The Issue The issues are whether Respondent violated Chapter 440, Florida Statutes (2009), by failing to secure the payment of workers' compensation, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that Florida employers secure the payment of workers' compensation for the benefit of their employees. See § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation providing pharmacy services. Respondent has business locations at 842 West Plymouth Avenue, Deland, Florida, and 112 East First Avenue, Pierson, Florida. Respondent's Pierson business site sells a small amount of food like bubble gum and other sundries. Activities at the Pierson location include filling prescriptions, compounding and blending drugs, and dispensing drugs or medicine to walk-in customers and patients. The patients are referred from a health care clinic known as Northeast Florida Health Services (NEFHS). The patients are federally qualified as indigent pursuant to a federal poverty calculation. Respondent's Deland location deals solely with prescription drug transactions to indigent patients who are referred by NEFHS. The Deland business site is very small and has no walk-in customers or food or other sundries for sale. At the end of the month, Respondent sends a bill to NEFHS for the prescriptions dispensed by Respondent at both locations. NEFHS than reimburses Respondent for its services. Respondent pays its employees at both locations out of a single checking account. Only one tax identification number is used for both business locations. On October 27, 2009, Hector Beauchamp, one of Petitioner's workers' compensation compliance investigators, received a referral, indicating that Respondent was operating without workers' compensation insurance coverage for its employees. After receiving the referral, Mr. Beauchamp used the website of the Department of State, Division of Corporations, to obtain Respondent's federal employer identification number. The Department of State website showed that Respondent became Pierson Community Pharmacy, Inc., on March 3, 2005. The website also indicated that Respondent had two corporate officers, John Eidt and Hanan Francis. Next, Mr. Beauchamp contacted Samantha Nixon, one of Petitioner’s penalty calculators, to research Respondent's unemployment compensation tax information on the Department of Revenue's website. Ms. Nixon's research revealed that Respondent employed in excess of four employees for each quarter in the past three years. Mr. Beauchamp also consulted Petitioner's Coverage and Compliance Automated System (CCAS) database. The CCAS database lists the workers' compensation insurance policy information for Florida employers together with any workers' compensation exemptions for corporate officers. The CCAS database accurately revealed that Respondent had no workers' compensation insurance policy in place for its employees and no workers' compensation exemptions for either Mr. Eidt or Ms. Francis as corporate officers. This was true from October 29, 2006, through October 28, 2009. Additionally, the CCAS database did not reveal any utilization of employee leasing by Respondent. Mr. Beauchamp also researched the National Council on Compensation Insurance, Inc. (NCCI) on-line database. Using Respondent's name and federal employer identification number, the database showed no record of a Florida workers' compensation insurance policy for Respondent. On October 28, 2009, Mr. Beauchamp visited both of Respondent's business locations. At the Pierson location, Mr. Beauchamp observed five individuals working behind a Plexiglas partition filling prescriptions. Mr. Beauchamp spoke with Mr. and Mrs. Francis. They confirmed that Respondent did not have workers' compensation insurance in place. Mr. Beauchamp then issued and served a Stop-Work Order. He also issued and served a records request. On October 29, 2010, Respondent provided Petitioner with the following records: (a) corporate tax records for 2007 and 2008; (b) a workers' compensation insurance application submitted after the issuance of the Stop-Work Order; and (c) payroll summaries for October 2006 through October 2009. The records confirmed that Respondent had employed more than four employees for the prior three years. On October 30, 2009, Petitioner issued and served the Amended Order of Penalty Assessment. That order was followed by the Second Amended Order of Penalty Assessment on March 15, 2010. Ms. Nixon calculated the gross payroll for Respondent's employees for the relevant time period. The gross payroll amounts for Ms. Francis from January 1, 2008, through December 31, 2008, and April 1, 2009, through June 30, 2009, were limited to the average weekly wage in effect at the time the Stop-Work Order was issued, multiplied by 1.5 for those periods pursuant to Florida Administrative Code Rule 69L- 6.035(2). As a corporate officer, Ms. Francis' actual earnings were in excess of these amounts. However, Florida Administrative Code Rule 69L-6.035(2) limits the amount of a corporate officer's income upon which workers' compensation penalties may be assessed to 1.5 times the average weekly wage in effect at the time a Stop-Work Order is issued or actual earnings, whichever is less. Using the classification codes in the NCCI Scopes® Manual, Petitioner accurately assigned the occupation classification code 8045, which corresponds to "Store: Drug Retail." Classification code 8045 is "applicable to store locations where the employer's books of accounts reflect at least 40 percent gross receipts in prescription sales and less than 50 percent gross receipts in the service of food." Prescription sales intended for the patients of health care facilities are included even though the facility is billed instead of the individual patient. Ms. Nixon then divided the payroll for each year by 100 and multiplied that figure by the approved manual rates adopted by the Florida Office of Insurance Regulation for 2006, 2007, 2008, and 2009 for classification code 8045. That product was then multiplied by 1.5 to find the penalty for the period for the three-year period. The total penalty is $13,996.60.
