The Issue The issues in this case are: (1) whether Respondent, PFR Services Corp., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes (2017)2/; and (2) if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation insurance covering their employees, pursuant to chapter 440. Respondent is a Florida corporation. At all times relevant to this proceeding, its business address was 8040 Northwest 95th Street, Hialeah, Florida. The evidence establishes that Respondent was actively engaged in business during the two-year audit period, from October 17, 2015, through October 16, 2017, pertinent to this proceeding.3/ The Compliance Investigation On October 16, 2017, Petitioner's compliance investigator, Cesar Tolentino, conducted a workers' compensation compliance investigation at a business located at 8040 Northwest 95th Street, Hialeah, Florida. The business was being operated as a restaurant, to which National Council on Compensation Insurance ("NCCI") class code 9082 applies. Tolentino observed Maria Morales, Gabriela Nava, and Geraldine Rodriquez performing waitressing job duties and Rafael Briceno performing chef job duties. The evidence established that these four persons were employed by Respondent. Additionally, the evidence established that corporate officers Rosanna Gutierrez and Mary Pineda were employed by Respondent.4/ The evidence established that neither had elected to be exempt from the workers' compensation coverage requirement. In sum, the evidence established that Respondent employed six employees, none of whom were independent contractors, and none of whom were exempt from the workers' compensation coverage requirement. Tolentino conducted a search of Petitioner's Coverage and Compensation Compliance Automated System, which consists of a database of workers' compensation insurance coverage policies issued for businesses in Florida, and all elections of exemptions filed by corporate officers of businesses in Florida. Tolentino's search revealed that Respondent had never purchased workers' compensation coverage for its employees; that its corporate officers had not elected to be exempt from the workers' compensation coverage requirement; and that Respondent did not lease employees from an employee leasing company. Gutierrez acknowledged that Respondent had not purchased workers' compensation coverage for its employees, and told Tolentino that she did not know it was required. Based on Tolentino's investigation, on October 16, 2017, Petitioner served Stop-Work Order No. 17-384 ("Stop-Work Order") on Respondent. At the time Tolentino served the Stop-Work Order, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner a receipt of the amount paid to activate the policy within 28 days of issuance of the Stop-Work Order, Respondent's penalty would be reduced by the amount paid to activate the policy. On October 16, 2017, Petitioner, through Tolentino, also served on Respondent a Request for Production of Business Records for Penalty Assessment Calculation ("Business Records Request"), requesting Respondent provide several categories of business records covering the two-year audit period from October 16, 2015, to October 16, 2017. Specifically, Petitioner requested that Respondent provide its payroll documents consisting of time sheets, time cards, attendance records, earnings records, check stubs, check images, and payroll summaries, as applicable. Petitioner also requested that Respondent provide, as applicable, its federal income tax documents; account documents, including business check journals and statements and cleared checks for all open or closed business accounts; cash and check disbursements records; workers' compensation coverage records; and independent contractor records. At the time Tolentino served the Business Records Request, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner the complete business records requested within ten business days, Respondent's penalty would be reduced by 25 percent. The evidence establishes that Respondent did not provide any business records within that time period, so is not entitled to receive that penalty reduction. On November 16, 2017, Petitioner issued an Amended Order of Penalty Assessment, assessing a total penalty of $35,262.32 against Respondent for having failed to secure workers' compensation coverage for its employees during the audit period. On December 14, 2017, Gutierrez met with Tolentino and, at that time, provided documentation to Petitioner showing that Respondent had acquired workers' compensation coverage for its employees, effective October 28, 2017, and had paid $3,966.00 for the policy. At the December 14, 2017, meeting, Gutierrez presented an envelope postmarked October 30, 2017, showing that Respondent had mailed Petitioner proof of having obtained the workers' compensation coverage within 28 days of the date the Stop-Work Order was issued; however, this mail was returned, so Petitioner did not receive such proof within 28 days. The evidence established that this mail was returned to Respondent on December 4, 2017——several days after the 28-day period had expired, and too late for Respondent to take additional steps to deliver to Petitioner the proof of its having purchased the workers' compensation policy.5/ Because Petitioner did not receive Respondent's proof of having purchased a workers' compensation policy within 28 days of issuance of the Stop-Work Order, it did not reduce the penalty imposed on Respondent by the amount that Respondent had paid for the premium. The evidence also establishes that at the December 14, 2017, meeting, Respondent tendered to Petitioner a cashier's check in the amount of $1,000.00. As a result of having received proof of workers' compensation coverage for Respondent's employees, Petitioner issued an Agreed Order of Conditional Release from Stop-Work Order ("Order of Conditional Release") on December 14, 2017, releasing Respondent from the Stop-Work Order. The Order of Conditional Release expressly recognized that Respondent "paid $1,000.00 as a down payment for a penalty calculated pursuant to F.S. 440.107(7)(d)1." Additionally, page 1 of 3 of the Penalty Calculation Worksheet attached to the Amended Order of Penalty Assessment admitted into evidence at the final hearing reflects that Respondent paid $1,000.00 toward the assessed penalty of $35,262.32. This document shows $34,262.32 as the "Balance Due." Calculation of Penalty to be Assessed Petitioner penalizes employers based on the amount of workers' compensation insurance premiums the employer has avoided paying. The amount of the evaded premium is determined by reviewing the employer's business records. In the Business Records Request served on October 16, 2017, Petitioner specifically requested that Respondent provide its payroll documents, federal income tax documents, disbursements records, workers' compensation coverage records, and other specified documents. When Gutierrez met with Tolentino on December 14, 2017, she provided some, but not all, of the business records that Petitioner had requested. Respondent subsequently provided additional business records to Petitioner, on the eve of the final hearing. Petitioner reviewed all of the business records that Respondent provided. However, these business records were incomplete because they did not include check images, as specifically required to be maintained and provided to Petitioner pursuant to Florida Administrative Code Rule 69L-6.015(6). Check images are required under Florida Administrative Code Rule 69L-6.015(6) because such images reveal the payees, which can help Petitioner identify the employees on the employer's payroll at any given time. This information is vital to determining whether the employer complied with the requirement to have workers' compensation coverage for all of its employees. Because Respondent did not provide the required check images, the records were insufficient to enable Petitioner to calculate Respondent's payroll for the audit period. Under section 440.107(7)(e), business records provided by the employer are insufficient to enable Petitioner to calculate the employer's payroll for the period for which the records are requested, Petitioner is authorized to impute the weekly payroll for each employee as constituting the statewide average weekly wage multiplied by 1.5. To calculate the amount of the penalty due using the imputed method, Petitioner imputes the gross payroll for each employee for each period during which that employee was not covered by required workers' compensation insurance. To facilitate calculation, Petitioner divides the gross payroll amount for each employee for the specific non-compliance period by 100.6/ Petitioner then multiplies this amount by the approved NCCI Scopes Manual rate——here, 2.34, which applies to