The Issue The issues are whether Respondent violated Chapter 440, Florida Statutes (2009), by failing to secure the payment of workers' compensation, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that Florida employers secure the payment of workers' compensation for the benefit of their employees. See § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation providing pharmacy services. Respondent has business locations at 842 West Plymouth Avenue, Deland, Florida, and 112 East First Avenue, Pierson, Florida. Respondent's Pierson business site sells a small amount of food like bubble gum and other sundries. Activities at the Pierson location include filling prescriptions, compounding and blending drugs, and dispensing drugs or medicine to walk-in customers and patients. The patients are referred from a health care clinic known as Northeast Florida Health Services (NEFHS). The patients are federally qualified as indigent pursuant to a federal poverty calculation. Respondent's Deland location deals solely with prescription drug transactions to indigent patients who are referred by NEFHS. The Deland business site is very small and has no walk-in customers or food or other sundries for sale. At the end of the month, Respondent sends a bill to NEFHS for the prescriptions dispensed by Respondent at both locations. NEFHS than reimburses Respondent for its services. Respondent pays its employees at both locations out of a single checking account. Only one tax identification number is used for both business locations. On October 27, 2009, Hector Beauchamp, one of Petitioner's workers' compensation compliance investigators, received a referral, indicating that Respondent was operating without workers' compensation insurance coverage for its employees. After receiving the referral, Mr. Beauchamp used the website of the Department of State, Division of Corporations, to obtain Respondent's federal employer identification number. The Department of State website showed that Respondent became Pierson Community Pharmacy, Inc., on March 3, 2005. The website also indicated that Respondent had two corporate officers, John Eidt and Hanan Francis. Next, Mr. Beauchamp contacted Samantha Nixon, one of Petitioner’s penalty calculators, to research Respondent's unemployment compensation tax information on the Department of Revenue's website. Ms. Nixon's research revealed that Respondent employed in excess of four employees for each quarter in the past three years. Mr. Beauchamp also consulted Petitioner's Coverage and Compliance Automated System (CCAS) database. The CCAS database lists the workers' compensation insurance policy information for Florida employers together with any workers' compensation exemptions for corporate officers. The CCAS database accurately revealed that Respondent had no workers' compensation insurance policy in place for its employees and no workers' compensation exemptions for either Mr. Eidt or Ms. Francis as corporate officers. This was true from October 29, 2006, through October 28, 2009. Additionally, the CCAS database did not reveal any utilization of employee leasing by Respondent. Mr. Beauchamp also researched the National Council on Compensation Insurance, Inc. (NCCI) on-line database. Using Respondent's name and federal employer identification number, the database showed no record of a Florida workers' compensation insurance policy for Respondent. On October 28, 2009, Mr. Beauchamp visited both of Respondent's business locations. At the Pierson location, Mr. Beauchamp observed five individuals working behind a Plexiglas partition filling prescriptions. Mr. Beauchamp spoke with Mr. and Mrs. Francis. They confirmed that Respondent did not have workers' compensation insurance in place. Mr. Beauchamp then issued and served a Stop-Work Order. He also issued and served a records request. On October 29, 2010, Respondent provided Petitioner with the following records: (a) corporate tax records for 2007 and 2008; (b) a workers' compensation insurance application submitted after the issuance of the Stop-Work Order; and (c) payroll summaries for October 2006 through October 2009. The records confirmed that Respondent had employed more than four employees for the prior three years. On October 30, 2009, Petitioner issued and served the Amended Order of Penalty Assessment. That order was followed by the Second Amended Order of Penalty Assessment on March 15, 2010. Ms. Nixon calculated the gross payroll for Respondent's employees for the relevant time period. The gross payroll amounts for Ms. Francis from January 1, 2008, through December 31, 2008, and April 1, 2009, through June 30, 2009, were limited to the average weekly wage in effect at the time the Stop-Work Order was issued, multiplied by 1.5 for those periods pursuant to Florida Administrative Code Rule 69L- 6.035(2). As a corporate officer, Ms. Francis' actual earnings were in excess of these amounts. However, Florida Administrative Code Rule 69L-6.035(2) limits the amount of a corporate officer's income upon which workers' compensation penalties may be assessed to 1.5 times the average weekly wage in effect at the time a Stop-Work Order is issued or actual earnings, whichever is less. Using the classification codes in the NCCI Scopes® Manual, Petitioner accurately assigned the occupation classification code 8045, which corresponds to "Store: Drug Retail." Classification code 8045 is "applicable to store locations where the employer's books of accounts reflect at least 40 percent gross receipts in prescription sales and less than 50 percent gross receipts in the service of food." Prescription sales intended for the patients of health care facilities are included even though the facility is billed instead of the individual patient. Ms. Nixon then divided the payroll for each year by 100 and multiplied that figure by the approved manual rates adopted by the Florida Office of Insurance Regulation for 2006, 2007, 2008, and 2009 for classification code 8045. That product was then multiplied by 1.5 to find the penalty for the period for the three-year period. The total penalty is $13,996.60.
Recommendation Based on the foregoing Findings of Facts and Conclusion of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop- Work Order and Second Amended order of Penalty Assessment in the amount of $13,996.60. DONE AND ENTERED this 26th day of April, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 2010. COPIES FURNISHED: John C. Eidt Pierson Community Pharmacy Inc. 112 East 1st Avenue Pierson, Florida 32180 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CRP, FP Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in the case is whether David Bumgarner (Respondent) should be assessed a penalty for an alleged failure to obtain workers' compensation coverage for his employees.
Findings Of Fact The Petitioner is the state agency designated to enforce the provisions of Chapter 440, Florida Statutes (2008),1 which requires that employers in Florida obtain workers' compensation coverage for their employees. The Respondent is a sole proprietor based in North Carolina and doing business as "Builders and Assemblers." On February 25, 2009, Ira Bender, an investigator employed by the Petitioner, observed ten men assembling the iron-and-steel frame for a single story storage building being constructed at 7253 Gasparilla Road, Port Charlotte, Florida. The Respondent was present at the time Mr. Bender observed the workers, and Mr. Bender asked the Respondent about the project. The Respondent advised Mr. Bender that he was the owner of the company constructing the building, that the ten men erecting the building frame were his employees, and that they were being paid $10.00 per hour. Mr. Bender, accompanied by the Respondent, then spoke to each of the ten men at the work site and obtained their names and other relevant information. The Respondent provided to Mr. Bender a copy of a certificate of insurance from "Acord" bearing policy number BNUWC0108275. Mr. Bender reviewed the Petitioner's "Coverage and Compliance Automated System" (CCAS) database and information contained on the National Council on Compensation Insurance ("NCCI") website. Both sources are routinely used to monitor and review workers' compensation coverage. Neither the CCAS database nor the NCCI website indicated that the Respondent had workers' compensation coverage valid within Florida for any of the ten employees at the work site or that the Respondent had a valid exemption from coverage for any employee. After discussing the collected information with his supervisor, Mr. Bender issued a Stop Work Order and Order of Penalty Assessment dated February 25, 2009. The Respondent subsequently provided a copy of his workers' compensation policy to the Petitioner. The policy information page attached to the policy is an NCCI-issued form identified as "WC 00 00 01 A." The Respondent's policy's information page provides, in relevant part, as follows: 3.A. Workers Compensation Insurance: Part One of the policy applied to the Workers Compensation Law of the states listed here: NC * * * C. Other States Insurance: Part Three of the policy applies to the states, if any listed here: All states and U.S. territories except North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the U.S. Virgin islands, and states designated in Item 3.A. of the Information Page. Administrative rules adopted by the Petitioner and referenced elsewhere herein explicitly state that the coverage identified in the Respondent's policy information page is not valid within the State of Florida. Mr. Bender also issued a Request for Production of Business Records on February 25, 2009. Other than the previously referenced insurance certificate and policy, no further business records were provided to the Petitioner by the Respondent. Mr. Bender subsequently forwarded the case to Lynn Murcia, the Petitioner's penalty calculator. Because the Respondent failed to provide business records sufficient to enable computation of a penalty, Ms. Murcia computed the penalty based on an imputed payroll as provided by Florida law. The NCCI publishes the "SCOPES Manual," which contains a commonly-used system of occupational classifications used to determine workers' compensation requirements. In Florida, the SCOPES Manual has been adopted by incorporation into the Florida Administrative Code. The SCOPES Manual identifies the erection of steel or iron frames for buildings not in excess of two stories under classification code 5059. The Respondent's employees were engaged in such activities, and Ms. Murcia therefore properly classified the Respondent's employees under code 5059. Ms. Murcia utilized the SCOPES classification in determining the imputed payroll applicable to this case and, thereafter, computed the penalty according to a worksheet that has been adopted as an administrative rule by the Petitioner. The worksheet is routinely used to calculate penalties applicable to employers who fail to obtain workers' compensation coverage for employees. Based on Ms. Murcia's calculations, the penalty was identified as $1,764,643.98, as was set forth in an Amended Order of Penalty Assessment issued on March 31, 2009. Ms. Murcia's calculation of the applicable penalty, including her reliance on the applicable SCOPES classification codes and the imputation of the Respondent's payroll, was not disputed at the hearing. Her testimony has been fully credited.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner enter a final order assessing a penalty of $1,764,643.98 against the Respondent. DONE AND ENTERED this 9th day of September, 2009, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of September, 2009.