Recommendation Based on the foregoing Findings of Facts and Conclusion of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop- Work Order and Second Amended order of Penalty Assessment in the amount of $13,996.60. DONE AND ENTERED this 26th day of April, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 2010. COPIES FURNISHED: John C. Eidt Pierson Community Pharmacy Inc. 112 East 1st Avenue Pierson, Florida 32180 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CRP, FP Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue to be determined is whether Respondent complied with coverage requirements of the workers' compensation law, Chapter 440, Florida Statutes. A determination of whether Respondent functioned as an employer is a preliminary issue to be resolved.
Findings Of Fact Petitioner is the agency of state government currently responsible for enforcing the requirement of Section 440.107, Florida Statutes, that employers secure the payment of compensation for their employees. Respondent works in the construction industry as a house framer. Petitioner's investigator received a report of a violation of the workers' compensation law on May 21, 2002. When the investigator arrived at the construction site located at 8225 Southwest 103rd Street Road, Ocala, Florida, he observed four men, including Respondent, installing trusses at a residence under construction. Respondent was identified by the other men as the person for whom they were working on the job. All four men told the investigator that they were employees of Dove Enterprises (DOVE). Upon further investigation, the owner of DOVE and also the general contractor of record, Steven Slocumb, stated to the investigator that DOVE operated as the subcontractor for Triple Crown Homes. Slocumb further stated that DOVE, through Slocumb, in turn subcontracted the work to Respondent on a piece rate or square foot basis. Respondent, according to Slocumb, in turn hired the other three men. When Petitioner's investigator returned to the construction site, the four men were gone. None of the four men had an exemption from coverage requirements of the workers' compensation law and none of them had workers' compensation insurance. Consequently, the investigator determined that Respondent was an employer both of himself and the three other workers and that all four were unprotected by workers' compensation insurance. On June 27, 2002, the investigator issued the Stop Work and Penalty Assessment Order at issue in this proceeding. The Order levied the minimum penalty under Section 440.107, Florida Statutes, of $1,100.00. Slocumb and Respondent appeared at the final hearing. Respondent's position was that he and the other three men were employees of DOVE. None of the men produced documentation of such an employment relationship. Rather, documentation presented shows that DOVE paid Respondent for equipment rental. Additionally, payments to Respondent from DOVE for the jobs in question did not include adjustments for employment taxes that would have applied had Respondent been an employee. Respondent's testimony is not credited. Slocumb confirmed the facts determined by the investigator. Slocumb's testimony was candid, direct and creditable.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order confirming the Stop Work and Penalty Assessment Order at issue in this proceeding. DONE AND ENTERED this 8th day of July, 2003, in Tallahassee, Leon County, Florida. S DON W. DAVIS 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 8th day of July, 2003. COPIES FURNISHED: Lawrence Simon 1683 Southeast 160th Terrace Oklawaha, Florida 33379 David C. Hawkins, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Lower Level 11 Tallahassee, Florida 32399-0300
The Issue Whether the Department of Financial Services, Division of Workers' Compensation, correctly assessed and collected an assessment of penalty against Respondent.
