The Issue Whether KP Roofing Masters, LLC ("Respondent"), failed to secure the payment of workers' compensation coverage for its employees, and if so, whether the Department of Financial Services, Division of Workers' Compensation ("Department"), correctly calculated the penalty imposed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440 that employers in Florida secure workers' compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent was a business providing services in the construction industry. Its principal office is located at 7100 Northwest 12th Street, Suite 210, Miami, Florida 33126. The Investigation. On September 26, 2014, the Department's compliance investigator, Cabrera, observed two individuals performing roofing work on a house in Coral Gables, Florida. Investigator Cabrera interviewed the individuals, identified as Rodolfo Moscoso and Jairo Alvarado. Both men informed Cabrera that they worked for Respondent. Cabrera then checked the permit board located at the jobsite and confirmed that Respondent pulled the permit for the roofing work. After gathering the information at the jobsite, Cabrera consulted the Division of Corporations’ website to determine, inter alia, the identity of Respondent's corporate officers. Cabrera found that Jorge Cappelleti ("Cappelleti") was Respondent's sole corporate officer. Cabrera then consulted the Department's Coverage and Compliance Automated System ("CCAS") for proof of workers' compensation coverage and for exemptions associated with Respondent. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. (2014). CCAS is the Department's internal database that contains workers' compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Cabrera's CCAS search revealed that Respondent did not have a workers' compensation policy or an employee leasing policy. Cabrera additionally discovered that Cappelleti had a valid exemption. Cabrera then called Cappelleti who confirmed that the two men at the jobsite were his employees and that the employees were not covered by workers' compensation insurance. Based on the information gathered, on September 26, 2014, Cabrera issued Respondent a Stop-Work Order and Order of Penalty Assessment. On September 29, 2014, Cabrera served Respondent with the Stop-Work Order and Order of Penalty Assessment. Cabrera simultaneously served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation ("BRR"). The BRR requested documents that would enable the Department to determine Respondent's payroll for the time period of September 27, 2012, through September 26, 2014. In response to the BRR, Respondent ultimately provided the Department with bank statements, check details, a general ledger, and other records. Penalty Calculation. In October 2014, the Department assigned Penalty Auditor Ruzzo to calculate the penalty assessed against Respondent. Ruzzo reviewed the business records produced by Respondent and properly identified the amount of gross payroll paid to Respondent's employees on which workers' compensation premiums had not been paid. Ruzzo researched Respondent and Respondent's subcontractors to determine those periods when they were not compliant with chapter 440 during the audit period. Ruzzo determined that Respondent was not compliant for the period of September 27, 2012, through September 26, 2014. However, Respondent's corporate officer was not included in the penalty for the periods in which he had an exemption. Additionally, Respondent's compliant subcontractors were not included in the penalty. The business records ultimately produced by Respondent were sufficient for Ruzzo to calculate a penalty for the entire audit period, except for September 26, 2014. For that day, Ruzzo imputed the payroll. On June 2, 2015, based on Ruzzo's calculations, the Department issued a 4th Amended Order of Penalty Assessment to Respondent. On September 1, 2015, the 4th Amended Order of Penalty Assessment was served on Respondent. The 4th Amended Order of Penalty Assessment assessed a penalty of $68,525.42. For the penalty assessment calculation, Ruzzo consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department of Financial Services through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist in the calculation of workers' compensation insurance premiums. Ruzzo assigned the class codes based on information provided to him by Cappelleti. Ruzzo then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. Ruzzo applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)l. and rules 69L-6.027 and 69L-6.028 to determine the penalty. The Penalty Associated With Subcontractor Emerald. Respondent only disputes the portion of the penalty associated with its subcontractor, Emerald, in the amount of $8,434.86 for the period of non-compliance from January 1, 2014, through April 8, 2014. Section 440.10(1) provides in relevant part: In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment. A contractor shall require a subcontractor to provide evidence of workers’ compensation insurance. A subcontractor who is a corporation and has an officer who elects to be exempt as permitted under this chapter shall provide a copy of his or her certificate of exemption to the contractor. Noticeably absent from the statute is the time period within which this evidence of coverage must be provided to the contractor or the nature of the required evidence. Rule 69L-6.032(1) provides: In order for a contractor who is not securing the payment of compensation pursuant to Section 440.38(1)(a), F.S. to satisfy its obligation to obtain evidence of workers’ compensation insurance or a Certificate of Election to Be Exempt from a subcontractor pursuant to Section 440.10(1)(c), F.S., such contractor shall obtain and provide to the Department, when requested, the evidence specified in subsections (2), (3), (4) or (5) herein. (Emphasis added). Rule 69L-6.032 sets forth the contractor requirements for obtaining evidence that the subcontractor possesses workers' compensation insurance. If a subcontractor is a client company of a leasing company, such as Emerald, rule 69L-6.032(3) specifies that the evidence shall be a Certificate of Liability Insurance ("Certificate"). According to the deposition testimony of Cappelleti (Exhibit 11, offered into evidence by the Department), when Emerald began providing services to Respondent in January 2014, Emerald represented that its workers were covered by a policy through an employee leasing company. In fact, a Certificate, obtained by Respondent sometime before it was requested by the Department, indicates that Emerald had coverage for the period of January 1, 2014, through December 31, 2014. This period encompasses the period of time for which the Department now seeks to penalize Respondent. Although Respondent obtained proof of coverage from Emerald, this occurred after Emerald was paid by Respondent for work occurring between January 1, 2014, and April 8, 2014. Ruzzo checked the CCAS and found that the Certificate for Emerald was inaccurate. Emerald apparently did not join the leasing company insurance policy until April 9, 2014. Although a contractor does not have a duty to further investigate when presented with what appears to be a valid Certificate, Ruzzo's calculations penalized Respondent for the period of non-compliance of Emerald because Respondent did not seek the proof of coverage until after Emerald's workers were already on the job for Respondent. The Department has demonstrated by clear and convincing evidence that Respondent employed Mr. Moscoso and Mr. Alvarado on September 26, 2014; that Respondent was engaged in the construction industry in Florida during the period of September 27, 2012, to September 26, 2014; and that Respondent failed to carry workers' compensation insurance to cover its employees as required by Florida's Workers' Compensation Law from September 27, 2012, to September 26, 2014. The Department has demonstrated by clear and convincing evidence that Ruzzo correctly utilized the methodology specified in section 440.107(7)(d)l. However, the Department failed to show by clear and convincing evidence that a penalty for Emerald's period of non-compliance, in the amount of $8,434.86, should be included in the total penalty assessment of $68,525.42.
