The Issue The issue to be determined is whether Respondent complied with coverage requirements of the workers' compensation law, Chapter 440, Florida Statutes. A determination of whether Respondent functioned as an employer is a preliminary issue to be resolved.
Findings Of Fact Petitioner is the agency of state government currently responsible for enforcing the requirement of Section 440.107, Florida Statutes, that employers secure the payment of compensation for their employees. Respondent works in the fence construction industry and employs four people. Petitioner's investigator identified three people preparing a worksite for the erection of a privacy fence at 3000 Majestic Oaks Lane South in Jacksonville, Florida. The investigator then contacted Respondent and confirmed that the three identified individuals in addition to Respondent, were employed by Respondent for a total of four employees. The investigator determined none of the employees had workers’ compensation exemptions nor had Respondent secured the payment of workers’ compensation to his employees. On April 27, 2005, the investigator served a SWO on Respondent. The SWO required Respondent to cease all business operations in Florida. At the same time, the investigator served a Request for Business Records for Penalty Calculation on Respondent, requesting payroll records from Respondent for the period April 27, 2002, through April 27, 2005 (the audit period for penalty calculation). Respondent provided no records to the investigator. On May 23, 2005, the investigator determined 520 days had passed between the beginning of the audit period and September 30, 2003, and the penalty for noncompliance during this period was $52,000.00. The investigator also determined that during the period October 1, 2003, through the end of the audit period, the statewide average weekly wage paid by employers was $651.38; Respondent had four (4) employees; the imputed weekly payroll for Respondent’s employees was $320,848.00; using approved manual rates Respondent should have paid $97,969.40 in workers’ compensation premium; and the penalty for noncompliance during this period was calculated to be $146,954.12. On May 26, 2005, Investigator Bowman served the Amended Order of Penalty Assessment on Respondent. The Amended Order assessed Respondent with a penalty for the entire audit period in the amount of $198,954.12. The investigator obtained records created by Respondent demonstrating Respondent placed a bid on a job on June 1, 2005, and Respondent completed the job on July 1, 2005. On July 19, 2005, the investigator served a Corrected Amended Order of Penalty Assessment on Respondent, which assessed a penalty in the amount of $3,000.00 for violating the terms of the SWO. Respondent violated the SWO on two separate days, the day of the bid and the day the work was completed. No competent substantial evidence was presented regarding intervening business operations.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order affirming the Stop Work Order and Order of Penalty Assessment, Amended Order of Penalty Assessment, and Corrected Amended Order of Penalty Assessment, requiring Respondent to pay a penalty in the amount of $200,594.12 to Petitioner, and requiring Respondent to cease all business operations in Florida. DONE AND ENTERED this 15th day of September, 2005, in Tallahassee, Leon County, Florida. S DON W. DAVIS 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 15th day of September, 2005. COPIES FURNISHED: John M. Iriye, Esquire Department of Financial Services Division of Workers Compensation 200 East Gaines Street Tallahassee, Florida 32399-422 Martin D. Snyder 10367 Allene Road Jacksonville, Florida 32219 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carols G. Muniz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues are whether Petitioner has proved that Respondent failed to secure workers' compensation insurance, as required by section 440.10, Florida Statutes, and, if so, the amount of the penalty, pursuant to section 440.107.
Findings Of Fact On September 18, 2013, the owner and Jesus Rodriguez, representing Respondent, signed a permit application for reroofing of a single-family residence located at 4311 Southwest 15th Street, Miami. An official of the Miami-Dade County Department of Regulatory and Economic Resources approved the plans on September 27, 2013. The record does not disclose when work commenced. However, at about 9:00 a.m. on September 25, 2013, an investigator of the Division of Workers' Compensation was randomly canvassing the area, noticed roofing work at the subject address, and conducted an inspection. The investigator observed three persons on the roof engaged in roofing work. When the investigator asked the three workers for whom they worked, one of them replied, "Oval Construction," and added that it was owned by Pedro Alfaro and Jesus R. Rodriguez (Mr. J. Rodriguez). When asked for a phone number for the owners, the worker gave the investigator a cell number for Mr. Alfaro. Prior to calling Mr. Alfaro, while still at the work site, the investigator researched Oval Construction and learned that it was an active corporation with two corporate officers: Mr. Alfaro and Mr. J. Rodriguez. The investigator learned that the corporation showed no workers' compensation exemptions for the officers or any workers' compensation coverage. While still at the worksite, the investigator then called Mr. Alfaro and asked him if Oval Construction had workers' compensation insurance. Mr. Alfaro said that Mr. J. Rodriguez handled such matters, so the investigator told Mr. Alfaro to have Mr. J. Rodriguez call the investigator immediately. Mr. J. Rodriguez did so and informed the investigator that the three workers worked for him, but not under Oval Construction; they worked for Respondent, and Respondent had workers' compensation insurance. Mr. J. Rodriguez stated that he did not have the insurance information at the moment, but would call back with the information. In the meantime, the investigator researched Respondent and learned that it was an active corporation with two officers: Mr. J. Rodriguez and Mr. Alberto Rodriguez (Mr. A. Rodriguez), who were not related. (Mr. J. Rodriguez is deceased.) Both officers had current workers' compensation exemptions, and the database indicated that Respondent leased its employees from South East Personnel Leasing Company. The investigator contacted South East Personnel Leasing and learned that the leasing contract had terminated on July 24, 2013, and Respondent had no current workers' compensation coverage through South East Personnel Leasing. At this point, the investigator called Mr. J. Rodriguez, who repeated that the workers were employed by Respondent, not Oval Construction. Subsequently, the investigator tried unsuccessfully several times to speak to Mr. J. Rodriguez. A few days after the inspection, Mr. A. Rodriguez called the investigator and arranged for a meeting between the investigator and Mr. J. Rodriguez for October 1, 2013. On October 1, 2013, the investigator and Mr. J. Rodriguez met, and the investigator served on him, in the name of Respondent, a Request for Production of Business Records for Penalty Assessment Calculation for the three-year period ending on September 25, 2013. Respondent never produced any business records to Petitioner. On October 2, 2013, Mr. J. Rodriguez caused the transfer of the building permit for the roofing work from Respondent to Blue Panther Roofing. On October 1, 2013, Mr. J. Rodriguez signed a Hold Harmless agreement holding Miami-Dade County harmless and assuming responsibility for any work already performed under the building permit issued to Respondent. Mr. A. Rodriguez testified that he knew nothing about the subject job. But Mr. J. Rodriguez was the qualifying general contractor of Respondent, was an officer of Respondent, and owned 20% of Respondent. In fact, Mr. J. Rodriguez was the only licensed or certified contractor employed by Respondent and was the sole person who could obtain building permits for work to be performed by Respondent. Mr. A. Rodriguez's lack of knowledge of the subject job is therefore not dispositive because Mr. J. Rodriguez had the authority to, and did, apply for the building permit in the name of Respondent, and he had the authority to, and did, obligate Respondent to do the subject reroofing work. During the above-described three-year period, according to Petitioner Exhibit 6, page 20, Respondent had workers' compensation insurance from October 4, 2010, through January 1, 2013. Additionally, according to Petitioner Exhibit 6, page 23, Respondent had workers' compensation insurance through South East Personnel Leasing from October 18, 2012, through February 20, 2013, and March 7, 2013, through July 24, 2013. This is borne out by the testimony of the investigator. (Tr., pp. 99-101.) Respondent thus did not have workers' compensation coverage for a total of 85 days during the three years at issue, during which time Respondent actively performed construction work in Florida. The three periods of noncoverage during the three years at issue are September 26 through October 3, 2010, for a total of 8 days; February 21, 2013, through March 6, 2013, for a total of 14 days; and July 25, 2013, through September 25, 2013, for a total of 63 days. A conflict in the evidence prevented Petitioner from proving by clear and convincing evidence a fourth period of noncoverage: October 4 through 17, 2012. Additionally, Mr. J. Rodriguez was listed as secretary of Respondent and exempt from workers' compensation insurance from March 1, 2013, through March 1, 2015, so he would be counted as an employee during the noncoverage periods of September 26, through October 3, 2010, and February 21, 2013, through February 28, 2013. Mr. A. Rodriguez was listed as president of Respondent and exempt from workers' compensation insurance from October 22, 2012, through October 22, 2014, so he would be counted as an employee during the noncoverage period of September 26, 2010, through October 3, 2010. Mr. A. Rodriguez's wife, Yubanis Ibarra, was also a corporate officer and was not exempt during one week of one noncoverage period: September 26 to October 3, 2010. On October 30, 2013, Petitioner issued an Amended Order of Penalty Assessment assessing a penalty of $15,594.34 pursuant to section 440.107(7)(d). The Amended Order of Penalty Assessment is supported by a Penalty Calculation Worksheet, which based the penalty on the three employees found on the job on the day of the inspection as employees during all periods of noncoverage and the three above-identified corporate officers during their respective periods of nonexemption that occurred while they served as officers. Subject to two exceptions, the Amended Order of Penalty Assessment correctly calculates the gross payroll based on the statewide average weekly wage multiplied by 1.5, applies the correct manual rates to the gross payroll, determines the correct evaded premium, and determines the correct penalty based on the premium multiplied by 1.5. The first exception is that Petitioner failed to prove by clear and convincing evidence a lack of coverage for the above-described 13 days in October 2012. This failure of proof noted in the preceding paragraph concerns four employees who generated total penalties of $2510.88, so the corrected total penalty would be $13,084.46. The second exception concerns the proof of the duration of employment of the three employees working on the roof at the time of the inspection on September 25, 2013. Petitioner has proved by clear and convincing evidence their employment only during the noncoverage period of July 24, 2013, through September 25, 2013, as discussed in the Conclusions of Law. For the two other noncoverage periods--three, if the period noted in paragraph 15 already had not been rejected--the penalty of $3220.05 has not been established, leaving a net penalty of $9864.41.
Recommendation It is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order finding Respondent guilty of not securing workers' compensation and imposing a penalty of $9864.41. DONE AND ENTERED this 13th day of November, 2015, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 2015. COPIES FURNISHED: Leon Melnicoff, Qualified Representative Thomas Nemecek, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Mariem Josefina Paez, Esquire The Law Offices of Mariem J. Paez, PLLC 300 Sevilla Avenue, Suite 304 Coral Gables, Florida 33134 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue The issues are whether the individuals included in the Amended Order of Penalty Assessment were employees of Respondent during the penalty period designated therein and, if so, whether Respondent failed to secure 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 $156,880.87.
