The Issue Whether Respondent committed the violations alleged in the Department of Financial Services, Division of Workers' Compensation's (Department's) Stop Work Order and Second Amended Penalty Assessment and if so, what penalty should be imposed?
Findings Of Fact The Department is the state agency charged with enforcement of the laws related to workers' compensation pursuant to Chapter 440, Florida Statutes. On August 15, 2006, Katina Johnson, a workers' compensation compliance investigator for the Division, observed two men painting the exterior of a home at 318 First Street, in Jacksonville. The two men were identified as William Furr and his son, Corey Furr. Upon inquiry, Mr. Furr stated that he held a lifetime exemption from workers' compensation requirements. He provided to Ms. Johnson a copy of his exemption card, which was issued April 30, 1995, in the name of Arby's Painting & Decorating. The exemption card had no apparent expiration date. 4. In 1998, Sections 440.05(3) and 440.05(6), Florida Statutes, were amended, effective January 1, 1999, to limit the duration of construction workers' compensation exemptions to a period of two years. Express language in the amended statute provided that previously held "lifetime exemptions" from workers' compensation requirements would expire on the last day of the birth month of the exemption holder in the year 1999. Ms. Johnson researched Respondent's status on the Department's Compliance and Coverage System (CCAS) database that contains all workers compensation insurance policy information from the carrier to an insured, and determined that Respondent did not have a State of Florida workers' compensation insurance policy. The CCAS database indicated that Respondent previously held an exemption as a partner for Arby's Painting and Decorating, and that the exemption expired December 31, 1999. Ms. Johnson also checked the National Council on Compensation Insurance ("NCCI") database which confirmed that Respondent did not have a current workers' compensation insurance policy in the State of Florida. After conferring with her supervisor, Ms. Johnson issued a Stop-Work Order and Order of Penalty Assessment to Respondent on August 15, 2006. She also made a request for business records for the purpose of calculating a penalty for lack of coverage. Respondent submitted a written payroll record for his son, Corey Furr, along with a summary of what Respondent had earned on various jobs he performed from 2004 through 2006 and a Miscellaneous Income Tax Form 1099 for himself. On August 30, 2006, he also provided to the Department a copy of his occupational license with the City of Jacksonville. Based on the financial records supplied by Respondent, Ms. Johnson calculated a penalty for a single day, August 15, 2006, for Corey Furr. She calculated a penalty from January 1, 2005, through August 15, 2006, for William Furr. Ms. Johnson assigned a class code to the type of work performed by Respondent using the SCOPES Manual, multiplied the class code's assigned approved manual rate with the payroll per one hundred dollars, and then multiplied the result by 1.5. The Amended Order of Penalty Assessment assessed a penalty of $5,296.37. A Second Amended Order of Penalty Assessment was issued November 1, 2006, with a penalty of $5,592.95. This Second Amended Order of Penalty Assessment was issued because Ms. Johnson used the incorrect period of violation for Respondent when she initially calculated the penalty. On August 25, 2006, Respondent entered into a Payment Agreement Schedule for periodic payment of the penalty, and was issued an Order of Conditional Release from Stop-Work Order by the Department. Respondent paid ten percent of the assessed penalty, provided proof of compliance with Chapter 440, Florida Statutes, by forming a new company and securing workers' compensation exemptions for both himself and his son, Corey Furr, and agreed to pay the remaining penalty in sixty equal monthly payments. Respondent claims that he was not aware of the change in the law and continued to operate under the belief that his "lifetime exemption" remained valid. Although under no statutory obligation to do so, the Department sent a form letter to persons on record as holding exemptions to inform them of the change in the law and the process to be followed to obtain a new exemption.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED: That the Division of Workers' Compensation enter a Final Order affirming the Stop Work Order issued August 15, 2006, and the Second Amended Order of Penalty Assessment issued to Respondent on November 1, 2006. DONE AND ENTERED this 23rd day of February, 2007, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of February, 2007.
Conclusions This cause came on before Tom Gallagher, as Chief Financial Officer of the State of Florida, for consideration of and final agency action on the Recommended Order issued herein on October 4, 2003, by Administrative Law Judge J.D. Parrish. No exceptions to that Recommended Order were filed. , Having reviewed the Recommended Order and the record of this proceeding, and being otherwise apprised in all material premises, IT IS HEREBY ORDERED that the Findings of Fact and Conclusions of Law made and announced by the Administrative Law Judge in the Recommended Order are adopted without exception as the Findings of Fact and Conclusions of law of the agency. IT IS HEREBY FURTHER ORDERED that Janusz Kraj shall pay to the Division of Worker's Compensation a civil penalty in the amount of $1,100, within thirty days from the date hereof, said sum to thereafter bear interest at the rate of 9% per anum until paid. IT {S$ HEREBY FURTHER ORDERED that the Stop Work And Penalty Assessment Order entered by the Division of Worker's Compensation is affirmed, and that Janusz Kraj shall cease all business operations unless and until he provides evidence satisfactory to the Division of Worker's Compensation of having now complied with the workers compensation law by securing the necessary worker's compensation for covered employees and, pursuant to Section 440.107(7)(a), Florida Statutes, paid the civil penalty imposed herein. Lh DONE AND ORDERED this 3° — day of November, 2003. ST ) Sie \eouw Tom Gallag Chief Financial Officer Tomy “ay a PEF LAO
The Issue The issues are whether Respondent conducted business operations in Florida without obtaining workers’ compensation coverage that met the requirements of Chapter 440, Florida Statutes (2009), for its employees, and if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency that is responsible for enforcing Chapter 440, Florida Statutes, which requires employers to secure the payment of workers’ compensation for the benefit of their employees. Respondent is a Louisville, Kentucky-based corporation that is engaged in the construction, maintenance, and painting of elevated water tanks. Respondent has a second fabrication facility located in Newnan, Georgia. Respondent’s work constitutes construction. On March 4, 2010, Petitioner’s investigator, Lawrence F. Eaton, observed Respondent’s employees working on a water tower in Pace, Florida. While visiting the worksite, one of Respondent’s employees stated that he did not have any information regarding if and how the men were covered by workers’ compensation. The employee gave Mr. Eaton a telephone number for Respondent. Next, Mr. Eaton consulted the Kentucky Secretary of State website to find information concerning the corporate status of Respondent. The website indicated that Respondent was incorporated in 1892 and that it had three corporate officers. Mr. Eaton then consulted Petitioner’s Coverage and Compliance Automated System (CCAS) database. CCAS contains workers’ compensation policy information for each employer that has a Florida policy and information relative to workers’ compensation exemptions that have been applied for and issued to individuals by Petitioner. Mr. Eaton was unable to find any indication on CCAS that Respondent had secured workers’ compensation coverage by purchasing a Florida policy. CCAS also provided no evidence that Respondent had entered into an arrangement with an employee leasing company to provide workers’ compensation coverage to its employees. Additionally, CCAS did not show that Respondent had obtained exemptions for its corporate officers. Mr. Eaton subsequently spoke with one of Respondent’s representatives. Mr. Eaton was informed that Respondent was self-insured for workers’ compensation in Kentucky. Mr. Eaton also learned that Respondent had another workers’ compensation policy. Respondent’s representative indicated that she would send Mr. Eaton the policy paperwork. When he received the paperwork from Petitioner, Mr. Eaton determined that the insurance coverage did not comply with the requirements of Florida’s workers’ compensation law. The paperwork included an excess policy of workers’ compensation and a Georgia workers’ compensation policy. On March 5, 2010, Mr. Eaton issued a Stop-Work Order and Order of Penalty Assessment against Respondent. Specifically, the Stop-Work Order states that Respondent was not in compliance with Chapter 440, Florida Statutes, because Respondent failed to obtain workers’ compensation coverage for its employees. On March 5, 2010, Mr. Eaton issued a Request for Production of Business Records for Penalty Assessment Calculation to Respondent. On March 8, 2010, Respondent provided Mr. Eaton with additional workers’ compensation policy information. The information included the declarations page for Chartis Company Policy No. WC 005-73-7942. The Chartis policy is a Workers’ Compensation and Employers Liability Policy. In Item 3A, the policy lists the states that are covered, in Part One of the policy, pursuant to each state’s workers’ compensation law. Georgia is named as a covered state in Item 3A. In Item 3C, the Chartis policy lists the states that are covered, in Part Three of the policy, as "other states insurance." Florida is listed only in Item 3C. Item 4 of the Chartis policy states that "[t]he premium of this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit." In response to the request for business records, Respondent provided Petitioner with payroll information for work it had performed in Florida between September 2007 and February 2010. After receiving this information, Respondent’s Penalty Calculator, Robert McAullife, calculated a penalty. Because Respondent had not provided all of the requested business records, Mr. McAullife imputed Respondent’s payroll for a portion of the relevant time period. In calculating the penalty, Mr. McAullife first sought to determine the amount of premium that Respondent would have paid had it been properly insured for the relevant three-year period. Mr. McAullife assigned a class code for each of Respondent’s employees, reflecting the work they performed. Mr. McAullife then took 1/100th of the payroll and multiplied that figure by the approved manual rate applicable to each class code. Mr. McAullife then took the previously obtained product and multiplied it by 1.5 to find a penalty in the amount of $122,242.23. This penalty is based on Respondent having $382,146.90 in Florida payroll that would have required $81,494.66 in workers’ compensation premium. There are no errors in Mr. McAullife’s penalty calculation. Mr. Eaton issued an Amended Order of Penalty Assessment on March 23, 2010. On March 24, 2010, Respondent and Petitioner entered into a Payment Agreement Schedule for Periodic Payment of Penalty that required ten percent of the penalty to be paid in advance and the remainder to be paid in 60 interest-free monthly payments. Respondent also produced a policy that provided coverage in compliance with Florida law with an effective date of March 12, 2010. As a result, Petitioner issued an Order of Conditional Release, permitting Respondent to return to work. During the hearing, Respondent presented evidence that it is a registered self-insured company in Kentucky for the first $500,000.00 of workers’ compensation. Additionally, Respondent has excess insurance for any workers’ compensation claims that exceed the $500,000.00 threshold. Because it is self-insured in Kentucky, Respondent must purchase letters of credit on an annual basis. Respondent paid the following for its recent letters of credit: (a) 2007, $26,755.54; (b) 2008, $32,438.48; (c) 2009, $33,626.38; and (d) 2010 to date, $8,931.39. The State of Kentucky assesses qualified self-insureds a six and one half percent tax based on an annual simulated premium. The amount of the simulated premium represents what a qualified self-insured would pay for a "first dollar" policy of workers’ compensation insurance. Respondent’s recent simulated premiums are as follows: (a) 2007, $453.440.00; (b) 2008, $480,637.00; (c) 2009, $623,940.00; and (d) 2010, $1,006,243.00. Respondent also maintains a "high dollar" deductible policy of insurance that provides workers’ compensation coverage for its Georgia employees. Respondent’s Georgia policy, Chartis Company Policy No. WC 005-73-7942, which includes Florida as part of "all other states" in Item 3C of the declarations page, also requires the payment of premiums. Respondent recently paid the following premiums for this insurance: (a) 2007, $124,736.78; (b) 2008, $125,950.08; and (c) 2009, $64,465.28. The premiums paid by Respondent for the Chartis Company Policy No. WC 005-73-7942 are not based on Florida rates. From 2007 to 2010, Respondent provided workers’ compensation benefits for at least four different workers that were injured while performing work for Respondent in Florida. The workers’ compensation benefits paid by Respondent on these claims totaled $147,958.25.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, enter a final order, finding that Caldwell Tanks, Inc., failed to comply with Chapter 440, Florida Statutes, and imposing a penalty in the amount of $122,224.22. DONE AND ENTERED this 8th day of December, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of December, 2010. COPIES FURNISHED: Claude M. Harden, III, Esquire Carr Allison 305 South Gadsden Street Tallahassee, Florida 32301 Jamila Georgette Gooden, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, 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 32399-0390 Honorable Alex Sink Chief Financial Officer The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0390
The Issue The issues are as follows: (a) whether Respondent failed to secure the payment of workers’ compensation for its employees; and if so, (b) whether Petitioner assessed an appropriate penalty.
Findings Of Fact Petitioner is the state agency that is responsible for enforcing the requirements Chapter 440, Florida Statutes, requiring employers to secure the payment of workers’ compensation for their employees. At all times relevant here, Respondent has been an active Florida corporation. Respondent’s business involves the installation of acoustic ceiling tiles. Respondent’s work in this regard constitutes construction. On March 16, 2010, Carl Woodall, Petitioner’s workers’ compensation compliance investigator, conducted a random compliance check at a construction site. The site was located at 707 Jenks Avenue in Panama City, Florida. Upon his arrival in the construction site, Mr. Woodall observed two individuals, Robin and Todd Calhoun, installing acoustic ceiling tiles in a commercial office building. The individuals informed Mr. Woodall that they were working for Jackie Shores. The individuals provided Mr. Woodall with contact information for Mr. Shores. Mr. Woodall initially contacted Mr. Shores by phone. Later, Mr. Woodall and Mr. Shores spoke in person at the construction site. Mr. Shores informed Mr. Woodall that he was employed by Respondent as a job supervisor. Mr. Shores also identified Robin and Todd Calhoun as Respondent’s employees. Mr. Shores informed Mr. Woodall that Respondent used Southeast Employee Leasing for workers’ compensation coverage, but that Robin and Todd Calhoun had not been signed up for coverage. Mr. Woodall then contacted George Kaspers from Southeast Employee Leasing to verify whether Respondent had secured workers’ compensation for Robin and Todd Calhoun. Mr. Kaspers confirmed that the Calhouns were not covered and that they did not have pending employee applications. On March 16, 2010, Mr. Kaspers faxed Mr. Woodall a list of Respondent’s employees that were covered by workers’ compensation insurance. The list did not name the Calhouns. Mr. Woodall next searched Petitioner’s Coverage and Compliance Automated System (CCAS) for proof of a workers’ compensation policy or officer exemptions. CCAS is a database that lists workers’ compensation insurance policy information and all workers’ compensation exemptions. The database did not list a current policy for Respondent or any valid exemptions. Mr. Woodall also reviewed the website maintained by the Florida Department of State, Division of Corporations. The review showed that Respondent had been an active corporation since May 7, 2002. Based on his investigation, Mr. Woodall determined that Respondent had not secured workers’ compensation coverage for all of its employees as required by Chapter 440, Florida Statutes. On March 16, 2010, Petitioner issued, and served on Respondent, a Stop-Work Order and Order of Penalty Assessment, together with a Request for the Production of Business Records for Penalty Assessment Calculation. The business records request applied to the period of March 17, 2007, through March 16, 2010. The request sought production of payroll records, workers’ compensation policy documents, employee leasing documents, temporary labor service documents, and workers’ compensation exemption documents. Mr. Woodall did not initially request subcontractor