Findings Of Fact On March 25, 2008, the Agency's investigator, Torry McClellan, conducted a compliance check at 6472 Tracy Lane, Tallahassee, Florida, to verify compliance with the workers' compensation statutes. At the worksite, Mr. McClellan observed three men carrying out carpentry work. Mr. McClellan interviewed John Harrell and Bradley Sheffield, II, and requested proof of workers' compensation coverage. John Harrell did not have proof of a current valid election to be exempt from workers' compensation. The Agency's Coverage and Compliance Automated System (CCAS) lists active workers' compensation policies and exemptions throughout Florida. Utilizing CCAS, Mr. McClellan was unable to locate a current valid election to be exempt from the requirement of securing the payment of workers' compensation for John Harrell. John Harrell's previous exemption had expired in 2003. Mr. McClellan was also unable to locate proof of either John Harrell or Respondent LLC securing the payment of workers' compensation through the purchase of an insurance policy or by any other means. Mr. McClellan testified that John Harrell admitted, and Horace Bradley Sheffield, Sr., confirmed, to Mr. McClellan that John Harrell was a subcontractor of Respondent Horace Bradley Sheffield Builders LLC, on March 25, 2008. Mr. Sheffield Sr.'s statement is accepted in evidence as an admission by Respondent LLC via its corporate principal and agent. Mr. Harrell's alleged statement is not even supplemental hearsay, pursuant to Section 120.57 (1) (c), Florida Statutes. On March 25, 2008, Mr. McClellan issued and served a Stop-Work Order and Order of Penalty Assessment on Respondent through Horace Bradley Sheffield, Jr., for failure of Respondent to meet the requirements of Chapter 440, Florida Statutes, and the Florida Insurance Code. Thereby, the LLC was ordered to cease all business operations, and a $1,000.00 penalty was assessed against the LLC, pursuant to Section 440.107(7)(d)1., Florida Statutes. On March 25, 2008, Mr. McClellan also issued and served on Respondent a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation. Respondent complied with the Department's request and submitted the required records. Utilizing the SCOPES Manual, published by the National Council of Compensation Insurance and adopted by Florida Administrative Code Rule 69L-6.021 as guidance, Mr. McClellan determined that carpentry is within the construction industry and assigned Occupation Code 5651 to Respondent's activities. Based on Respondent's business records, Mr. McClellan issued an Amended Order of Penalty Assessment, and served it on Respondent LLC through Horace Bradley Sheffield, Sr., on April 11, 2008, in the amount of $1,000.00, which is an amount greater than the calculated amount due per Respondent LLC's payroll. One thousand dollars is the statutory minimum. At some point, Respondent paid the $1,000.00, in order to get the Stop-Work Order lifted but did not withdraw the request for hearing.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services that affirms, approves, and adopts the Stop-Work Order and Second Amended Order of Penalty Assessment at $1,000.00, and which permits the Agency's retention of the $1,000.00 penalty. DONE AND ENTERED this 28th day of August, 2008, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 August, 2008. COPIES FURNISHED: Douglas Dolan, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Horace Sheffield Horace B. Sheffield Builders, LLC 4564 Ambervalley Drive Tallahassee, Florida 32312 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
The Issue The issues in this case are whether Respondent, Customs Logistics Services, Inc., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency charged with enforcing the requirement in chapter 440 that employers in Florida secure workers' compensation coverage for their employees. At all times relevant to this proceeding, Respondent was a corporation registered to do business in Florida. Respondent is a family-owned-and-operated customs brokerage service with its principal office located at 6940 Northwest 12th Street, Miami, Florida 33126. At the time of the inspection giving rise to this proceeding, Respondent employed seven or eight employees.2/ The Compliance Inspection On September 29, 2014, Petitioner's compliance inspector, Hector Fluriach, conducted an onsite inspection at Respondent's principal office to determine whether Respondent was in compliance with the workers' compensation coverage requirements established in chapter 440. At that time, Respondent's co-owners, Astrid Escalona and