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 an "S" corporation domiciled in Florida and engaged in the construction industry. The company was incorporated in late October 2003 and began operating at or near that time. At all times relevant to this proceeding, David Roquet was the president and sole shareholder of the company. On April 7, 2004, Petitioner conducted an investigative sweep of areas in Pasco County, including the Lexington Oaks Subdivision. While in the Lexington Oaks Subdivision, one of Petitioner's investigators observed five individuals working on a residence under construction. These individuals were framing the house and performing other carpentry work. At the time of the investigation, John Sullivan, an investigator for Petitioner, spoke to Maurilio Carrizales, one of the five individuals working at the site. Later, Mr. Sullivan also spoke with Mr. Roquet after he arrived at the construction site. On April 7, 2004, Mr. Sullivan issued a Stop Work Order against Respondent after he determined that Maurilio Carrizales and other individuals working on the construction project did not have workers' compensation insurance. That same day, Petitioner issued to Mr. Roquet, as Respondent's president, a Request for Production of Business Records for Penalty Assessment Calculation. On April 12, 2004, pursuant to the Division's request, Mr. Roquet provided the Division with copies of Respondent's business records, which included check stubs, payroll records, tax records, and workers' compensation documents. Respondent's business records revealed that Respondent made direct payments to Maurilio Carrizales, Raudel Carrizales, Victor Carrizales, and George Betz for the construction work they performed for the company. According to the check stubs and tax records, Respondent treated these individuals as subcontractors and did not withhold any taxes from the direct payments that were made to them. Respondent did not have workers' compensation coverage on the individuals named in paragraph 7 during the penalty periods covered in the Amended Order of Penalty Assessment. There was no documentation in Respondent's business records which indicated that Maurilio Carrizales, Raudel Carrizales, Victor Carrizales, and George Betz had workers' compensation coverage or exemptions from such coverage during the penalty period. Moreover, Petitioner, which maintains a database of all workers' compensation exemptions in the State of Florida, determined that there were no exemptions from workers' compensation coverage for Mr. Roquet,1/ Raudel Carrizales, Maurilio Carrizales, Victor Carrizales, and George Betz for the time periods which are at issue in this proceeding. Based on Petitioner's review of its records and on the business records provided by Respondent, Petitioner issued an Amended Order of Penalty Assessment which assessed a penalty of $156,880.87 against Respondent for failing to secure workers' compensation as required by Subsection 440.107(2), Florida Statutes (2003). The penalty amount of $156,880.87 was determined by multiplying the payroll amount by the workers' compensation approved manual rate for carpentry of $37.91. That amount was then multiplied by 1.5. See Subsection 440.107(7)(d), Florida Statutes (2003), for the method of calculating penalties. The penalty assessed in the Amended Order is based on Petitioner's determination that Mr. Roquet, Maurilio Carrizales, Raudel Carrizales, Victor Carrizales, and George Betz were Respondent's employees during designated time periods and on the gross payments Respondent made to those employees. The Penalty Assessment Worksheet, upon which the total penalty amount is based, listed Respondent's employees and its gross payments to the employees and the periods which Petitioner determined the employees had no workers' compensation coverage or exemptions, as follows: (1) from October 30, 2003, until December 17, 2003, Mr. Roquet was paid $22,994; (2) from October 31, 2003, until December 31, 2003, Maurilio Carrizales was paid $33,536; (3) from October 31, 2003, through December 31, 2003, Raudel Carrizales' was paid $33,536; (4) from January 1, 2004, until April 7, 2004, Maurilio Carrizales was paid $57,023; (5) from February 1, 2004, through April 7, 2004, Raudel Carrizales was paid $24,666; (6) from January 4, 2004, until April 7, 2004, Victor Carrizales was paid $99,938; and (7) from January 16, 2004, until January 23, 2004, George Betz was paid $4,190. During this proceeding, Respondent stipulated that during the time period at issue in this proceeding George Betz did not have either workers' compensation coverage or a valid exemption from such coverage.2/ Respondent's net or ordinary income for 2003, as reported on its Internal Revenue Service Form 1120S (IRS Form 1120S) for the tax year 2003, was $22,994. Based on its review of this document, Petitioner determined that in 2003, Mr. Roquet received compensation of $22,994 from the company. Contrary to Petitioner's conclusion, the $22,994 was not compensation to Mr. Roquet and should not have been attributed to him as such. The ordinary income of Respondent, a corporation, reported on IRS Form 1120S prepared for the tax year 2003, does not represent compensation that was paid to Mr. Roquet, the sole shareholder and officer in the company. Because the corporation had initiated operations in late October 2003 and operated only the last two months of 2003, Mr. Roquet had not begun compensating himself in 2003 and had performed no services for the company for which he expected or received remuneration. In mid-October 2003, when Mr. Roquet filed for the corporation's federal identification number, he indicated on the form that he would begin receiving compensation in January 2004. That form was received and approved by IRS on or about October 21, 2003, and consistent with the intent stated therein, Mr. Roquet began receiving compensation from Respondent in January 2004. In 2003, Respondent made a distribution of $6,700 to Mr. Roquet. However, this distribution was not compensation to Mr. Roquet, but was reimbursement to him for expenses he had paid out of his personal funds for some of the company's day-to- day operating costs and was also a withdrawal of dividend distributions from the company. For the reasons stated in paragraphs 13, 14, and 15 above, Respondent's ordinary income of $22,994, and no part thereof, is compensation to Mr. Roquet for purposes of determining any penalty assessment against Respondent. Mr. Roquet, as Respondent's president, entered into an oral agreement with three brothers: Maurilio Carrizales, Raudel Carrizales, and Victor Carrizales. Pursuant to the oral agreement, each brother was a subcontractor of the company and would be paid $1.67 per square foot for the framing work that he completed. With the funds that the company paid, each of the brothers had to buy whatever supplies and materials were needed to complete the job. However, there was no written agreement to describe or define the business relationship between Respondent and each of the brothers. Prior to Respondent's hiring the Carrizales brothers, Mr. Roquet requested information regarding their workers' compensation coverage. Based on information provided, Mr. Roquet mistakenly believed that both Raudel Carrizales and Maurilio Carrizales had workers' compensation coverage through an employee leasing company and that Victor Carrizales had an exemption from such coverage. However, at the time periods relevant to this proceeding, these individuals had neither workers' compensation coverage nor exemptions from coverage. Victor Carrizales, as a sole proprietor of a construction business, had a valid exemption from workers' compensation coverage from October 25, 2000, to October 25, 2002, and from February 15, 2003, until December 31, 2003. The letter of exemption for Victor Carrizales was initially valid from February 15, 2003, until February 14, 2005, but became invalid after December 31, 2003, and individuals previously exempt had to re-apply for exemption. That change in the law became effective January 1, 2004. See Fla. Admin. Code R. 69L-6.012. The portion of the penalty assessment attributable to Victor Carrizales was January 1, 2004, to April 7, 2004, a time period in which he had no workers' compensation coverage or exemption. During this proceeding, Respondent contended that Raudel Carrizales, Maurilio Carrizales, and Victor Carrizales had workers' compensation coverage through a personnel leasing company, Southeast Personnel Services, Inc. (Southeast Personnel). Pursuant to Subsection 468.520(5), Florida Statutes (2003), an employee leasing company is a business entity engaged in employee leasing. "Employee leasing" is an arrangement whereby a leasing company assigns its employees to a client and allocates the direction of and control over the leased employees between the leasing company and the client. § 468.520(4), Fla. Stat. (2003). When the employee leasing company accepts a client, the client becomes an employee of the employer's leasing company. An employee leasing company is the employer of the leased employees and is responsible for providing workers' compensation pursuant to Chapter 440, Florida Statutes (2003). § 468.529(1), Fla. Stat. (2003). Additionally, an employee leasing company assumes responsibility for the payment of wages to the leased employees without regard to payments by the client and for the payment of payroll taxes and collection of taxes from the payroll of leased employees. § 468.525(4)(b) and (c), Fla. Stat. (2003). Records from Southeast Personnel provided to Petitioner reflect that at one time, Raudel Carrizales, through his company, Carrizales Brothers Framing, was associated with that personnel leasing company pursuant to a written agreement (Agreement) entered into on or about October 27, 2003.3/ At the time the Agreement was executed, both Raudel Carrizales and Maurilio Carrizales were listed by Southeast Personnel as employees of Carrizales Brothers Framing. Pursuant to the Agreement, as the leasing company, Southeast Personnel was responsible for providing workers' compensation coverage for its leased employees, who were paid through the leasing company. The Agreement, which refers to leased employees as "assigned employees," provides in relevant part the following: Client "represents and warrants that all wages (including bonuses) paid to any assigned employee are to be paid through SPLI [Southeast Personnel] and that any such assigned employee will receive no additional wages in any form from Client. Client agrees that it will be solely responsible for damages of any nature arising out of Client's failure to report to SPLI [Southeast Personnel] the payment to an assigned employee of any remuneration for services rendered for Client. In addition, SPLI [Southeast Personnel] shall not be considered to be an employer of any individual for who required payroll information is not supplied during any pay period (except as may be required by law). Client assumes full responsibility for workers' compensation claims, . . . and any and all other obligations or claims pertaining in any way to any individual for whom payroll information is not supplied during any payroll period (except as may be required by law), or who is paid in whole or part by Client, as an employee, independent contractor, or in any other capacity. For workers' compensation coverage to apply through the leasing company, the "assigned employees" must be paid through the leasing company. In this case, none of the employees listed on the Penalty Worksheet were paid by Southeast Personnel for the construction work they did for Respondent. Instead, they were paid directly by Respondent. There is no evidence that these direct payments were ever reported to Southeast Personnel. Rodney Holderbau, a marketing specialist with Southeast Personnel, testified that Raudel Carrizales, Maurilio Carrizales, and Victor Carrizales had workers' compensation coverage through Southeast Personnel, even though they were paid directly by Respondent for the work they did for that company and received no payments for that job from Southeast Personnel. However, no documentary evidence was presented to support this position. Mr. Holderbau's testimony that Raudel Carrizales, Maurilio Carrizales, and Victor Carrizales had workers' compensation coverage during all the alleged periods noted on the Amended Order of Penalty Assessment is neither credible nor persuasive. As a marketing specialist responsible for recruiting companies to become clients of Southeast Personnel, Mr. Holderbau failed to establish that he possessed the qualifications or position within Southeast Personnel to speak on behalf of the company and to interpret the terms of the contract. The claim of Mr. Holderbau is inconsistent with and contradicts the meaning of employee leasing companies within the meaning of Chapter 468, Part XI, Florida Statutes (2003), and the terms of the Agreement between Raudel Carrizales' company, Carrizales Brothers Framing, and Southeast Personnel. Raudel Carrizales allowed the Agreement between Carrizales Brothers Framing and Southeast Personnel to expire on January 31, 2004. Raudel Carrizales, on behalf of his new company, signed another contract with Southeast Personnel on April 13, 2004, six days after the Stop Work Order was issued. Therefore, between January 31, 2004, and April 13, 2004, Raudel Carrizales had no workers' compensation coverage through the employee leasing company. Maurilio Carrizales, who was listed on Southeast Personnel documents as an employee of Carrizales Brothers Framing, had no workers' compensation coverage through Southeast Personnel on January 31, 2004, when the contract between Carrizales Brothers Framing and Southeast Personnel expired. Maurilio Carrizales again became eligible for workers' compensation coverage through Southeast Personnel, as a leased employee, effective April 13, 2004, almost a week after the Stop Work Order was issued. Between January 31, 2004, and April 12, 2004, Raudel Carrizales had no workers' compensation coverage through Southeast Personnel. During the time period alleged in the Amended Order of Penalty Assessment, Raudel Carrizales and Maurilio Carrizales received direct payments from Respondent, thus, circumventing Southeast Personnel and the coverage that they may have had through that employee leasing company. Respondent did not intend to violate the law. Rather, he mistakenly believed that Raudel Carrizales, Maurilio Carrizales, and George Betz had workers' compensation coverage; that Victor Carrizales had an exemption from workers' compensation coverage; and/or that the aforementioned individuals were subcontractors to whom he had no insurance- related responsibility. Nonetheless, these individuals did not have workers' compensation coverage or exemptions from coverage. Thus, they were employees of Respondent and, as such, Respondent was required to provide workers' compensation coverage for them. Petitioner correctly calculated the penalty assessment based on the money paid to Respondent's employees, Raudel Carrizales, Maurilio Carrizales, Victor Carrizales, and George Betz; the class code assigned to each employee utilizing the SCOPES Manual; and the statutory guidelines in Subsection 440.107(d), Florida Statutes (2003). Based on that calculation, the correct penalty assessment in this case is $143.805.33.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order confirming the Stop Work Order and imposing a penalty in the amount of $143,805.33. DONE AND ENTERED this 28th day of December, 2004, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 December, 2004.
