The Issue Whether Respondent failed to secure the payment of workers’ compensation in violation of Sections 440.10(1), 440.38(1) and 440.107(2), Florida Statutes, by materially misrepresenting and concealing employee duties as to avoid proper classification for premium calculation, and if so, what is the appropriate penalty?
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees. Respondent is a commercial welding corporation based in Putnam County, Florida. It has been in business as an active Florida corporation since the early 1950s. Its principal office is located at 1301 Madison Street, Palatka, Florida 32177. Petitioner is an “employer” for purposes of Chapter 440, Florida Statutes. Respondent is in the business of welding, fabrication and erection of structural steel, fabrication and installation of metal handrails and fire escapes to existing buildings, and various other metal fabrication and welding operations. Respondent is engaged in the construction industry. At all material times, Respondent maintained a policy of workers’ compensation insurance for all of its employees. Respondent’s workers’ compensation insurance at issue in this case was obtained through the Florida Retail Federation Insurance Fund, and was in place since February 1, 2002. Pursuant to the Department's statutory authority, after receiving a referral based on a fatal accident at a site where Respondent was providing work, Investigator Daniel Pfaff of the Department's Division of Workers' Compensation, Bureau of Compliance, conducted an investigation into Respondent’s workers’ compensation coverage. The investigator reviewed payroll records as well as certificates of insurance. Respondent cooperated with the Department’s investigation, providing all requested documents and responding to the questions of Petitioner’s investigation. Investigator Pfaff determined that Respondent had not secured workers’ compensation coverage consistent with the job descriptions of its employees. At the final hearing it was shown that, indeed, the job classification code2/ listed on Respondent's workers' compensation policy for Respondent's non-clerical work used to determine premiums paid by Respondent was not appropriate for much of the work Respondent was performing. The job classification code on Respondent’s workers’ compensation policy for the non-clerical work performed by Respondent was 3822. Classification code 3822 encompasses manufacturing or assembling automobile, bus, truck, or trailer bodies made of die pressed steel. Classification code 3822 does not encompass fabrication of iron or steel outside of a welding shop, erection of iron or steel structures, fabrication and installation of metal handrails and fire escapes to existing buildings, or operation of machinery to lift materials used to erect buildings (collectively "off-site erection work"). Based upon contracts provided by Respondent to the Department, the Department determined that the proper classification codes for the off-site erection work performed by Respondent’s employees were 5040 and 5057. Classification code 5040 encompasses the erection of iron or steel frame structures, the assembly and fabrication of iron or steel frame structures at the erection site, welding operations incidental to steel erection work, and the installation of iron or steel balconies, fire escapes, and staircases to existing buildings. Classification code 5057 encompasses iron or steel erection not otherwise classified in the Scopes® Manual. After it was determined that Respondent did not have the proper workers’ compensation insurance, Investigator Pfaff issued a Stop Work Order and Order of Penalty Assessment against Respondent on behalf of the Department on February 12, 2010. The Stop-Work Order is on a form with supporting allegations that may be selected by checking the box next to the allegation. The boxes checked on the Stop-Work Order comprise the following allegation: “Failure to secure the payment of workers’ compensation in violation of sections 440.10(1), 440.38(1) and 440.107(2) Florida Statutes by: materially misrepresenting and concealing employee duties as to avoid proper classification for premium calculation.” The allegation selected in the Amended Order of Penalty Assessment refines the allegation of the Stop-Work Order by alleging “Failure to secure the payment of workers’ compensation within the meaning of section 440.107(2), F.S., by: materially misrepresenting or concealing employee duties so as to avoid proper classification for premium calculations.” The Second Amended Order of Penalty Assessment contains no separate allegation, but rather references the original Stop-Work Order and Order of Penalty Assessment and the Amended Order of Penalty Assessment. No other charging documents were provided by Petitioner in support of the proposed penalty. At the final hearing, Petitioner presented evidence demonstrating that the appropriate job classification code for the majority of Respondent’s work was 5040. It also provided evidence that $60,873.60 was the amount of penalty that would be due if a violation had occurred. The penalty amount was calculated by using payroll amounts provided by Respondent and the approved rates for the proper job classification codes to determine the amount of premium that should have been paid and then, after giving Respondent credit for previous premiums paid, multiplying the result by 1.5 in accordance with applicable rules. Petitioner, however, did not provide sufficient evidence that Respondent failed “to secure the payment of workers’ compensation in violation of sections 440.10(1), 440.38(1) and 440.107(2) Florida Statutes by materially misrepresenting and concealing employee duties as to avoid proper classification for premium calculation” as alleged in the Stop-Work Order. Rather than showing that Respondent misrepresented or concealed employee duties to avoid proper classification, the evidence indicated that Respondent believed that its company was compliant with Florida workers’ compensation coverage requirements. While the Scopes® Manual explains the various job classification codes, there was no evidence that the Scopes® Manual has ever been provided to Respondent or that Respondent was the one who selected the job classification codes that were on its workers’ compensation policy. The job classification description for classification code 3822 provided on premium summaries and statements from the insurance agent and carrier to Respondent were different at different times. One description was “auto, bus, truck body, MFG/steel” and another was “auto, bus, truck, trailer manufacturing, die press.” The self-audit reports abbreviate job classification 3822 as “Auto bus truck body mfg/steel.” These abbreviations do not give notice that Respondent’s job classification was wrong. In addition, the evidence showed that Respondent’s workers’ compensation insurance carrier conducted regular audits of Respondent's operations. Respondent cooperated with the audits. During the course of the audits, the insurance auditor would go to Respondent’s premises where the auditor was able to observe the types of machinery, equipment, and operations used by Respondent. Despite evidence on the premises indicating that Respondent was engaged in work beyond the scope of job classification code 3822 established at the final hearing, there is no evidence that the auditors, carriers, or agents ever questioned the workers’ compensation insurance job classification codes that were on Respondent’s policy, summaries, and audit forms that they transmitted to Respondent. Aside from cooperating with regular audits and allowing inspection of its premises, Respondent also provided additional information to its agent and carrier regarding its operations through Respondent’s requests for certificates of insurance for various off-site jobs. Investigator Pfaff has substantial experience in the insurance industry as an adjustor, special investigator and supervisor in property and casualty for over 30 years. As part of the investigation, investigator Pfaff obtained a number of Respondent’s certificates of insurance. The certificates of insurance were introduced as Petitioner’s Exhibit 21. Investigator Pfaff provided credible testimony that there was no real reason to send out a certificate of insurance unless a company was planning to perform work for another company. The certificates of insurance were issued by Respondent’s insurance agent at Respondent’s request for off- site erection work for a variety of different companies located in a variety of counties, and contain information showing that Respondent was performing work outside its premises. Respondent’s representative testified that Respondent informed its insurance agent of the location of the work each time a certificate of insurance was issued. The Department demonstrated that the off-site erection work being performed by Respondent was not consistent with the workers’ compensation classification code in place for Respondent. The certificates of insurance, however, were approved by the insurance agent or carrier, and neither expressed any concern that the workers’ compensation insurance coverage was insufficient in any respect. In addition, the carrier was made aware of the type of work performed by Respondent by prior claims. Respondent had previously reported two other workers’ compensation incidents which arose from work performed off of the premises. One previous off-site erection work incident involved an injury resulting from an employee falling from a crane, and the other involved an employee’s fall through a roof skylight. The insurance carrier was made aware that off-site erection and construction work was being performed by Respondent in each of these incidents. Even though it was established at the final hearing that job classification code 3822 utilized for Respondent’s workers’ compensations insurance for those incidents should not have covered the off-the-premises incidents, Respondent’s insurance carrier and insurance agent never suggested that Respondent’s workers’ compensation coverage was deficient or erroneous. In sum, Petitioner did not show that Respondent materially misrepresented or concealed employee duties in order to avoid proper classification for premium calculation of its workers’ compensation policy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing the Stop-Work Order, Order of Penalty Assessment, Amended Order of Penalty Assessment, and Second Amended Order of Penalty Assessment issued against Respondent, and ordering the return of any penalty paid by Respondent under the Periodic Payment Agreement. DONE AND ENTERED this 24th day of November, 2010, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of November, 2010.