payroll and workers’ compensation documentation from Respondent because he did not see any subcontractors on site. He did not want to burden Respondent with a request for more documents that were necessary to determine a proper penalty. However, after Respondent failed to produce the requested records within the required time-period, the case was assigned to Monica Moye, Respondent’s penalty calculator, to prepare a penalty based on Respondent’s imputed payroll. On April 8, 2010, Mr. Woodall personally served an Amended Order of Penalty Assessment on Respondent. The Order assessed a total penalty in the amount of $77,492.93 against Respondent for failure to secure workers’ compensation coverage for its employees. On April 5, 2010, and April 7, 2010, Respondent provided bank records with check images to Petitioner for the period of March 1, 2007, through March 31, 2010. Ms. Moye used these records to calculate a 2nd Amended Order of Penalty Assessment. The second order was based on payments to employees and subcontractors that were not covered by workers’ compensation insurance or an exemption there from. The second order assessed a penalty in the amount of $13,018.63. After service of the 2nd Amended Order of Penalty Assessment, Ms. Moye received additional information from Respondent regarding a subcontractor that was covered by its own workers’ compensation policy. After confirming the subcontractor's coverage, Ms. Moye removed all payments to that subcontractor from Respondent's penalty. Mr. Woodall subsequently issued a 3rd Amended Order of Penalty Assessment to Respondent, assessing a penalty in the amount of $7,105.35. Later, Ms. Moye received information from Respondent, indicating that two additional subcontractors had workers’ compensation coverage for their employees. This information resulted in the issuance of a 4th Amended Order of Penalty Assessment, assessing a penalty in the amount of $6,675.91. Classification codes are four digit codes assigned to occupation by the National Council on Compensation Insurance, Inc. (NCCI) to assist in the calculation of workers’ compensation insurance premiums. The codes are listed in the Scopes® Manual, which Petitioner has adopted by rule. After discovery was completed in this case, Petitioner determined that some of Respondent’s employees had been assigned an improper construction classification code of 5348 on the 4th Amended Order of Penalty Assessment. Code 5348 encompasses ceramic tile, indoor stone, and marble installation. The proper code for Respondent’s employees was 5020, which encompasses the installation of suspended acoustical ceilings. Based on information provided by Respondent during discovery, Petitioner also determined that one of Respondent’s clerical employees should be assigned classification code 8810 rather than construction code 5348. Additionally, Petitioner discovered that payments to two entities were payments for material rather than labor. Based on information learned during discovery, Petitioner prepared a 5th Amended Order of Penalty Assessment, assessing a total penalty in the amount of $8,621.46. To calculate the penalty of the 5th Amended Order of Penalty Assessment, Petitioner totaled the gross payroll paid to Respondent’s employees and subcontractors that were not covered by workers’ compensation for each period of non-compliance. Respondent conceded that all of the individuals and entities listed on the penalty worksheet performed services for Respondent during the time periods listed. Respondent also conceded that the gross payroll amounts were correctly calculated, that none of the individuals listed had secured an exemption, and that none of the payments to employees or subcontractors included in the penalty calculation were covered by a workers’ compensation policy. Approved manual rates are established by NCCI and adopted by Petitioner. The approved manual rates are calculated upon the risk assigned to the type of employment reflected by each classification code. Using the penalty calculation worksheet, Petitioner divided the gross payroll amount for each employee and subcontractor in each period of non-compliance by 100 and multiplied that figure by the approved manual rate for the classification code assigned to that employee or subcontractor. The product was the amount of workers’ compensation premium Respondent should have paid for each employee and subcontractor if Respondent had been compliant. The premium amounts were then multiplied by 1.5 to arrive at the penalty for each employee and subcontractor. The penalties for each employee and subcontractor for each period of non-compliance were then added together to come up with a total penalty of $8,621.48.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, enter a final order, affirming, approving, and adopting the 5th Amended Order of Penalty Assessment. DONE AND ENTERED this 10th day of December, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 2010. COPIES FURNISHED: Jackie Shores M & M Coop Construction Co., Inc. 1401 Minnesota Avenue Lynn Haven, Florida 32444 Holly R. Werkema, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CP, FRP Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services’ The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in 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 The issues in this enforcement proceeding are whether Respondent failed to comply with Sections 440.10, 440.05, and , Florida Statutes (2003),1 and, if so, whether Petitioner correctly assessed the penalty for said failure.
Findings Of Fact Based upon observation of the demeanor and candor of each witness while testifying; documentary materials received in evidence; evidentiary rulings made pursuant to Section 120.57, Florida Statutes (2004); and stipulations of the parties, the following relevant and material facts, arrived at impartially based solely upon testimony and information presented at the final hearing, are objectively determined: At all times material, Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), is the state agency responsible for enforcement of the statutory requirements that employers secure the payment of workers' compensation coverage requirements for the benefit of their employees in compliance with the dictates of Chapter 440, Florida Statutes. Employers who failed to comply with Chapter 440, Florida Statutes, are subject to enforcement provisions, including penalty assessment, of Chapter 440, Florida Statutes. At all times material, Respondent, St. James Automotive, Inc. (St. James), is a corporation domiciled in the State of Florida and engaged in automobile repair, with known business locations in Pine Island and St. James City, Florida. Both locations are owned by Richard Conrad (Mr. Conrad). On or about August 5, 2004, a Department investigator conducted an "on-site visit" at the St. James location on Pine Island Road, Pine Island, Florida. The purpose of the on-site visit was to determine whether or not St. James was in compliance with Chapter 440, Florida Statutes, regarding workers' compensation coverage for the workers found on-site. The investigator observed four individuals working on-site in automotive repair functions. One employee, when asked whether "the workers had workers' compensation coverage in place," referred the investigator to the "owner," who, at that time, was at the second business location at 2867 Oleander Street, St. James City, Florida. The investigator verified the owner's presence at the St. James City location by telephone and met him there. Upon his arrival at the St. James City location, the investigator initiated a workers' compensation coverage check on two databases. He first checked the Coverage and Compliance Automated System (CCAS) to ascertain whether St. James had in place workers' compensation coverage. The CCAS system contained current status and proof of workers' compensation coverage, if any, and record of any exemptions from workers' compensation coverage requirements filed by St. James' corporate officers. The CCAS check revealed no workers' compensation coverage filed by any corporate officers of St. James. The second system, the National Council on Compensation Insurance (NCCI), contained data on workers' compensation coverage in effect for workers (employees) in the State of Florida. NCCI similarly revealed no workers' compensation coverage in effect for St. James' Florida employees. The investigator discussed the situation and findings from both the CCAS and NCCI with Mr. Conrad who acknowledged and admitted: (1) St. James had no workers' compensation coverage in place; (2) St. James had made inquiry and arranged for an unnamed attorney to file exemptions from workers' compensation coverage on behalf of several St. James employees, but the attorney never filed exemptions; and (3) Mr. Conrad subsequently attempted to file the exemptions himself but