statement that there were no disputed issues of material fact. As a result, on April 23, 2010, the Department issued an Order Dismissing Petition for Section 120.57(1), Florida Statutes, Hearing Without Prejudice, giving McDonnell 21 days to file a Petition that satisfied the requirements of Rule 28- 106.2015(5), Florida Administrative Code. 6. The Order Dismissing Petition for Section 120.57(1), Florida Statutes, Hearing Without Prejudice was served on McDonnell by certified mail on April 27, 2010. 7. On May 19, 2010, McDonnell timely filed an Amended Petition requesting an administrative hearing pursuant to Section 120.57(1), Florida Statutes. A copy of the Amended Petition is attached hereto as “Exhibit C” and incorporated herein by reference. The matter was referred to the Division of Administrative Hearings, where it was assigned Case No. 10-2788. 8. On January 10, 2011, the Department and McDonnell reached a negotiated settlement in which the Department agreed to issue a 2"! Amended Order of Penalty Assessment assessing a penalty in the amount of $2,379.00, and McDonnell agreed to pay the total penalty of $2,379 and to no longer contest the Stop- Work Order and Order of Penalty Assessment and gn Amended Order of Penalty Assessment. 9. On January 10, 2011, the Department filed a Notice of Settlement with the Division of Administrative Hearings, advising the Administrative Law Judge that the parties had resolved all issues pending in Case No. 10-2788. A copy of the Notice of Settlement is attached hereto as “Exhibit D.” 10. On January 10, 2011, Administrative Law Judge R. Bruce McKibben entered an Order Closing File, relinquishing jurisdiction to the Department. A copy of the Order Closing File is attached hereto as “Exhibit E.” 11. On August 5, 2011, the Department issued a 2"™ Amended Order of Penalty Assessment to McDonnell in Case No. 10-053-D4. The 2™ Amended Order of Penalty Assessment lowered the penalty assessed against McDonnell to $2,379.00 pursuant to the negotiated settlement. The 2"? Amended Order of Penalty was served on McDonnell by email on August 11,2011. A copy of the 2"! Amended Order of Penalty Assessment is attached hereto as “Exhibit F” and incorporated herein by reference.
The Issue The issue is whether The Department of Financial Services properly imposed a Stop Work Order and Amended Order of Penalty Assessment pursuant to the requirements of Chapter 440, Florida Statutes.
Findings Of Fact The Division is charged with the regulation of workers' compensation insurance in the State of Florida. Petitioner Kenny Nolan, d/b/a/ Great Southern Tree Service, is a sole proprietor located in Jacksonville, Florida, and is engaged in the business of cutting trees, which is not a construction activity. Michael Robinson is an investigator employed by the Division. His duties include making site visits at locations where work is being conducted and determining whether the employers in the state are in compliance with the requirements of the workers' compensation law and related rules. On June 6, 2006, Mr. Robinson visited a job site in a subdivision in Jacksonville, Florida, and observed five individuals at the residential work site. Mr. Robinson interviewed the individuals and, based upon these interviews, determined that four of the individuals worked for Mr. Nolan: Chad Pasanen, David Soloman, Michael Walton, and Eric Kane. None of these workers had a workers' compensation exemption. Mr. Robinson also completed a Field Interview Worksheet on June 6, 2006, when interviewing the four workers. Mr. Robinson wrote on the interview worksheet that Mr. Pasanen worked for Mr. Nolan for three weeks with a daily basis of pay and that Mr. Walton worked for Mr. Nolan for two weeks with a daily basis of pay. The interview worksheet has no entry for the length of time Mr. Solomon worked for Mr. Nolan but does indicate he was paid by the job. The portion of the interview worksheet regarding Mr. Kane is not in evidence. Mr. Robinson checked the database in the Coverage and Compliance Automated System and found no proof of coverage nor an exemption for Mr. Nolan. After conferring with his supervisor, Mr. Robinson issued a Stop-Work Order and Order of Penalty Assessment to Petitioner on June 6, 2006, along with a request for business records for the purpose of calculating a penalty for lack of coverage for the period June 6, 2003 through June 6, 2006. The request for business records instructed Mr. Nolan to produce business records within five days. Mr. Nolan did not produce business records as requested. On June 27, 2006, Mr. Robinson issued an Amended Order of Penalty Assessment to Petitioner for $272,948.96. Attached to the Amended Order of Penalty Assessment is a penalty worksheet with a list of names under the heading, "Employee Name," listing the names of Chad Pasanen, David Solomon, Michael Walton and Eric Kane. The amount of the penalty was imputed using the statewide weekly average wage that was in effect at the time of the issuance of the stop-work order. Through imputation of payroll for the four employees, the Department calculated a penalty for the time period of October 1, 2003 through June 6, 2006. Using rates from an approved manual, Mr. Robinson assigned a class code to the type of work performed by Petitioner and multiplied the approved manual rate with the imputed payroll per one hundred dollars, then multiplied all by 1.5. Penalties are calculated by determining the premium amount the employer would have paid based on his or her Florida payroll and multiplying by a factor of 1.5. The payroll was imputed back to October 1, 2003. For the period prior to October 1, 2003, Mr. Robinson assessed a penalty of $100 per day for each calendar day of noncompliance. The portion of the penalty attributable to the period June 6, 2003 through September 30, 2003, is $11,600.00. Respondent's Business Mr. Nolan started the business, Great Southern Tree Service, in February or March 2005, as a sole proprietor. Mr. Nolan was not in business prior to early 2005 and did not employ anyone in 2003 or 2004. At the inception of his tree trimming business, Mr. Nolan's brother worked for Mr. Nolan for two to three months until his brother's health rendered him unable to continue working for Mr. Nolan. Mr. Nolan subsequently worked with Christopher Wilcox until December 2005, when Mr. Wilcox was in an automobile accident and became unable to work. After Wilcox was injured in December 2005, Mr. Nolan did not have any employees for the remainder of the winter. Only Mr. Nolan's brother and Christopher Wilcox worked with Mr. Nolan in 2005. The nature of the tree trimming business is seasonal. Mr. Nolan obtained work sporadically. Typically, he had jobs two or three times a week. It is busiest in the spring and summer and slowest during the fall and winter months. In March 2006, Mr. Nolan was approached by David Solomon who was looking for work. Mr. Solomon worked for Mr. Nolan "maybe twice a week" and possibly three times a week when he was "lucky." Mr. Nolan worked exclusively for residential customers. He obtained business by knocking on doors and handing out business cards. When he was paid by his customers, he immediately paid the men who were helping him. He was usually paid in cash. In the instances when he was paid by a check, he would take his employees to the bank, where he would cash the check and pay off his workers. Eric Kane also began working for Nolan in March 2006. Like Mr. Soloman, he also worked two to three days a week for Mr. Nolan. Kane was at the jobsite on the day Mr. Robinson made the site visit, but was not working that day. He was sitting off to the side and was "just hanging out" with the other men. According to Mr. Kane, Mr. Robinson did not ask him any questions. In May 2006, a storm or small tornado hit an area of Jacksonville called Ortega. The resulting tree damage temporarily enabled Mr. Nolan to get more work. At that point, Mr. Nolan hired Chad Pasanen. Mr. Nolan estimates that Mr. Pasanen worked for him for about three weeks before the site visit by Mr. Robinson. Mr. Pasanen previously worked for Asplundh Tree Expert Company. One of his paycheck stubs establishes that he worked for Asplundh as late as April 8, 2006. Mr. Nolan also hired Michael Walton in May 2006. Mr. Walton previously worked for Seaborn Construction Company. A paycheck stub establishes that he worked for Seaborn as late as April 26, 2006. Mr. Walton sporadically worked for Mr. Nolan for about two weeks prior to the site visit. The Division did not count Mr. Nolan as an employee for purposes of calculating the penalty assessment.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it RECOMMENDED: That the Division of Workers' Compensation enter a Final Order rescinding the Amended Order of Penalty Assessment issued June 27, 2006, and the Stop Work Order issued to Petitioner on June 6, 2006. DONE AND ENTERED this 28th day of November, 2006, in Tallahassee, Leon County, Florida. S BARBARA J. STAROS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of November, 2006.