The Issue The issue in this case is whether Respondent violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers’ compensation, as alleged in the Stop-Work Order and Third Amended Order of Penalty Assessment, and if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation coverage for the benefit of their employees. Respondent is a Florida, for-profit corporation with its principal office located at 3539 Apalachee Parkway, Suite 3-204, Tallahassee, Florida 32311. Respondent was incorporated on October 26, 2012, and has been engaged in the construction industry in Florida as a roofing company since October 31, 2012. From Respondent’s inception, Richard Paul Morejon has been Respondent’s president, secretary, and treasurer, and has received compensation from Respondent’s roofing contract proceeds. In July or August 2013, the Department received a complaint alleging that Respondent was not in compliance with Florida's Workers' Compensation Law. The Department assigned investigation of the complaint to then-Department investigator Carey Horn. Based upon materials apparently gathered and reports purportedly authored by Investigator Horn, the Department issued a stop-work order dated September 23, 2013, to Respondent alleging that Respondent did not secure workers’ compensation coverage for its employees as required. The Department, however, did not call Investigator Horn as a witness, and, despite Mr. Morejon’s attempt to subpoena her to testify in this case, Investigator Horn could not be found. The Department’s delay in referring this case for a final hearing either caused or contributed to Investigator Horn’s unavailability as a witness in this proceeding. The reports and conclusions of Investigator Horn were prepared in anticipation of litigation and are hearsay.2/ Therefore, they have not been used to support factual findings in this Recommended Order unless corroborative of non-hearsay evidence.3/ In addition, on October 20, 2014, the Department filed a document entitled "Joint Prehearing Stipulation" signed by the Department’s counsel and Mr. Morejon purporting to contain a number of stipulated facts and factual admissions by Mr. Morejon on behalf of Respondent. However, at the final hearing, the manner in which the Joint Prehearing Stipulation was procured was brought into question when Mr. Morejon advised that he was told to sign it and that the stipulation would be “ironed out” at the final hearing. The Department’s counsel confirmed that the conversation occurred regarding the correct classification code to be utilized in calculating the penalty against Respondent. Accordingly, it was ruled at the final hearing that the Joint Stipulation would not be used to support a finding regarding the classification. Upon further consideration of Mr. Morejon’s comments and the Department’s counsel’s admission as to the manner in which at least one of the stipulated facts was secured, the undersigned has not utilized and otherwise rejects as untrustworthy the document entitled "Joint Prehearing Stipulation" filed in this case on October 20, 2014, finding that it does not represent any bona fide stipulations or admissions. Nevertheless, in his testimony during his deposition and at the final hearing in this case, Mr. Morejon admitted a number of factual matters demonstrating that Respondent was not in compliance with Florida’s Workers’ Compensation Law on September 23, 2013. The factual findings in this Recommended Order are derived from Mr. Morejon’s testimony, non-hearsay evidence, and corroborative hearsay submitted during the final hearing. On September 23, 2013, Investigator Horn visited a jobsite at a residence located at 5747 Sioux Drive, Tallahassee, Florida (Jobsite), where Respondent, through employees, was performing roofing and related activities. On that date, Mr. Morejon was on the ground supervising two men on the roof engaged in roofing activities and two men on the ground picking up debris, for a total of five men, including Mr. Morejon, at the Jobsite working for Respondent. There was another man sitting in a vehicle at the Jobsite that day who never did any work for Respondent. There is no evidence that Respondent provided workers’ compensation coverage for any of the men working at the Jobsite that day. The two men working on the roof were Guadalupe Perez- Martinez and Hermilo Perez-Martinez. At the time, Guadalupe Perez-Martinez had an exemption from the requirements for workers’ compensation through his company, Lupe Builders, LLC. Although Hermilo Perez-Martinez previously had an exemption from the requirements of workers’ compensation through Perez Builders, LLC, that exemption expired the previous month, on August 3, 2013. There is no evidence that the two men picking up debris, Hermilo Pantaleon Paz and Timotio Aguilar, qualified for an exemption from workers’ compensation coverage that day. Although Mr. Morejon had an exemption from the requirements of Florida's Workers' Compensation Law for a separate and unaffiliated company, Comerxio, Mr. Morejon did not have an exemption from the coverage requirements of Florida's Workers' Compensation Law for Respondent on September 23, 2013, or during the relative time periods of this case. According to Mr. Morejon, other than Guadalupe Perez- Martinez, none of the other workers at the Jobsite that day had ever performed work for Respondent. Mr. Morejon also recalled that another person on the Jobsite that day, David Amaro- Rodriguez, just sat in a car and performed no work. Mr. Morejon’s recollections are unrefuted. The Department’s delay in referring this case undoubtedly affected the ability of either party to call other witnesses, including a number of the workers or the investigator, who were at the Jobsite that day. During the relevant time periods, Respondent did not maintain a bank account to pay its employees and it did not directly pay Mr. Morejon or other employees. Rather, historically, proceeds from roofing contracts performed by Respondent were deposited into a bank account held by another corporation named "A 2 Z Roofing, Inc." After paying various expenses, including permit fees, materials, and other costs associated with the roofing contracts, A 2 Z Roofing, Inc., paid Mr. Morejon, and any others performing work under the contracts, by check. On September 23, 2013, the Department personally served the Respondent with a stop work order (Stop Work Order) and a request for production of business records for penalty assessment calculation (Records Request). The Records Request requested Respondent’s corporate records, licenses, payroll documents, account documents, disbursements, contracts for work, employee leasing information, subcontractors, and workers' compensation coverage or exemptions "for the period from 10/31/2012 through 09/23/2013 [the Non- Compliance Period]." The Records Request further stated, in part: The employer should scan and email the records requested herein to the investigator with the Department of Financial Services, Division of Workers’ Compensation for examination within 5 business days after receipt of this Request for Production of Business Records. If the employer fails to provide the required business records sufficient to enable the Department of Financial Services, Division of Workers’ Compensation to determine the employer’s payroll for the period requested for the calculation of the penalty provided in section 440.107(7)(d), F.S., the imputed weekly payroll for each employee, corporate officer, sole proprietor, or partner shall be the statewide average weekly wage as defined in section 440.12(2), F.S. multiplied by 1.5. The Department shall impute the employer’s payroll at any time after ten, but before the expiration of twenty business days after receipt by the employer of a written request to produce such business records. (FAC 69L-6.028) If the employer is unable to scan and email these documents, please mail or deliver copies to our office located at 200 East Gaines Street Tallahassee, FL, 32399-4228. The next day, September 24, 2013, Mr. Morejon hand delivered Respondent’s business records to the Department in response to the Records Request. The business records delivered by Mr. Morejon included roofing permit applications; roofing permits issued to A to Z Roofing, Inc.; several contracts between homeowners and A to Z Roofing, Inc., identifying Mr. Morejon as project manager; five checks from A 2 Z Roofing, Inc. (not Respondent), payable to the City of Tallahassee; and 24 checks from A 2 Z Roofing, Inc., payable to "Mr. Morejon – Petty Cash." The 24 checks from A 2 Z Roofing, Inc., to Mr. Morejon totaled $55,955.4/ The checks, dated from November 17, 2012, to August 23, 2013, constitute all of the money paid to Mr. Morejon from Respondent’s roofing contract proceeds during the Non- Compliance Period. In addition to the 24 checks payable to Mr. Morejon, it is evident that the Department also received other checks from A 2 Z Roofing, Inc., from the records requests made in this case and in DOAH Case No. 14-2829, made payable to Lupe Builders, LLC, Gene Pfund, and perhaps others, during the Non- Compliance Period. The Department, however, did not utilize those records in its determinations in this case. In fact, the Department’s penalty auditor did not utilize payments made by A 2 Z Roofing, Inc., in calculating the penalty because, in the Department’s penalty auditor’s opinion, Respondent was not compliant because it did not have a bank account. Final Hearing Transcript, pp. 232-233. The determination of payroll, however, is not dependent on whether an employer has a bank account or whether the employer is the entity that pays its employees. Rather, the Department’s own rule defining payroll considers "[p]ayments, including cash payments, made to employees by or on behalf of the employer" in determining payroll. See Fla. Admin. Code Rule 69L-6.035(1)(b)(emphasis added). During the hearing, the Department, through counsel, stated that the payments from A 2 Z Roofing to Lupe Builders, LLC, or Gene Pfund were not considered because those entities had valid exemptions from the requirements of workers’ compensation. In addition, the Department complained that their receipt of bank records from A 2 Z Roofing, Inc., had been delayed and took the position that bank records from A 2 Z Roofing, Inc., would not be utilized in this case. The Department’s own discovery tactics, however, were responsible for delays in responses to its requests for records from A 2 Z Roofing, Inc.5/ Considering the records produced by Respondent introduced into evidence in this case, the testimony of Mr. Morejon regarding the checks payable to him from A 2 Z Roofing, Inc., the Department’s unwillingness to utilize other records from A 2 Z Roofing, Inc., in its possession, and evidence of the total payments to Mr. Morejon during the Non- Compliance Period, it is found that the Department’s decision to impute payroll is unfounded. Imputation of payroll would improperly allow the Department to benefit from its own lack of analysis. The imputed payroll determined by the Department in the amount of $347,334.69 exceeds Respondent’s total revenue for the Non- Compliance Period by more than $100,0006/ and is based, at least in part, upon hearsay evidence prepared by a witness whose unavailability was likely caused by the Department’s undue delay in referring Respondent’s Request for Hearing. Furthermore, the records produced by Respondent and the evidence in this case are sufficient to determine Respondent's payroll for use in the calculation of a penalty pursuant to section 440.107(7)(d)l. The evidence demonstrated that the $55,955 reflected in checks payable to Mr. Morejon from A 2 Z Roofing, Inc., represent all of the payments to Respondent’s employees who were not covered by workers’ compensation while performing services for roofing contracts during the Non-Compliance Period, other than payments reflected in records the Department may have in its possession but did not present at the final hearing. It was also shown, however, that the $55,955 was paid to Mr. Morejon without the maintenance of a cash log or cash journal and without securing the payment of workers' compensation coverage for Mr. Morejon or others receiving cash payments from those funds. And, there is no evidence that any of those employees were exempt from the requirements of workers’ compensation. Respondent was required to secure workers' compensation coverage and failed to secure that coverage under Florida’s Workers’ Compensation Law for its employees who were paid $55,955.00 during the Non-Compliance Period. Therefore, the Department was justified in issuing the Stop Work Order delivered to Mr. Morejon on September 23, 2013. Although the Department failed to show that Respondent’s payroll should be imputed, the evidence adduced at the final hearing demonstrated that a penalty should be imposed against Respondent for failure to pay workers’ compensation for its employees who were paid a total of $55,955 during the Non- Compliance Period. For determining the appropriate penalty, the Department has adopted a penalty calculation worksheet to aid in calculating penalties against employers pursuant to section 440.107, Florida Statutes. See Florida Administrative Code Rule 69L-6.027. The classification codes listed in the National Council on Compensation Insurance ("NCCI") Scopes® Manual have been adopted by the Department through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are four-digit codes assigned to occupations by NCCI to assist in the calculation of workers' compensation insurance premiums. Under the descriptions listed in the NCCI Scopes® Manual, the proper classification code for Respondent’s employees is 5551, which corresponds to "Roofing - All Kinds and Drivers." The Department has adopted the approved manual rates in the Florida Administrative Code, as authorized by section 440.107(7). Rule 69L-6.027 adopts form number DFS-F4-1595, the Penalty Calculation Worksheet, which specifically incorporates approved manual rates. As accurately set forth in the Penalty Calculation Worksheets attached to the Amended Order of Penalty Assessment, the approved manual rates for the following periods of Non- Compliance were: From 10/31/2012 to 12/31/2012 the rate was 17.10; From 01/01/2013 to 06/30/2013 the rate was 18.17; From 07/01/2013 to 09/23/2013 the rate was 18.03. A breakdown of Respondent’s total payroll of $55,955 based upon check dates corresponding to the manual rates in effect during the Non-Compliance Period, is as follows: From 10/31/2012 to 12/31/2012 payroll totaled $6,300; From 01/01/2013 to 06/30/2013 payroll totaled $33,655; From 07/01/2013 to 09/23/2013 payroll totaled $16,000. Calculation of the penalty, using the Penalty Calculation Worksheet and Respondent’s payroll based on records (as opposed to imputed) during the Non-Compliance Period, results in a total penalty of $15,116.12, as follows: Calculation Method (a) Class Code (b) Non-Compliance period (c) Gross Payroll (d) /100 (e) Approved Rates (f) Premium (d)X(e) (g) Penalty (f)X 1.5 Records 5551 10/31/12 12/31/12 6,300 63 17.10 1,077.30 1,616.25 Records 5551 01/01/13 06/30/13 33,655 336.55 18.17 6,115.11 9,172.67 Records 5551 07/01/13 09/23/13 16,000 160 18.03 2,884.80 4,327.20 Totals: $55,955.00 $15,116.12 The clear and convincing evidence in this proceeding demonstrated that Respondent was in violation of Florida’s Workers’ Compensation law because it employed one or more uninsured employees in the construction industry throughout the Non-Compliance Penalty, and that the appropriate penalty, based upon Respondent’s payroll, is in the amount of $15,116.12.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a Final Order consistent with this Recommended Order upholding the Stop Work Order, and reducing the penalty set forth in the Amended Order of Penalty Assessment to $15,116.12 by recalculating the penalty based upon Respondent’s payroll of $55,955.00 during the Non-Compliance Period. DONE AND ENTERED this 5th day of February, 2015, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 2015.
