The Issue Whether Millenium Homes, Inc. (Petitioner) conducted operations in the State of Florida without obtaining workers’ compensation coverage which meets the requirements of Chapter 440, Florida Statutes (2008), in violation of Subsection 440.107(2), Florida Statutes (2008)1, as alleged in the Stop-Work Order and Order and Penalty Assessment and the Fifth Amended Order of Penalty Assessment. If so, what penalty should be assessed by the Department of Financial Services, Division of Workers’ Compensation (Respondent), pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Respondent is the state agency charged with the responsibility of enforcing the requirements of Chapter 440, Florida Statutes, that employers in Florida secure the payment of workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Workers’ compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. The payment of workers’ compensation coverage may be secured via three non-mutually exclusive methods: 1) the purchase of a workers’ compensation insurance policy; 2) arranging for the payment of wages and workers’ compensation coverage through an employee leasing company; and 3) applying for and receiving a certificate of exemption from workers’ compensation coverage if certain statutorily mandated criteria are met. On September 4, 2008, Maria Seidler, a compliance investigator employed by Respondent, was making random site visits at the Bella Vida development in North Fort Myers. Seidler observed eight workers unloading a truck, taking measurements, and performing various tasks on new homes under construction. All eight of the men were engaged in some type of activity on the job site. None were merely standing around, sitting in a truck, or otherwise idle. Seidler had all eight men stand in front of her, spoke to them in Spanish, and recorded their names on her field interview worksheet. All eight men advised Seidler, in Spanish, that they worked for Millenium Homes. None of the men advised Seidler that they did not work for Petitioner, nor that they were present in hopes of applying for a job. The individual apparently in charge at the job site, did not advise Seidler that not all of the men present were working for Petitioner. The evidence demonstrated that D.R. Horton was the general contractor for the project, and that D.R. Horton had contracted with Petitioner to frame out the housing units at the project. The eight men, who were present on the job site and who identified themselves as employees of Petitioner, confirmed that they were present on September 4, 2008, to perform framing. Framing is a construction activity as contemplated by Subsection 440.02(8), Florida Statutes, and Florida Administrative Code Rule 69L-6.021. James Loubert, president and sole shareholder of Petitioner, was not on the job site at the time of Seidler’s arrival, and she initially spoke with him by telephone. Loubert arrived at the job site a short time later. Loubert advised Seidler that Petitioner had secured workers’ compensation coverage for its employees through an employee leasing arrangement with Employee Leasing Solutions (ELS). This coverage was later confirmed by Seidler. However, of the eight workers found on the job site, three workers, Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar, were not named on the ELS list of Petitioner’s active, covered employees. Seidler was very definite and precise in her testimony that she observed Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar wearing hard hats and engaging in work activities upon her arrival at the job site. Her testimony is found to be credible. When Loubert arrived at the job site, he informed Seidler that two of the workers, not listed on Petitioner’s active employee roster, were to have been sent home to pick up their Social Security cards, and that he had called in the third worker, Josue Sanchez Bautista, to ELS. Loubert did not inform Seidler that Osorio, Bautista, and Aguilar were not employees of Petitioner and were merely present at the job site in hopes of applying for a job. The Pre-hearing Stipulation signed by counsel for the parties and filed with the DOAH clerk on December 8, 2009, contained the following statements of admitted facts in section E: Respondent’s [sic] employees Josue Sanchez Bautista, Luis Aguilar, and Juan Perez had not been called into and accepted as employees by ELS as of September 4, 2008. Respondent [sic] was not in compliance with the coverage requirements of Chapter 440, Florida Statutes, as of September 4, 2008.2 At the hearing, both Javier Perez and Loubert testified that Osorio, Bautista, and Aguilar were not employees of Petitioner, but rather were waiting on site for Loubert to arrive, so that they could ask for jobs. However, they were all wearing hard hats. The testimony of Perez and Loubert is inconsistent with the observations of Seidler, as well as the statements made to Seidler by Loubert at the job site on September 8, 2008, and is, therefore, not credible. Petitioner had no workers’ compensation coverage other than that provided though ELS, and no active exemptions. James Loubert is the only officer of Petitioner, and did not have an exemption from coverage as of September 4, 2008. At the work-site, a Stop-Work Order 08-234-D7 was issued and personally served upon James Loubert based upon Petitioner’s failure to secure the payment of workers’ compensation for its employees Josue Sanchez Bautista, Luis Aguilar, and Alejandro Osorio. A business records request was also served on Loubert in order to obtain the records necessary to calculate and assess a penalty on Petitioner based upon its failure to comply with the coverage requirements of Chapter 440, Florida Statutes. Pursuant to Section 440.107(5), Florida Statutes, Petitioner’s business records were requested back to September 5, 2005, or three years prior to the issuance of the Stop-Work Order. Petitioner produced the register for its primary checking account to Respondent on September 4, 2008, in response to Respondent’s request for business records. Lynne Murcia is a compliance specialist for Respondent. She reviews business records produced by employers to determine the amount of payroll on which workers’ compensation premium was not paid, in order to calculate an appropriate penalty for violations of the coverage requirements of Chapter 440, Florida Statutes. Upon review of the business records initially produced by Petitioner, it was determined that the register from one of Petitioner’s two business checking accounts was missing. The records initially produced by Petitioner were, therefore, insufficient for the calculation of an appropriate penalty. It was requested that Petitioner produce the register for the second checking account, and those records were quickly produced. Thereafter, a 45-page summary of all transactions potentially meeting the definitions of payroll set forth in Florida Administrative Code Rule 69L-6.035 (the Rule), was prepared and an Order of Penalty Assessment issued. In determining which payments should potentially be considered payroll, pursuant to the Rule, all payments made by Petitioner directly to its employees that did not pass through ELS were included. To the extent that those direct payments meet the definition of payroll, they were subject to workers’ compensation premium and would be properly included in an assessed penalty. Petitioner also made direct “per diem” payments to reimburse its employees for the cost of meals and lodging which they incurred during the times that they were required to travel away from home to perform their jobs. The per diem rates were calculated pursuant to Internal Revenue Service guidelines, and were deducted as a business expense on Petitioner’s income tax returns for the years 2005-2007. The Rule requires that expense reimbursements by an employer to employees be included as payroll subject to workers’ compensation premium to the extent that the business records of the employer do not confirm that the expenses were incurred as valid business expenses. All per diem payments made by Petitioner to its employees were included in the calculations, because Petitioner did not produce the receipts reflecting that its employees had actually incurred meal and lodging expenses in those amounts. However, following the December 15, 2009, hearing, Respondent examined the issue further and concluded that Petitioner’s per diem payments to its employees were properly documented as business expenses on Petitioner’s income tax returns. Respondent thereafter sought leave to file its Fifth Amended Order of Penalty Assessment deleting all per diem payments from the assessed penalty. Petitioner made numerous payments to third parties who provided construction, maintenance, or janitorial services at the homes of James Loubert, his father, Adrian Loubert, and his wife, April White, or who provided child care services for the Loubert family. For example, Petitioner paid $1,500.00 for tile work performed at James Loubert’s residence; $478.00 to Alex Ortiz, Antonio Elias, and Candy Ortiz for pressure-washing the homes of James Loubert and April White; $2,548.14 to Pedro Delgano for building cabinets for the homes of James Loubert and his father; $11,326.40 to Rick Wilson for painting the houses of James and Adrian Loubert; and beginning August 23, 2007, through December 20, 2007, $1,433.66 to Diane Berger for cleaning James Loubert’s home. Petitioner also paid $3,402.00 to Cinta Smollis for babysitting services provided to Loubert. These individuals do not appear on the penalty work sheet of the Fifth Amended Order of Penalty Assessment, since they do not meet the statutory definition of employees. Petitioner also paid large sums of money to Adrian Loubert for the purchase of a farm in Canada. In addition, James Loubert testified that some of the payments to his father represented expense reimbursements, suggesting that, at some point, Adrian Loubert had been an employee of Petitioner. Petitioner did not introduce any exhibits into evidence reflecting the nature or amount of the reimbursements allegedly being made to Adrian Loubert. James Loubert was actively involved in the carpentry work performed by Petitioner, on the project on which the stop- work order was issued as well as on prior projects. Nevertheless, he received only a minimal salary through Petitioner’s employee leasing company, ELS. In 2007, Loubert received a total salary of $11,000.00 through ELS. In 2008, he received a total salary through ELS of only $7,200.00. Any payments that James Loubert received directly from Petitioner, that meet the definition of payroll set forth in the Rule, were subject to workers’ compensation premium, and are therefore subject to penalty. During the three-year penalty period specified by the statute, Petitioner made many cash payments to, or for the benefit of, James Loubert. The business records produced by Petitioner indicate that these cash payments were made to payees such as Blockbuster Video, Toys-R-Us, and PetsMart, as well as for vacation expenses. In addition, James Loubert took large amounts of cash from Petitioner to facilitate his hobby of racing cars. Throughout the penalty period, Petitioner also made numerous payments to Loubert’s wife, April White, and to his daughter, Alexa Seagate. Petitioner also made numerous payments to Gary White, his father-in-law and one of Petitioner’s employees. James Loubert testified that the payments made to, or on behalf of, family members, the payments made to third- party payees, and the cash payments which he took from Petitioner reflected shareholder distributions. However, the memo lines on those payment entries do not indicate that those payments were intended to be shareholder distributions. Petitioner’s business records reflect that the memo line on a check would indicate that it was a shareholder distribution, if that was what it was intended to be. This was the practice on other transactions. In addition, James Loubert testified that the memos for his Quick Books entries reflect “exactly what” each payment was for. Presumably those memo entries are the same as the memo entries on the corresponding checks. The payments made by Petitioner to third parties from which it appears that Petitioner did not receive services or a benefit, including but not limited to the payments made to family members of James Loubert, and the cash payments made by Petitioner to finance James Loubert’s auto racing hobby, do not constitute legitimate business expenses. Petitioner frequently made loans or wage advances to its employees. Although Loubert testified that those loans were repaid to him, he later acknowledged that a $2,000.00 loan to employee Rachel Broulet was never paid back, and that a $975.00 loan to Nicholas Susa was never repaid. Petitioner did not produce business records or documentary evidence at the hearing that indicates that any of the loans which it made to employees were repaid. The State of Florida has adopted a classification code developed by the National Council of Compensation Insurance (NCCI), which assigns individual four digit codes to various classes of labor. This classification code is utilized to segregate different categories of labor by risk and to determine appropriate workers’ compensation premiums for those classes of labor in Florida. Fla. Admin. Code R. 69L-6.021. As noted above, Petitioner was performing framing work at the time of the September 4, 2008, inspection. Because Petitioner’s employees were observed at work constructing residential homes, classification code 5645, detached one or two family dwellings, was correctly applied to Petitioner’s employees directly engaged in construction activities. This includes Javier Perez, as he was working along with and directly supervising the other seven carpenters who were working on site when the inspection took place. Classification code 8742, outside sales, has been applied to James Loubert, as he was not observed working on September 4, 2008. However, Loubert did testify at his deposition that he usually performed construction work along side Petitioner’s other employees, but Respondent did not apply the construction code to him in the Fifth Amended Order of Penalty Assessment. Classification code 8810 was correctly applied to those employees of Petitioner who performed clerical work in the office. The appropriate manual rates for each year of the penalty period of September 5, 2005, through September 4, 2008, was applied for each classification code assigned to Petitioner’s employees. In preparing the Fifth Amended Order of Penalty Assessment, the amount of unsecured payroll attributable to each employee of Petitioner listed on the penalty worksheet was correctly calculated. From the evidence, Luis Aguilar and Alejandro Osorio were to be paid $10.00 per hour. There was no evidence that Aguilar and Osorio had worked prior to the issuance of the Stop-Work Order, and therefore, earnings of $80.00 assigned, reflecting eight hours at $10.00 per hour for September 4, 2008, was correct. Petitioner failed to provide any business records or other information concerning the rate of pay for Josue Sanchez Bautista, the third non-compliant worker. Bautista’s wages for September 4, 2008, can be imputed utilizing the statewide average wage pursuant to Subsection 440.107(7)(e), Florida Statutes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding that Millenium Homes, Inc., failed to secure the payment of workers’ compensation insurance coverage for its employees, in violation of Section 440.38(1), Florida Statutes, and that a penalty in the amount of $66,099.37 should be imposed for the failure to provide the required workers’ compensation insurance coverage. DONE AND ORDERED this 28th day of May, 2010, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 2010.