The Issue Whether Respondent properly secured the payment of workers' compensation insurance coverage, as delineated by Subsection 440.107(2), Florida Statutes (2005),1 and, if not, what penalty for such failure is warranted. Whether Respondent conducted business operations in violation of a stop-work order, and, if so, what is the correct penalty for such violation, pursuant to Subsection 440.107(7)(c), Florida Statutes.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. § 440.107, Fla. Stat. Respondent is a corporation domiciled in Florida and engaged in the business of roofing, which is a construction activity. On December 21, 2004, Petitioner's investigator, Hector Vega, visited 951 North Park Avenue, Apopka, Florida, the site of a church, on a referral from his supervisor. Five men were observed engaged in roofing work. William Sims, Respondent's president, agreed to meet at the worksite. Sims, upon inquiry, informed Petitioner's investigator that he had not secured the payment of workers' compensation for the workers. However, Sims testified that for Respondent to re-roof the Apopka Church of God, Sims had to calculate the amount of roofing shingles needed, which proved to be difficult due to the architecture of the church's specialty roof. The amount of shingles needed for the job was overestimated in order to avoid running out of shingles during the job. As of December 21, 2004, the Apopka Church of God roofing job was done, so Respondent sold the extra, unused shingles to D&L Trucking, owned and operated by David Lorenzo, who was paying the five men found working on the roof on December 21, 2004. A check of Petitioner's Compliance and Coverage Automated System ("CCAS") database, which contains information on all workers' compensation insurance policy information from the carrier to an insured, determined that Respondent did not have a State of Florida workers' compensation insurance policy to provide workers' compensation coverage of the five workers. Chapter 440, Florida Statutes, allows an individual to apply for an election to be exempt from workers' compensation benefits. Only the named individual on the application is exempt from carrying workers' compensation insurance coverage. Petitioner, which maintains a database of all workers' compensation exemptions in the State of Florida, found a current, valid exemption only for William R. Sims in December 2004. On December 21, 2004, Petitioner issued and served on Respondent a stop-work order for failing to obtain coverage that meets the requirements of Chapter 440, Florida Statutes, and the Insurance Code. Also at that time, a Request for Production of Business Records was issued to Respondent. Employers employing workers on job sites in Florida are required to keep business records that enable Petitioner to determine whether the employer is in compliance with the workers' compensation law. At the time the Stop Work Order was issued, and pursuant to Subsection 440.107(5), Florida Statutes, Petitioner had in effect Florida Administrative Code Rule 69L-6.015, which requires employers to maintain certain business records. Respondent failed to comply with the Request for Production. Florida law requires that an employer who has employees engaged in work in Florida must obtain a Florida workers' compensation policy or endorsement for such employees which utilizes Florida class codes, rates, rules, and manuals that are in compliance with the provisions of Chapter 440, Florida Statutes, as well as the Florida Insurance Code. See § 440.10(1)(g), Fla. Stat. Florida Administrative Code Rule 69L-6.019(2) requires that in order for an employer to comply with Subsections 440.10(1)(g) and 440.38(7), Florida Statutes, any policy or endorsement used by an employer to prove the fact of workers' compensation coverage for employees engaged in Florida work must be issued by an insurer that holds a valid certificate of authority in the State of Florida. 12. Subsections 440.107(3) and 440.107(7)(a), Florida Statutes, authorize Petitioner to issue stop-work orders to employers unable to provide proof of workers' compensation coverage. Failure to provide such proof is deemed "an immediate serious danger to public health, safety, or welfare " § 440.107(7)(a), Fla. Stat. Following the follow-up efforts by Sims that extended until February 2005, Respondent believed that the Stop Work Order had been lifted by February 2005. Later in 2005, after Sims understood the Stop Work Order to be lifted, he pulled some permits from Orange County. The permits were called "a permit to work" and this supported, in Sims' mind, the conclusion that the Stop Work Order had been lifted. On November 1, 2005, Petitioner received a referral to investigate Respondent. Petitioner's investigator visited Respondent's worksite on November 1, 2005, and observed six men engaged in roofing work. Sims, upon inquiry, informed the investigator that he secured the payment of workers' compensation coverage for the workers through Emerald Staffing Services, an employee leasing company. Chapter 468, Part XI, Florida Statutes, governs employee leasing companies. Respondent contracted with Emerald Staffing for its services in October 2005 and became the client company of Emerald Staffing. Respondent paid invoices for its employees, thus indicating that it was engaged in business activities in October 2005 and November 2005. On November 2, 2005, Petitioner issued a Request for Production of Business Records to Respondent. The request was for business records from December 21, 2004, through November 2, 2005. Respondent remained under the belief that the Stop Work Order had been lifted until Sims was approached by Petitioner's inspector, Robert Cerrone, on November 4 or 5, 2005, and was told by Cerrone that Respondent was still under the Stop Work Order. Respondent thereafter stopped working at Cerrone's request. Although Respondent asserts it did not know the Stop Work Order was in place between December 21, 2004, and December 19, 2005, and therefore Respondent believed it appropriate to continue working during that time, Sims testified there was a health problem in his immediate family that slowed down his business from working in 2005. His wife was diagnosed with cancer, and this made him very distracted from work. Although Sims pulled a few permits in 2005, he reviewed all those permits in his testimony, and it became clear to him that all those permits were for work previously done during the hectic clean-up from the hurricanes. This testimony is not credible. Respondent acknowledges the issuance and receipt of the Stop Work Order, but alleges in its petition that the Stop Work Order should never have been issued because the men at the worksite were not performing