The Issue Whether Royal Roofing and Restoration, Inc. (Respondent or Royal Roofing), failed to secure workers’ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (Petitioner or Department), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement of chapter 440, that Florida employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation organized on July 28, 2015, and engaged in the business of roofing and storm damage restoration. The company was formed, and initially conducted business, in Tallahassee, Florida, but expanded to the Panama City area in 2016. Traci Fisher is Respondent’s President and Registered Agent, with a mailing address of 1004 Kenilworth, Tallahassee, Florida 32312. DOAH Case No. 17-0879 On May 4, 2016, Department Compliance Investigator Jesse Holman, conducted a routine workers’ compensation compliance inspection at 374 Brown Place in Crestview, Florida. Mr. Holman observed four men removing shingles from the roof of a residential structure at that address. Mr. Holman first interviewed a worker who identified himself as Dustin Hansel and reported that he and the other three workers on site were a new crew for Respondent, the permit for the job had not yet been pulled, and the workers were not aware of the rate of pay for the job. Mr. Hansel telephoned Respondent’s sales manager, Dillon Robinson, who then spoke directly with Mr. Holman via telephone. Mr. Robinson informed Mr. Holman that Respondent obtained workers’ compensation coverage through Payroll Management Inc. (PMI), an employee-leasing company. Mr. Holman identified the three remaining workers at the jobsite as Milton Trice, Winston Perrotta, and Kerrigan Ireland. Mr. Holman contacted PMI and secured a copy of Respondent’s then-active employee roster. None of the workers at the jobsite, including Mr. Hansel, were included on Respondent’s employee roster. Upon inquiry, Mr. Holman was informed that PMI had no pending employee applications for Respondent. Mr. Holman consulted the Department’s Coverage Compliance Automated System (CCAS) and found Respondent had no workers’ compensation insurance policy and no active exemptions. During Mr. Holman’s onsite investigation, the workers left the jobsite. Mr. Holman could not immediately reach Ms. Fisher, but did speak with her husband, Tim Fisher. Mr. Fisher informed Mr. Holman that the crew was on their way to the PMI Fort Walton office to be enrolled on Respondent’s employee roster. On May 5, 2016, based on his investigation, and after consultation with his supervisor, Mr. Holman issued Respondent Stop-Work Order (SWO) 16-148-1A, along with a Business Records Request (BRR) for records covering the audit period of July 27, 2015 through May 4, 2016. Later that day, Mr. Holman spoke to Ms. Fisher, who informed him the crew did not have permission to begin the work on that date, as she had not yet pulled the permit for the reroof. Ms. Fisher further explained that the crewmembers had been instructed to complete applications with PMI prior to departing Tallahassee for Crestview. Ms. Fisher confirmed the crewmembers were completing applications at PMI Fort Walton that same day. Mr. Holman met with Ms. Fisher the following day and personally served SWO 16-148-1A. Ms. Fisher delivered to Mr. Holman an updated employee roster from PMI which included Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter documenting Mr. Trice was not employed by Respondent; and a $1000 check as downpayment on the penalty. Respondent initially submitted business records in response to the BRR on May 23 and 25, 2017. DOAH Case No. 17-1558 On June 8, 2016, Mr. Holman conducted a random workers’ compensation compliance inspection at 532 Rising Star Drive in Crestview. The single-family home at that address was undergoing renovations and Mr. Holman observed three men on the roof removing shingles. None of the men on the roof spoke English, but a fourth man, who identified himself as Jose Manuel Mejia, appeared and stated he worked for Respondent, and that all the workers onsite were paid through PMI at a rate of $10.00 per hour. Mr. Mejia admitted that one of the worker’s onsite, Emelio Lopez, was not enrolled with PMI and explained that Mr. Mejia brought him to the worksite that day because he knew Mr. Lopez to be a good worker. The remaining workers onsite were identified as Juan Mencho and Ramon Gonzalez, both from Atlanta, Georgia. Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho. Mr. Mejia stated that he and his crews also received reimbursement checks directly from Respondent for gas, rentals, materials, and the like. Mr. Holman contacted PMI, who produced Respondent’s then-active employee roster. Mr. Mejia and Mr. Mencho were on the roster, but neither Mr. Gonzalez nor Mr. Lopez was included. Mr. Holman next contacted Ms. Fisher, who identified Mr. Mejia as a subcontractor, but was not familiar with any of the other men Mr. Holman encountered at the worksite. Mr. Holman consulted via telephone with his supervisor, who instructed him to issue an SWO to Respondent for failing to secure workers’ compensation coverage for its employees. Mr. Holman issued SWO 16-198-1A by posting the worksite on June 8, 2016. Department Facilitator Don Hurst, personally served Ms. Fisher with SWO 16-198-1A in Tallahassee that same day. SWO 16-148-1A Penalty Calculation1/ Department Penalty Auditor Eunika Jackson, was assigned to calculate the penalties associated with the SWOs issued to Respondent. On June 8, 2016, Ms. Jackson began calculating the penalty associated with SWO 16-148-1A. Ms. Jackson reviewed the documents submitted by Respondent in response to the BRR. The documents included Respondent’s Wells Fargo bank statements, check images, and PMI payroll register for the audit period.2/ Based on a review of the records, Ms. Jackson identified the following individuals as Respondent’s employees because they received direct payment from Respondent at times during the audit period: David Rosinsky, Dylan Robinson, Jarod Bell, Tommy Miller, and David Shields. Ms. Jackson determined periods of non-compliance for these employees based on the dates they received payments from Respondent and were not covered for workers’ compensation via PMI employment roster, separate policy, or corporate officer exemption. Ms. Jackson deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. Based upon Ms. Fisher’s deposition testimony, Ms. Jackson assigned National Council on Compensation Insurance (NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class code 5474, Painting, to Mr. Rosinsky; NCCI class code 8742, Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810, clerical office employee, to Mr. Shields. Utilizing the statutory formula for penalty calculation, Ms. Jackson calculated a total penalty of $191.28 associated with these five “employees.” Ms. Jackson next calculated the penalty for Dustin Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta, the workers identified at the jobsite as employees on May 4, 2016. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll to these “employees,” thus, Ms. Jackson used the statutory formula to impute payroll to these workers. Ms. Jackson calculated a penalty of $14,970.12 against Respondent for failure to secure payment of workers’ compensation insurance for each of these four “employees” during the audit period. The total penalty associated with these four “employees” is $59,880.48. Ms. Jackson calculated a total penalty of $60,072.96 to be imposed against Respondent in connection with SWO 16-148- 1A. Business Records In compliance with the Department’s BRR, Respondent submitted additional business records on several occasions-- March 21, May 3 and 31, June 7, and August 15 and 24, 2017--in order to establish its complete payroll for the audit period. While the Department admits that the final documents submitted do establish Respondent’s complete payroll, the Department did not issue amended penalty assessment based on those records in either case. The Department maintains Respondent did not timely submit records, pursuant to Florida Administrative Code Rule 69L-6.028(4), which allows an employer 20 business days after service of the first amended order of penalty assessment to submit sufficient records to establish payroll. All business records submitted by Respondent were admitted in evidence and included as part of the record. The undersigned is not limited to the record before the Department at the time the amended penalty assessments were imposed, but must determine a recommendation in a de novo proceeding. The undersigned has relied upon the complete record in arriving at the decision in this case. Penalty Calculation for Ireland, Trice, and Perrotta For purposes of workers’ compensation insurance coverage, an “employee” is “any person who receives remuneration from an employer” for work or services performed under a contract. § 440.02(15)(a), Fla. Stat. Respondent did not issue a single check to Mr. Ireland, Mr. Trice, or Mr. Perrotta during the audit period. Mr. Ireland, Mr. Trice, and Mr. Perrotta are not included on any PMI leasing roster included in the record for the audit period. The uncontroverted evidence, including the credible and unrefuted testimony of each person with knowledge, established that Mr. Ireland, Mr. Trice, and Mr. Perrotta were newly hired for the job in Crestview on May 4, 2016, and began working that day prior to submitting applications at PMI, despite Ms. Fisher’s directions otherwise. Petitioner did not prove that either Mr. Ireland, Mr. Trice, or Mr. Perrotta was Respondent’s employee at any time during the audit period. Petitioner did not correctly calculate the penalty of $44,911.26 against Respondent for failure to secure workers’ compensation insurance for Mr. Ireland, Mr. Trice, and Mr. Perrotta during the audit period. Penalty Calculation for Hansel Ms. Fisher testified that Mr. Hansel has owned several businesses with which Respondent has conducted business over the years. Originally, Mr. Hansel owned a dumpster rental business, now owned by his father. Mr. Hansel also owned an independent landscaping company with which Respondent occasionally transacted business. When Respondent expanded business into the Panama City area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise new crews in the area. The job on May 4, 2016, was his first roofing job. A review of Respondent’s records reveals Respondent issued the following checks to Mr. Hansel during the audit period: December 4, 2015, in the amount of $360, $300 of which was for “dumpster rental” and the remaining $60 for “sod”; May 4, 2016, in the amount of $200 for “sod repair”; May 6, 2016, in the amount of $925 as reimbursement for travel expenses; May 9, 2016, in the amount of $1,011.50 (with no memo); and May 21, 2016, in the amount of $100 for “7845 Preservation.” Mr. Hansel was included on Respondent’s PMI leasing roster beginning on May 13, 2016. Petitioner proved that Mr. Hansel was Respondent’s employee at times during the audit period. Petitioner did not prove that Respondent’s records were insufficient to determine payroll to Mr. Hansel during the audit period, which would have required an imputed penalty. Petitioner did not correctly calculate the penalty of $14,970.42 against Respondent for failure to secure workers’ compensation insurance coverage for Mr. Hansel during the audit period. Sod repair by Mr. Hansel is a service performed for Respondent during the audit period. Reimbursement of travel expenses is specifically included in the definition of payroll for purposes of calculating the penalty. See Fla. Admin. Code R. 69L- 6.035(1)(f) (“Expense reimbursements, including reimbursements for travel” are included as remuneration to employees “to the extent that the employer’s business records and receipts do not confirm that the expense incurred as a valid business expense.”). Dumpster rental is neither work performed on behalf of, nor service provided to, Respondent during the audit period. The correct uninsured payroll amount attributable to Mr. Hansel is $2,296.50. Petitioner correctly applied NCCI class code 5551, Roofing, to work performed by Mr. Hansel based on the observation of Mr. Holman at the worksite on May 4, 2016. With respect to Mr. Hansel’s services for sod and sod repair, Petitioner did not correctly apply NCCI class code 5551. Petitioner did not introduce competent substantial evidence of the applicable NCCI class code and premium amount for landscaping services performed during the audit period.3/ Uninsured payroll attributable to Mr. Hansel for roofing services during the audit period is $2,036.50. The approved manual rate for workers’ compensation insurance for NCCI class code 5551 during the period of non- compliance--May 9 and 21, 2016--is $18.60. The premium amount Respondent would have paid to provide workers’ compensation insurance for Mr. Hansel is $378.79 (One percent of Mr. Hansel’s gross payroll during the non-compliance period--$20.36--multiplied by $18.60). The penalty for Respondent’s failure to secure worker’s compensation coverage insurance for Mr. Hansel during the period of non-compliance is calculated as two times the amount Respondent would have paid in premium for the non- compliance period. The correct penalty for Respondent’s failure to maintain workers’ compensation coverage for Mr. Hansel during the period of non-compliance is $757.58. Penalty Calculation for Salesmen Independent contractors not engaged in the construction industry are not employees for purposes of enforcing workers’ compensation insurance requirements. See § 440.02(15)(d)1., Fla. Stat. Sales is a non-construction industry occupation. The Department calculated a penalty associated with payroll attributable to the following persons identified by Ms. Fisher as independent salesmen: Dylan Robinson, Kevin Miller, Marc Medley, Mike Rucker, Colby Fisher, David Jones, Jarod Bell, Matt Flynn, and Todd Zulauf. Section 440.02(15)(d)1. provides that an individual may be an independent contractor, rather than an employee, as follows: In order to meet the definition of independent contractor, at least four of the following criteria must be met: 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 regulations; The independent contractor receives compensation for services rendered or work performed and such compensation is paid to a business rather than to an individual; The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying business expenses or other expenses related to services rendered or work performed for compensation; The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or The independent contractor receives compensation for work or services rendered on a competitive-bid basis or completion of a task or a set of tasks as defined by a contractual agreement, unless such contractual agreement expressly states that an employment relationship exists. If four of the criteria listed in sub- subparagraph a. do not exist, an individual may still be presumed to be an independent contractor and not an employee based on full consideration of the nature of the individual situation with regard to satisfying any of the following conditions: The independent contractor performs or agrees to perform specific services or work for a specific amount 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 the work or services that he or she performs or agrees to perform. The independent contractor receives compensation for work or services performed for a commission or on a per-job 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. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures. Ms. Fisher testified that each of the above-named salesmen sold roofing jobs for her at various times during the audit period on a commission-only basis. The contractors inspect homeowner roofs, draft schematics, use their own equipment (e.g., drones), incur all of their own expenses, and handle the insurance filing for the homeowner’s insurance to pay on the claim. Ms. Fisher further testified that each of the salesmen also sells for other roofing contractors in the Tallahassee area. She pays the salesmen on a per-job basis. Ms. Fisher does not compensate the salesmen for the time involved in inspecting a roof, preparing schematics, or making the sale. Nor does Ms. Fisher reimburse the salesmen for travel to sales jobsites. Ms. Fisher’s testimony was credible, persuasive, and uncontroverted. Respondent introduced in evidence four “Independent Contractor Checklists” allegedly completed by Mr. Robinson, Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist follows the format of section 440.02(15)(d)1., listing the criteria set forth in subparagraphs a. and b. The forms indicate that they each meet all the criteria listed in subparagraph b.: they perform, or agree to perform services for a specific amount of money and control the means of performing the service; they incur the principal expenses related to the service performed; they are responsible for satisfactory completion of the services performed; they receive compensation for the services performed on a per-job or commission basis; they may realize a profit or suffer a loss in connection with performing the services; they have continuing and recurring business liabilities or obligations; and the success or failure of their business depends on the relationship of business receipts to expenditures.4/ In its Proposed Recommended Order, Petitioner conceded the nine men identified by Respondent as independent sales contractors “would not be considered employees of Respondent” because the “salesmen would seem to meet the majority of [the] requirements [of section 440.02(15)(d)1.b.].” Respondent issued Dylan Robinson, Mark Medley, Colby Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Jarod Bell, David Jones, and Todd Zulauf an IRS FORM 1099-MISC for income paid during the 2016 tax year. Respondent did not prove by clear and convincing evidence that the above-named salesmen were Respondent’s employees during the audit period. For SWO 16-148-1A, Respondent did not correctly calculate the penalty because Respondent included a penalty associated with Petitioner’s failure to provide workers’ compensation insurance coverage for Dylan Robinson and Jarod Bell. Penalty in the amount of $20.70 associated with Dylan Robinson and Jarod Bell should not be included in the total penalty. The correct penalty amount for SWO 16-148-1A, based on records submitted by Respondent on or before March 20, 2016, is $929.16. Draft Revised Second Amended Order of Penalty Assessment The additional records submitted by Respondent revealed payments made to persons during the audit period who were not included in the Department’s Second Amended Order of Penalty Assessment. The Department and Respondent disagreed at hearing whether the payments qualified as payroll. At hearing, Petitioner submitted a draft revised second amended penalty calculation for SWO 16-148-1A based on all records received from Respondent. The revised penalty is in the amount of $61,453.50. Ms. Jackson populated the spreadsheet with the name of every individual to whom a check was written on Respondent’s business bank account during the audit period, removing only those payments to individuals and entities which, to Petitioner’s knowledge, were not Respondent’s employees. Respondent’s calculations in the revised penalty suffer from some of the same errors as in the second amended penalty calculation--they include individuals Petitioner did not prove were Respondent’s employees, as well as payments which were not uninsured payroll. For the reasons explained herein, Petitioner did not prove that salesmen David Jones, Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer, and Colby Fisher were Respondent’s employees during the audit period. Respondent did not accurately calculate the penalty associated with those persons. Respondent made payments to David Shields during the audit period, which the Department argues should be included as payroll. The Department included payments to Mr. Shields in its draft revised second amended order of penalty assessment and assigned NCCI class code “8810” for clerical work. Mr. Shields is a licensed professional roofing contractor who acts as “qualifier” for Respondent’s business. A qualifier is a licensed professional who certifies plans for permit applications submitted by another business. Respondent pays Mr. Shields a flat fee per permit application qualified by him. The record evidence does not support a finding that Mr. Shields provides clerical services to Respondent. Mr. Shields provides some sort of professional services to Respondent, and is likely an independent contractor providing his own materials and supplies, maintaining his own business accounts, and liable for his own business success. Assuming Mr. Shields were Respondent’s employee, the Department introduced no evidence of an appropriate NCCI class code for Mr. Shields’ services. The Department did not prove that payments to Mr. Shields should be included as Respondent’s uninsured payroll during the audit period. Respondent paid Susan Swain a total of $258 during the audit period for clerical work. Ms. Fisher maintained Ms. Swain’s work was casual at first, and the payments reflect a time when she worked on-again, off-again, handling the paperwork for restoration insurance claims. Later, Ms. Swain came to work for Respondent full-time and was added to the PMI leasing roster. Section 440.02(15)(d)5. provides that a person “whose employment is both casual and not in the course of the trade, business, profession or occupation of the employer” is not an employee. The statute defines “casual” employment as work that is anticipated to be completed in 10 working days or less and at a total labor cost of less than $500. See § 440.02(5), Fla. Stat. In its Proposed Recommended Order, the Department argues Ms. Swain’s wages should be included as payroll because the “testimony regarding Ms. Swain does not suggest that she was employed for less than 10 days[.]” However, it was the Department’s burden to prove that Ms. Swain was a statutory employee. The Department did not prove that Ms. Swain’s wages should be included within Respondent’s uninsured payroll. The largest portion of the penalty assessed by the Department, as well as in the draft revised second amended penalty assessment, against Respondent is in connection with various roofers who were employed by Respondent at times during the audit period. Each of the roofers was included on Respondent’s PMI leasing roster, but received checks directly from Respondent in addition to PMI payroll checks. The Department included all the direct payments to those roofers as payroll for purposes of calculating a penalty in this case. As Ms. Fisher explained, the company bids a reroof on a per job basis--usually a per square foot price. Ms. Fisher adds each roofing contractor’s name to the PMI leasing roster to ensure that each roofer is covered by workers’ compensation insurance for the duration of the job. When the job is completed (which is a matter of just a few days), the contractor reports to Ms. Fisher what amount of the contract price was spent on materials, supplies, or other non-labor costs. Ms. Fisher cuts a check to the contractor for that amount and authorizes PMI to issue payroll checks for the “labor cost” (the difference between the contract price and the non-labor costs). Ms. Fisher refers to this process as “back-charging” the contractors for their materials, maintenance, tools, and other non-labor costs. The Department is correct that the direct payments are payroll to the roofing contractors. See Fla. Admin. Code R. 69L-6.035(1)(b) and (h) (remuneration includes “payments, including cash payments, made to employees by or on behalf of the employer” and “payments or allowances made by or on behalf of the employer for tools or equipment used by employees in their work or operations for the employer.”). The Department would be correct to include these payments in the penalty calculation if they represented uninsured payroll. However, the evidence supports a finding that the direct payments to the roofing contractors were made for the same jobs on which Respondent secured workers’ compensation coverage through PMI. The roofing contractors were covered for workers’ compensation throughout the job, even though they may have received partial payment for the job outside of the PMI payroll checks.5/ The direct payments were not for separate reroofs on which the roofers were not otherwise insured. The Department did not correctly calculate penalties associated with the following roofing contractors: Donald Tontigh, Joseph Howard, Keith Mills, Aaron Kilpatrick, Gustavo Tobias, Jose Mejia, and Tommy Miller. Ms. Fisher also received cash payments from Respondent during the audit period. These payments were made in addition to her payroll through PMI. Ms. Fisher described these payments as “cash tickets,” which were paid outside of her PMI payroll to reimburse her for investments made in the company. For purposes of calculating the penalty in this case, these “cash tickets” are clearly payroll, as that term is to be calculated pursuant to rule 69L-6.035. Similar to the issue with the roofing contractors, the question is whether the payments represent uninsured payroll. Ms. Fisher did not hold a corporate officer exemption at any time relevant hereto. Ms. Fisher testified that she was covered through PMI payroll leasing. In contrast to the roofing contractors, Ms. Fisher’s direct payments do not directly coincide with any particular job or specific time frame during which Ms. Fisher was covered for workers’ compensation insurance through PMI. The evidence was insufficient to determine that the amounts were insured payroll. The Department properly calculated a penalty associated with payroll attributable to Ms. Fisher. Respondent made one payment of $75 to Donald Martin during the audit period. The Department calculated a penalty of $27.90 associated with this payment to Mr. Martin. Ms. Fisher explained that Mr. Martin was a down-on-his-luck guy who came by the office one day complaining that Mr. Hansel owed him some money. Ms. Fisher offered to put him on a roofing crew and wrote him the $75 check to help him out. Ms. Fisher’s testimony was both credible and unrefuted. Mr. Martin was never hired by Respondent, put on any roofing crew, or added to the PMI leasing roster. Mr. Martin was not Respondent’s employee because he did not receive remuneration for the “performance of any work or service while engaged in any employment under any appointment or contract for hire” with Respondent. § 440.02(15)(a), Fla. Stat. Cale Dierking works for Respondent full-time in a clerical position. During the audit period, Respondent paid Mr. Dierking directly by check for $1,306.14. This payment was made outside of Mr. Dierking’s PMI payroll checks. Ms. Fisher testified that she paid Mr. Dierking directly on one occasion when “PMI’s payroll got stuck in Memphis, I believe it was a snow-in situation where payroll checks didn’t come.” Rather than ask her employee to go without a timely paycheck, she advanced his payroll. Ms. Fisher’s testimony was both credible and unrefuted. The payment to Mr. Dierking is clearly payroll. However, Mr. Dierking was covered for workers’ compensation through PMI for the period during which the check was issued. Thus, there is no evidence that it was uninsured payroll. The Department did not correctly calculate a penalty associated with payments to Mr. Dierking. The correct penalty to be assessed against Respondent for failure to secure workers’ compensation coverage for its employees during the audit period in connection with SWO 16-148- 1A is $770.60. Penalty Calculation for SWO 16-198-1A Ms. Jackson calculated a total penalty against Respondent in connection with SWO 16-198-1A in the amount of $19,115.84, as reflected in the Second Amended Order of Penalty Assessment. The Department correctly imputed penalty against Respondent in the amount of $91.68 each for uninsured payroll to Mr. Gonzalez and Mr. Lopez. The evidence supported a finding that these workers were Respondent’s statutory employees on June 8, 2016, and were not enrolled on the PMI leasing roster. The Department did not correctly calculate the penalty associated with salesmen Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, and Todd Zulauf. The Department did not correctly calculate the penalty associated with roofing contractors Abraham Martinez- Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina-Agustin, Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy Miller. The Department did not correctly calculate the penalty against Respondent associated with Mr. Shields, Respondent’s qualifier. Based on a review of Respondent’s complete “untimely” records, the Department discovered direct payments made to additional employees not included on the Second Amended Order of Penalty Assessment. Respondent made a direct payment to Ethan Burch in the amount of $602.50 during the audit period. Ethan Burch is one of Respondent’s full-time clerical employees. The evidence is insufficient to determine whether the payment of $602.50 was insured or uninsured payroll. As such, the Department did not prove it correctly calculated the penalty associated with Mr. Burch. Respondent also made a direct payment to Chelsea Hansel in the amount of $965 during the audit period. Ms. Hansel is another clerical employee. Ms. Hansel’s PMI enrollment was delayed due to some background investigation. Respondent paid Ms. Hansel for work she completed prior to enrollment. The direct payment to Ms. Hansel constitutes uninsured payroll. The Department correctly calculated the penalty associated with the payment to Chelsea Hansel. The correct penalty amount to be imposed against Respondent for failure to secure payment of workers’ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel) during the audit period in connection with SWO 16-198-1A is $187.80.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers’ Compensation, finding that Royal Roofing and Restoration, Inc., violated the workers’ compensation insurance law and, in DOAH Case No. 17-0879, assessing a penalty of $770.60; and in DOAH Case No. 17-1558, assessing a penalty of $187.80. DONE AND ENTERED this 24th day of January, 2018, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 2018.