The Issue The issue is whether Petitioner properly issued a Stop Work Order (SWO) and Second Amended Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of Chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to Section 440.107, Florida Statutes. Nobel is a corporation operating as a moving business in Florida. Nobel was incorporated in 2004 and has been operating with an active status since its inception. Yaniv Dalei is the sole owner and president of Nobel. On June 9, 2009, Petitioner's investigator, Cesar Tolentino, visited 18255 Northeast 4th Court, North Miami, Florida ("business site"), after being referred to the location to investigate Respondent for compliance with the Florida Workers' Compensation Law. At the business site, Petitioner's investigator spoke to the manager, and saw the bookkeeper and the receptionist during the visit. Respondent was not at the business site, but was out of the country in Panama when Tolentino visited. Respondent spoke to Tolentino by telephone. Respondent informed Tolentino that he had five employees and that he "was in the process of obtaining workers' compensation insurance." While at the business site, Tolentino, used the Department of Financial Services' Coverage and Compliance Automated System (CCAS), and confirmed Respondent lacked insurance for the payment of workers' compensation coverage. Additionally, Petitioner's investigator verified through the CCAS that Nobel had not secured an employee leasing company to secure workers' compensation insurance for its employees as well as found that no exemptions from workers' compensation had been issued in connection with Nobel. Petitioner's investigator also performed a National Council on Compensation Insurance search on Nobel while at the business site. The search revealed that Nobel's employees had not had workers' compensation insurance in the past. On June 9, 2009, Petitioner's investigator issued a SWO and posted it at the business site. The SWO required Respondent to cease all business operations. On June 10, 2009, Respondent obtained a certificate of insurance for workers' compensation coverage with the effective date being the same. The policy was issued by One-Stop Insurance Agency. Respondent provided the certificate to Tolentino upon receipt. On June 12, 2009, Petitioner's investigator issued to Respondent a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation ("Request"). Soon thereafter, Respondent responded to the Request and provided Petitioner's investigator with the requested records. Petitioner's investigator forwarded the documents to Jorge Pinera, Petitioner's penalty calculator, for review. On or about July 17, 2009, Petitioner issued an Amended Order of Penalty Assessment assessing a penalty of $74,794.38 against Respondent. On August 10, 2009, Respondent entered into a payment agreement with the Division. Respondent provided the Division a $7,480.00 cashier's check and agreed to pay the remainder of the assessed penalty in monthly installments. As a result, Petitioner issued an Order of Conditional Release for Nobel to operate. On March 3, 2010, Respondent supplied an employee list with position descriptions to Petitioner. After reviewing the document, Petitioner changed some employee class codes to indicate a lower rate for some occupations and recalculated the penalty amount owed with the new class codes. For the recalculation, Petitioner's penalty calculator, Russell Gray, used the following calculation from the penalty worksheet: (a) Respondent's total gross payroll from June 10, 2006, through June 9, 2009, was $1,010,001.32; (b) the total workers' compensation premium that Respondent should have paid for its employees during the relevant time period was $45,483.96; and (c) the premium was multiplied by the statutory factor of 1.5 resulting in a penalty assessment in the amount of $68,224.81. The new calculation superseded the Amended Order and a Second Amended Order of Penalty Assessment was issued March 3, 2010, reducing Respondent's penalty to $68,224.81.1 During the hearing, Respondent admitted not having workers' compensation coverage for his employees. He said, "Yes, you're right I needed to have workers' compensation but as I said . . . I never knew that I needed to have workers' compensation . . . I'm here to ask for forgiveness."
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, issue a final order affirming the Stop Work Order and Second Amended Order of Penalty Assessment in the amount of $68,224.81. DONE AND ENTERED this 20th day of April, 2010, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 2010.
The Issue The issues are as follows: (a) whether Respondent failed to secure the payment of workers’ compensation for its employees; and if so, (b) whether Petitioner assessed an appropriate penalty.
Findings Of Fact Petitioner is the state agency that is responsible for enforcing the requirements Chapter 440, Florida Statutes, requiring employers to secure the payment of workers’ compensation for their employees. At all times relevant here, Respondent has been an active Florida corporation. Respondent’s business involves the installation of acoustic ceiling tiles. Respondent’s work in this regard constitutes construction. On March 16, 2010, Carl Woodall, Petitioner’s workers’ compensation compliance investigator, conducted a random compliance check at a construction site. The site was located at 707 Jenks Avenue in Panama City, Florida. Upon his arrival in the construction site, Mr. Woodall observed two individuals, Robin and Todd Calhoun, installing acoustic ceiling tiles in a commercial office building. The individuals informed Mr. Woodall that they were working for Jackie Shores. The individuals provided Mr. Woodall with contact information for Mr. Shores. Mr. Woodall initially contacted Mr. Shores by phone. Later, Mr. Woodall and Mr. Shores spoke in person at the construction site. Mr. Shores informed Mr. Woodall that he was employed by Respondent as a job supervisor. Mr. Shores also identified Robin and Todd Calhoun as Respondent’s employees. Mr. Shores informed Mr. Woodall that Respondent used Southeast Employee Leasing for workers’ compensation coverage, but that Robin and Todd Calhoun had not been signed up for coverage. Mr. Woodall then contacted George Kaspers from Southeast Employee Leasing to verify whether Respondent had secured workers’ compensation for Robin and Todd Calhoun. Mr. Kaspers confirmed that the Calhouns were not covered and that they did not have pending employee applications. On March 16, 2010, Mr. Kaspers faxed Mr. Woodall a list of Respondent’s employees that were covered by workers’ compensation insurance. The list did not name the Calhouns. Mr. Woodall next searched Petitioner’s Coverage and Compliance Automated System (CCAS) for proof of a workers’ compensation policy or officer exemptions. CCAS is a database that lists workers’ compensation insurance policy information and all workers’ compensation exemptions. The database did not list a current policy for Respondent or any valid exemptions. Mr. Woodall also reviewed the website maintained by the Florida Department of State, Division of Corporations. The review showed that Respondent had been an active corporation since May 7, 2002. Based on his investigation, Mr. Woodall determined that Respondent had not secured workers’ compensation coverage for all of its employees as required by Chapter 440, Florida Statutes. On March 16, 2010, Petitioner issued, and served on Respondent, a Stop-Work Order and Order of Penalty Assessment, together with a Request for the Production of Business Records for Penalty Assessment Calculation. The business records request applied to the period of March 17, 2007, through March 16, 2010. The request sought production of payroll records, workers’ compensation policy documents, employee leasing documents, temporary labor service documents, and workers’ compensation exemption documents. Mr. Woodall did not initially request subcontractor payroll and workers’ compensation documentation from Respondent because he did not see any subcontractors on site. He did not want to burden Respondent with a request for more documents that were necessary to determine a proper penalty. However, after Respondent failed to produce the requested records within the required time-period, the case was assigned to Monica Moye, Respondent’s penalty calculator, to prepare a penalty based on Respondent’s imputed payroll. On April 8, 2010, Mr. Woodall personally served an Amended Order of Penalty Assessment on Respondent. The Order assessed a total penalty in the amount of $77,492.93 against Respondent for failure to secure workers’ compensation coverage for its employees. On April 5, 2010, and April 7, 2010, Respondent provided bank records with check images to Petitioner for the period of March 1, 2007, through March 31, 2010. Ms. Moye used these records to calculate a 2nd Amended Order of Penalty Assessment. The second order was based on payments to employees and subcontractors that were not covered by workers’ compensation insurance or an exemption there from. The second order assessed a penalty in the amount of $13,018.63. After service of the 2nd Amended Order of Penalty Assessment, Ms. Moye received additional information from Respondent regarding a subcontractor that was covered by its own workers’ compensation policy. After confirming the subcontractor's coverage, Ms. Moye removed all payments to that subcontractor from Respondent's penalty. Mr. Woodall subsequently issued a 3rd Amended Order of Penalty Assessment to Respondent, assessing a penalty in the amount of $7,105.35. Later, Ms. Moye received information from Respondent, indicating that two additional subcontractors had workers’ compensation coverage for their employees. This information resulted in the issuance of a 4th Amended Order of Penalty Assessment, assessing a penalty in the amount of $6,675.91. Classification codes are four digit codes assigned to occupation by the National Council on Compensation Insurance, Inc. (NCCI) to assist in the calculation of workers’ compensation insurance premiums. The codes are listed in the Scopes® Manual, which Petitioner has adopted by rule. After discovery was completed in this case, Petitioner determined that some of Respondent’s employees had been assigned an improper construction classification code of 5348 on the 4th Amended Order of Penalty Assessment. Code 5348 encompasses ceramic tile, indoor stone, and marble installation. The proper code for Respondent’s employees was 5020, which encompasses the installation of suspended acoustical ceilings. Based on information provided by Respondent during discovery, Petitioner also determined that one of Respondent’s clerical employees should be assigned classification code 8810 rather than construction code 5348. Additionally, Petitioner discovered that payments to two entities were payments for material rather than labor. Based on information learned during discovery, Petitioner prepared a 5th Amended Order of Penalty Assessment, assessing a total penalty in the amount of $8,621.46. To calculate the penalty of the 5th Amended Order of Penalty Assessment, Petitioner totaled the gross payroll paid to Respondent’s employees and subcontractors that were not covered by workers’ compensation for each period of non-compliance. Respondent conceded that all of the individuals and entities listed on the penalty worksheet performed services for Respondent during the time periods listed. Respondent also conceded that the gross payroll amounts were correctly calculated, that none of the individuals listed had secured an exemption, and that none of the payments to employees or subcontractors included in the penalty calculation were covered by a workers’ compensation policy. Approved manual rates are established by NCCI and adopted by Petitioner. The approved manual rates are calculated upon the risk assigned to the type of employment reflected by each classification code. Using the penalty calculation worksheet, Petitioner divided the gross payroll amount for each employee and subcontractor in each period of non-compliance by 100 and multiplied that figure by the approved manual rate for the classification code assigned to that employee or subcontractor. The product was the amount of workers’ compensation premium Respondent should have paid for each employee and subcontractor if Respondent had been compliant. The premium amounts were then multiplied by 1.5 to arrive at the penalty for each employee and subcontractor. The penalties for each employee and subcontractor for each period of non-compliance were then added together to come up with a total penalty of $8,621.48.