The Issue Whether Royal Roofing and Restoration, Inc. (Respondent or Royal Roofing), failed to secure workers’ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (Petitioner or Department), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement of chapter 440, that Florida employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation organized on July 28, 2015, and engaged in the business of roofing and storm damage restoration. The company was formed, and initially conducted business, in Tallahassee, Florida, but expanded to the Panama City area in 2016. Traci Fisher is Respondent’s President and Registered Agent, with a mailing address of 1004 Kenilworth, Tallahassee, Florida 32312. DOAH Case No. 17-0879 On May 4, 2016, Department Compliance Investigator Jesse Holman, conducted a routine workers’ compensation compliance inspection at 374 Brown Place in Crestview, Florida. Mr. Holman observed four men removing shingles from the roof of a residential structure at that address. Mr. Holman first interviewed a worker who identified himself as Dustin Hansel and reported that he and the other three workers on site were a new crew for Respondent, the permit for the job had not yet been pulled, and the workers were not aware of the rate of pay for the job. Mr. Hansel telephoned Respondent’s sales manager, Dillon Robinson, who then spoke directly with Mr. Holman via telephone. Mr. Robinson informed Mr. Holman that Respondent obtained workers’ compensation coverage through Payroll Management Inc. (PMI), an employee-leasing company. Mr. Holman identified the three remaining workers at the jobsite as Milton Trice, Winston Perrotta, and Kerrigan Ireland. Mr. Holman contacted PMI and secured a copy of Respondent’s then-active employee roster. None of the workers at the jobsite, including Mr. Hansel, were included on Respondent’s employee roster. Upon inquiry, Mr. Holman was informed that PMI had no pending employee applications for Respondent. Mr. Holman consulted the Department’s Coverage Compliance Automated System (CCAS) and found Respondent had no workers’ compensation insurance policy and no active exemptions. During Mr. Holman’s onsite investigation, the workers left the jobsite. Mr. Holman could not immediately reach Ms. Fisher, but did speak with her husband, Tim Fisher. Mr. Fisher informed Mr. Holman that the crew was on their way to the PMI Fort Walton office to be enrolled on Respondent’s employee roster. On May 5, 2016, based on his investigation, and after consultation with his supervisor, Mr. Holman issued Respondent Stop-Work Order (SWO) 16-148-1A, along with a Business Records Request (BRR) for records covering the audit period of July 27, 2015 through May 4, 2016. Later that day, Mr. Holman spoke to Ms. Fisher, who informed him the crew did not have permission to begin the work on that date, as she had not yet pulled the permit for the reroof. Ms. Fisher further explained that the crewmembers had been instructed to complete applications with PMI prior to departing Tallahassee for Crestview. Ms. Fisher confirmed the crewmembers were completing applications at PMI Fort Walton that same day. Mr. Holman met with Ms. Fisher the following day and personally served SWO 16-148-1A. Ms. Fisher delivered to Mr. Holman an updated employee roster from PMI which included Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter documenting Mr. Trice was not employed by Respondent; and a $1000 check as downpayment on the penalty. Respondent initially submitted business records in response to the BRR on May 23 and 25, 2017. DOAH Case No. 17-1558 On June 8, 2016, Mr. Holman conducted a random workers’ compensation compliance inspection at 532 Rising Star Drive in Crestview. The single-family home at that address was undergoing renovations and Mr. Holman observed three men on the roof removing shingles. None of the men on the roof spoke English, but a fourth man, who identified himself as Jose Manuel Mejia, appeared and stated he worked for Respondent, and that all the workers onsite were paid through PMI at a rate of $10.00 per hour. Mr. Mejia admitted that one of the worker’s onsite, Emelio Lopez, was not enrolled with PMI and explained that Mr. Mejia brought him to the worksite that day because he knew Mr. Lopez to be a good worker. The remaining workers onsite were identified as Juan Mencho and Ramon Gonzalez, both from Atlanta, Georgia. Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho. Mr. Mejia stated that he and his crews also received reimbursement checks directly from Respondent for gas, rentals, materials, and the like. Mr. Holman contacted PMI, who produced Respondent’s then-active employee roster. Mr. Mejia and Mr. Mencho were on the roster, but neither Mr. Gonzalez nor Mr. Lopez was included. Mr. Holman next contacted Ms. Fisher, who identified Mr. Mejia as a subcontractor, but was not familiar with any of the other men Mr. Holman encountered at the worksite. Mr. Holman consulted via telephone with his supervisor, who instructed him to issue an SWO to Respondent for failing to secure workers’ compensation coverage for its employees. Mr. Holman issued SWO 16-198-1A by posting the worksite on June 8, 2016. Department Facilitator Don Hurst, personally served Ms. Fisher with SWO 16-198-1A in Tallahassee that same day. SWO 16-148-1A Penalty Calculation1/ Department Penalty Auditor Eunika Jackson, was assigned to calculate the penalties associated with the SWOs issued to Respondent. On June 8, 2016, Ms. Jackson began calculating the penalty associated with SWO 16-148-1A. Ms. Jackson reviewed the documents submitted by Respondent in response to the BRR. The documents included Respondent’s Wells Fargo bank statements, check images, and PMI payroll register for the audit period.2/ Based on a review of the records, Ms. Jackson identified the following individuals as Respondent’s employees because they received direct payment from Respondent at times during the audit period: David Rosinsky, Dylan Robinson, Jarod Bell, Tommy Miller, and David Shields. Ms. Jackson determined periods of non-compliance for these employees based on the dates they received payments from Respondent and were not covered for workers’ compensation via PMI employment roster, separate policy, or corporate officer exemption. Ms. Jackson deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. Based upon Ms. Fisher’s deposition testimony, Ms. Jackson assigned National Council on Compensation Insurance (NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class code 5474, Painting, to Mr. Rosinsky; NCCI class code 8742, Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810, clerical office employee, to Mr. Shields. Utilizing the statutory formula for penalty calculation, Ms. Jackson calculated a total penalty of $191.28 associated with these five “employees.” Ms. Jackson next calculated the penalty for Dustin Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta, the workers identified at the jobsite as employees on May 4, 2016. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll to these “employees,” thus, Ms. Jackson used the statutory formula to impute payroll to these workers. Ms. Jackson calculated a penalty of $14,970.12 against Respondent for failure to secure payment of workers’ compensation insurance for each of these four “employees” during the audit period. The total penalty associated with these four “employees” is $59,880.48. Ms. Jackson calculated a total penalty of $60,072.96 to be imposed against Respondent in connection with SWO 16-148- 1A. Business Records In compliance with the Department’s BRR, Respondent submitted additional business records on several occasions-- March 21, May 3 and 31, June 7, and August 15 and 24, 2017--in order to establish its complete payroll for the audit period. While the Department admits that the final documents submitted do establish Respondent’s complete payroll, the Department did not issue amended penalty assessment based on those records in either case. The Department maintains Respondent did not timely submit records, pursuant to Florida Administrative Code Rule 69L-6.028(4), which allows an employer 20 business days after service of the first amended order of penalty assessment to submit sufficient records to establish payroll. All business records submitted by Respondent were admitted in evidence and included as part of the record. The undersigned is not limited to the record before the Department at the time the amended penalty assessments were imposed, but must determine a recommendation in a de novo proceeding. The undersigned has relied upon the complete record in arriving at the decision in this case. Penalty Calculation for Ireland, Trice, and Perrotta For purposes of workers’ compensation insurance coverage, an “employee” is “any person who receives remuneration from an employer” for work or services performed under a contract. § 440.02(15)(a), Fla. Stat. Respondent did not issue a single check to Mr. Ireland, Mr. Trice, or Mr. Perrotta during the audit period. Mr. Ireland, Mr. Trice, and Mr. Perrotta are not included on any PMI leasing roster included in the record for the audit period. The uncontroverted evidence, including the credible and unrefuted testimony of each person with knowledge, established that Mr. Ireland, Mr. Trice, and Mr. Perrotta were newly hired for the job in Crestview on May 4, 2016, and began working that day prior to submitting applications at PMI, despite Ms. Fisher’s directions otherwise. Petitioner did not prove that either Mr. Ireland, Mr. Trice, or Mr. Perrotta was Respondent’s employee at any time during the audit period. Petitioner did not correctly calculate the penalty of $44,911.26 against Respondent for failure to secure workers’ compensation insurance for Mr. Ireland, Mr. Trice, and Mr. Perrotta during the audit period. Penalty Calculation for Hansel Ms. Fisher testified that Mr. Hansel has owned several businesses with which Respondent has conducted business over the years. Originally, Mr. Hansel owned a dumpster rental business, now owned by his father. Mr. Hansel also owned an independent landscaping company with which Respondent occasionally transacted business. When Respondent expanded business into the Panama City area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise new crews in the area. The job on May 4, 2016, was his first roofing job. A review of Respondent’s records reveals Respondent issued the following checks to Mr. Hansel during the audit period: December 4, 2015, in the amount of $360, $300 of which was for “dumpster rental” and the remaining $60 for “sod”; May 4, 2016, in the amount of $200 for “sod repair”; May 6, 2016, in the amount of $925 as reimbursement for travel expenses; May 9, 2016, in the amount of $1,011.50 (with no memo); and May 21, 2016, in the amount of $100 for “7845 Preservation.” Mr. Hansel was included on Respondent’s PMI leasing roster beginning on May 13, 2016. Petitioner proved that Mr. Hansel was Respondent’s employee at times during the audit period. Petitioner did not prove that Respondent’s records were insufficient to determine payroll to Mr. Hansel during the audit period, which would have required an imputed penalty. Petitioner did not correctly calculate the penalty of $14,970.42 against Respondent for failure to secure workers’ compensation insurance coverage for Mr. Hansel during the audit period. Sod repair by Mr. Hansel is a service performed for Respondent during the audit period. Reimbursement of travel expenses is specifically included in the definition of payroll for purposes of calculating the penalty. See Fla. Admin. Code R. 69L- 6.035(1)(f) (“Expense reimbursements, including reimbursements for travel” are included as remuneration to employees “to the extent that the employer’s business records and receipts do not confirm that the expense incurred as a valid business expense.”). Dumpster rental is neither work performed on behalf of, nor service provided to, Respondent during the audit period. The correct uninsured payroll amount attributable to Mr. Hansel is $2,296.50. Petitioner correctly applied NCCI class code 5551, Roofing, to work performed by Mr. Hansel based on the observation of Mr. Holman at the worksite on May 4, 2016. With respect to Mr. Hansel’s services for sod and sod repair, Petitioner did not correctly apply NCCI class code 5551. Petitioner did not introduce competent substantial evidence of the applicable NCCI class code and premium amount for landscaping services performed during the audit period.3/ Uninsured payroll attributable to Mr. Hansel for roofing services during the audit period is $2,036.50. The approved manual rate for workers’ compensation insurance for NCCI class code 5551 during the period of non- compliance--May 9 and 21, 2016--is $18.60. The premium amount Respondent would have paid to provide workers’ compensation insurance for Mr. Hansel is $378.79 (One percent of Mr. Hansel’s gross payroll during the non-compliance period--$20.36--multiplied by $18.60). The penalty for Respondent’s failure to secure worker’s compensation coverage insurance for Mr. Hansel during the period of non-compliance is calculated as two times the amount Respondent would have paid in premium for the non- compliance period. The correct penalty for Respondent’s failure to maintain workers’ compensation coverage for Mr. Hansel during the period of non-compliance is $757.58. Penalty Calculation for Salesmen Independent contractors not engaged in the construction industry are not employees for purposes of enforcing workers’ compensation insurance requirements. See § 440.02(15)(d)1., Fla. Stat. Sales is a non-construction industry occupation. The Department calculated a penalty associated with payroll attributable to the following persons identified by Ms. Fisher as independent salesmen: Dylan Robinson, Kevin Miller, Marc Medley, Mike Rucker, Colby Fisher, David Jones, Jarod Bell, Matt Flynn, and Todd Zulauf. Section 440.02(15)(d)1. provides that an individual may be an independent contractor, rather than an employee, as follows: In order to meet the definition of independent contractor, at least four of the following criteria must be met: The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal regulations; The independent contractor receives compensation for services rendered or work performed and such compensation is paid to a business rather than to an individual; The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying business expenses or other expenses related to services rendered or work performed for compensation; The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or The independent contractor receives compensation for work or services rendered on a competitive-bid basis or completion of a task or a set of tasks as defined by a contractual agreement, unless such contractual agreement expressly states that an employment relationship exists. If four of the criteria listed in sub- subparagraph a. do not exist, an individual may still be presumed to be an independent contractor and not an employee based on full consideration of the nature of the individual situation with regard to satisfying any of the following conditions: The independent contractor performs or agrees to perform specific services or work for a specific amount of money and controls the means of performing the services or work. The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform. The independent contractor is responsible for the satisfactory completion of the work or services that he or she performs or agrees to perform. The independent contractor receives compensation for work or services performed for a commission or on a per-job basis and not on any other basis. The independent contractor may realize a profit or suffer a loss in connection with performing work or services. The independent contractor has continuing or recurring business liabilities or obligations. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures. Ms. Fisher testified that each of the above-named salesmen sold roofing jobs for her at various times during the audit period on a commission-only basis. The contractors inspect homeowner roofs, draft schematics, use their own equipment (e.g., drones), incur all of their own expenses, and handle the insurance filing for the homeowner’s insurance to pay on the claim. Ms. Fisher further testified that each of the salesmen also sells for other roofing contractors in the Tallahassee area. She pays the salesmen on a per-job basis. Ms. Fisher does not compensate the salesmen for the time involved in inspecting a roof, preparing schematics, or making the sale. Nor does Ms. Fisher reimburse the salesmen for travel to sales jobsites. Ms. Fisher’s testimony was credible, persuasive, and uncontroverted. Respondent introduced in evidence four “Independent Contractor Checklists” allegedly completed by Mr. Robinson, Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist follows the format of section 440.02(15)(d)1., listing the criteria set forth in subparagraphs a. and b. The forms indicate that they each meet all the criteria listed in subparagraph b.: they perform, or agree to perform services for a specific amount of money and control the means of performing the service; they incur the principal expenses related to the service performed; they are responsible for satisfactory completion of the services performed; they receive compensation for the services performed on a per-job or commission basis; they may realize a profit or suffer a loss in connection with performing the services; they have continuing and recurring business liabilities or obligations; and the success or failure of their business depends on the relationship of business receipts to expenditures.4/ In its Proposed Recommended Order, Petitioner conceded the nine men identified by Respondent as independent sales contractors “would not be considered employees of Respondent” because the “salesmen would seem to meet the majority of [the] requirements [of section 440.02(15)(d)1.b.].” Respondent issued Dylan Robinson, Mark Medley, Colby Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Jarod Bell, David Jones, and Todd Zulauf an IRS FORM 1099-MISC for income paid during the 2016 tax year. Respondent did not prove by clear and convincing evidence that the above-named salesmen were Respondent’s employees during the audit period. For SWO 16-148-1A, Respondent did not correctly calculate the penalty because Respondent included a penalty associated with Petitioner’s failure to provide workers’ compensation insurance coverage for Dylan Robinson and Jarod Bell. Penalty in the amount of $20.70 associated with Dylan Robinson and Jarod Bell should not be included in the total penalty. The correct penalty amount for SWO 16-148-1A, based on records submitted by Respondent on or before March 20, 2016, is $929.16. Draft Revised Second Amended Order of Penalty Assessment The additional records submitted by Respondent revealed payments made to persons during the audit period who were not included in the Department’s Second Amended Order of Penalty Assessment. The Department and Respondent disagreed at hearing whether the payments qualified as payroll. At hearing, Petitioner submitted a draft revised second amended penalty calculation for SWO 16-148-1A based on all records received from Respondent. The revised penalty is in the amount of $61,453.50. Ms. Jackson populated the spreadsheet with the name of every individual to whom a check was written on Respondent’s business bank account during the audit period, removing only those payments to individuals and entities which, to Petitioner’s knowledge, were not Respondent’s employees. Respondent’s calculations in the revised penalty suffer from some of the same errors as in the second amended penalty calculation--they include individuals Petitioner did not prove were Respondent’s employees, as well as payments which were not uninsured payroll. For the reasons explained herein, Petitioner did not prove that salesmen David Jones, Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer, and Colby Fisher were Respondent’s employees during the audit period. Respondent did not accurately calculate the penalty associated with those persons. Respondent made payments to David Shields during the audit period, which the Department argues should be included as payroll. The Department included payments to Mr. Shields in its draft revised second amended order of penalty assessment and assigned NCCI class code “8810” for clerical work. Mr. Shields is a licensed professional roofing contractor who acts as “qualifier” for Respondent’s business. A qualifier is a licensed professional who certifies plans for permit applications submitted by another business. Respondent pays Mr. Shields a flat fee per permit application qualified by him. The record evidence does not support a finding that Mr. Shields provides clerical services to Respondent. Mr. Shields provides some sort of professional services to Respondent, and is likely an independent contractor providing his own materials and supplies, maintaining his own business accounts, and liable for his own business success. Assuming Mr. Shields were Respondent’s employee, the Department introduced no evidence of an appropriate NCCI class code for Mr. Shields’ services. The Department did not prove that payments to Mr. Shields should be included as Respondent’s uninsured payroll during the audit period. Respondent paid Susan Swain a total of $258 during the audit period for clerical work. Ms. Fisher maintained Ms. Swain’s work was casual at first, and the payments reflect a time when she worked on-again, off-again, handling the paperwork for restoration insurance claims. Later, Ms. Swain came to work for Respondent full-time and was added to the PMI leasing roster. Section 440.02(15)(d)5. provides that a person “whose employment is both casual and not in the course of the trade, business, profession or occupation of the employer” is not an employee. The statute defines “casual” employment as work that is anticipated to be completed in 10 working days or less and at a total labor cost of less than $500. See § 440.02(5), Fla. Stat. In its Proposed Recommended Order, the Department argues Ms. Swain’s wages should be included as payroll because the “testimony regarding Ms. Swain does not suggest that she was employed for less than 10 days[.]” However, it was the Department’s burden to prove that Ms. Swain was a statutory employee. The Department did not prove that Ms. Swain’s wages should be included within Respondent’s uninsured payroll. The largest portion of the penalty assessed by the Department, as well as in the draft revised second amended penalty assessment, against Respondent is in connection with various roofers who were employed by Respondent at times during the audit period. Each of the roofers was included on Respondent’s PMI leasing roster, but received checks directly from Respondent in addition to PMI payroll checks. The Department included all the direct payments to those roofers as payroll for purposes of calculating a penalty in this case. As Ms. Fisher explained, the company bids a reroof on a per job basis--usually a per square foot price. Ms. Fisher adds each roofing contractor’s name to the PMI leasing roster to ensure that each roofer is covered by workers’ compensation insurance for the duration of the job. When the job is completed (which is a matter of just a few days), the contractor reports to Ms. Fisher what amount of the contract price was spent on materials, supplies, or other non-labor costs. Ms. Fisher cuts a check to the contractor for that amount and authorizes PMI to issue payroll checks for the “labor cost” (the difference between the contract price and the non-labor costs). Ms. Fisher refers to this process as “back-charging” the contractors for their materials, maintenance, tools, and other non-labor costs. The Department is correct that the direct payments are payroll to the roofing contractors. See Fla. Admin. Code R. 69L-6.035(1)(b) and (h) (remuneration includes “payments, including cash payments, made to employees by or on behalf of the employer” and “payments or allowances made by or on behalf of the employer for tools or equipment used by employees in their work or operations for the employer.”). The Department would be correct to include these payments in the penalty calculation if they represented uninsured payroll. However, the evidence supports a finding that the direct payments to the roofing contractors were made for the same jobs on which Respondent secured workers’ compensation coverage through PMI. The roofing contractors were covered for workers’ compensation throughout the job, even though they may have received partial payment for the job outside of the PMI payroll checks.5/ The direct payments were not for separate reroofs on which the roofers were not otherwise insured. The Department did not correctly calculate penalties associated with the following roofing contractors: Donald Tontigh, Joseph Howard, Keith Mills, Aaron Kilpatrick, Gustavo Tobias, Jose Mejia, and Tommy Miller. Ms. Fisher also received cash payments from Respondent during the audit period. These payments were made in addition to her payroll through PMI. Ms. Fisher described these payments as “cash tickets,” which were paid outside of her PMI payroll to reimburse her for investments made in the company. For purposes of calculating the penalty in this case, these “cash tickets” are clearly payroll, as that term is to be calculated pursuant to rule 69L-6.035. Similar to the issue with the roofing contractors, the question is whether the payments represent uninsured payroll. Ms. Fisher did not hold a corporate officer exemption at any time relevant hereto. Ms. Fisher testified that she was covered through PMI payroll leasing. In contrast to the roofing contractors, Ms. Fisher’s direct payments do not directly coincide with any particular job or specific time frame during which Ms. Fisher was covered for workers’ compensation insurance through PMI. The evidence was insufficient to determine that the amounts were insured payroll. The Department properly calculated a penalty associated with payroll attributable to Ms. Fisher. Respondent made one payment of $75 to Donald Martin during the audit period. The Department calculated a penalty of $27.90 associated with this payment to Mr. Martin. Ms. Fisher explained that Mr. Martin was a down-on-his-luck guy who came by the office one day complaining that Mr. Hansel owed him some money. Ms. Fisher offered to put him on a roofing crew and wrote him the $75 check to help him out. Ms. Fisher’s testimony was both credible and unrefuted. Mr. Martin was never hired by Respondent, put on any roofing crew, or added to the PMI leasing roster. Mr. Martin was not Respondent’s employee because he did not receive remuneration for the “performance of any work or service while engaged in any employment under any appointment or contract for hire” with Respondent. § 440.02(15)(a), Fla. Stat. Cale Dierking works for Respondent full-time in a clerical position. During the audit period, Respondent paid Mr. Dierking directly by check for $1,306.14. This payment was made outside of Mr. Dierking’s PMI payroll checks. Ms. Fisher testified that she paid Mr. Dierking directly on one occasion when “PMI’s payroll got stuck in Memphis, I believe it was a snow-in situation where payroll checks didn’t come.” Rather than ask her employee to go without a timely paycheck, she advanced his payroll. Ms. Fisher’s testimony was both credible and unrefuted. The payment to Mr. Dierking is clearly payroll. However, Mr. Dierking was covered for workers’ compensation through PMI for the period during which the check was issued. Thus, there is no evidence that it was uninsured payroll. The Department did not correctly calculate a penalty associated with payments to Mr. Dierking. The correct penalty to be assessed against Respondent for failure to secure workers’ compensation coverage for its employees during the audit period in connection with SWO 16-148- 1A is $770.60. Penalty Calculation for SWO 16-198-1A Ms. Jackson calculated a total penalty against Respondent in connection with SWO 16-198-1A in the amount of $19,115.84, as reflected in the Second Amended Order of Penalty Assessment. The Department correctly imputed penalty against Respondent in the amount of $91.68 each for uninsured payroll to Mr. Gonzalez and Mr. Lopez. The evidence supported a finding that these workers were Respondent’s statutory employees on June 8, 2016, and were not enrolled on the PMI leasing roster. The Department did not correctly calculate the penalty associated with salesmen Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, and Todd Zulauf. The Department did not correctly calculate the penalty associated with roofing contractors Abraham Martinez- Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina-Agustin, Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy Miller. The Department did not correctly calculate the penalty against Respondent associated with Mr. Shields, Respondent’s qualifier. Based on a review of Respondent’s complete “untimely” records, the Department discovered direct payments made to additional employees not included on the Second Amended Order of Penalty Assessment. Respondent made a direct payment to Ethan Burch in the amount of $602.50 during the audit period. Ethan Burch is one of Respondent’s full-time clerical employees. The evidence is insufficient to determine whether the payment of $602.50 was insured or uninsured payroll. As such, the Department did not prove it correctly calculated the penalty associated with Mr. Burch. Respondent also made a direct payment to Chelsea Hansel in the amount of $965 during the audit period. Ms. Hansel is another clerical employee. Ms. Hansel’s PMI enrollment was delayed due to some background investigation. Respondent paid Ms. Hansel for work she completed prior to enrollment. The direct payment to Ms. Hansel constitutes uninsured payroll. The Department correctly calculated the penalty associated with the payment to Chelsea Hansel. The correct penalty amount to be imposed against Respondent for failure to secure payment of workers’ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel) during the audit period in connection with SWO 16-198-1A is $187.80.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers’ Compensation, finding that Royal Roofing and Restoration, Inc., violated the workers’ compensation insurance law and, in DOAH Case No. 17-0879, assessing a penalty of $770.60; and in DOAH Case No. 17-1558, assessing a penalty of $187.80. DONE AND ENTERED this 24th day of January, 2018, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 2018.