The Issue Whether Royal Roofing and Restoration, Inc. (Respondent or Royal Roofing), failed to secure workers’ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (Petitioner or Department), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement of chapter 440, that Florida employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation organized on July 28, 2015, and engaged in the business of roofing and storm damage restoration. The company was formed, and initially conducted business, in Tallahassee, Florida, but expanded to the Panama City area in 2016. Traci Fisher is Respondent’s President and Registered Agent, with a mailing address of 1004 Kenilworth, Tallahassee, Florida 32312. DOAH Case No. 17-0879 On May 4, 2016, Department Compliance Investigator Jesse Holman, conducted a routine workers’ compensation compliance inspection at 374 Brown Place in Crestview, Florida. Mr. Holman observed four men removing shingles from the roof of a residential structure at that address. Mr. Holman first interviewed a worker who identified himself as Dustin Hansel and reported that he and the other three workers on site were a new crew for Respondent, the permit for the job had not yet been pulled, and the workers were not aware of the rate of pay for the job. Mr. Hansel telephoned Respondent’s sales manager, Dillon Robinson, who then spoke directly with Mr. Holman via telephone. Mr. Robinson informed Mr. Holman that Respondent obtained workers’ compensation coverage through Payroll Management Inc. (PMI), an employee-leasing company. Mr. Holman identified the three remaining workers at the jobsite as Milton Trice, Winston Perrotta, and Kerrigan Ireland. Mr. Holman contacted PMI and secured a copy of Respondent’s then-active employee roster. None of the workers at the jobsite, including Mr. Hansel, were included on Respondent’s employee roster. Upon inquiry, Mr. Holman was informed that PMI had no pending employee applications for Respondent. Mr. Holman consulted the Department’s Coverage Compliance Automated System (CCAS) and found Respondent had no workers’ compensation insurance policy and no active exemptions. During Mr. Holman’s onsite investigation, the workers left the jobsite. Mr. Holman could not immediately reach Ms. Fisher, but did speak with her husband, Tim Fisher. Mr. Fisher informed Mr. Holman that the crew was on their way to the PMI Fort Walton office to be enrolled on Respondent’s employee roster. On May 5, 2016, based on his investigation, and after consultation with his supervisor, Mr. Holman issued Respondent Stop-Work Order (SWO) 16-148-1A, along with a Business Records Request (BRR) for records covering the audit period of July 27, 2015 through May 4, 2016. Later that day, Mr. Holman spoke to Ms. Fisher, who informed him the crew did not have permission to begin the work on that date, as she had not yet pulled the permit for the reroof. Ms. Fisher further explained that the crewmembers had been instructed to complete applications with PMI prior to departing Tallahassee for Crestview. Ms. Fisher confirmed the crewmembers were completing applications at PMI Fort Walton that same day. Mr. Holman met with Ms. Fisher the following day and personally served SWO 16-148-1A. Ms. Fisher delivered to Mr. Holman an updated employee roster from PMI which included Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter documenting Mr. Trice was not employed by Respondent; and a $1000 check as downpayment on the penalty. Respondent initially submitted business records in response to the BRR on May 23 and 25, 2017. DOAH Case No. 17-1558 On June 8, 2016, Mr. Holman conducted a random workers’ compensation compliance inspection at 532 Rising Star Drive in Crestview. The single-family home at that address was undergoing renovations and Mr. Holman observed three men on the roof removing shingles. None of the men on the roof spoke English, but a fourth man, who identified himself as Jose Manuel Mejia, appeared and stated he worked for Respondent, and that all the workers onsite were paid through PMI at a rate of $10.00 per hour. Mr. Mejia admitted that one of the worker’s onsite, Emelio Lopez, was not enrolled with PMI and explained that Mr. Mejia brought him to the worksite that day because he knew Mr. Lopez to be a good worker. The remaining workers onsite were identified as Juan Mencho and Ramon Gonzalez, both from Atlanta, Georgia. Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho. Mr. Mejia stated that he and his crews also received reimbursement checks directly from Respondent for gas, rentals, materials, and the like. Mr. Holman contacted PMI, who produced Respondent’s then-active employee roster. Mr. Mejia and Mr. Mencho were on the roster, but neither Mr. Gonzalez nor Mr. Lopez was included. Mr. Holman next contacted Ms. Fisher, who identified Mr. Mejia as a subcontractor, but was not familiar with any of the other men Mr. Holman encountered at the worksite. Mr. Holman consulted via telephone with his supervisor, who instructed him to issue an SWO to Respondent for failing to secure workers’ compensation coverage for its employees. Mr. Holman issued SWO 16-198-1A by posting the worksite on June 8, 2016. Department Facilitator Don Hurst, personally served Ms. Fisher with SWO 16-198-1A in Tallahassee that same day. SWO 16-148-1A Penalty Calculation1/ Department Penalty Auditor Eunika Jackson, was assigned to calculate the penalties associated with the SWOs issued to Respondent. On June 8, 2016, Ms. Jackson began calculating the penalty associated with SWO 16-148-1A. Ms. Jackson reviewed the documents submitted by Respondent in response to the BRR. The documents included Respondent’s Wells Fargo bank statements, check images, and PMI payroll register for the audit period.2/ Based on a review of the records, Ms. Jackson identified the following individuals as Respondent’s employees because they received direct payment from Respondent at times during the audit period: David Rosinsky, Dylan Robinson, Jarod Bell, Tommy Miller, and David Shields. Ms. Jackson determined periods of non-compliance for these employees based on the dates they received payments from Respondent and were not covered for workers’ compensation via PMI employment roster, separate policy, or corporate officer exemption. Ms. Jackson deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. Based upon Ms. Fisher’s deposition testimony, Ms. Jackson assigned National Council on Compensation Insurance (NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class code 5474, Painting, to Mr. Rosinsky; NCCI class code 8742, Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810, clerical office employee, to Mr. Shields. Utilizing the statutory formula for penalty calculation, Ms. Jackson calculated a total penalty of $191.28 associated with these five “employees.” Ms. Jackson next calculated the penalty for Dustin Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta, the workers identified at the jobsite as employees on May 4, 2016. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll to these “employees,” thus, Ms. Jackson used the statutory formula to impute payroll to these workers. Ms. Jackson calculated a penalty of $14,970.12 against Respondent for failure to secure payment of workers’ compensation insurance for each of these four “employees” during the audit period. The total penalty associated with these four “employees” is $59,880.48. Ms. Jackson calculated a total penalty of $60,072.96 to be imposed against Respondent in connection with SWO 16-148- 1A. Business Records In compliance with the Department’s BRR, Respondent submitted additional business records on several occasions-- March 21, May 3 and 31, June 7, and August 15 and 24, 2017--in order to establish its complete payroll for the audit period. While the Department admits that the final documents submitted do establish Respondent’s complete payroll, the Department did not issue amended penalty assessment based on those records in either case. The Department maintains Respondent did not timely submit records, pursuant to Florida Administrative Code Rule 69L-6.028(4), which allows an employer 20 business days after service of the first amended order of penalty assessment to submit sufficient records to establish payroll. All business records submitted by Respondent were admitted in evidence and included as part of the record. The undersigned is not limited to the record before the Department at the time the amended penalty assessments were imposed, but must determine a recommendation in a de novo proceeding. The undersigned has relied upon the complete record in arriving at the decision in this case. Penalty Calculation for Ireland, Trice, and Perrotta For purposes of workers’ compensation insurance coverage, an “employee” is “any person who receives remuneration from an employer” for work or services performed under a contract. § 440.02(15)(a), Fla. Stat. Respondent did not issue a single check to Mr. Ireland, Mr. Trice, or Mr. Perrotta during the audit period. Mr. Ireland, Mr. Trice, and Mr. Perrotta are not included on any PMI leasing roster included in the record for the audit period. The uncontroverted evidence, including the credible and unrefuted testimony of each person with knowledge, established that Mr. Ireland, Mr. Trice, and Mr. Perrotta were newly hired for the job in Crestview on May 4, 2016, and began working that day prior to submitting applications at PMI, despite Ms. Fisher’s directions otherwise. Petitioner did not prove that either Mr. Ireland, Mr. Trice, or Mr. Perrotta was Respondent’s employee at any time during the audit period. Petitioner did not correctly calculate the penalty of $44,911.26 against Respondent for failure to secure workers’ compensation insurance for Mr. Ireland, Mr. Trice, and Mr. Perrotta during the audit period. Penalty Calculation for Hansel Ms. Fisher testified that Mr. Hansel has owned several businesses with which Respondent has conducted business over the years. Originally, Mr. Hansel owned a dumpster rental business, now owned by his father. Mr. Hansel also owned an independent landscaping company with which Respondent occasionally transacted business. When Respondent expanded business into the Panama City area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise new crews in the area. The job on May 4, 2016, was his first roofing job. A review of Respondent’s records reveals Respondent issued the following checks to Mr. Hansel during the audit period: December 4, 2015, in the amount of $360, $300 of which was for “dumpster rental” and the remaining $60 for “sod”; May 4, 2016, in the amount of $200 for “sod repair”; May 6, 2016, in the amount of $925 as reimbursement for travel expenses; May 9, 2016, in the amount of $1,011.50 (with no memo); and May 21, 2016, in the amount of $100 for “7845 Preservation.” Mr. Hansel was included on Respondent’s PMI leasing roster beginning on May 13, 2016. Petitioner proved that Mr. Hansel was Respondent’s employee at times during the audit period. Petitioner did not prove that Respondent’s records were insufficient to determine payroll to Mr. Hansel during the audit period, which would have required an imputed penalty. Petitioner did not correctly calculate the penalty of $14,970.42 against Respondent for failure to secure workers’ compensation insurance coverage for Mr. Hansel during the audit period. Sod repair by Mr. Hansel is a service performed for Respondent during the audit period. Reimbursement of travel expenses is specifically included in the definition of payroll for purposes of calculating the penalty. See Fla. Admin. Code R. 69L- 6.035(1)(f) (“Expense reimbursements, including reimbursements for travel” are included as remuneration to employees “to the extent that the employer’s business records and receipts do not confirm that the expense incurred as a valid business expense.”). Dumpster rental is neither work performed on behalf of, nor service provided to, Respondent during the audit period. The correct uninsured payroll amount attributable to Mr. Hansel is $2,296.50. Petitioner correctly applied NCCI class code 5551, Roofing, to work performed by Mr. Hansel based on the observation of Mr. Holman at the worksite on May 4, 2016. With respect to Mr. Hansel’s services for sod and sod repair, Petitioner did not correctly apply NCCI class code 5551. Petitioner did not introduce competent substantial evidence of the applicable NCCI class code and premium amount for landscaping services performed during the audit period.3/ Uninsured payroll attributable to Mr. Hansel for roofing services during the audit period is $2,036.50. The approved manual rate for workers’ compensation insurance for NCCI class code 5551 during the period of non- compliance--May 9 and 21, 2016--is $18.60. The premium amount Respondent would have paid to provide workers’ compensation insurance for Mr. Hansel is $378.79 (One percent of Mr. Hansel’s gross payroll during the non-compliance period--$20.36--multiplied by $18.60). The penalty for Respondent’s failure to secure worker’s compensation coverage insurance for Mr. Hansel during the period of non-compliance is calculated as two times the amount Respondent would have paid in premium for the non- compliance period. The correct penalty for Respondent’s failure to maintain workers’ compensation coverage for Mr. Hansel during the period of non-compliance is $757.58. Penalty Calculation for Salesmen Independent contractors not engaged in the construction industry are not employees for purposes of enforcing workers’ compensation insurance requirements. See § 440.02(15)(d)1., Fla. Stat. Sales is a non-construction industry occupation. The Department calculated a penalty associated with payroll attributable to the following persons identified by Ms. Fisher as independent salesmen: Dylan Robinson, Kevin Miller, Marc Medley, Mike Rucker, Colby Fisher, David Jones, Jarod Bell, Matt Flynn, and Todd Zulauf. Section 440.02(15)(d)1. provides that an individual may be an independent contractor, rather than an employee, as follows: In order to meet the definition of independent contractor, at least four of the following criteria must be met: The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal regulations; The independent contractor receives compensation for services rendered or work performed and such compensation is paid to a business rather than to an individual; The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying business expenses or other expenses related to services rendered or work performed for compensation; The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or The independent contractor receives compensation for work or services rendered on a competitive-bid basis or completion of a task or a set of tasks as defined by a contractual agreement, unless such contractual agreement expressly states that an employment relationship exists. If four of the criteria listed in sub- subparagraph a. do not exist, an individual may still be presumed to be an independent contractor and not an employee based on full consideration of the nature of the individual situation with regard to satisfying any of the following conditions: The independent contractor performs or agrees to perform specific services or work for a specific amount of money and controls the means of performing the services or work. The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform. The independent contractor is responsible for the satisfactory completion of the work or services that he or she performs or agrees to perform. The independent contractor receives compensation for work or services performed for a commission or on a per-job basis and not on any other basis. The independent contractor may realize a profit or suffer a loss in connection with performing work or services. The independent contractor has continuing or recurring business liabilities or obligations. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures. Ms. Fisher testified that each of the above-named salesmen sold roofing jobs for her at various times during the audit period on a commission-only basis. The contractors inspect homeowner roofs, draft schematics, use their own equipment (e.g., drones), incur all of their own expenses, and handle the insurance filing for the homeowner’s insurance to pay on the claim. Ms. Fisher further testified that each of the salesmen also sells for other roofing contractors in the Tallahassee area. She pays the salesmen on a per-job basis. Ms. Fisher does not compensate the salesmen for the time involved in inspecting a roof, preparing schematics, or making the sale. Nor does Ms. Fisher reimburse the salesmen for travel to sales jobsites. Ms. Fisher’s testimony was credible, persuasive, and uncontroverted. Respondent introduced in evidence four “Independent Contractor Checklists” allegedly completed by Mr. Robinson, Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist follows the format of section 440.02(15)(d)1., listing the criteria set forth in subparagraphs a. and b. The forms indicate that they each meet all the criteria listed in subparagraph b.: they perform, or agree to perform services for a specific amount of money and control the means of performing the service; they incur the principal expenses related to the service performed; they are responsible for satisfactory completion of the services performed; they receive compensation for the services performed on a per-job or commission basis; they may realize a profit or suffer a loss in connection with performing the services; they have continuing and recurring business liabilities or obligations; and the success or failure of their business depends on the relationship of business receipts to expenditures.4/ In its Proposed Recommended Order, Petitioner conceded the nine men identified by Respondent as independent sales contractors “would not be considered employees of Respondent” because the “salesmen would seem to meet the majority of [the] requirements [of section 440.02(15)(d)1.b.].” Respondent issued Dylan Robinson, Mark Medley, Colby Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Jarod Bell, David Jones, and Todd Zulauf an IRS FORM 1099-MISC for income paid during the 2016 tax year. Respondent did not prove by clear and convincing evidence that the above-named salesmen were Respondent’s employees during the audit period. For SWO 16-148-1A, Respondent did not correctly calculate the penalty because Respondent included a penalty associated with Petitioner’s failure to provide workers’ compensation insurance coverage for Dylan Robinson and Jarod Bell. Penalty in the amount of $20.70 associated with Dylan Robinson and Jarod Bell should not be included in the total penalty. The correct penalty amount for SWO 16-148-1A, based on records submitted by Respondent on or before March 20, 2016, is $929.16. Draft Revised Second Amended Order of Penalty Assessment The additional records submitted by Respondent revealed payments made to persons during the audit period who were not included in the Department’s Second Amended Order of Penalty Assessment. The Department and Respondent disagreed at hearing whether the payments qualified as payroll. At hearing, Petitioner submitted a draft revised second amended penalty calculation for SWO 16-148-1A based on all records received from Respondent. The revised penalty is in the amount of $61,453.50. Ms. Jackson populated the spreadsheet with the name of every individual to whom a check was written on Respondent’s business bank account during the audit period, removing only those payments to individuals and entities which, to Petitioner’s knowledge, were not Respondent’s employees. Respondent’s calculations in the revised penalty suffer from some of the same errors as in the second amended penalty calculation--they include individuals Petitioner did not prove were Respondent’s employees, as well as payments which were not uninsured payroll. For the reasons explained herein, Petitioner did not prove that salesmen David Jones, Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer, and Colby Fisher were Respondent’s employees during the audit period. Respondent did not accurately calculate the penalty associated with those persons. Respondent made payments to David Shields during the audit period, which the Department argues should be included as payroll. The Department included payments to Mr. Shields in its draft revised second amended order of penalty assessment and assigned NCCI class code “8810” for clerical