restaurants——to determine the amount of the avoided premium for each employee for each non-compliance period. This premium amount is then multiplied by two to determine the penalty amount to be assessed for each employee not covered by required workers' compensation insurance for each specific period of non- compliance. Performing these calculations, Petitioner determined that a penalty in the amount of $35,262.32 should be assessed against Respondent for failing to provide workers' compensation insurance for its employees, as required by chapter 440, for the period from October 17, 2015, through October 16, 2017. As discussed above, on December 14, 2017, Respondent paid a down payment of $1,000.00 toward the penalty, and this was expressly recognized in the Stop-Work Order that was issued that same day. Thus, the amount of the penalty to be assessed against Respondent should be reduced by $1,000.00, to $34,262.32. As previously noted, this amount is identified on page 1 of 3 of the Amended Order of Penalty Assessment as the "Balance Due." As discussed in paragraphs 17 and 18, above, the evidence establishes that Respondent purchased a workers' compensation policy to cover its employees within 11 days of issuance of the Stop-Work Order, and mailed to Petitioner proof of having purchased such policy on October 30, 2017——well within the 28-day period for providing such proof. However, as discussed above, this mail was returned to Respondent on December 4, 2017——too late for Respondent to take additional steps to provide such proof to Petitioner within the 28-day period. There is no evidence in the record showing that failure of the mailed proof to be received by Petitioner was due to any fault on Respondent's part. Respondent's Defenses On behalf of Respondent, Gutierrez testified that Respondent did everything that Tolentino had told them to do. Respondent purchased workers' compensation insurance and provided proof to Petitioner that its employees were covered.7/ Gutierrez also testified that although Respondent's business was created in May 2013, it did not begin operating and, therefore, did not have any employees, until January 2016.8/ However, as previously noted, the persuasive evidence does not support this assertion.
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 PFR Services Corp. violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage for its employees during the audit period, and imposing a penalty of $30,296.32. DONE AND ENTERED this 14th day of January, 2019, 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 14th day of January, 2019.
The Issue The issue to be determined is whether Respondent, Wilby’s Home Repairs, LLC, failed to secure the payment of workers’ compensation coverage for its employees, and if so, what penalty is owed.
Findings Of Fact The Department of Financial Services, Division of Workers’ Compensation, is the state agency charged with the enforcement of the requirement in chapter 440, Florida Statutes, that employers in Florida secure workers’ compensation coverage for their employees as required by section 440.107(3). At all times relevant to this case, Respondent was a company engaged in the construction industry. Its principal office was located at 2641 University Boulevard North, H115, Jacksonville, Florida 32211. On or about October 2, 2014, Ann Johnson, a compliance investigator for the Division, observed two people doing patch/repair work using a ladder on the outside of a home at 2322 Myra Street in Jacksonville, Florida. She approached and spoke to both men, who identified themselves as Michael Wilbur and Robert Nelson and stated that they worked for Wilby’s Home Repairs. When Ms. Johnson asked for proof of workers’ compensation coverage, Mr. Wilbur could not provide it but thought both gentlemen had exemptions. Mr. Wilbur thought that his accountant who had prepared the paperwork for filing with the Division of Corporations for his company had also completed the applications for exemptions for workers’ compensation coverage. However, no applications for exemptions had been filed. Investigator Johnson consulted the Division of Corporations website to determine the identity of Respondent’s corporate officers and found that Mr. Wilbur and Mr. Nelson were the listed officers. She then consulted the Division’s Coverage and Compliance Automated System (“CCAS”) for proof of workers’ compensation coverage and for any exemptions associated with Respondent. Investigator Johnson’s research revealed that Respondent did not have a workers’ compensation policy or an employee-leasing policy, and further, there were no exemptions for its corporate officers on file. Based on this information, Investigator Johnson consulted with her supervisor, who provided authorization for the issuance of a Stop-Work Order. She then issued a Stop-Work Order and personally served it on Mr. Wilbur on October 2, 2014. At the same time, she issued and served a Request for Production of Business Records for Penalty Assessment Calculation (BRR). The requested documents were for the purpose of determining Respondent’s payroll from May 16, 2014 (the date the company was formed according to the Division of Corporations website) to October 2, 2014 (the date of the random inspection). They consisted of payroll documents, such as time sheets or cards, attendance records, check stubs, and payroll summaries; account documents, such as check journals and statements; disbursements records; workers’ compensation coverage documents, such as copies of policies, declaration pages, and certificates of workers’ compensation; documents related to any exemptions held; documents reflecting the identity of each subcontractor and the relationship thereto, including any and all payments to subcontractors; and documentation of subcontractors’ workers’ compensation coverage. On October 3, 2014, Mr. Wilbur came into the Division office in Jacksonville and filled out the applications for exemptions, and those were processed. Mr. Wilbur submitted a cashier’s check for $1,000 and Respondent was released from the Stop-Work Order. He also brought in some records in response to the BRR. Those records consisted of letters, notations, and copies of checks made out to Robert Nelson or Mike Wilbur from Grant-Dooley Rental. The records were scanned and provided to the penalty auditing team to calculate an appropriate penalty according to the statutory formula. Penalty audit supervisor Anita Proano reviewed the business records provided by Respondent, but could not, from those records, properly identify the amount of gross payroll paid to Respondent’s employees on which workers’ compensation premiums had not been paid. Ms. Proano determined that Respondent had not been in compliance with coverage requirements from May 16, 2014, to October 2, 2014. The business records provided by Respondent were not sufficient for the Department to calculate a penalty for Respondent’s period of noncompliance with the coverage requirements of chapter 440. The auditor assigned to the case then calculated a penalty based upon imputed payroll pursuant to the procedures required by section 440.107(7)(e) and Florida Administrative Code Rule 69L-6.208. Had the documents submitted by Respondent been adequate, then the Division would have used those documents to calculate Respondent’s payroll. The checks provided by Respondent to the Division consisted of checks made out to Robert Nelson and Michael Wilbur, individually, spanning from approximately May 9, 2014, through October 2014, from Grant- Dooley Rental. Mr. Wilbur testified that the only job Respondent handled during this period was the family home on Myra Street, and he and Mr. Nelson were paid directly by the homeowner rather than having payments made to Wilby’s Home Repair as an entity. Unfortunately, these direct payments are not the type of records contemplated by the Division’s rules regarding appropriate documentation of payroll. On October 17, 2014, the Division issued an Amended Order of Penalty Assessment to Respondent, which was served on Respondent on October 20, 2014. The penalty assessed for noncompliance was $21,583.48. The penalty assessment calculation is based upon the classification codes listed in the Scopes® Manual, which have been adopted through the rulemaking process through rules 68L- 6.021 and 69L-6.031. Classification codes are codes assigned to different occupations by the National Council on Compensation Insurance, Inc. (NCCI), to assist in the calculation of workers’ compensation insurance premiums. Auditor Proano used classification code 5645 (carpentry) for both employees. Code 5645 is the correct code for the type of work observed by Ms. Johnson during her inspection. Using this classification code, Ms. Proano used the corresponding approved manual rates for