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, KP Roofing Masters, LLC, violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage, and imposing upon it a total penalty assessment of $60,090.56. DONE AND ENTERED this 2nd day of March, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 2nd day of March, 2016.
The Issue Whether Respondent, John H. Woods, d/b/a Woods Construction, conducted operations in the State of Florida without obtaining workers’ compensation coverage which meets the requirements of Chapter 440, Florida Statutes (2008)1, in violation of Subsection 440.107(2), Florida Statutes, as alleged in the Amended Stop-Work Order and Order of Penalty Assessment and Second Amended Order of Penalty Assessment. If so, what penalty should be assessed by Petitioner, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with the responsibility of enforcing the requirement of Section 440.107, Florida Statutes, that employers in Florida secure the payment of workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Workers’ compensation coverage is required if a business entity is engaged in the construction industry in Florida. Securing the payment of workers’ compensation coverage can be achieved via three different methods: purchase a workers’ compensation insurance policy; ensure that workers are paid and workers’ compensation coverage is provided by a third party entity called a Professional Employment Organization (PEO); or apply for a Certificate of Exemption from Workers’ Compensation Coverage (Exemption Certificate) assuming certain statutorily mandated criteria are met. These methods are not mutually exclusive of each other. On August 14, 2008, a workers’ compensation compliance investigator employed by Petitioner, visited a construction site in Lee County, Florida. On the site, she observed several groups of men conducting various construction activities including the laying of a sidewalk along Lexington Street in Fort Myers. The work performed involved construction activities as contemplated under the applicable agency rule. Fla. Admin. Code R. 69L-6.021. By a preponderance of evidence, it is determined that among the entities on the worksite was a group of three laborers who worked for Woods Construction. There was no proof of coverage for workers’ compensation for the Woods Construction Company, neither an insurance policy, nor any exemption certificate for the individuals encountered on the worksite. Woods Construction assumed that the three laborers were covered by Able Body Labor, a PEO. The evidence confirmed that two of the three laborers were covered. However, the third laborer, Filberto Castro, was unable to be included on the work roster due to his lack of corresponding documentation necessary for employment in the United States. Therefore, Castro was working without coverage. An SWO was issued and a Request for Production of Business Records for Penalty Calculation (BRR) was served on J. Woods Construction, Corp. [sic] on August 14, 2008. The SWO was later amended to conform to the correct name of the company, which is not a corporation. The amended SWO was served on John H. Woods on August 22, 2008, via certified mail. Pursuant to the BRR, Respondent provided business records to Petitioner. Petitioner’s Penalty Calculator’s duties are to receive records from the employer, and organize, identify, and audit those records which indicate payroll activities, while delineating other business activities, which may be related to the non-payroll activities of the business such as purchasing supplies, maintaining a place of business, etc. The characterization of the voluminous records received from Respondent were categorized into three distinct categories: reliable, somewhat reliable, and unreliable records. The records were characterized as “reliable” if they were records from an independent third party or the bank with whom Respondent conducted business, and were thus extremely difficult to alter without a high level of expertise. They are considered “source documentation.” The bank records capture the transactions as they occurred, to whom money was paid, and for what amount. The next category of records deemed “somewhat reliable” were those records which, on their face appear to be legitimate records, such as copies of the checks with corresponding amounts and dates to those in the “reliable” category. However, certain inconsistencies in these records demonstrated that they were less than reliable. These records were only used in select instances when there was corresponding source documentation supporting their veracity. A prime example, among many, is check number 1078 for $100.00 indicating a payment for a credit card; the corresponding checkstub indicates that the payment went to “Whitney,” a grand-child of John H. Woods. In toto, the documents illustrated that Respondent failed to follow generally accepted accounting principles by mislabeling or mischaracterizing funds on a regular basis. The third category of records were records which were considered “unreliable” as these records lacked any corresponding source documentation and they could not be considered in assessing the payroll activities of the firm. In the construction industry, there are instruments called “draw requests.” The draw request is an item that a subcontractor or builder will utilize to show partial completion of a project and concurrently request more funds (the draw) to complete the remaining portion of the project. The draw requests are often utilized at pre-measured stages of the project, e.g.: 25 percent completion, 50 percent completion, etc. The draw requests would have attached source documentation such as receipts from suppliers, servicers, and other miscellanea to show that the project is worked upon as opposed to the funds being siphoned off elsewhere. Nowhere, in the box full of records produced, was a proper draw request found with attached receipts. Therefore, none of the records produced could be considered as reliable documents. Many irregularities in Respondent’s methodology of accounting were also noted; as an example, there were numerous times that company checks from Respondent were deposited by an entity known as “Hendry Contracting,” without explanation. Respondent personally held the license as a