The Issue The issue is whether the Stop-Work Order and the Third Amended Order of Penalty Assessment entered by Petitioner on July 25, 2013, and August 13, 2013, respectively, should be upheld.
Findings Of Fact The Department is the state agency tasked with the responsibility of enforcing the requirement of section 440.107(3), Florida Statutes, that employers in Florida secure the payment of workers' compensation for their employees. Respondent, Mad Dog Marketing Group, Inc., is a corporation organized under chapter 607, Florida Statutes, and was registered with the Florida Department of State, Division of Corporations, throughout the period of July 26, 2010, to July 25, 2013. At all times relevant to this proceeding, Respondent was engaged in the operation of a hardware store business with three locations in Florida. On July 25, 2013, based upon an anonymous referral, Tracey Gilbert, the Department's compliance investigator, commenced a workers' compensation compliance investigation of Respondent by visiting the job site, an appliance parts store at 730 West Brandon Boulevard, Brandon, Florida, and interviewing Sharon Belcher. According to Ms. Gilbert, Ms. Belcher informed her that she had 11 employees at the time of the site visit and that she did not have workers' compensation coverage for them. Ms. Belcher showed Ms. Gilbert an application for workers' compensation insurance and said she had not taken action with it since the company wanted a $10,000 premium. She also showed Ms. Gilbert some OSHA and workplace posters, but not the typical "broken arm poster" that describes workers' compensation coverage for a place of business. Ms. Belcher then gave Ms. Gilbert a list of Respondent's 11 current employees. On her laptop computer, Ms. Gilbert consulted the Department's Coverage and Compliance Automated System (CCAS) database to determine whether Respondent had secured workers' compensation coverage or an exemption from the requirements for coverage for its employees. CCAS is the database Ms. Gilbert routinely consults during the course of her investigations. She determined from CCAS that Respondent neither had workers' compensation coverage for her employees nor had received an exemption from such coverage from the Department. Ms. Belcher's recollection of her meeting with Ms. Gilbert differs from Ms. Gilbert's. Ms. Belcher recalled that she had applied for insurance with ADP on July 11, 2013, received the "broken arm poster," and believed she was covered at the time Ms. Belcher conducted her investigation. She offered an exhibit showing photographs of posters (but not the "broken arm poster") on the office bulletin board. She also offered an exhibit she testified was the UPS label from the tube containing the "broken arm poster." No photograph of the "broken arm poster" was produced as an exhibit. Ms. Gilbert did not contact ADP to verify whether Respondent had coverage on the date of her site visit to the Brandon store. Ms. Gilbert issued a Stop-Work Order to Respondent and a concurrent Request for Production of Business Records for Penalty Assessment Calculation at 11:20 a.m. on July 25, 2013. Ms. Belcher first submitted an application for workers' compensation coverage on July 11, 2013, but coverage was not bound on that date. Ms. Belcher submitted the paperwork to bind her insurance coverage on the afternoon of July 25, 2013, according to Mark Cristillo, an employee of ADP Insurance. Mr. Cristillo testified that he had made several attempts during the month of July 2013 to obtain the signed documents from Ms. Belcher, including an attempt as late as July 23, 2013, at 11:45 a.m. Ms. Belcher told Mr. Cristillo at that time that she had not reviewed the quote package. At 11:20 a.m., the time Ms. Gilbert's issued the Stop-Work Order on July 25, 2013, Ms. Belcher had not bound her insurance coverage. When she submitted the payment with the signed documents to ADP later that afternoon, the coverage was bound effective 12:01 a.m. on July 25, 2013. The records produced by Ms. Belcher were given to Chad Mason, one of the Department's penalty auditors, to calculate the penalty. He reviewed the records and determined the amount of gross payroll paid to Respondent's employees during the three- year penalty period preceding the investigation during which Respondent was not in compliance with the workers' compensation coverage requirements. Using Respondent's bi-weekly payroll chart, Respondent's Florida Department of Revenue UCT-6 reports, and the classification codes for each employee, Mr. Mason calculated a Third Amended Order of Penalty Assessment of $42,251.43, based upon what Respondent would have paid in workers' compensation premiums had it been in compliance with Florida's Workers' Compensation Law. The order was issued on October 24, 2013. Mr. Mason determined that the appropriate codes for Respondent's employees were 8010 and 8810, which are hardware store employees and general clerical employees, respectively. These codes were derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers' compensation. The manual is produced by NCCI, the National Council on Compensation Insurance, Inc., the nation's most authoritative data collecting and disseminating organization for workers' compensation. The parties stipulated prior to hearing that all of the individuals listed on the penalty worksheet of the Amended Order of Penalty Assessment were "employees" in the state of Florida of Respondent during the periods of non-compliance listed on the penalty worksheets. However, Respondent claimed that some of the employees were out-of-state and not subject to Florida law. Ms. Belcher testified that, as of July 25, 2013, three of its employees, Fred Hasselman, Douglas Strickland, and Josh Hyers, were employees of the Tennessee store and not subject to a Florida penalty. Mr. Hyers was a Florida employee prior to July 1, according to Ms. Belcher. However, all three of the employees were listed on the Florida Department of Revenue's UCT-6 form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida's Unemployment Compensation Law. Mr. Mason reasonably relied upon the UCT-6 filings for the relevant time period to calculate Respondent's gross payroll in Florida. No evidence was produced to show them listed as Tennessee employees on that state's comparable tax form or any official document from outside Florida. The logical assumption is that they are Florida employees under the law. Accepting all the employees disclosed by Respondent as Florida employees led Mr. Mason to make his calculations of the penalty assessment using the appropriate codes from the Scopes Manual for hardware store and general clerical workers, 8010 and 8810. All the named employees on the Third Amended Order of Penalty Assessment were paid by Respondent in the amounts indicated on the penalty worksheet that accompanies that assessment during the penalty period of July 26, 2010, through July 25, 2013. Even though small discrepancies came up at the hearing regarding the classifications of some of Respondent's employees, the parties had stipulated to the accuracy of the classifications of those employees so those numbers will be accepted for purposes of this decision. Based upon the testimony at the hearing and the pre-hearing stipulations of the parties, the penalty assessment in the amount of $42,251.43 is accurate. Mr. Mason correctly applied the methodology for determining the amount of coverage required, determining that the appropriate premium for the three- year period would have been $28,167.50. When multiplied by the factor used to calculate the penalty, 1.5 times the premium, the total amount due is $42,251.43. The Department has proven by clear and convincing evidence that at the time the Stop-Work Order was issued and served on Respondent on the morning of July 25, 2013, Respondent had not secured workers' compensation coverage for its employees as required by chapter 440. On two occasions, August 2 and August 21, 2013, Ms. Gilbert returned to Respondent's Brandon location after the Stop-Work Order had been issued. The first was to serve the Amended Order of Penalty Assessment and the second was to serve the Second Amended Order of Penalty Assessment. On both occasions, the business was open in violation of the Stop-Work Order. A business under a Stop-Work Order may elect to enter into a payment plan after a ten percent down payment to keep the business open while a challenge to DOAH is under way. Respondent had not entered into such a plan. Therefore, the Department seeks $1,000 penalty for each of the days Ms. Gilbert visited the Brandon store and saw it open for business. This total additional penalty of $2,000 could have been greater had the Department further investigated whether the business remained open on other days after the Stop-Work Order had been imposed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order upholding the Stop-Work Order and Third Amended Order of Penalty Assessment, and assess a penalty in the amount of $42,251.43. It is further RECOMMENDED that the Department fine Respondent an additional $1,000 per day for the two days Respondent did not comply with the Stop-Work Order, resulting in a total penalty of $44,251.43. DONE AND ENTERED this 20th day of December, 2013, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN 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 December, 2013. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Kristian Eiler Dunn, Esquire Dickens and Dunn, P.L. 517 East College Avenue Tallahassee, Florida 32301 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390
The Issue The issues are: (1) Whether Respondent, Bravo Construction, Inc. ("Respondent"), was in violation of the workers’ compensation requirements of Chapter 440.107, Florida Statutes (2003),1/ by failing to secure workers’ compensation coverage for its workers; (2) Whether such individuals possessed current valid workers’ compensation exemptions; and (3) Whether Respondent paid its workers remuneration outside of Respondent’s employee leasing company.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of Section 440.107, Florida Statutes, which requires that employers secure the payment of workers’ compensation coverage for their employees. Respondent is a company engaged in the construction industry. Specifically, Respondent's business is framing houses. At all time relevant to this proceeding, Elias Bravo was president of the company. On May 26, 2004, the Department’s investigators, Carol Porter and Kelley Dunning, conducted a random visit of a work site in Grassy Point, a gated community in Port Charlotte, Florida, and discovered Mr. Bravo and his workers on site as the house-framers. When the investigators arrived at the site, they spoke with Mr. Bravo, who advised the investigators that Respondent utilized a personnel leasing company, Time Management, which was actually a brokerage firm for Southeast Personnel Leasing, Inc. ("SEPL"), to secure workers’ compensation coverage. On May 26, 2005, Mr. Bravo was the only person in his crew who had coverage with SEPL. At the time of the site visit, the other men were not listed with SEPL because Mr. Bravo still had their applications in his car. After Respondent was unable to provide proof that the men had workers' compensation coverage pursuant to Subsections 440.107(3) and (7)(a), Florida Statutes, the investigators issued a Stop Work Order to Respondent while at the work site on May 26, 2004. On the same day that the Stop Work Order was issued, Investigator Dunning served Mr. Bravo with a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Production of Business Records"). The Department requested copies of Respondent's business records in order to determine whether Respondent had secured workers' compensation coverage; whether Mr. Bravo or Respondent's employees had workers' compensation exemptions; and, if not, to determine the penalty assessment. In response to the Request for Production of Business Records, Mr. Bravo provided certificates of insurance, Respondent's check stubs written to various entities or individuals on behalf of Respondent, payroll records, and Form 1099s for the year ending 2003. Many of the documents provided by Mr. Bravo indicated that Respondent made payments directly to the entities and individuals. The Department maintains records regarding the workers' compensation coverage of individuals and entities in a statewide database called Compliance and Coverage Automated System ("CCAS"). The CCAS database is utilized by the Department to verify if an individual or entity has workers' compensation coverage or a valid exemption from coverage. As part of the Department's investigation, Investigator Porter conducted a CCAS search for Respondent's workers’ compensation insurance coverage records. This search verified that Mr. Bravo had workers' compensation coverage. However, many of the workers or entities to whom Respondent made direct payments did not have workers’ compensation coverage or current valid workers’ compensation exemptions. Based on a review of the payroll records, check stubs, and the Form 1099s that Respondent provided to the Department, Investigator Porter determined that Respondent was an "employer" as that term is defined in Subsection 440.02(16), Florida Statutes. Subsequently, the Department reassessed the original penalty and issued the Amended Order with the attached penalty worksheet which detailed the basis of the penalty assessment. In determining the amended penalty assessment, Investigator Porter disregarded and did not include Respondent's