that classification and the period of non-compliance. The average weekly wage as established by the Department of Economic Opportunity for the relevant period is $827.08. Ms. Proano used that amount and multiplied it by 2 for the number of days of noncompliance. Based on that calculation, she came up with a gross payroll amount of $66,166.40, which she divided by 100. Ms. Proano then multiplied that amount by the manual approved rate ($16.31), times two to reach the amount of penalty to be imposed. All of the penalty calculations are in accordance with the Division’s Penalty Calculation Worksheet. The Department has demonstrated by clear and convincing evidence that Respondent employed Robert Nelson and Michael Wilbur on October 2, 2014, and that Respondent was engaged in the construction business for the period of May 16, 2014, through October 2, 2014, without proper workers’ compensation coverage for that period. The Department also demonstrated by clear and convincing evidence that the documents submitted by Respondent, which may indeed be all of the documentation Respondent possessed, were not sufficient to establish Respondent’s payroll, thus necessitating imputation of payroll. Finally, the Department proved by clear and convincing evidence that the required penalty for the period of noncompliance is $21,583.48.
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 finding that Wilby’s Home Repairs, LLC, failed to secure the payment of workers’ compensation insurance coverage for its employees with respect to Robert Nelson and Michael Wilbur, in violation of section 440.107, Florida Statutes, and imposing a penalty of $21,583.48. DONE AND ENTERED this 10th day of June, 2015, 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 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 2015. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Mike Wilbur 5376 Shirley Avenue Jacksonville, Florida 32210 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue At issue in this proceeding is whether the Respondent, Forever Floors and More, Inc. ("Forever Floors"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes by not obtaining workers' compensation insurance for its employees, and, if so, whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Forever Floors is a Florida corporation. The Division of Corporations’ “Sunbiz” website indicates that Forever Floors was first incorporated on February 4, 2012, and remained active as of the date of the hearing. Forever Floors’s principal office is at 8205 Oak Bluff Road, Saint Augustine, Florida 32092. Forever Floors is solely owned and operated by Christopher Bohren. Mr. Bohren is the president and sole officer of the corporation. Forever Floors was actively engaged in performing tile installation during the two-year audit period from April 3, 2013, through April 2, 2015. John C. Brown is a government operations consultant for the Department. During the period relevant to this proceeding, Mr. Brown was a Department compliance investigator assigned to Duval County. Mr. Brown’s job included conducting random compliance investigations and investigating referrals made to his office by members of the public. Mr. Brown testified that as an investigator, he would enter worksites and observe the workers and the types of work they were doing. On April 2, 2015, Mr. Brown visited a worksite at 3714 McGirts Boulevard in Jacksonville. He observed two workers installing tile in a shower in an older single-family residence that was undergoing renovations. Mr. Brown identified himself to the two workers and then inquired as to their identities and employment. Mr. Bohren replied that he was the company officer and that his company had an exemption from the requirement to provide workers’ compensation insurance coverage. Mr. Bohren identified the other worker as Dustin Elliott and stated that Mr. Elliott had worked for Forever Floors for about eight months. Mr. Bohren told Mr. Brown that he paid Mr. Elliott sometimes by check and sometimes with cash. After speaking with Mr. Bohren, Mr. Brown returned to his vehicle to perform computer research on Forever Floors. He consulted the Sunbiz website for information about the company and its officers. His search confirmed that Forever Floors was an active Florida corporation and that Christopher Bohren was listed as its registered agent, and as president of the corporation. No other corporate officers were listed. Mr. Brown also checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Forever Floors had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Forever Floors had no active workers' compensation insurance coverage for its employees and that no insurance had ever been reported to the state for Forever Floors. There was no evidence that Forever Floors used an employee leasing service. Mr. Bohren had an active exemption as an officer of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012, effective September 24, 2013, through September 24, 2015. There was no exemption noted for Dustin Elliott. Based on his jobsite interviews with the employees and Mr. Bohren, and his Sunbiz and CCAS computer searches, Mr. Brown concluded that as of April 2, 2015, Forever Floors had an exemption for Mr. Bohren but had failed to procure workers’ compensation coverage for its employee, Dustin Elliott, in violation of chapter 440. Mr. Brown consequently issued a Stop- Work Order that he personally served on Mr. Bohren on April 2, 2015. Also on April 2, 2015, Mr. Brown served Forever Floors with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers’ compensation insurance coverage, and other business records, to enable the Department to determine the appropriate penalty owed by Forever Floors. Mr. Brown testified, and Mr. Bohren confirmed, that Mr. Bohren provided no records in response to the Request for Production. The case file was assigned to a penalty calculator, who reviews the records and calculates the penalty imposed on the business. Mr. Brown did not state the name of the person assigned to calculate the penalty in this case. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two- year period preceding the Stop-Work Order, which in this case was the period from April 3, 2013, through April 2, 2015. § 440.107(7)(d), Fla. Stat. Because Mr. Bohren had no payroll records for himself or Mr. Elliott on April 2, 2015, the penalty calculator lacked sufficient business records to determine the company’s actual gross payroll on that date. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer’s actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L- 6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5348, titled “Ceramic Tile, Indoor Stone, Marble, or Mosaic Work,” which “applies to specialist contractors who perform tile, stone, mosaic, or marble work.” The corresponding rule provision is rule 69L- 6.021(2)(aa). The penalty calculator used the approved manual rates corresponding to Class Code 5348 for the periods of non- compliance to calculate the penalty. On May 22, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $23,538.34, based on Mr. Bohren’s imputed wages for the periods not covered by his exemption and the imputed wages for Mr. Elliott for the entire penalty period. Mr. Bohren was served with the Amended Order of Penalty Assessment on June 8, 2015. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Forever Floors was in violation of the workers' compensation coverage requirements of chapter 440. Dustin Elliott was an employee of Forever Floors on April 2, 2015, performing services in the construction industry without valid workers' compensation insurance coverage. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. Ms. Proano’s recalculation of the penalty confirmed the correctness of the penalty calculator’s work. Forever Floors could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Christopher Bohren testified that he is the sole proprietor of Forever Floors and that Mr. Elliott had only worked for him for six-to-eight months, mostly on a part-time basis, as of April 2, 2015. He stated that the penalty assessed in this case is more than he has made from his start-up business. After his discussion with Mr. Brown, he immediately procured workers’ compensation insurance coverage for Mr. Elliott and intends to stay within the ambit of the law in the future. Mr. Bohren testified that he was unable to access his business records because they were with his ex-wife, from whom he had an apparently acrimonious departure. Mr. Bohren’s testimony elicited sympathy, but the equitable considerations that he raised have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $23,538.34 against Forever Floors and More, Inc. DONE AND ENTERED this 28th day of October, 2015, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2015.