The Issue The issue is whether Respondent’s request for an administrative hearing was timely filed by virtue of the doctrine of equitable tolling.
Findings Of Fact The Division is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees and corporate officers. § 440.107, Fla. Stat. Respondent is a Florida limited liability company engaged in the construction business. Its offices are located at 2474 Ambassador Avenue, Spring Hill, Florida. To enforce this requirement, the Division performs random inspections of job sites and investigates complaints concerning potential violations of workers’ compensation rules. On June 6, 2018, James Acaba, a Division compliance inspector, conducted a compliance investigation at a job site in Lutz, Florida. Mr. Acaba observed two individuals working at the job site: Respondent’s owner, Mr. Smith; and Mr. Smith’s step- son. Mr. Smith claimed he had an exemption for himself. Mr. Acaba ascertained that Mr. Smith’s exemption expired on January 19, 2017. Mr. Acaba determined that: Mr. Smith’s step-son was working for $12.00 an hour; had been working for Respondent for about a week; and did not have workers compensation coverage. On June 6, 2018, a Stop-Work Order and a Request for Production of Business Records for Penalty Assessment Calculation purposes were hand-served on Mr. Smith at the job site. The Stop-Work Order contained an Order of Penalty Assessment, which explained how a penalty is calculated, but gave no specific amount pending a review of Respondent’s financial records. Mr. Smith was advised to provide the requested business records within 10 business days or by June 16, 2019. Mr. Smith requested information on how to have the Stop- Work Order removed. Mr. Acaba explained to Mr. Smith several options available to him to have the Stop-Work Order released: obtain a workers’ compensation policy; engage an employee leasing company; or terminate the step-son’s employment. On June 14, 2018, Mr. Smith provided Mr. Acaba a letter reflecting Respondent’s “reduction in (its) workforce.” On June 15, 2018, Mr. Smith secured the reinstatement of his exemption to work for Respondent. However, Mr. Smith did not provide the requested business records. On November 10, 2018, the Division served an Amended Order of Penalty Assessment (Amended Order) at the address Mr. Smith provided during the June 6, 2018, job site encounter. This Amended Order provided the total penalty amount of $35,769.16. According to Mr. Smith, his girlfriend, Samantha Nigh, signed for the Amended Order on November 10, 2018, saw the large amount of the penalty assessment, and “decided not to show” it to Mr. Smith. Ms. Nigh did not testify during the hearing. The Amended Order contained a Notice of Rights, which stated that, if Respondent wished to contest the penalty, a petition seeking a hearing had to be filed with the Division within twenty-one calendar days of the Amended Order. It also stated that the petition “must be filed with Julie Jones, DFS Agency Clerk, Department of Financial Services, 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399- 0300.” The Amended Order included the following: FAILURE TO FILE A PETITION WIHTIN TWENTY-ONE(21) CALENDAR DAYS OF RECEIPT OF THIS AGENCY ACTION CONSTITUTES A WAIVER OF YOUR RIGHT TO ADMINISTRATIVE REVIEW OF THIS AGENCY ACTION. This meant that a petition had to be filed, and in the hands of the Agency Clerk no later than December 3, 2018. Although the actual due date was Saturday, December 1, 2018, Respondent could have filed the petition by the close of business on Monday, December 3, 2018. Florida Administrative Code Rule 18.106.103. Mr. Smith did not provide the date on which he became aware of the Amended Order. However, once he was aware of it, Mr. Smith knew the 21-day period to file a petition had expired, and admitted at hearing “it was already too late.” On December 14, 2018, 33 days after the Division served the Amended Order, and 11 days after the actual due date, the Division received Respondent’s hearing request. As a result of the late filing, the Division issued an Order to Show Cause (OTSC) on January 10, 2019. The OTSC required Respondent to show cause why the December 14, 2018, hearing request should not be dismissed as untimely. In the written response to the OTSC, Mr. Smith asserted that his brother, Edward Unger, “was only on the job site for the one day,” and Mr. Unger could “provide proof of employment elsewhere further (sic) showing he was not of our employment at the time.” Additionally, the response provided that “due to [an] emergency family situation where Byron Smith, owner, had to take a minor leave of absence to be with a close family member who had emergency open heart coronary bypass surgery. . ., the days and dates got scrambled with emotions clouding what needed to be done promptly.” The Division construed this conversation as possibly excusing the late filing and forwarded the matter to DOAH to resolve that narrow issue. During the hearing, Mr. Smith testified that his girlfriend, Ms. Nigh, prepared the OTSC response, but that his signature was on the document. Mr. Smith never clarified or corrected that Mr. Unger was his brother or step-son, and he merely reiterated the family problem and personal issues, without further detail or explanations, as his excuse. Lastly, Mr. Smith admitted that at the time Mr. Acaba observed the two working on June 6, 2018, he was breaking the rules, but “it was a huge penalty.” There is no credible evidence that Mr. Acaba gave Respondent’s owner, Mr. Smith any information that would cause him to miss the deadline for filing the petition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that that the Department of Financial Services, Division of Workers’ Compensation, enter a final order dismissing Respondent’s request for a hearing as untimely. DONE AND ENTERED this 31st day of May, 2019, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of May, 2019. COPIES FURNISHED: Mattie Birster, Esquire Department of Financial Services Office of the General Counsel 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Byron K. Smith, Jr. Smith's Interior Finishes, LLC 17829 Laura Lee Drive Shadyhills, Florida 34610 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2016),1/ by failing to secure the payment of workers’ compensation coverage, as alleged in the Third Amended Order of Penalty Assessment; and, if so, what penalty is appropriate.
Findings Of Fact Parties. The Department is responsible for enforcing the requirements of chapter 440, which mandate employers in Florida secure the payment of workers’ compensation insurance to cover their employees in case of workplace injuries. § 440.107, Fla. Stat. ASAP Flooring is owned and operated by Mr. Reinartsen; it has been an active corporation since 2006. ASAP Flooring provides flooring, painting and drywall services for construction projects. Ms. Brigantty is a Department compliance investigator. Her job is to ensure compliance by employers in her district with the workers’ compensation insurance regulations. Her job duties include conducting investigations triggered either through a report to the Department of non-compliance or through random inspections of workplaces and jobsites. As part of her investigative duties she conducts employer and employee interviews, collects financial documentation, and researches various data banks for corporate and workers’ compensation status. Department’s Investigation and Assessment. On October 24, 2016, Ms. Brigantty was driving around Pinellas County as part of her work duties. She stopped to conduct a random check at a residential construction site located at 3583 Douglas Place, Palm Harbor, Florida 34683 (“Jobsite”). At the Jobsite, Ms. Brigantty observed two men -- later identified as Eric Reinartsen and Wallace Humbert -- preparing and installing floors. After identifying herself as a compliance officer and interviewing them, she discovered Mr. Reinartsen was the owner of ASAP Flooring, and Mr. Humbert was an ASAP Flooring employee. Mr. Reinartsen admitted ASAP Flooring did not have workers’ compensation. At the time, he believed ASAP Flooring was exempt from the workers’ compensation insurance requirements due to his role as a corporate officer and because it only had one employee. During the initial interview, Ms. Brigantty learned Mr. Humbert had worked for ASAP Flooring for four or five months and was paid a flat fee per job. After meeting with Mr. Reinartsen, Ms. Brigantty checked the Florida Department of State, Division of Corporations website to confirm Respondent’s status as an active corporation, and that Mr. Reinartsen was its only officer. Mr. Brigantty then used the Department’s database, Coverage and Compliance Automated System (“CCAS”), which contained information on employers and their workers’ compensation status and any exemptions. According to CCAS, at the time of Ms. Brigantty’s inspection, ASAP Flooring had no workers’ compensation insurance. CCAS also reflected Respondent had an exemption from the workers’ compensation insurance requirements for Mr. Reinartsen because he was its sole corporate officer, but there was no exemption for Mr. Humbert or for any other employees. On October 24, 2016, after confirming ASAP Flooring had at least one employee, but had not secured workers’ compensation insurance, the Department issued a SWO and had it personally served on Mr. Reinartsen at the Jobsite.3/ At this time, the Department also served Mr. Reinartsen with a Request for Production of Business Records for Penalty Assessment Calculations. In response, Respondent provided bank statements, check images, check stubs, tax information and e-mails to the Department. These documents showed that during the previous two-year period (“look-back period”), October 24, 2014, to October 24, 2016, Respondent had a number of employees, but did not have workers’ compensation coverage for them. At the hearing, Respondent did not dispute ASAP Flooring was required to have workers’ compensation insurance, the status of the people identified as employees, or the fact that it did not have adequate workers’ compensation coverage.4/ Penalty Calculation. To calculate the penalty assessed against Respondent, the Department’s Auditor utilized the information she gleaned from documents submitted by Respondent and through Mr. Reinartsen’s deposition testimony taken in these proceedings. She then applied the formulas and rules set forth in the Florida Administrative Code to the information and utilized a Penalty Calculation Worksheet (the “worksheet”) to compute the final penalty assessment amount. The worksheet for the Third OPA is attached as Appendix “A” to this Recommended Order (“Appx. A”). Through her review of ASAP Flooring’s business records and Mr. Reinartsen’s deposition testimony, the Auditor confirmed (1) the individuals who were direct employees or construction subcontractors during those periods of non-compliance (Appx. A, column “Employer’s Payroll”); (2) the periods of non-compliance (Appx. A, column “b”); (3) the gross payroll for those individuals during these periods of non-compliance (Appx. A, column “c”); and (4) the services provided by those individuals. The Auditor used the services to determine the classification codes created by the National Council on Compensation Insurance (“NCCI”), and listed in the NCCI’s Scopes Manual, which has been adopted by the Department through Florida Administrative Code Rule 69L-6.021(1). These classification codes are four-digit codes assigned to various occupations by the NCCI to assist in the calculation of workers’ compensation insurance premiums. To derive the gross pay figures in the worksheet (Appx. A, column “c”) the Auditor explained she utilized payment information in the ASAP Flooring’s business records. Although Respondent initially asserted some of these payments were actually for both labor and materials, these distinctions were not detailed in the business records created at the time of service or payment. Regardless, pursuant to rule 69L-6.035(i) and (j), the Auditor excluded the cost of materials from the payroll calculations. Specifically, she applied an “80:20” ration rule for those payments Respondent claimed were partly labor and partly materials: considering 80 percent of the total payment as “labor” for penalty calculation purposes; and excluding 20 percent for penalty calculation purposes as “materials.” Using the gross payroll (Appx. A, column “c”) and the appropriate NCCI manual rate (Appx. A, column “e”), the Auditor calculated the premium rate (Appx. A, column “f”) for each individual or entity (Appx. A, column “Employer’s Payroll”). She then multiplied the premium rate by two to reach a penalty amount (Appx. A, column “g”). This calculation method to determine a final penalty is authorized by section 440.107(7)(d)1., and rule 69L-6.027. Ultimately, based on the amounts indicated in the worksheet, the Department issued a Third Amended OPA calculating the penalty as $15,577.84. The Department applied a 25 percent reduction, yielding a remaining penalty of $11,683.38. According to the evidence, in November 2016, Respondent paid $1,000 to the Department as a “down payment” toward any ultimate assessment. Applying this $1,000 as a credit to the penalty in the Third OPA results in Respondent owing $10,683.38. Respondent’s Defenses. At the final hearing, Mr. Reinartsen did not dispute any of the figures in the worksheet or the penalty amount. Rather, he raised three arguments unrelated to ASAP Flooring’s failure to secure workers’ compensation insurance for its employees. First, Respondent asserted Ms. Brigantty was not properly outfitted to enter a construction site and therefore, he argued, she was violating rules set forth by the Occupational Safety and Health Agency (“OSHA”). Ms. Brigantty admitted she was not wearing a hard hat, and did not think she was wearing steel-toed boots with hard soles when she entered the Jobsite. Second, Respondent argued Ms. Brigantty did not issue a SWO to another contractor at a neighboring construction site who was putting in pavers, identified only as “Luis.” Mr. Reinartsen could not provide the name of the other contractor’s company, a last name, or any other identifying information; nor did Respondent provide evidence that “Luis” was in a similar situation: non-compliant with and non-exempt from chapter 440. Ms. Brigantty did not remember going to the neighboring site or speaking to anyone else during her stop at the Jobsite. Finally, Respondent argued the penalty is substantial and payment in full (as opposed to a payment plan spread out over a number of years) would put him and his small family-owned company out of business. Ultimate Findings. The Department demonstrated, by clear and convincing evidence, Respondent violated chapter 440 as charged in the SWO by failing to secure workers’ compensation coverage for its employees. The Department demonstrated, by clear and convincing evidence, the penalty for this violation is $11,683.38.