payments to any individual or entity that had workers’ compensation coverage or an exemption from such coverage. The Amended Order, which reflected a penalty assessment of $97,416.68, was issued to Respondent on May 28, 2004.2/ Respondent paid remuneration to the individuals listed on the penalty worksheet of the Amended Order for work they performed. Nonetheless, during the period covered by the penalty assessment, Respondent did not secure workers' compensation coverage for the individuals listed on the penalty worksheet, and none of them had workers' compensation coverage or exemptions from such coverage. The individuals listed on the penalty worksheet of the Amended Order were Respondent's employees during the relevant period, in that they were paid by Respondent, a construction contractor, and did not have workers’ compensation coverage or an exemption from such coverage. Mr. Bravo had workers' compensation coverage through SEPL. However, none of the employees listed on the Amended Order had workers' compensation coverage through SEPL, because they were paid directly by Respondent. A personnel leasing company provides workers' compensation coverage and payroll services to its clients, then leases those employees back to the clients for a fee. Respondent was a client of SEPL, and based on that relationship, Mr. Bravo believed that he and his workers received workers' compensation coverage through that personnel leasing company. However, the workers' compensation coverage provided by SEPL applied only to those employees SEPL leased to Respondent. In the case of leased employees, Respondent would have to make payments to the leasing company and not directly to his workers. The leasing company would then, in turn, pay the leased employees. When, as in this case, the construction company makes direct payments to individuals performing construction work, those workers are not leased employees and, thus, are not secured by the workers’ compensation coverage provided by the personnel leasing company. See § 468.520, Fla. Stat. Some of the individuals listed on the penalty worksheet may have been "dually employed"; that is, sometimes they were employed by Respondent and at other times, they were employees of SEPL and were leased to Respondent. However, during the periods in which individuals worked for Respondent and were paid by Respondent, and were not paid by SEPL, they were without workers’ compensation coverage unless Respondent provided such coverage. With regard to the individuals listed on the penalty worksheet, Respondent provided no such coverage. Respondent, through Mr. Bravo, paid its employees directly, thus, circumventing SEPL and losing the coverage that the employees may have had through it. The Department assessed the penalty against Respondent based on the remuneration Respondent gave directly to the employees outside of SEPL, the class code assigned to each employee utilizing the SCOPES Manual adopted by the Department in Florida Administrative Code Rule 69L-6.021, and the guidelines in Subsection 440.107(7)(d), Florida Statutes.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order that affirms the Stop Work Order and the Amended Order of Penalty Assessment, which imposes a penalty of $97,416.68. DONE AND ENTERED this 10th day of May, 2005, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of May, 2005.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2013)1/, by failing to obtain workers? compensation insurance coverage, as alleged in the Stop-Work Order and Amended Order of Penalty Assessment; and, if so, the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement that employers secure the payment of workers? compensation insurance coverage, pursuant to chapter 440, Florida Statutes, for their employees. Respondent is a Florida-limited liability company engaged in business operations for the time period of March 16, 2010, through March 15, 2013. Mark Markisen is the managing member of Respondent listed with the State of Florida, Division of Corporations. On March 15, 2013, Jack Gumph, an investigator with the Department, conducted a random on-site compliance inspection of a construction site for a single family residence. Gumph determined that the general contractor for the job was Gulf Shore Homes and that it had subcontracted with Tradewinds Design for certain work inside the home. As Gumph interviewed the different workers present on the worksite, he spoke with Mark and Brett Markisen, who informed him that they worked for Tradewinds Design. Gumph observed Brett Markisen installing a wine cabinet in the home. Gumph confirmed through the Department?s online records that Gulf Shores Homes and Tradewinds Design had current workers? compensation insurance coverage on March 15, 2013. Based on this initial information, Gumph left the worksite. On March 19, 2013, Gumph subsequently learned from a conversation with Mark Markisen that Mark and Brett Markisen were not employees of Tradewinds Design. Rather, Tradewinds had subcontracted with Respondent, Cabinetry by Design of Collier County, L.L.C., to build and install the wine cabinets. Mark Markisen stated that he was the managing member of Cabinetry by Design of Collier County, L.L.C., and that he had selected to be exempt from workers? compensation insurance coverage. Gumph confirmed that Mark Markisen had selected to be exempt from workers? compensation insurance coverage. However, because Respondent did not have worker?s compensation coverage for Brett Markisen, the Department issued a Stop-Work Order on March 19, 2013, and Request for Production of Business Records for Penalty Assessment Calculation on April 8, 2013. Mark Markisen possessed an exemption from the workers? compensation insurance coverage requirement during the penalty period of March 16, 2010, through March 15, 2013. Brett Markisen did not possess an exemption from the workers? compensation insurance coverage requirement during the penalty period. Brett Markisen was employed by Respondent throughout the penalty period. During the penalty period, Brett Markisen received approximately $187,000.00 from Respondent. The amount of this money attributed to wages is unclear, based on the fact that Mark Markisen indicated that some of the payments reflected loans, not wages. Respondent was an “employer” as defined in chapter 440, Florida Statutes, throughout the penalty period. On March 15, 2013, Brett Markisen was Respondent?s “employee” working on the installation of cabinets in the single family residence.2/ On March 15, 2013, Respondent failed to provide workers? compensation insurance coverage for Brett Markisen. Respondent also failed to provide coverage during the penalty period of March 16, 2010, through March 15, 2013. Therefore, the Department properly entered a Stop-Work Order on March 19, 2013. Respondent failed to provide sufficient business records in order to establish a payroll. Therefore, the Department correctly imputed payroll against Respondent. The Amended Order of Penalty Assessment used the proper class code for the calculation of the penalty, concerning the installation of cabinets, and correctly followed the procedure set out in section 440.107(7)(d)1, Florida Statutes, and Florida Administrative Code Rule 69L-6.028.
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 upholding the Stop-Work Order and Amended Order of Penalty Assessment, assessing a penalty against Respondent in the amount of $21,436.61. DONE AND ENTERED this 30th day of December, 2013, in Tallahassee, Leon County, Florida. S THOMAS P. CRAPPS 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 30th day of December, 2013.
The Issue Whether Respondent, Gulf Coast Site Prep, Inc., failed to comply with the coverage requirements of the Workers’ Compensation Law, chapter 440, Florida Statutes, by not obtaining workers’ compensation insurance for its employees, and, if so, what penalty should be assessed against Respondent pursuant to section 440.107, Florida Statutes (2014).1/
Findings Of Fact 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. Respondent, Gulf Coast Site Prep., Inc., is a Florida for-profit corporation organized on March 3, 2008. Respondent’s registered business address is 952 TR Miller Road, Defuniak Springs, Florida. Ashley Adams is Respondent’s President and Registered Agent. On March 27, 2015, the Department’s investigator-in- training, Jill Scogland, and lead investigator, Sharon Kelson, conducted a random workers’ compensation compliance check at Lot 34 in the Driftwood Estates residential subdivision in Santa Rosa Beach, Florida. Ms. Scogland observed two men on site. David Wayne Gibson was operating a front-end loader spreading dirt on site. Colby Smith was shoveling dirt on site. While Ms. Scogland was inspecting the site, a third man, Ashley Adams, arrived driving a dump truck with a load of dirt. Mr. Adams identified himself as the owner of Gulf Coast, and stated that he had an exemption from the requirement for workers’ compensation insurance and that he thought Mr. Gibson did as well. Mr. Adams advised Ms. Scogland that he hired both Mr. Gibson and Mr. Smith to work at the site.2/ At hearing, Respondent challenged the evidence supporting a finding that Respondent hired Mr. Gibson.3/ Specifically, Respondent argues that Ms. Scogland’s testimony that Mr. Adams told her he hired Mr. Gibson is unreliable because Ms. Scogland did not include that information in her field notes. Respondent claims that Ms. Scogland’s status as investigator-in-training on the date of the inspection is indicative of her unreliability. To the contrary, Ms. Scogland’s testimony regarding both the persons and events on the date of the inspection was clear and unequivocal. While Ms. Scogland admitted her field notes were not as detailed on the date in question as they are for more recent inspections, she was confident that her investigation of the facts was thorough. The fact that Ms. Scogland did not write down what Mr. Adams said does not render her testimony unreliable. The undersigned finds Ms. Scogland’s testimony to be clear and convincing. Ms. Scogland reviewed the Department of State, Division of Corporations’ online information and identified Mr. Gibson as President and Registered Agent of David Wayne Gibson Tractor Service, Inc. According to Ms. Scogland, the online records indicated the corporation had been administratively dissolved in September 2013. Ms. Scogland next accessed the Department’s Coverage and Compliance Automated System (CCAS) and determined that Mr. Gibson had obtained a workers’ compensation coverage exemption for himself, but the exemption had expired on February 15, 2015. The information contained in CCAS is information on new policies, cancellations, etc., reported to the Department by insurance agencies as required by administrative rule. Next, Ms. Scogland accessed the Division of Corporations’ website, verified Gulf Coast as an active corporation, and identified Mr. Adams as the sole officer of Gulf Coast. Ms. Scogland then accessed CCAS and determined that, although Gulf Coast did not have workers’ compensation coverage, Mr. Adams had an active exemption effective from February 12, 2014 through February 12, 2016. Mr. Adams had a prior exemption that expired on April 14, 2013, but had no valid exemption in place between April 14, 2013 and February 12, 2014. After contacting her supervisor, Michelle Lloyd, Ms. Scogland served Mr. Adams, on behalf of Gulf Coast, with a site-specific Stop-Work Order for failure to ensure workers’ compensation coverage for its employees. Ms. Scogland also served Mr. Adams with a Request for Production of Business Records for Penalty Assessment Calculation. The request was for Gulf Coast’s payroll, account, and disbursement records, as well as records identifying its subcontractors, payments thereto, and workers’ compensation coverage thereof, from March 28, 2013 through March 27, 2015 (the penalty period).4/ Mr. Adams did not provide any records to the Department in response to the records request. The Department’s penalty auditor, Eunika Jackson, was assigned to calculate the penalty to be assessed against Gulf Coast for failure to secure workers’ compensation insurance during the penalty period. The penalty to be assessed against an employer for failure to secure workers’ compensation coverage is two times the amount the employer would have paid in workers’ compensation insurance premiums when applying approved manual rates to the employer’s payroll during the penalty period. § 440.107(7)(d), Fla. Stat. Ms. Jackson consulted the Scopes Manual, which is published by the National Council on Compensation Insurance (NCCI), and identified class code 6217--Excavation and Drivers-- as the appropriate construction class code for the work being performed at the worksite. Respondent contests the assignment of class code 6217 to Mr. Adams, who was driving a dump truck and delivering a load of dirt to the site. Respondent admits that Mr. Gibson’s operation of the front-end loader was properly classified as Excavation and Drivers. NCCI Scopes Manual provides the following with regard to classification code 6217: Includes burrowing, filling or backfilling. * * * Code 6217 is applied to specialist contractors engaged in general excavation including ditch digging, burrowing, filling or backfilling provided such operations are not otherwise classified in the manual. The operations involve the removal of earth, small boulders and rocks by power shovels, trench diggers or bulldozers and piling it at the jobsite for backfill. The material may also be removed