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, affirming, approving, and adopting the 5th Amended Order of Penalty Assessment. DONE AND ENTERED this 10th day of December, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 2010. COPIES FURNISHED: Jackie Shores M & M Coop Construction Co., Inc. 1401 Minnesota Avenue Lynn Haven, Florida 32444 Holly R. Werkema, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CP, FRP Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services’ The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in this case is whether Elite Restoration and Construction, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers’ compensation, as alleged in the Stop-Work Order and Second Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees and corporate officers. Respondent is an active Florida corporation that was formed on August 28, 2009, with a principal address of 7185 West Village Drive, Homosassa, Florida 34446. Respondent was engaged in business operations in the state of Florida during the entire period of November 2, 2014, to November 1, 2016. Brian Johnson (Respondent’s owner or Mr. Johnson) is Respondent's sole shareholder, owning 100 percent of the stock. The Department's investigator, Michael Robinson, commenced a random worksite compliance investigation on November 1, 2016, at a gas station at 970 Atlantic Boulevard, Jacksonville, Florida 32225. He observed Respondent's owner, Mr. Johnson, and three others, Tim Neeld, Derrick Windier, and James Ingash, painting a metal canopy covering the gas pumps. Mr. Johnson told the investigator that his company, Elite Restoration & Construction, LLC, was a subcontractor for Aluminum Plus of DeLand, Florida. By searching the Division's Coverage and Compliance Automated System, the investigator determined that Brian Johnson obtained a workers' compensation exemption on October 12, 2016, or 20 days prior to the investigation, and further determined that an employee leasing contract previously held by Respondent terminated on January 15, 2015, which is more than nine months prior to the investigation. Mr. Johnson confirmed that Respondent had an exemption for himself, effective October 12, 2016, but did not have any workers' compensation insurance for its employees. On November 1, 2016, after consulting with a supervisor, the Department's investigator issued the Stop-Work Order, which was posted at Respondent's worksite and personally served upon Respondent’s owner. On the same day, the investigator also personally served the Request for Production, which requested business records to determine Respondent's payroll during the two-year penalty period proscribed by section 440.107(7)(d)1., which in this case is from November 2, 2014, to November 1, 2016. The Request for Production explicitly states that the requested records must be provided within 10 business days from receipt of the request. Respondent obtained an Agreed Order of Conditional Release from the Stop-Work Order on November 8, 2016, by terminating the three workers observed during the compliance investigation who did not have workers’ compensation coverage and paying the Department a $1,000 down payment toward the penalty that would be calculated in this case. Respondent produced business records for penalty calculation on November 17, 2016, and February 28, 2017, which is beyond the 10-day time period required by the Request for Production.2/ The Department's penalty auditor, Lynne Murcia, used those records to calculate a $21,475.30 penalty for failing to comply with the workers' compensation insurance requirements of chapter 440. On April 20, 2017, when Respondent’s owner came to the Department’s Jacksonville office, he was personally served with the Amended Penalty and advised of his right to seek administrative review of the Stop-Work Order and Amended Penalty. Mr. Johnson filed a petition for hearing on behalf of Respondent on May 5, 2017, stating that the penalty calculated was wrong because it included income earned in states other than Florida. Respondent produced additional business records on May 17, August 21, and August 31, 2017, for the purpose of demonstrating that a portion of his company’s payroll was derived from work completed at worksites outside of Florida, and arguing that the out-of-state payroll should not be included in the penalty calculation. The invoices showed $182,056.78 in total income, consisting of $77,268 from 14 jobs in Florida, and $104,788.60 for 14 jobs outside of the State of Florida. Upon initial review, the Department’s auditor declined to make any adjustments because the invoices did not provide information showing earnings of specific employees for jobs outside of Florida. Thereafter, Mr. Johnson produced additional records that allowed the Department’s auditor to trace out-of-state employment to transactions in Respondent’s general ledger. The Department's auditor reviewed Respondent's additional records and removed out-of-state payroll and per diem payments. In accordance with that review, the Department issued the 2nd Amended Penalty which reduced the penalty to $16,671.14. The 2nd Amended Penalty also reduced the 2016 payroll attributed to Respondent's owner. Respondent was an "employer" in the state of Florida, as that term is defined in section 440.02(16), from November 2, 2014, to November 1, 2016. Respondent did not secure the payment of workers' compensation insurance coverage, nor have others secured the payment of workers' compensation insurance coverage for the employees listed on the penalty worksheet of the 2nd Amended Penalty during the periods of noncompliance listed on the penalty worksheet. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty had a valid Florida workers' compensation coverage exemption during the periods of noncompliance listed on the penalty worksheet. In the past, Respondent had an employee leasing contract with Southeast Personnel Leasing, Inc. That contract was terminated on January 15, 2015, due to the leasing company’s concerns about out-of-state employment that would not be covered by the leasing company's workers' compensation insurance. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were "independent contractors" as that term is defined in section 440.02(15)(d)1. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were employees of a temporary labor company. Employees on the penalty worksheet of the 2nd Amended Penalty are correctly classified under Class Code 5474, painting, as defined in the "Scopes Manual" published by the National Council on Compensation Insurance, Inc. (NCCI), and adopted in Florida Administrative Code Rule 69L-6.021(2)(jj). The approved manual rates used in the penalty worksheet of the 2nd Amended Penalty, as defined by the NCCI Scopes Manual and adopted by the Office of Insurance Regulation, are the correct manual rates for the corresponding periods of noncompliance listed on the penalty worksheet. In calculating the 2nd Amended Penalty, the Department’s auditor used the worksheet required by rule 69L-6.027, along with Respondent’s bank statements, check images, general ledger, and tax returns filed with the Internal Revenue Service. The auditor capped Respondent’s owner’s pay for that portion of 2014 falling within the penalty period because his salary and dividend totaling $73,484 in 2014 exceeded the statewide average of $862.51 per week or $44,850.52 per year. She also adjusted the period of noncompliance for Mr. Johnson, pursuant to rule 69L-6.028(2), because he obtained an exemption from Florida’s Workers’ Compensation Law on October 12, 2016. The auditor explained that she used Respondent’s tax returns for 2014 and 2015 because she believed they were the most reliable indication of salaries and wages, officer compensation, and payroll for outside services and subcontractors. She further explained that she used Respondent’s tax returns and general ledger as the most accurate sources for determining payroll for 2016. The auditor’s explanation is reasonable and credited. Mr. Johnson questioned the auditor’s method of determining payroll and offered alternative methods using spreadsheets he created to identify what he called “member draws” and other summaries. The invoices provided by Respondent to the Department, however, do not match the summaries; and Respondent’s method of determining payroll, when compared to the method utilized by the Department, is not accurate or reliable. The auditor’s method reflected in the 2nd Amended Penalty appropriately applied approved manual rates corresponding to Class Code 5474, painting, to determine the evaded workers’ compensation insurance premium. Then, the evaded premium was properly multiplied by two in accordance with section 440.107(7)(d)1.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Elite Restoration and Construction, LLC. DONE AND ENTERED this 20th day of February, 2018, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of February, 2018.
The Issue The issues in this enforcement proceeding are whether Respondent failed to comply with Sections 440.10, 440.05, and , Florida Statutes (2003),1 and, if so, whether Petitioner correctly assessed the penalty for said failure.
Findings Of Fact Based upon observation of the demeanor and candor of each witness while testifying; documentary materials received in evidence; evidentiary rulings made pursuant to Section 120.57, Florida Statutes (2004); and stipulations of the parties, the following relevant and material facts, arrived at impartially based solely upon testimony and information presented at the final hearing, are objectively determined: At all times material, Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), is the state agency responsible for enforcement of the statutory requirements that employers secure the payment of workers' compensation coverage requirements for the benefit of their employees in compliance with the dictates of Chapter 440, Florida Statutes. Employers who failed to comply with Chapter 440, Florida Statutes, are subject to enforcement provisions, including penalty assessment, of Chapter 440, Florida Statutes. At all times material, Respondent, St. James Automotive, Inc. (St. James), is a corporation domiciled in the State of Florida and engaged in automobile repair, with known business locations in Pine Island and St. James City, Florida. Both locations are owned by Richard Conrad (Mr. Conrad). On or about August 5, 2004, a Department investigator conducted an "on-site visit" at the St. James location on Pine Island Road, Pine Island, Florida. The purpose of the on-site visit was to determine whether or not St. James was in compliance with Chapter 440, Florida Statutes, regarding workers' compensation coverage for the workers found on-site. The investigator observed four individuals working on-site in automotive repair functions. One employee, when asked whether "the workers had workers' compensation coverage in place," referred the investigator to the "owner," who, at that time, was at the second business location at 2867 Oleander Street, St. James City, Florida. The investigator verified the owner's presence at the St. James City location by telephone and met him there. Upon his arrival at the St. James City location, the investigator initiated a workers' compensation coverage check on two databases. He first checked the Coverage and Compliance Automated System (CCAS) to ascertain whether St. James had in place workers' compensation coverage. The CCAS system contained current status and proof of workers' compensation coverage, if any, and record of any exemptions from workers' compensation coverage requirements filed by St. James' corporate officers. The CCAS check revealed no workers' compensation coverage filed by any corporate officers of St. James. The second system, the National Council on Compensation Insurance (NCCI), contained data on workers' compensation coverage in effect for workers (employees) in the State of Florida. NCCI similarly revealed no workers' compensation coverage in effect for St. James' Florida employees. The investigator discussed the situation and findings from both the CCAS and NCCI with Mr. Conrad who acknowledged and admitted: (1) St. James had no workers' compensation coverage in place; (2) St. James had made inquiry and arranged for an unnamed attorney to file exemptions from workers' compensation coverage on behalf of several St. James employees, but the attorney never filed exemptions; and (3) Mr. Conrad subsequently attempted to file the exemptions himself but was unsuccessful-- "because names of exemption applicants [employees] did not match the corporate information on file for St. James, Inc., at the Division of Corporations." When offered the opportunity by the Department's investigator to produce any proof of workers' compensation coverage or exemption from coverage, Mr. Conrad was unable to do so. At the conclusion of the August 5, 2004, on-site visit, and based upon a review of the CCAS and NCCI status reports and Mr. Conrad's inability to produce proof of workers' compensation coverage or exemptions, the investigator determined that St. James was not in compliance with requirements of Chapter 440, Florida Statutes. The investigator then issued a Stop Work Order on St. James' two business locations. The Stop Work Order contained an initial assessed penalty of $1,000, subject to increase to an amount equal to 1.5 times the amount of the premium the employer would have paid during the period for which coverage was not secured or whichever is greater. Mr. Conrad acknowledged his failure to conform to the requirements of Chapter 440, Florida Statutes, stating5: I guess you could say--I first of all, I am guilty, plain and simple. In other words, I did not conform. Subsequent to issuing the August 5, 2004, Stop Work Order, the Department made a written records' request to Mr. Conrad that he should provide payroll records listing all employees by name, social security number, and gross wages paid to each listed employee.6 Mr. Conrad provided the requested employee payroll records, listing himself and his wife, Cheryl L. Conrad, not as owners, stockholders or managers, but as employees. Pursuant to Section 440.107, Florida Statutes, the Department is required to link the amount of its enforcement penalty to the amount of payroll (total) paid to each employee. The persons listed on St. James' payroll records received remuneration for the performance of their work on behalf of St. James and are "employees" as defined in Subsection 440.02(15), Florida Statutes. Review of the payroll records by the Department's investigator revealed the listed employees for services performed on its behalf. The employee payroll records provided by St. James were used by the Department's investigator to reassess applicable penalty and subsequent issuance of the Amended Order of Penalty Assessment in the amount of $97,260.75.7 St. James' payroll records did not list the type of work (class code or type) each employee performed during the period in question. Accordingly, the Department's investigator properly based the penalty assessment on the highest-rated class code or type of work in which St. James was engaged, automotive repair. The highest-rated class code has the most expensive insurance premium rate associated with it, indicating the most complex activity or type of work associated with St. James' business of automotive repair. The Department's methodology and reliance on the NCCI Basic Manual for purpose of penalty calculation is standardized and customarily applied in circumstances and situations as presented herein.8 Mr. Conrad, in his petition for a Chapter 120, Florida Statutes, hearing alleged the 8380 (highest premium rate) class code applied to only three of his employees: himself, Brain Green, and William Yagmin. On the basis of this alleged penalty assessment error by the Department, Mr. Conrad seeks a reduction of the Amended Order of Penalty Assessment amount of $97,260.75. Mr. Conrad presented no evidence to substantiate his allegation that the Department's investigator assigned incorrect class codes to employees based upon the employee information Mr. Conrad provided in response to the Department's record request. To the contrary, had he enrolled in workers' compensation coverage or had he applied for exemption from coverage, Mr. Conrad would have known that his premium payment rates for coverage would have been based upon the employees' class codes he would have assigned each employee in his workers' compensation coverage application. In an attempt to defend his failure to comply with the workers' compensation coverage requirement of Chapter 440, Florida Statutes, Mr. Conrad asserted that the Department's investigator took his verbal verification that certain employees were clerical, but neglected to recognize his statement that he was also clerical, having been absent from the job-site for over three years. Mr. Conrad's excuses and avoidance testimony was not internally consistent with his earlier stated position of not conforming to the statutory requirements of Chapter 440, Florida Statutes. The above testimony was not supported by other credible evidence of record. This is critical to the credibility determination since Mr. Conrad seeks to avoid paying a significant penalty. For those reasons, his testimony lacks credibility. Mr. Conrad also attempted to shift blame testifying that--"My attorney did not file exemption forms with the Department," and my "personal attempts to file St. James' exemption form failed--[B]ecause the mailing instructions contained in the Department's form were not clear." In his final defensive effort of avoidance, Mr. Conrad testified that he offered to his employees, and they agreed to accept, unspecified "increases" in their respective salaries in lieu of St. James' providing workers' compensation coverage for them. This defense suffered from a lack of corroboration from those employees who allegedly agreed (and those who did not agree) and lack of documented evidence of such agreement. The intended inference that all his employees' reported salaries included some unspecified "salary increase" is not supported by employee identification or salary specificity and is thus unacceptable to support a finding of fact. St. James failed to produce credible evidence that the Department's Stop Work Order, the Penalty Assessment, and/or the Amended Penalty Assessment were improper. St. James failed to produce any credible evidence that the Department's use of the NCCI Basic Manual, as the basis for penalty assessment calculation based upon employee information provided by St. James, was improper and/or not based upon actual employee salary information provided by St. James. Prior to this proceeding, the Department and Mr. Conrad entered into a penalty payment agreement as authorized by Subsection 440.107(7)(a), Florida Statutes.9 The penalty payment agreement required fixed monthly payments be made by Mr. Conrad and afforded Mr. Conrad the ability to continue operation of his automotive repair business that was, by order, stopped on August 5, 2004.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby 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 in the amount of $97,260.75, minus any and all periodic payments of the penalty remitted by St. James, pursuant to agreed upon conditional release from the Stop Work Order dated August 5, 2004. DONE AND ENTERED this 4th day of March, 2005, in Tallahassee, Leon County, Florida. S FRED L. BUCKINE 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 4th day of March, 2005.