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, ASAP Flooring, violated the requirement in chapter 440 to secure workers’ compensation coverage and imposing a total penalty of $11,683.38, less the $1,000 down payment, the balance to be paid in $100 a month increments. DONE AND ENTERED this 12th day of February, 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 12th day of February, 2018.
The Issue Whether Respondent violated chapter 440, Florida Statutes (2017), by failing to secure payment of workers’ compensation coverage, as alleged in the Stop-Work Order (“SWO”) and Amended Order of Penalty Assessment (“Amended Penalty Assessment”); and, if so, whether Petitioner correctly calculated the proposed penalty assessment against Respondent.
Findings Of Fact Based on the oral and documentary evidence admitted at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: Background The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that requires employers to secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. The Department is also responsible for conducting random inspections of jobsites and investigating complaints concerning potential violations of workers’ compensation rules. At all times material to this matter, Native Cuts was a for-profit limited liability company engaged in business in the State of Florida. Native Cuts was organized as a business on January 19, 2010, and engaged in the business of construction and landscaping. Earl Lee, Jr. and Virginia Brown are Respondent’s managers. Earl Lee, Jr. is Respondent’s registered agent, with a mailing address of 316 North Lake Avenue, Leesburg, Florida 34748. Investigation On July 27, 2017, the Department’s investigator, Chuck Mays, conducted a random workers’ compensation compliance inspection at 27746 Cypress Glen Court, Yalaha, Florida 34797. At that time, Mr. Mays observed three men performing work. Mr. Mays testified that one man was observed operating a Bobcat utility vehicle (small tractor) to transport dirt from the front to the back of the structure, which was under construction. The two other men were removing debris, e.g., cut tree limbs, from the jobsite. Mr. Mays approached the man on the Bobcat and identified himself as an investigator. Mr. Mays began interviewing the Bobcat driver who reported that he and the other two workers at the jobsite were employees of Native Cuts, which the two men confirmed. Mr. Mays ultimately identified the three men at the jobsite as Rodolfo Ramirez, Mitchel Pike, and Dave Herrington. Based on his observations, Mr. Mays determined that the three men were performing construction-related work. Mr. Mays called Respondent’s manager, Mr. Lee, who identified the three men working at the jobsite as his employees. Mr. Mays asked Mr. Lee about the rate of pay and the length of employment for the employees and Mr. Lee referred Mr. Mays to Virginia Brown to obtain the information. Ms. Brown confirmed the three employees, and a fourth employee who was not present at the jobsite. Following the interviews on July 27, 2017, Mr. Mays researched the Division of Corporations system and established that Native Cuts was an active business. He then conducted a search of the Department’s Coverage Compliance Automated System (“CCAS”) and found Respondent did not have workers’ compensation coverage for its employees. Mr. Mays also conducted a further search of CCAS and discovered that Mr. Lee previously had an exemption, which expired on October 30, 2016. Based on his investigation and after consultation with his supervisor, Mr. Mays issued SWO No. 17-246-D4, and posted it at the jobsite. On July 28, 2017, Mr. Mays met with Ms. Brown at her home and personally served the SWO and Request for Production of Business Records for Penalty Assessment Calculation (“Business Records Request”). The Business Records Request directed Respondent to produce business records for the time period of July 28, 2015, through July 27, 2017 (“Audit Period”), within 10 business days from the receipt of the Business Records Request. On August 11, 2017, Respondent provided business records, including bank statements, checks, and receipts. The records were deemed sufficient to apply a 25-percent discount to Respondent for timely production of records. Penalty Calculation Generally, the Department uses business records to calculate the penalty assessment. Lynne Murcia, a Department penalty auditor, was assigned to review the calculation of the penalty assessment for Respondent. To calculate the penalty assessment, the Department uses a two-year auditing period looking back from the date of the SWO, July 27, 2017, also known as the look-back period. Penalties for workers' compensation insurance violations are based on doubling the amount of insurance premiums that would have been paid during the look-back period. § 440.107(7)(d), Fla. Stat. Ms. Murcia testified as to the process of penalty calculation. Ms. Murcia reviewed the business records submitted by Respondent, as well as notes, worksheets, and summaries from the original auditor.1/ Based on her review of the records, Ms. Murcia identified the individuals who received payments from Respondent as employees during the Audit Period. Ms. Murcia deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Based on Mr. Mays’ observations at the jobsite, the Department assigned either NCCI classification (“class”) code 0042, entitled “Landscaping, Gardening, & Drivers” or class code 9102, entitled “Lawn Maintenance-Commercial or Domestic & Drivers.” The class code 0042 “applies to work involving new landscaping installations whereas class code 9102 applies to work involving maintenance of existing landscaping and/or lawn maintenance.” Mr. Mays testified that class code 0042 is considered construction work, whereas class code 9102 is considered nonconstruction work for workers’ compensation purposes. Generally, if a business provides proper payroll records to support a division, the appropriate code and correlating rate would apply based on the work performed. If the payroll records are not maintained to support the division of the work performed between class code 0042 and class code 9102, the highest rate of the two classifications is applied to the employee. Ms. Murcia testified that class code 0042 and class code 9102 were applied to Native Cuts employees due to the mixed work performed (Landscaping and Lawn Maintenance) by Respondent. However, class code 9102 was applied to most of the employees. Utilizing the statutory formula for penalty calculation specified in section 440.107(7)(d)1. and rule 69L- 6.027, the total penalty was calculated based on periods of non- compliance for employees based on the dates they received payments from Respondent and were not covered for workers’ compensation. Since Mr. Lee’s exemption expired on October 30, 2016, the calculation for his work performed was limited to the period after the expiration of his exemption, November 1, 2016, through July 27, 2017. Regarding records designated as cash payments, the Department determined that the Native Cuts’ records and receipts did not validate the payroll and expenses that corresponded with the company’s cash withdrawals. Pursuant to rule 69L- 6.035(1)(k), the Department included 80 percent of cash withdrawals as wages or salaries to employees. Penalty Calculation for Imputed Payroll The Department determined the calculated penalty for Rudolfo Ramirez, David Harrington, and Mitchel Pike, the workers who were identified at the jobsite as employees on July 27, 2017. Mr. Lee was also included in the calculation of penalty for the imputed payroll. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll for these employees during the investigation period, thus, the Department used the statutory formula to impute payroll to these employees. The Department correctly assigned a class code of 0042 and calculated a penalty of $149.20 against Respondent for failure to secure payment of workers’ compensation insurance for each of these employees. The Department also calculated the penalty for Ms. Brown, who was not at the jobsite but participated in the investigation on July 27, 2017. The Department applied a classification code 9102 to Ms. Brown. However, the evidence presented at hearing demonstrated Ms. Brown maintained records for the business and was the person identified as maintaining the wage rate information for employees. The evidence of record does not support a finding that Ms. Brown provided any landscaping or construction services to Respondent. Ms. Brown’s work, at best, could be described as clerical work. The Department introduced no evidence of an appropriate NCCI class code for Ms. Brown. Thus, the Department did not prove by clear and convincing evidence that the imputed payroll related to Ms. Brown should be included for purposes of calculating the penalty. The Department did not prove by clear and convincing evidence that the penalty in the amount of $19.60 attributed to Ms. Brown should be included in the penalty assessment. Penalty Calculation for Uninsured Labor Ms. Murcia testified that the class code 0042 was applied to the general category of uninsured labor, as the work performed could not be determined from the payroll records. Thus, the highest rate, class code 0042, of the two classifications for work performed by Native Cuts, is applied to these individuals. The Department correctly calculated a penalty of $17,015.10 for these employees. Penalty Calculation for Remaining Employees In addition to the penalty calculated for the imputed payroll (excluding Ms. Brown) and uninsured labor, the Department applied the appropriate class code for the work performed and correctly calculated the penalty for Native Cut employees2/ in the amount of $52,350.10. Total Penalty Calculation Ms. Murcia calculated a total penalty of $69,534.34 against Respondent for failure to secure payment of workers’ compensation insurance for each of its employees during the audit period. The amount of the penalty should be reduced by the amount attributed to Ms. Brown in the amount of $19.60. Thus, the total penalty amount that should be assessed against Native Cuts is $69,514.40. Mr. Lee paid a $1,000.00 down payment for the penalty assessed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $68,514.74 against Native Cuts Property Management, LLC. DONE AND ENTERED this 31st day of May, 2019, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of May, 2019.
The Issue The issue is whether Respondent complied with the requirements of the Workers' Compensation Law and, if not, what is the appropriate penalty?