by dump trucks for fill in some other area. Code 6217 includes excavation in connection with building foundations, swimming pools, landscape gardening and waterproofing operations. * * * This classification also is applied to specialist contractors engaged in grading land and landfilling, provided these operations are not otherwise classified in this manual. This classification includes ditch digging, burrowing, filling or backfilling, and operations such as scraping, cutting, piling or pushing the earth to rearrange the terrain. These operations utilize equipment such as bulldozers, motor graders and carryalls. [emphasis supplied]. Mr. Adams’ operation of the dump truck falls squarely within the definition of Excavation and Drivers. The material in the dump truck was fill for the site under excavation, a purpose which is directly addressed in the manual under code 6217. Under Respondent’s interpretation, fill removed from the site by a dump truck would be an excavation activity, but would no longer be excavation when the dump truck arrived at another site (or at another location on the same site) with the fill. That interpretation is illogical. No evidence was introduced to support a finding that typical operation of a dump truck in preconstruction was classified by a different code in the Scopes Manual. It is found that Ms. Jackson properly applied the Scopes Manual in assigning code 6217 to the work being performed by Mr. Adams on the site. Having no payroll records from Gulf Coast, Ms. Jackson had to impute the statewide average weekly wage as Respondent’s payroll for Mr. Adams and his subcontractor, Mr. Gibson. The average weekly wages were calculated based on the Workers’ Compensation and Employers Liability approved rate manual also published by NCCI and adopted by the Department by administrative rule. Ms. Jackson calculated a penalty of two times the workers’ compensation insurance premiums that would have applied to the purchase of insurance for Mr. Adams and Mr. Gibson during periods of non-compliance during the penalty. The period of non-compliance for Mr. Adams was April 15, 2013 to February 11, 2014, during which time his exemption had lapsed. The period of non-compliance for Mr. Gibson was February 16, 2015 to March 27, 2015, during which his exemption had expired. § 440.107(7)(e), Fla. Stat. Utilizing the penalty calculation worksheet adopted by Florida Administrative Code Rule 69L-6.027, Ms. Scogland calculated a penalty of $12,181.42. On May 20, 2015, the Department issued an Amended Order of Penalty Assessment against Gulf Coast in the amount of $12,181.42. The Department correctly calculated the penalty based on the statutory formulas and adopted rules governing workers’ compensation insurance.
Recommendation Having considered 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 upholding the Stop-Work Order and Amended Penalty Assessment against Respondent, Gulf Coast Site Prep., Inc., for its failure to secure and maintain required workers’ compensation insurance for its employees. DONE AND ENTERED this 14th day of January, 2016, 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 14th day of January, 2016.
The Issue The issues to be resolved in this proceeding concern whether the Respondent was an employer in the State of Florida, required to secure the payment of workers' compensation insurance coverage pursuant to the appropriate provisions of Chapter 440, Florida Statutes (2007); whether the Respondent secured such coverage, if required; and whether the proposed penalty, if any, is warranted.
Findings Of Fact The Department is an agency of the State of Florida charged with enforcing the various requirements of Chapter 440 Florida Statutes. This includes the requirement, in Section 440.107(3) Florida Statutes, that employers in the State of Florida, as defined by statute, secure the payment of workers' compensation coverage for all employees, as provided in Sections 440.10(1)(a), 440.38(1), and 440.107(2), Florida Statutes (2007). The Respondent is a closely held Florida corporation with a principal business address of record at 1815 West Detroit Boulevard, Pensacola, Florida 32534. The president of the Respondent Corporation is Richard Longoria. On October 29, 2008, an investigator for the Department, Michelle Newcomer, observed construction work being conducted at a site at 4111 Baisden Road in Pensacola, Florida. Ms. Newcomer stopped at that address and encountered Richard Longoria, the Respondent's president. In the course of their conversation, Mr. Longoria told Investigator Newcomer that he was sanding and caulking window frames in preparation for painting them. He also was engaged in painting shutters at that address. The so-called "Scopes Manual" is a manual published by the National Counsel on Compensation Insurance, Inc. (NCCI). In that manual are certain codes, related to the construction industry and trades considered to be within that industry. Painting is considered to be "construction" under the relevant codes in this manual. The manual, with its codes and classifications is relied upon in the insurance industry and has been adopted by the State of Florida, and the Department, in Florida Administrative Code Rule 69L-6.021. The preparation of surfaces for painting is contemplated as being included in the construction trade or industry in that manual, under the painting classification code. Mr. Longoria performs a significant amount of painting, but also does general construction, wallpapering, general maintenance and carpentry work. He has three different occupational licenses: maintenance, carpentry and painting/wallpapering. The trades or types of work Mr. Longoria had disclosed in the course of obtaining his construction industry exemption, which was effective April 13, 2006, through April 12, 2008, included paperhanging, wallpapering and carpentry. During his conversation with Investigator Newcomer, Mr. Longoria disclosed that he did not have workers' compensation coverage because he had an exemption from such coverage. He provided her with a workers' compensation Exemption card for the construction industry. Ms. Newcomer observed that the workers' compensation exemption held by Mr. Longoria, as an officer of the Respondent, had actually expired some months previously, on April 12, 2008. Ms. Newcomer consulted the Department's automated database, called the Coverage and Compliance Automated System (CCAS). That system is routinely used and lists workers' compensation insurance policy information for each corporation, which insurance companies are required to provide to the Department, as well as the workers' compensation exemptions for corporate officers, if any. The database confirmed that Mr. Longoria's most recent exemption had expired on April 12, 2008. He thus did not have a current workers' compensation exemption on October 29, 2008, when he encountered Investigator Newcomer. That database also revealed that there was no record of a workers' compensation insurance policy in effect for the Respondent, and this was confirmed by Mr. Longoria's testimony during his deposition (in evidence). Corporate officers who qualify for a workers' compensation coverage exemption are not automatically exempt, but must submit a Notice of Election to Be Exempt. They submit a form, along with a $50 fee, to apply for an exemption. Upon receipt of a Notice of Election to Be Exempt, the Department makes a determination as to whether the applicant for the exemption meets the relevant eligibility requirements. The exemption request is then processed by the Department and a Notice of Granting the Exemption, or denial, or a Notice of Incompletion, and the necessity for more information, is sent to the applicant. A workers' compensation exemption has a duration of two years from its effective date. Its effective date is the date that is entered into the CCAS system. The only Notice of Election to Be Exempt the Department received from Mr. Longoria, as of the October 29, 2008, inspection date, was the application received on April 10, 2006. It became effective on April 13, 2006, and thus was effective until April 13, 2008. Before October 29, 2008, Mr. Longoria had three construction industry exemptions which were renewed. One exemption was as a sole proprietor and was effective from July 4, 1993, through July 4, 1995. He had another exemption extending from April 13, 2004, through April 13, 2006, and then an exemption from April 13, 2006, through April 12, 2008. Mr. Longoria stated to Ms. Newcomer, in their conversation on October 29, 2008, that he had not received notice of his April 13, 2006 exemption's expiration prior to the expiration date of April 13, 2008. Ms. Newcomer thereupon consulted the CCAS system to determine when the notification of expiration of the exemption had been sent to Mr. Longoria or the Respondent. That database revealed that a letter notifying him of the expiration of his exemption had been sent on January 29, 2008. The CCAS entry shows that the expiration notice had been mailed out to Mr. Longoria to his address of record, 1815 West Detroit Boulevard, Pensacola, Florida 32354. That is the same address which had been shown on Mr. Longoria's exemption certificate, effective on April 13, 2006. Mr. Longoria's wife was stricken with cancer. She is a veteran and sought treatment and therapy for her cancer at a Veteran's Administration facility in Tennessee. Consequently, Mr. and Mrs. Longoria moved to Tennessee in May 2006, soon after the effective date of his exemption. Mr. Longoria filed a mail-forwarding form with the United States Postal Service in Pensacola so that his mail would be forwarded to his residence and address in Tennessee. Mail was forwarded for approximately one year, but no mail originally sent to his Pensacola address was forwarded to his address in Tennessee after sometime in August 2007. Mr. Longoria did not notice this fact until April 2008. None of the later mail addressed to the Pensacola address was forwarded to Tennessee, even after he renewed his forwarding application with the postal service in April of 2008. In fact, he testified that "99 percent of whatever mail was sent to the Florida address between 2007 and April 2008 was never forwarded to [Mr. Longoria] in Tennessee." Mr. Longoria, however, did not file a change of address notification with the Department prior to submitting his new Notice of Election to be Exempt, which he filed on October 31, 2008. The Respondent did not change his mailing address with the Florida Department of State, Division of Corporations until April 9, 2008. On October 29, 2008, after the discussion between Mr. Longoria and Investigator Newcomer, concerning the matter of workers' compensation coverage, Ms. Newcomer issued a Stop Work Order and Order of Penalty Assessment, and served it on Mr. Longoria and the Respondent. These were issued because of the Respondent's failure to secure payment of workers' compensation in purported violation of Sections 440.10(1), 440.38(1) and 440.107(2), Florida Statutes. Upon issuance of the Stop Work Order, Mr. Longoria promptly complied. Investigator Newcomer also requested production of certain business records in order to perform the relevant penalty assessment calculations. Mr. Longoria promptly provided the necessary business records to the Department. The parties stipulated that work was being performed by the Respondent between the dates of April 12, 2008, and October 29, 2008. This was the period of time when the exemption was in an expired state. Based upon the Respondent's records, Investigator Newcomer calculated an amended penalty, for the period of noncompliance with the workers' compensation law (the period of expiration of the exemption) using the penalty calculation worksheet adopted in Florida Administrative Code Rule 69L-6.027. The total penalty based upon that formula resulted in an assessment of less than $1,000. The penalty assessed was therefore $1,000, pursuant to Section 440.107(7)(d), Florida Statutes, which provides that the penalty to be assessed will be based on the formula provided in the referenced provision of Section 440.107, Florida Statutes, and the above-cited rule, or a minimum of $1,000, whichever is greater. The parties stipulated that the penalty assessed is accurate, if it is ultimately determined that the penalty was properly and lawfully assessed. After being served with the Amended Order of Penalty Assessment on October 31, 2008, Mr. Longoria promptly paid the penalty in full, in the form of a cashier's check. He submitted a new Notice of Election to Be Exempt for himself, as a corporate officer of the Respondent, which exemption became effective on that same date. The Respondent was subsequently issued an Order of Release from the Stop Work Order and an Amended Order of Penalty Assessment, which allowed the Respondent to resume working. The expiration of the exemption, for the number of months referenced above, occurred because the Respondent, through Mr. Longoria, inadvertently failed to renew the exemption. Mr. Longoria had not been reminded of his expiration because he had not received the Notice of Impending Expiration from the Department. There is no dispute that Mr. Longoria and the Respondent corporation qualified for the exemption and were thus not required to secure the payment of workers' compensation, if the exemption had been effective at times pertinent hereto. This is because of the corporate business entity under which the Respondent and Mr. Longoria operated, with Mr. Longoria as the sole employee and sole corporate officer and owner.