was unsuccessful-- "because names of exemption applicants [employees] did not match the corporate information on file for St. James, Inc., at the Division of Corporations." When offered the opportunity by the Department's investigator to produce any proof of workers' compensation coverage or exemption from coverage, Mr. Conrad was unable to do so. At the conclusion of the August 5, 2004, on-site visit, and based upon a review of the CCAS and NCCI status reports and Mr. Conrad's inability to produce proof of workers' compensation coverage or exemptions, the investigator determined that St. James was not in compliance with requirements of Chapter 440, Florida Statutes. The investigator then issued a Stop Work Order on St. James' two business locations. The Stop Work Order contained an initial assessed penalty of $1,000, subject to increase to an amount equal to 1.5 times the amount of the premium the employer would have paid during the period for which coverage was not secured or whichever is greater. Mr. Conrad acknowledged his failure to conform to the requirements of Chapter 440, Florida Statutes, stating5: I guess you could say--I first of all, I am guilty, plain and simple. In other words, I did not conform. Subsequent to issuing the August 5, 2004, Stop Work Order, the Department made a written records' request to Mr. Conrad that he should provide payroll records listing all employees by name, social security number, and gross wages paid to each listed employee.6 Mr. Conrad provided the requested employee payroll records, listing himself and his wife, Cheryl L. Conrad, not as owners, stockholders or managers, but as employees. Pursuant to Section 440.107, Florida Statutes, the Department is required to link the amount of its enforcement penalty to the amount of payroll (total) paid to each employee. The persons listed on St. James' payroll records received remuneration for the performance of their work on behalf of St. James and are "employees" as defined in Subsection 440.02(15), Florida Statutes. Review of the payroll records by the Department's investigator revealed the listed employees for services performed on its behalf. The employee payroll records provided by St. James were used by the Department's investigator to reassess applicable penalty and subsequent issuance of the Amended Order of Penalty Assessment in the amount of $97,260.75.7 St. James' payroll records did not list the type of work (class code or type) each employee performed during the period in question. Accordingly, the Department's investigator properly based the penalty assessment on the highest-rated class code or type of work in which St. James was engaged, automotive repair. The highest-rated class code has the most expensive insurance premium rate associated with it, indicating the most complex activity or type of work associated with St. James' business of automotive repair. The Department's methodology and reliance on the NCCI Basic Manual for purpose of penalty calculation is standardized and customarily applied in circumstances and situations as presented herein.8 Mr. Conrad, in his petition for a Chapter 120, Florida Statutes, hearing alleged the 8380 (highest premium rate) class code applied to only three of his employees: himself, Brain Green, and William Yagmin. On the basis of this alleged penalty assessment error by the Department, Mr. Conrad seeks a reduction of the Amended Order of Penalty Assessment amount of $97,260.75. Mr. Conrad presented no evidence to substantiate his allegation that the Department's investigator assigned incorrect class codes to employees based upon the employee information Mr. Conrad provided in response to the Department's record request. To the contrary, had he enrolled in workers' compensation coverage or had he applied for exemption from coverage, Mr. Conrad would have known that his premium payment rates for coverage would have been based upon the employees' class codes he would have assigned each employee in his workers' compensation coverage application. In an attempt to defend his failure to comply with the workers' compensation coverage requirement of Chapter 440, Florida Statutes, Mr. Conrad asserted that the Department's investigator took his verbal verification that certain employees were clerical, but neglected to recognize his statement that he was also clerical, having been absent from the job-site for over three years. Mr. Conrad's excuses and avoidance testimony was not internally consistent with his earlier stated position of not conforming to the statutory requirements of Chapter 440, Florida Statutes. The above testimony was not supported by other credible evidence of record. This is critical to the credibility determination since Mr. Conrad seeks to avoid paying a significant penalty. For those reasons, his testimony lacks credibility. Mr. Conrad also attempted to shift blame testifying that--"My attorney did not file exemption forms with the Department," and my "personal attempts to file St. James' exemption form failed--[B]ecause the mailing instructions contained in the Department's form were not clear." In his final defensive effort of avoidance, Mr. Conrad testified that he offered to his employees, and they agreed to accept, unspecified "increases" in their respective salaries in lieu of St. James' providing workers' compensation coverage for them. This defense suffered from a lack of corroboration from those employees who allegedly agreed (and those who did not agree) and lack of documented evidence of such agreement. The intended inference that all his employees' reported salaries included some unspecified "salary increase" is not supported by employee identification or salary specificity and is thus unacceptable to support a finding of fact. St. James failed to produce credible evidence that the Department's Stop Work Order, the Penalty Assessment, and/or the Amended Penalty Assessment were improper. St. James failed to produce any credible evidence that the Department's use of the NCCI Basic Manual, as the basis for penalty assessment calculation based upon employee information provided by St. James, was improper and/or not based upon actual employee salary information provided by St. James. Prior to this proceeding, the Department and Mr. Conrad entered into a penalty payment agreement as authorized by Subsection 440.107(7)(a), Florida Statutes.9 The penalty payment agreement required fixed monthly payments be made by Mr. Conrad and afforded Mr. Conrad the ability to continue operation of his automotive repair business that was, by order, stopped on August 5, 2004.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order that affirms the Stop Work Order and the Amended Order of Penalty Assessment in the amount of $97,260.75, minus any and all periodic payments of the penalty remitted by St. James, pursuant to agreed upon conditional release from the Stop Work Order dated August 5, 2004. DONE AND ENTERED this 4th day of March, 2005, in Tallahassee, Leon County, Florida. S FRED L. BUCKINE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of March, 2005.
The Issue The issue is whether the Stop-Work Order and the Third Amended Order of Penalty Assessment entered by Petitioner on July 25, 2013, and August 13, 2013, respectively, should be upheld.
Findings Of Fact The Department is the state agency tasked with the responsibility of enforcing the requirement of section 440.107(3), Florida Statutes, that employers in Florida secure the payment of workers' compensation for their employees. Respondent, Mad Dog Marketing Group, Inc., is a corporation organized under chapter 607, Florida Statutes, and was registered with the Florida Department of State, Division of Corporations, throughout the period of July 26, 2010, to July 25, 2013. At all times relevant to this proceeding, Respondent was engaged in the operation of a hardware store business with three locations in Florida. On July 25, 2013, based upon an anonymous referral, Tracey Gilbert, the Department's compliance investigator, commenced a workers' compensation compliance investigation of Respondent by visiting the job site, an appliance parts store at 730 West Brandon Boulevard, Brandon, Florida, and interviewing Sharon Belcher. According to Ms. Gilbert, Ms. Belcher informed her that she had 11 employees at the time of the site visit and that she did not have workers' compensation coverage for them. Ms. Belcher showed Ms. Gilbert an application for workers' compensation insurance and said she had not taken action with it since the company wanted a $10,000 premium. She also showed Ms. Gilbert some OSHA and workplace posters, but not the typical "broken arm poster" that describes workers' compensation coverage for a place of business. Ms. Belcher then gave Ms. Gilbert a list of Respondent's 11 current employees. On her laptop computer, Ms. Gilbert consulted the Department's Coverage and