General Contractor, and would utilize Hendry Contracting as a subcontractor. Hendry Contracting did not have any license whatsoever. It utilized Respondent’s license while performing construction activities. Brad Hendry, the principal of Hendry Contracting, is married to Janice Hendry, the daughter of John H. Woods, the owner of Respondent, Woods Construction. Janice Hendry administered Respondent’s company account and the company account of Hendry Contracting. The evidence is clear that no separation of duties was attempted. Furthermore, Hendry admitted that she did not exercise any sense of separation between the two different accounts (Woods Construction and/or Hendry Contracting). The two businesses were “commingled,” and the ability to retain any form of standard accounting requirement of checks and balances has been nullified. Numerous irregularities that defied “generally accepted accounting principles” appeared, including personal loans to family members, wholesale transfers of monies from Respondent to Hendry Contracting without explanation, and checks drafted to Brad Hendry (personally). Further, Woods testified that he exercised little or no control over his company in the last ten years. Hendry also confirmed the haphazard method of managing the two firms’ different accounts by writing checks from one firm to another, when the other firm’s account was running low. Hendry’s testimony regarding the financial cooperation of Respondent and Hendry Contracting is indicative of the commingling of accounts, as well. Hendry testified that each entity would draw on each other’s accounts depending on the cash levels within each respective account. Hendry also testified that Hendry Contracting was utilized for obtaining bank loans and utilizing Hendry’s name to purchase materials when the other accounts were depleted. By utilizing only the bank records, a general ledger for Respondent was constructed which derived the amounts that came into the business and the amounts paid out for labor. The fact that Respondent had no general ledger meant that some items would never be accounted for, such as building supply costs. Based on that caveat, Florida Administrative Code Rule 69L- 6.035(i) was applied to the total payroll derived from the bank records. This had the effect of reducing total payroll by twenty percent to account for building supplies (which were never accounted for due to the non-existent business ledger of Respondent). The amount of money flowing and commingling between the two firms (Respondent and Hendry Contracting) and among family members, numbered in the hundreds of thousands of dollars. The commingled money was utilized for all manners of payments: loans (not expected to be paid back) to family members, inflated wages to family members for de minimis services, or payment for services/goods for family members’ personal residences. A proposed penalty in the amount of $365,876.82 was originally assessed, as reflected in the AOPA, and served on Respondent on August 26, 2008. Based on further records produced and the understanding that Respondent was a construction firm but was unable to show any receipts of building supplies, the proposed penalty, utilizing Florida Administrative Code Rule 69L- 6.035(i), decreased the payroll by 20 percent to account for building supplies that were not documented. After consideration of the documents provided and application of the rule, a Second AOPA was prepared showing an assessment in the amount of $306,876.82. With Hendry as the sole financial officer of Respondent, approximately $351,632.43 of payroll was allocated to various family members. There was unambiguous testimony from Woods and Hendry that family members were employed in various roles, most notably the grand-daughters who were earning wages while conducting secretarial duties. A further $472,292.94 was paid to Hendry Contracting during the three-year audit time- period. Hendry Contracting never had any discernible workers’ compensation coverage for this amount of payroll, rendering Respondent liable for failure to secure workers’ compensation coverage for the monies paid. The remainder of the unsecured payroll assessed to Respondent was for various non-family workers for whom no proof of workers’ compensation coverage could be ascertained. The Second AOPA was computed by calculating Respondent’s payroll for the past three years using the business records Respondent provided. The payroll was then divided for each year by 100 and that figure was multiplied by an approved manual rate assigned to the classification codes (class codes) found in the National Council on Compensation Insurance’s Scope of Trade Manual (Scopes Manual). Class codes were assigned to the individuals listed on the penalty worksheet according to their historical duties. The grand-daughters and other female employees of Respondent were listed as clerical employees (classification code 8810), while the remaining names were listed as general carpentry workers (classification code 5645). Next, the product of the approved manual rate and the payroll for each year divided by 100 was then multiplied by 1.5, pursuant to statute, to derive the penalty for each year or part of a year. The penalties for each employee and year or part of a year were then added together to come up with a total penalty of $306,213.78. Based on the assessment of the financial records in conjunction with the documents admitted into evidence, the grand total of $306,213.78 is a true and correct penalty amount for Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Chief Financial Officer of the Department of Financial Services, Division of Workers’ Compensation, enter a final order: Finding that Respondent failed to secure the payment of workers’ compensation insurance coverage for its employees in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent in the amount of $306,213.78, which is equal to 1.5 times the evaded premium based on the payroll records provided by Respondent and on the applicable approved manual rates and classification codes for the period extending from August 15, 2005, through August 14, 2008, as provided in Subsection 440.107(7), Florida Statutes. DONE AND ENTERED this 17th day of July, 2009, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 2009.