roofing work. On November 10, 2005, however, Sims provided a statement to Petitioner's investigator wherein he admitted to having employed four individuals on December 21, 2004, without securing the payment of workers' compensation for any of them. However, Respondent admitted, through its president, by letter, dated November 10, 2005, and signed in the presence of Cerrone that four of the persons observed on the Apopka Church of God work site on December 21, 2004, were Petitioner's employees and they were not covered by workers' compensation insurance. Sims' testimony that he was forced to sign the letter or that he was tricked or mislead into signing it, is not credible. From the evidence presented, the four identified men found on the roof of the Apopka Church of God on December 21, 2004, were the employees of Respondent, and Respondent had not complied with the requirements of the workers' compensation law. Therefore, the Stop Work Order was not erroneously issued against Respondent on December 21, 2004. After learning from Cerrone that the Stop Work Order was in place, Respondent worked with Petitioner to come into compliance and agreed to the Order of Conditional Release from Stop-Work Order that Cerrone signed on December 19, 2005, under it, Respondent has been making payments to Petitioner to satisfy the penalty Petitioner has levied against Respondent. On November 16, 2005, Petitioner issued a Request for Production of Business Records for Penalty Assessment, in which Petitioner requested business records from Respondent for the period of December 21, 2001, through December 21, 2004. Respondent complied with the records requests and provided Petitioner with tax ledgers and documents for the years 2002 through 2004, along with permits. Subsection 440.107(7)(c), Florida Statutes, provides: "The department shall assess a penalty of $1,000 per day against an employer for each day that the employer conducts business operations that are in violation of a stop-work order." Documentation specifically showed Respondent was engaged in business activities after December 21, 2004. The Orange County building department records indicate that a number of roofing permits that had been pulled by Respondent after December 21, 2004, the date the Stop Work Order was issued. Sims also stated that he was aware of the need to pull permits as part of his job as a roofer in Orange County, Florida. He alluded at the hearing that Orange County should have informed him of the existing Stop Work Order. Darlene Elaine Talley, contractor certification coordinator with the Orange County building department, testified that Respondent, through Sims, pulled a number of permits after December 21, 2004. Some of the permits were pulled for work performed prior to December 21, 2004. Although Respondent alleges that much of the actual roofing work was done prior to pulling permits and, thus, prior to the issuance of the Stop Work Order, the act of pulling a permit is considered "conducting business operations," which is prohibited by Subsection 440.107(7)(c), Florida Statutes, when a stop-work order is in effect. A-1 Construction ("A-1"), a Georgia company, performed roofing services for Respondent in Orlando, Florida, from September 2004 to November 2004, and was paid remuneration for those services. Although Respondent sought to prove that A-1 had Florida workers' compensation coverage through its Georgia workers' compensation and should not be included in the penalty calculation, the credible evidence showed that Georgia workers' compensation coverage, with Key Risk, did not extend to Florida, nor did A-1 purchase extra Florida coverage. Subsection 440.10(1)(c), Florida Statutes, states, "A contractor shall require a subcontractor to provide evidence of workers' compensation insurance." Respondent did not request evidence of workers' compensation coverage from A-1, and Respondent was not aware whether A-1's Florida workers' compensation coverage was purchased or not. Under the Workers' Compensation Law in effect during the penalty period, a subcontractor becomes an "employee" if the subcontractor has not validly elected an exemption as permitted by Chapter 440, Florida Statutes, or has not otherwise secured the payment of compensation coverage as a subcontractor. § 440.02(15)(c)2., Fla. Stat. The entities listed on the Amended Order's penalty worksheet, including the employees of A-1, were Respondent's employees during the relevant period, all of whom Respondent paid, and all of whom had neither valid workers' compensation exemptions nor workers' compensation coverage. To determine the number of days that Respondent was in violation of the Stop Work Order, the payroll records for Respondent were obtained from Emerald Staffing, and the permits pulled by Respondent were gathered. The investigator further discussed the matter with Respondent to determine the number of days Respondent worked in violation of the Stop Work Order. It is determined that Respondent worked for 10 days in violation of the Stop Work Order. Utilizing the records provided, in evidence, the penalty is calculated for Respondent by assigning a class code to the type of work utilizing the SCOPES Manual, multiplying the class code's assigned approved manual rate with the wages paid to the employee per one hundred dollars, and then multiplying all by 1.5. The penalty for violation of the Stop Work Order is $1,000.00 per day for each day of violation, which for 10 days amounts to $10,000.00. The Amended Order, which assessed a penalty of $49,413.18, was personally served on Respondent on December 19, 2005. Sims was not personally calculated into the penalty because he had a current valid workers' compensation exemption. On December 19, 2005, Respondent entered into a Payment Agreement Schedule for Periodic Payment of Penalty and was issued an Order of Conditional Release from Stop-Work Order by Petitioner. Respondent made a down payment of 10 percent of the assessed penalty; provided proof of compliance with Chapter 440, Florida Statutes, by securing the payment of workers' compensation through Emerald Staffing; and agreed to pay the remaining penalty in 60 equal monthly payment installments.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order that adopts the Stop Work Order and Order of Penalty Assessment and the Amended Order of Penalty Assessment; and that assesses a penalty of $49,413.18. DONE AND ENTERED this 30th day of November, 2006, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th of November, 2006.
The Issue The issue in this case is whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation, as alleged in the Stop-Work Order and 3rd Amended Order of Penalty Assessment, and, if so, what penalty is appropriate.