Carlos Henoa, told Fluriach that Respondent employed six employees and two corporate officers, and also paid two family members who did not work at the principal office. Upon inquiry, Escalona and Henoa informed Fluriach that Respondent did not have workers' compensation insurance coverage for its employees. Using Petitioner's Coverage and Compliance Automated System ("CCAS") and the National Council for Compensation Insurance ("NCCI") insurance coverage verification system, Fluriach confirmed that Respondent had not obtained workers' compensation insurance coverage for its employees, and that it was not in compliance with chapter 440 during certain periods within the two years preceding the inspection. Under the NCCI basic occupational classification system and Scopes Manual, six of Respondent's employees are classified as clerical (Code 8810), and one is classified as a driver (Code 7380). None of Respondent's employees is classified as employed within the construction industry. As a private entity employing four or more employees in a non-construction industry occupation, Respondent was required under chapter 440 to provide workers' compensation coverage for its employees. Respondent's corporate officers were eligible under section 440.05 to elect to be exempt from the workers' compensation coverage requirements of chapter 440; however, none had elected to be exempt. Fluriach issued Stop-Work Order No. 14-329-D5 ("Stop- Work Order"), personally served it on Respondent, and explained it to Escalona. The Stop-Work Order included an Order of Penalty Assessment, ordering assessment of a penalty against Respondent in an amount equal to two times the amount Respondent would have paid in workers' compensation coverage premiums when applying the approved manual rates to Respondent's payroll during the periods for which it had failed to secure workers' compensation coverage during the preceding two years (for convenience, hereafter referred to as the "look-back period"). Fluriach also served a business records request, requesting Respondent to provide specified business records3/ for Petitioner's use in determining the penalty. In a series of submittals, Respondent provided the requested business records to Petitioner. The evidence showed that during the two-year look- back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, and none of its corporate officers were exempt from the workers' compensation coverage requirement. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Petitioner's Computation of Penalty Amount To calculate the applicable penalty, Petitioner must determine, from a review of the employer's business records, the employer's gross payroll for the two-year look-back period. For days during the look-back period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the look-back period for purposes of calculating the applicable penalty commenced on September 30, 2012, and ended on September 29, 2014, the day on which the compliance inspection was conducted. Respondent's business records revealed that Respondent had fewer than four employees between January 1 and March 31, 2013, so Respondent was not required to have workers' compensation coverage for that period. Thus, Petitioner did not assess a penalty against Respondent for that period. For the rest of the look-back period, Respondent employed four or more employees, so was required to obtain workers' compensation coverage for those employees for that portion of the period. Respondent provided business records sufficient for Petitioner to determine Respondent's gross payroll for all but September 30, 2012. For that day, Petitioner imputed Respondent's gross payroll using Florida's statewide average weekly wage. On the basis of Respondent's business records submittals, Petitioner's auditor, Eric Ruzzo, recalculated the penalty to be assessed against Respondent. Petitioner issued an Amended Order of Penalty Assessment on October 17, 2014, imposing a total penalty of $5,617.04. On November 7, 2014, following receipt of additional records, Petitioner issued a Second Amended Order of Penalty Assessment, reducing the penalty to $3,982.52. Finally, after receiving more records, Petitioner issued a Third Amended Order of Penalty Assessment on January 12, 2015, further reducing the penalty to $3,205.70. Each of these penalty assessments was served on Respondent. Petitioner seeks to impose a $3,205.70 penalty against Respondent in this proceeding. In calculating the penalty, Ruzzo examined three-month (i.e., quarterly) periods within the two-year look-back period. Ruzzo identified the