The Issue Whether Petitioner failed to obtain workers’ compensation insurance meeting the requirements of Chapter 440, Florida Statutes, and, if so, the penalty that should be imposed.
Findings Of Fact Olender is a Delaware corporation that is registered to do business in Florida and engaged in the business of construction. Primarily, Olender frames the walls of structures and installs siding, windows and moisture barriers to such structures. Such activities are construction activities under the Florida’s workers’ compensation law. See Ch. 440, Fla. Stat., and Fla. Admin. Code R. 69L-6. On June 22, 2006, an investigator for the Department visited the Alta Westgate Apartment complex construction project, located at 6872 Alta Westgate Drive, Orlando, Florida. The visit was prompted by a “confidential tip” received by the Department from Tyler Balsinger, a former employee of Petitioner. The Alta Westgate complex is owned by Alta Westgate, LLC. The general contractor responsible for the construction of the complex was W.P. South Builders. The overall project manager for the general contractor was Robert Beliveau. The on-site representative for the general contractor was Danny Campbell. Mr. Campbell provided the Department’s investigator with a list of subcontractors on the project worksite. The list reflected that the subcontractor for framing was Olender and that John Olender was the person in charge of the company’s work at the project site. Among other things, the contract also included the installation of a moisture barrier, generally known as Tyvek, on the framed structures. Because of the nature of construction work, it is not unusual to have several subcontractors on a construction worksite at the same time. It is unlikely that Olender was the only subcontractor working on the day the Department’s investigator visited the Alta Westgate project. The subcontract required that Olender secure the payment of workers’ compensation on its employees. The evidence was not clear regarding whether the general contractor, under its subcontract with Olender, would provide workers’ compensation insurance on the employees of Olender’s subcontractors. However, the evidence was clear that J.P. Builders did not secure such workers’ compensation insurance on the employees of Olender’s subcontractors. Mr. Campbell also provided the certificate of insurance for Petitioner. The certificate reflected that Modern Business Associates, Inc. (MBA), an employee leasing company, provided workers’ compensation for Olender’s leased employees. See § 468.520, Fla. Stat. MBA entered into a client service agreement with Olender. Under the agreement, Olender would lease employees from MBA and MBA would provide payroll services and workers’ compensation coverage for the employees it leased to Petitioner. The agreement terminated on August 30, 2006. MBA’s Client Service Agreement with Petitioner states on p. 3: Insurance Coverage. MBA is responsible for providing Workers’ Compensation coverage to workers employed by MBA and assigned to Client, in compliance with applicable law, and as specified in the Proposal. Workers performing services for Client not covered by this Agreement and not on MBA’s payroll shall not be covered by the workers’ compensation insurance. Client understands, agrees, and acknowledges that MBA shall not cover any workers with workers’ compensation coverage who has not completed and submitted to MBA an employment application and tri- fold, and which applicant has not been reviewed and approved for hire by MBA. (emphasis supplied) Other than information necessary to supply its services, MBA was not aware of any specific project or projects on which Olender was working when it leased employees from MBA. John Olender and Ruben Rojo were two employees that Olender leased from MBA and for whom MBA provided workers’ compensation insurance. The workers’ compensation policy complied with Florida’s workers’ compensation requirements. After speaking with Mr. Campbell, the Department’s investigator, who is fluent in Spanish, walked around the complex’s worksite. She did not have a hardhat on. She eventually saw about 10 to 12 workers on the third floor of one of the buildings under construction (Building 8 or 9). The Department’s investigator could not say if they were framing. At some point, John Olender, the company’s project superintendent, saw the Department’s investigator, noticed she did not have any safety equipment on, and went to meet her. The investigator yelled to the workers on the third floor and showed her Department badge or identification. She was speaking Spanish to them. The workers ran in an effort to avoid the Department’s investigator. Mr. Olender, who does not speak or understand Spanish, sent for Ruben Rojo. Mr. Rojo is the assistant superintendent for Olender and works under John Olender. He is fluent in Spanish. He does not hire employees for Olender, but oversees the work being performed under Olender’s subcontracts. The Department’s investigator continued to attempt to explain to the workers that she was not interested in their immigration status, but was there to make sure they were covered by workers’ compensation insurance. At least some of the workers came down to talk to her. Mr. Rojo thought the investigator was asking about the workers’ immigration status and told them that they did not have to talk to her. However, apparently some workers very reluctantly gave her limited information. The workers who talked to her were Pedro Antonio Mendez, Jaco Sarmentio, Juan Cardenas, Alvaro Don Juan Diaz, Jose Varela Orellana, Nesto Suarez Ventura, Miguel Martinez Diaz, Jose Perez Renaldo and Antonio Hernandez. She did not obtain any addresses, phone numbers or other identifying information from the employees. The evidence did not show whether these individuals gave the Department’s investigator the correct information. Importantly, they did not tell her who their employer was or what duties they were performing. None of these individuals testified at the hearing. John Olender did not recognize these workers. Mr. Rojo told the investigator that Olender subcontracted the framing portion of its contract to “T-Bo”. T-Bo was also known as Primitivo Torres. In his deposition testimony, Mr. Torres did not recognize these workers’ names. He also thought that most of the workers he employed for his framing subcontract with Olender were illegal immigrants. Mr. Torres was unclear in his testimony regarding his status with Olender. He did indicate that he worked in both Orlando and Tampa. Apparently, at times, he was an employee and at other times he was a subcontractor. He was listed as a leased employee under MBA’s contract with Olender. The evidence suggests, but does not prove, that Mr. Torres was a person who supplied immigrant workers to construction sites. In Orlando, Mr. Torres lived in an apartment complex in the Rosemond area with his employees. The rent was sometimes paid by Olender and then deducted from the remuneration paid to Mr. Torres. Mr. Torres paid his employees from the money he received under his subcontract with Olender. Mr. Torres also testified that when the Department’s investigator contacted him in June 2006, to discuss workers’ compensation insurance, he told her that he neither secured the payment of workers’ compensation for himself nor for the other workers in both Tampa and Orlando. Donna Knoblauch, who oversaw Olender’s main office, received a faxed copy of a certificate of workers’ compensation insurance from Mr. Torres. However, the faxed certificate was an illegible copy of what appeared to be a certificate of liability insurance issued by a company in Texas. The certificate does not have a legible “sent date,” a legible workers’ compensation policy number, legible dates of coverage, a legible producer name, or any information indicating that coverage includes the State of Florida. The document is insufficient to demonstrate that Mr. Torres provided workers’ compensation coverage for his employees that worked under his subcontract with Olender. John Olender testified that Mr. Torres utilized, at most, 20 framers for the construction at Alta Westgate. Mr. Torres corroborates that number and indicates that various people worked in crews of around five. On the other hand, Danny Campbell testified that Olender had approximately 20 workers when the project started, increased to approximately 75 people performing framing duties on the worksite and decreased to about 20 workers by the time the Department’s investigator visited the worksite. Mr. Campbell testified that on January 22, 2006, he believed that Olender had approximately five individuals for the punch-out group, three–to-five cleaners, a forklift operator, approximately two individuals installing the Tyvek moisture- barrier paper, two individuals performing window installation and approximately 15–to-20 individuals installing siding at the worksite. No other testimony supports the number of workers Mr. Campbell believed to be at the jobsite on June 22. On balance, the best evidence of the approximate number of workers was that of Mr. Olender and Mr. Torres. However, these figures were only estimates of the actual number which may have been less than 20 workers. In any event, the employment of these 12 workers on the third floor was not demonstrated by the evidence. Their names did not appear on the list of employees leased by Olender from MBA and were otherwise, unknown to the Mr. Olender, Rojo and Torres. While at the jobsite, the Department’s investigator also spoke with Victor Ibarra. Mr. Ibarra drove a forklift and indicated that he worked for Olender. Again, no address or other identifying information was supplied to the investigator. Later, the investigator spoke with a woman who purported to be Mr. Ibarra’s wife. There was no information on the forklift indicating that it belonged to Olender and Olender denies employing a person named Victor Ibarra. Mr. Campbell testified in his deposition that Olender had forklifts on the jobsite. However, he did not testify that the forklift Victor Ibarra drove on June 22, 2006, was owned by Olender. Likewise, Mr. Campbell did not testify that Mr. Ibarra was an employee of Olender. Mr. Ibarra’s name did not appear on the list of leased employees provided by MBA. The Department's investigator included Mr. Ibarra as an employee of Olender based on Mr. Ibarra’s statements. However, the evidence presented by the Department is not sufficient to establish that Mr. Ibarra was an employee of Olender, since Mr. Ibarra did not testify at the hearing. Mr. Campbell’s testimony does not corroborate the hearsay statements of Mr. Ibarra since the testimony does not indicate the forklift Mr. Ibarra drove belonged to Olender or to another subcontractor on the project. After talking to Mr. Ibarra, the Department’s investigator met Rosa Barden, Martha Alvarado and Ismael Ortiz, who were applying a moisture barrier paper known as “Tyvek” to a building at the construction site. The three individuals told the investigator that that they had been hired by Mr. Rojo on behalf of Olender and had only worked for about a day. The investigator included these three individuals as employees of Olender. No addresses or other contact information was obtained by the investigator. None of these individuals testified at the hearing. Mr. Rojo testified that he did not know the three individuals on the “paper crew” and did not hire them. None of the three individuals were listed as leased employees with MBA. However, Olender’s subcontract clearly lists the application of Tyvek as a part of its contract. Additionally, the payment information supplied by the general contractor shows that Olender was paid for Tyvek application on all the buildings in the complex. Unlike Mr. Ibarro’s testimony, the contract and payment evidence independently corroborates the otherwise hearsay statements of these three individuals and Olender should have provided workers compensation insurance on them. There was no evidence that Olender provided such workers’ compensation insurance; such failure violates Chapter 440, Florida Statutes. See §§ 440.10(1)(g) and 440.38(7), Fla. Stat., and Fla. Admin. Code R. 69L-6.019. In total, the Department’s inspector met with John Olender for approximately one hour discussing the work performed by Olender and the employees retained by Olender. During this meeting, Mr. Olender, identified members of a “punch-out” crew who had worked on the project. The punch-out crew repaired any defects in framing prior to inspection. The names supplied by Mr. Olender were Juan Gonzalez, Miguel, Sal, William, WI Gerardo (noted as El Guardo in the third Amended Order of Penalty assessment), Pedro, Jacobo and Boso. Mr. Olender did not know their last names. The evidence did not show the period of time that the punch-out crew would have been working at the project site. Presumably, they would have begun some time after the initial building was framed. The Department’s investigator did not personally see the punch-out crew at the project. Mr. Olender also informed the Department’s investigator that he did not handle matters concerning workers’ compensation insurance and that she would have to contact the Company’s main office in Missouri. He provided the number for the office. He also gave the investigator the number for Michael Olender, the president of the company and the number for Mr. Torres. The investigator issued a Workers’ Compensation Request for Production of Business Records to Olender. She left the Request with John Olender. The request for records asked for certain categories of Olender’s business records for the period of January 22, 2004 to June 22, 2004. Of importance here, the Department requested records in categories 1, 4, 5 and 6. In general, category 1 covers all payroll records, including checks and check stubs, time sheets, attendance records and cash payment records. Categories 4, 5 and 6 cover all records that relate to subcontractors, including their identity, contract, payment