Findings Of Fact Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation for their employees and corporate officers. Respondent, Po’ Boys, Inc. (Po’ Boys), is a Florida corporation engaged in business operations as a restaurant in the State of Florida from January 31, 2010, through January 30, 2013. Respondent employed more than four non-exempt employees during the periods January 31 through February 24, 2010; June 8 through September 3, 2010; and July 11, 2012, through January 30, 2013. Respondent was an "employer" as defined in chapter 440, Florida Statutes, throughout the penalty period. All of the individuals listed on the Penalty Worksheet of the 2nd Amended Order of Penalty Assessment were "employees" (as that term is defined in section 440.02(l5)(a), Florida Statutes) of Respondent during the periods of noncompliance listed on the penalty worksheets. None of the employees listed on the Penalty Worksheet can be classified as independent contractors, as defined in section 440.02, Florida Statutes. Mr. Jonas Hall is a workers’ compensation compliance officer who has worked for Petitioner for about four years. He has been involved with between 200 and 300 cases. On the morning of January 30, 2013, Mr. Hall received a “referral” report that Po’ Boys was not securing the payment of workers’ compensation for its employees. Po’ Boys operates three “traditional” restaurants in Tallahassee, which provide wait-service to their customers. Mr. Hall checked the Florida Department of State’s “Sunbiz” website, which gave him information on Po’ Boys’ legal structure, corporate officers, and principal location. He also checked workers’ compensation information for Po’ Boys, Inc., by accessing the Coverage and Compliance Automated System (CCAS) maintained by the Department. It indicated that Po’ Boys’ last coverage, which had become effective on February 6, 2012, had ended on July 11, 2012. He determined that active workers’ compensation exemptions were on file for four individuals, including Mr. Carmen Calabrese and Mr. Jon Sweede, co-owners of Po’ Boys. Information in the CCAS is submitted by insurance companies and the National Council on Compensation Insurance (NCCI). Mr. Hall drove to the College Avenue location of Po’ Boys to conduct a site visit, but it did not appear open because there were no vehicles present and the lights were off. Mr. Hall proceeded to the West Pensacola Street location. There were vehicles present and he saw an individual who appeared to be arranging chairs on the patio. Mr. Hall introduced himself and explained what he was doing there, and was then referred to Mr. Carmen Calabrese, the manager. It was about 10:00 a.m. Payroll records indicate that employees reported for work between 10:00 and 11:00 and that the restaurant was open to serve lunch and dinner. Mr. Calabrese took Mr. Hall to a “Broken Arm” poster which had a workers’ compensation sticker on the bottom. The sticker contained a workers’ compensation policy number and periods of coverage, as well as contact information for Zenith Insurance Company. Mr. Hall contacted Zenith Insurance Company, and they confirmed that coverage had not been in effect since July 11, 2012. In response to Mr. Hall’s questions, Mr. Calabrese indicated that Po’ Boys had between 50 and 60 employees working at its three locations. Mr. Calabrese told Mr. Hall that he had no knowledge that coverage was not in effect and that Mr. Hall would have to talk to Mr. Sweede, who handled the workers’ compensation for the business. Mr. Calabrese was a credible witness. Mr. Hall called Mr. Sweede, who in turn told Mr. Hall to contact Mr. Wade Shapiro, his insurance agent for providing workers’ compensation coverage. Mr. Sweede then called Mr. Shapiro as soon as he completed his telephone call with Mr. Hall. When Mr. Hall later telephoned Mr. Shapiro, Mr. Shapiro confirmed that Po’ Boys had no policy in effect, but said that he was in the process of obtaining coverage for them. Mr. Hall contacted his supervisor, Ms. Michelle Newcomer, who provided him with a Stop-Work Order Number. Mr. Hall served the Stop-Work Order and Order of Penalty Assessment on Mr. Calabrese, along with a Request for Production of Business Records for Penalty Assessment Calculation, at about 11:15 a.m. Although some records indicated that the Stop-Work Order was served at 10:30, other records and the testimony of the witnesses that it was served at 11:15 were more credible. Mr. Sweede testified that he was unaware until January 30, 2013, that his workers’ compensation coverage was not in effect. He testified that the Electronic Funds Transfer payment “came back” in July, but that he had been unaware of this. He testified, “I must not have found the paperwork, must not have looked at the envelopes, take all the heat for that in this business.” Mr. Sweede testified that he later learned Mr. Shapiro was not only aware that Po’ Boys’ coverage was not in effect, but that he had already been working to get Po’ Boys new coverage before Mr. Sweede telephoned him on January 30, 2013, all without the knowledge or authorization of Mr. Sweede. Mr. Sweede entered into an agreement to obtain workers’ compensation coverage for Po’ Boys sometime on January 30, 2013. Several documents were required, at least one with a notary’s signature. Mr. Sweede signed a letter stating that there had been no workers’ compensation claims since his previous coverage had been canceled on July 11, 2012, joined the Florida United Businesses Association (FUBA), filled out an application for coverage, and made a down payment from the Po’ Boys bank account to the (FUBA sponsored) Florida Citrus, Business, and Industries Fund. Under the terms of the agreement, coverage was made effective retroactively to 12:01 a.m. on January 30, 2013. Mr. Sweede testified that Mr. Shapiro notified him, although he could not remember exactly how, that workers’ compensation coverage was obtained for Po’ Boys at around 11:00 a.m. on January 30, 2013, about 15 minutes before the Stop-Work Order was served. Mr. Sweede’s testimony as to how he came to be satisfied that his coverage at Zenith was actually not in effect, determined how and why it had been canceled, decided to obtain insurance elsewhere, and arranged for people in at least three different locations to prepare and execute all of the required documents in approximately 45 minutes, from about 10:15 a.m. until 11:00 a.m., was unclear. The transcript reflects the following exchange: Q: Okay. So this is another –- this is something else. Obviously when Wade Shapiro came by you brought this check, right, and then he also had you sign these documents? A: I really couldn’t tell you. I couldn’t tell you which way, you know, I mean, obviously, you know, like I said, I was stressed. I got him the check. Whether he ran the check up, brought this stuff back, I probably couldn’t –- I can’t remember which chronology it was. It was, you know, a pretty stressful morning. But I know it was all fast, fortunately. Although it does not contain a jurat or notarial certificate,1/ the application for insurance does contain the signature and stamp of a notary public beneath the signatures of Mr. Sweede and Mr. Shapiro. All signatures on the document are followed by a handwritten notation of “1-30-13” in the space provided for a date. The signature and seal provide credible evidence that the document was signed sometime on January 30, 2013. Regardless of the time when coverage became effective, there is clear and convincing evidence in this case that Petitioner had no information reasonably available to it indicating that Respondent had obtained workers’ compensation coverage in the last minutes before the Stop-Work Order was issued. Respondent concedes it did not have coverage at the time of Mr. Hall’s site inspection, and does not claim that when coverage was obtained, it notified Petitioner, or even attempted to do so. Mr. Hall wrote a “Narrative” in a Department database on the afternoon of January 30, 2013, describing the events of the morning. Although Respondent demonstrated that the description was “modified” several days later on on February 5, 2013, the Department put on no evidence to explain what was modified, or why. The testimony of witnesses that Mr. Hall served the Stop-Work Order at 11:15 a.m. was deemed more credible under all of the circumstances than the notation in the Narrative that it was served at 10:30 a.m. Respondent executed a Payment Agreement Schedule for Periodic Payment of Penalty and was issued an Order of Conditional Release from the Stop-Work Order on February 6, 2013. Po’ Boys failed to secure the payment of workers’ compensation for its employees from January 31 through February 24, 2010; June 8 through September 3, 2010; and July 11, 2012, through January 29, 2013. It obtained coverage sometime on January 30, 2013. Respondent would have paid an amount less than $11,565.68 in premiums for those periods during which it failed to secure the payment of workers’ compensation, because that figure should be reduced by the premium paid for coverage on January 30, 2013. Payroll records submitted by Po’ Boys indicate several employees were paid for varying hours after 11:15 a.m. on January 30, 2013. The parties stipulated that the Department has assigned the appropriate class code and manual rates to Respondent's employees from the NCCI SCOPES Manual.
Recommendation Upon consideration of the above findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, enter a final order determining that Respondent, Po’ Boys, Inc., violated the requirement in chapter 440, Florida Statutes, that it secure workers' compensation coverage for its employees, and imposing upon it a total penalty assessment of $17,349.70, reduced by the amount attributable to lack of coverage on January 30, 2013. DONE AND ENTERED this 23rd day of May, 2013, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of May, 2013.