work. Mr. Shields is a licensed professional roofing contractor who acts as “qualifier” for Respondent’s business. A qualifier is a licensed professional who certifies plans for permit applications submitted by another business. Respondent pays Mr. Shields a flat fee per permit application qualified by him. The record evidence does not support a finding that Mr. Shields provides clerical services to Respondent. Mr. Shields provides some sort of professional services to Respondent, and is likely an independent contractor providing his own materials and supplies, maintaining his own business accounts, and liable for his own business success. Assuming Mr. Shields were Respondent’s employee, the Department introduced no evidence of an appropriate NCCI class code for Mr. Shields’ services. The Department did not prove that payments to Mr. Shields should be included as Respondent’s uninsured payroll during the audit period. Respondent paid Susan Swain a total of $258 during the audit period for clerical work. Ms. Fisher maintained Ms. Swain’s work was casual at first, and the payments reflect a time when she worked on-again, off-again, handling the paperwork for restoration insurance claims. Later, Ms. Swain came to work for Respondent full-time and was added to the PMI leasing roster. Section 440.02(15)(d)5. provides that a person “whose employment is both casual and not in the course of the trade, business, profession or occupation of the employer” is not an employee. The statute defines “casual” employment as work that is anticipated to be completed in 10 working days or less and at a total labor cost of less than $500. See § 440.02(5), Fla. Stat. In its Proposed Recommended Order, the Department argues Ms. Swain’s wages should be included as payroll because the “testimony regarding Ms. Swain does not suggest that she was employed for less than 10 days[.]” However, it was the Department’s burden to prove that Ms. Swain was a statutory employee. The Department did not prove that Ms. Swain’s wages should be included within Respondent’s uninsured payroll. The largest portion of the penalty assessed by the Department, as well as in the draft revised second amended penalty assessment, against Respondent is in connection with various roofers who were employed by Respondent at times during the audit period. Each of the roofers was included on Respondent’s PMI leasing roster, but received checks directly from Respondent in addition to PMI payroll checks. The Department included all the direct payments to those roofers as payroll for purposes of calculating a penalty in this case. As Ms. Fisher explained, the company bids a reroof on a per job basis--usually a per square foot price. Ms. Fisher adds each roofing contractor’s name to the PMI leasing roster to ensure that each roofer is covered by workers’ compensation insurance for the duration of the job. When the job is completed (which is a matter of just a few days), the contractor reports to Ms. Fisher what amount of the contract price was spent on materials, supplies, or other non-labor costs. Ms. Fisher cuts a check to the contractor for that amount and authorizes PMI to issue payroll checks for the “labor cost” (the difference between the contract price and the non-labor costs). Ms. Fisher refers to this process as “back-charging” the contractors for their materials, maintenance, tools, and other non-labor costs. The Department is correct that the direct payments are payroll to the roofing contractors. See Fla. Admin. Code R. 69L-6.035(1)(b) and (h) (remuneration includes “payments, including cash payments, made to employees by or on behalf of the employer” and “payments or allowances made by or on behalf of the employer for tools or equipment used by employees in their work or operations for the employer.”). The Department would be correct to include these payments in the penalty calculation if they represented uninsured payroll. However, the evidence supports a finding that the direct payments to the roofing contractors were made for the same jobs on which Respondent secured workers’ compensation coverage through PMI. The roofing contractors were covered for workers’ compensation throughout the job, even though they may have received partial payment for the job outside of the PMI payroll checks.5/ The direct payments were not for separate reroofs on which the roofers were not otherwise insured. The Department did not correctly calculate penalties associated with the following roofing contractors: Donald Tontigh, Joseph Howard, Keith Mills, Aaron Kilpatrick, Gustavo Tobias, Jose Mejia, and Tommy Miller. Ms. Fisher also received cash payments from Respondent during the audit period. These payments were made in addition to her payroll through PMI. Ms. Fisher described these payments as “cash tickets,” which were paid outside of her PMI payroll to reimburse her for investments made in the company. For purposes of calculating the penalty in this case, these “cash tickets” are clearly payroll, as that term is to be calculated pursuant to rule 69L-6.035. Similar to the issue with the roofing contractors, the question is whether the payments represent uninsured payroll. Ms. Fisher did not hold a corporate officer exemption at any time relevant hereto. Ms. Fisher testified that she was covered through PMI payroll leasing. In contrast to the roofing contractors, Ms. Fisher’s direct payments do not directly coincide with any particular job or specific time frame during which Ms. Fisher was covered for workers’ compensation insurance through PMI. The evidence was insufficient to determine that the amounts were insured payroll. The Department properly calculated a penalty associated with payroll attributable to Ms. Fisher. Respondent made one payment of $75 to Donald Martin during the audit period. The Department calculated a penalty of $27.90 associated with this payment to Mr. Martin. Ms. Fisher explained that Mr. Martin was a down-on-his-luck guy who came by the office one day complaining that Mr. Hansel owed him some money. Ms. Fisher offered to put him on a roofing crew and wrote him the $75 check to help him out. Ms. Fisher’s testimony was both credible and unrefuted. Mr. Martin was never hired by Respondent, put on any roofing crew, or added to the PMI leasing roster. Mr. Martin was not Respondent’s employee because he did not receive remuneration for the “performance of any work or service while engaged in any employment under any appointment or contract for hire” with Respondent. § 440.02(15)(a), Fla. Stat. Cale Dierking works for Respondent full-time in a clerical position. During the audit period, Respondent paid Mr. Dierking directly by check for $1,306.14. This payment was made outside of Mr. Dierking’s PMI payroll checks. Ms. Fisher testified that she paid Mr. Dierking directly on one occasion when “PMI’s payroll got stuck in Memphis, I believe it was a snow-in situation where payroll checks didn’t come.” Rather than ask her employee to go without a timely paycheck, she advanced his payroll. Ms. Fisher’s testimony was both credible and unrefuted. The payment to Mr. Dierking is clearly payroll. However, Mr. Dierking was covered for workers’ compensation through PMI for the period during which the check was issued. Thus, there is no evidence that it was uninsured payroll. The Department did not correctly calculate a penalty associated with payments to Mr. Dierking. The correct penalty to be assessed against Respondent for failure to secure workers’ compensation coverage for its employees during the audit period in connection with SWO 16-148- 1A is $770.60. Penalty Calculation for SWO 16-198-1A Ms. Jackson calculated a total penalty against Respondent in connection with SWO 16-198-1A in the amount of $19,115.84, as reflected in the Second Amended Order of Penalty Assessment. The Department correctly imputed penalty against Respondent in the amount of $91.68 each for uninsured payroll to Mr. Gonzalez and Mr. Lopez. The evidence supported a finding that these workers were Respondent’s statutory employees on June 8, 2016, and were not enrolled on the PMI leasing roster. The Department did not correctly calculate the penalty associated with salesmen Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, and Todd Zulauf. The Department did not correctly calculate the penalty associated with roofing contractors Abraham Martinez- Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina-Agustin, Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy Miller. The Department did not correctly calculate the penalty against Respondent associated with Mr. Shields, Respondent’s qualifier. Based on a review of Respondent’s complete “untimely” records, the Department discovered direct payments made to additional employees not included on the Second Amended Order of Penalty Assessment. Respondent made a direct payment to Ethan Burch in the amount of $602.50 during the audit period. Ethan Burch is one of Respondent’s full-time clerical employees. The evidence is insufficient to determine whether the payment of $602.50 was insured or uninsured payroll. As such, the Department did not prove it correctly calculated the penalty associated with Mr. Burch. Respondent also made a direct payment to Chelsea Hansel in the amount of $965 during the audit period. Ms. Hansel is another clerical employee. Ms. Hansel’s PMI enrollment was delayed due to some background investigation. Respondent paid Ms. Hansel for work she completed prior to enrollment. The direct payment to Ms. Hansel constitutes uninsured payroll. The Department correctly calculated the penalty associated with the payment to Chelsea Hansel. The correct penalty amount to be imposed against Respondent for failure to secure payment of workers’ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel) during the audit period in connection with SWO 16-198-1A is $187.80.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers’ Compensation, finding that Royal Roofing and Restoration, Inc., violated the workers’ compensation insurance law and, in DOAH Case No. 17-0879, assessing a penalty of $770.60; and in DOAH Case No. 17-1558, assessing a penalty of $187.80. DONE AND ENTERED this 24th day of January, 2018, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 2018.