thereof, workers compensation coverage for all the subcontractor’s employees, and/ or the employees’ exemption status. These records are required to be maintained by a company doing business in Florida. Mr. Campbell testified that some members of the punch- out crew often approached him about whether he had paid Olender so that they in turn could be paid. Again, none of these individuals testified at the hearing. However, given the admissions of Olender’s employee and Mr. Campbell’s testimony, the evidence supports the conclusion that the eight individuals on the punch-out crew were employed by Olender. None of these employees were leased employees and therefore, were not covered by the workers’ compensation policy provided by MBA. There was no evidence that Olender secured any workers' compensation insurance on these eight employees. Such failure violates Chapter 440, Florida Statutes. See §§ 440.10(1)(g) and 440.38(7), Fla. Stat., and Fla. Admin. Code R. 69L-6.019. The Department’s investigator contacted Ms. Knoblauch while she was on her way to a medical appointment. The investigator requested Olender’s proof of workers’ compensation insurance. Ms. Knoblauch told the investigator that she was not at the office where the records were kept, but on the way to a medical appointment. She said she would be returning to the office after the appointment. The investigator said she needed the records immediately. Ms. Knoblauch offered to skip her appointment and requested time to turn around and return to the office. The investigator refused to permit her the time to return to the office. At some point, MBA supplied the Department’s investigator with a list of Olender’s leased employees. The list did not contain any of the names she had gathered during her visit to the worksite. Within a few hours from the beginning of the investigation, the Department's investigator issued a Stop Work Order and an Order of Penalty Assessment on June 22, 2006. The Order was served via certified mail on Michael Olender and Olender’s legal counsel. The Stop Work Order required that Olender "cease all business operations in this state" and advised that a penalty of $1,000.00 per day would be imposed if Olender were to conduct any business in violation of the Stop Work Order. Additionally, along with the Order, the Department issued and served on Petitioner via certified mail a Division of Workers’ Compensation Request for Production of Business Records for Penalty Calculation, requesting records for a period of three years. The request, made pursuant to Section 440.107(7), Florida Statutes, asked the employer to produce, for the preceding three years, documents that reflected payroll, proof of insurance, workers’ compensation audit reports, identity, duration, contracts, invoices and check stubs reflecting payment to subcontractors, proof of workers’ compensation coverage for those subcontractors, employee leasing company information, temporary labor service information, and any certificate of workers’ compensation exemption. The request asked for the same type of records that had been requested earlier. Neither request for records was specific to a particular construction job that Olender may have performed work on. The investigator informed Mr. Campbell that Petitioner was being issued a Stop-Work Order and gave him a copy of the Order. Mr. Campbell faxed the Order to Olender’s office in Missouri. The Department’s investigator also checked the Department’s Coverage and Compliance Automated System (“CCAS”) database. The system tracks workers' compensation insurance policy information provided by workers’ compensation carriers on an insured employer. The database did not contain an entry that reflected a current State of Florida workers' compensation insurance policy for Olender. The database did reference that Olender had a stop-work order served on it on July 12, 2002, which had been lifted on July 31, 2002, with payment of the penalty. Florida law requires that employers maintain a variety of business records involving their business. See § 440.107(5), Fla. Stat., and Fla. Admin. Code R. 69L-6.015. The Rule is limited to records regarding a business’ employees and any payout by the employer to any person. In this case, under the Rule, the only records Olender was required to maintain related to its employees and its subcontractor, Mr. Torres. There was no evidence regarding any other subcontractors Olender may have contracted with. The only records supplied by Olender to the Department were the records from MBA that included workers’ compensation information and W-2 forms for Olender’s leased employees, the illegible proof of insurance for Mr. Torres and copies of checks from Olender to Mr. Torres for the subcontract. Those records reflected that John Olender, Ruben Rojo and Primitivo Torres were leased employees and covered by workers’ compensation insurance under Olender’s contract with MBA. Olender supplied no records regarding workers’ compensation coverage for the eight employees who were members of the punch- out crew, the three workers who were members of the paper crew or the 12 workers who were on the third floor. When an employer fails to provide requested business records that the statute requires it to maintain, the Department is required to impute the employer's payroll using "the statewide average weekly wage as defined in Section 440.12(2)." § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028. The penalty for failure to secure the workers' compensation insurance coverage required by Florida law is 1.5 times the premium that would have been charged for such coverage for each employee identified by the Department. The premium is calculated by applying the approved manual rate for workers' compensation insurance coverage for each employee to each $100.00 of the gross payroll for each employee. In this case, the Department, after several amended assessments, imputed the payroll for Olender for the period beginning January 22, 2004, Petitioner’s date of incorporation, and ending June 26, 2006. Included in the calculation were the eight individuals on the punch-out crew identified by John Olender, the 12 employees who were working on the third floor, the forklift driver Victor Ibarra, and the three individuals on the paper crew. In calculating the premium for workers' compensation insurance coverage, the Department's investigator used the risk classifications and definitions of the National Council of Compensation Insurance, Inc. ("NCCI") SCOPES Manual. The appropriate code for Olender’s employees was classification code 5561 which covers framing of multiple family dwellings. The gross payroll imputed to each of the 27 employees was $683.00 per week. The Department then utilized the imputed payroll for same employees for the years 2004 and 2005. The Department’s calculation resulted in an assessed penalty of $1,205,535.40. However, the evidence establishes that Olender had 11 direct employees rather than 27 employees during the period of the Alta Westgate contract. Olender’s performance under that contract began on April 3, 2006. Other than the period of time involved with the Alta Westgate project, there was no evidence regarding the period of time Olender conducted business in Florida that would require it to comply with Florida law. The date of incorporation of Olender is insufficient to demonstrate that Olender engaged in any business in Florida that would require it to comply with Florida’s workers’ compensation law. Therefore, the penalty calculation must be modified to reflect only those eleven employees for the time period Olender performed under its contract on the Alta Westgate project.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order: Finding that Olender Construction Co., Inc., failed to have Florida workers' compensation insurance coverage for 11 of its employees, in violation of Sections 440.10(1)(a) and 440.38(1), Florida Statutes; and Recalculating the penalty against Olender. DONE AND ENTERED this 14th day of March, 2008, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 2008. COPIES FURNISHED: Colin M. Roopnarine, Esquire Department of Financial Services, Division of Workers Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 Jeremy T. Springhart, Esquire Broad and Cassel 390 North Orange Avenue, Suite 1500 Orlando, Florida 32801 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Y. Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in this case is whether Respondent, Ocala Exterior Solutions, Inc., failed to properly maintain workers' compensation insurance coverage for its employees, and, if so, what penalty should be assessed.
Findings Of Fact The Department is the state agency responsible for ensuring that all employers maintain workers' compensation insurance for themselves and their employees. It is the duty of the Department to make random inspections of job sites and to answer complaints concerning potential violations of workers' compensation rules. This case arose as a result of a random inspection. Respondent is a business created by Johnny Busciglio on or about October 16, 2012. At all times relevant hereto, Respondent was duly licensed to do business in the State of Florida. Its business address is 140 Southwest 74th Lane, Ocala, Florida 34476. On May 22, 2015, the Department’s investigator, William Pangrass, made a random site visit to a construction site located at a residence at 9189 Southwest 60th Terrace Road, Ocala, Florida. He saw two men installing soffit as part of the construction which was going on. Pangrass remembers the men identifying themselves as Derek McVey and Frank Deil. When Pangrass inquired as to their employer, the two men were initially not certain for whom they were working. One of the men made a telephone call and then told Pangrass they were employees of Sauer & Sons. Interestingly, Respondent said the two men on-site that day were McVey and a man named James Van Brunt. Pangrass contacted Sauer & Sons and were told that neither McVey nor Deil (or Van Brunt) were employees of that company. He was told by a representative of Sauer & Sons that the men were in fact employees of Respondent. Pangrass then verified that Respondent was a current, viable company and checked whether the company had workers’ compensation insurance coverage for its employees. He found that Respondent had a workers’ compensation insurance policy for a short time in 2014. Two of Respondent’s employees, however, did have exemptions from coverage. Those two were Johnny Busciglio and Anthony Wayne. Based on his findings, Pangrass issued a SWO which he posted at the work site he had visited. He posted the SWO on the permit board in front of the job site on May 26, 2015. On May 29, he served a Request for Production of Business Records on Respondent, seeking information concerning Respondent’s business for purposes of calculating a penalty for failure to have workers’ compensation insurance in place. Respondent emailed the requested business records to Pangrass. The Department requested additional records and clarification concerning some of the records which had been provided. Busciglio made a good faith effort to respond to each of the Department’s requests. After review of Respondent’s business records, the Department calculated a penalty and issued an amended OPA. That amended OPA was issued on September 8 and served on Busciglio (as agent for Respondent) on October 1, 2015. The amount of the penalty in the amended OPA was $9,896.32. Within a few days after receiving the amended Order, Busciglio obtained workers’ compensation insurance for his employees, paid a down payment of $1,000 to the Department, and Respondent was released to resume its work. The penalty in the amended OPA was based upon information obtained from Busciglio concerning Respondent. Using the bank records supplied by Busciglio, the Department determined that Respondent had the following employees: Eric McVey, Frank Dorneden, Jeff Burns, Jordan Anchondo, Anthony Wayne, Nikki Smith, Johnny Busciglio, and Jason Bridge. Their wages were used by the Department to calculate the penalty. The penalty was calculated by the Department as follows: The business was assigned class code 5645, construction on residential dwellings; The period of non-compliance was set at two years; The gross payroll amount for that two-year period was established at $30,905.14; The gross payroll amount was divided by 100, resulting in the sum of $309.05; The approved manual rate, i.e., the amount the employer would have paid if insurance was in place, was assigned for each employee; The gross payroll was multiplied by the manual rate; And the penalty amount was established, taking the figure in (f), above, and multiplying by two. Busciglio established by credible testimony, unrefuted by the Department, that Nikki Smith was a person from whom he bought tools; she was never an employee of Respondent. The same was true for the person listed as Jason Bridge (although his real name may have been Jason Woolridge). As for Eric McVey, he worked for Frank Dorneden, who paid McVey directly. There were no payroll records or checks from Respondent provided to the Department which were attributable to McVey. Dorneden had begun working for Respondent on December 22, 2014. On May 22, 2015, he was asked by Busciglio to visit the work site; he found McVey working there and Deil/Van Brunt was also on the site. Neither the Department nor Respondent offered any further explanation about Deil/Van Brunt, nor did the Department attribute any penalty to Van Brunt as a putative employee. His status in this matter is a mystery. When the penalties associated with McVey, Smith, and Bride are subtracted from the calculation, the amount of the penalty would be $9,454.22.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services requiring Respondent, Ocala Exterior Solutions, Inc., to pay the sum of $9,454.22. DONE AND ORDERED this 20th day of November, 2015, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of November, 2015.