The Issue The issues in the case are whether J. D. Tree Service, Inc. (Respondent), conducted business in violation of a previously- issued Stop-Work Order, and, if so, whether the Department of Financial Services, Division of Workers' Compensation (Petitioner), properly calculated the applicable penalty assessment.
Findings Of Fact The Petitioner is the state agency charged with the responsibility to enforce chapter 440, Florida Statutes (2010),1/ which essentially requires that Florida employers secure workers' compensation coverage for their employees. The Respondent is a Florida corporation providing various tree services, including trimming and related activities. On June 11, 2007, the Petitioner issued a Stop-Work Order (07-172-D7) and an Order of Penalty Assessment based on the Respondent's failure to obtain proper workers' compensation insurance coverage for employees. On June 14, 2007, the Petitioner issued an Amended Order of Penalty Assessment for $147,419.52 against the Respondent. The amended order was personally served on the Respondent on the date of issuance. The Respondent did not challenge either the Stop-Work Order or the Amended Order of Penalty Assessment. On June 15, 2007, the Respondent executed a "Payment Agreement Schedule for Periodic Payment of Penalty" (hereinafter "Agreement"). The Agreement permitted the Respondent to satisfy the penalty through a ten percent down payment and 60 subsequent monthly payments. Based on the execution of the Agreement, the Petitioner lifted the Stop-Work Order on the condition that the Respondent complied with the terms of the Agreement. The Agreement specifically stated that failure to meet the terms set forth therein would "result in the immediate reinstatement of the Stop-Work Order, and the remaining unpaid balance of the penalty to be paid by the employer shall become immediately due." The Respondent was provided a copy of the Agreement and acknowledged understanding the terms set forth therein. The Respondent made the down payment required at the time the Agreement was executed, but thereafter made none of the monthly payments due under the Agreement. On May 18, 2007, the Petitioner issued an Order Reinstating Stop-Work Order (the "Reinstatement Order") based on the Respondent's failure to comply with the payment terms of the Agreement. The Reinstatement Order identified the unpaid balance as $132,674.52 and directed the Respondent to "cease all business operations in the State of Florida" until certain conditions were met. Such conditions included satisfaction of the existing unpaid penalty balance as well as any additional penalty related to business operations conducted in violation of the Stop-Work Order and a determination by the Petitioner that the Respondent was in compliance with workers' compensation coverage requirements. The Respondent did not challenge the Reinstatement Order, and it became effective on June 6, 2008. On December 14, 2009, a workers' compensation compliance investigator employed by the Petitioner observed tree service operations being conducted at a recreational vehicle park in Naples, Florida. The investigator observed that there were persons wearing t-shirts bearing the Respondent's identification. Upon inquiry by the investigator, the workers stated that they were working for the Respondent. The investigator observed that the vehicles from which the workers were operating bore the Respondent's insignia. The investigator determined that there was an existing Stop-Work Order against the Respondent. On January 8, 2010, the Petitioner issued a Request for Production of Business Records, seeking to identify the number of days during which the Respondent had operated in violation of the Stop-Work Order, and provided the request to the Respondent. Also on January 8, 2010, the Petitioner issued an Order Assessing Penalty for Working in Violation of Reinstated Stop-Work Order, seeking to impose a penalty of $555,000.00. The penalty calculation was based on the 555 calendar days from June 7, 2008, to December 14, 2009. The Respondent challenged the penalty assessment and requested a formal administrative hearing. On May 21, 2010, the Respondent submitted payroll records for the period of March 21, 2009, through December 11, 2009. The records established that the Respondent had conducted business operations during the period that the Stop- Work Order was effective. The records also indicated that the Respondent routinely conducted business operations from Monday through Friday of each week, but did not operate on Saturdays, Sundays, or usual legal holidays. On January 21, 2011, the Department issued an Amended Order Assessing Penalty for Working in Violation of Reinstated Stop-Work Order in the amount of $381,000.00, based on the Respondent's routine work schedule with the deletion of the Saturdays, Sundays, and legal holidays that had been included in the January 8, 2010, Assessment. On January 25, 2011, the Petitioner filed a Motion to Amend Order of Penalty Assessment. The Motion was granted without objection at the commencement of the hearing. All orders relevant to this dispute were hand- delivered or were mailed to the Respondent's corporate address, which was also the residential address for the principals of the Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order assessing a penalty of $381,000.00 against the Respondent for conducting business operations in violation of the reinstated Stop-Work Order. DONE AND ENTERED this 29th day of March, 2011, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 29th day of March, 2011.
Findings Of Fact 13. The factual allegations contained in the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment issued on July 20, 2010, the Amended Order of Penalty Assessment issued on August 17, 2010, the Amended Stop-Work Order and Order of Penalty Assessment issued on September 13, 2010, and the 2! Amended Order of Penalty Assessment issued on September 14, 2010, the Notice of Voluntary Dismissal, and the Order Closing File which are fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Jeff Atwater, Chief Financial Officer of the State of Florida, or his designee, having considered the record in this case, including the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment, the Amended Order of Penalty Assessment, the Petition for Formal Hearing, the Amended Stop- Work Order and Order of Penalty Assessment, the 2™ Amended Order of Penalty Assessment, the Notice of Voluntary Dismissal, and the Order Closing file, and being otherwise fully advised in the premises, hereby finds that: 1. On July 20, 2010, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment in Division of Workers” Compensation Case No. 10-230-D5 to DISTINGUISHED CONTRACTING GROUP, INC. The Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment included a Notice of Rights wherein DISTINGUISHED CONTRACTING GROUP, INC. was advised that any request for an administrative proceeding to challenge or contest the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Stop- Work Order for Specific Worksite Only and Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. | 2. On July 21, 2010, the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment was served by personal service on DISTINGUISHED CONTRACTING GROUP, INC. A copy of the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On August 17, 2010, the Department issued an Amended Order of Penalty Assessment in Division of Workers’ Compensation Case No. 10-230-D5 to DISTINGUISHED CONTRACTING GROUP, INC. The Amended Order of Penalty Assessment assessed a total penalty of $235,415.26 against DISTINGUISHED CONTRACTING GROUP, INC. The Amended Order of Penalty Assessment included a Notice of Rights wherein DISTINGUISHED CONTRACTING GROUP, INC. was advised that any request for an administrative proceeding to challenge or contest the Amended Order of Penalty Assessment must be filed within twenty- one (21) days of receipt of the Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 4. On August 18, 2010, the Amended Order of Penalty Assessment was served by certified mail on DISTINGUISHED CONTRACTING GROUP, INC. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On August 20, 2010, DISTINGUISHED CONTRACTING GROUP, INC. filed a Petition for Formal Hearing(“Petition”) with the Department in response to the Amended Order of Penalty Assessment. A copy of the Petition is attached hereto as “Exhibit C” and incorporated herein by reference. 6. On September 14, 2010, the Petition was forwarded to the Division of Administrative Hearings and assigned DOAH Case No. 10-9054. The case was subsequently assigned DOAH Case No. 11-1188. 7. On September 13, 2010, the Department issued an Amended Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 10-230-D5 to DISTINGUISHED CONTRACTING GROUP, INC. 8. On September 14, 2010, the Amended Stop-Work Order and Order of Penalty Assessment was served at the Division of Administrative Hearings. A copy of the Amended Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit D” and incorporated herein by reference. 9. On September 14, 2010, the Department of Financial Services, Division of Workers’ Compensation issued a 2nd Amended Order of Penalty Assessment in Division of Workers’ Compensation Case No. 10-230-D5 to DISTINGUISHED CONTRACTING GROUP, INC. The 2nd Amended Order of Penalty Assessment assessed a penalty in the amount of $150,655.64 against DISTINGUISHED CONTRACTING GROUP, INC. 10. On September 14, 2010, the 2nd Amended Order of Penalty Assessment was served at the Division of Administrative Hearings. A copy of the 2nd Amended Order of Penalty Assessment is attached hereto as “Exhibit E” and incorporated herein by reference. 11. On May 11, 2011, DISTINGUISHED CONTRACTING GROUP, INC. filed a Notice of Voluntary Dismissal. A copy of the Notice of Voluntary Dismissal is attached hereto as “Exhibit F” and incorporated herein by reference. 12. On May 12, 2011, an Order Closing File was entered in Division of Administrative Hearings Case. No. 11-1188. A copy of the Order Closing File is attached hereto as “Exhibit G” and incorporated herein by reference.