Compliance Automated System (CCAS) database to determine whether Respondent had secured workers' compensation coverage or an exemption from the requirements for coverage for its employees. CCAS is the database Ms. Gilbert routinely consults during the course of her investigations. She determined from CCAS that Respondent neither had workers' compensation coverage for her employees nor had received an exemption from such coverage from the Department. Ms. Belcher's recollection of her meeting with Ms. Gilbert differs from Ms. Gilbert's. Ms. Belcher recalled that she had applied for insurance with ADP on July 11, 2013, received the "broken arm poster," and believed she was covered at the time Ms. Belcher conducted her investigation. She offered an exhibit showing photographs of posters (but not the "broken arm poster") on the office bulletin board. She also offered an exhibit she testified was the UPS label from the tube containing the "broken arm poster." No photograph of the "broken arm poster" was produced as an exhibit. Ms. Gilbert did not contact ADP to verify whether Respondent had coverage on the date of her site visit to the Brandon store. Ms. Gilbert issued a Stop-Work Order to Respondent and a concurrent Request for Production of Business Records for Penalty Assessment Calculation at 11:20 a.m. on July 25, 2013. Ms. Belcher first submitted an application for workers' compensation coverage on July 11, 2013, but coverage was not bound on that date. Ms. Belcher submitted the paperwork to bind her insurance coverage on the afternoon of July 25, 2013, according to Mark Cristillo, an employee of ADP Insurance. Mr. Cristillo testified that he had made several attempts during the month of July 2013 to obtain the signed documents from Ms. Belcher, including an attempt as late as July 23, 2013, at 11:45 a.m. Ms. Belcher told Mr. Cristillo at that time that she had not reviewed the quote package. At 11:20 a.m., the time Ms. Gilbert's issued the Stop-Work Order on July 25, 2013, Ms. Belcher had not bound her insurance coverage. When she submitted the payment with the signed documents to ADP later that afternoon, the coverage was bound effective 12:01 a.m. on July 25, 2013. The records produced by Ms. Belcher were given to Chad Mason, one of the Department's penalty auditors, to calculate the penalty. He reviewed the records and determined the amount of gross payroll paid to Respondent's employees during the three- year penalty period preceding the investigation during which Respondent was not in compliance with the workers' compensation coverage requirements. Using Respondent's bi-weekly payroll chart, Respondent's Florida Department of Revenue UCT-6 reports, and the classification codes for each employee, Mr. Mason calculated a Third Amended Order of Penalty Assessment of $42,251.43, based upon what Respondent would have paid in workers' compensation premiums had it been in compliance with Florida's Workers' Compensation Law. The order was issued on October 24, 2013. Mr. Mason determined that the appropriate codes for Respondent's employees were 8010 and 8810, which are hardware store employees and general clerical employees, respectively. These codes were derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers' compensation. The manual is produced by NCCI, the National Council on Compensation Insurance, Inc., the nation's most authoritative data collecting and disseminating organization for workers' compensation. The parties stipulated prior to hearing that all of the individuals listed on the penalty worksheet of the Amended Order of Penalty Assessment were "employees" in the state of Florida of Respondent during the periods of non-compliance listed on the penalty worksheets. However, Respondent claimed that some of the employees were out-of-state and not subject to Florida law. Ms. Belcher testified that, as of July 25, 2013, three of its employees, Fred Hasselman, Douglas Strickland, and Josh Hyers, were employees of the Tennessee store and not subject to a Florida penalty. Mr. Hyers was a Florida employee prior to July 1, according to Ms. Belcher. However, all three of the employees were listed on the Florida Department of Revenue's UCT-6 form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida's Unemployment Compensation Law. Mr. Mason reasonably relied upon the UCT-6 filings for the relevant time period to calculate Respondent's gross payroll in Florida. No evidence was produced to show them listed as Tennessee employees on that state's comparable tax form or any official document from outside Florida. The logical assumption is that they are Florida employees under the law. Accepting all the employees disclosed by Respondent as Florida employees led Mr. Mason to make his calculations of the penalty assessment using the appropriate codes from the Scopes Manual for hardware store and general clerical workers, 8010 and 8810. All the named employees on the Third Amended Order of Penalty Assessment were paid by Respondent in the amounts indicated on the penalty worksheet that accompanies that assessment during the penalty period of July 26, 2010, through July 25, 2013. Even though small discrepancies came up at the hearing regarding the classifications of some of Respondent's employees, the parties had stipulated to the accuracy of the classifications of those employees so those numbers will be accepted for purposes of this decision. Based upon the testimony at the hearing and the pre-hearing stipulations of the parties, the penalty assessment in the amount of $42,251.43 is accurate. Mr. Mason correctly applied the methodology for determining the amount of coverage required, determining that the appropriate premium for the three- year period would have been $28,167.50. When multiplied by the factor used to calculate the penalty, 1.5 times the premium, the total amount due is $42,251.43. The Department has proven by clear and convincing evidence that at the time the Stop-Work Order was issued and served on Respondent on the morning of July 25, 2013, Respondent had not secured workers' compensation coverage for its employees as required by chapter 440. On two occasions, August 2 and August 21, 2013, Ms. Gilbert returned to Respondent's Brandon location after the Stop-Work Order had been issued. The first was to serve the Amended Order of Penalty Assessment and the second was to serve the Second Amended Order of Penalty Assessment. On both occasions, the business was open in violation of the Stop-Work Order. A business under a Stop-Work Order may elect to enter into a payment plan after a ten percent down payment to keep the business open while a challenge to DOAH is under way. Respondent had not entered into such a plan. Therefore, the Department seeks $1,000 penalty for each of the days Ms. Gilbert visited the Brandon store and saw it open for business. This total additional penalty of $2,000 could have been greater had the Department further investigated whether the business remained open on other days after the Stop-Work Order had been imposed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order upholding the Stop-Work Order and Third Amended Order of Penalty Assessment, and assess a penalty in the amount of $42,251.43. It is further RECOMMENDED that the Department fine Respondent an additional $1,000 per day for the two days Respondent did not comply with the Stop-Work Order, resulting in a total penalty of $44,251.43. DONE AND ENTERED this 20th day of December, 2013, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of December, 2013. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Kristian Eiler Dunn, Esquire Dickens and Dunn, P.L. 517 East College Avenue Tallahassee, Florida 32301 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390