Findings Of Fact The Division is charged with the regulation of workers' compensation insurance in the State of Florida. Respondent, River City Roofing Sheet Metal, Inc. (River City Roofing), is a Florida corporation located in Jacksonville, Florida, and is engaged in the construction industry. Michael Robinson is an insurance analyst/compliance 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 August 17, 2010, Mr. Robinson visited a residential job site at 4206 Katanga Drive, Jacksonville, Florida, and observed five individuals reroofing the property at the site. Mr. Robinson called up to the workers and asked them to come down from the roof so that he could speak to them. One of the workers identified himself as David Hannans, and informed Mr. Robinson that he and the others were employees of River City Roofing. Mr. Robinson proceeded to get the names of the other workers. However, during this time, one of the men wandered away and left the worksite without speaking to Mr. Robinson. Mr. Robinson inquired about the name of the worker who left the worksite, and was informed his name was "Shorty." During his conversation with Mr. Hannans, Mr. Robinson also learned that the worksite supervisor, Gary Pittman, had been at the worksite but left to go to the store. Mr. Robinson confirmed with Mr. Hannans that the men at the worksite, including Mr. Hannans, were employees of River City Roofing. Mr. Robinson inquired about the owner of the business and learned the owner is Robert Olszanowski. Mr. Robinson then called Mr. Olszanowski. According to Mr. Robinson, Mr. Olszanowski verified that three of the men at the worksite were his employees, but claimed not to know the other two men. Mr. Robinson advised Mr. Olszanowski to contact Mr. Pittman to find out who the other two men were. During a follow-up telephone call with Mr. Olszanowski, Mr. Robinson was told that one of the individuals was a friend of Mr. Hannans and the other was a man from the neighborhood. According to Mr. Robinson, Mr. Olszanowski informed him that he was unaware of the other two men. Mr. Robinson then inquired about what type of workers' compensation coverage had been procured and learned that Mr. Olszanowski held an exemption and used Phoenix Resources, Inc., a staffing company, to cover his employees. Mr. Robinson contacted Phoenix Resources and was informed that River City Roofing was a client and as of August 17, 2010, had four individuals on the payroll: Gary Pittman, Miguel Hernandez Lopez, Ancelmo Perez Fernandez, and Simon Aguilar Sanchez. Mr. Robinson requested written confirmation of this and received an e-mail communication from Phoenix Resources which provided written confirmation. David Hannans and "Shorty" were not listed. Mr. Robinson inquired as to whether Phoenix Resources carried workers' compensation coverage on the listed individuals, and learned that those listed employees were covered under a policy procured from Business Personnel Solutions. Mr. Robinson contacted Business personnel Solutions and verified that there was a policy that covered those employees of Phoenix Resources. Mr. Robinson again contacted Phoenix Resources and inquired as to whether it had received any new applications from River City Roofing, and learned that it had not received any new applications. Mr. Robinson then consulted the Department of State, Division of Corporations website, to find information concerning the corporate status of River City Roofing. He verified from the website that River City Roofing is an active corporation and that Robert Olszanowski is the Chief Executive Officer. Mr. Robinson then consulted the Division's Coverage and Compliance Automated System (CCAS) database, which is routinely used by the Department and contains both the workers' compensation policy information for each employer that has a Florida policy, as well as all information concerning workers' compensation exemptions that have been applied for and issued to individuals by the Department. Mr. Robinson learned that Respondent previously had a policy that expired on August 25, 2008, and confirmed that Mr. Olszanowski held an exemption. Based upon his investigative findings, Mr. Robinson concluded that Mr. Hannans and "Shorty" were employees of River City Roofing who were not covered by a workers' compensation policy or a valid exemption in violation of chapter 440, Florida Statutes. On August 18, 2010, Mr. Robinson issued Stop-Work Order No. 10-253-D1 to Respondent and issued a Request for Production of Business Records for Penalty Assessment Calculation. Both were personally served by Mr. Robinson on Mr. Olszanowski. The Request for Production of Business Records requested records for the time period August 26, 2008 through August 18, 2010. Respondent did not produce business records as requested. Cathe Ferguson is a Penalty Calculator for the Division. She reviews business records such as payroll, bank statements, and copies of checks, and calculates the amount of penalty for non-compliance with workers' compensation laws. As required by Chapter 440, Ms. Ferguson imputed Respondent's payroll as a result of Respondent's failure to provide business records. Mr. Robinson then issued and served by certified mail an Amended Order of Penalty Assessment to Respondent in the amount of $116,240.82. Subsequent to this and subsequent to Respondent's request for an administrative hearing, Ms. Ferguson determined there was an internal error and amended the penalty amount downward. On February 7, 2011, Mr. Robinson issued a second Amended Order of Penalty Assessment in the amount of $71,028.94. In calculating the penalty for failure to comply with chapter 440, Ms. Ferguson first sought to determine the amount of premium that Respondent would have paid had Respondent obtained the proper workers' compensation insurance in place for the period of August 26, 2008 through August 17, 2010. In determining the premium that Respondent avoided by not obtaining workers' compensation insurance coverage for all of its employees, Ms. Ferguson utilized a penalty worksheet. Ms. Ferguson identified the individual employees of Respondent not covered by a workers' compensation policy or an exemption and listed them on the penalty worksheet. For each individual listed on the penalty worksheet, Ms. Ferguson assigned a class code reflecting the work done by each employee as observed by Mr. Robinson (i.e., the class code for roofing). The amount of the penalty was imputed using the Average Weekly Wage as determined by the Agency for Workforce Innovation, across the entire period of non-compliance. Ms. Ferguson imputed the penalty because Respondent did not produce business records from which the Division could have calculated the gross payroll from the employees in question. Ms. Ferguson then took 1/100th of the payroll and multiplied that figure by the approved manual rate applicable to the applicable class code, as adopted by the Office of Insurance Regulation. Ms. Ferguson then took the previously obtained product and multiplied it by 1.5 to determine the penalty for the period of August 26, 2008 through August 17, 2010, the time period requested in the business records request. Based upon her calculations, Ms. Ferguson determined the appropriate penalty to be assessed against Respondent to be $71,028.94. Respondent disputed portions of the penalty worksheet attached to the Amended Order of Penalty Assessment, which gave rise to this proceeding. Specifically, Respondent wrote the word "Dispute" next to David Hannans and "Shorty's" names for all time periods on the penalty worksheet except for the time period July 1, 2010 through August 17, 2010, next to which Respondent wrote "not disputed". Thus, in its request for hearing, Respondent did not dispute that Hannans and "Shorty" were employees of Respondent; rather, Respondent disputed that they were employees during most of the periods of time listed on the penalty worksheet.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That the Division of Workers' Compensation enter a Final Order upholding the Second Amended Order of Penalty Assessment, assigning a penalty of $71,028.94, and the Stop-Work Order issued to Respondent on August 8, 2010. DONE AND ENTERED this 29th day of March, 2011, 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 29th day of March, 2011. COPIES FURNISHED: Jamila Georgette Gooden, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Robert L. Olszanowski River City Roofing Sheet Metal, Inc. 10650 Haverford Road, Suite 2 Jacksonville, Florida 32218 Honorable Jeff Atwater Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 P. J. Jameson, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in this case is whether Elite Restoration and Construction, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers’ compensation, as alleged in the Stop-Work Order and Second Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees and corporate officers. Respondent is an active Florida corporation that was formed on August 28, 2009, with a principal address of 7185 West Village Drive, Homosassa, Florida 34446. Respondent was engaged in business operations in the state of Florida during the entire period of November 2, 2014, to November 1, 2016. Brian Johnson (Respondent’s owner or Mr. Johnson) is Respondent's sole shareholder, owning 100 percent of the stock. The Department's investigator, Michael Robinson, commenced a random worksite compliance investigation on November 1, 2016, at a gas station at 970 Atlantic Boulevard, Jacksonville, Florida 32225. He observed Respondent's owner, Mr. Johnson, and three others, Tim Neeld, Derrick Windier, and James Ingash, painting a metal canopy covering the gas pumps. Mr. Johnson told the investigator that his company, Elite Restoration & Construction, LLC, was a subcontractor for Aluminum Plus of DeLand, Florida. By searching the Division's Coverage and Compliance Automated System, the investigator determined that Brian Johnson obtained a workers' compensation exemption on October 12, 2016, or 20 days prior to the investigation, and further determined that an employee leasing contract previously held by Respondent terminated on January 15, 2015, which is more than nine months prior to the investigation. Mr. Johnson confirmed that Respondent had an exemption for himself, effective October 12, 2016, but did not have any workers' compensation insurance for its employees. On November 1, 2016, after consulting with a supervisor, the Department's investigator issued the Stop-Work Order, which was posted at Respondent's worksite and personally served upon Respondent’s owner. On the same day, the investigator also personally served the Request for Production, which requested business records to determine Respondent's payroll during the two-year penalty period proscribed by section 440.107(7)(d)1., which in this case is from November 2, 2014, to November 1, 2016. The Request for Production explicitly states that the requested records must be provided within 10 business days from receipt of the request. Respondent obtained an Agreed Order of Conditional Release from the Stop-Work Order on November 8, 2016, by terminating the three workers observed during the compliance investigation who did not have workers’ compensation coverage and paying the Department a $1,000 down payment toward the penalty that would be calculated in this case. Respondent produced business records for penalty calculation on November 17, 2016, and February 28, 2017, which is beyond the 10-day time period required by the Request for Production.2/ The Department's penalty auditor, Lynne Murcia, used those records to calculate a $21,475.30 penalty for failing to comply with the workers' compensation insurance requirements of chapter 440. On April 20, 2017, when Respondent’s owner came to the Department’s Jacksonville office, he was personally served with the Amended Penalty and advised of his right to seek administrative review of the Stop-Work Order and Amended Penalty. Mr. Johnson filed a petition for hearing on behalf of Respondent on May 5, 2017, stating that the penalty calculated was wrong because it included income earned in states other than Florida. Respondent produced additional business records on May 17, August 21, and August 31, 2017, for the purpose of demonstrating that a portion of his company’s payroll was derived from work completed at worksites outside of Florida, and arguing that the out-of-state payroll should not be included in the penalty calculation. The invoices showed $182,056.78 in total income, consisting of $77,268 from 14 jobs in Florida, and $104,788.60 for 14 jobs outside of the State of Florida. Upon initial review, the Department’s auditor declined to make any adjustments because the invoices did not provide information showing earnings of specific employees for jobs outside of Florida. Thereafter, Mr. Johnson produced additional records that allowed the Department’s auditor to trace out-of-state employment to transactions in Respondent’s general ledger. The Department's auditor reviewed Respondent's additional records and removed out-of-state payroll and per diem payments. In accordance with that review, the Department issued the 2nd Amended Penalty which reduced the penalty to $16,671.14. The 2nd Amended Penalty also reduced the 2016 payroll attributed to Respondent's owner. Respondent was an "employer" in the state of Florida, as that term is defined in section 440.02(16), from November 2, 2014, to November 1, 2016. Respondent did not secure the payment of workers' compensation insurance coverage, nor have others secured the payment of workers' compensation insurance coverage for the employees listed on the penalty worksheet of the 2nd Amended Penalty during the periods of noncompliance listed on the penalty worksheet. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty had a valid Florida workers' compensation coverage exemption during the periods of noncompliance listed on the penalty worksheet. In the past, Respondent had an employee leasing contract with Southeast Personnel Leasing, Inc. That contract was terminated on January 15, 2015, due to the leasing company’s concerns about out-of-state employment that would not be covered by the leasing company's workers' compensation insurance. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were "independent contractors" as that term is defined in section 440.02(15)(d)1. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were employees of a temporary labor company. Employees on the penalty worksheet of the 2nd Amended Penalty are correctly classified under Class Code 5474, painting, as defined in the "Scopes Manual" published by the National Council on Compensation Insurance, Inc. (NCCI), and adopted in Florida Administrative Code Rule 69L-6.021(2)(jj). The approved manual rates used in the penalty worksheet of the 2nd Amended Penalty, as defined by the NCCI Scopes Manual and adopted by the Office of Insurance Regulation, are the correct manual rates for the corresponding periods of noncompliance listed on the penalty worksheet. In calculating the 2nd Amended Penalty, the Department’s auditor used the worksheet required by rule 69L-6.027, along with Respondent’s bank statements, check images, general ledger, and tax returns filed with the Internal Revenue Service. The auditor capped Respondent’s owner’s pay for that portion of 2014 falling within the penalty period because his salary and dividend totaling $73,484 in 2014 exceeded the statewide average of $862.51 per week or $44,850.52 per year. She also adjusted the period of noncompliance for Mr. Johnson, pursuant to rule 69L-6.028(2), because he obtained an exemption from Florida’s Workers’ Compensation Law on October 12, 2016. The auditor explained that she used Respondent’s tax returns for 2014 and 2015 because she believed they were the most reliable indication of salaries and wages, officer compensation, and payroll for outside services and subcontractors. She further explained that she used Respondent’s tax returns and general ledger as the most accurate sources for determining payroll for 2016. The auditor’s explanation is reasonable and credited. Mr. Johnson questioned the auditor’s method of determining payroll and offered alternative methods using spreadsheets he created to identify what he called “member draws” and other summaries. The invoices provided by Respondent to the Department, however, do not match the summaries; and Respondent’s method of determining payroll, when compared to the method utilized by the Department, is not accurate or reliable. The auditor’s method reflected in the 2nd Amended Penalty appropriately applied approved manual rates corresponding to Class Code 5474, painting, to determine the evaded workers’ compensation insurance premium. Then, the evaded premium was properly multiplied by two in accordance with section 440.107(7)(d)1.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Elite Restoration and Construction, LLC. DONE AND ENTERED this 20th day of February, 2018, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III 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 February, 2018.