The Issue Whether the Respondent was required to carry workers' compensation insurance coverage for its employees and, if it failed to do so, whether the Amended Notice and Penalty Assessment Order is correct.
Findings Of Fact At all times material to this case, the Petitioner, the Department of Labor and Employment Security, Division of Workers’ Compensation was the state agency charged with the responsibility of administering compliance with state laws governing workers’ compensation (WC). The Respondent, A. J. Interiors, Inc., is a Florida corporation doing business at 1825 Mears Parkway, Margate, Florida. At all times material to this case, Robert Barnes was an investigator employed by the Department to perform compliance investigations for WC. On July 6, 2000, Investigator Barnes performed a random construction site inspection at a new construction project located at 16687 Jog Road, Delray Beach, Florida. While at that location, Investigator Barnes observed two men wearing T-shirts bearing the company name "A. J. Interiors, Inc." along with its telephone number. The men were installing metal framing in order to hang and finish drywall. The field interview with the two men, identified in this record as Sergio and Jaime Gonzalez, revealed that neither was covered by WC insurance. This information was later confirmed by Investigator Barnes. Additionally, neither man had obtained an exemption from coverage as the sole proprietor of a business. Based upon the field interview of the two men, a review of Department records, and contact with the Respondent's insurance agent, Investigator Barnes correctly determined that the men were the Respondent’s "employees” as that term is defined by the WC law. The men did not supply materials to the job site but agreed to perform work based upon a price described as a "per board" industry standard rate. In other words, the men would hang the drywall at a flat rate (established by and consistent with the local industry standard) for each job accepted through the Respondent. If the work were completed, the men expected to be paid by the Respondent. The men did not contract with or work for the general contractor of the job. The only requirement for payment was the performance of the work. The only risk incurred by the workers related to their relationship with the Respondent. Having concluded that the workers were not covered by WC and were not exempt, Investigator Barnes caused a stop work order to be issued against the Respondent. In conjunction with that order, the Department requested copies of the Respondent's business records. A review of the "vendor accounts” supplied by the Respondent established that its workers were paid amounts presumably based upon the number of boards hung per job identified. The payments were not always the same amount as the number of boards hung for a given job could vary. Additionally, the Respondent allowed workers to receive "draws" against the expected payments for uncompleted jobs. The Respondent’s claim that the workers were independent contractors has not been deemed credible. Based upon the testimony of the Respondent's witness all of the workers performed as outlined by the men interviewed by Investigator Barnes. The Respondent did not have a valid WC policy during the three years preceding the stop work order. The Amended Notice and Penalty Assessment Order prepared by Investigator Barnes accurately calculates the amounts owed by the Respondent for the three-year period.
The Issue Whether Petitioner is entitled to an award of attorney's fees pursuant to Section 57.111, Florida Statutes.1/
Findings Of Fact The Department is the state agency charged with the regulation of workers’ compensation insurance in the State of Florida. The Department issued a Stop Work Order to Petitioner on June 6, 2006. On June 27, 2006, the Department issued an Amended Order of Penalty Assessment, assessing $272,948.96 in penalties against Petitioner. Petitioner timely challenged the Stop Work Order and Amended Order of Penalty Assessment and requested an administrative hearing. A formal hearing was held on October 5, 2006. The Recommended Order, which was entered on November 28, 2006, recommended that the Department enter a final order rescinding the Amended Order of Penalty Assessment and the Stop Work Order. On February 23, 2007, a Final Order was issued by the Agency adopting the findings of fact and conclusions of law set forth in the Recommended Order. On March 30, 2007, Petitioner filed the Petition with a supporting affidavit and fee statement which initiated the instant proceeding. In the Petition, Petitioner seeks relief under the Florida Equal Access to Justice Act, Section 57.111, Florida Statutes. There is no dispute that Petitioner is the prevailing party in the underlying case. Petitioner seeks attorney's fees in the amount of $20,197.50. There is no dispute as to the reasonableness of the fees sought. At the time the underlying action was initiated, Petitioner was a sole proprietor located in Jacksonville, Florida, which engaged in the business of cutting trees. There is no dispute that Petitioner is a small business party for purposes of Subsection 57.111(4)(a), Florida Statutes. On June 6, 2006, the Department’s investigator, Michael Robinson, conducted a site visit at a job site where he observed five individuals, four of whom were involved in tree cutting activities. During his June 6, 2006, site visit, Robinson interviewed the four individuals and recorded their responses on a field interview worksheet. The workers identified Nolan as their employer, and answered Mr. Robinson’s questions regarding how long they had been employed by Nolan, and their basis of pay. One of the workers informed Mr. Robinson that he had been employed by Nolan for two weeks; a second worker informed him that he had worked for Nolan for three weeks. Both of these workers informed Mr. Robinson that they were paid on a daily basis. A third worker informed Mr. Robinson that he was paid by the job. The workers were compliant and responsive to Mr. Robinson’s inquiries. Mr. Nolan was not at the jobsite at the time of Mr. Robinson’s site visit, but Mr. Robinson obtained his phone number, called, and left a message. Mr. Nolan promptly returned the call. Mr. Nolan was also compliant and responsive to Mr. Robinson’s questions. Mr. Nolan acknowledged to Mr. Robinson that the four individuals interviewed by Mr. Robinson were his employees and that he had no workers’ compensation insurance. Mr. Nolan also informed Mr. Robinson that his business was a non-construction business entity and was not required to carry workers’ compensation insurance. Mr. Robinson told Mr. Nolan that he was required to have workers’ compensation insurance. Mr. Robinson also searched the Coverage and Compliance Automated System (CCAS) and found no proof of coverage nor an exemption for Nolan. The Stop Work Order On the same day as the site visit, Mr. Robinson conferred with his supervisor, Robert Lambert, to discuss the issuance of a stop work order. Mr. Robinson conveyed to Mr. Lambert that Nolan had four employees who were non- construction workers, and that there was no workers’ compensation coverage. Mr. Robinson did not convey the short duration of employment of two employees or that they were paid daily or by the job. Based upon this information, Mr. Lambert immediately approved a Stop Work Order, which was issued that day. Mr. Robinson also issued a request for business records to Nolan for the purpose of calculating a penalty for lack of coverage. Paragraphs 12 through 24 of the Recommended Order, adopted within the Final Order, found that Mr. Nolan started the business, Great Southern Tree Service, in February or March 2005, as a sole proprietor; that he did not employ anyone in 2003 or 2004; that the nature of the tree trimming business is seasonal and sporadic; that Nolan had fewer than four employees during 2005; and that the only time Nolan had four employees was from May 2006 until June 6, 2006, when two workers worked occasionally for Nolan due to tree damage in the Jacksonville area from a storm. Nolan did not produce business records as requested by the Department because there were no such records to produce. The Amended Order of Penalty Assessment On June 27, 2006, an Amended Order of Penalty Assessment (Amended Order) was issued to Nolan in the amount of $272,948.96, for the time period June 6, 2003 to June 6, 2006. Attached to the Amended Order is a worksheet with the names of the four workers interviewed by Mr. Robinson on June 6, 2006. Using a statutory formula, Mr. Robinson imputed a penalty for the period October 1, 2003 to June 6, 2006, and a penalty of $100 per day for the time period between June 6, 2003 and September 30, 2003. At the time of the issuance of the Stop Work Order and the Order of Penalty Assessment, Mr. Robinson and Mr. Lambert were aware of the statutory requirement that to be considered an employer under the workers’ compensation law, four or more persons must be employed by the same private non-construction employer. However, neither Mr. Robinson nor Mr. Lambert was aware of well-established case law holding that the elements of regularity, continuity, common employment, and duration, should be considered in determining the applicability of the law, and that an occasional increase in the number of workers for some unusual occasion does not automatically result in application of the workers' compensation law.2/