The Issue Whether Respondent was required and failed to obtain workers' compensation insurance coverage for his employees during the period from March 7, 1997 through March 7, 2000, and, if so, what penalty should be assessed, pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement that employers secure workers' compensation insurance for the benefit of their employees. On March 7, 2001, one of Petitioner's investigators observed two individuals, Worker 1 and Worker 2,3 painting a sidewalk, curb stops, and lines in the parking lot of a 7-Eleven store in Lake Worth, Florida. At that time, the investigator performed an on-site inspection. The investigator interviewed the two workers and completed a worksheet to determine if they were independent contractors. Worker 1 and Worker 2, among other things, worked for and were paid weekly by Respondent as painters, did not maintain a separate business from Respondent, did not control the means of performing their work, did not incur the expenses of their work, and did not incur the principal expenses related to their work. The investigator determined that the two workers were not independent contractors but were employees of Respondent. Neither Worker 1 nor Worker 2 was granted a workers' compensation exemption. Both workers were unprotected by workers' compensation insurance. Respondent provided to Petitioner's investigator federal tax Form 1099s for the years 1998 and 1999, pertaining to Worker 1 and Worker 2 and a handwritten note indicating the compensation paid to them during the year 2000. The documents indicated that Respondent paid the workers for the years 1998 through 2000 the following: Worker 1--$9,685 for 1998, $19,180 for 1999, and $3,330 for 2000; and Worker 2--$2,790 for 1999, and $240 for 2000. A compilation of approved classifications that groups employers according to their operations is published by the National Council of Compensation Insurance (NCCI). The publication is Scopes Manual, Scopes of Basic Manual Classifications (Scopes Manual). NCCI is a rating organization in Florida, which represents workers' compensation carriers. NCCI seeks approval from Florida's Department of Insurance of rates charged by workers' compensation carriers. NCCI and Professional Insurance Associates, as well as other sources, publish tables of approved rates for each classification code. It is undisputed that NCCI's publication of class codes and rates is relied upon and used by Petitioner to determine an employer's class code and the workers' compensation insurance rate. On March 7, 2000, Petitioner's investigator issued a SWO to Respondent. On March 8, 2000, Petitioner issued a NPAO to Respondent, indicating an assessment and penalty of $18,824. The investigator determined that, based upon what he had observed and the information that he had obtained, the work being performed by Worker 1 and Worker 2 was painting and was classified under Scopes Manual Code 5474. The investigator determined the evaded premium, or the premium that Respondent would have paid had he secured workers’ compensation insurance, by multiplying the gross compensation to employees each year by the premium rate for that Code for that year. The statutory penalty on the evaded premium is twice the evaded premium. The calculated penalty was $18,724. Added to the $18,724 was $100, which represented the penalty for the one day, March 7, 2000, that Respondent was not in compliance with the workers’ compensation requirement. On October 20, 2000, Petitioner issued a Second Amended Notice and Penalty Assessment Order, which was the final assessment, against Respondent assessing a penalty of $69,569, which included the $100 penalty. Pursuant to an agreement, Respondent performs general maintenance and preventative maintenance (GMPM) for Southland Corporation at 100 or more 7-Eleven stores in Dade, Broward, and Palm Beach counties. Petitioner was able to interview 13 of Respondent's employees, Worker 1 through Worker 13.4 As not a part of the GMPM agreement, Respondent's employees paint curbs, bumpers, and lines in the parking lot of each 7-Eleven store once each year. Respondent’s employees also engaged in the following: painting of buildings’ exterior and interior, parking lots, and loading docks; hanging drywall; setting of tile; paving of parking lots; repairing stucco and concrete; minor plumbing; carpentry, including trim, installation of doors and locks; filling potholes; and installing walls and cabinets. For example, Worker 10, who was employed with Respondent between June 1996 and January 1998, initially performed a daily activity of painting lines and curbs in parking lots at 7-Eleven stores. He could be assigned three stores in one day performing this activity. Later, Worker 10 performed under the GMPM agreement doing the following: painting the exterior and interior of stores, which could be the entire outside or a storeroom; tiling floors and ceilings; patching blacktop and repairing asphalt; and engaging in carpentry work, including putting up wooden shelves in storage rooms, cutting, nailing and screwing boards, and operating saws. Worker 10 also assisted Worker 6, who was a carpenter, repairing enclosures for dumpsters. The repairs consisted of sinking four-by-four posts into the ground, replacing slats, and occasionally replacing the entire enclosure due to damage caused by a truck backing into the enclosure. As another example, Worker 11 was employed with Respondent during 1998 and 1999 for 14 months and worked under the GMPM agreement. Worker 11 performed all activities under the agreement in maintaining the 7-Eleven stores, except for electrical and internal plumbing. The work to which he was assigned generally lasted four days a week, but for one day a week, he was assigned to handling service calls or performing line striping. Worker 11 performed the following: resurfacing asphalt; painting the entire parking lot, including lines for parking spaces and curbs; replacing or repairing ceiling and floor tile; laying tar on the roof; performing carpentry, including building shelves in storing rooms, reinforcing shelving, hanging new doors, replacing door hardware, and performing carpentry alongside Worker 6; and repairing enclosures for dumpsters by re-hanging doors, replacing slats, and replacing four-by-four posts. Even though Respondent stated that he subcontracted the repair of roofs and dumpsters, the installation of doors and electrical and plumbing work, he failed to present evidence showing to whom and when the work was subcontracted.5 Petitioner presented evidence demonstrating that Respondent’s employees performed all of the work described, except for electrical work. The work performed by Respondent’s employees included multiple class codes. NCCI requires the assignment of the highest rated classification under such circumstances. Carpentry is the highest-rated classification for all the work performed by Respondent’s employees, and the Scopes Manual Code for carpentry is 5403. Scopes Manual Code 5403 is also the code for the enclosure of a dumpster and the installation of a pre-hung door. The corresponding rate per $100 of payroll assigned to Scopes Manual Code 5403 is different for the applicable years 1997 through 2000. The rate for 1997 was 29.77; for 1998 was 29.09; for 1999 was 26.66; and 2000 was 27.96. Worker 1 through Worker 13 did not maintain a separate business from Respondent, did not control the means of performing their work, did not incur the expenses of their work, and did not incur the principal expenses related to their work. None of Respondent’s 13 employees had a valid workers’ compensation exemption. None of them were protected by workers’ compensation insurance. Respondent’s usual and customary practice was to pay his employees on a weekly basis. His usual and customary practice was to employ four or more employees during a weekly pay period. Respondent’s usual and customary practice was to employ four or more employees during any payroll period. Respondent asserts that he relied upon subcontractors for some of the work. The identity of the subcontractors, the service performed, and the frequency of their work are unknown. Whether the subcontractors had workers’ compensation insurance is also unknown. As a result, a determination cannot be made as to what Respondent’s responsibility, if any, was to the subcontractors as to workers’ compensation insurance, which in turn would affect an assessed penalty under worker’s compensation. To establish what his payroll was for the three years preceding the issuance of the SWO on March 7, 2000, Respondent used federal tax Form 1099s and cancelled business checks. For the years 1997 through 2000, Respondent’s payroll was as follows: Worker 1--1998 was $9,685, 1999 was $19,180, and 2000 was $3,330; Worker 2--1999 was $2,790, and 2000 was $240; Worker 3--1997 was $2,100, 1999 was $2,035, and 2000 was $3,045; Worker 4--1999 was $2,100; Worker 5--1997 was $1,900; Worker 6--1997 was $4,620, 1998 was $15,965, 1999 was $5,100, and 2000 was $3,303; Worker 7- -1999 was $610; Worker 8--1997 was $1,380, 1998 was $5,640, 1999 was $7,640, and 2000 was $350; Worker 9--1997 was $3,120; Worker 10--1997 was $8,450, and 1998 was $960; Worker 11--1998 was $7,095, and 1999 was $7,225; Worker 12--1998 was $2,883; and Worker 13--1999 was $2,675. Consequently, Respondent’s total payroll for 1997 was $21,570, for 1998 was $42,228, for 1999 was $49,355, and for 2000 was $10,268. Respondent’s payroll of $21,570 for 1997, was for the entire year. Petitioner made no reduction for the time period in the year 1997 prior to March 8, 1997, which would have been three years prior to the SWO on March 7, 2000. The statutory penalty assessed by Petitioner in its Second Amended Notice and Assessment Order against Respondent was $69,569, which included the penalty of $100. Petitioner’s assessment should be reduced to compensate for the Respondent’s payroll during the period of January 1, 1997 through March 7, 1997.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Labor and Employment Security, Division of Workers' Compensation, Bureau of Compliance enter a final order against Gregory Dennis Nelly: Sustaining the Stop Work Order. Sustaining the penalty assessed in the Second Amended Notice and Penalty Assessment Order minus the calculation for the payroll during the period of January 1, 1997 through March 7, 1997. DONE AND ENTERED this 5th day of June, 2001, in Tallahassee, Leon County, Florida. ERROL H. POWELL 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 5th day of June, 2001.