occupational class code applicable to each of Respondent's employees. As stated above, all but one of Respondent's employees were classified as clerical, and one of Respondent's employees was classified as a driver. For each employee, Ruzzo determined the gross payroll paid to that employee for the specific quarter in which Respondent was non-compliant during the look-back period, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupational class code. This calculation yielded the workers' compensation coverage premium for that specific employee for the specific quarter for which Respondent was non- compliant during the look-back period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. As previously noted, Respondent did not provide gross payroll records covering September 30, 2012; thus, for that day, Ruzzo imputed the gross payroll for each of Respondent's employees using the statewide average weekly wage as defined in section 440.12(2)4/ multiplied by two. Ruzzo then performed the same computations to yield the penalty amount to be imposed for Respondent's failure to provide workers' compensation on September 30, 2012. Ruzzo then added each penalty amount determined for each employee using actual gross payroll and imputed payroll, to yield the total penalty amount of $5,286.70. Because Respondent had not previously been issued a stop-work order, pursuant to section 440.107(7)(d)1., Petitioner applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $2,081.00. This was subtracted from the calculated penalty of $5,286.70, yielding a total penalty of $3,205.70. Respondent's Defense At the final hearing, Escalona testified that she and the other co-owners of Respondent always have attempted to fully comply with every law applicable to Respondent's business, and have never had compliance problems. She testified that neither she nor the other co-owners of Respondent realized that Respondent was required to have workers' compensation coverage for its employees, and they did not intentionally violate the law. Petitioner apparently mailed a memorandum regarding verifying workers' compensation coverage requirements to businesses in the area before it conducted compliance inspections. The memorandum was dated October 8, 2014, and Escalona testified Respondent received it on October 13, 2014, approximately two weeks after the compliance inspection that Fluriach conducted. Escalona asserted that had Respondent received the memorandum before the compliance inspection was conducted, she would have called Petitioner to determine if Respondent needed to obtain workers' compensation coverage, would have asked how to obtain it, and would have obtained coverage for its employees and exemptions for its corporate officers. Escalona testified that the $3,205.70 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact Petitioner has shown, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the Stop-Work Order, by failing to secure workers' compensation coverage for its employees. Petitioner has shown, by clear and convincing evidence, that the $3,205.70 penalty proposed to be assessed against Respondent pursuant to the Third Amended Penalty Assessment is the correct amount of the penalty to be assessed in this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent, Customs Logistics Services, Inc., violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $3,205.70. DONE AND ENTERED this 11th day of August, 2015, in Tallahassee, Leon County, Florida S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2015.
The Issue The issue in this case is whether MS Dockside Marina, 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 Second 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 the statutory requirement that employers secure workers' compensation coverage for the benefit of their employees. Respondent is a Florida limited liability company formed on May 13, 2010. The officers of Respondent are Angela and Eric Pfeufer. At all pertinent times, Respondent has been active, licensed to do business, and engaged in the business of a boat storage and boat repair marina located on the Carrabelle River at 292 Graham Drive, Carrabelle, Florida 32322. The Carrabelle River is one of the navigable waters of the United States. The boat repair services offered by Respondent include boat painting, sandblasting, structural repairs, driveline generator repairs, fiberglass repair, welding, pressure washing, and engine work. On August 5, 2015, Department investigator Donald Hurst visited Respondent’s marina in connection with a workers’ compensation compliance investigation