The Issue The issue in this case is whether Respondent, Ocala Exterior Solutions, Inc., failed to properly maintain workers' compensation insurance coverage for its employees, and, if so, what penalty should be assessed.
Findings Of Fact The Department is the state agency responsible for ensuring that all employers maintain workers' compensation insurance for themselves and their employees. It is the duty of the Department to make random inspections of job sites and to answer complaints concerning potential violations of workers' compensation rules. This case arose as a result of a random inspection. Respondent is a business created by Johnny Busciglio on or about October 16, 2012. At all times relevant hereto, Respondent was duly licensed to do business in the State of Florida. Its business address is 140 Southwest 74th Lane, Ocala, Florida 34476. On May 22, 2015, the Department’s investigator, William Pangrass, made a random site visit to a construction site located at a residence at 9189 Southwest 60th Terrace Road, Ocala, Florida. He saw two men installing soffit as part of the construction which was going on. Pangrass remembers the men identifying themselves as Derek McVey and Frank Deil. When Pangrass inquired as to their employer, the two men were initially not certain for whom they were working. One of the men made a telephone call and then told Pangrass they were employees of Sauer & Sons. Interestingly, Respondent said the two men on-site that day were McVey and a man named James Van Brunt. Pangrass contacted Sauer & Sons and were told that neither McVey nor Deil (or Van Brunt) were employees of that company. He was told by a representative of Sauer & Sons that the men were in fact employees of Respondent. Pangrass then verified that Respondent was a current, viable company and checked whether the company had workers’ compensation insurance coverage for its employees. He found that Respondent had a workers’ compensation insurance policy for a short time in 2014. Two of Respondent’s employees, however, did have exemptions from coverage. Those two were Johnny Busciglio and Anthony Wayne. Based on his findings, Pangrass issued a SWO which he posted at the work site he had visited. He posted the SWO on the permit board in front of the job site on May 26, 2015. On May 29, he served a Request for Production of Business Records on Respondent, seeking information concerning Respondent’s business for purposes of calculating a penalty for failure to have workers’ compensation insurance in place. Respondent emailed the requested business records to Pangrass. The Department requested additional records and clarification concerning some of the records which had been provided. Busciglio made a good faith effort to respond to each of the Department’s requests. After review of Respondent’s business records, the Department calculated a penalty and issued an amended OPA. That amended OPA was issued on September 8 and served on Busciglio (as agent for Respondent) on October 1, 2015. The amount of the penalty in the amended OPA was $9,896.32. Within a few days after receiving the amended Order, Busciglio obtained workers’ compensation insurance for his employees, paid a down payment of $1,000 to the Department, and Respondent was released to resume its work. The penalty in the amended OPA was based upon information obtained from Busciglio concerning Respondent. Using the bank records supplied by Busciglio, the Department determined that Respondent had the following employees: Eric McVey, Frank Dorneden, Jeff Burns, Jordan Anchondo, Anthony Wayne, Nikki Smith, Johnny Busciglio, and Jason Bridge. Their wages were used by the Department to calculate the penalty. The penalty was calculated by the Department as follows: The business was assigned class code 5645, construction on residential dwellings; The period of non-compliance was set at two years; The gross payroll amount for that two-year period was established at $30,905.14; The gross payroll amount was divided by 100, resulting in the sum of $309.05; The approved manual rate, i.e., the amount the employer would have paid if insurance was in place, was assigned for each employee; The gross payroll was multiplied by the manual rate; And the penalty amount was established, taking the figure in (f), above, and multiplying by two. Busciglio established by credible testimony, unrefuted by the Department, that Nikki Smith was a person from whom he bought tools; she was never an employee of Respondent. The same was true for the person listed as Jason Bridge (although his real name may have been Jason Woolridge). As for Eric McVey, he worked for Frank Dorneden, who paid McVey directly. There were no payroll records or checks from Respondent provided to the Department which were attributable to McVey. Dorneden had begun working for Respondent on December 22, 2014. On May 22, 2015, he was asked by Busciglio to visit the work site; he found McVey working there and Deil/Van Brunt was also on the site. Neither the Department nor Respondent offered any further explanation about Deil/Van Brunt, nor did the Department attribute any penalty to Van Brunt as a putative employee. His status in this matter is a mystery. When the penalties associated with McVey, Smith, and Bride are subtracted from the calculation, the amount of the penalty would be $9,454.22.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services requiring Respondent, Ocala Exterior Solutions, Inc., to pay the sum of $9,454.22. DONE AND ORDERED this 20th day of November, 2015, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of November, 2015.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2017), by failing to secure the payment of workers’ compensation coverage as alleged in the Stop-Work Order and Second Amended Order of Penalty Assessment and, if so, what penalty is appropriate.1/
Findings Of Fact The Department is the state agency responsible for the enforcement of the workers’ compensation insurance coverage requirements established in chapter 440. On September 14, 2017, Investigator Murvin conducted a random workers’ compensation compliance check at a residential construction site at 8256 Lake James Drive in Lakeland, Florida. During the course of the compliance check, Investigator Murvin observed two individuals--Donald Steven Paul, Jr. and Dean Wayne Paul--painting the home. It is undisputed that Respondent had been subcontracted to perform painting services at this site; and that these two individuals were, at the time of Investigator Murvin’s visit, employed by Respondent. After speaking to Donald and Dean Paul, Investigator Murvin used the Department’s database to verify that Respondent did not have workers’ compensation insurance coverage, nor did Donald or Dean Paul have an exemption from the coverage requirements. Donald Paul admitted to Investigator Murvin at the hearing that he did not have workers’ compensation coverage for himself or Dean Paul. Donald Paul explained that he believed that his incorporation with the state and securing of liability insurance provided compliance of all insurance requirements. Based on the information provided by Dean and Donald Paul, and from the database, Investigator Murvin issued a SWO to Respondent on the same day as the site visit. A Request for Production of Business Records was also issued to Respondent. In response to the request for documentation, Respondent provided bank statements that indicated the business began in August 1, 2016. The bank statements also established that there was money being deposited and being paid out, but there was no indication what the money was for or how it was allocated. In other words, there was no way to discern whether the money paid out of the bank account was for employee salaries or other business expenses. In support of its Second Amended Order of Penalty Assessment, the Department prepared a penalty calculation worksheet showing a total penalty owed of $2,090.14. At the hearing, Respondent did not challenge the accuracy or method of calculating the assessed penalty, but only asserted that it believed it had the appropriate coverage and that the penalty was “too high.” Based on the evidence, it is clear Respondent provides construction services and has at least one employee; therefore, it was required to secure workers’ compensation insurance. The Department established by clear and convincing evidence that Respondent failed to secure the payment of workers’ compensation as required by chapter 440. The Department has established through the records submitted and testimony of Auditor Murcia, the appropriate penalty for Respondent’s failure to obtain workers’ compensation coverage is $2,090.14 for the audit period of August 1, 2016, to August 14, 2017.