The Issue Whether Respondent failed to secure the payment of workers’ compensation in violation of Sections 440.10(1), 440.38(1) and 440.107(2), Florida Statutes, by materially misrepresenting and concealing employee duties as to avoid proper classification for premium calculation, 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. Respondent is a commercial welding corporation based in Putnam County, Florida. It has been in business as an active Florida corporation since the early 1950s. Its principal office is located at 1301 Madison Street, Palatka, Florida 32177. Petitioner is an “employer” for purposes of Chapter 440, Florida Statutes. Respondent is in the business of welding, fabrication and erection of structural steel, fabrication and installation of metal handrails and fire escapes to existing buildings, and various other metal fabrication and welding operations. Respondent is engaged in the construction industry. At all material times, Respondent maintained a policy of workers’ compensation insurance for all of its employees. Respondent’s workers’ compensation insurance at issue in this case was obtained through the Florida Retail Federation Insurance Fund, and was in place since February 1, 2002. Pursuant to the Department's statutory authority, after receiving a referral based on a fatal accident at a site where Respondent was providing work, Investigator Daniel Pfaff of the Department's Division of Workers' Compensation, Bureau of Compliance, conducted an investigation into Respondent’s workers’ compensation coverage. The investigator reviewed payroll records as well as certificates of insurance. Respondent cooperated with the Department’s investigation, providing all requested documents and responding to the questions of Petitioner’s investigation. Investigator Pfaff determined that Respondent had not secured workers’ compensation coverage consistent with the job descriptions of its employees. At the final hearing it was shown that, indeed, the job classification code2/ listed on Respondent's workers' compensation policy for Respondent's non-clerical work used to determine premiums paid by Respondent was not appropriate for much of the work Respondent was performing. The job classification code on Respondent’s workers’ compensation policy for the non-clerical work performed by Respondent was 3822. Classification code 3822 encompasses manufacturing or assembling automobile, bus, truck, or trailer bodies made of die pressed steel. Classification code 3822 does not encompass fabrication of iron or steel outside of a welding shop, erection of iron or steel structures, fabrication and installation of metal handrails and fire escapes to existing buildings, or operation of machinery to lift materials used to erect buildings (collectively "off-site erection work"). Based upon contracts provided by Respondent to the Department, the Department determined that the proper classification codes for the off-site erection work performed by Respondent’s employees were 5040 and 5057. Classification code 5040 encompasses the erection of iron or steel frame structures, the assembly and fabrication of iron or steel frame structures at the erection site, welding operations incidental to steel erection work, and the installation of iron or steel balconies, fire escapes, and staircases to existing buildings. Classification code 5057 encompasses iron or steel erection not otherwise classified in the Scopes® Manual. After it was determined that Respondent did not have the proper workers’ compensation insurance, Investigator Pfaff issued a Stop Work Order and Order of Penalty Assessment against Respondent on behalf of the Department on February 12, 2010. The Stop-Work Order is on a form with supporting allegations that may be selected by checking the box next to the allegation. The boxes checked on the Stop-Work Order comprise the following allegation: “Failure to secure the payment of workers’ compensation in violation of sections 440.10(1), 440.38(1) and 440.107(2) Florida Statutes by: materially misrepresenting and concealing employee duties as to avoid proper classification for premium calculation.” The allegation selected in the Amended Order of Penalty Assessment refines the allegation of the Stop-Work Order by alleging “Failure to secure the payment of workers’ compensation within the meaning of section 440.107(2), F.S., by: materially misrepresenting or concealing employee duties so as to avoid proper classification for premium calculations.” The Second Amended Order of Penalty Assessment contains no separate allegation, but rather references the original Stop-Work Order and Order of Penalty Assessment and the Amended Order of Penalty Assessment. No other charging documents were provided by Petitioner in support of the proposed penalty. At the final hearing, Petitioner presented evidence demonstrating that the appropriate job classification code for the majority of Respondent’s work was 5040. It also provided evidence that $60,873.60 was the amount of penalty that would be due if a violation had occurred. The penalty amount was calculated by using payroll amounts provided by Respondent and the approved rates for the proper job classification codes to determine the amount of premium that should have been paid and then, after giving Respondent credit for previous premiums paid, multiplying the result by 1.5 in accordance with applicable rules. Petitioner, however, did not provide sufficient evidence that Respondent failed “to secure the payment of workers’ compensation in violation of sections 440.10(1), 440.38(1) and 440.107(2) Florida Statutes by materially misrepresenting and concealing employee duties as to avoid proper classification for premium calculation” as alleged in the Stop-Work Order. Rather than showing that Respondent misrepresented or concealed employee duties to avoid proper classification, the evidence indicated that Respondent believed that its company was compliant with Florida workers’ compensation coverage requirements. While the Scopes® Manual explains the various job classification codes, there was no evidence that the Scopes® Manual has ever been provided to Respondent or that Respondent was the one who selected the job classification codes that were on its workers’ compensation policy. The job classification description for classification code 3822 provided on premium summaries and statements from the insurance agent and carrier to Respondent were different at different times. One description was “auto, bus, truck body, MFG/steel” and another was “auto, bus, truck, trailer manufacturing, die press.” The self-audit reports abbreviate job classification 3822 as “Auto bus truck body mfg/steel.” These abbreviations do not give notice that Respondent’s job classification was wrong. In addition, the evidence showed that Respondent’s workers’ compensation insurance carrier conducted regular audits of Respondent's operations. Respondent cooperated with the audits. During the course of the audits, the insurance auditor would go to Respondent’s premises where the auditor was able to observe the types of machinery, equipment, and operations used by Respondent. Despite evidence on the premises indicating that Respondent was engaged in work beyond the scope of job classification code 3822 established at the final hearing, there is no evidence that the auditors, carriers, or agents ever questioned the workers’ compensation insurance job classification codes that were on Respondent’s policy, summaries, and audit forms that they transmitted to Respondent. Aside from cooperating with regular audits and allowing inspection of its premises, Respondent also provided additional information to its agent and carrier regarding its operations through Respondent’s requests for certificates of insurance for various off-site jobs. Investigator Pfaff has substantial experience in the insurance industry as an adjustor, special investigator and supervisor in property and casualty for over 30 years. As part of the investigation, investigator Pfaff obtained a number of Respondent’s certificates of insurance. The certificates of insurance were introduced as Petitioner’s Exhibit 21. Investigator Pfaff provided credible testimony that there was no real reason to send out a certificate of insurance unless a company was planning to perform work for another company. The certificates of insurance were issued by Respondent’s insurance agent at Respondent’s request for off- site erection work for a variety of different companies located in a variety of counties, and contain information showing that Respondent was performing work outside its premises. Respondent’s representative testified that Respondent informed its insurance agent of the location of the work each time a certificate of insurance was issued. The Department demonstrated that the off-site erection work being performed by Respondent was not consistent with the workers’ compensation classification code in place for Respondent. The certificates of insurance, however, were approved by the insurance agent or carrier, and neither expressed any concern that the workers’ compensation insurance coverage was insufficient in any respect. In addition, the carrier was made aware of the type of work performed by Respondent by prior claims. Respondent had previously reported two other workers’ compensation incidents which arose from work performed off of the premises. One previous off-site erection work incident involved an injury resulting from an employee falling from a crane, and the other involved an employee’s fall through a roof skylight. The insurance carrier was made aware that off-site erection and construction work was being performed by Respondent in each of these incidents. Even though it was established at the final hearing that job classification code 3822 utilized for Respondent’s workers’ compensations insurance for those incidents should not have covered the off-the-premises incidents, Respondent’s insurance carrier and insurance agent never suggested that Respondent’s workers’ compensation coverage was deficient or erroneous. In sum, Petitioner did not show that Respondent materially misrepresented or concealed employee duties in order to avoid proper classification for premium calculation of its workers’ compensation policy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing the Stop-Work Order, Order of Penalty Assessment, Amended Order of Penalty Assessment, and Second Amended Order of Penalty Assessment issued against Respondent, and ordering the return of any penalty paid by Respondent under the Periodic Payment Agreement. DONE AND ENTERED this 24th day of November, 2010, 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 24th day of November, 2010.
The Issue The issue in this case is whether Respondent, Sunburst Construction, Inc. ("Sunburst"), failed to properly maintain workers' compensation insurance coverage for his employees and, if so, what penalty should be assessed.