of Respondent. On that date, Respondent had 10 employees, but did not have a workers’ compensation policy or employee leasing policy, and there were no active exemptions for Respondent’s officers. On the day of Investigator Hurst’s visit, Respondent’s employees were Angela Pfeufer, Eric Pfeufer, Shiloh Spivey, Austin Pfeufer, Luke Steinle, Travis Clayton, Richard Sand, Vernon Thompson, Gavin Pfeufer, and Jesse Carrot. Angela and Eric Pfeufer were Respondent’s managing members. The categories and pay rate of Respondent’s other employees were as follows: secretary Shiloh Spivey at $14 per hour; maintenance man and lift operator Austin Pfeufer at $15 per hour; boat lift operator Luke Steinle at $17.50 per hour; boat painter and fiberglass worker Richard Sand at $17 per hour; boat mechanic and boatyard worker Travis Clayton at $15 per hour; painter Gavin Pfeufer at $12 per hour; painter and fiberglass worker Jesse Carroll at $12 per hour; and maintenance man and boat-lift operator Vernon Thompson at $12 per hour. Because Respondent had no workers’ compensation insurance policy in place, on August 5, 2015, Investigator Hurst served the Stop-Work Order and a business records request on Respondent. When they were served, Investigator Hurst explained to Respondent’s officers the effect and purpose of the documents and how Respondent could come into compliance. Respondent came into compliance on August 6, 2015, by making a $1,000 down payment, signing a conditional release, reducing its workforce, and obtaining exemptions for its two managing members. Respondent also purchased a Zenith Insurance Company workers’ compensation insurance policy on August 15, 2015. Respondent timely responded to the Department’s business records request by providing the Department with financial documentation, payroll records, and business records. After receiving Respondent’s records, the Department assigned Department penalty auditor Lynne Murcia the task of reviewing the records and calculating the penalty to be assessed against Respondent. Based on the information provided to Investigator Hurst at the job site by Respondent’s managing member Angela Pfeufer, Investigator Hurst’s observations at the job site on August 5, 2015, and the managing members’ exemptions, Penalty Auditor Murcia assigned classification codes 8810 and 6836 in calculating a penalty. 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 codes are listed in the Scopes® Manual. Classification code 8810 applies to clerical office employees. Classification code 6836 applies to “waterfront operations including the operation of boat docks, storage facilities, repair shops . . . repair of boats and engines . . . and all dockside employees.” The Department determined the gross payroll for Respondent’s employees in accordance with the procedures required by section 440.107(7)(d)1., and Florida Administrative Code Rule 69L-6.027(1), and the gross payroll was used in calculating the penalty. Penalty auditor Murcia then applied the corresponding approved manual rates for classification codes 8810 and 6836 for the related periods of non-compliance and utilized the methodology specified in section 440.107(7)(d)1. and rule 69L- 6.027 to determine the final penalty. Once the penalty was calculated, on September 11, 2015, the Department served the Amended Order of Penalty Assessment on Respondent, assessing a penalty of $34,718.00. After that, Respondent provided the Department with proof that it had obtained a Zenith Insurance Company workers’ compensation insurance policy with a paid premium totaling $1,678.00. In accordance with section 440.107(7)(d)1., the Department reduced Respondent’s penalty by applying a $1,678.00 credit for a paid premium against the previously calculated penalty, resulting in the issuance of the 2nd Amended Order of Penalty Assessment totaling $33,040.00, served on Respondent by electronic mail on January 8, 2016.
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 MS Dockside Marina, LLC. DONE AND ENTERED this 3rd day of November, 2016, 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 3rd day of November, 2016.
The Issue Whether Respondent, Randall Lee Southerland, conducted operations in the construction industry in the State of Florida without obtaining workers’ compensation coverage, meeting the requirements of Chapter 440, Florida Statutes (2007),1 in violation of Subsection 440.107(2), Florida Statutes. If so, what penalty should be assessed by Petitioner, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes (2007), and Florida Administrative Code Chapter 69L.