The Issue The Principal issues in this matter are whether the Department of Financial Services, Division of Workers’ Compensation acted appropriately and within its’ statutory authority when it entered the Second Amended Order of Penalty Assessment and Stop-Work Order against the Petitioner for failing to secure workers’ compensation insurance for their employees when 4 tequired by Florida law, and whether any provisions of the Florida Workers’ Compensation Law provide for the mitigation or rescission of penalties against the Petitioner. 1 PRELIMINARY STATEMENT. This proceeding arose out of the requirement in Florida workers’ compensation law that employers must secure the payment of workers’ compensation insurance for the protection of their employees. The Petitioner in this matter is a Florida corporation currently doing business as a neighborhood food and convenience store in Fort Walton Beach, Florida. On April 26, 2011, Larry Eaton, a Compliance Investigator for the Florida Department of Financial Services, Division of Workers’ Compensation conducted a random job site workers’ compensation compliance investigation at the Petitioner’s place of business. After concluding the Petitioner had four (4) employees and did not maintain workers’ compensation insurance, the Department issued a Stop-Work Order and delivered a request for the production of business records. The Petitioner and their accountant cooperated with the Department’s investigation and provided records that were used to determine the mandated statutory monetary penalty for failing to maintain workers’ compensation insurance. The Petitioner then executed a penalty payment plan with the Department and also came into compliance with Florida’s Workers’ Compensation Law. The Petitioner has consistently objected to the Departments mandated statutory penalty as excessive, in violation of both the Florida and Federal Constitution, and contrary to the “principle of proportionality”. The Department originally referred this matter to this Hearing Officer for a F.S. 120.57(2) informal hearing, but that matter was closed when the Parties agreed a disputed issue of fact existed. This matter was then forwarded to the Florida Division of Administrative Hearings to hold a formal hearing pursuant to F.S. 120.57(1), and after discovery, the Administrative Law Judge closed his file after a finding there were no disputed issues of material fact. This matter was again assigned to this Hearing Officer to hold a telephonic informal hearing pursuant to Section 120.57(2), Florida Statutes, which occurred on November 1, 2011. Both Parties timely submitted Proposed Recommended Orders. EXHIBITS AND WITNESSES The Department submitted Eleven (11) Exhibits that are admitted into evidence without objection and include the following: Respondents Exhibit |: A copy of the Petitioner’s corporate status as contained within the Florida Secretary of State Records, dated April 26, 2010, the same day as the Departments random workers’ compliance Investigation. Respondent’s Exhibit 2: A two (2) page April 26, 2010, printout from the Department’s Financial Services Coverage and Compliance Automated System (“CCAS”) database for Mubarak Trading Corporation, Inc. teflecting no evidence of workers’ compensation insurance coverage and no exemptions from coverage. Respondent’s Exhibit 3: A copy of the Department’s hand delivered April 26, 2010 Stop- Work Order. Respondents Exhibit 4: A copy of the Department’s hand delivered April 26, 2011, Request for Production of Business Records for Penalty Assessment Calculation. Respondents Exhibit 5: A twenty six (26) page composite exhibit of the Petitioner’s payroll and -business records provided to the Department’s workers’ compensation compliance investigator. Respondent’s Exhibit 6: A copy of the Department’s May 12, 2010 Amended Order of Penalty Assessment hand delivered to the Petitioner on May 13, 2010. Respondent’s Exhibit 7: A copy of the Department’s’ Payment Agreement Schedule for Periodic Payment of Penalty executed by the Petitioner on May 13, Respondent's Exhibit 8: Respondent’s Exhibit 9: Respondent’s Exhibit 10: Respondent’s Exhibit 11: 2010, wherein the Petitioner paid Eighteen Hundred ($1,800.00) dollars as a ten percent (10%) down-payment on the Department’s Administrative Penalty. A copy of the Department’s Order of Conditional Release From Stop-Work Order dated May 13, 2010, that was entered after the execution and payment reflected in Respondent's Exhibit 7. A copy of the Department’s Second Amended Order of Penalty Assessinent dated February 2, 2011. A five (5) page excerpt from the National Council on Compensation Insurance, Inc. (“NCCI”) Scopes Manual description of Classification Code 8017 (Retail Store). A forty-nine (49) page excerpt of NCCI approved Manual Rates for Classification Code 8017, used in the calculation of the Department’s May 12, 2010, Amended Order for Penalty Assessment and February 2, 2011, Second Amended Order of Penalty Assessment. The Petitioner submitted two (2) exhibits that were admitted into evidence and consist of the following: Petitioner’s Exhibit 1: Petitioner’s Exhibit 2. A two (2) page copy of the Petitioner’s timely filed request for an informal proceeding to contest his administrative penalty, pursuant to Section 120.57(2), Florida Statutes, A four (4) page May 5, 2011, letter of tax representation from Mr. Chris Marsh and Mr. James Marsh, who provide accounting and tax services for and on behalf of Mubarak ‘Trading Corporation, Inc. The Department called two (2) witnesses to testify at the telephonic informal hearing, including Mr. Larry Eaton, a workers’ compensation compliance investigator for the Department, and Mrs. Michelle Newcomer, a workers’ compensation penalty calculator for the Department. The Petitioner offered the testimony of its’ President Ziad (“Mike”) Mubarak, as well as their tax advisors, Mr. Christopher Marsh, and Mr. James Marsh. Both Parties submitted Proposed Recommended Orders. FINDINGS OF FACT. Pursuant to Section 440.107, Florida Statutes, the Respondent is the state agency tesponsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees. The Petitioner is a Florida corporation that first registered with the Florida Department of State on July 15, 1993, and was in good-standing on April 26, 2010, the date on which the Department conducted their random workers’ compensation compliance investigation. (Respondent’s Exhibit 1.) On April 26, 2011, the Respondents Workers’ Compensation Compliance Investigator, Mr. Larry Eaton, conducted a random compliance investigation at the Principal Business Address of Mubarak Trading Corporation, Inc., in Fort Walton Beach, Florida. (Respondent’s Exhibit’s 2, 3, and 4.) Upon entering the Petitioner’s work-place on April 26, 2011, the Department’s compliance investigator conducted a field interview, as well as a database search to confirm the existence of four (4) employees of Mubarak Trading Corporation, Inc., and the lack of either workers’ compensation insurance or exemptions from workers? compensation insurance coverage. (Respondent’s Exhibits 2, 3, and 4.) Upon finding four (4) employees and no workers’ compensation insurance coverage for those employees, the Department’s compliance investigator hand delivered an April 26, 2010, Stop Work Order, as well as a Request for Production of Business Records for Penalty Assessment Calculation seeking payroll information for the past three (3) years. (Respondent’s Exhibits 3 and 4.) The Petitioner provided business records to the Department in response to their Request, and based on those records, an Amended Order of Penalty Assessment was hand delivered to the Petitioner on May 13, 2010, in the amount of Seventeen Thousand Seven Hundred Ninety One and 76/100 Dollars ($17,791.76). (Respondent’s Exhibits 5 and 6.) Under protest, and in the effort to remove the Department’s April 26, 2010, Stop Work Order, the Petitioner executed a Payment Agreement Schedule for Periodic Payment of Penalty on May 13, 2010, paying Eighteen Hundred Dollars ($1,800.00) to the Department as a ten percent (10%) down-payment of the administrative penalty. (Respondent’s Exhibit 7.) The Petitioner did not purchase a policy of workers’ compensation insurance, but instead the Corporation’s President obtained an exemption from the requirement of being covered by workers’ compensation insurance. With only three (3) remaining non- exempt employees, Florida law does not require an underlying worker’s compensation insurance policy, and Mubarak Trading Corporation, Inc., was no longer in violation of Florida Workers’ Compensation Law. , Mrs. Michelle Newcomb, Penalty Calculator for the Florida Department of Financial Services, Division of Workers’ Compensation, Bureau of Compliance, was assigned the task of calculating the statutory penalty to be assessed against Mubarak Trading Corporation, Inc., for failing to secure workers’ compensation insurance. Utilizing NCCI Class Code 8017 for retail stores, the appropriate NCCI premium pages for Class Code 8017, and the documentation provided by the Petitioner, the Department calculated the mandated statutory penalty of Seventeen Thousand Seven Hundred Ninety One and 76/100 ($17,791.76) in their May 12, 2010, Amended Order for Penalty Assessment (Respondent’s Exhibit 6, 10 and 11.) The Department’s administrative penalty was ultimately adjusted downward to Sixteen Thousand, Four Hundred Twenty Nine and 44/100 Dollars ($16,429.76), as reflected in the Department’s February 2, 2011, Second Amended Order of Penalty Assessment. (Respondents Exhibit 9.) There are no disputed issues of material fact in this matter. The Petitioner’s Proposed Recommended Order acknowledges “[t]he calculation of the Section 440.107(7)(d) penalty is not in question...” The Petitioner has consistently objected to the “excessive” amount of the Department’s penalty, challenged the Department’s authority to assess unconstitutional penalties, and argues the penalty assessed violates the “principle of proportionality.”