Findings Of Fact The Department is the state agency responsible for ensuring that all employers maintain workers' compensation insurance for themselves and their employees. It is the duty of the Department to make random inspections of job sites and to answer complaints concerning potential violations of workers' compensation rules. Sunburst is a business created by Cecil Moore and has been in operation for 35 years in the construction industry. At all times relevant hereto, Sunburst was duly-licensed to do business in the State of Florida. Construction work is assigned a Class Code of 5651 for purposes of calculating workers' compensation insurance coverage. On April 30, 2014, the Department’s investigator, Stephanie Scarton, was driving on South Peninsula Drive in Daytona Beach, Florida, when she noticed what appeared to be construction activity going on. As she is charged with doing, Scarton went to find out whether people working at the construction site were legally covered by workers’ compensation insurance. She talked to four people at the job site and made a determination that workers’ compensation coverage was missing. Scarton’s and Sunburst’s statements of the facts surrounding the coverage are significantly different in detail. Each will be set forth below. Scarton’s Version of the Facts According to Scarton, she observed three people working at the site: Two men were engaged in carpentry, specifically, securing bolts to beams on a form used for pouring concrete. One man was grinding a screw or some other metal object. Scarton identified herself to the man who was grinding the metal object. The man was Carlos Barbecho. The man did not speak English very well, but conversed with Scarton, telling her that he (Barbecho) worked for Sunburst. According to Scarton, Barbecho also told her that the other two men, Edlezar “Eddie” Cano-Lopez and Jeronimo Cano-Lopez, also worked for Sunburst. Neither of the two men (who were brothers) spoke English. Barbecho acted as an interpreter for Scarton as she asked the brothers if they worked for Sunburst. They allegedly “shook their heads up and down,” i.e., they nodded affirmation. However, Scarton could not verify exactly what question Barbecho posed to the brothers in Spanish. Meanwhile, another man, Raley, showed up at the site on his bicycle. He reported that he was an independent contractor and was not related to Sunburst. He was doing some pressure washing on the house located at the site. The investigator then went to her vehicle to research Sunburst, finding it to be a duly-registered Florida corporation. She checked the building permit which had been issued by the City of Daytona Beach and found that it had been pulled by Sunburst. She then checked the Coverage and Compliance Automated System (CCAS) used by the Department to track workers’ compensation coverage by businesses and individuals. According to CCAS, there was no coverage for Sunburst but Moore had a personal exemption. When she found there was no coverage for Sunburst but that its employees were working at the job site, Scarton contacted Moore directly via telephone. Barbecho had provided Scarton with Moore’s number. Scarton testified that Moore admitted the men were his employees, but that he believed he had up to 24 hours to obtain workers’ compensation coverage for them. Scarton eventually ascertained that Sunburst did have appropriate workers’ compensation coverage for Barbecho through a leasing company, but neither of the Cano-Lopez brothers was on the policy. Sunburst’s Version of the Facts Moore has owned Sunburst for over 35 years. He has always maintained workers’ compensation coverage for his employees and has never been cited for failing to do so. In April 2014, Sunburst was in the midst of renovations at the South Peninsula Drive job site. Barbecho was the foreman on the job. He had been working for Sunburst for about two years as a foreman or job manager. Moore had obtained workers’ compensation coverage for Barbecho through a leasing company. On April 30, 2014, Barbecho was working at the job site when the Cano-Lopez brothers came up and asked if there was work for them to do. They had been referred to the site by Pillo, a man who had worked with Moore for many years and often found laborers for him. Barbecho called Moore to see if he wanted to hire the brothers or not. Meanwhile, the men stood around talking as they waited for a determination from Moore. Raley had also been at the site on that date. He was preparing to pressure-wash the outside of the house so that it could be painted. Just about the time he was leaving on his bicycle to retrieve a chair from his nearby home, the Cano-Lopez brothers arrived. Raley paid them no mind as he had never seen them before at the job site. When he returned with his chair, Raley met Scarton, who identified herself as an investigator for the Department. Although Raley told Scarton that he was an independent contractor, he was actually doing the pressure- washing because he owed a favor to Moore. Raley watched Scarton talk to the brothers and could see that there was a large communication problem based upon language. Scarton then began talking more to Raley because he spoke English much better than the other men there. Barbecho says he only met the Cano-Lopez brothers the morning that Scarton showed up at the work site. He did not have authority to hire them on behalf of Sunburst, but put a call into Moore to see if he wanted to hire the men. Barbecho maintains that he never told Scarton the men were employees of Sunburst. He does not remember being asked to ask the brothers, in Spanish, whether they were employees of Sunburst. The men had arrived on the job site just minutes prior to Scarton’s arrival, and Barbecho had not really talked to them at all other than to give a casual greeting. Edlezar Cano-Lopez says he is not now nor has he ever been an employee of Sunburst. He has never done any work for or received any money from Moore or Sunburst. (He was hoping that Moore would pay him for his time traveling to Tallahassee and appearing at the final hearing, but there was no specific agreement in that regard.) When Moore got a call from Scarton, he told her that he did not know who the Cano-Lopez brothers were, that they were not his employees, and that he had coverage for all of his bona fide employees. He has no recollection of telling Scarton that he believed he had 24 hours to get the workers covered by insurance. Scarton asked Moore to come to the job site and he complied with her request. At the job site, Scarton served Moore with a Stop Work Order (SWO) and explained that he needed to cease doing business until it was addressed. The basis of the SWO was that two putative employees, the Cano-Lopez brothers, did not have workers’ compensation insurance coverage. The Stop Work Order and Penalty Assessment At the same time, Scarton made a request for business records in order to determine what penalty should be assessed. The request had a list of various types of documents needed by the Department to make its penalty assessment. Moore was given 20 days to produce the records to the Department. Moore contacted his bank about obtaining the requested records. He was told that it would take five to seven days to pull the records together, but in fact it took more than three weeks. The records were therefore not timely submitted to the Department. Based upon the absence of business records, the Department calculated a penalty assessment which imputed income to the Cano-Lopez brothers for a period of three years. This assessment was in accordance with the Department’s rules and guidelines. A penalty assessment of $61,568.36 was imposed on Sunburst. After the penalty assessment was calculated by the Department, the requested business records were eventually received from the bank by Moore. The records contained summaries of statements, but did not include check images. The check images were provided at a later date. However, the check images showed a large number of checks made out to “cash” so the Department could not really ascertain whether any of them were for payroll or not. Moore explained that his employee leasing company required cash, so each week he would find out what amount was needed and issue a check made payable to “cash” and obtain the needed funds. Moore’s explanation is plausible. The Department did not take heed of the business records provided by Moore because they did not arrive within the prescribed 20-day window. The Department’s auditor did, however, create a draft penalty assessment based upon the records.1/ The Cano-Lopez Brothers The dispositive issue in this case appears to be the employee status of Eddie and Jeronimo Cano-Lopez. Eddie testified at final hearing (through an interpreter) that he has never been an employee of Sunburst. He and his brother were at the job site on April 30 for the purpose of obtaining employment, but they were never hired and have never been paid for doing any work for Sunburst. There are no check images or other business records that reflect Sunburst ever paid the Cano-Lopez brothers for doing work. Moore did not hire them and did not know they were at the work site on April 30 until advised by Barbecho and Scarton that very day. Moore’s denial that he told Scarton he was intending to add the Cano-Lopez brothers to his insurance coverage within 24 hours is credible. Scarton inspects 45 to 55 business sites per month and could easily be confused about who told her they were adding employees. After 35 years in the industry, it is unlikely Moore would be confused about the requirements for coverage of his employees. The foreman, Barbecho, met the Cano-Lopez brothers for the first time on April 30 at the job site. He knew that in order to work for Sunburst, the brothers would first have to fill out an application. In fact, the Cano-Lopez brothers filled out an application after the SWO had been entered. The applications were delivered to Sunburst’s employee leasing company the next day in hopes of alleviating the SWO. But as the SWO was still in place, the Cano-Lopez brothers never engaged in work for Sunburst, and have not to this day. And in the words of the Department’s investigator, “An employee is someone who is being paid by the business.” Scarton testimony, transcript page 46. The Department calculated its penalty assessment as follows: It ascertained the average wage for construction laborers and assigned that figure to each of the Cano-Lopez brothers. The appropriate class code was assigned. A period of three years of non-compliance was imputed, per rule. The gross payroll for that three-year period was assigned to each of the brothers. The gross payroll amount was divided by 100. The resulting sum was multiplied by the manual rate, resulting in a premium. The premium was then multiplied by 1.5 to reach the penalty amount. The calculation of the penalty was based upon the mistaken presumption that the Cano-Lopez brothers were employees of Sunburst. It is clear from the evidence presented that neither Eddie nor Jeronimo Cano-Lopez were ever employees of Sunburst. Scarton’s recollection of the events (without the benefit of any contemporaneous note) was refuted by the testimony of Moore, Barbecho, Raley, and Eddie Cano-Lopez, thus her testimony does not constitute clear and convincing evidence.
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 rescinding the Stop-Work Order and Amended Penalty Assessment. DONE AND ENTERED this 5th day of January, 2015, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of January, 2015.
The Issue The issues in this case are whether Respondent, Customs Logistics Services, Inc., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency charged with enforcing the requirement in chapter 440 that employers in Florida secure workers' compensation coverage for their employees. At all times relevant to this proceeding, Respondent was a corporation registered to do business in Florida. Respondent is a family-owned-and-operated customs brokerage service with its principal office located at 6940 Northwest 12th Street, Miami, Florida 33126. At the time of the inspection giving rise to this proceeding, Respondent employed seven or eight employees.2/ The Compliance Inspection On September 29, 2014, Petitioner's compliance inspector, Hector Fluriach, conducted an onsite inspection at Respondent's principal office to determine whether Respondent was in compliance with the workers' compensation coverage requirements established in chapter 440. At that time, Respondent's co-owners, Astrid Escalona and Carlos Henoa, told Fluriach that Respondent employed six employees and two corporate officers, and also paid two family members who did not work at the principal office. Upon inquiry, Escalona and Henoa informed Fluriach that Respondent did not have workers' compensation insurance coverage for its employees. Using Petitioner's Coverage and Compliance Automated System ("CCAS") and the National Council for Compensation Insurance ("NCCI") insurance coverage verification system, Fluriach confirmed that Respondent had not obtained workers' compensation insurance coverage for its employees, and that it was not in compliance with chapter 440 during certain periods within the two years preceding the inspection. Under the NCCI basic occupational classification system and Scopes Manual, six of Respondent's employees are classified as clerical (Code 8810), and one is classified as a driver (Code 7380). None of Respondent's employees is classified as employed within the construction industry. As a private entity employing four or more employees in a non-construction industry occupation, Respondent was required under chapter 440 to provide workers' compensation coverage for its employees. Respondent's corporate officers were eligible under section 440.05 to elect to be exempt from the workers' compensation coverage requirements of chapter 440; however, none had elected to be exempt. Fluriach issued Stop-Work Order No. 14-329-D5 ("Stop- Work Order"), personally served it on Respondent, and explained it to Escalona. The Stop-Work Order included an Order of Penalty Assessment, ordering assessment of a penalty against Respondent in an amount equal to two times the amount Respondent would have paid in workers' compensation coverage premiums when applying the approved manual rates to Respondent's payroll during the periods for which it had failed to secure workers' compensation coverage during the preceding two years (for convenience, hereafter referred to as the "look-back period"). Fluriach also served a business records request, requesting Respondent to provide specified business records3/ for Petitioner's use in determining the penalty. In a series of submittals, Respondent provided the requested business records to Petitioner. The evidence showed that during the two-year look- back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, and none of its corporate officers were exempt from the workers' compensation coverage requirement. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Petitioner's Computation of Penalty Amount To calculate the applicable penalty, Petitioner must determine, from a review of the employer's business records, the employer's gross payroll for the two-year look-back period. For days during the look-back period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the look-back period for purposes of calculating the applicable penalty commenced on September 30, 2012, and ended on September 29, 2014, the day on which the compliance inspection was conducted. Respondent's business records revealed that Respondent had fewer than four employees between January 1 and March 31, 2013, so Respondent was not required to have workers' compensation coverage for that period. Thus, Petitioner did not assess a penalty against Respondent for that period. For the rest of the look-back period, Respondent employed four or more employees, so was required to obtain workers' compensation coverage for those employees for that portion of the period. Respondent provided business records sufficient for Petitioner to determine Respondent's gross payroll for all but September 30, 2012. For that day, Petitioner imputed Respondent's gross payroll using Florida's statewide average weekly wage. On the basis of Respondent's business records submittals, Petitioner's auditor, Eric Ruzzo, recalculated the penalty to be assessed against Respondent. Petitioner issued an Amended Order of Penalty Assessment on October 17, 2014, imposing a total penalty of $5,617.04. On November 7, 2014, following receipt of additional records, Petitioner issued a Second Amended Order of Penalty Assessment, reducing the penalty to $3,982.52. Finally, after receiving more records, Petitioner issued a Third Amended Order of Penalty Assessment on January 12, 2015, further reducing the penalty to $3,205.70. Each of these penalty assessments was served on Respondent. Petitioner seeks to impose a $3,205.70 penalty against Respondent in this proceeding. In calculating the penalty, Ruzzo examined three-month (i.e., quarterly) periods within the two-year look-back period. Ruzzo identified the occupational class code applicable to each of Respondent's employees. As stated above, all but one of Respondent's employees were classified as clerical, and one of Respondent's employees was classified as a driver. For each employee, Ruzzo determined the gross payroll paid to that employee for the specific quarter in which Respondent was non-compliant during the look-back period, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupational class code. This calculation yielded the workers' compensation coverage premium for that specific employee for the specific quarter for which Respondent was non- compliant during the look-back period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. As previously noted, Respondent did not provide gross payroll records covering September 30, 2012; thus, for that day, Ruzzo imputed the gross payroll for each of Respondent's employees using the statewide average weekly wage as defined in section 440.12(2)4/ multiplied by two. Ruzzo then performed the same computations to yield the penalty amount to be imposed for Respondent's failure to provide workers' compensation on September 30, 2012. Ruzzo then added each penalty amount determined for each employee using actual gross payroll and imputed payroll, to yield the total penalty amount of $5,286.70. Because Respondent had not previously been issued a stop-work order, pursuant to section 440.107(7)(d)1., Petitioner applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $2,081.00. This was subtracted from the calculated penalty of $5,286.70, yielding a total penalty of $3,205.70. Respondent's Defense At the final hearing, Escalona testified that she and the other co-owners of Respondent always have attempted to fully comply with every law applicable to Respondent's business, and have never had compliance problems. She testified that neither she nor the other co-owners of Respondent realized that Respondent was required to have workers' compensation coverage for its employees, and they did not intentionally violate the law. Petitioner apparently mailed a memorandum regarding verifying workers' compensation coverage requirements to businesses in the area before it conducted compliance inspections. The memorandum was dated October 8, 2014, and Escalona testified Respondent received it on October 13, 2014, approximately two weeks after the compliance inspection that Fluriach conducted. Escalona asserted that had Respondent received the memorandum before the compliance inspection was conducted, she would have called Petitioner to determine if Respondent needed to obtain workers' compensation coverage, would have asked how to obtain it, and would have obtained coverage for its employees and exemptions for its corporate officers. Escalona testified that the $3,205.70 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact Petitioner has shown, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the Stop-Work Order, by failing to secure workers' compensation coverage for its employees. Petitioner has shown, by clear and convincing evidence, that the $3,205.70 penalty proposed to be assessed against Respondent pursuant to the Third Amended Penalty Assessment is the correct amount of the penalty to be assessed in this proceeding.