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, finding that the Respondent failed to properly secure workers' compensation insurance coverage for its employee in violation of Sections 440.10(1)(a) and 440.38(1), Florida Statutes, and that a penalty in the amount of $1,000 be assessed, as mandated by Section 440.107(7), Florida Statutes. DONE AND ENTERED this 28th day of May, 2009, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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, 2009. COPIES FURNISHED: Tracey Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Samuel W. Bearman, Esquire Law Office of Samuel W. Bearman, L.C. 820 North 12th Avenue Pensacola, Florida 32501
The Issue At issue in this proceeding is whether the Respondent, Forever Floors and More, Inc. ("Forever Floors"), 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, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Forever Floors is a Florida corporation. The Division of Corporations’ “Sunbiz” website indicates that Forever Floors was first incorporated on February 4, 2012, and remained active as of the date of the hearing. Forever Floors’s principal office is at 8205 Oak Bluff Road, Saint Augustine, Florida 32092. Forever Floors is solely owned and operated by Christopher Bohren. Mr. Bohren is the president and sole officer of the corporation. Forever Floors was actively engaged in performing tile installation during the two-year audit period from April 3, 2013, through April 2, 2015. John C. Brown is a government operations consultant for the Department. During the period relevant to this proceeding, Mr. Brown was a Department compliance investigator assigned to Duval County. Mr. Brown’s job included conducting random compliance investigations and investigating referrals made to his office by members of the public. Mr. Brown testified that as an investigator, he would enter worksites and observe the workers and the types of work they were doing. On April 2, 2015, Mr. Brown visited a worksite at 3714 McGirts Boulevard in Jacksonville. He observed two workers installing tile in a shower in an older single-family residence that was undergoing renovations. Mr. Brown identified himself to the two workers and then inquired as to their identities and employment. Mr. Bohren replied that he was the company officer and that his company had an exemption from the requirement to provide workers’ compensation insurance coverage. Mr. Bohren identified the other worker as Dustin Elliott and stated that Mr. Elliott had worked for Forever Floors for about eight months. Mr. Bohren told Mr. Brown that he paid Mr. Elliott sometimes by check and sometimes with cash. After speaking with Mr. Bohren, Mr. Brown returned to his vehicle to perform computer research on Forever Floors. He consulted the Sunbiz website for information about the company and its officers. His search confirmed that Forever Floors was an active Florida corporation and that Christopher Bohren was listed as its registered agent, and as president of the corporation. No other corporate officers were listed. Mr. Brown also checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Forever Floors 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 Forever Floors had no active workers' compensation insurance coverage for its employees and that no insurance had ever been reported to the state for Forever Floors. There was no evidence that Forever Floors used an employee leasing service. Mr. Bohren had an active exemption as an officer of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012, effective September 24, 2013, through September 24, 2015. There was no exemption noted for Dustin Elliott. Based on his jobsite interviews with the employees and Mr. Bohren, and his Sunbiz and CCAS computer searches, Mr. Brown concluded that as of April 2, 2015, Forever Floors had an exemption for Mr. Bohren but had failed to procure workers’ compensation coverage for its employee, Dustin Elliott, in violation of chapter 440. Mr. Brown consequently issued a Stop- Work Order that he personally served on Mr. Bohren on April 2, 2015. Also on April 2, 2015, Mr. Brown served Forever Floors 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 Forever Floors. Mr. Brown testified, and Mr. Bohren confirmed, that Mr. Bohren provided no records in response to the Request for Production. The case file was assigned to a penalty calculator, who reviews the records and calculates the penalty imposed on the business. Mr. Brown did not state 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 April 3, 2013, through April 2, 2015. § 440.107(7)(d), Fla. Stat. Because Mr. Bohren had no payroll records for himself or Mr. Elliott on April 2, 2015, 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 5348, titled “Ceramic Tile, Indoor Stone, Marble, or Mosaic Work,” which “applies to specialist contractors who perform tile, stone, mosaic, or marble work.” The corresponding rule provision is rule 69L- 6.021(2)(aa). The penalty calculator used the approved manual rates corresponding to Class Code 5348 for the periods of non- compliance to calculate the penalty. On May 22, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $23,538.34, based on Mr. Bohren’s imputed wages for the periods not covered by his exemption and the imputed wages for Mr. Elliott for the entire penalty period. Mr. Bohren was served with the Amended Order of Penalty Assessment on June 8, 2015. 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 Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Forever Floors was in violation of the workers' compensation coverage requirements of chapter 440. Dustin Elliott was an employee of Forever Floors on April 2, 2015, 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 through the use of the approved manual rates 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. Forever Floors could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Christopher Bohren testified that he is the sole proprietor of Forever Floors and that Mr. Elliott had only worked for him for six-to-eight months, mostly on a part-time basis, as of April 2, 2015. He stated that the penalty assessed in this case is more than he has made from his start-up business. After his discussion with Mr. Brown, he immediately procured workers’ compensation insurance coverage for Mr. Elliott and intends to stay within the ambit of the law in the future. Mr. Bohren testified that he was unable to access his business records because they were with his ex-wife, from whom he had an apparently acrimonious departure. Mr. Bohren’s testimony elicited sympathy, 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 $23,538.34 against Forever Floors and More, Inc. DONE AND ENTERED this 28th day of October, 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 October, 2015.
The Issue The issue in this case is whether Respondent had a sufficient amount of workers’ compensation coverage during the time period in question; and, if not, what penalty should be imposed.
Findings Of Fact The Division is the state agency responsible for enforcing the requirement in chapter 440, Florida Statutes (2015),1/ that employers in Florida secure workers’ compensation coverage for their employees. While an exemption can be obtained for up to three corporate officers, any employer in the construction industry with at least one employee must have workers’ compensation coverage. § 440.02(15), Fla. Stat. Kent Howe works for the Division as a compliance investigator based in Orlando, Florida. As part of his job responsibilities, Mr. Howe visits construction sites in order to verify that employers in the construction industry have obtained workers’ compensation coverage for their employees. Mr. Kehr was the owner and sole corporate officer of JNK. Mr. Howe visited a construction site in Port Orange, Florida, on the morning of December 10, 2015, and saw Mr. Kehr and two other men building the interior walls/frames of a house. Mr. Howe talked to the two men (James Hicks and James Garthwait) working with Mr. Kehr, and they reported that Mr. Kehr was paying them approximately $8.00 an hour. Mr. Kehr told Mr. Howe that Messrs. Hicks and Garthwait had been working for him for approximately two hours that morning. Mr. Kehr also stated that he had not obtained workers’ compensation coverage for Messrs. Hicks and Garthwait. Following those conversations, Mr. Howe returned to his car and accessed the Division’s Coverage and Compliance Automated System (“CCAS”) and learned that JNK had no workers’ compensation coverage. Mr. Howe also determined from CCAS that Mr. Kehr had obtained an exemption from workers’ compensation coverage that had been in effect from November 18, 2014, through November of 2016.2/ After relaying that information to his supervisor, Mr. Howe received authorization to serve Mr. Kehr with a Stop- Work Order, and he did so on December 10, 2015. That Stop-Work Order required JNK to “cease all business operations for all worksites in the State” based on the Division’s determination that JNK had failed to obtain workers’ compensation coverage. In addition, the Stop-Work Order stated that JNK would be penalized an amount “[e]qual to 2 times the amount [JNK] would have paid in premium when applying approved manual rates to the employer’s payroll during periods for which it [had] failed to secure the payment of compensation within the preceding 2-year period.” Along with the Stop-Work Order, Mr. Howe also served a “Request for Production of Business Records for Penalty Assessment Calculation” (“the BRR”) on Mr. Kehr. In order to ascertain JNK’s payroll disbursements during the relevant time period and the resulting penalty for JNK’s failure to obtain workers’ compensation coverage, the BRR requested that JNK remit several different types of business records covering the period from November 10, 2014, through December 10, 2015. Mr. Howe explained during the final hearing that the Division usually reviews business records pertaining to the two years preceding the Stop Work Order.3/ Because JNK came into existence on November 10, 2014, the Division’s review was limited to examining the period between November 10, 2014, and December 10, 2015. The business records sought by the Division included items such as time sheets, payroll summaries, check journals, certificates of exemption, and evidence that any JNK subcontractors had obtained workers’ compensation coverage. Section 440.107(7)(e) provides that if an employer fails to provide business records sufficient to enable the Department to ascertain the employer’s actual payroll for the time period in question, then the Division will estimate the employer’s actual payroll for that time period by imputing the employer’s payroll based on the statewide average weekly wage. The Division then multiplies that amount by two. JNK did not provide business records typically sought by the Division. Instead, JNK responded to the BRR by producing a written statement from Mr. Kehr indicating that he founded JNK in November of 2014, but did no work until July of 2015. That initial job involved fixing a set of stairs for $200. Afterwards, Mr. Kehr performed three separate small jobs between July and November of 2015, earning approximately $550. Because the Division could not ascertain JNK’s actual payroll from the documentation provided by JNK, the Division imputed JNK’s payroll for the time period in question and issued an Amended Order of Penalty Assessment on January 19, 2016, seeking to impose a penalty of $61,424.04. Phillip Sley calculated the aforementioned penalty amount by filling out a worksheet that has been adopted by the Division through Florida Administrative Code Rule 69L-6.027. The first step in completing the worksheet required Mr. Sley to assign a classification code to the type of work that Mr. Howe witnessed Messrs. Kehr, Hicks and Garthwait performing at the Port Orange worksite on December 10, 2015. Classification codes come from the Scopes® Manual, which