The Issue At issue in this proceeding is whether the Respondent, Marvin's Electric Service, Inc. ("Marvin's Electric"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes (2014), by not obtaining workers' compensation insurance for its employees, and, if so, whether the Petitioner, Department of Financial Services, Division of Workers' Compensation ("Department"), properly assessed a penalty against the Respondent pursuant to section 440.107.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Marvin's Electric is a corporation based in Cantonment, Florida. The Division of Corporations' "Sunbiz" website indicates that Marvin's Electric was first incorporated on December 15, 2003, and remained an active corporation until September 23, 2011, when it was administratively dissolved for failure to file an Annual Report. The corporation continued to hold itself out as eligible to do business throughout the period relevant to this proceeding. Sunbiz records indicate that the corporation filed new articles of incorporation on April 9, 2015, and is currently an active corporation. The principal office of Marvin's Electric is at 2647 Stefani Road in Cantonment. Marvin's Electric is solely owned and operated by Marvin Mobley. It has no regular employees aside from Mr. Mobley. Marvin's Electric was actively engaged in performing electrical work during the two-year audit period from November 19, 2012, through November 18, 2014. Kali King is a Department compliance investigator assigned to Escambia County. Ms. King testified that her job includes driving around the county conducting random compliance investigations and investigating referrals made to her office by members of the public. On November 18, 2014, Ms. King drove to a residence off Pale Moon Drive in Pensacola to investigate a public referral made against a different business entity that happened to be working on the same single-family residence as Mr. Mobley. Ms. King testified that when she arrived at the residence, she saw Mr. Mobley and two other workers on the site before she ever spoke to the employees of the business she was there to investigate. Mr. Mobley and the two other men were digging a shallow trench from the home to a shed on the back of the property. The homeowner told Ms. King that Mr. Mobley was installing electricity in the shed. Ms. King approached the three men and identified herself. She asked who was in charge, who hired them, and whether they were working as a business. Mr. Mobley replied that he was in charge, he had been hired by the homeowner, and he was working in the name of his business, Marvin's Electric. Ms. King asked how he was providing workers' compensation insurance for his business. Mr. Mobley answered that he had an exemption for himself and that he did not have insurance for the other two workers because they were not employees of his business. One of the men was his foster child who was working for Mr. Mobley in exchange for room and board. The other man was returning a favor to Mr. Mobley, who had helped the man with some construction work on his property in Alabama. The other men confirmed Mr. Mobley's story when Ms. King separately interviewed them. Ms. King went inside the house to speak with the contractor she had been sent out to investigate, then she returned to her vehicle to perform computer research on Marvin's Electric. She consulted the Sunbiz website for information about the company and its officers. Her search confirmed that Marvin's Electric was an inactive Florida corporation, having been administratively dissolved for failure to file an Annual Report in 2011. Marvin Mobley was listed as its registered agent and as president of the corporation. No other corporate officers were listed. Ms. King also checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Marvin's Electric had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Marvin's Electric had no active workers' compensation insurance coverage for its employees and that no insurance had ever been reported to the state for Marvin's Electric. There was no evidence that Marvin's Electric used an employee leasing service. Mr. Mobley had, in the past, elected an exemption as an officer of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012, but the exemption had expired as of the date of the investigation. Based on his jobsite interviews with the employees and Mr. Mobley, and her Sunbiz and CCAS computer searches, Ms. King concluded that as of November 18, 2014, Marvin's Electric had three employees working in the construction industry and that the company had failed to procure workers' compensation coverage for these employees in violation of chapter 440. Ms. King, consequently, issued a Stop-Work Order that she personally served on Mr. Mobley on November 18, 2014. Also on November 18, 2014, Ms. King served Marvin's Electric with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers' compensation insurance coverage, and other business records to enable the Department to determine the appropriate penalty owed by Marvin's Electric. Ms. King testified that Mr. Mobley provided records in response to the Request for Production. The records were scanned into the Department's internal auditing system, and the file was placed into a queue to be assigned to a penalty calculator, who reviews the records and calculates the penalty imposed on the business. Ms. King could not recall the name of the person assigned to calculate the penalty in this case. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two-year period preceding the Stop-Work Order, which in this case was the period from November 19, 2012, through November 18, 2014. § 440.107(7)(d), Fla. Stat. Because Mr. Mobley had no payroll records for the two men who worked for him on November 18, 2014, the penalty calculator lacked sufficient business records to determine the company's actual gross payroll on that date. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer's actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications ("Scopes Manual") published by the National Council on Compensation Insurance ("NCCI"). The Scopes Manual has been adopted by reference in rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L- 6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5190, titled "Electrical Wiring—-Within Buildings & Drivers," which "applies to the installation of electrical wiring systems within buildings." The corresponding rule provision is rule 69L-6.021(2)(u). The penalty calculator used the approved manual rates corresponding to Class Code 5190 for the periods of non-compliance to calculate the penalty. On February 3, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $1,381.58, based upon Mr. Mobley's actual wages during the penalty period, plus an imputation of wages for the date of November 18, 2014, for Mr. Mobley and the two men who were working for him on that date. After Mr. Mobley clarified that one item treated as payroll by the Department was actually a refund to a customer, the Department on June 10, 2015, was able to issue a Second Amended Order of Penalty Assessment in the amount of $1,373.56, based on the mixture of actual payroll information and imputation referenced above. Ms. Proano persuasively testified that the administrative dissolution of the corporate status of Marvin's Electric had no bearing on the question of the company's responsibility to provide workers' compensation insurance for its employees or to establish an exemption. After dissolution, the company continued to hold itself out as a corporate entity prepared to do business and, in fact, accepted work and was paid as a corporation. Therefore, the Department investigated Marvin's Electric as a corporate entity. In any event, under the facts of this case, the penalty calculation would have been the same had the Department treated Mr. Mobley as a sole proprietor, rather than as the president of a corporate entity. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Second Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Marvin's Electric was in violation of the workers' compensation coverage requirements of chapter 440. Justice Kirchhevel and Wayne Richardson were employees of Marvin's Electric on November 18, 2014, performing services in the construction industry without valid workers' compensation insurance coverage.2/ The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates, business records provided by Marvin's Electric, and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. Ms. Proano's recalculation of the penalty confirmed the correctness of the penalty calculator's work. Marvin's Electric could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Mr. Mobley testified that he has always been the sole proprietor of Marvin's Electric and that he has never had to pay employees. The two men with him on November 18, 2014, were there because Mr. Mobley was in poor health and needed help digging the trench from the house to the shed. He testified that he never received notice from the Department that his exemption was expiring and that, in the midst of several major surgeries, he forgot that it was time to renew his exemption. Mr. Mobley's testimony was eloquent and credible, but the equitable considerations that he raised have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $1,373.56 against Marvin's Electric Service, Inc. DONE AND ENTERED this 19th day of August, 2015, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of August, 2015.
The Issue At issue in this proceeding is whether the Respondent, Klenk Roofing, Inc. ("Klenk Roofing"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees and, if so, whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the workers' compensation law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Klenk Roofing is a corporation based in Daytona Beach. The Division of Corporations’ “Sunbiz” website indicates that Klenk Roofing was first incorporated on February 23, 2005, and remained an active corporation up to the date of the hearing. Klenk Roofing’s principal office is at 829 Pinewood Street in Daytona Beach. As the name indicates, Klenk Roofing’s primary business is the installation of new roofs and the repair of existing roofs. Klenk Roofing was actively engaged in roofing operations during the two-year audit period from July 24, 2012, through July 23, 2014. Kent Howe is a Department compliance investigator assigned to Volusia County. Mr. Howe testified that his job includes driving around the county conducting random compliance investigations of any construction sites he happens to see. On July 23, 2014, Mr. Howe was driving through a residential neighborhood when he saw a house under construction at 2027 Peninsula Drive in Daytona Beach. He saw a dumpster in the driveway with the name “Klenk Roofing” written on its side. Mr. Howe also saw a gray van with the name “Klenk Roofing” on the door. Mr. Howe saw three men working on the house. He spoke first with Vincent Ashton, who was collecting debris and placing it in the dumpster. Mr. Howe later spoke with Jonny Wheeler and Craig Saimes, both of whom were laying down adhesive tarpaper on the roof when Mr. Howe approached the site. All three men told Mr. Howe that they worked for Klenk Roofing and that the owner was Ronald Klenk. Mr. Ashton and Mr. Wheeler told Mr. Howe that they were each being paid $10 per hour. Mr. Saimes would not say how much he was being paid. After speaking with the three Klenk Roofing employees, Mr. Howe returned to his vehicle to perform computer research on Klenk Roofing. He first consulted the Sunbiz website for information about the company and its officers. His search confirmed that Klenk Roofing was an active Florida corporation and that Ronald Klenk was its registered agent. Ronald Klenk was listed as the president of the corporation and Kyle Klenk was listed as the vice president. Mr. Howe next checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Klenk Roofing had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Klenk Roofing had no active workers' compensation insurance coverage for its employees and that Ronald and Kyle Klenk had elected exemptions as officers of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012. Mr. Howe’s next step was to telephone Ronald Klenk to verify the employment of the three workers at the jobsite and to inquire as to the status of Klenk Roofing's workers' compensation insurance coverage. Mr. Klenk verified that Klenk Roofing employed Mr. Wheeler, Mr. Ashton, and Mr. Saimes. Mr. Klenk also informed Mr. Howe that Klenk Roofing did not have workers' compensation insurance coverage for the three employees. Based on his jobsite interviews with the employees, his interview with Mr. Klenk, and his Sunbiz and CCAS computer searches, Mr. Howe concluded that as of July 23, 2014, Klenk Roofing had three employees working in the construction industry and that the company had failed to procure workers’ compensation coverage for these employees in violation of chapter 440. Mr. Howe consequently issued a Stop-Work Order that he personally served on Mr. Klenk on July 23, 2014. Also on July 23, 2014, Mr. Howe served Klenk Roofing with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers compensation insurance coverage, and other business records to enable the Department to determine the appropriate penalty owed by Klenk Roofing. Anita Proano, penalty audit supervisor for the Department, was assigned to calculate the appropriate penalty to be assessed on Klenk Roofing. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two-year period preceding the Stop-Work Order, which, in this case was the period from July 24, 2012, through July 23, 2014. § 440.107(7)(d), Fla. Stat. At the time Ms. Proano was assigned, Klenk Roofing had not provided the Department with sufficient business records to enable Ms. Proano to determine the company’s actual gross payroll. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer’s actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that “[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers’ compensation classification code for an employee based upon records or the investigator’s physical observation of that employee’s activities.” Ms. Proano applied NCCI Class Code 5551, titled “Roofing — All Kinds and Drivers,” which “applies to the installation of new roofs and the repair of existing roofs.” The corresponding rule provision is rule 69L-6.021(2)(uu). Ms. Proano used the approved manual rates corresponding to Class Code 5551 for the periods of non-compliance to calculate the penalty. On September 17, 2014, the Department issued an Amended Order of Penalty Assessment in the amount of $214,335.58, based upon an imputation of wages for the employees known to the Department at that time. After Klenk Roofing provided further business records, the Department on December 16, 2014, was able to issue a Second Amended Order of Penalty Assessment in the amount of $87,159.20, based on a mixture of actual payroll information and imputation. The Department eventually received records sufficient to determine Klenk Roofing's payroll for the time period of July 24, 2012, through July 23, 2014. The additional records enabled Ms. Proano to calculate a Third Amended Order of Penalty Assessment in the amount of $19.818.04. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Third Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Klenk Roofing was in violation of the workers' compensation coverage requirements of chapter 440. Jonny Wheeler, Vincent Ashton, and Craig Saimes were employees of Klenk Roofing performing services in the construction industry without valid workers' compensation insurance coverage. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated by Ms. Proano, through the use of the approved manual rates, business records provided by Klenk Roofing, and the penalty calculation worksheet adopted by the Department in Florida Administrative Code Rule 69L-6.027. Klenk Roofing could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Ronald Klenk testified he was unable to obtain workers’ compensation coverage during the penalty period because it was prohibitively expensive to carry coverage for fewer than four employees. He stated that the insurers demanded a minimum of $1,500 per week in premiums, which wiped out his profits when the payroll was low. Mr. Klenk presented a sympathetic picture of a small business squeezed by high premiums, but such equitable considerations have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $19,818.04 against Klenk Roofing, Inc. DONE AND ENTERED this 28th day of April, 2015, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of April, 2015.