Conclusions Christopher O. Marsh, Econotax 139 Beal Parkway SE, Ste. 102 ne Fort Walton Beach, Florida 32548 f Representative for Mubarak Trading Corp, Inc. Jamila Georgette Gooden, Esq. Florida Department of Financial Services Division of Legal Services Tallahassee, Florida 32399-4429 Attorney for the Florida Department of Financial Services, Division of Workers’ Compensation
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that a Final Order be entered affirming the Division of Workers’ Compensation Second Amended Order of Penalty Assessment in the amount of Sixteen Thousand Four Hundred Twenty Nine and 44/100 Dollars ($16, 429.44). Respectfully submitted this 19" day of December, 2011. Department of Financial Services 3700 Lifford Circle Tallahassee, Florida 32309 Phone: (850)668-9820 Fax: (850)668-9825 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the above and foregoing Recommended Order has been provided by US Mail to: Mr. Christopher Marsh, Econotax, on behalf of Mubarak Trading Corporation, Inc., 139 Deal Parkway, SE, Suite 102, Fort Walton Beach, Florida 32548 and via hand delivery in the interests of judicial economy to Alexander Brick, Esq. Department of Financial Services, Division of Legal Services, 200 East Gaines Street, Tallahassee, FL 32399-4429 this 19" day of December, 2011. Alan J. ~ 2h -13-
The Issue The issues in this case are whether Respondent, Customs Logistics Services, Inc., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency charged with enforcing the requirement in chapter 440 that employers in Florida secure workers' compensation coverage for their employees. At all times relevant to this proceeding, Respondent was a corporation registered to do business in Florida. Respondent is a family-owned-and-operated customs brokerage service with its principal office located at 6940 Northwest 12th Street, Miami, Florida 33126. At the time of the inspection giving rise to this proceeding, Respondent employed seven or eight employees.2/ The Compliance Inspection On September 29, 2014, Petitioner's compliance inspector, Hector Fluriach, conducted an onsite inspection at Respondent's principal office to determine whether Respondent was in compliance with the workers' compensation coverage requirements established in chapter 440. At that time, Respondent's co-owners, Astrid Escalona and Carlos Henoa, told Fluriach that Respondent employed six employees and two corporate officers, and also paid two family members who did not work at the principal office. Upon inquiry, Escalona and Henoa informed Fluriach that Respondent did not have workers' compensation insurance coverage for its employees. Using Petitioner's Coverage and Compliance Automated System ("CCAS") and the National Council for Compensation Insurance ("NCCI") insurance coverage verification system, Fluriach confirmed that Respondent had not obtained workers' compensation insurance coverage for its employees, and that it was not in compliance with chapter 440 during certain periods within the two years preceding the inspection. Under the NCCI basic occupational classification system and Scopes Manual, six of Respondent's employees are classified as clerical (Code 8810), and one is classified as a driver (Code 7380). None of Respondent's employees is classified as employed within the construction industry. As a private entity employing four or more employees in a non-construction industry occupation, Respondent was required under chapter 440 to provide workers' compensation coverage for its employees. Respondent's corporate officers were eligible under section 440.05 to elect to be exempt from the workers' compensation coverage requirements of chapter 440; however, none had elected to be exempt. Fluriach issued Stop-Work Order No. 14-329-D5 ("Stop- Work Order"), personally served it on Respondent, and explained it to Escalona. The Stop-Work Order included an Order of Penalty Assessment, ordering assessment of a penalty against Respondent in an amount equal to two times the amount Respondent would have paid in workers' compensation coverage premiums when applying the approved manual rates to Respondent's payroll during the periods for which it had failed to secure workers' compensation coverage during the preceding two years (for convenience, hereafter referred to as the "look-back period"). Fluriach also served a business records request, requesting Respondent to provide specified business records3/ for Petitioner's use in determining the penalty. In a series of submittals, Respondent provided the requested business records to Petitioner. The evidence showed that during the two-year look- back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, and none of its corporate officers were exempt from the workers' compensation coverage requirement. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Petitioner's Computation of Penalty Amount To calculate the applicable penalty, Petitioner must determine, from a review of the employer's business records, the employer's gross payroll for the two-year look-back period. For days during the look-back period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the look-back period for purposes of calculating the applicable penalty commenced on September 30, 2012, and ended on September 29, 2014, the day on which the compliance inspection was conducted. Respondent's business records revealed that Respondent had fewer than four employees between January 1 and March 31, 2013, so Respondent was not required to have workers' compensation coverage for that period. Thus, Petitioner did not assess a penalty against Respondent for that period. For the rest of the look-back period, Respondent employed four or more employees, so was required to obtain workers' compensation coverage for those employees for that portion of the period. Respondent provided business records sufficient for Petitioner to determine Respondent's gross payroll for all but September 30, 2012. For that day, Petitioner imputed Respondent's gross payroll using Florida's statewide average weekly wage. On the basis of Respondent's business records submittals, Petitioner's auditor, Eric Ruzzo, recalculated the penalty to be assessed against Respondent. Petitioner issued an Amended Order of Penalty Assessment on October 17, 2014, imposing a total penalty of $5,617.04. On November 7, 2014, following receipt of additional records, Petitioner issued a Second Amended Order of Penalty Assessment, reducing the penalty to $3,982.52. Finally, after receiving more records, Petitioner issued a Third Amended Order of Penalty Assessment on January 12, 2015, further reducing the penalty to $3,205.70. Each of these penalty assessments was served on Respondent. Petitioner seeks to impose a $3,205.70 penalty against Respondent in this proceeding. In calculating the penalty, Ruzzo examined three-month (i.e., quarterly) periods within the two-year look-back period. Ruzzo identified the occupational class code applicable to each of Respondent's employees. As stated above, all but one of Respondent's employees were classified as clerical, and one of Respondent's employees was classified as a driver. For each employee, Ruzzo determined the gross payroll paid to that employee for the specific quarter in which Respondent was non-compliant during the look-back period, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupational class code. This calculation yielded the workers' compensation coverage premium for that specific employee for the specific quarter for which Respondent was non- compliant during the look-back period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. As previously noted, Respondent did not provide gross payroll records covering September 30, 2012; thus, for that day, Ruzzo imputed the gross payroll for each of Respondent's employees using the statewide average weekly wage as defined in section 440.12(2)4/ multiplied by two. Ruzzo then performed the same computations to yield the penalty amount to be imposed for Respondent's failure to provide workers' compensation on September 30, 2012. Ruzzo then added each penalty amount determined for each employee using actual gross payroll and imputed payroll, to yield the total penalty amount of $5,286.70. Because Respondent had not previously been issued a stop-work order, pursuant to section 440.107(7)(d)1., Petitioner applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $2,081.00. This was subtracted from the calculated penalty of $5,286.70, yielding a total penalty of $3,205.70. Respondent's Defense At the final hearing, Escalona testified that she and the other co-owners of Respondent always have attempted to fully comply with every law applicable to Respondent's business, and have never had compliance problems. She testified that neither she nor the other co-owners of Respondent realized that Respondent was required to have workers' compensation coverage for its employees, and they did not intentionally violate the law. Petitioner apparently mailed a memorandum regarding verifying workers' compensation coverage requirements to businesses in the area before it conducted compliance inspections. The memorandum was dated October 8, 2014, and Escalona testified Respondent received it on October 13, 2014, approximately two weeks after the compliance inspection that Fluriach conducted. Escalona asserted that had Respondent received the memorandum before the compliance inspection was conducted, she would have called Petitioner to determine if Respondent needed to obtain workers' compensation coverage, would have asked how to obtain it, and would have obtained coverage for its employees and exemptions for its corporate officers. Escalona testified that the $3,205.70 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact Petitioner has shown, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the Stop-Work Order, by failing to secure workers' compensation coverage for its employees. Petitioner has shown, by clear and convincing evidence, that the $3,205.70 penalty proposed to be assessed against Respondent pursuant to the Third Amended Penalty Assessment is the correct amount of the penalty to be assessed in this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent, Customs Logistics Services, Inc., violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $3,205.70. DONE AND ENTERED this 11th day of August, 2015, in Tallahassee, Leon County, Florida S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2015.