The Issue Whether Thompson Enterprises of Jacksonville, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers' compensation, as alleged in the Stop-Work Order and 2nd Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing workers' compensation coverage requirements applicable to employers under Florida law. Respondent is a Florida limited-liability company organized on October 25, 2011. The managing members listed on Respondent’s State of Florida Articles of Organization are Thomas Thompson, Michael Thompson, and Vicky Thompson. In May 2016, Department Compliance Investigator Ann Johnson was assigned to conduct a job site visit on Respondent’s business because its name appeared on the Department’s Bureau of Compliance’s “lead list.” The “lead list” is one of the Department’s databases listing employers that are potentially out of compliance with Florida's workers' compensation insurance requirements. Prior to the job site visit, Investigator Johnson reviewed the Division of Corporations website, www.sunbiz.org, and confirmed Respondent's address, managing members' names, and that Respondent was a current, active Florida company. Respondent’s website advertised towing, wrecker, mechanic, and body shop services. On May 6, 2016, Investigator Johnson visited Respondent's principal address located at 7600 Bailey Body Road, Jacksonville, Florida 32216. She noted a large commercial sign near Respondent’s address that advertised towing and wrecker services. During her visit, Investigator Johnson spoke with Vicky Thompson and Michael Thompson, both of whom advised that they were owners of Respondent. The Thompsons informed Investigator Johnson that Respondent had six employees, including the three listed as managers on Respondent’s Articles of Organization. When Investigator Johnson asked for proof of workers’ compensation coverage, Michael Thompson admitted that Respondent had no such coverage. Under Florida law, employers in the non-construction industry, such as Respondent, must secure workers' compensation insurance if "four or more employees are employed by the same employer." §§ 440.02(17)(b) and 440.107, Fla. Stat. On the same day as her site visit, Investigator Johnson confirmed Respondent’s lack of insurance with a search of the Department's internal database, Coverage and Compliance Automated System. At the time, Respondent had no active exemptions from the requirements of obtaining workers’ compensation for its three managing members. Based on her investigation, Investigator Johnson served Respondent with the Stop-Work Order and a Request for Production on May 6, 2016. Upon serving the documents, Investigator Johnson explained the effect and purpose of the documents and how Respondent could come into compliance. Respondent came into compliance that same day by paying a $1,000 down payment, reducing Respondent's workforce to three employees, applying for exemptions for its three managing members, and executing an agreed Order of conditional release with the Department. Respondent subsequently complied with the Department’s Request for Production. In June 2016, the Department assigned Penalty Auditor Eunika Jackson to review records obtained from Respondent and calculate the penalty to be assessed against Respondent. In accordance with applicable law, the Department's audit spanned the preceding two-year period, starting from the date of the Stop-Work Order. See § 440.107(7)(d)1., Fla. Stat. The audit period in this case was from May 7, 2014, through May 6, 2016. Based on information obtained during the investigation, Auditor Jackson assigned classification codes 7219, 8380, and 8810 to those identified as employees working for Respondent during the audit period. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance ("NCCI") to assist in the calculation of workers' compensation insurance premiums. Classification code 8810 applies to clerical office employees, code 7219 applies to trucking and "towing companies," and code 8380 applies to automobile service or repair centers. According to Respondent, it was out of compliance with the coverage requirements of chapter 440 for only "368 days" during the two-year audit period. Respondent's records, however, do not support this contention. Respondent provided a detailed "Employee Earnings Summary" for each employee stating the employee’s name, pay rate, and pay period. Respondent's payroll records reflect that Respondent employed "four or more employees" during the audit period. Throughout the two-year audit period, Respondent employed four or more employees with the following duties: Anna Lee, mechanic/bodywork; Cedric Blake, mechanic/bodywork; David Raynor, mechanic/bodywork; James Budner, mechanic/bodywork; Jason Leighty, mechanic; Kevin Croker, Jr., porter/detailer; Nicholas Conway, bodywork; Ralph Tenity, bodywork; Rebecca Thompson, secretary/office help; Stephen Collins, shop helper/porter; Todd Gatshore, tow truck driver/shop helper; and Williams Reeves, tow truck driver/shop helper. Evidence further demonstrated that, during the audit period, managing member Michael Thompson worked as a wrecker truckdriver, and worked with the Sheriff's Office to clear traffic accidents. He was assigned class code 7219 — tow truck driver. Managing member Vicky Thompson was given the clerical class code 8810 because she was observed working in the office during Investigator Johnson's site visit. Managing member Thomas Thompson was assigned the clerical class code 8810 based upon the fact that he occasionally does office work for the business. The corresponding approved manual rates for classification codes 8810, 7219, and 8380 were correctly applied to each employee for the related periods of non-compliance to determine the final penalty. In accordance with the Request for Production, Respondent provided the Department payroll summary reports, tax reports, and unemployment tax reports. The payroll summary reports and records provided by Respondent listed the payroll and duties for each employee. The gross payroll amounts for each employee reflected in the penalty in this case were derived from those documents. Upon receiving those reports and records, the Department correctly determined the gross payroll for Respondent's employees. On June 13, 2016, the Department served the Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,788.90. A portion of the first penalty was based on imputed payroll for Respondent’s three managing members. After service of the Amended Order of Penalty Assessment, Respondent provided additional records showing the payroll of its three managing members, and the 2nd Amended Order of Penalty Assessment was calculated after removing the imputed payroll. On August 22, 2016, the Department served the 2nd Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,112.44, which was correctly calculated in accordance with section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027(1). In sum, the clear and convincing evidence demonstrated that Respondent was a tow truck company engaged in the wrecker/tow truck and body shop mechanic industries in Florida during the periods of noncompliance; that Respondent failed to secure the payment of workers' compensation for its employees in violation of Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027(1) to determine the appropriate penalty of $33,112.44.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Thompson Enterprises of Jacksonville, LLC. DONE AND ENTERED this 27th day of April, 2017, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of April, 2017.