The Issue Whether Respondent was required and failed to obtain workers' compensation insurance coverage for his employees during the period from March 7, 1997 through March 7, 2000, and, if so, what penalty should be assessed, pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement that employers secure workers' compensation insurance for the benefit of their employees. On March 7, 2001, one of Petitioner's investigators observed two individuals, Worker 1 and Worker 2,3 painting a sidewalk, curb stops, and lines in the parking lot of a 7-Eleven store in Lake Worth, Florida. At that time, the investigator performed an on-site inspection. The investigator interviewed the two workers and completed a worksheet to determine if they were independent contractors. Worker 1 and Worker 2, among other things, worked for and were paid weekly by Respondent as painters, did not maintain a separate business from Respondent, did not control the means of performing their work, did not incur the expenses of their work, and did not incur the principal expenses related to their work. The investigator determined that the two workers were not independent contractors but were employees of Respondent. Neither Worker 1 nor Worker 2 was granted a workers' compensation exemption. Both workers were unprotected by workers' compensation insurance. Respondent provided to Petitioner's investigator federal tax Form 1099s for the years 1998 and 1999, pertaining to Worker 1 and Worker 2 and a handwritten note indicating the compensation paid to them during the year 2000. The documents indicated that Respondent paid the workers for the years 1998 through 2000 the following: Worker 1--$9,685 for 1998, $19,180 for 1999, and $3,330 for 2000; and Worker 2--$2,790 for 1999, and $240 for 2000. A compilation of approved classifications that groups employers according to their operations is published by the National Council of Compensation Insurance (NCCI). The publication is Scopes Manual, Scopes of Basic Manual Classifications (Scopes Manual). NCCI is a rating organization in Florida, which represents workers' compensation carriers. NCCI seeks approval from Florida's Department of Insurance of rates charged by workers' compensation carriers. NCCI and Professional Insurance Associates, as well as other sources, publish tables of approved rates for each classification code. It is undisputed that NCCI's publication of class codes and rates is relied upon and used by Petitioner to determine an employer's class code and the workers' compensation insurance rate. On March 7, 2000, Petitioner's investigator issued a SWO to Respondent. On March 8, 2000, Petitioner issued a NPAO to Respondent, indicating an assessment and penalty of $18,824. The investigator determined that, based upon what he had observed and the information that he had obtained, the work being performed by Worker 1 and Worker 2 was painting and was classified under Scopes Manual Code 5474. The investigator determined the evaded premium, or the premium that Respondent would have paid had he secured workers’ compensation insurance, by multiplying the gross compensation to employees each year by the premium rate for that Code for that year. The statutory penalty on the evaded premium is twice the evaded premium. The calculated penalty was $18,724. Added to the $18,724 was $100, which represented the penalty for the one day, March 7, 2000, that Respondent was not in compliance with the workers’ compensation requirement. On October 20, 2000, Petitioner issued a Second Amended Notice and Penalty Assessment Order, which was the final assessment, against Respondent assessing a penalty of $69,569, which included the $100 penalty. Pursuant to an agreement, Respondent performs general maintenance and preventative maintenance (GMPM) for Southland Corporation at 100 or more 7-Eleven stores in Dade, Broward, and Palm Beach counties. Petitioner was able to interview 13 of Respondent's employees, Worker 1 through Worker 13.4 As not a part of the GMPM agreement, Respondent's employees paint curbs, bumpers, and lines in the parking lot of each 7-Eleven store once each year. Respondent’s employees also engaged in the following: painting of buildings’ exterior and interior, parking lots, and loading docks; hanging drywall; setting of tile; paving of parking lots; repairing stucco and concrete; minor plumbing; carpentry, including trim, installation of doors and locks; filling potholes; and installing walls and cabinets. For example, Worker 10, who was employed with Respondent between June 1996 and January 1998, initially performed a daily activity of painting lines and curbs in parking lots at 7-Eleven stores. He could be assigned three stores in one day performing this activity. Later, Worker 10 performed under the GMPM agreement doing the following: painting the exterior and interior of stores, which could be the entire outside or a storeroom; tiling floors and ceilings; patching blacktop and repairing asphalt; and engaging in carpentry work, including putting up wooden shelves in storage rooms, cutting, nailing and screwing boards, and operating saws. Worker 10 also assisted Worker 6, who was a carpenter, repairing enclosures for dumpsters. The repairs consisted of sinking four-by-four posts into the ground, replacing slats, and occasionally replacing the entire enclosure due to damage caused by a truck backing into the enclosure. As another example, Worker 11 was employed with Respondent during 1998 and 1999 for 14 months and worked under the GMPM agreement. Worker 11 performed all activities under the agreement in maintaining the 7-Eleven stores, except for electrical and internal plumbing. The work to which he was assigned generally lasted four days a week, but for one day a week, he was assigned to handling service calls or performing line striping. Worker 11 performed the following: resurfacing asphalt; painting the entire parking lot, including lines for parking spaces and curbs; replacing or repairing ceiling and floor tile; laying tar on the roof; performing carpentry, including building shelves in storing rooms, reinforcing shelving, hanging new doors, replacing door hardware, and performing carpentry alongside Worker 6; and repairing enclosures for dumpsters by re-hanging doors, replacing slats, and replacing four-by-four posts. Even though Respondent stated that he subcontracted the repair of roofs and dumpsters, the installation of doors and electrical and plumbing work, he failed to present evidence showing to whom and when the work was subcontracted.5 Petitioner presented evidence demonstrating that Respondent’s employees performed all of the work described, except for electrical work. The work performed by Respondent’s employees included multiple class codes. NCCI requires the assignment of the highest rated classification under such circumstances. Carpentry is the highest-rated classification for all the work performed by Respondent’s employees, and the Scopes Manual Code for carpentry is 5403. Scopes Manual Code 5403 is also the code for the enclosure of a dumpster and the installation of a pre-hung door. The corresponding rate per $100 of payroll assigned to Scopes Manual Code 5403 is different for the applicable years 1997 through 2000. The rate for 1997 was 29.77; for 1998 was 29.09; for 1999 was 26.66; and 2000 was 27.96. Worker 1 through Worker 13 did not maintain a separate business from Respondent, did not control the means of performing their work, did not incur the expenses of their work, and did not incur the principal expenses related to their work. None of Respondent’s 13 employees had a valid workers’ compensation exemption. None of them were protected by workers’ compensation insurance. Respondent’s usual and customary practice was to pay his employees on a weekly basis. His usual and customary practice was to employ four or more employees during a weekly pay period. Respondent’s usual and customary practice was to employ four or more employees during any payroll period. Respondent asserts that he relied upon subcontractors for some of the work. The identity of the subcontractors, the service performed, and the frequency of their work are unknown. Whether the subcontractors had workers’ compensation insurance is also unknown. As a result, a determination cannot be made as to what Respondent’s responsibility, if any, was to the subcontractors as to workers’ compensation insurance, which in turn would affect an assessed penalty under worker’s compensation. To establish what his payroll was for the three years preceding the issuance of the SWO on March 7, 2000, Respondent used federal tax Form 1099s and cancelled business checks. For the years 1997 through 2000, Respondent’s payroll was as follows: Worker 1--1998 was $9,685, 1999 was $19,180, and 2000 was $3,330; Worker 2--1999 was $2,790, and 2000 was $240; Worker 3--1997 was $2,100, 1999 was $2,035, and 2000 was $3,045; Worker 4--1999 was $2,100; Worker 5--1997 was $1,900; Worker 6--1997 was $4,620, 1998 was $15,965, 1999 was $5,100, and 2000 was $3,303; Worker 7- -1999 was $610; Worker 8--1997 was $1,380, 1998 was $5,640, 1999 was $7,640, and 2000 was $350; Worker 9--1997 was $3,120; Worker 10--1997 was $8,450, and 1998 was $960; Worker 11--1998 was $7,095, and 1999 was $7,225; Worker 12--1998 was $2,883; and Worker 13--1999 was $2,675. Consequently, Respondent’s total payroll for 1997 was $21,570, for 1998 was $42,228, for 1999 was $49,355, and for 2000 was $10,268. Respondent’s payroll of $21,570 for 1997, was for the entire year. Petitioner made no reduction for the time period in the year 1997 prior to March 8, 1997, which would have been three years prior to the SWO on March 7, 2000. The statutory penalty assessed by Petitioner in its Second Amended Notice and Assessment Order against Respondent was $69,569, which included the penalty of $100. Petitioner’s assessment should be reduced to compensate for the Respondent’s payroll during the period of January 1, 1997 through March 7, 1997.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Labor and Employment Security, Division of Workers' Compensation, Bureau of Compliance enter a final order against Gregory Dennis Nelly: Sustaining the Stop Work Order. Sustaining the penalty assessed in the Second Amended Notice and Penalty Assessment Order minus the calculation for the payroll during the period of January 1, 1997 through March 7, 1997. DONE AND ENTERED this 5th day of June, 2001, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of June, 2001.