The Issue The issues are whether Respondent was required to obtain workers' compensation coverage for himself pursuant to Section 440.107, Florida Statutes (2002), during the penalty period designated in the Amended Order of Penalty Assessment; and, if so, whether Petitioner should impose a penalty against Respondent in the amount of $120,467.88.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. § 440.107, Fla. Stat. (2002). On February 9, 2004, while conducting a random site inspection, Department investigator, Eric Duncan, observed three men performing construction work in the form of carpentry and house-framing at 720 Southwest 10th Street, Cape Coral, Florida. One of the workers on the site was Respondent, Jeremy Butzler, a sole proprietor who had employed the other two workers. Mr. Duncan interviewed Mr. Butzler at the site and requested proof of workers' compensation coverage, which Mr. Butzler was unable to provide. Mr. Duncan then issued the first Stop Work and Penalty Assessment Order, directing Mr. Butzler to cease work and pay a civil penalty of $1000.00. Also on February 9, 2004, Mr. Duncan served Mr. Butzler with a "Request for Production of Business Records," seeking copies of business records to determine whether Mr. Butzler had secured workers' compensation coverage, whether he had a current valid workers' compensation exemption, and to determine any civil penalties that may be owed for failing to secure workers' compensation coverage. Mr. Butzler complied in a very limited way. Mr. Duncan testified that most of the documents provided by Mr. Butzler were records of electronic transfer of funds that did not identify their recipients. No company checkbook or ledger was produced. After the penalty was calculated, the Department issued the First Amended Stop Work and Penalty Assessment Order, which increased the assessed penalty to $132,027.64. This assessment was later reduced to $120,467.88 after the Department corrected the workers' compensation premium rate it employed to calculate the penalty. At the time the Stop Work Order was issued and pursuant to Subsection 440.107(5), Florida Statutes (2002), the Department had adopted Florida Administrative Code Rule 4L-6.015,1/ which stated, in relevant part: In order for the Division to determine that an employer is in compliance with the provisions of Chapter 440, F.S., every business entity conducting business within the state of Florida shall maintain for the immediately preceding three year period true and accurate records. Such business records shall include original documentation of the following, or copies, when originals are not in the possession of or under the control of the business entity: All workers’ compensation insurance policies of the business entity, and all endorsements, notices of cancellation, nonrenewal, or reinstatement of such policies. * * * Records indicating for every pay period a description of work performed and amount of pay or description of other remuneration paid or owed to each person by the business entity, such as time sheets, time cards, attendance records, earnings records, payroll summaries, payroll journals, ledgers or registers, daily logs or schedules, time and materials listings. All contracts entered into with a professional employer organization (PEO) or employee leasing company, temporary labor company, payroll or business record keeping company. If such services are not pursuant to a written contract, written documentation including the name, business address, telephone number, and FEIN or social security number of all principals if an FEIN is not held, of each such PEO, temporary labor company, payroll or business record keeping company; and For every contract with a PEO: a payroll ledger for each pay period during the contract period identifying each worker by name, address, home telephone number, and social security number or documentation showing that the worker was eligible for employment in the United States during the contract for his/her services, and a description of work performed during each pay period by each worker, and the amount paid each pay period to each worker. A business entity may maintain such records or contract for their maintenance by the PEO to which the records pertain. * * * All check ledgers and bank statements for checking, savings, credit union, or any other bank accounts established by the business entity or on its behalf; and All federal income tax forms prepared by or on behalf of the business and all State of Florida, Division of Unemployment Compensation UCT-6 forms and any other forms or reports prepared by the business or on its behalf for filing with the Florida Division of Unemployment Compensation. During the period in question, Respondent was a "sole proprietor," as that term was defined in Subsection 440.02(25), Florida Statutes (2002): "Sole proprietor" means a natural person who owns a form of business in which that person owns all the assets of the business and is solely liable for all the debts of the business. Subsection 440.02(15)(c)1., Florida Statutes (2002), in effect during the penalty assessment period, stated, in relevant part: "Employee" includes a sole proprietor . . . Partners or sole proprietors actively engaged in the construction industry are considered employees unless they elect to be excluded from the definition of employee by filing written notice of the election with the department as provided in s. 440.05 . . . A sole proprietor or partner who is actively engaged in the construction industry and who elects to be exempt from this chapter by filing a written notice of the election with the department as provided in s. 440.05 is not an employee. (Emphasis added). Section 440.05, Florida Statutes (2002), allowed an individual to apply for election to be exempt from workers' compensation benefits. Only the named individual on the application was exempt from carrying workers' compensation insurance coverage. The Department maintains a database of all workers' compensation exemptions in the State of Florida. Mr. Duncan's review of this database revealed that, although Respondent had a valid workers' compensation exemption from November 18, 1999, to November 15, 2001, there were no exemptions for Respondent for 2002, the year constituting the penalty period in this case. At the hearing, Respondent admitted that he did not obtain an exemption for the year 2002. Mr. Duncan's investigation also revealed that Respondent did not have workers compensation insurance coverage during the year 2002. During the investigation, Respondent informed Mr. Duncan that he had contracted with an employee leasing company, Southeast Personnel Services, Inc., that was responsible for paying the salaries of and providing workers' compensation insurance coverage for Respondent and his workers. Pursuant to Subsection 468.520(5), Florida Statutes (2002),2/ an employee leasing company is a business entity engaged in employee leasing. "Employee leasing" is an arrangement whereby a leasing company assigns its employees to a client and allocates the direction of, and control over, the leased employees between the leasing company and the client. § 68.520(4), Fla. Stat. (2002). When the employee leasing company accepts a client, the client becomes an employee of the leasing company. An employee leasing company is the employer of the leased employees and is responsible for providing workers' compensation pursuant to Chapter 440, Florida Statutes (2002). § 468.529(1), Fla. Stat. (2002). Additionally, an employee leasing company assumes responsibility for the payment of wages to the leased employees without regard to payments by the client and for the payment of payroll taxes and collection of taxes from the payroll of leased employees. § 468.525(4)(b) and (c), Fla. Stat. (2002). At the hearing, Respondent demonstrated that he had workers' compensation coverage as an employee of the employee leasing company. However, the Department did not utilize any payments made through the leasing company in its penalty calculation. The evidence demonstrated that Respondent received compensation directly from Holiday Builders, Inc., in the amount of $185,006.50, and Gatco Construction, in the amount of $10,590.00. These amounts, totaling $195,596.50, were utilized by the Department to calculate Respondent's penalty. Mr. Duncan explained that in order for workers' compensation coverage to apply through the employee leasing company, companies such as Gatco Construction would have to make payments to the leasing company, not directly to Respondent. The leasing company would then pay a salary to Respondent, as its employee, and Respondent would be covered by the employee leasing company's workers' compensation insurance. Payments made directly to Respondent would not be secured by the workers' compensation coverage obtained through the employee leasing company. Respondent claimed that the Division utilized the incorrect gross income amount in calculating the penalty. To support this claim, Respondent attempted to introduce what he claimed was his personal income tax return for the year 2002. Respondent claimed this return had been prepared and filed by his bookkeeper some time in February 2004, subsequent to the Department's investigation. However, the return produced at hearing was unsigned and indicated that it had been self- prepared by Respondent. Respondent could not recall the bookkeeper's name without prodding from his counsel. Respondent offered no proof that this return had ever been completed or filed with the Internal Revenue Service. The purported 2002 tax return was not admitted into evidence, and Respondent's testimony as to the information contained on the return is not reliable. The Department correctly calculated the penalty assessment based on the money paid to Respondent as a sole proprietor "employee" who failed to file for a workers' compensation exemption for the year 2002. The Department calculated the total penalty based on Respondent's gross payroll, the class code assigned to Respondent utilizing the SCOPES Manual (a standard classification tool published by the National Council on Compensation Insurance), and the statutory guidelines in Subsection 440.107(7), Florida Statutes (2002). Based on that calculation, the correct penalty assessment in this case is $120,467.88.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order confirming the Amended Stop Work Order and imposing a penalty in the amount of $120,467.88. DONE AND ENTERED this 5th day of May, 2005, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of May, 2005.