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, Customs Logistics Services, Inc., violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $3,205.70. DONE AND ENTERED this 11th day of August, 2015, in Tallahassee, Leon County, Florida S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2015.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2016), by failing to secure the payment of workers' compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Respondent owns and operates a gas station/convenience store in Miami, Florida. The Investigation. The Department received a public referral that Respondent was operating without workers' compensation coverage. The case was assigned by the Department to Compliance Investigator Julio Cabrera ("Cabrera"). Cabrera first checked the Florida Department of State, Division of Corporations, Sunbiz website to verify Respondent's status as an active corporation. Cabrera then checked the Department's Coverage and Compliance Automated System ("CCAS") to see whether Respondent had a workers' compensation policy or any exemptions. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. CCAS is the Department's internal database that contains workers' compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Cabrera's CCAS search revealed that Respondent had no coverage or exemptions during the relevant period. On February 23, 2016, Cabrera visited Respondent's place of business and observed two women, Margarita Maya ("Maya"), and Nuri Penagos ("Penagos") serving customers. Cabrera asked to speak to the owner. Maya telephoned John Obando ("Obando"). After introducing himself, Cabrera asked how many employees worked for the business. Obando indicated he needed to check with his accountant. Shortly thereafter, Obando called Cabrera back and indicated that his employees included Maya; Carolina Santos ("Santos"); his wife, Marta Ayala ("Ayala"); and himself. Obando confirmed that the business did not currently have workers' compensation insurance coverage nor did any of the members of the LLC have an exemption. The LLC had three managing members: Obando; Maria Rios ("Rios"); and Carlos Franco ("Franco"). Obando explained that Rios lived out of the country and did not provide services to Respondent. According to Obando, Franco also resides outside of the United States, but he travels to Florida and periodically assists with the running of Respondent's business enterprise. Cabrera contacted his supervisor and relayed this information. With his supervisor's approval, Cabrera issued a SWO and served a Business Records Request. Respondent provided the requested business records to the Department. The evidence showed that during the two-year look-back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, including managing members without exemptions. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Penalty Calculation. The Department assigned Penalty Auditor Matt Jackson ("Jackson") to calculate the penalty assessed against Respondent. Jackson used the classification code 8061 listed in the Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rule 69L-6.021(1). Classification code 8061 applies to employees of gasoline stations with convenience stores. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance to assist in the calculation of workers' compensation insurance premiums. In the penalty assessment, Jackson applied the corresponding approved manual rate for classification code 8061 for the related periods of non-compliance. The corresponding approved manual rate was correctly utilized using the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027 to determine the final penalties. Utilizing the business records provided by Respondent, the Department determined Respondent’s gross payroll pursuant to the procedures required by section 440.107(7)(d) and rule 69L- 6.027. The Department served an Amended OPA on March 29, 2016, imposing a total penalty of $29,084.62. On May 6, 2016, following receipt of additional records, the Department issued a Second Amended OPA, reducing the penalty to $25,670.88. Because Respondent had not previously been issued a SWO, pursuant to section 440.107(7)(d)1., the Department applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $1,718.00. This was subtracted from the calculated penalty of $25,670.88, yielding a total remaining penalty of $23,952.88. No records were provided regarding the compensation of Penagos, who was observed working on the date of the inspection. According to Respondent, Penagos was present and working on that date, not as an employee, but as an unpaid volunteer who was testing out the job to see if it was to her liking. The Department imputed gross payroll for Penagos for February 23, 2016, which resulted in a penalty in the amount of $16.26 and was included in the Second Amended OPA. Respondent's Defenses. At the final hearing, Obando testified that he and the other co-owners of Respondent always attempted to fully comply with every law applicable to Respondent's business and have never had compliance problems. He testified that the business carried workers' compensation coverage until 2013, when its insurance agent advised Respondent it could go without coverage due to the size of the business, if the managing members of the LLC were to apply for, and be granted, an exemption. Obando offered no explanation why Respondent failed to secure the exemptions before letting coverage lapse during the penalty period. Obando also argues that on the date of the investigation, Penagos was not an employee, but rather his sister-in-law, who was trying out the job for a day as a volunteer to determine if she would replace Obando's wife, Ayala, who no longer wanted to work in the store. Obando asserts that only two employees were actually working in the store that day, so Respondent should not have been considered out of compliance. Obando also testified that at most, no more than three employees work at the store on any particular day. Obando testified that Respondent has ample liability coverage and that each worker has health insurance, suggesting that workers' compensation insurance coverage is unnecessary. According to Obando, the $23,952.88 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact. Excluding Penagos as a volunteer, and Rios as a managing member of the LLC with no active service to Respondent, Respondent was a covered employer with four or more employees at all times during the penalty period. The Department demonstrated, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the SWO, by failing to secure workers' compensation coverage for its employees.
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, S & S of Florida, LLC, violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $23,936.62. DONE AND ENTERED this 7th day of December, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 7th day of December, 2016. COPIES FURNISHED: Joaquin Alvarez, Esquire Trevor Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) John J. Obando S & S of Florida, LLC 8590 Southwest Eighth Street Miami, Florida 33144 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 committed the violations alleged in the Department of Financial Services, Division of Workers' Compensation's (Department's) Stop Work Order and Second Amended Penalty Assessment and if so, what penalty should be imposed?
Findings Of Fact The Department is the state agency charged with enforcement of the laws related to workers' compensation pursuant to Chapter 440, Florida Statutes. On August 15, 2006, Katina Johnson, a workers' compensation compliance investigator for the Division, observed two men painting the exterior of a home at 318 First Street, in Jacksonville. The two men were identified as William Furr and his son, Corey Furr. Upon inquiry, Mr. Furr stated that he held a lifetime exemption from workers' compensation requirements. He provided to Ms. Johnson a copy of his exemption card, which was issued April 30, 1995, in the name of Arby's Painting & Decorating. The exemption card had no apparent expiration date. 4. In 1998, Sections 440.05(3) and 440.05(6), Florida Statutes, were amended, effective January 1, 1999, to limit the duration of construction workers' compensation exemptions to a period of two years. Express language in the amended statute provided that previously held "lifetime exemptions" from workers' compensation requirements would expire on the last day of the birth month of the exemption holder in the year 1999. Ms. Johnson researched Respondent's status on the Department's Compliance and Coverage System (CCAS) database that contains all workers compensation insurance policy information from the carrier to an insured, and determined that Respondent did not have a State of Florida workers' compensation insurance policy. The CCAS database indicated that Respondent previously held an exemption as a partner for Arby's Painting and Decorating, and that the exemption expired December 31, 1999. Ms. Johnson also checked the National Council on Compensation Insurance ("NCCI") database which confirmed that Respondent did not have a current workers' compensation insurance policy in the State of Florida. After conferring with her supervisor, Ms. Johnson issued a Stop-Work Order and Order of Penalty Assessment to Respondent on August 15, 2006. She also made a request for business records for the purpose of calculating a penalty for lack of coverage. Respondent submitted a written payroll record for his son, Corey Furr, along with a summary of what Respondent had earned on various jobs he performed from 2004 through 2006 and a Miscellaneous Income Tax Form 1099 for himself. On August 30, 2006, he also provided to the Department a copy of his occupational license with the City of Jacksonville. Based on the financial records supplied by Respondent, Ms. Johnson calculated a penalty for a single day, August 15, 2006, for Corey Furr. She calculated a penalty from January 1, 2005, through August 15, 2006, for William Furr. Ms. Johnson assigned a class code to the type of work performed by Respondent using the SCOPES Manual, multiplied the class code's assigned approved manual rate with the payroll per one hundred dollars, and then multiplied the result by 1.5. The Amended Order of Penalty Assessment assessed a penalty of $5,296.37. A Second Amended Order of Penalty Assessment was issued November 1, 2006, with a penalty of $5,592.95. This Second Amended Order of Penalty Assessment was issued because Ms. Johnson used the incorrect period of violation for Respondent when she initially calculated the penalty. On August 25, 2006, Respondent entered into a Payment Agreement Schedule for periodic payment of the penalty, and was issued an Order of Conditional Release from Stop-Work Order by the Department. Respondent paid ten percent of the assessed penalty, provided proof of compliance with Chapter 440, Florida Statutes, by forming a new company and securing workers' compensation exemptions for both himself and his son, Corey Furr, and agreed to pay the remaining penalty in sixty equal monthly payments. Respondent claims that he was not aware of the change in the law and continued to operate under the belief that his "lifetime exemption" remained valid. Although under no statutory obligation to do so, the Department sent a form letter to persons on record as holding exemptions to inform them of the change in the law and the process to be followed to obtain a new exemption.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED: That the Division of Workers' Compensation enter a Final Order affirming the Stop Work Order issued August 15, 2006, and the Second Amended Order of Penalty Assessment issued to Respondent on November 1, 2006. DONE AND ENTERED this 23rd day of February, 2007, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 23rd day of February, 2007.