has been adopted by the Department through rule 69L-6.021. Each code within the Scopes® Manual pertains to an occupation or type of work, and each code has an approved manual rate used by insurance companies to assist in the calculation of workers’ compensation insurance premiums. The imputed weekly payroll for each employee and corporate officer “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.” See Fla. Admin. Code. R. 69L-6.028(3)(d). In the instant case, Mr. Sley determined “5645” was the appropriate classification code. According to the Scopes Manual, [w]hen all of the carpentry work in connection with the construction of residential dwellings not exceeding three stories in height is performed by employees of the same carpentry contractor or general contractor responsible for the entire dwelling construction project, the work is assigned to Code 5645. This includes the construction of the sill, rough framework, rough floor, wood or light-gauge steel studs, wood or lighted-gauge steel joists, rafters, roof deck, all types of roofing materials, sidewall sheathing, siding, doors, wallboard installation, lathing, windows, stairs, finished flooring, cabinet installation, fencing, detached structures, and all interior wood trim. Mr. Sley’s next step in calculating the penalty amount was to determine the period of non-compliance. With regard to Mr. Kehr, the Department asserted that JNK failed to have workers’ compensation coverage between the date of JNK’s inception (November 10, 2014) and the date that Mr. Kehr received an exemption from the workers’ compensation coverage requirement (November 18, 2014). Despite having no evidence that Messrs. Hicks and Garthwait worked for JNK on any day other than December 10, 2015, the Division’s penalty calculation was based on an assumption that Messrs. Hicks and Garthwait worked for JNK from November 10, 2014, through December 10, 2015. Mr. Sley’s next step was to calculate JNK’s gross payroll for the time period in question. Because JNK did not provide the Division with business records that would have enabled the Division to calculate JNK’s actual payroll, Mr. Sley based JNK’s payroll on the statewide average weekly wage determined by the Department of Economic Opportunity for the time period in question.4/ Mr. Sley then multiplied that amount by two.5/ After converting the payroll numbers into a percentage, Mr. Sley multiplied the payroll amounts by the approved manual rate. As noted above, every classification code is associated with a particular manual rate determined by the Office of Insurance Regulation, and a manual rate corresponds to the risk associated with a particular occupation or type of work. Manual rates associated with potentially dangerous activities will have higher manual rates than activities with little or no potential danger. Mr. Sley’s next step was to calculate a premium for obtaining workers compensation coverage for Messrs. Kehr, Hicks, and Garthwait. Mr. Sley then multiplied that premium by two in order to calculate the individual penalties resulting from JNK not having workers’ compensation coverage for Messrs. Kehr, Hicks, and Garthwait. The sum of those amounts was $61,424.04. The evidence produced at the final hearing established that Mr. Sley utilized the correct class code, average weekly wage, and manual rates in his calculation of the penalty set forth in the Amended Order of Penalty Assessment. The Division has demonstrated by clear and convincing evidence that JNK was in violation of the workers’ compensation coverage requirements of chapter 440. In particular, the Division proved by clear and convincing evidence that Mr. Kehr had no workers’ compensation coverage for himself and no exemption from November 10, 2014, through November 17, 2014. However, the Division did not demonstrate by clear and convincing evidence that Messrs. Hicks and Garthwait were employees of JNK on any day other than December 10, 2015. Mr. Kehr testified during the final hearing that Messrs. Hicks and Garthwait were working for him on December 10, 2015. He also testified that he was paying them at a rate of $8.00 an hour. However, Mr. Kehr persuasively testified that Messrs. Hicks and Garthwait had not worked for him at any other time between November 10, 2014, and December 10, 2015. The undersigned finds Mr. Kehr’s testimony on this point to be credible. Messrs. Hicks and Garthwait did not testify during the final hearing in this matter. There is no evidence that Messrs. Hicks and Garthwait worked for JNK at any time other than December 10, 2015. Because there is no evidence indicating that Messrs. Hicks and Garthwait were employees of JNK at any time other than December 10, 2015, during the time period in question, the undersigned finds that the Department failed to carry its burden of proving that $61,424.04 is the appropriate penalty. Based on the above findings, the undersigned finds that the correct penalty resulting from Mr. Kehr’s lack of coverage is $627.48. The worksheet completed by Mr. Sley indicates that is the amount of the $61,424.04 penalty associated with Mr. Kehr’s lack of coverage. As for the penalties associated with the lack of coverage for Messrs. Hicks and Garthwait on December 10, 2015, the undersigned multiplied the average weekly wage utilized by the Division ($841.57) by two. That results in a weekly gross payroll amount of $1,683.14. Dividing $1,683.14 by five results in a daily gross payroll amount of $336.63. Dividing $336.63 by 100 and then multiplying the result by 15.91 (the approved manual rate utilized by the Division for the period from January 1, 2015, through December 10, 2015) yields a daily premium of $53.62. Multiplying $53.62 by two results in a penalty of $107.23. Multiplying $107.23 by two yields $214.46, JNK’s penalty for not having workers’ compensation coverage for Messrs. Hicks and Garthwait on December 10, 2015. JNK’s total penalty is $841.94. Because section 440.107(7)(d)1. mandates a minimum penalty of $1,000, the undersigned finds that $1,000 is the correct penalty for the instant case.
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 imposing impose a $1,000 penalty on Donald Kehr, d/b/a JNK Framing Inc., a Dissolved Florida Corporation. DONE AND ENTERED this 10th day of August, 2016, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL 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 August, 2016.
The Issue The issues to be resolved in this proceeding concern whether the Respondent failed to abide by the coverage requirements of the Florida Workers' Compensation Law embodied in Chapter 440, Florida Statutes, by not obtaining a workers' compensation insurance policy and whether the Petitioner properly assessed a penalty against the Respondent pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Investigator Pangrass conducted a random inspection of a construction site at 9 Pecan Drive Pass, Ocala, Florida, on December 18, 2002. On that occasion he observed several people working, hanging drywall. Investigator Pangrass spoke to one of the workers, Daniel Maloney, and asked him, to identify his employer. Daniel Maloney identified the Respondent as his employer. When Maloney identified him the Respondent was only 10 feet away and the noise level at the site was such that the Respondent could hear himself being identified as the employer. The Respondent did not then deny that he was Daniel Maloney's employer. Daniel Maloney stated he had worked for the Respondent full-time for two months and was paid by the hour. The Respondent told Mr. Pangrass he was unable to complete the work at the job without additional labor. Mr. Maloney assisted the Respondent by "hanging the ceiling." The Respondent offered a hearsay statement of Mr. Maloney, wherein he stated, "I am the employee." The Respondent confirmed that he had a prior employment relationship with Daniel Maloney and that Daniel Maloney wanted to work with the Respondent. Another worker observed by Mr. Pangrass, Desmond Neil, told Investigator Pangrass that he worked for the Respondent part-time and was paid by the hour. The Respondent had used the services of Desmond Neil on prior occasions and stated "we do a job for Holiday the day before." The Respondent told Mr. Pangrass that he was trying to get workers' compensation for Desmond Neil. The Respondent made a statement against his own interest and said he "re-hired" Desmond Neil because Neil could not get a workers' compensation exemption. The Respondent's use of the word "re-hired" is significant because in a prior compliance matter the Respondent had employed Desmond Neil and agreed to terminate Desmond Neil's employment. The Respondent in testimony, changed his version of the facts and said that he re-hired Desmond Neil, but that Neil worked for Charles Brandon. Investigator Pangrass interviewed the Respondent. During this interview the Respondent stated he had labor expenses connected with his business. He testified he was paid by Holiday Builders and then in turn paid Desmond Neil and Daniel Maloney. Charles Brandon did not employ or was not the sole employer of Desmond Neil or Daniel Maloney on December 18, 2002. Investigator Pangrass contacted Mr. Brandon, who stated he knew the Respondent was going to hire helpers. Mr. Brandon was not at the job-site to direct Desmond Neil or Daniel Maloney and could only be reached by phone. The Petitioner's evidence that the Respondent was the employer of Desmond Neil and Daniel Maloney on December 18, 2002, instead of Mr. Brandon or some other person or entity, is the most persuasive and is accepted. The Respondent offered conflicting evidence regarding who provided money to Desmond Neil and Daniel Maloney. The Respondent offered a hearsay statement of Daniel Maloney that Holiday Builders was Daniel Maloney's employer. The Respondent said that when Holiday Builders pays him (the Respondent) he then pays his employees. The Respondent changed his testimony, however, and then said Charles Brandon gave him checks to give to the employees. (Implying that they were Brandon's employees in this version of his story.) The Respondent submitted a signed statement to the Petitioner indicating that he had no employees between 1999 and 2002, in evidence as Petitioner's Exhibit 10-B. The Respondent recognized the signature on that statement as being his own, but professed not to remember who wrote it or what it said. The Respondent, however, did admit to having at least one employee in 2001, directly contradicting his own statement. The Respondent also testified that the only times he used Desmond Neil's services were the two times Investigator Pangrass stopped by the Respondent's job sites. It is a trifle too coincidental that the only two times the investigator visited the job sites were the only times when the Respondent purportedly used the services of Desmond Neil. This is especially the case since Desmond Neil's testimony and even that of the Respondent himself tend to contradict that statement. Finally, the Respondent admitted that he did not have a workers' compensation policy for any employees. In summary, the evidence adduced by the Petitioner is deemed more consistent and credible and is accepted. It was thus demonstrated that the Respondent had one or more employees at the times pertinent hereto.
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 directing that the Respondent stop work and cease his operations until such time as he secures workers' compensation coverage for employees and directing that the Respondent pay a penalty in the amount of $1,100.00. DONE AND ENTERED this 4th day of December, 2003, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 Clerk of the Division of Administrative Hearings this 4th day of December, 2003. COPIES FURNISHED: John M. Iriye, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 Berisford Champagnie 15508 Southwest 34th Avenue Ocala, Florida 34473 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Level 11 Tallahassee, Florida 32399-0300