The Issue Whether Royal Roofing and Restoration, Inc. (Respondent or Royal Roofing), failed to secure workers’ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (Petitioner or Department), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement of chapter 440, that Florida employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation organized on July 28, 2015, and engaged in the business of roofing and storm damage restoration. The company was formed, and initially conducted business, in Tallahassee, Florida, but expanded to the Panama City area in 2016. Traci Fisher is Respondent’s President and Registered Agent, with a mailing address of 1004 Kenilworth, Tallahassee, Florida 32312. DOAH Case No. 17-0879 On May 4, 2016, Department Compliance Investigator Jesse Holman, conducted a routine workers’ compensation compliance inspection at 374 Brown Place in Crestview, Florida. Mr. Holman observed four men removing shingles from the roof of a residential structure at that address. Mr. Holman first interviewed a worker who identified himself as Dustin Hansel and reported that he and the other three workers on site were a new crew for Respondent, the permit for the job had not yet been pulled, and the workers were not aware of the rate of pay for the job. Mr. Hansel telephoned Respondent’s sales manager, Dillon Robinson, who then spoke directly with Mr. Holman via telephone. Mr. Robinson informed Mr. Holman that Respondent obtained workers’ compensation coverage through Payroll Management Inc. (PMI), an employee-leasing company. Mr. Holman identified the three remaining workers at the jobsite as Milton Trice, Winston Perrotta, and Kerrigan Ireland. Mr. Holman contacted PMI and secured a copy of Respondent’s then-active employee roster. None of the workers at the jobsite, including Mr. Hansel, were included on Respondent’s employee roster. Upon inquiry, Mr. Holman was informed that PMI had no pending employee applications for Respondent. Mr. Holman consulted the Department’s Coverage Compliance Automated System (CCAS) and found Respondent had no workers’ compensation insurance policy and no active exemptions. During Mr. Holman’s onsite investigation, the workers left the jobsite. Mr. Holman could not immediately reach Ms. Fisher, but did speak with her husband, Tim Fisher. Mr. Fisher informed Mr. Holman that the crew was on their way to the PMI Fort Walton office to be enrolled on Respondent’s employee roster. On May 5, 2016, based on his investigation, and after consultation with his supervisor, Mr. Holman issued Respondent Stop-Work Order (SWO) 16-148-1A, along with a Business Records Request (BRR) for records covering the audit period of July 27, 2015 through May 4, 2016. Later that day, Mr. Holman spoke to Ms. Fisher, who informed him the crew did not have permission to begin the work on that date, as she had not yet pulled the permit for the reroof. Ms. Fisher further explained that the crewmembers had been instructed to complete applications with PMI prior to departing Tallahassee for Crestview. Ms. Fisher confirmed the crewmembers were completing applications at PMI Fort Walton that same day. Mr. Holman met with Ms. Fisher the following day and personally served SWO 16-148-1A. Ms. Fisher delivered to Mr. Holman an updated employee roster from PMI which included Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter documenting Mr. Trice was not employed by Respondent; and a $1000 check as downpayment on the penalty. Respondent initially submitted business records in response to the BRR on May 23 and 25, 2017. DOAH Case No. 17-1558 On June 8, 2016, Mr. Holman conducted a random workers’ compensation compliance inspection at 532 Rising Star Drive in Crestview. The single-family home at that address was undergoing renovations and Mr. Holman observed three men on the roof removing shingles. None of the men on the roof spoke English, but a fourth man, who identified himself as Jose Manuel Mejia, appeared and stated he worked for Respondent, and that all the workers onsite were paid through PMI at a rate of $10.00 per hour. Mr. Mejia admitted that one of the worker’s onsite, Emelio Lopez, was not enrolled with PMI and explained that Mr. Mejia brought him to the worksite that day because he knew Mr. Lopez to be a good worker. The remaining workers onsite were identified as Juan Mencho and Ramon Gonzalez, both from Atlanta, Georgia. Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho. Mr. Mejia stated that he and his crews also received reimbursement checks directly from Respondent for gas, rentals, materials, and the like. Mr. Holman contacted PMI, who produced Respondent’s then-active employee roster. Mr. Mejia and Mr. Mencho were on the roster, but neither Mr. Gonzalez nor Mr. Lopez was included. Mr. Holman next contacted Ms. Fisher, who identified Mr. Mejia as a subcontractor, but was not familiar with any of the other men Mr. Holman encountered at the worksite. Mr. Holman consulted via telephone with his supervisor, who instructed him to issue an SWO to Respondent for failing to secure workers’ compensation coverage for its employees. Mr. Holman issued SWO 16-198-1A by posting the worksite on June 8, 2016. Department Facilitator Don Hurst, personally served Ms. Fisher with SWO 16-198-1A in Tallahassee that same day. SWO 16-148-1A Penalty Calculation1/ Department Penalty Auditor Eunika Jackson, was assigned to calculate the penalties associated with the SWOs issued to Respondent. On June 8, 2016, Ms. Jackson began calculating the penalty associated with SWO 16-148-1A. Ms. Jackson reviewed the documents submitted by Respondent in response to the BRR. The documents included Respondent’s Wells Fargo bank statements, check images, and PMI payroll register for the audit period.2/ Based on a review of the records, Ms. Jackson identified the following individuals as Respondent’s employees because they received direct payment from Respondent at times during the audit period: David Rosinsky, Dylan Robinson, Jarod Bell, Tommy Miller, and David Shields. Ms. Jackson determined periods of non-compliance for these employees based on the dates they received payments from Respondent and were not covered for workers’ compensation via PMI employment roster, separate policy, or corporate officer exemption. Ms. Jackson deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. Based upon Ms. Fisher’s deposition testimony, Ms. Jackson assigned National Council on Compensation Insurance (NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class code 5474, Painting, to Mr. Rosinsky; NCCI class code 8742, Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810, clerical office employee, to Mr. Shields. Utilizing the statutory formula for penalty calculation, Ms. Jackson calculated a total penalty of $191.28 associated with these five “employees.” Ms. Jackson next calculated the penalty for Dustin Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta, the workers identified at the jobsite as employees on May 4, 2016. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll to these “employees,” thus, Ms. Jackson used the statutory formula to impute payroll to these workers. Ms. Jackson calculated a penalty of $14,970.12 against Respondent for failure to secure payment of workers’ compensation insurance for each of these four “employees” during the audit period. The total penalty associated with these four “employees” is $59,880.48. Ms. Jackson calculated a total penalty of $60,072.96 to be imposed against Respondent in connection with SWO 16-148- 1A. Business Records In compliance with the Department’s BRR, Respondent submitted additional business records on several occasions-- March 21, May 3 and 31, June 7, and August 15 and 24, 2017--in order to establish its complete payroll for the audit period. While the Department admits that the final documents submitted do establish Respondent’s complete payroll, the Department did not issue amended penalty assessment based on those records in either case. The Department maintains Respondent did not timely submit records, pursuant to Florida Administrative Code Rule 69L-6.028(4), which allows an employer 20 business days after service of the first amended order of penalty assessment to submit sufficient records to establish payroll. All business records submitted by Respondent were admitted in evidence and included as part of the record. The undersigned is not limited to the record before the Department at the time the amended penalty assessments were imposed, but must determine a recommendation in a de novo proceeding. The undersigned has relied upon the complete record in arriving at the decision in this case. Penalty Calculation for Ireland, Trice, and Perrotta For purposes of workers’ compensation insurance coverage, an “employee” is “any person who receives remuneration from an employer” for work or services performed under a contract. § 440.02(15)(a), Fla. Stat. Respondent did not issue a single check to Mr. Ireland, Mr. Trice, or Mr. Perrotta during the audit period. Mr. Ireland, Mr. Trice, and Mr. Perrotta are not included on any PMI leasing roster included in the record for the audit period. The uncontroverted evidence, including the credible and unrefuted testimony of each person with knowledge, established that Mr. Ireland, Mr. Trice, and Mr. Perrotta were newly hired for the job in Crestview on May 4, 2016, and began working that day prior to submitting applications at PMI, despite Ms. Fisher’s directions otherwise. Petitioner did not prove that either Mr. Ireland, Mr. Trice, or Mr. Perrotta was Respondent’s employee at any time during the audit period. Petitioner did not correctly calculate the penalty of $44,911.26 against Respondent for failure to secure workers’ compensation insurance for Mr. Ireland, Mr. Trice, and Mr. Perrotta during the audit period. Penalty Calculation for Hansel Ms. Fisher testified that Mr. Hansel has owned several businesses with which Respondent has conducted business over the years. Originally, Mr. Hansel owned a dumpster rental business, now owned by his father. Mr. Hansel also owned an independent landscaping company with which Respondent occasionally transacted business. When Respondent expanded business into the Panama City area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise new crews in the area. The job on May 4, 2016, was his first roofing job. A review of Respondent’s records reveals Respondent issued the following checks to Mr. Hansel during the audit period: December 4, 2015, in the amount of $360, $300 of which was for “dumpster rental” and the remaining $60 for “sod”; May 4, 2016, in the amount of $200 for “sod repair”; May 6, 2016, in the amount of $925 as reimbursement for travel expenses; May 9, 2016, in the amount of $1,011.50 (with no memo); and May 21, 2016, in the amount of $100 for “7845 Preservation.” Mr. Hansel was included on Respondent’s PMI leasing roster beginning on May 13, 2016. Petitioner proved that Mr. Hansel was Respondent’s employee at times during the audit period. Petitioner did not prove that Respondent’s records were insufficient to determine payroll to Mr. Hansel during the audit period, which would have required an imputed penalty. Petitioner did not correctly calculate the penalty of $14,970.42 against Respondent for failure to secure workers’ compensation insurance coverage for Mr. Hansel during the audit period. Sod repair by Mr. Hansel is a service performed for Respondent during the audit period. Reimbursement of travel expenses is specifically included in the definition of payroll for purposes of calculating the penalty. See Fla. Admin. Code R. 69L- 6.035(1)(f) (“Expense reimbursements, including reimbursements for travel” are included as remuneration to employees “to the extent that the employer’s business records and receipts do not confirm that the expense incurred as a valid business expense.”). Dumpster rental is neither work performed on behalf of, nor service provided to, Respondent during the audit period. The correct uninsured payroll amount attributable to Mr. Hansel is $2,296.50. Petitioner correctly applied NCCI class code 5551, Roofing, to work performed by Mr. Hansel based on the observation of Mr. Holman at the worksite on May 4, 2016. With respect to Mr. Hansel’s services for sod and sod repair, Petitioner did not correctly apply NCCI class code 5551. Petitioner did not introduce competent substantial evidence of the applicable NCCI class code and premium amount for landscaping services performed during the audit period.3/ Uninsured payroll attributable to Mr. Hansel for roofing services during the audit period is $2,036.50. The approved manual rate for workers’ compensation insurance for NCCI class code 5551 during the period of non- compliance--May 9 and 21, 2016--is $18.60. The premium amount Respondent would have paid to provide workers’ compensation insurance for Mr. Hansel is $378.79 (One percent of Mr. Hansel’s gross payroll during the non-compliance period--$20.36--multiplied by $18.60). The penalty for Respondent’s failure to secure worker’s compensation coverage insurance for Mr. Hansel during the period of non-compliance is calculated as two times the amount Respondent would have paid in premium for the non- compliance period. The correct penalty for Respondent’s failure to maintain workers’ compensation coverage for Mr. Hansel during the period of non-compliance is $757.58. Penalty Calculation for Salesmen Independent contractors not engaged in the construction industry are not employees for purposes of enforcing workers’ compensation insurance requirements. See § 440.02(15)(d)1., Fla. Stat. Sales is a non-construction industry occupation. The Department calculated a penalty associated with payroll attributable to the following persons identified by Ms. Fisher as independent salesmen: Dylan Robinson, Kevin Miller, Marc Medley, Mike Rucker, Colby Fisher, David Jones, Jarod Bell, Matt Flynn, and Todd Zulauf. Section 440.02(15)(d)1. provides that an individual may be an independent contractor, rather than an employee, as follows: In order to meet the definition of independent contractor, at least four of the following criteria must be met: The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal regulations; The independent contractor receives compensation for services rendered or work performed and such compensation is paid to a business rather than to an individual; The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying business expenses or other expenses related to services rendered or work performed for compensation; The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or The independent contractor receives compensation for work or services rendered on a competitive-bid basis or completion of a task or a set of tasks as defined by a contractual agreement, unless such contractual agreement expressly states that an employment relationship exists. If four of the criteria listed in sub- subparagraph a. do not exist, an individual may still be presumed to be an independent contractor and not an employee based on full consideration of the nature of the individual situation with regard to satisfying any of the following conditions: The independent contractor performs or agrees to perform specific services or work for a specific amount of money and controls the means of performing the services or work. The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform. The independent contractor is responsible for the satisfactory completion of the work or services that he or she performs or agrees to perform. The independent contractor receives compensation for work or services performed for a commission or on a per-job basis and not on any other basis. The independent contractor may realize a profit or suffer a loss in connection with performing work or services. The independent contractor has continuing or recurring business liabilities or obligations. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures. Ms. Fisher testified that each of the above-named salesmen sold roofing jobs for her at various times during the audit period on a commission-only basis. The contractors inspect homeowner roofs, draft schematics, use their own equipment (e.g., drones), incur all of their own expenses, and handle the insurance filing for the homeowner’s insurance to pay on the claim. Ms. Fisher further testified that each of the salesmen also sells for other roofing contractors in the Tallahassee area. She pays the salesmen on a per-job basis. Ms. Fisher does not compensate the salesmen for the time involved in inspecting a roof, preparing schematics, or making the sale. Nor does Ms. Fisher reimburse the salesmen for travel to sales jobsites. Ms. Fisher’s testimony was credible, persuasive, and uncontroverted. Respondent introduced in evidence four “Independent Contractor Checklists” allegedly completed by Mr. Robinson, Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist follows the format of section 440.02(15)(d)1., listing the criteria set forth in subparagraphs a. and b. The forms indicate that they each meet all the criteria listed in subparagraph b.: they perform, or agree to perform services for a specific amount of money and control the means of performing the service; they incur the principal expenses related to the service performed; they are responsible for satisfactory completion of the services performed; they receive compensation for the services performed on a per-job or commission basis; they may realize a profit or suffer a loss in connection with performing the services; they have continuing and recurring business liabilities or obligations; and the success or failure of their business depends on the relationship of business receipts to expenditures.4/ In its Proposed Recommended Order, Petitioner conceded the nine men identified by Respondent as independent sales contractors “would not be considered employees of Respondent” because the “salesmen would seem to meet the majority of [the] requirements [of section 440.02(15)(d)1.b.].” Respondent issued Dylan Robinson, Mark Medley, Colby Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Jarod Bell, David Jones, and Todd Zulauf an IRS FORM 1099-MISC for income paid during the 2016 tax year. Respondent did not prove by clear and convincing evidence that the above-named salesmen were Respondent’s employees during the audit period. For SWO 16-148-1A, Respondent did not correctly calculate the penalty because Respondent included a penalty associated with Petitioner’s failure to provide workers’ compensation insurance coverage for Dylan Robinson and Jarod Bell. Penalty in the amount of $20.70 associated with Dylan Robinson and Jarod Bell should not be included in the total penalty. The correct penalty amount for SWO 16-148-1A, based on records submitted by Respondent on or before March 20, 2016, is $929.16. Draft Revised Second Amended Order of Penalty Assessment The additional records submitted by Respondent revealed payments made to persons during the audit period who were not included in the Department’s Second Amended Order of Penalty Assessment. The Department and Respondent disagreed at hearing whether the payments qualified as payroll. At hearing, Petitioner submitted a draft revised second amended penalty calculation for SWO 16-148-1A based on all records received from Respondent. The revised penalty is in the amount of $61,453.50. Ms. Jackson populated the spreadsheet with the name of every individual to whom a check was written on Respondent’s business bank account during the audit period, removing only those payments to individuals and entities which, to Petitioner’s knowledge, were not Respondent’s employees. Respondent’s calculations in the revised penalty suffer from some of the same errors as in the second amended penalty calculation--they include individuals Petitioner did not prove were Respondent’s employees, as well as payments which were not uninsured payroll. For the reasons explained herein, Petitioner did not prove that salesmen David Jones, Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer, and Colby Fisher were Respondent’s employees during the audit period. Respondent did not accurately calculate the penalty associated with those persons. Respondent made payments to David Shields during the audit period, which the Department argues should be included as payroll. The Department included payments to Mr. Shields in its draft revised second amended order of penalty assessment and assigned NCCI class code “8810” for clerical work. Mr. Shields is a licensed professional roofing contractor who acts as “qualifier” for Respondent’s business. A qualifier is a licensed professional who certifies plans for permit applications submitted by another business. Respondent pays Mr. Shields a flat fee per permit application qualified by him. The record evidence does not support a finding that Mr. Shields provides clerical services to Respondent. Mr. Shields provides some sort of professional services to Respondent, and is likely an independent contractor providing his own materials and supplies, maintaining his own business accounts, and liable for his own business success. Assuming Mr. Shields were Respondent’s employee, the Department introduced no evidence of an appropriate NCCI class code for Mr. Shields’ services. The Department did not prove that payments to Mr. Shields should be included as Respondent’s uninsured payroll during the audit period. Respondent paid Susan Swain a total of $258 during the audit period for clerical work. Ms. Fisher maintained Ms. Swain’s work was casual at first, and the payments reflect a time when she worked on-again, off-again, handling the paperwork for restoration insurance claims. Later, Ms. Swain came to work for Respondent full-time and was added to the PMI leasing roster. Section 440.02(15)(d)5. provides that a person “whose employment is both casual and not in the course of the trade, business, profession or occupation of the employer” is not an employee. The statute defines “casual” employment as work that is anticipated to be completed in 10 working days or less and at a total labor cost of less than $500. See § 440.02(5), Fla. Stat. In its Proposed Recommended Order, the Department argues Ms. Swain’s wages should be included as payroll because the “testimony regarding Ms. Swain does not suggest that she was employed for less than 10 days[.]” However, it was the Department’s burden to prove that Ms. Swain was a statutory employee. The Department did not prove that Ms. Swain’s wages should be included within Respondent’s uninsured payroll. The largest portion of the penalty assessed by the Department, as well as in the draft revised second amended penalty assessment, against Respondent is in connection with various roofers who were employed by Respondent at times during the audit period. Each of the roofers was included on Respondent’s PMI leasing roster, but received checks directly from Respondent in addition to PMI payroll checks. The Department included all the direct payments to those roofers as payroll for purposes of calculating a penalty in this case. As Ms. Fisher explained, the company bids a reroof on a per job basis--usually a per square foot price. Ms. Fisher adds each roofing contractor’s name to the PMI leasing roster to ensure that each roofer is covered by workers’ compensation insurance for the duration of the job. When the job is completed (which is a matter of just a few days), the contractor reports to Ms. Fisher what amount of the contract price was spent on materials, supplies, or other non-labor costs. Ms. Fisher cuts a check to the contractor for that amount and authorizes PMI to issue payroll checks for the “labor cost” (the difference between the contract price and the non-labor costs). Ms. Fisher refers to this process as “back-charging” the contractors for their materials, maintenance, tools, and other non-labor costs. The Department is correct that the direct payments are payroll to the roofing contractors. See Fla. Admin. Code R. 69L-6.035(1)(b) and (h) (remuneration includes “payments, including cash payments, made to employees by or on behalf of the employer” and “payments or allowances made by or on behalf of the employer for tools or equipment used by employees in their work or operations for the employer.”). The Department would be correct to include these payments in the penalty calculation if they represented uninsured payroll. However, the evidence supports a finding that the direct payments to the roofing contractors were made for the same jobs on which Respondent secured workers’ compensation coverage through PMI. The roofing contractors were covered for workers’ compensation throughout the job, even though they may have received partial payment for the job outside of the PMI payroll checks.5/ The direct payments were not for separate reroofs on which the roofers were not otherwise insured. The Department did not correctly calculate penalties associated with the following roofing contractors: Donald Tontigh, Joseph Howard, Keith Mills, Aaron Kilpatrick, Gustavo Tobias, Jose Mejia, and Tommy Miller. Ms. Fisher also received cash payments from Respondent during the audit period. These payments were made in addition to her payroll through PMI. Ms. Fisher described these payments as “cash tickets,” which were paid outside of her PMI payroll to reimburse her for investments made in the company. For purposes of calculating the penalty in this case, these “cash tickets” are clearly payroll, as that term is to be calculated pursuant to rule 69L-6.035. Similar to the issue with the roofing contractors, the question is whether the payments represent uninsured payroll. Ms. Fisher did not hold a corporate officer exemption at any time relevant hereto. Ms. Fisher testified that she was covered through PMI payroll leasing. In contrast to the roofing contractors, Ms. Fisher’s direct payments do not directly coincide with any particular job or specific time frame during which Ms. Fisher was covered for workers’ compensation insurance through PMI. The evidence was insufficient to determine that the amounts were insured payroll. The Department properly calculated a penalty associated with payroll attributable to Ms. Fisher. Respondent made one payment of $75 to Donald Martin during the audit period. The Department calculated a penalty of $27.90 associated with this payment to Mr. Martin. Ms. Fisher explained that Mr. Martin was a down-on-his-luck guy who came by the office one day complaining that Mr. Hansel owed him some money. Ms. Fisher offered to put him on a roofing crew and wrote him the $75 check to help him out. Ms. Fisher’s testimony was both credible and unrefuted. Mr. Martin was never hired by Respondent, put on any roofing crew, or added to the PMI leasing roster. Mr. Martin was not Respondent’s employee because he did not receive remuneration for the “performance of any work or service while engaged in any employment under any appointment or contract for hire” with Respondent. § 440.02(15)(a), Fla. Stat. Cale Dierking works for Respondent full-time in a clerical position. During the audit period, Respondent paid Mr. Dierking directly by check for $1,306.14. This payment was made outside of Mr. Dierking’s PMI payroll checks. Ms. Fisher testified that she paid Mr. Dierking directly on one occasion when “PMI’s payroll got stuck in Memphis, I believe it was a snow-in situation where payroll checks didn’t come.” Rather than ask her employee to go without a timely paycheck, she advanced his payroll. Ms. Fisher’s testimony was both credible and unrefuted. The payment to Mr. Dierking is clearly payroll. However, Mr. Dierking was covered for workers’ compensation through PMI for the period during which the check was issued. Thus, there is no evidence that it was uninsured payroll. The Department did not correctly calculate a penalty associated with payments to Mr. Dierking. The correct penalty to be assessed against Respondent for failure to secure workers’ compensation coverage for its employees during the audit period in connection with SWO 16-148- 1A is $770.60. Penalty Calculation for SWO 16-198-1A Ms. Jackson calculated a total penalty against Respondent in connection with SWO 16-198-1A in the amount of $19,115.84, as reflected in the Second Amended Order of Penalty Assessment. The Department correctly imputed penalty against Respondent in the amount of $91.68 each for uninsured payroll to Mr. Gonzalez and Mr. Lopez. The evidence supported a finding that these workers were Respondent’s statutory employees on June 8, 2016, and were not enrolled on the PMI leasing roster. The Department did not correctly calculate the penalty associated with salesmen Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, and Todd Zulauf. The Department did not correctly calculate the penalty associated with roofing contractors Abraham Martinez- Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina-Agustin, Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy Miller. The Department did not correctly calculate the penalty against Respondent associated with Mr. Shields, Respondent’s qualifier. Based on a review of Respondent’s complete “untimely” records, the Department discovered direct payments made to additional employees not included on the Second Amended Order of Penalty Assessment. Respondent made a direct payment to Ethan Burch in the amount of $602.50 during the audit period. Ethan Burch is one of Respondent’s full-time clerical employees. The evidence is insufficient to determine whether the payment of $602.50 was insured or uninsured payroll. As such, the Department did not prove it correctly calculated the penalty associated with Mr. Burch. Respondent also made a direct payment to Chelsea Hansel in the amount of $965 during the audit period. Ms. Hansel is another clerical employee. Ms. Hansel’s PMI enrollment was delayed due to some background investigation. Respondent paid Ms. Hansel for work she completed prior to enrollment. The direct payment to Ms. Hansel constitutes uninsured payroll. The Department correctly calculated the penalty associated with the payment to Chelsea Hansel. The correct penalty amount to be imposed against Respondent for failure to secure payment of workers’ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel) during the audit period in connection with SWO 16-198-1A is $187.80.