The Issue The issues are: (1) Whether Respondent, Bravo Construction, Inc. ("Respondent"), was in violation of the workers’ compensation requirements of Chapter 440.107, Florida Statutes (2003),1/ by failing to secure workers’ compensation coverage for its workers; (2) Whether such individuals possessed current valid workers’ compensation exemptions; and (3) Whether Respondent paid its workers remuneration outside of Respondent’s employee leasing company.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of Section 440.107, Florida Statutes, which requires that employers secure the payment of workers’ compensation coverage for their employees. Respondent is a company engaged in the construction industry. Specifically, Respondent's business is framing houses. At all time relevant to this proceeding, Elias Bravo was president of the company. On May 26, 2004, the Department’s investigators, Carol Porter and Kelley Dunning, conducted a random visit of a work site in Grassy Point, a gated community in Port Charlotte, Florida, and discovered Mr. Bravo and his workers on site as the house-framers. When the investigators arrived at the site, they spoke with Mr. Bravo, who advised the investigators that Respondent utilized a personnel leasing company, Time Management, which was actually a brokerage firm for Southeast Personnel Leasing, Inc. ("SEPL"), to secure workers’ compensation coverage. On May 26, 2005, Mr. Bravo was the only person in his crew who had coverage with SEPL. At the time of the site visit, the other men were not listed with SEPL because Mr. Bravo still had their applications in his car. After Respondent was unable to provide proof that the men had workers' compensation coverage pursuant to Subsections 440.107(3) and (7)(a), Florida Statutes, the investigators issued a Stop Work Order to Respondent while at the work site on May 26, 2004. On the same day that the Stop Work Order was issued, Investigator Dunning served Mr. Bravo with a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Production of Business Records"). The Department requested copies of Respondent's business records in order to determine whether Respondent had secured workers' compensation coverage; whether Mr. Bravo or Respondent's employees had workers' compensation exemptions; and, if not, to determine the penalty assessment. In response to the Request for Production of Business Records, Mr. Bravo provided certificates of insurance, Respondent's check stubs written to various entities or individuals on behalf of Respondent, payroll records, and Form 1099s for the year ending 2003. Many of the documents provided by Mr. Bravo indicated that Respondent made payments directly to the entities and individuals. The Department maintains records regarding the workers' compensation coverage of individuals and entities in a statewide database called Compliance and Coverage Automated System ("CCAS"). The CCAS database is utilized by the Department to verify if an individual or entity has workers' compensation coverage or a valid exemption from coverage. As part of the Department's investigation, Investigator Porter conducted a CCAS search for Respondent's workers’ compensation insurance coverage records. This search verified that Mr. Bravo had workers' compensation coverage. However, many of the workers or entities to whom Respondent made direct payments did not have workers’ compensation coverage or current valid workers’ compensation exemptions. Based on a review of the payroll records, check stubs, and the Form 1099s that Respondent provided to the Department, Investigator Porter determined that Respondent was an "employer" as that term is defined in Subsection 440.02(16), Florida Statutes. Subsequently, the Department reassessed the original penalty and issued the Amended Order with the attached penalty worksheet which detailed the basis of the penalty assessment. In determining the amended penalty assessment, Investigator Porter disregarded and did not include Respondent's payments to any individual or entity that had workers’ compensation coverage or an exemption from such coverage. The Amended Order, which reflected a penalty assessment of $97,416.68, was issued to Respondent on May 28, 2004.2/ Respondent paid remuneration to the individuals listed on the penalty worksheet of the Amended Order for work they performed. Nonetheless, during the period covered by the penalty assessment, Respondent did not secure workers' compensation coverage for the individuals listed on the penalty worksheet, and none of them had workers' compensation coverage or exemptions from such coverage. The individuals listed on the penalty worksheet of the Amended Order were Respondent's employees during the relevant period, in that they were paid by Respondent, a construction contractor, and did not have workers’ compensation coverage or an exemption from such coverage. Mr. Bravo had workers' compensation coverage through SEPL. However, none of the employees listed on the Amended Order had workers' compensation coverage through SEPL, because they were paid directly by Respondent. A personnel leasing company provides workers' compensation coverage and payroll services to its clients, then leases those employees back to the clients for a fee. Respondent was a client of SEPL, and based on that relationship, Mr. Bravo believed that he and his workers received workers' compensation coverage through that personnel leasing company. However, the workers' compensation coverage provided by SEPL applied only to those employees SEPL leased to Respondent. In the case of leased employees, Respondent would have to make payments to the leasing company and not directly to his workers. The leasing company would then, in turn, pay the leased employees. When, as in this case, the construction company makes direct payments to individuals performing construction work, those workers are not leased employees and, thus, are not secured by the workers’ compensation coverage provided by the personnel leasing company. See § 468.520, Fla. Stat. Some of the individuals listed on the penalty worksheet may have been "dually employed"; that is, sometimes they were employed by Respondent and at other times, they were employees of SEPL and were leased to Respondent. However, during the periods in which individuals worked for Respondent and were paid by Respondent, and were not paid by SEPL, they were without workers’ compensation coverage unless Respondent provided such coverage. With regard to the individuals listed on the penalty worksheet, Respondent provided no such coverage. Respondent, through Mr. Bravo, paid its employees directly, thus, circumventing SEPL and losing the coverage that the employees may have had through it. The Department assessed the penalty against Respondent based on the remuneration Respondent gave directly to the employees outside of SEPL, the class code assigned to each employee utilizing the SCOPES Manual adopted by the Department in Florida Administrative Code Rule 69L-6.021, and the guidelines in Subsection 440.107(7)(d), Florida Statutes.
Recommendation Based upon 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 that affirms the Stop Work Order and the Amended Order of Penalty Assessment, which imposes a penalty of $97,416.68. DONE AND ENTERED this 10th day of May, 2005, 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 10th day of May, 2005.
The Issue The issues in this matter are whether Countrywide Siding and Windows, Inc., failed to secure workers compensation that meets the requirements of Chapter 440, Florida Statutes, and, if so was correctly assessed a penalty for violating, the workers’ compensation laws of Florida.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation for the benefit of their employees. § 440.107, Fla. Stat. (2009). Respondent is a corporation domiciled in Florida and engaged in the construction industry. On February 13, 2009, Petitioner’s investigator, Carl Woodall, stopped to spot check a house in the Cabrille Lane area of Panama City, Florida, where he saw workers installing siding. Petitioner’s investigator is the only employee for Petitioner who investigated and developed the substantive evidence in this case. Other employees, who have no direct knowledge of the underlying facts, calculated the amounts of the proposed penalties. Mr. Woodall inquired of the workers and ascertained that they worked for Respondent. The investigator then contacted the Respondent to determine whether Respondent had secured or obtained workers’ compensation insurance under Florida’s workers’ compensation law. Respondent’s representative indicated that it maintained workers’ compensation insurance through Employee Leasing Service (ELS), an employee-leasing company. There is no dispute that in February 2009, Respondent leased its workers from ELS and that under the lease agreement, ELS provided workers’ compensation coverage to Respondent and its leased workers. Other evidence suggested that in past years, Respondent had leased its workers from other employee-leasing companies. The evidence was not specific as to who those companies were. The evidence, while not specific, also suggested that Respondent paid its leased employees bonuses and sometimes loaned them money.1/ In general, employee-leasing agreements provide clerical duties to client companies including tax deduction and workers’ compensation, in exchange for a fee. Client companies’ workers who are registered with the leasing company are employees of the leasing company, not the client company. In this case, the specific contract between ELS and Respondent was not introduced into evidence. Likewise, neither the contract nor the proof of coverage between ELS and its workers’ compensation insurer was introduced into evidence and it is unknown who the actual workers’ compensation insurer was or is. Therefore, there is no credible evidence regarding the specific terms of the contract between ELS, Respondent or the workers’ compensation insurer. Importantly, there is no evidence regarding any fee arrangement between ELS and Respondent showing that workers’ compensation coverage was provided based on payroll or that direct payments to Respondent’s workers constituted payroll under the terms of the lease contract for which workers’ compensation had not been secured. Petitioner’s investigator telephoned ELS and learned from some person (purportedly Ellen Clark) that it did have an employee-leasing contract with Respondent and did maintain workers’ compensation on Respondent’s workers. The investigator was also told that ELS intended to or had cancelled its employee-leasing contract with Respondent effective either February 14 or 15, 2009. No one from ELS testified at the hearing and the substance of the above conversation, as with all the testimony about purported ELS statements, constitutes hearsay that was not corroborated by other credible evidence in the record. As such, the substance of these conversations is not found as facts, other than to establish that Petitioner’s investigator had a conversation with a person purporting to Represent ELS. However, on February 14, 2010, the investigator did not take any action against Respondent since he felt Respondent was in compliance with Florida’s workers’ compensation law. On February 17, 2009, Mr. Woodall again returned to the Cabrille Lane area and observed Respondent’s workers installing siding on a house. One of the workers, Mike Moore, revealed to Mr. Woodall that he was a subcontractor of Respondent, but that the other worker, Ryan Grantham, was Respondent’s employee. The subcontractor was in compliance with Florida’s workers’ compensation laws. In order to find out if the other worker was covered by workers’ compensation insurance, Mr. Woodall met with Ronnie Creed, Respondent’s owner and officer, who was exempt under Florida’s workers’ compensation law. Mr. Creed was unaware of Respondent’s workers’ compensation status but put Mr. Woodall in contact with his wife, India Creed, who was also exempt from Florida’s workers’ compensation law. Ms. Creed told Mr. Woodall that Respondent had received a letter from ELS that day, purportedly notifying it that ELS intended to cancel or had cancelled its employee-leasing contract with Respondent. The letter was not introduced into evidence and it is unclear whether the letter discussed the workers’ compensation insurance coverage ELS maintained on its employees that it leased to Respondent. Again, no one from ELS or its workers’ compensation insurer testified at the hearing regarding its lease or which workers were covered under the lease. The record is devoid of any evidence that these employees were no longer employed by ELS and, more importantly, not covered by ELS’s workers’ compensation coverage on February 17, 2009.2/ Mr. Woodall also checked the Department’s Coverage and Compliance Automated System (CCAS) database. CCAS is a database that maintains information on business entities in Florida and whether they have secured workers’ compensation and /or whether exemptions from workers’ compensation have been granted to eligible company officers. CCAS did not reflect that Respondent had a workers’ compensation insurance policy in place. However, the investigator did not check to see if ELS or another employee-leasing company had such a policy. Similarly, the investigator did not investigate the terms of those contracts and whether those contracts considered any bonuses or loans paid by Petitioner to its employees to be payroll, and if it was, whether any workers’ compensation coverage was dependent on such