The Issue 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 Whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure payment of workers’ compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, the appropriate penalty.
Findings Of Fact Jurisdiction The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure workers’ compensation coverage for their employees and corporate officers, pursuant to section 440.107. Patrick Hoffman was the owner and sole corporate officer for American. At all times material to this proceeding, American sold materials for window screens, patio sliding doors, screws, and spline screening; and it provided window and screen installation services. Investigation On June 29, 2016, the Department commenced an investigation following the observation of Patrick Hoffman and Timothy Barnett (also known as Adam Barnett) performing window installation services at a residential property. Kent Howe, an investigator in the Department’s compliance division, conducted an investigation regarding American’s operation of its business without proper workers’ compensation coverage. On June 29, 2016, Mr. Howe personally served a Stop-Work Order requiring American to cease all business operations and Order of Penalty Assessment on Mr. Hoffman. On June 29, 2016, Mr. Howe also served Mr. Hoffman with a Request for Production of Business Records for Penalty Calculation, requesting records to enable the Department to calculate the appropriate penalty for the period of June 30, 2014, through June 29, 2016. On June 30, 2016, the Department issued a conditional release from the Stop-Work Order. The conditional release required Respondent to pay $1,000, and agree to pay the penalty assessment within 28 days after the penalty calculation. American paid the $1,000 payment but it disputed the calculated penalty amount. An employer is required to maintain workers’ compensation coverage for employees unless there is an exemption from coverage. In the construction industry, a company must maintain coverage if it employs one or more persons. In the non-construction industry, a company is required to maintain coverage if it employs three or more persons. A contractor serving as a corporate officer in the construction industry may obtain an exemption from coverage requirements. See § 440.05, Fla. Stat. A contractor must demonstrate compliance with the workers’ compensation requirements or produce a copy of an employee leasing agreement or exemption for each employee. If an employee is a subcontractor without their own workers’ compensation coverage or an exemption, the individual is considered an employee of the contractor. American did not dispute that Timothy Barnett and Roger Wilson were employees of the company. American also did not dispute that it did not have workers’ compensation coverage for the employees as required by chapter 440. As a corporate officer, Mr. Hoffman elected to be exempted from workers’ compensation coverage. Penalty Calculation The Department assigned Eunika Jackson, a Department penalty auditor, to calculate the appropriate penalty for American. Ms. Jackson conducts penalty audits for construction and non-construction employers. Ms. Jackson testified that workers’ compensation coverage penalties are calculated based on a statutory formula in which the auditor calculates two-times the amount of the insurance premium the employer would have paid for each employee over the two-year period preceding the Stop-Work Order. The two-year period is commonly referred to as the look-back period. The penalty calculation is based on the employer’s payroll, the classification code for the industry of operation during the audit period, and the manual rate assigned to that classification code. To determine the appropriate code, the auditor uses the classification code in the Scopes® Manual, which has been adopted by Petitioner through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Ms. Jackson used business records Mr. Hoffman provided to determine the appropriate industry code and the penalty amount for each employee. Ms. Jackson reviewed bank statements to determine the gross payroll paid to Mr. Wilson and Mr. Barnett during the two-year non-compliance period. The records demonstrated that Roger Wilson received payment during the period of June 30, 2014, through December 31, 2015. Timothy (Adam) Barnett received payment during the period of January 1, 2015, through June 29, 2016. Ms. Jackson determined that American operated in the construction industry and initially assigned each employee a classification code of 5102. On August 11, 2016, the Department issued the Amended Order that assessed a total penalty of $10,785.04. The Amended Order was personally served on Mr. Hoffman on August 16, 2016. In response to the Amended Order, Respondent disputed the classification code assigned to Mr. Wilson. Mr. Hoffman testified that Mr. Wilson did not perform construction work, but rather worked as a retail employee selling merchandise in the store front. Mr. Hoffman further testified that contractors purchased items at American for use in their businesses. Mr. Hoffman’s description of Mr. Wilson’s job responsibilities and description of merchandise sold at American clearly demonstrates that Mr. Wilson did not perform construction work. Ms. Jackson correctly determined that the classification code 8018, which applies to retail and wholesale salespersons, was the appropriate code for Mr. Wilson. The classification code change resulted in a manual rate reduction and a reduced assessment applied to Mr. Wilson. On November 18, 2016, the Department filed a Motion for Leave to Amend Order of Penalty Assessment, which the undersigned granted. The Second Amended Order reduced the penalty assessment to $6,818.00. During the hearing, American continued to dispute the calculation of the penalty for Mr. Hoffman because he maintained an exemption as a corporate officer. The Department ultimately agreed to remove Mr. Hoffman from the penalty assessment worksheet and reduced the penalty assessment to $6,764.96. At hearing, there was no dispute regarding the penalty assessment related to Mr. Barnett. However, Respondent argued in the post-hearing statement for the first time that Timothy Barnett had an exemption. There was no evidence to support Respondent’s assertion. Therefore, Ms. Jackson correctly included payment to Mr. Barnett as payroll for purposes of calculating the penalty. Regarding Mr. Wilson, Mr. Hoffman argued that Mr. Wilson had an exemption from workers’ compensation coverage when he began working for American.1/ However, Mr. Hoffman could not produce a copy of the exemption and Mr. Wilson was not present at the hearing for testimony. Ms. Jackson conducted research using the Coverage Compliance Automated System (“CCAS”), a database used by the Department to maintain information regarding workers’ compensation policies, employee leasing plans, and exemptions for employees. Ms. Jackson found no record of an exemption for Mr. Wilson in CCAS. While Ms. Jackson did not exhaust all efforts to locate an exemption for Mr. Wilson, it was American’s burden to produce evidence of an exemption. Mr. Hoffman’s testimony with nothing more was insufficient to demonstrate that Mr. Wilson had an exemption and as such, Ms. Jackson appropriately included payments to Mr. Wilson as payroll to calculate the penalty. The calculation of the penalty for Mr. Wilson in the amount of $2,784.58 is correct. However, the penalty calculation for Mr. Barnett is incorrect. The amount should be $3,872.27. Therefore, the amount of the penalty should be reduced to $6,656.85. Ultimate Findings of Fact American was actively involved in business operations within the construction industry during the audit period of June 30, 2014, through June 29, 2016. Based upon the description of American’s business and the duties performed, Mr. Wilson was properly classified with a code 8018. Ms. Jackson used the correct manual rates and methodology to determine the appropriate penalty.