The Issue The issue is whether Respondent, Department of Financial Services, Division of Workers' Compensation, properly assessed a penalty of $90,590.42 against Petitioner, S.A.C., LLC.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure payment of workers' compensation for the benefit of their employees pursuant to Section 440.107, Florida Statutes. At all times relevant to this proceeding, Petitioner, S.A.C., LLC, was a corporation domiciled in Florida. S.A.C.'s 2007 Limited Liability Company Annual Report lists its principal place of business as 626 Lafayette Court, Sarasota, Florida, 34236, and its mailing address as Post Office Box 49075, Sarasota, Florida 34230. At all times relevant to this proceeding, William R. Suzor was the president and managing member of S.A.C. Collen Wharton is an Insurance Analyst II with the Department. In this position, Ms. Wharton conducts inspections to ensure that employers are in compliance with the law. On June 20, 2007, Ms. Wharton conducted a compliance check at 2111 South Osprey Avenue in Sarasota, Florida. During the compliance check, Ms. Wharton observed three males working at that location. The three men were framing a single-family house that was under construction. This type of work is carpentry, which is considered construction. During the compliance check, Ms. Wharton asked David Crawford, one of the men working at the site, who was their employer. Mr. Crawford told Ms. Wharton that he and the other two men worked for S.A.C., but were paid by a leasing company. Mr. Crawford told Ms. Wharton that the company was owned by Mr. Suzor and, in response to Ms. Wharton's inquiry, he gave her Mr. Suzor's telephone number. In addition to Mr. Crawford, the other workers at the site were identified as Terry Jenkins and Frank Orduno. By checking the records the Department maintains in a computerized database, Ms. Wharton determined that S.A.C. did not carry workers' compensation insurance, but had coverage on its employees through Employee Leasing Solutions, an employee leasing company. She also determined, by consulting the Department's database, that none of the men had a workers' compensation exemption. Ms. Wharton telephoned Employee Leasing Solutions, which advised her that two of the workers at the site, Mr. Crawford and Mr. Jenkins, were on the roster of employees that the company maintained. The company advised her that the other worker, Mr. Orduno, was not on its roster of employees. This information was verified by an employee list that the leasing company provided to Ms. Wharton. On June 20, 2007, after determining that one worker at the work site had no workers' compensation coverage, Mr. Wharton prepared a Stop-Work Order. She then telephoned Mr. Suzor, told him that he had one worker at the site who did not have workers' compensation coverage and requested that he come to the work site. During the conversation, Mr. Suzor advised Ms. Wharton that Mr. Crawford was in charge at the work site, that she could give the Stop-Work Order to Mr. Crawford, and that he (Mr. Suzor) would meet her the following day. Ms. Wharton, after she telephoned Mr. Suzor, she conferred with her supervisor and then issued Stop-Work Order No. 07-125-D3, posting it at the work site and serving it on Mr. Crawford. On June 21, 2007, Mr. Suzor met with Ms. Wharton at her office. During that meeting, Ms. Wharton served a copy of Stop-Work Order No. 07-125-D3 on Mr. Suzor. She also served him with a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Business Records"). The Request for Business Records listed specific records that Mr. Suzor/S.A.C. should provide to the Department so that the Department could determine the workers who S.A.C. paid during the period of June 19, 2004, through June 20, 2007. The Request for Business Records notes that the requested records must be produced within five business days of receipt. According to the Request for Business Records, if no records are provided or the records provided are insufficient to enable the Department to determine the payroll for the time period requested for the calculation of the penalty in Subsection 440.107(7)(d), Florida Statutes, "the imputed weekly payroll for each employee, . . . shall be the statewide average weekly wage as defined in section 440.12(2), F.S. multiplied by 1.5." S.A.C. did not respond to the Department's Request for Business Records. On July 17, 2007, the Department had received no records from S.A.C. Without any records, Ms. Wharton had no information from which she could determine an accurate assessment of S.A.C.'s payroll for the previous three years. Therefore, Ms. Wharton calculated the penalty based on an imputed payroll. In her calculations, Ms. Wharton assumed that Mr. Orduno worked from June 21, 2004, through June 20, 2007, and that he was paid 1.5 times the state-wide average weekly wage for the class code assigned to the work he performed for each year or portion of the year. The Department then applied the statutory formula set out in Subsection 440.107(7)(d), Florida Statutes. Based on that calculation, the Department correctly calculated S.A.C.'s penalty assessment as $90,590.42, as specified in the Amended Order of Penalty Assessment dated July 17, 2007. The Amended Order of Penalty Assessment reflecting the correct penalty amount was served on S.A.C.'s attorney, John Myers, Esquire, by hand-delivery, on July 17, 2007.3/ On July 21, 2007, S.A.C., through its former counsel, filed a Petition for Hearing.
Recommendation Based upon the Findings of Fact and Conclusions of Law, RECOMMENDED that Respondent, Department of Financial Services, Division of Workers' Compensation, enter a final order which affirms the Amended Order of Penalty Assessment issued July 17, 2007, assessing a penalty of $90,590.42, and the Stop-Work Order issued to Petitioner, S.A.C., LLC, on June 20, 2007. DONE AND ENTERED this 25th day of March, 2008, 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 25th day of March, 2008.
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, 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 Whether Thompson Enterprises of Jacksonville, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers' compensation, as alleged in the Stop-Work Order and 2nd Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing workers' compensation coverage requirements applicable to employers under Florida law. Respondent is a Florida limited-liability company organized on October 25, 2011. The managing members listed on Respondent’s State of Florida Articles of Organization are Thomas Thompson, Michael Thompson, and Vicky Thompson. In May 2016, Department Compliance Investigator Ann Johnson was assigned to conduct a job site visit on Respondent’s business because its name appeared on the Department’s Bureau of Compliance’s “lead list.” The “lead list” is one of the Department’s databases listing employers that are potentially out of compliance with Florida's workers' compensation insurance requirements. Prior to the job site visit, Investigator Johnson reviewed the Division of Corporations website, www.sunbiz.org, and confirmed Respondent's address, managing members' names, and that Respondent was a current, active Florida company. Respondent’s website advertised towing, wrecker, mechanic, and body shop services. On May 6, 2016, Investigator Johnson visited Respondent's principal address located at 7600 Bailey Body Road, Jacksonville, Florida 32216. She noted a large commercial sign near Respondent’s address that advertised towing and wrecker services. During her visit, Investigator Johnson spoke with Vicky Thompson and Michael Thompson, both of whom advised that they were owners of Respondent. The Thompsons informed Investigator Johnson that Respondent had six employees, including the three listed as managers on Respondent’s Articles of Organization. When Investigator Johnson asked for proof of workers’ compensation coverage, Michael Thompson admitted that Respondent had no such coverage. Under Florida law, employers in the non-construction industry, such as Respondent, must secure workers' compensation insurance if "four or more employees are employed by the same employer." §§ 440.02(17)(b) and 440.107, Fla. Stat. On the same day as her site visit, Investigator Johnson confirmed Respondent’s lack of insurance with a search of the Department's internal database, Coverage and Compliance Automated System. At the time, Respondent had no active exemptions from the requirements of obtaining workers’ compensation for its three managing members. Based on her investigation, Investigator Johnson served Respondent with the Stop-Work Order and a Request for Production on May 6, 2016. Upon serving the documents, Investigator Johnson explained the effect and purpose of the documents and how Respondent could come into compliance. Respondent came into compliance that same day by paying a $1,000 down payment, reducing Respondent's workforce to three employees, applying for exemptions for its three managing members, and executing an agreed Order of conditional release with the Department. Respondent subsequently complied with the Department’s Request for Production. In June 2016, the Department assigned Penalty Auditor Eunika Jackson to review records obtained from Respondent and calculate the penalty to be assessed against Respondent. In accordance with applicable law, the Department's audit spanned the preceding two-year period, starting from the date of the Stop-Work Order. See § 440.107(7)(d)1., Fla. Stat. The audit period in this case was from May 7, 2014, through May 6, 2016. Based on information obtained during the investigation, Auditor Jackson assigned classification codes 7219, 8380, and 8810 to those identified as employees working for Respondent during the audit period. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance ("NCCI") to assist in the calculation of workers' compensation insurance premiums. Classification code 8810 applies to clerical office employees, code 7219 applies to trucking and "towing companies," and code 8380 applies to automobile service or repair centers. According to Respondent, it was out of compliance with the coverage requirements of chapter 440 for only "368 days" during the two-year audit period. Respondent's records, however, do not support this contention. Respondent provided a detailed "Employee Earnings Summary" for each employee stating the employee’s name, pay rate, and pay period. Respondent's payroll records reflect that Respondent employed "four or more employees" during the audit period. Throughout the two-year audit period, Respondent employed four or more employees with the following duties: Anna Lee, mechanic/bodywork; Cedric Blake, mechanic/bodywork; David Raynor, mechanic/bodywork; James Budner, mechanic/bodywork; Jason Leighty, mechanic; Kevin Croker, Jr., porter/detailer; Nicholas Conway, bodywork; Ralph Tenity, bodywork; Rebecca Thompson, secretary/office help; Stephen Collins, shop helper/porter; Todd Gatshore, tow truck driver/shop helper; and Williams Reeves, tow truck driver/shop helper. Evidence further demonstrated that, during the audit period, managing member Michael Thompson worked as a wrecker truckdriver, and worked with the Sheriff's Office to clear traffic accidents. He was assigned class code 7219 — tow truck driver. Managing member Vicky Thompson was given the clerical class code 8810 because she was observed working in the office during Investigator Johnson's site visit. Managing member Thomas Thompson was assigned the clerical class code 8810 based upon the fact that he occasionally does office work for the business. The corresponding approved manual rates for classification codes 8810, 7219, and 8380 were correctly applied to each employee for the related periods of non-compliance to determine the final penalty. In accordance with the Request for Production, Respondent provided the Department payroll summary reports, tax reports, and unemployment tax reports. The payroll summary reports and records provided by Respondent listed the payroll and duties for each employee. The gross payroll amounts for each employee reflected in the penalty in this case were derived from those documents. Upon receiving those reports and records, the Department correctly determined the gross payroll for Respondent's employees. On June 13, 2016, the Department served the Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,788.90. A portion of the first penalty was based on imputed payroll for Respondent’s three managing members. After service of the Amended Order of Penalty Assessment, Respondent provided additional records showing the payroll of its three managing members, and the 2nd Amended Order of Penalty Assessment was calculated after removing the imputed payroll. On August 22, 2016, the Department served the 2nd Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,112.44, which was correctly calculated in accordance with section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027(1). In sum, the clear and convincing evidence demonstrated that Respondent was a tow truck company engaged in the wrecker/tow truck and body shop mechanic industries in Florida during the periods of noncompliance; that Respondent failed to secure the payment of workers' compensation for its employees in violation of Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027(1) to determine the appropriate penalty of $33,112.44.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Thompson Enterprises of Jacksonville, LLC. DONE AND ENTERED this 27th day of April, 2017, 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 27th day of April, 2017.