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order finding that Respondent, Donald Steven Paul d/b/a/ D. P. Painting of Lakeland, violated the provisions of chapter 440 by failing to secure the payment of workers’ compensation and assessing against Respondent a penalty in the amount of $2,090.14. DONE AND ENTERED this 20th day of April, 2018, in Tallahassee, Leon County, Florida. S HETAL DESAI 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 April, 2018.
The Issue The issues in this case are whether Respondent violated chapter 440, Florida Statutes (2014),1/ by failing to secure the payment of workers' compensation coverage as alleged in the Stop-work Order and 2nd Amended Order of Penalty Assessment, and if so, the amount of the penalty that should be assessed.
Findings Of Fact The Parties Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the requirement in chapter 440 that employers in the state of Florida secure the payment of workers' compensation insurance covering their employees. Respondent, Bargain Bob's Carpets, Inc., is a corporation registered to do business in Florida. Its principal business address is 3954 Byron Drive, Riviera Beach, Florida. The Compliance Investigation As the result of an anonymous referral, Petitioner's compliance investigator, Peter Sileo, investigated Respondent to determine whether it had secured workers' compensation coverage for its employees as required by chapter 440. Before Sileo visited Respondent's business location, he checked the State of Florida Coverage and Compliance Automated System ("CCAS") computer database, which contains information regarding workers' compensation insurance policies that have been obtained by employers. The CCAS database showed no record of any workers' compensation policies covering Respondent's employees having been issued. On Sileo's first visit to Respondent's business location, he observed a man loading carpeting into a van. Upon being questioned, the man identified himself as Gary Persad. He told Sileo that he was a carpet installation subcontractor for Respondent. Sileo checked CCAS and determined that Persad was covered by workers' compensation insurance. On January 23, 2015, Sileo again visited Respondent's business location, which is a warehouse housing large rolls of carpeting and other flooring materials. There, Sileo met John Charles, an owner and corporate officer of Respondent. Charles claimed that he did not know that Respondent was required to have workers' compensation coverage for its employees. Charles told Sileo that Respondent sold flooring but did not install it and that all installation was performed by subcontractors. At the time of the inspection, Sileo determined that Respondent employed five employees: Charles and Calideen, each of whom own more than ten percent of Respondent's business; Alex Stark; Peter Phelps; and Anthony Frenchak. Sileo served a Stop-work Order, ordering Respondent to cease all business operations in the state pending demonstrating compliance with the workers' compensation coverage requirement. Sileo also served a Request for Production of Business Records for Penalty Assessment Calculation. Respondent subsequently demonstrated compliance with the workers' compensation coverage requirement, and Petitioner lifted the Stop-work Order.2/ Respondent also produced business records consisting of spreadsheets showing quarterly payroll, transaction listings, affidavits, insurance coverage documents, and other records. The Penalty Assessment Eric Ruzzo, a penalty auditor with Petitioner, used these records to calculate the penalty to be assessed against Respondent. The $31,061.68 penalty is reflected in the 2nd Amended Order of Penalty Assessment, issued April 23, 2015, that is the subject of this proceeding. To calculate the applicable penalty, Petitioner determines the employer's gross payroll for the two-year period preceding the noncompliance determination——the so-called "penalty period"——from a review of the employer's business records. For days during the penalty 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 penalty period commenced on January 24, 2013, and ended on January 23, 2015, the day on which the compliance inspection was conducted, and Respondent was determined to not be in compliance with the workers' compensation coverage requirement. Initially, Respondent produced payroll records that did not identify the subcontractors Respondent hired to install the carpeting. Ruzzo identified the subcontractors using Respondent's transaction records. Respondent subsequently provided information, including affidavits and certificates of exemption regarding the subcontractors it had hired during the penalty period. At all times during the penalty period, Respondent employed four or more non-construction employees, including Charles and Calideen.3/ Based on the business records produced, Ruzzo compiled a list of the persons, including the subcontractors and non-construction employees who were on Respondent's payroll, but not covered by workers' compensation insurance during the penalty period. This list of employees and the penalty computation for each is set forth on the Penalty Calculation Worksheet attached to the 2nd Amended Order of Penalty Assessment. Using the National Council on Compensation Insurance ("NCCI") workers' compensation insurance occupation class codes set forth in the NCCI Scopes Manual, Ruzzo determined the occupation class code applicable to each employee listed on the Penalty Calculation Worksheet. Respondent's subcontractors were classified in NCCI class code 5478, which is the class code for the flooring installation industry. This is consistent with Florida's construction industry class code rule, Florida Administrative Code Rule 69L-6.021(2)(kk), which identifies the installation of carpet and other floor covering as NCCI class code 5478. Alex Stark, Amber Krembs, Jacquelyn Skwarek, and Monica Stahl were classified in NCCI class code 8018, which applies to workers engaged in selling merchandise, including carpeting and linoleum, at the wholesale level. Calideen, Frenchak, and Phelps were classified in NCCI class code 8742, which applies to outside salespersons primarily engaged in sales off of the employer's premises. Charles was classified in NCCI class code 8810, which applies to clerical office employees. Ruzzo then determined the period of Respondent's noncompliance for each employee listed on the Penalty Calculation Worksheet. For each of these employees, Ruzzo determined the gross payroll paid to that employee for the period during which Respondent was noncompliant, 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 occupation class code. This calculation yielded the workers' compensation coverage premium for that specific employee for which Respondent