The Issue The issues are whether nine workers were employees of Respondent, during part of the audit period; whether Respondent failed to secure the payment of workers' compensation coverage in violation of Section 440.107, Florida Statutes (2003); and whether Petitioner should impose a penalty against Respondent in the amount of $123,960.23.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. § 440.107, Fla. Stat. (2002). Respondent is a closely held corporation domiciled in Florida and engaged in the sale and installation of floor coverings. Mr. Dennis Davison and Mrs. Lynne Davison, a married couple, own all of the outstanding stock of Respondent (the owners). Respondent has five in-office employees, including the owners, and had a net worth of approximately $100,000 before paying the proposed penalty. On April 2, 2004, Petitioner's compliance officer conducted a random site inspection of a single-family residence at 213 Northwest 3rd Place, Cape Coral, Florida. Mr. John Walega and Mr. Mike Stephens were laying carpet in the residence (Walega and Stephens, respectively). Walega was a sole proprietor who employed Stephens. The compliance officer determined that Walega was an employee of Respondent because Walega had an expired exemption and no proof of workers' compensation insurance coverage. The compliance officer issued separate stop work orders against Walega and Respondent. The stop work order against Walega is not at issue in this proceeding. The compliance officer issued the stop work order against Respondent even though: she knew that Respondent had compensation coverage for Respondent's five employees through a leasing company; and she had no knowledge that Respondent had subcontractors other than Walega working for Respondent. The compliance officer requested Respondent's business records for the three years from April 2, 2001, through April 2, 2004 (the audit period). Respondent fully complied with the request in a timely manner. The stop work order issued against Respondent on April 2, 2004, also assessed a penalty stated as the greater of $1,000 or 1.5 times the premium Respondent would have paid in premium charges during the period Respondent allegedly failed to secure the payment of workers' compensation insurance. Sometime between April 2 and 16, 2004, Petitioner amended the penalty assessment to $137,820.72. On April 16, 2004, the owners mortgaged their personal residence to pay the amended penalty assessment. Petitioner released the stop work order, but the owners lost business in an unspecified dollar amount while the stop work order was in effect and continue to incur monthly interest expense in the amount of $500 to service the mortgage on their home. On June 28, 2004, Petitioner issued a Seconded Amended Order of Penalty Assessment No. 04-157-D7-2 that reduced the assessed penalty to $123,960.23 (the Seconded Amended Order). Respondent is entitled to a refund in the amount of $13,860.49, but Petitioner had not paid the refund as of the date of hearing. The Second Amended Order is the proposed agency action at issue in this proceeding. The compliance officer is the only employee for Petitioner who investigated and developed the substantive information that forms the basis of Petitioner's proposed agency action. Other employees calculated the actual amounts of the proposed penalties. Respondent does not challenge the mathematical accuracy of the penalty calculations by Petitioner, but challenges the legal and factual basis of Petitioner's determination that nine workers were Respondent's employees. The nine workers are identified in the record as Walega; Messrs. James Allan, Bertin Flores, Cliff Hill, David Lancaster, Earl Lancaster, Jeff Dozier, Anthony Gioe; and Ms. Patricia Lancaster. The statutory definition of an employee for that part of the audit period before January 1, 2004 (the relevant period), was different than the statutory definition that became effective on January 1, 2004. Factual findings concerning the nine workers at issue are driven by one statutory definition during the relevant period and another statutory definition thereafter. Any of the nine workers that satisfied the statutory definition in former Subsection 440.02(15)(d)1, Florida Statutes (2003), of an independent contractor should not have been included in that part of the proposed penalty attributable to the relevant period. Effective January 1, 2004, however, Subsection 440.02(15)(d)1, Florida Statutes (2003), no longer excludes independent contractors in the construction industry from the definition of an employee. Thus, a determination of whether a worker was an independent contractor is not relevant to that portion of the proposed penalty covering any part of the audit period after December 31, 2003. Effective January 1, 2004, Subsection 440.02(15)(c)2, Florida Statutes (2003), no longer excludes a subcontractor, including those that would have satisfied the former definition of an independent contractor, from the definition of an employee unless the subcontractor either executes a valid exemption election or otherwise secures payment of compensation coverage as a subcontractor. There is insufficient evidence to support a finding that any of the nine workers at issue in this proceeding either elected a valid exemption or otherwise secured payment for compensation coverage after December 31, 2003. The nine workers at issue in this proceeding are not excluded from the definition of an employee after December 31, 2004, even if they were independent contractors throughout the audit period. Except for constitutional arguments raised by Respondent over which DOAH has no jurisdiction, Respondent owes that part of the penalty attributable to any period after December 31, 2003. It is undisputed that the nine workers included in that part of the penalty assessment attributable to the relevant period were subcontractors throughout the audit period. Respondent's ledger clearly treated the workers as subcontractors and reported their earnings on Form 1099 for purposes of the federal income tax. Petitioner treated the workers as subcontractors in the penalty calculation. Customers of Respondent paid Respondent for installation of floor coverings they purchased from Respondent, and Respondent paid each of the nine workers to install the floor coverings. The Workers' Compensation Law in effect during the relevant period did not expressly exclude from the definition of an employee those subcontractors who executed a valid exemption election or otherwise secured payment of compensation coverage as a subcontractor. Findings concerning the existence of an exemption election or payment of compensation coverage are neither relevant nor material to the statutory definition of an employee during the relevant period. During the relevant period, the nine workers at issue were excluded from the definition of an employee only if they satisfied the definition of an independent contractor in former Subsection 440.02(15)(d)1, Florida Statutes (2003). Each of the nine