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. Respondent is a sole proprietor, allegedly engaged in the construction industry, providing tile and grouting services and carpet removal to private residences in Florida. On November 30, 2007, Eric Duncan and Alison Pasternak, both of whom are workers’ compensation investigators for Petitioner, were conducting random compliance checks in Lee County. Investigator Duncan noticed two men working outside of a residence in Cape Coral, one using a power saw and the other mixing a substance in a bucket. Investigators Duncan and Pasternak decided to conduct a compliance check of these two men to ensure they were workers’ compensation coverage compliant. The two men identified themselves as Randall Lee Southerland and Tim Weaver. Weaver produced his Exemption Certificate for workers’ compensation coverage. No further action was taken in regards to that investigation. Southerland was observed mixing the substance, which was later determined to be tiling grout. Southerland did not have a workers’ compensation insurance policy, a coverage exemption certificate, nor was he employed via a leasing agency. After consulting with his supervisor, Investigator Duncan issued SWO No. 07-364-D7 to Respondent along with a Business Records Request for the time-period of December 1, 2004, through November 30, 2007. Respondent provided records to Petitioner shortly thereafter, and, subsequently, a penalty assessment was calculated. The calculations of Respondent’s gross payroll was necessary since it was alleged that he worked in the construction field of tiling. Respondent disputes this classification and argues that grouting is separate from the installation of tiles and is not a classification within the construction field. Therefore, neither a workers’ compensation insurance policy, nor an exception is required. The National Counsel on Compensation Insurance (NCCI) established a codification of construction employment activities; all of which have been adopted by Petitioner and are commonly referred to as “class codes.” The NCCI class code for tiling is “5348.” It is undisputed that Respondent was doing the grout- work for the newly installed tiles. It is further undisputed that the definition of tiling, per the NCCI class code “5348,” included the finishing, setting, and installation of tiles. It was also established that loose tiles, merely laying on the floor, are not finished, nor set, until the grout is laid. Pursuant to Section 440.107, Florida Statutes, the calculation of the penalty was completed on a penalty calculation worksheet. The worksheet was completed by examining the records received from Respondent and calculating the gross payroll that was paid to him. The penalty was later amended to reflect additional records provided through discovery, the evidence of the payment for the November 30, 2007, job consisting of a $500.00 check from the real estate agent. The Amended Order assessed a penalty of $1,168.68, which is the applicable amount of the premium evaded and includes the 50 percent penalty for the time period of December 1, 2004, through November 30, 2007.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order: Finding that Respondent failed to secure the payment of workers’ compensation coverage for the sole proprietor, Randall Lee Southerland, in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent, in the amount of $1,168.68, which is equal to 1.5 times the evaded premium based on the payroll records provided by Respondent and the applicable approved manual rate and classification code. DONE AND ENTERED this 3rd day of June, 2008, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of June, 2008.
The Issue Whether Respondent, Gulf Coast Site Prep, Inc., failed to comply with the coverage requirements of the Workers’ Compensation Law, chapter 440, Florida Statutes, by not obtaining workers’ compensation insurance for its employees, and, if so, what penalty should be assessed against Respondent pursuant to section 440.107, Florida Statutes (2014).1/
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of the Workers’ Compensation Law that employers secure the payment of workers’ compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Respondent, Gulf Coast Site Prep., Inc., is a Florida for-profit corporation organized on March 3, 2008. Respondent’s registered business address is 952 TR Miller Road, Defuniak Springs, Florida. Ashley Adams is Respondent’s President and Registered Agent. On March 27, 2015, the Department’s investigator-in- training, Jill Scogland, and lead investigator, Sharon Kelson, conducted a random workers’ compensation compliance check at Lot 34 in the Driftwood Estates residential subdivision in Santa Rosa Beach, Florida. Ms. Scogland observed two men on site. David Wayne Gibson was operating a front-end loader spreading dirt on site. Colby Smith was shoveling dirt on site. While Ms. Scogland was inspecting the site, a third man, Ashley Adams, arrived driving a dump truck with a load of dirt. Mr. Adams identified himself as the owner of Gulf Coast, and stated that he had an exemption from the requirement for workers’ compensation insurance and that he thought Mr. Gibson did as well. Mr. Adams advised Ms. Scogland that he hired both Mr. Gibson and Mr. Smith to work at the site.2/ At hearing, Respondent challenged the evidence