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, American Aluminum Concepts, Inc., violated the requirement in chapter 440, by failing to secure workers’ compensation coverage for its employees; and Imposing a total penalty assessment of $6,656.85. DONE AND ENTERED this 16th day of December, 2016, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of December, 2016.
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 issues in this case are whether Respondent, Axiom Construction Design Corporation (Axiom), failed to provide workers' compensation coverage, and, if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing the various requirements of chapter 440, Florida Statutes. Section 440.107(3) mandates, in relevant part, that employers in Florida must secure workers’ compensation insurance coverage for their employees. At all times relevant, Axiom was a small Florida corporation engaged in the construction industry, principally installing drywall. Axiom’s principal office is located at 1067 Walt Williams Road, Lakeland, Florida. Mr. Pratt is Axiom’s owner, sole corporate officer, and registered agent. On July 23, 2014, Randall Durham conducted a job site workers’ compensation compliance investigation (Compliance Investigation). Mr. Durham spoke with Mr. Pratt at a job site at 109 Cattleman Road, the new Sarasota mall. Mr. Pratt and Al Lappohn were working the job site at the new mall. Mr. Pratt had a workers’ compensation policy in place with Southeast Personnel Leasing. Mr. Lappohn did not have an exemption from workers’ compensation coverage, and he was not covered by Axiom’s Southeast Personnel Leasing policy. On July 23, 2014, Mr. Pratt, as Axiom’s representative, was hand-served a Stop-Work Order1/ and a Request for Production of Business Records for Penalty Assessment Calculation (Request). This Request encompassed all of Axiom’s payroll documents, account documents, disbursements, workers’ compensation coverage policies, and professional employer organization records from January 4, 2013, through July 23, 2014. Mr. Pratt provided the certificates of liabilities, payroll and tax records for 2013, and additional business records to the Department. These records were given to Mr. Knopke to calculate the penalty. In reviewing the records, Mr. Knopke determined that Mr. Pratt, Mr. Lappohn and Frank Cutts were employees of Axiom, and that Axiom did not provide workers’ compensation coverage for them. Mr. Cutts worked for Axiom at a Family Dollar Store build-out in Orlando in early 2014. Mr. Cutts swept up after the drywall was installed in the store, and was paid $125. Axiom conceded it owed the workers’ compensation penalty based on the work Mr. Lappohn and Mr. Cutts performed. The business records provided that during the audit period Mr. Pratt had dual employment, payment being paid outside of leasing. Dual employment is when a business has a leasing policy and there is extraneous payroll that is paid outside of the leasing policy. Payments received outside of a leasing policy are considered unsecured payroll for the purposes of calculating a penalty against an employer. Mr. Knopke included Mr. Pratt’s outside distributions in the penalty calculation. The “Scopes Manual” is published by the National Council on Compensation Insurance, Inc. (NCCI), the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. The manual contains certain codes related to the construction industry and trades considered to be within that industry. The installation of drywall, wallboard, sheetrock, plasterboard or cement board is considered to be “construction” under the relevant codes in the manual. The manual, with its codes and classifications, is relied upon in the insurance industry and has been adopted by the Department in Florida Administrative Code Rule 69L-6.021. Mr. Knopke, using the manual, determined the appropriate classification code for Respondent’s employees was 5445. Mr. Knopke applied the correct rates and used the methodology found in section 440.107(7)(d)1., and Florida Administrative Code Rules 69L-6.027 and 69L-6.028 to calculate the penalty assessment. Based upon the testimony and exhibits, the 3rd Amended Penalty Assessment in the amount of $20,221.62 is accurate and correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the 3rd Amended Order of Penalty Assessment, and assess a penalty in the amount of $20,221.62. DONE AND ENTERED this 2nd day of June, 2015, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK 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 2nd day of June, 2015.