payments being reported to these companies. As such, the information in that system is hearsay which may or may not indicate a need to investigate further. Moreover, CCAS is simply a database of information reported by others and maintained by the Petitioner. Its reliability is questionable in this case given the multiple contractual entities involved in the provision of workers’ compensation to Respondent and the lack of any direct evidence from those contractual entities. Therefore, the fact that CCAS did not reflect that Respondent had workers’ compensation insurance is not given weight in this Order and is neither clear nor convincing evidence demonstrating that Respondent failed to secure workers’ compensation insurance on February 17, 2009, or for prior years. Based on his belief that Respondent had not secured workers’ compensation on its workers, Mr. Woodall issued a Stop- Work Order and Order of Penalty Assessment and a Request for Production of Business Records for Penalty Assessment Calculation to Respondent (Request) asking for Respondent’s business and financial records related to Respondent’s business and employee leasing for the last 3 years. The records were requested to construct Respondent’s alleged payroll and determine the employees of Respondent. There was no evidence that there was any inquiry into past employment leasing companies that Petitioner contracted with or the terms of those contracts. As with the contract with ELS, there was no inquiry into whether loans or bonuses or any other money paid by Respondent to its workers was considered payroll, required to be reported, or had any impact on workers’ compensation coverage that the leasing companies provided on the employees they leased to Respondent. Respondent complied with the Request and provided the requested business records to Petitioner. Mr. Woodall forwarded the financial records to Petitioner’s penalty calculator, Monica Moye. Beyond checking CCAS, Ms. Moye was not responsible for factually determining whether Respondent had properly secured workers’ compensation insurance during the period under review. Using Respondent’s financial records, Ms. Moye calculated a penalty to be assessed to Respondent based on class code 5645 for siding installation as established by the National Council on Compensation Insurance in the Scopes Manual. She also separated Respondent’s periods of alleged noncompliance based on periodically changing approved manual rates. Approved manual rates are set by the National Council on Compensation Insurance and represent the amounts employers would pay in workers’ compensation premiums for tasks performed by their employees. On March 13, 2009, Petitioner issued an Amended Order of Penalty Assessment, assessing a penalty of $159,002.46 to Respondent. Based on additional records submitted by Respondent, Petitioner recalculated the previously-assessed penalty and issued a 2nd Amended Order of Penalty Assessment to Respondent on June 9, 2009, reducing the assessed penalty to $130,914.99. Additionally, following the hearing, the Department revised the assessed penalty and issued a 3rd Amended Order of Penalty Assessment (3rd Amended Order) reducing the assessed penalty to $130,135.03.3/ The list of employees attached to the 3rd Amended Order of Penalty Assessment contains several incidents of imputed employment listed as “cash,” “unknown” or “Star H.” There is nothing in the record that supports a finding that these amounts were paid for employment purposes. However, the evidence did not establish that Petitioner did not secure workers’ compensation coverage and the issues regarding the correctness of the amount of penalty assessed against Respondent is not addressed in this Recommended Order. Since the evidence did not establish that Respondent failed to secure workers’ compensation, the Stop-work order should be cancelled and the 3rd Amended Order of Penalty Assessment dismissed.
Recommendation Based on the findings of fact and conclusions of law, it is RECOMMENDED that the Department of Financial Services enter a Final Order that Petitioner failed to establish by clear and convincing evidence that Petitioner failed to secure workers’ compensation to its employees and canceling the Stop Work Order and dismissing the 3rd Amended Order of Penalty Assessment. DONE AND ENTERED this 2nd day of April, 2010, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 2010.
The Issue Whether Respondent, Forgue General Contracting, Inc., violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation coverage; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing workers’ compensation coverage requirements in Florida, including the requirement that employers secure the payment of workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Respondent operates a construction company in Florida, and Respondent has been in business since 2004. On October 31, 2018, Margaret Cavazos, a compliance investigator with the Department, conducted a random workers’ compensation check at a worksite located at 1172 East State Road 434 in Winter Springs, Florida. The worksite is a two-story commercial building with five individual storefronts. Investigator Cavazos arrived at the worksite at 8:30 a.m. There, she observed four individuals who she believed were preparing the exterior of the building for painting. One person was covering a window with tape and brown construction paper. Two more individuals were standing in the bucket of a boom lift approximately 15 feet above the ground next to the building. They appeared to be placing blue tape over a sign of one of the businesses in the building. A fourth person was positioned by a truck supervising the activity. Investigator Cavazos further noticed that several of the business names had already been covered with construction paper and tape. Investigator Cavazos approached the person standing by the truck and introduced herself. He identified himself as Jose Luis Chachel. Mr. Chachel informed Investigator Cavazos that he and the other three individuals at the worksite were working for a company called RC Painting Services, Inc. (“RC Painting”). Mr. Chachel further stated that they were preparing the building to be painted. The other three individuals at the worksite identified themselves to Investigator Cavazos as Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Investigator Cavazos watched the four individuals work at the jobsite for about an hour, then they departed. Investigator Cavazos, however, did not obtain any information from Mr. Chachel or the other individuals concerning how long they had worked for RC Painting, when they had arrived at the jobsite, their rate of pay, or whether RC Painting had actually paid them for their work. At the final hearing, Investigator Cavazos testified that her duties for the Department include inspecting businesses and worksites to determine whether a business has obtained the required workers’ compensation insurance coverage. Investigator Cavazos explained that a business that performs construction- related work must have workers’ compensation coverage. Therefore, Investigator Cavazos believed that, prior to beginning the painting activities, RC Painting should have secured sufficient workers’ compensation coverage for all four individuals identified at the worksite. After learning the name of the business that arranged for the presence of the four individuals at the jobsite, Investigator Cavazos consulted the Department’s Coverage and Compliance Automated System (“CCAS”) database for information on RC Painting. CCAS is a Department database that tracks workers’ compensation insurance coverage. CCAS contains coverage data from insurance carriers, as well as any workers’ compensation exemptions on file with the Department. Insurance providers are required to report coverage and cancellation information, which the Department uses to update CCAS. CCAS had no record that RC Painting carried any workers’ compensation coverage for the four individuals Investigator Cavazos observed at the worksite. While reviewing CCAS, Inspector Cavazos also noted that the Department did not have on file any request from RC Painting for an “exemption” from workers’ compensation coverage. An exemption is a method by which a business’s corporate officer may exempt him or herself from the requirements of chapter 440. See § 440.05, Fla. Stat. CCAS also revealed to Investigator Cavazos that on the date of her inspection, RC Painting had an active employee leasing agreement with SouthEast Personnel Leasing (“SouthEast Leasing”), an employee staffing company. At the final hearing, Inspector Cavazos explained that a business is not required to obtain workers’ compensation insurance for its employees if coverage is properly provided by or through an employee leasing company’s workers’ compensation policy. However, in order for an employee leasing company to become responsible for the workers’ compensation coverage of a particular employee, the business seeking coverage for that employee must ensure that the employee submits an application to the leasing company. Thereafter, if (and only if) the leasing company accepts the application, the leasing company becomes accountable for the workers’ compensation insurance coverage for that employee. Investigator Cavazos contacted SouthEast Leasing. SouthEast Leasing provided Investigator Cavazos an active roster of employees it leased to RC Painting. However, neither Mr. Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, nor Jenny Araque were listed on this roster. Therefore, Investigator Cavazos concluded that none of the four individuals she identified at the worksite were covered by workers’ compensation insurance under RC Painting’s leasing arrangement with SouthEast Leasing on October 31, 2018. After determining that neither CCAS nor SouthEast Leasing recorded any workers’ compensation coverage for the persons at the worksite, Investigator Cavazos contacted RC Painting’s owner, Roberto Chavez. (Mr. Chachel provided Investigator Cavazos with his phone number during her inspection.) Investigator Cavazos testified that, during their phone call, Mr. Chavez confirmed that the four individuals worked for him. Mr. Chavez further informed Investigator Cavazos that RC Painting had been hired by Respondent to paint the building. At that point, Investigator Cavazos called Respondent to inquire about workers’ compensation coverage for Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Investigator Cavazos spoke with one of Respondent’s employees, Anthony Gonzalez. Mr. Gonzalez confirmed that Respondent engaged RC Painting to paint the building. Continuing to search for active workers’ compensation coverage, Investigator Cavazos discovered that Respondent also had an employee leasing agreement with SouthEast Leasing. Investigator Cavazos reviewed SouthEast Leasing’s roster which recorded only two covered employees for Respondent, Anthony Gonzalez and Edward Forgue (Respondent’s president). As with RC Painting’s leasing agreement, Respondent’s leasing agreement with SouthEast Leasing did not cover Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, or Jenny Araque on October 31, 2018. As detailed below, under section 440.10(1), a contractor is liable for, and is required to secure, workers’ compensation coverage for all employees of a subcontractor to whom the contractor sublets work. (Section 440.10(1)(c) also directs the contractor to require a subcontractor to provide evidence of workers’ compensation insurance.) Therefore, as a contractor hiring a subcontractor for construction work, Respondent was required to exercise due diligence to ensure that all RC Painting’s employees who were painting the building were covered by workers’ compensation insurance. On October 31, 2018, based on her findings, Investigator Cavazos issued a Stop-Work Order to RC painting. Later that day, Mr. Chavez ventured to the Department’s local office to determine how his business could be released from the Stop-Work Order. There, he met with district supervisor, Salma Qureshi. Ms. Qureshi informed Mr. Chavez that, in order for his company to return to work, he needed to pay a $1,000 fine and complete an Affirmation. She explained to Mr. Chavez that on the Affirmation, he was to describe how RC Painting intended to come into full compliance with workers’ compensation coverage requirements. Mr. Chavez had, in fact, brought with him a cashier’s check for $1,000. (The amount was included on the Stop-Work Order.) Mr. Chavez then completed an Affirmation before Ms. Qureshi. On the Affirmation, Mr. Chavez wrote the names of the four individuals Investigator Cavazos identified at the jobsite. Next to each name, Mr. Chavez wrote “$20.” Below the names, he wrote “I am terminating.” Mr. Chavez then signed and dated the Affirmation. At the final hearing, Ms. Qureshi expressed that Mr. Chavez told her that he was going to pay each of the four individuals $20 for the day’s work they performed on October 31, 2018, and then he was terminating them. In addition to issuing the Stop-Work Order to RC Painting, on October 31, 2018, Investigator Cavazos issued a Stop-Work Order for Specific Worksite Only to Respondent, which was served on November 2, 2018. Investigator Cavazos also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Through this document, the Department requested several categories of business records from Respondent for the period of November 1, 2016, through October 31, 2018. The requested documents pertained to: employer identification, payroll documents, account