was noncompliant during the penalty 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. Respondent did not provide records covering Charles, Calideen, Stark, Frenchak, or Phelps for the period between January 1, 2015, and January 23, 2015. For this period, Ruzzo imputed the gross payroll for each of these employees using the statewide average weekly wage as defined in section 440.12(2),4/ multiplied by two. Ruzzo then performed the same computations discussed above to determine the penalty amount to be imposed for Respondent's failure to provide workers' compensation for those employees during this time period. Ruzzo added the penalty determined for each employee using actual gross payroll and imputed payroll, as applicable, to arrive at the total penalty assessment amount of $31,061.68. Respondent's Defense Respondent is engaged in the retail sale of various types of flooring, such as carpeting, and hires subcontractors to install the flooring. The evidence did not establish that Respondent engaged in wholesale sales of flooring. Charles testified that Respondent had attempted to operate its business as a "cash and carry" operation in which Respondent would sell the flooring to retail customers, who would take the purchased flooring from Respondent's premises and would be solely responsible for securing their own installation services. In Charles' words, "[t]hat didn't work. The public demanded that we provide them, as part of the sale, installers—— I might be saying it wrong legally, but they demanded that it all be done in one shot." Thus, Respondent began hiring subcontractors to do the installation work. Charles explained that Respondent makes retail sales of flooring to customers, either on Respondent's premises or at the customer's premises through its outside sales people. The flooring is then cut from the roll on Respondent's premises and placed in the installer's vehicle. The installer transports the purchased flooring to, and installs it at, the customer's premises. Charles estimated that Respondent currently does approximately five percent of its business as "cash and carry" sales, and the remaining 95 percent consists of sales requiring installation. Charles testified that he and Calideen, as corporate officers of Respondent, previously had obtained exemptions from the workers' compensation coverage requirements for themselves; however, they were unaware that the exemptions had to be renewed, so their exemptions had expired. As of the date of the 2nd Amended Order of Penalty Assessment, neither Charles nor Calideen possessed valid certificates of exemption from the workers' compensation coverage requirement. Charles testified that Respondent always had tried to operate in compliance with the law. He was of the view that because he and Calideen were exempt from the worker's compensation coverage requirement, Respondent effectively employed only three employees——one fewer than the workers' compensation coverage requirement threshold of four employees applicable to non-construction industry businesses. Charles and Calideen testified that when Respondent initially hired subcontractors, they required copies of their insurance policies, including proof of workers' compensation coverage or exemption therefrom. Calideen testified that thereafter, he and Charles assumed that the subcontractors were in compliance with the workers' compensation laws, and they did not know that they needed to obtain updated certificates of workers' compensation exemption or coverage from the subcontractors. On that basis, Charles asserted that Respondent should not be required to "babysit" its subcontractors to ensure that they are in compliance with the workers' compensation law. Respondent thus asserts that it should not be responsible for securing workers' compensation coverage for subcontractors whose workers' compensation policies or exemptions had expired during the penalty period. The undisputed evidence establishes that Charles' employment entails clerical work. Calideen testified, credibly, that Stark's employment duties entail selling flooring on Respondent's business premises, and that he does not engage in sales off the premises. Calideen testified, credibly, that Frenchak and Phelps primarily are engaged in outside sales off of Respondent's premises. Calideen testified, credibly, that he performs clerical duties rather than sales duties. Calideen and Charles both testified, credibly, that employees Krembs, Skwarek, and Stahl performed computer-related duties for Respondent, such as entering business information into Respondent's computer databases, and that they did not work on Respondent's business premises. Calideen testified, credibly, that subcontractor Mike Smith was hired on a one-time basis to paint parking place stripes at the newly-repaved parking lot behind Respondent's business premises. Findings of Ultimate Fact The credible, persuasive evidence establishes that Respondent is engaged in the retail sale of carpeting and other flooring materials and that Respondent itself does not install the flooring. The credible, persuasive evidence establishes, and the parties stipulated, that Respondent is not a member of the construction industry. The credible, persuasive evidence establishes that at all times during the penalty period, Respondent employed more than four employees who were engaged in non-construction employment. Accordingly, Respondent was required to secure workers' compensation coverage for its employees, including Charles and Calideen, whose previously-issued certificates of exemption had expired and were not in effect during the penalty period. The undisputed evidence establishes that at certain times during the penalty period, Respondent employed subcontractors who performed floor installation. The evidence clearly establishes that the subcontractors, in installing the flooring, perform a service that is integral to Respondent's business and that they work specifically at Respondent's direction for each particular installation job. Even though Respondent is not classified as a member of the construction industry, it nonetheless is a "statutory employer" of its subcontractors, who are members of the construction industry. Thus, Respondent is responsible for securing workers' compensation coverage for its subcontractors who failed to secure an exemption or coverage for themselves.5/ The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to flooring installation subcontractors for which Respondent was noncompliant during the penalty period. However, the unrebutted evidence establishes that subcontractor Mike Smith was hired on a one-time basis to paint parking lot stripes in Respondent's parking lot. Thus, Petitioner's classification of Smith in NCCI class code 5478—— which is a construction industry code that applies to workers engaged in flooring installation——obviously is incorrect, and no evidence was presented showing the correct NCCI class code in which Smith should be classified. Accordingly, Smith should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to Respondent's noncompliance with respect to Charles, Frenchak, and Phelps during the penalty period. The credible, persuasive evidence establishes that Stark is engaged in retail sales on Respondent's business premises. However, in calculating the penalty, Petitioner classified Stark in NCCI class code 8018, which applies to salespersons engaged in selling merchandise at the wholesale level, rather than at the retail level. Thus, Petitioner incorrectly classified Stark in NCCI class code 8018. There is no evidence in the record identifying the correct NCCI class code in which Stark should be classified. Accordingly, Stark should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Calideen performs