The Issue The issue is whether Petitioner properly issued a Stop Work Order (SWO) and Second Amended Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of Chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to Section 440.107, Florida Statutes. Nobel is a corporation operating as a moving business in Florida. Nobel was incorporated in 2004 and has been operating with an active status since its inception. Yaniv Dalei is the sole owner and president of Nobel. On June 9, 2009, Petitioner's investigator, Cesar Tolentino, visited 18255 Northeast 4th Court, North Miami, Florida ("business site"), after being referred to the location to investigate Respondent for compliance with the Florida Workers' Compensation Law. At the business site, Petitioner's investigator spoke to the manager, and saw the bookkeeper and the receptionist during the visit. Respondent was not at the business site, but was out of the country in Panama when Tolentino visited. Respondent spoke to Tolentino by telephone. Respondent informed Tolentino that he had five employees and that he "was in the process of obtaining workers' compensation insurance." While at the business site, Tolentino, used the Department of Financial Services' Coverage and Compliance Automated System (CCAS), and confirmed Respondent lacked insurance for the payment of workers' compensation coverage. Additionally, Petitioner's investigator verified through the CCAS that Nobel had not secured an employee leasing company to secure workers' compensation insurance for its employees as well as found that no exemptions from workers' compensation had been issued in connection with Nobel. Petitioner's investigator also performed a National Council on Compensation Insurance search on Nobel while at the business site. The search revealed that Nobel's employees had not had workers' compensation insurance in the past. On June 9, 2009, Petitioner's investigator issued a SWO and posted it at the business site. The SWO required Respondent to cease all business operations. On June 10, 2009, Respondent obtained a certificate of insurance for workers' compensation coverage with the effective date being the same. The policy was issued by One-Stop Insurance Agency. Respondent provided the certificate to Tolentino upon receipt. On June 12, 2009, Petitioner's investigator issued to Respondent a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation ("Request"). Soon thereafter, Respondent responded to the Request and provided Petitioner's investigator with the requested records. Petitioner's investigator forwarded the documents to Jorge Pinera, Petitioner's penalty calculator, for review. On or about July 17, 2009, Petitioner issued an Amended Order of Penalty Assessment assessing a penalty of $74,794.38 against Respondent. On August 10, 2009, Respondent entered into a payment agreement with the Division. Respondent provided the Division a $7,480.00 cashier's check and agreed to pay the remainder of the assessed penalty in monthly installments. As a result, Petitioner issued an Order of Conditional Release for Nobel to operate. On March 3, 2010, Respondent supplied an employee list with position descriptions to Petitioner. After reviewing the document, Petitioner changed some employee class codes to indicate a lower rate for some occupations and recalculated the penalty amount owed with the new class codes. For the recalculation, Petitioner's penalty calculator, Russell Gray, used the following calculation from the penalty worksheet: (a) Respondent's total gross payroll from June 10, 2006, through June 9, 2009, was $1,010,001.32; (b) the total workers' compensation premium that Respondent should have paid for its employees during the relevant time period was $45,483.96; and (c) the premium was multiplied by the statutory factor of 1.5 resulting in a penalty assessment in the amount of $68,224.81. The new calculation superseded the Amended Order and a Second Amended Order of Penalty Assessment was issued March 3, 2010, reducing Respondent's penalty to $68,224.81.1 During the hearing, Respondent admitted not having workers' compensation coverage for his employees. He said, "Yes, you're right I needed to have workers' compensation but as I said . . . I never knew that I needed to have workers' compensation . . . I'm here to ask for forgiveness."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop Work Order and Second Amended Order of Penalty Assessment in the amount of $68,224.81. DONE AND ENTERED this 20th day of April, 2010, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 2010.
The Issue Whether Leonard Smith, d/b/a Site Development & Pipeline Construction, Inc., violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation coverage for its employees; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing workers’ compensation coverage requirements in Florida, including the requirement that employers secure the payment of workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Leonard Smith is an 85-year-old retired contractor. Respondent’s corporate records with the Florida Division of Corporations record that Leonard Smith is Respondent’s owner, president, and registered agent. Respondent was incorporated in February 2014. The company was administratively dissolved in September 2015. However, Leonard Smith still does business using Respondent’s name. On June 13, 2017, Cristina Brigantty, a compliance investigator with the Department, conducted a random workers’ compensation check at a worksite located at 499 Lorraine Leland Street in Dunedin, Florida. At the site, Investigator Brigantty observed an individual operating a compact excavator/tractor commonly called a “Bobcat” (the manufacturer’s name). The Bobcat operator was moving soil and appeared to be grading the site in preparation for the pouring of concrete. Investigator Brigantty approached the individual operating the Bobcat and requested his name. The driver identified himself as Joe Smith. Joe Smith also relayed to Investigator Brigantty that he was just hired by Leonard Smith (no relation) to work on the site. Joe Smith added that he expected to work approximately ten hours and be paid around $2,000 from Leonard Smith for the job. Joe Smith then provided Investigator Brigantty with Leonard Smith’s business card and phone number. At the final hearing, Investigator Brigantty testified that her duties for the Department include inspecting businesses to determine whether the business has obtained the required workers’ compensation insurance coverage. Investigator Brigantty explained that a business that performs construction-related work must have workers’ compensation coverage. Therefore, Investigator Brigantty believed that Respondent should have secured sufficient workers’ compensation coverage for its employee (Joe Smith). After learning Leonard Smith’s name, Investigator Brigantty searched the Department’s Coverage and Compliance Automated System (“CCAS”) database. CCAS is a Department database that tracks workers’ compensation insurance coverage. CCAS contains coverage data from insurance carriers, as well as any workers’ compensation exemptions on file with the Department. Insurance providers are required to report coverage and cancellation information, which the Department uses to update CCAS. While reviewing CCAS, Inspector Brigantty initially noted that the Department did not have on file any request from Leonard Smith, Respondent’s owner-of-record, for an exemption from workers’ compensation coverage. An exemption is a method by which a business’s corporate officer may exempt him or herself from the requirements of chapter 440. See § 440.05, Fla. Stat. Thereafter, based on her research of the information in CCAS, Inspector Brigantty concluded that Respondent did not have a valid exemption for a corporate officer (Leonard Smith) on June 13, 2017. Neither did Respondent carry any workers’ compensation coverage for Joe Smith. After determining that Respondent had not obtained workers’ compensation coverage for Joe Smith on the date of her visit, Investigator Brigantty called Leonard Smith. In the ensuing conversation, Leonard Smith told her that Joe Smith was working for him at the jobsite. On June 22, 2017, Investigator Brigantty issued a Stop- Work Order to Respondent. With the Stop-Work Order, Investigator Brigantty also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Through this document, the Department requested several categories of business records from Respondent for the period of June 14, 2015, through June 13, 2017. The requested documents pertained to: employer identification, payroll documents, account documents, disbursements, workers’ compensation coverage, professional employer organization, temporary labor service, exemptions, subcontractors, and subcontractor’s workers’ compensation coverage. Based on its investigation, the Department determined that Respondent failed to secure adequate workers’ compensation coverage for its employees. Therefore, the Department proceeded to calculate a penalty based on Respondent’s lack of compliance with chapter 440. The Penalty Calculation: Lynne Murcia, the penalty auditor who determined the penalty the Department seeks to impose on Respondent, testified regarding her computation. Ms. Murcia explained that the penalty essentially consists of the “evaded” premium amount, or the actual amount the employer would have paid in workers’ compensation insurance for the uncovered employees, multiplied by two. To calculate the appropriate penalty for Respondent’s failure to secure workers’ compensation coverage, the Department first ascertained Respondent’s period of non-compliance. In determining this time frame, the Department referred to Florida Administrative Code Rule 69L-6.028(2), which directs that: The employer’s time period or periods of non- compliance means the time period(s) within the two years preceding the date the stop- work order was issued to the employer within which the employer failed to secure the payment of compensation pursuant to chapter 440, F.S., and must be either the same time period as set forth in the business records request for the calculation of penalty or an alternative time period or period(s) as determined by the Department, whichever is less. The employer may provide the Department with records from other sources, including, but not limited to, the Department of State, Division of Corporations, the Department of Business and Professional Regulation, licensing offices, and building permitting offices to show an alternative time period or period(s) of non-compliance. Based on these instructions, the Department deduced that Respondent’s period of non-compliance was from June 14, 2015, through June 13, 2017, which was the two-year period preceding the date of the Stop-Work Order.2/ (This two-year period was also the time for which the Department requested business records from Respondent.) After determining Respondent’s period of