documents, disbursements, workers’ compensation coverage, professional employer organization records, temporary labor service, exemptions, subcontractor records, and subcontractors’ workers’ compensation coverage. Based on Investigator Cavazos’s investigation, the Department determined that Respondent failed to secure adequate workers’ compensation coverage for its employees. Therefore, the Department proceeded to calculate a penalty based on Respondent’s lack of compliance with chapter 440. The Penalty Calculation: Nathaniel Hatten, the penalty auditor who determined the penalty the Department seeks to impose on Respondent, testified regarding his computation. Mr. Hatten explained that the penalty essentially consists of the “avoided” premium amount, or the actual premium the employer would have paid in workers’ compensation insurance for the uncovered employees, multiplied by two. To calculate the appropriate penalty for Respondent’s failure to secure workers’ compensation coverage, the Department first ascertained Respondent’s period of non-compliance. To determine this time frame, the Department referred to Florida Administrative Code Rule 69L-6.028(2), which directs that: The employer’s time period or periods of non-compliance means the time period(s) within the two years preceding the date the stop-work order was issued to the employer within which the employer failed to secure the payment of compensation pursuant to chapter 440, F.S., and must be either the same time period as set forth in the business records request for the calculation of penalty or an alternative time period or period(s) as determined by the Department, whichever is less. The employer may provide the Department with records from other sources, including, but not limited to, the Department of State, Division of Corporations, the Department of Business and Professional Regulation, licensing offices, and building permitting offices to show an alternative time period or period(s) of non- compliance. Based on these instructions, the Department deduced that Respondent’s period of non-compliance ran from November 1, 2016, through October 31, 2018, which was the two-year period preceding the date of the Stop-Work Order. (This two-year period was also the time for which the Department requested business records from Respondent.) After determining Respondent’s period of non- compliance, the Department then calculated the monetary penalty it should impose upon Respondent. In accordance with section 440.107(7)(d)1., the Department must assess against an employer: a penalty equal to 2 times the amount the employer would have paid in premium when applying approved manual rates to the employer’s payroll during periods for which it failed to secure the payment of workers’ compensation required by this chapter within the preceding 2-year period or $1,000, whichever is greater. Therefore, the Department reviewed the business records Respondent provided to ascertain the amount of Respondent’s payroll during the two-year period of non-compliance. In response to the Department’s request for documents, Respondent produced its client leasing agreement with SouthEast Leasing. This leasing agreement, however, only covered Mr. Forgue and Mr. Gonzalez. Further, the leasing agreement was only in effect from February 7, 2018, through October 30, 2018, for Mr. Forgue and February 21, 2018, through October 30, 2018 for Mr. Gonzalez. No evidence establishes that Respondent made any other payments for workers’ compensation insurance coverage outside of the SouthEast Leasing agreement. Consequently, the evidence in the record establishes that Respondent had no workers’ compensation coverage for any of its employees, officers, or subcontractor employees from November 1, 2016, through February 6, 2018. And, only Mr. Forgue and Mr. Gonzalez were covered from February 2018 through October 30, 2018. Further, Respondent did not provide any payroll information to the Department per its request for business records. Consequently, the documentation was not comprehensive enough for the Department to determine all the wages Respondent paid to its employees, or the work they performed for the period of November 1, 2016, through October 31, 2018. Therefore, the Department determined that Respondent did not provide business records sufficient for it to calculate Respondent’s complete payroll or the actual employee wages it paid over the two-year period of non-compliance. Accordingly, the Department exercised its option to “impute” Respondent’s weekly payroll from November 1, 2016, through October 31, 2018. To calculate Respondent’s imputed weekly payroll, section 440.107(7)(e) directs that the gross payroll for an employer who provides insufficient business records is imputed at the statewide average weekly wage, multiplied by 1.5, for each employee who worked during the period requested for the penalty calculation. Therefore, the Department obtained the statewide average weekly wage effective at the time of the Stop- Work Order ($917.00)2/ for each identified employee, corporate officer, and subcontractor, then multiplied that number by 1.5. See § 440.107(7)(e), Fla. Stat.; and Fla. Admin. Code R. 69L- 6.028(3)(a). The Department imputed the payroll for all four individuals Investigator Cavazos observed at the worksite on October 31, 2018 (Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque), for all periods of non- compliance (November 1, 2016 through October 31, 2018). No evidence established that these individuals were covered under a workers’ compensation policy either through Respondent, RC Painting, or SouthEast Leasing. The Department also included Mr. Forgue for a period of non-compliance from January 22, 2018, through February 8, 2018. The Department imputed his payroll during this period of time explaining that Respondent did not have an active workers’ compensation exemption on file for Mr. Forgue. Neither was he covered by SouthEast Leasing’s policy during this brief timeframe. Therefore, Respondent was required to carry workers’ compensation for Mr. Forgue from January 22, 2018, through February 8, 2018. See Fla. Admin. Code R. 69L-6.028(3)(b). To calculate a penalty based on the imputed payroll, the Department assigned Respondent’s employees the highest rated workers’ compensation classification code. The classification code is based on either the business records submitted or the investigator’s observation of the employees’ activities. In this case, the business records Respondent provided to the Department were not sufficient to categorize the exact type of work that the identified workers performed for Respondent over the two-year period of non-compliance. However, during her investigation of the jobsite on October 31, 2018, Investigator Cavazos observed the four employees engaging in activities associated with “painting.” According to the Scopes Manual issued by the National Council on Compensation Insurance, Inc. (“NCCI”), class code 5475 is applied to “painting contractors engaged in painting.”3/ Consequently, the Department used class code 5474 for all Respondent’s employees and corporate officer for the penalty period. See Fla. Admin. Code R. 69L-6.028(3)(b) and 69L- 6.021(2)(jj)(painting is classified as “construction activity”). Therefore, to calculate the premium amount for the workers’ compensation insurance Respondent should have paid for its “employees” (Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque) and officer (Mr. Forgue), the Department applied the manual rates corresponding to class code 5474. Thereafter, based on: 1) the total periods of non- compliance, 2) Respondent’s calculated payroll for the periods of non-compliance, and 3) the estimated premium for workers’ compensation insurance, the Department issued the Amended Order of Penalty Assessment (“Penalty Assessment”) on November 30, 2018, which was served on Respondent on February 28, 2019. The Penalty Assessment seeks to impose a penalty of $129,089.60 against Respondent. At the final hearing, Respondent argued that the individuals Investigator Cavazos identified at the worksite on October 31, 2018, were never hired by Respondent’s subcontractor, RC Painting. Therefore, they are not “employees” under chapter 440, and Respondent is not an “employer” for purposes of securing workers’ compensation coverage. Consequently, Respondent argues that the penalty the Department seeks to assess against Respondent is not warranted. Mr. Chavez testified at the final hearing for Respondent describing his employment relationship with Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Initially, Mr. Chavez confirmed that Respondent hired RC Painting to paint the exterior of the shopping plaza. Regarding the four individuals Investigator Cavazos identified at the jobsite, however, Mr. Chavez denied that they were “employees” of RC Painting on October 31, 2018. Mr. Chavez explained that he used SouthEast Leasing to “hire” his employees. Mr. Chavez asserted that before he puts someone to work, he requires them to complete an employment application with SouthEast Leasing. Only after SouthEast Leasing approved the employee would he allow the individual to work on a job. In this matter, Mr. Chavez denied that he had ever worked with Mr. Chachel before, or ever met the other three individuals that Mr. Chachel brought with him to the jobsite. Mr. Chavez maintained that he called Mr. Chachel on the evening of October 30, 2018, about the prospective painting job. He then asked Mr. Chachel to bring two other workers and meet him at the jobsite the following morning. Mr. Chavez testified that he instructed Mr. Chachel that he would need to send information to SouthEast Leasing before anyone actually started working on the project. Mr. Chavez further contended that he did not have any discussion with Mr. Chachel about wages or the rate of pay for the job. He declared that he never commits to paying any prospective employee before ascertaining what type of skills they possess. Mr. Chavez explained that, “anyone can tell you, ‘I’ve been painting all of my life,’ and they show up and don’t know how to paint, or they don’t know how to do anything.” In response to Inspector Cavazos’s testimony, Mr. Chavez exclaimed that he never told her that the four individuals were his “employees.” He merely relayed that they were “with” him. Mr. Chavez also insisted that he never authorized Mr. Chachel or his crew to start preparing the building for painting prior to meeting with him. Mr. Chavez further relayed that Respondent provided the boom lift for the job. But, he never instructed Mr. Chachel to begin using it. Mr. Chavez arrived at the shopping plaza around 9:30 a.m. However, by that time Investigator Cavazos had issued the Stop- Work Order, and only Mr. Chachel remained at the scene. Regarding the Affirmation he completed at the Department’s district office, Mr. Chavez testified that, other than Mr. Chachel, he did not know the names of individuals who Investigator Cavazos identified at the jobsite. He asserted that he wrote their names on the Affirmation only after Ms. Qureshi spelled them out for him on a sticky note. Mr. Chavez further professed that he only penned “$20” by each name because Ms. Qureshi told him that the Department would not release him from the Stop-Work Order until he added the wages he paid to each individual. Mr. Chavez claimed that Ms. Qureshi specifically instructed him to insert a number by each employee. Mr. Chavez declared that he felt like he had no choice but to include “$20” on the Affirmation if he wanted to return to work. In actuality, however, Mr. Chavez insisted that he did not pay Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, or Jenny Araque anything for their activities on October 31, 2018. Ms. Qureshi testified for the Department on rebuttal. She credibly voiced that she did not write out the names of the four “employees” for Mr. Chavez to list on his Affirmation. Neither did she suggest a wage amount for their work, or force Mr. Chavez to write that he “terminated” them. On the contrary, Ms. Qureshi attested, clearly and without hesitation, that Mr. Chavez independently completed his sworn Affirmation, and he did not ask for her assistance with the specific information he wrote down. Ms. Qureshi persuasively stated that Mr. Chavez knew the names of Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque when he composed the Affirmation. Further, Mr. Chavez expressly told her that he was going to pay the four individuals $20 for the day, and that he was terminating them. The competent substantial evidence in the record establishes that Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque were “employees” of RC Painting under section 440.02(15) on October 31, 2018. Based on this finding, the Department demonstrated, by clear and convincing evidence, that Respondent failed to secure workers’ compensation insurance coverage or a workers’ compensation exemption for four employees for the period of November 1, 2016, through October 31, 2018, as well as its corporate officer from January 22, 2018, through February 8, 2018. Accordingly, the Department met its burden of proving that Respondent violated chapter 440 and should be penalized.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order determining that Respondent, Forgue General Contracting, Inc., violated the requirement in chapter 440 to secure workers’ compensation coverage, and imposing a total penalty of $129,089.60. DONE AND ENTERED this 18th day of October, 2019, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 2019.