clerical employment duties and does not perform sales duties, so he should be classified in NCCI class code 8810, rather than in class code 8742. Accordingly, Petitioner should recalculate the portion of the penalty attributable to Respondent's noncompliance for Calideen using NCCI class code 8810. The credible, persuasive evidence establishes that Krembs, Skwarek, and Stahl are not employed as salespersons at the wholesale level. Thus, Petitioner incorrectly classified these employees in NCCI class code 8018. In its Proposed Recommended Order, Petitioner contends that because Respondent disputes the classification of these employees in class code 8018, Respondent is responsible for identifying the correct applicable class code, which it has not done. This position disregards that in this proceeding, Petitioner bears the burden of proof, by clear and convincing evidence, to show that its proposed penalty assessment against Respondent is accurate. Thus, Petitioner——not Respondent——is responsible for correctly identifying the NCCI class codes applicable to Respondent's employees. Here, the credible, persuasive evidence establishes that in calculating the penalty, Petitioner incorrectly classified Krembs, Skwarek, and Stahl in class code 8018,6/ and no evidence was presented showing the correct NCCI class code applicable to these employees. Accordingly, Krembs, Skwarek, and Stahl should not be included in Petitioner's calculation of the penalty to be assessed against Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Department of Financial Services, Division of Workers' Compensation, issue a final order amending the penalty to be assessed against Respondent as follows: Subtracting the penalty assessed for subcontractor Mike Smith, as shown on the Penalty Calculation Worksheet; and Subtracting the penalties assessed for Respondent's alleged noncompliance with respect to employees Amber Krembs, Jacquelyn Skwarek, and Monica Stahl, as shown on the Penalty Calculation Worksheet; and Reclassifying employee Andy Calideen in NCCI class code 8810 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Calideen using this class code; and Reclassifying employee Alexander Stark in NCCI class code 5784 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Stark using this class code. DONE AND ENTERED this 22 day of January, 2016, 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 22 day of January, 2016.
The Issue The issue is whether Petitioner violated Chapter 440, Florida Statutes, by not having workers’ compensation insurance coverage, and if so, what penalty should be imposed.
Findings Of Fact Petitioner operates a gas station and convenience store in Winter Garden. Mohammad Sultan is Petitioner’s owner and president. On November 2, 2006, Margaret Cavazos conducted an unannounced inspection of Petitioner’s store. Ms. Cavazos is a workers’ compensation compliance investigator employed by the Department. Petitioner had nine employees, including Mr. Sultan and his wife, on the date of Ms. Cavazos' inspection. Petitioner had more than four employees at all times over the three-year period preceding Ms. Cavazos' inspection. Petitioner did not have workers’ compensation insurance coverage at the time of Ms. Cavazos’ inspection, or at any point during the three years preceding the inspection. On November 2, 2006, the Department served a Stop-Work Order and Order of Penalty Assessment on Petitioner, and Ms. Cavazos requested payroll documents and other business records from Petitioner. On November 6, 2006, the Department served an Amended Order of Penalty Assessment,1 which imposed a penalty of $70,599.78 on Petitioner. The penalty was calculated by Ms. Cavazos, using the payroll information provided by Petitioner and the insurance premium rates published by the National Council on Compensation Insurance. The parties stipulated at the final hearing that the gross payroll attributed to Mr. Sultan for the period of January 1, 2006, through November 2, 2006, should have been $88,000, rather than the $104,000 reflected in the penalty worksheet prepared by Ms. Cavazos. The net effect of this $16,000 correction in the gross payroll attributed to Mr. Sultan is a reduction in the penalty to $68,922.18.2 On November 3, 2006, Mr. Sultan filed a notice election for exemption from the Workers’ Compensation Law. His wife did not file a similar election because she is not an officer of Petitioner. The election took effect on November 3, 2006. On November 6, 2006, Petitioner obtained workers’ compensation insurance coverage through American Home Insurance Company, and Petitioner also entered into a Payment Agreement Schedule for Periodic Payment of Penalty in which it agreed to pay the penalty imposed by the Department over a five-year period. On that same date, the Department issued an Order of Conditional Release from Stop-Work Order. Petitioner made the $7,954.30 “down payment” required by the Payment Agreement Schedule, and it has made all of the required monthly payments to date. The payments required by the Payment Agreement Schedule are $1,044.09 per month, which equates to approximately $12,500 per year. Petitioner was in compliance with the Workers’ Compensation Law at the time of the final hearing. Petitioner reported income of $54,358 on gross receipts in excess of $3.1 million in its 2005 tax return. Petitioner reported income of $41,728 in 2004, and a loss of $8,851 in 2003. Petitioner had total assets in excess of $750,000 (including $540,435 in cash) at the end of 2005, and even though Petitioner had a large line of credit with Amsouth Bank, its assets exceeded its liabilities by $99,041 at the end of 2005. Mr. Sultan has received significant compensation from Petitioner over the past four years, including 2003 when Petitioner reported a loss rather than a profit. He received a salary in excess of $104,000 in 2006, and he was paid $145,333 in 2005, $63,750 in 2004, and $66,833 in 2003. Mr. Sultan’s wife is also on Petitioner’s payroll. She was paid $23,333.40 in 2006, $25,000 in 2005, and $12,316.69 in 2004. Mr. Sultan characterized 2005 as an “exceptional year,” and he testified that his business has fallen off recently due to an increase in competition in the area. Todd Baldwin, Petitioner’s accountant, similarly testified that 2006 was not as good of a year as 2005, but no corroborating evidence on this issue (such as Petitioner’s 2006 tax return) was presented at the final hearing. Mr. Sultan testified that payment of the penalty imposed by the Department adversely affects his ability to run his business. The weight given to that testimony was significantly undercut by the tax returns and payroll documents that were received into evidence, which show Petitioner’s positive financial performance and the significant level of compensation paid to Mr. Sultan and his wife over the past several years. The effect of the workers’ compensation exemption elected by Mr. Sultan is that his salary will no longer be included in the calculation of the workers’ compensation insurance premiums paid by Petitioner. If his salary had not been included in Ms. Cavazos’ calculations, the penalty imposed on Petitioner would have been $40,671.36. Ms. Cavazos properly included Mr. Sultan’s salary in her penalty calculations because he was being paid by Petitioner and he did not file an election for exemption from the Workers' Compensation Law until after her inspection.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $68,922.18 on Petitioner to be paid in accordance with a modified payment schedule reflecting the reduced penalty and the payments made through the date of the final order. DONE AND ENTERED this 22nd day of August, 2007, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 22nd day of August, 2007.