workers were required to satisfy all of the following requirements: The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal requirements; The independent contractor performs or agrees to perform specific services or work for specific amounts of money and controls the means of performing the services or work; The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform; The independent contractor is responsible for the satisfactory completion of work or services that he or she performs or agrees to perform and is or could be held liable for a failure to complete the work or services; The independent contractor receives compensation for work or services performed for a commission or on a per-job or competitive-bid basis and not on any other basis; The independent contractor may realize a profit or suffer a loss in connection with performing work or services; The independent contractor has continuing or recurring business liabilities or obligations; and The success or failure of the independent contractor's business depends on the relationship of business receipts to expenditures. The preponderance of evidence shows that each of the nine workers at issue was an independent contractor during the relevant period. Respondent conducted the ordinary course of its trade or business with each of the nine workers in substantially the identical manner. None of the workers shared office space with Respondent. Each worker used his or her own truck, equipment, and tools to transport the floor coverings sold by Respondent and to install them in a customer's premises. Petitioner admits that Walega was a sole proprietor. Each of the other workers either held a federal employer identification number or was a sole proprietor who was not required to obtain a federal employer identification number. Each worker agreed to perform specific services or work for specific amounts of money and controlled the means of performing the services or work. Each worker incurred his or her own expenses to install floor coverings. Each worker transported floor coverings and necessary materials to the work site in the worker's own truck and used his or her own tools to perform the work. Each worker exercised independent professional judgment to perform the work. Respondent did not perform any pre-installation site inspection and did not perform any site preparation. Respondent did not train workers, instruct workers on how to perform their work, did not supervise their work while it was being performed, and did not perform any post-installation site inspection unless Respondent received a customer complaint. Each worker was responsible for the satisfactory completion of work or services that he or she performed. Each worker was liable to Respondent and the customer for any failure to complete the work or services or for inferior workmanship. Each worker warranted his or her work to the customer's satisfaction and absorbed the costs of rework and any damage to the customer's premises. Respondent paid each worker for work or services performed on a per-job or competitive-bid basis rather than any other basis. Respondent negotiated the price paid to a worker on a square-foot basis. The price did not change regardless of the amount of time the job required or the number of helpers the worker paid to assist the worker on the job. Each worker realized a profit or suffered a loss in installing floor coverings sold by Respondent. Each worker performed work for other vendors and had continuing or recurring business liabilities or obligations apart from installing floor coverings for Respondent. Each worker depended on the relationship of business receipts of expenditures for the success or failure of the worker's business. Each worker maintained his or her own occupational and professional licenses. Each worker maintained his or her own liability insurance. Respondent required each worker to sign a written form stating that the worker was an independent contractor. The form acknowledged the workers' warranty obligations and his or her obligations for their own taxes and insurance. Each form disclosed the workers' social security number or federal employer identification number. Respondent did not withhold federal income taxes from the payments to workers. Petitioner did not explicate the basis for reducing the proposed assessment in the Second Amended Order. However, the evidence reveals that the penalty reduction resulted from the exclusion of corporate subcontractors from the penalty base. The business relationship between Respondent and its corporate subcontractors during the relevant period was substantially the same as that between Respondent and the nine workers at issue. Early in this administrative proceeding on April 8, 2004, the compliance officer advised the owners that she was unable to release the stop work order against Respondent unless she could verify in Petitioner's data base, in relevant part, that the nine workers at issue each had a valid exemption or had insurance. However, Petitioner's database would not have disclosed compensation coverage maintained by a subcontractor through a leasing company. The compliance officer's advice to the owners did not reflect the law in effect during the relevant period. The Workers' Compensation Law in effect during the relevant period did not expressly exclude from the definition of an employee those workers who executed a valid exemption election or otherwise secured payment of compensation coverage as a subcontractor. The law excluded subcontractors from the definition of an employee only if the subcontractors satisfied the statutory definition of an independent contractor. The compliance officer made no effort to determine whether any of the workers she included in the penalty base satisfied the definition of an independent contractor. The compliance officer never advised the owners that establishing a subcontractor as an independent contractor would avoid part of the assessment against Respondent during the relevant period. The compliance officer never advised the owners that Respondent was free to choose to be represented by counsel during the audit process. The compliance officer told the owners that the only thing Respondent could do to avoid the assessment was to provide a certificate of insurance or an exemption for each of the subcontractors included in the penalty base. The compliance officer admitted that she was unaware that a subcontractor who was an independent contractor during the relevant period was legally excluded from the penalty base. Counsel for Respondent advised the compliance officer of the correct legal standard on April 12, 2004, but the compliance officer refused to release the stop work order unless Respondent paid the assessed penalty. The compliance officer knew that Walega had held a valid exemption at various times in the past as a sole proprietor. She knew Walega had renewed the exemption on October 29, 2003, for five years. However, Petitioner's database showed the exemption had expired on January 1, 2004, by operation of new law. Walega provided Respondent with a copy of the exemption he renewed on October 29, 2003. The exemption stated on its face that it was effective for five years. The owners had no actual knowledge that the exemption expired on January 1, 2004, as a result of a change in the Workers' Compensation Law. Petitioner admits that it issued the exemption to Walega knowing that the exemption would expire on January 1, 2004. Petitioner issued the exemption so that Walega could use it until January 1, 2004.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order dismissing the disputed charges against Respondent for the relevant period, refunding any overpayment by Respondent, and sustaining the remaining allegations and penalties against Respondent. DONE AND ENTERED this 27th day of August, 2004, in Tallahassee, Leon County, Florida. DANIEL MANRY 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 27th day of August, 2004. COPIES FURNISHED: David C. Hawkins, Esquire Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Susan McLaughlin, Esquire Law Offices of Michael F. Tew Building 800, Suite 2 6150 Diamond Center Court Fort Myers, Florida 33912 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