The Issue The issues in this case are whether Respondent, Raul A. Correa, M.D. (Dr. Correa), failed to provide workers' compensation coverage, and if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107, Florida Statutes (2013). That section mandates, in relevant part, that employers in Florida secure workers’ compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, Dr. Correa was a Florida small business engaged in the practice of medicine, with his principal office located at 2505 Manatee Avenue West, Bradenton, Florida. Dr. Correa is not incorporated. On February 12, 2014, Ms. Green conducted an on-site workers’ compensation compliance investigation (compliance investigation) of Dr. Correa’s office. After identifying herself to the receptionist, Ms. Green met Dr. Correa and explained the reason for her presence, a compliance investigation. Dr. Correa telephoned his wife who handles his office management from their residence. Mrs. Correa immediately faxed a copy of the liability insurance policy to the office. However, that liability policy did not include workers’ compensation coverage. After a telephonic consultation with her supervisor, Ms. Green served a Request for Production of Business Records (Request) on Dr. Correa at 11:50 a.m. on February 12, 2014. This Request encompassed records from October 1, 2013, through February 12, 2014, for all of Dr. Correa’s payroll documents, account documents, disbursements, and workers’ compensation coverage policies. Ms. Green consulted the Department’s Coverage and Compliance Automated System (CCAS) database to determine whether Dr. Correa had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees. CCAS is a database Ms. Green consults during the course of her investigations. Ms. Green determined from CCAS that Dr. Correa did not have any current workers’ compensation coverage for his employees and he did not have an exemption from such coverage from the Department. The records reflected that Dr. Correa’s last active workers’ compensation coverage was in 2004. Dr. Correa obtained workers’ compensation coverage on February 20, 2014. Approximately one month later, Ms. Green served a Request for Production of Business Records for Penalty Assessment Calculation on Dr. Correa. Dr. Correa produced the requested records. These records were given to Lynne Murcia, one of the Department’s penalty auditors, to calculate the penalty. Ms. Murcia determined that the appropriate classification code for Dr. Correa’s employees was 8832, which incorporates physicians and clerical workers. This code was 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 the National Council on Compensation Insurance, Inc., the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. Dr. Correa listed seven employees on the Florida Department of Revenue Unemployment Compensation Tax (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. Ms. Murcia reasonably relied upon the UCT-6 filings for the relevant time period to calculate Dr. Correa’s gross payroll in Florida. Using Dr. Correa’s payroll chart, the UCT reports, and the classification codes for each employee, Ms. Murcia calculated the penalty assessment for the three-year penalty period preceding the investigation. This three-year period is the allocated time for reviewing coverage for those who do not have the appropriate workers’ compensation coverage. On April 9, 2014, Ms. Murcia determined the penalty to be $4,287.12. However, upon receipt of additional information regarding a former employee of Dr. Correa, an Amended Order of Penalty Assessment of $3,898.77 was issued on July 28, 2014. Dr. Correa’s position is that his practice is a small “mom and pop” operation. He employs members of his family to run the business side of his practice. His daughter, Antonia, works as Dr. Correa’s “doctor’s assistant.” She works at the various nursing homes that Dr. Correa services. Antonia believed that the nursing homes’ liability insurance would cover her, and she was not subject to workers’ compensation coverage. However, she was, in fact, paid by Dr. Correa. Dr. Correa’s daughter-in-law, Valeria, works from her home computer completing the medical billing for her father-in- law. She has been working in this capacity for approximately 14- 16 years, and it never occurred to her that she needed workers’ compensation coverage. She was paid by Dr. Correa. Dr. Correa’s brother-in-law, Mr. Collado, runs all the errands for the practice. He may go to the bank, take care of car maintenance, buy office supplies or fix things, all in support of Dr. Correa’s practice. Mr. Collado receives regular pay checks from Dr. Correa. Dr. Correa testified that his wife is his office manager and has been since he opened the practice in 1978. Mrs. Correa works from their home, in a small home office. She does all the paper work related to the practice. Dr. Correa firmly believed that he did not require workers’ compensation coverage because some of his employees were “independent contractors” or never worked in his office, but at other locations (individual homes, nursing homes, or just outside the office). Dr. Correa believed his insurance agent who did not think Dr. Correa needed the workers’ compensation coverage. Based upon the testimony and exhibits, the amended penalty assessment in the amount of $3,898.77 is accurate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the Amended Order of Penalty Assessment, and assessing a penalty in the amount of $3,898.77. DONE AND ENTERED this 24th day of September, 2014, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of September, 2014.
The Issue The issues are whether Respondent failed to provide workers' compensation insurance for its employees, whether the "Stop-Work" Order was warranted, and, whether Petitioner correctly calculated the assessed penalty.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following facts were established by clear and convincing evidence: Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. Respondent, Harold's Plumbing, Inc., a Florida corporation, was engaged in business operations from January 23, 2005, through January 19, 2008. A Stop-Work Order was issued to Respondent on January 22, 2008, after Harold Whitfield advised Petitioner's investigator that Respondent did not have workers' compensation insurance coverage. Petitioner's Coverage and Compliance Automated System database confirmed the lack of coverage. The initial Order of Penalty Assessment was issued on January 22, 2008, and served on Respondent the next day. Based on additional documentation provided by Whitfield and a human resources out-sourcing organization, Gevity HR, which had provided some insurance coverage until it severed its business relationship with Respondent, the Order of Penalty Assessment was amended; the last amendment is dated October 13, 2008. The total penalty, $29,688.72, is accurate and reflects the result of a detailed assessment of Respondent's employee payroll records and application of the classification codes, published by the National Council on Compensation Insurance, Inc., and incorporated into Florida law in Florida Administrative Code Rule 69L-6.021.