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers’ Compensation, finding that Royal Roofing and Restoration, Inc., violated the workers’ compensation insurance law and, in DOAH Case No. 17-0879, assessing a penalty of $770.60; and in DOAH Case No. 17-1558, assessing a penalty of $187.80. DONE AND ENTERED this 24th day of January, 2018, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 2018.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation coverage for its employees; 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 painting company in Florida. Respondent began operations in 2014. On August 19, 2016, Kirk Glover, a Compliance Investigator with the Department, investigated a shopping plaza located at 353-367 Cypress Parkway, Kissimmee, Florida. At the site, Investigator Glover observed three individuals painting the exterior of a building. Two of the individuals were actively painting with paint rollers. The third was carrying a bucket of paint. Investigator Glover approached the three individuals and requested their names. The individuals identified themselves as Manuel Espino, Bienvenido Ferreras-Varcas, and Pedro Quinga. The individuals also relayed that they were employed by Respondent. The individuals provided Investigator Glover their rates of pay and length of employment with Respondent. At the final hearing, Investigator Glover testified that his duties for the Department include inspecting businesses to determine whether the business has obtained the required workers’ compensation coverage. Investigator Glover explained that a business with four or more employees that performs construction- related work must have workers’ compensation coverage. Therefore, Investigator Glover believed that Respondent should have secured sufficient workers’ compensation coverage for all three employees at the worksite. After receiving the employees’ names, Investigator Glover searched the Department’s Coverage and Compliance Automated System (“CCAS”) database. CCAS is a Department database that tracks workers’ compensation insurance coverage. CCAS contains data from insurance carriers, as well as any workers’ compensation exemptions filed with the Department. Insurance providers are required to report coverage and cancellation information, which the Department then inputs into CCAS. Inspector Glover initially noted that according to CCAS, the Department did not have on file any request from Respondent for an exemption from workers’ compensation coverage. An exemption is a method by which a business’s corporate officer may exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. CCAS also informed Investigator Glover that on the date of his inspection, Respondent had an active employee leasing agreement with FrankCrum, an employee staffing company. Inspector Glover 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 policy with another company. Investigator Glover contacted FrankCrum. FrankCrum relayed that only one employee, Edwin Perez, was covered under its leasing arrangement with Respondent. Conversely, none of the three individuals Investigator Glover found at the worksite (Mr. Espino, Mr. Ferreras-Varcas, and Mr. Quinga) were covered by the employee leasing policy. After determining that neither CCAS nor FrankCrum had record of any workers’ compensation coverage for the three individuals he found at the worksite, Investigator Glover contacted Respondent’s owner-of-record, Joseph Iturria. In the ensuing conversation, Mr. Iturria verified that Mr. Espino, Mr. Ferreras-Varcas, and Mr. Quinga were all Respondent’s employees on the date of the inspection. At the final hearing, Mr. Iturria testified that as of August 19, 2016, Mr. Espino and Mr. Ferreras-Varcas had worked for Respondent for a few months, while Mr. Quinga had worked for Respondent for one or two days. On August 19, 2016, based on the findings of his investigation, Investigator Glover issued a Stop-Work Order to Respondent. With the Stop-Work Order, Investigator Glover served a Request for Production of Business Records for Penalty Assessment Calculation. The Department requested several categories of business records from Respondent for the period of August 20, 2014, through August 19, 2016. The requested documents pertained to: employer identification, payroll documents, account documents, disbursements, workers’ compensation coverage, professional employer organization, temporary labor service, exemptions, subcontractors, and subcontractor’s workers’ compensation coverage. Thereafter, Respondent submitted several business records to the Department. These business records included Mr. Iturria’s personal tax return for 2014, Respondent’s corporate tax return for 2015, and Respondent’s corporate bank statements for 2016. Based on its investigation, the Department determined that Respondent failed to secure sufficient workers’ compensation coverage for its employees, in violation of chapter 440. Therefore, the Department calculated a penalty for Respondent. The Penalty Calculation: To calculate the appropriate penalty for Respondent’s failure to secure adequate workers’ compensation coverage for its employees, the Department first ascertained Respondent’s period of non-compliance. In determining this period of non-compliance, the Department referred to Florida Administrative Code Rule 69L-6.028(2), which provides 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. Based on the instructions set forth in rule 69L-6.028(2), the Department determined that Respondent’s period of non-compliance was August 20, 2014, through August 19, 2016, which was the time period for which the Department requested business records from Respondent. After determining Respondent’s period of non- compliance, the Department next calculated the penalty it should impose upon Respondent. In accordance with section 440.107(7)(d)1., the penalty the Department must assess against an employer who has failed to obtain workers’ compensation coverage is: 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 [of non- compliance] within the preceding 2-year period or $1,000, whichever is greater. Therefore, the Department reviewed the business records Respondent provided to determine the amount of Respondent’s payroll during the period of non-compliance. Initially, the Department excepted from the period of non-compliance the time period from September 12, 2014, through March 14, 2015. For these dates, Respondent produced proof that it had secured a valid workers’ compensation insurance policy for its employees. For the remaining period of non-compliance in 2014 (August 20 through September 11), the only relevant documentation Respondent presented for the Department’s consideration was Mr. Iturria’s personal tax return with a schedule C form for an entity called Renew Painting and Renovation, LLC. However, Renew Painting and Renovation, LLC, is a separate business from Respondent. Consequently, Respondent did not provide sufficient records for the Department to accurately determine Respondent’s payroll for August 20 through September 11 (the period of non- compliance in 2014). For the remaining period of non-compliance in 2015 (March 15 through December 31), Respondent provided the Department a copy of its 2015 corporate income tax return. This tax return listed the salaries and wages Respondent paid in 2015. Using this document, the Department was able to prorate Respondent’s employee salaries and taxes paid and determine an appropriate payroll for Respondent’s employees in 2015. With no other records from Respondent, the Department decided to use these 2015 tax figures in lieu of the alternative which would have been to impute Respondent’s gross payroll for 2015. See § 440.107(7)(e), Fla. Stat. For the period of non-compliance in 2016 (January 1 through August 19), Respondent submitted to the Department copies of corporate bank statements. However, Respondent did not provide the images of any checks it wrote in 2016. Without the check images, the Department was not able to determine the purpose of each payment (e.g., wages, materials, expenses, etc.), or how much it paid its employees. Therefore, the Department could not determine Respondent’s payroll for the period of non- compliance in 2016. Furthermore, although Respondent had entered an employee leasing policy with FrankCrum, none of the three individuals Investigator Glover found at the worksite were covered by the leasing arrangement. As a result, all of the 2016 period of non-compliance was included in the penalty audit period. As discussed above, for the two periods of non- compliance (August 20 through September 11, 2014, and January 1 through August 19, 2016), Respondent failed to provide business records sufficient to enable the Department to determine Respondent’s payroll or the actual wages it paid its employees. Consequently, the Department exercised its option to impute Respondent’s weekly payroll. To calculate the imputed weekly payroll for each employee, the Department determined the statewide average weekly wage effective at the time of the Stop- Work Order for each identified employee and corporate officer, multiplied by two. See § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028(3)(a). The Department imputed the payroll for all three employees Investigator Glover observed at the worksite on August 19, 2016 (Mr. Espino, Mr. Ferreras-Varcas, and Mr. Quinga), for all periods of non-compliance. Using records Respondent filed with the Florida Division of Corporations, the Department identified Respondent’s corporate officers as Joseph Iturria, Craig Foss, and Julio A. Feliciano, Jr. Therefore, the Department also included these three individuals in the imputed portions of the penalty during all periods of non-compliance for which they were registered as corporate officers but did not hold active workers’ compensation exemptions. See Fla. Admin. Code R. 69L-6.028(3)(b). On September 6, 2016 (after the period of non- compliance), Mr. Iturria and Mr. Foss acquired workers’ compensation exemptions from the Department. Pursuant to section 440.05(5), workers’ compensation exemptions become effective when issued by the Department or 30 days after the Department receives the applications, whichever occurs first. Thus, workers’ compensation exemptions are not retroactive. Consequently, the workers’ compensation exemptions Mr. Iturria and Mr. Foss acquired after the issuance of the Stop-Work Order had no impact on the imputed payroll for the period of non- compliance. The business records Respondent provided to the Department were not sufficient to enable the Department to identify the exact type of work Respondent’s employees performed during the period of non-compliance. Investigator Glover observed that the three individuals working for Respondent on August 19, 2016, were painting. According to the Scopes Manual issued by the National Council on Compensation Insurance, Inc. (“NCCI”), class code 5474 is the general painting classification.2/ Therefore, the Department applied class code 5474 to all Respondent’s employees and officers for the entire penalty period. See Fla. Admin. Code R. 69L-6.028(3)(d) and 69L-6.021(2)(jj)(painting is classified as “construction activity”). Accordingly, to calculate the premium amount for the workers’ compensation insurance Respondent should have paid for its employees, 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 11, 2016. The Penalty Assessment imposed a penalty of $76,621.62 against Respondent. At the final hearing, Mr. Iturria expressed that he has always attempted to fully comply with every applicable law. Mr. Iturria asserted that following Investigator Glover’s visit, he acted quickly to address his business’s workers’ compensation issues. Mr. Iturria voiced that since this incident, he has taken steps to implement better business and payroll practices, and he will not make the same mistake again. Based on the competent substantial evidence in the record, the Department demonstrated, by clear and convincing evidence, that Respondent failed to secure workers’ compensation insurance coverage or workers’ compensation exemptions for its employees for the periods of August 20 through September 11, 2014, and March 15, 2015, through August 19, 2016. 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, Renew Painting, Inc., violated the requirement in chapter 440 to secure workers’ compensation coverage, and imposing a total penalty of $76,621.62. DONE AND ENTERED this 16th day of August, 2017, 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 16th day of August, 2017.