non- compliance, the Department then calculated the monetary penalty it should impose upon Respondent. In accordance with section 440.107(7)(d)1., the Department must assess against an employer: a penalty equal to 2 times the amount the employer would have paid in premium when applying approved manual rates to the employer’s payroll during periods for which it failed to secure the payment of workers’ compensation required by this chapter within the preceding 2-year period or $1,000, whichever is greater. Therefore, the Department reviewed the business records Respondent provided to ascertain the amount of Respondent’s payroll during the two-year period of non-compliance. In response to the Department’s request for documents, Respondent produced a number of financial records. These records consisted primarily of bank statements and cancelled checks. The documentation Respondent submitted, however, was not comprehensive enough for the Department to determine all the wages Respondent paid to its employees, or the work they performed for the period of June 13, 2015, through June 14, 2017. Specifically, Respondent failed to provide complete bank statements or the corresponding check images for the periods of January 1 through April 30, 2016; June 1 through July 31, 2016; and June 1 through June 13, 2017. Consequently, the Department determined that Respondent did not provide business records sufficient for it to calculate Respondent’s complete payroll or the actual employee wages it paid over the two-year period of non-compliance. Therefore, the Department exercised its option to “impute” Respondent’s weekly payroll from June 13, 2015, through June 14, 2017. In addition to Joe Smith, the Department imputed wages for several other individuals and entities it identified in Respondent’s business records. Based on Respondent’s financial records, between June 14, 2015, and June 13, 2017, Respondent made payments to Earl Cockeranoham, “J.M.L.,” Martin Moore, “Peterson,” and Robert Tamburan. The Department also identified a subcontractor Respondent paid in 2015 named Roger’s Dirt Works, Inc. The Department further determined that at the time of the transaction, Roger’s Dirt Works, Inc., had neither workers’ compensation coverage, nor an exemption for a corporate officer. (Roger’s Dirt Works, Inc., subsequently obtained a valid exemption.) Therefore, the Department included Roger’s Dirt Works, Inc., in the penalty for the period of June 14 through December 31, 2015. The Department also added to Respondent’s payroll “uninsured labor” for the full period of non-compliance. Ms. Murcia relayed that “uninsured labor” reflects undesignated cash transactions for which the recipient was not identified or “validated” by Respondent’s business records and receipts. See Fla. Admin. Code R. 69L-6.035(1)(k). Respondent’s financial records revealed four separate cash payments totaling $6,892. Finally, the Department included Leonard Smith in all periods of non-compliance. The Department explained that Leonard Smith was registered as a corporate officer of Respondent. However, he did not have an active workers’ compensation exemption on file. Therefore, Respondent was also required to carry workers’ compensation for himself. See Fla. Admin. Code R. 69L-6.028(3)(b). To calculate Respondent’s imputed weekly payroll, section 440.107(7)(e) directs that the gross payroll for an employer who provides insufficient business records is imputed at the statewide average weekly wage multiplied by 1.5 for each employee for the period requested for the calculation of the penalty. Therefore, the Department obtained the statewide average weekly wage effective at the time of the Stop-Work Order ($886.46)3/ for each identified employee, corporate officer, and subcontractor, then multiplied that number by 1.5. See § 440.107(7)(e), Fla. Stat.; and Fla. Admin. Code R. 69L- 6.028(3)(a). To calculate a penalty based on an imputed payroll, the Department assigns an employer’s employees the highest rated workers’ compensation classification code. The classification code is based on either the business records submitted or the investigator’s observation of the employees’ activities. In this case, the business records Respondent provided to the Department were not sufficient to categorize the exact type of work that Joe Smith, or any of the other identified employees, performed for Respondent over the two-year period of non-compliance. However, during her investigation of the jobsite on June 13, 2017, Investigator Brigantty observed Joe Smith engaging in activities consistent with excavating, such as filling, backfilling, and moving earth. According to the Scopes Manual issued by the National Council on Compensation Insurance, Inc. (“NCCI”), class code 6217 is the “Excavation and Drivers” classification.4/ Consequently, the Department applied class code 6217 to all Respondent’s employees and officer for the entire penalty period. See Fla. Admin. Code R. 69L-6.028(3)(b) and 69L-6.021(2)(mmm)(excavation is classified as “construction activity”). Therefore, to calculate the premium amount for the workers’ compensation insurance Respondent should have paid for its employees, the Department applied the manual rates corresponding to class code 6217. Thereafter, based on: 1) the total periods of non- compliance, 2) Respondent’s calculated payroll for the periods of non-compliance, and 3) the estimated premium for workers’ compensation insurance, the Department issued the Amended Order of Penalty Assessment (“Penalty Assessment”) on October 13, 2017. The Penalty Assessment imposed a penalty of $42,407.08 against Respondent. Ms. Murcia explained that the initial penalty amount was calculated without the benefit of Respondent’s business records. However, after Respondent began providing its financial records in October 2017, the Department reduced its penalty assessment three times. On November 30, 2018, the Department served a 2nd Amended Order of Penalty Assessment, which adjusted the penalty down to $11,958.46. On May 29, 2019 (following leave by the undersigned), the Department produced a 3rd Amended Order of Penalty Assessment, which further reduced the penalty to $8,443.96. Finally, at the final hearing (in light of Leonard Smith’s deposition), the Department introduced a 4th Amended Order of Penalty Assessment with a revised (and final) penalty amount of $8,366.44. At the final hearing, Leonard Smith was adamant that Joe Smith was not his employee on June 13, 2017, or at any point. Instead, Leonard Smith explained that he is just a “broker” to help place workers with construction projects. Leonard Smith claimed that for the last nine years, he simply does estimating and consulting for other small contractors. Consequently, because he no longer engages in construction work or employs any workers, Leonard Smith asserted that he does not need to carry workers’ compensation insurance. Regarding the work that Investigator Brigantty witnessed on June 13, 2017, Leonard Smith testified that a church contacted him about supplying, filling, and spreading dirt on its property. Leonard Smith explained that the church was to pay him $12,840.00 for the job. Leonard Smith referred to Joe Smith as a “private contractor.” Leonard Smith relayed that he met Joe Smith in June 2017. Joe Smith expressed that he was looking for work. Leonard Smith told him about the job in Dunedin, Florida. On June 13, 2017, Leonard Smith met Joe Smith, who had brought his Bobcat, at the church and discussed the job. Leonard Smith then left him to complete the work. Leonard Smith insisted that he never “paid” Joe Smith. Instead, he simply agreed to share the money the church was giving him for the job. Leonard Smith called his own portion a “consulting fee.” On June 23, 2017, after he had received the $12,840.00 from the church, Leonard Smith wrote a check to Joe Smith for $3,440.00. Joe Smith never worked for Respondent or Leonard Smith before or since June 13, 2017. Regarding the payment to Earl Cockeranoham recorded in Respondent’s business records, Leonard Smith testified that Mr. Cockeranoham never worked for him. Instead, the money he paid to Mr. Cockeranoham in 2015 ($460.00) was for work Mr. Cockeranoham performed for the same church. Regarding evidence of a payment to Martin Moore, Leonard Smith testified that he paid Mr. Moore $500.00 in 2016 for Mr. Moore’s rent. Leonard Smith denied that he paid Mr. Moore for construction work. Respondent further testified that Respondent had known Mr. Moore a long time. Joe Smith testified at the final hearing regarding his understanding of his employment relationship with Respondent on June 13, 2017. Initially, Joe Smith explained that he had been out of work for several months and was looking for a job when he met Leonard Smith in June 2017. Leonard Smith offered him the work at the church spreading soil. Joe Smith relayed that he owned the Bobcat and brought it with him to the jobsite. Joe Smith stated that, on June 13, 2017, he met Leonard Smith at the church. There, Leonard Smith informed him that he was to bring an area of land up to proper elevation. They also discussed how they would split payment for the job. Joe Smith understood that the church was going to pay Leonard Smith. Then, Leonard Smith was going to give him his share. Joe Smith confirmed that Leonard Smith sent him approximately $3,000.00 several weeks after the job. Joe Smith also conceded that he was not covered by workers’ compensation on June 13, 2017. Joe Smith further testified that Investigator Brigantty showed up at the worksite the day he started working. Finally, at the final hearing, Joe Smith was dismayed that he had created this issue regarding workers’ compensation coverage. He expressed that he was simply looking for work, and Leonard Smith was kind enough to help him out. Joe Smith did not want to get anyone in trouble. Based on the competent substantial evidence in the record, the Department demonstrated, by clear and convincing evidence, that Respondent failed to secure workers’ compensation insurance coverage or workers’ compensation exemptions for its “employees” for the periods of June 14, 2015, through June 13, 2017. Accordingly, the Department met its burden of proving that Respondent violated chapter 440 and should be penalized. (As more fully addressed below, the evidence in the record does not sufficiently establish that either Earl Cockeranoham or Martin Moore were “employees” of Respondent under chapter 440. Therefore, they should not be included in the penalty calculation.)
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order determining that Respondent, Leonard Smith, d/b/a Site Development & Pipeline Construction, Inc., violated the requirement in chapter 440 to secure workers’ compensation coverage, and imposing a total penalty of $8,219.06. DONE AND ENTERED this 13th day of September, 2019, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of September, 2019.