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, enter a final order: Finding that Respondent, Harold's Plumbing, Inc., failed to secure the payment of workers' compensation for its employees, in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent in the amount of $29,668.72, which is equal to 1.5 times the evaded premium based on Petitioner's records and the applicable approved manual rate and classification code. DONE AND ENTERED this 17th day of December, 2008, in Tallahassee, Leon County, Florida. S JEFF B. CLARK 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 17th day of December, 2008. COPIES FURNISHED: Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Kristian E. Dunn, Esquire Justin H. Faulkner, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street, 6th Floor Tallahassee, Florida 32399-4229 Harold Whitfield 1125 5th Street Southwest Winter Haven, Florida 33880
The Issue Whether the Respondent committed the violations alleged in the Second Amended Order of Penalty Assessment filed May 11, 2009,1 and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of Section 440.107, Florida Statutes, that employers in Florida secure workers' compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. C.S.E Paving is a Florida corporation located in Delray Beach, Florida. Stephen Warden is the owner of C.S.E Paving, which engages in the business of paving. On November 24, 2008, Germaine Greer, a compliance investigator employed by the Department, observed two workers repairing and reinstalling concrete brick pavers at a Best Western Hotel. She learned that these workers were employed by C.S.E Paving. After her visit on November 24, 2008, the compliance investigator conducted research through the Coverage and Compliance Automated System database, which provides information on workers' compensation insurance coverage and exemptions. The investigator's research revealed that, during the three-year period from November 24, 2005, and November 24, 2008, C.S.E Paving had workers' compensation insurance coverage for its employees from July 25, 2006, through July 28, 2007; from July 16, 2007, through July 16, 2008; and from July 16, 2008, through August 6, 2008, when the policy was cancelled. Mr. Warden did not have an exemption from the requirement to have workers' compensation insurance coverage. Mr. Warden provided the compliance investigator with the payroll and other records requested in the business records request. Based on these records, the compliance investigator calculated the penalty to be imposed on C.S.E Paving for its failure to have workers' compensation insurance coverage during the approximately six-month period in 2005 and 2006 and the approximately four-month period in 2008. The penalty assessed in the Second Amended Order of Penalty Assessment was $13,487.64, which assessment superseded the $21,290.11 penalty assessed in the Amended Order of Penalty Assessment dated December 22, 2008. The compliance investigator looked to the NCCI SCOPES Basic Manual of Classifications ("SCOPES Manual") for classification codes attributable to the workplace operations of the persons working for C.S.E Paving. The classification code assigned by the compliance investigator to the workmen employed by C.S.E Paving between November 24, 2005, and November 24, 2006, who engaged in paving activities was Code 5221. According to the SCOPES Manual and to Florida Administrative Code Rule 69L-6.021(1)(w), Code 5221 is a code applicable to the construction industry and covers "Concrete or Cement Work Floors, Driveways, Yards, and Sidewalks & Drivers." The approved NCCI Manual rate in Florida effective January 1, 2006, for Code 5221 was $10.37 per $100.00 of payroll; and the approved NCCI Manual rate in Florida effective January 1, 2008, for Code 5221 was $6.97 per $100.00 of payroll. The classification code found in the SCOPES Manual assigned by the compliance investigators to the clerical workers employed by C.S.E Paving between November 24, 2005, and November 24, 2006, was Code 8810. According to the SCOPES Manual, Code 8810 covers "Clerical Office Employees." The approved NCCI Manual rate in Florida effective January 1, 2006, for Code 8810 was $.58 per $100.00 of payroll; and the approved NCCI Manual rate in Florida effective January 1, 2008, for Code 8810 was $.37 per $100.00 of payroll. The classification code assigned by the compliance investigator to Stephen Warden, the owner of C.S.E Paving, was Code 5606. According to the SCOPES Manual, Code 5606 covers "Contractor - Project Manager, Construction Executive, Construction Manager or Construction Superintendent." The approved NCCI Manual rate in Florida effective January 1, 2006, for Code 5606 was $3.84 per $100.00 of payroll; and the approved NCCI Manual rate in Florida effective January 1, 2008, for Code 5606 was $2.74 per $100.00 of payroll. The compliance investigator calculated the total penalty attributable to C.S.E Paving's failure to provide workers' compensation insurance coverage for its employees during the covered time periods. She obtained the names of each of the individuals included in her calculations and the amount of the gross payroll for each individual from the payroll information provided by Mr. Warden in response to the business records request. The compliance investigator calculated the penalty as follows: She listed C.S.E Paving's employees on the Penalty Worksheet; assigned each employee a classification code based on the definitions of workplace operations that most closely described the work they performed for C.S.E Paving; set out the dates during which C.S.E Paving did not provide workers' compensation insurance coverage; entered the annual or pro-rated gross payroll for each employee during the period of non- compliance; divided the gross payroll for each employee by 100; set out the approved manual rate for each employee during the period of non-compliance in accordance with his or her classification code; determined the premium that C.S.E Paving would have paid for workers' compensation insurance coverage for each employee during the period of non-compliance by multiplying the approved manual rate and one one-hundredth of the gross payroll for each employee; calculated the penalty attributable to each employee during the period of non-compliance by multiplying the premium for each employee by 1.5; and, finally, calculated the total penalty owed by C.S.E Paving attributable to its failure to secure workers' compensation insurance coverage for its employees during the time periods at issue.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding that C.S.E Paving of South Florida Inc., failed to secure workers' compensation insurance coverage for its employees in violation of Section 440.38(1), Florida Statutes, from January 1, 2006, through July 25, 2006, and from August 6, 2008, through November 24, 2008, and imposing a penalty in the amount of $13,487.64 for the failure to provide the required workers' compensation insurance coverage. DONE AND ENTERED this 28th day of September, 2009, in Tallahassee, Leon County, Florida. PATRICIA M. HART 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 September, 2009.