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 primary issue to be decided in this proceeding is whether Respondent's backdated, retroactive workers' compensation policy complied with the requirements of chapter 440, Florida Statutes. If not, was the penalty properly assessed.
Findings Of Fact The undersigned makes the following findings of fact: Petitioner 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.; Pet. Exs. 1, 2, 3. Respondent is a corporation in the State of Florida and was formed on March 6, 1996. Pet. Ex. 4. Respondent operates a preschool located at 15 Northwest 5th Avenue, Hallandale, Florida 33309, known as Hallandale Academy. Pet. Ex. 13 at 4:11-25, 5:1-5. Respondent obtained a workers' compensation policy AWC1098385 through Associated Industries Insurance Company, an insurance carrier authorized to write workers' compensation policies in the State of Florida. Respondent's workers' compensation policy was effective from February 5, 2018, to March 11, 2018. Pet. Exs. 9 and 14. On or about February 28, 2018, Respondent received notification of cancellation of its policy from its insurance carrier. § 440.42(3), Fla. Stat.; Pet. Ex. 9. Respondent's workers' compensation policy was cancelled by Associated Industries Insurance Company on March 11, 2018, at 12:01 a.m. due to nonpayment of the premium. Pet. Exs. 8, 9, 10, and 11. On or about March 11, 2018, Associated Industries Insurance Company notified the Department of the cancelled policy. § 440.185(6), Fla. Stat.; Pet. Ex. 14. On March 16, 2018, Workers' Compensation Compliance Investigators Faline Moeses ("Moeses") and Emily Metzenheim ("Metzenheim") conducted a routine workers' compensation compliance investigation of Respondent's preschool. Pet. Ex. 8. Moeses confirmed that Respondent had no workers' compensation coverage through the Department's internal database, Coverage and Compliance Automated System ("CCAS".)3/ Pet. Exs. 8 and 14. Moeses confirmed that her findings in CCAS matched the information found on the National Council on Compensation Insurance ("NCCI") website.4/ Pet. Ex. 8. Both CCAS and NCCI confirmed that Respondent did not have an active workers' compensation insurance policy on March 16, 2018, when Moeses visited. Pet. Ex. 8. On March 16, 2018, while at Respondent's place of business, Moeses called Respondent's insurance carrier, Associated Industries Insurance Company, and received additional confirmation that Respondent's workers' compensation insurance policy had been cancelled and was not in effect due to nonpayment of premium. Pet. Exs. 8 and 9. Moeses contacted Respondent's corporate officer, Davain Baldeo ("Mr. Baldeo"), by phone. He identified himself as the owner of Baldeo Enterprises, Inc. Pet. Ex. 8. Moeses provided information to Mr. Baldeo about the purpose of the investigation. Pet. Ex. 8. Moeses requested to meet with Mr. Baldeo in person to discuss the investigation. Mr. Baldeo refused the request to meet and asked that Moeses cease speaking with his employees and send all communications by mail.5/ Pet. Exs. 8. On March 19, 2018, a Request for Production of Business Records was sent via certified mail to Respondent. Pet. Exs. 1 and 8. The Request for Production of Business Records requested several categories of business records from Respondent for the period of December 15, 2017, through March 16, 2018. See Petitioner's Exhibit 1 for a detailed description of the records requested. Respondent submitted sufficient business records to the Department in response to the Request for Production of Business Records, to allow it to complete its investigation. Pet. Ex. 5. The records submitted by Respondent confirmed that Respondent employed four or more regular and customary employees during the period of December 15, 2017, through March 16, 2018. Pet. Exs. 5 and 8. On March 19, 2018, Associated Industries Insurance Company, reinstated Respondent's workers' compensation policy and it backdated the policy to March 11, 2018. Pet. Exs. 8, 9, 10, and 11. On April 6, 2018, the Request for Production of Business Records was converted into a BRR based on the lapse in Respondent's workers' compensation insurance coverage between March 11 and March 19, 2018. Pet. Ex. 2. On April 19, 2018, the BRR was served on Respondent. Pet. Ex. 8. Respondent did not provide any additional documents in response to the BRR. Pet. Ex. 8. Department Auditor Christopher Collins was assigned to calculate a penalty for Respondent's noncompliance with Florida's Workers' Compensation Law. Pet. Ex. 8. Respondent's business records were sufficient for the Department to determine Respondent's payroll for the audit review period. The Department assessed a penalty against Respondent for its noncompliance with chapter 440, Florida Statutes. Pet. Ex. 3 and 5. The Department served Respondent with an Order of Penalty Assessment totaling $1,000.00. Pet. Exs. 3 and 11. Respondent's period of noncompliance was March 11 through March 18, 2018, as Respondent failed to secure workers' compensation insurance coverage for this period. Pet. Exs. 8, 9, 10, and 11. Based on Respondent's records, the Department determined Respondent's gross payroll during the period of noncompliance was $3,423.99. Pet. Ex. 11. Respondent's unsecured gross payroll was then divided by 100 so that it could be multiplied by the approved manual rate in order to determine the premium due. Pet. Ex. 11. The approved manual rates are drafted by NCCI and then approved by the Florida Office of Insurance Regulation. § 627.091(4), Fla. Stat. The approved manual rates represent the risk factor associated with each NCCI class code and are critical to calculating a premium. Pet. Ex. 7. The calculations reveal that Respondent would have paid $62.32 in workers' compensation premium for its unsecured gross payroll, had coverage been in place, and not lapsed during the period of March 11 through March 18, 2018. Pet. Ex. 11. The Department demonstrated by clear and convincing evidence that Respondent violated Florida's Workers' Compensation Law by employing four or more employees without securing the payment of workers' compensation from March 11 through March 18, 2018, or a proper exemption. This violation required the issuance of the BRR and OPA to Respondent. Petitioner provided clear and convincing evidence that its penalty calculation was correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order imposing and assessing the proposed Order of Penalty Assessment against Respondent. DONE AND ENTERED this 7th day of January, 2019, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of January, 2019.
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.