supporting a finding that Respondent hired Mr. Gibson.3/ Specifically, Respondent argues that Ms. Scogland’s testimony that Mr. Adams told her he hired Mr. Gibson is unreliable because Ms. Scogland did not include that information in her field notes. Respondent claims that Ms. Scogland’s status as investigator-in-training on the date of the inspection is indicative of her unreliability. To the contrary, Ms. Scogland’s testimony regarding both the persons and events on the date of the inspection was clear and unequivocal. While Ms. Scogland admitted her field notes were not as detailed on the date in question as they are for more recent inspections, she was confident that her investigation of the facts was thorough. The fact that Ms. Scogland did not write down what Mr. Adams said does not render her testimony unreliable. The undersigned finds Ms. Scogland’s testimony to be clear and convincing. Ms. Scogland reviewed the Department of State, Division of Corporations’ online information and identified Mr. Gibson as President and Registered Agent of David Wayne Gibson Tractor Service, Inc. According to Ms. Scogland, the online records indicated the corporation had been administratively dissolved in September 2013. Ms. Scogland next accessed the Department’s Coverage and Compliance Automated System (CCAS) and determined that Mr. Gibson had obtained a workers’ compensation coverage exemption for himself, but the exemption had expired on February 15, 2015. The information contained in CCAS is information on new policies, cancellations, etc., reported to the Department by insurance agencies as required by administrative rule. Next, Ms. Scogland accessed the Division of Corporations’ website, verified Gulf Coast as an active corporation, and identified Mr. Adams as the sole officer of Gulf Coast. Ms. Scogland then accessed CCAS and determined that, although Gulf Coast did not have workers’ compensation coverage, Mr. Adams had an active exemption effective from February 12, 2014 through February 12, 2016. Mr. Adams had a prior exemption that expired on April 14, 2013, but had no valid exemption in place between April 14, 2013 and February 12, 2014. After contacting her supervisor, Michelle Lloyd, Ms. Scogland served Mr. Adams, on behalf of Gulf Coast, with a site-specific Stop-Work Order for failure to ensure workers’ compensation coverage for its employees. Ms. Scogland also served Mr. Adams with a Request for Production of Business Records for Penalty Assessment Calculation. The request was for Gulf Coast’s payroll, account, and disbursement records, as well as records identifying its subcontractors, payments thereto, and workers’ compensation coverage thereof, from March 28, 2013 through March 27, 2015 (the penalty period).4/ Mr. Adams did not provide any records to the Department in response to the records request. The Department’s penalty auditor, Eunika Jackson, was assigned to calculate the penalty to be assessed against Gulf Coast for failure to secure workers’ compensation insurance during the penalty period. The penalty to be assessed against an employer for failure to secure workers’ compensation coverage is two times the amount the employer would have paid in workers’ compensation insurance premiums when applying approved manual rates to the employer’s payroll during the penalty period. § 440.107(7)(d), Fla. Stat. Ms. Jackson consulted the Scopes Manual, which is published by the National Council on Compensation Insurance (NCCI), and identified class code 6217--Excavation and Drivers-- as the appropriate construction class code for the work being performed at the worksite. Respondent contests the assignment of class code 6217 to Mr. Adams, who was driving a dump truck and delivering a load of dirt to the site. Respondent admits that Mr. Gibson’s operation of the front-end loader was properly classified as Excavation and Drivers. NCCI Scopes Manual provides the following with regard to classification code 6217: Includes burrowing, filling or backfilling. * * * Code 6217 is applied to specialist contractors engaged in general excavation including ditch digging, burrowing, filling or backfilling provided such operations are not otherwise classified in the manual. The operations involve the removal of earth, small boulders and rocks by power shovels, trench diggers or bulldozers and piling it at the jobsite for backfill. The material may also be removed by dump trucks for fill in some other area. Code 6217 includes excavation in connection with building foundations, swimming pools, landscape gardening and waterproofing operations. * * * This classification also is applied to specialist contractors engaged in grading land and landfilling, provided these operations are not otherwise classified in this manual. This classification includes ditch digging, burrowing, filling or backfilling, and operations such as scraping, cutting, piling or pushing the earth to rearrange the terrain. These operations utilize equipment such as bulldozers, motor graders and carryalls. [emphasis supplied]. Mr. Adams’ operation of the dump truck falls squarely within the definition of Excavation and Drivers. The material in the dump truck was fill for the site under excavation, a purpose which is directly addressed in the manual under code 6217. Under Respondent’s interpretation, fill removed from the site by a dump truck would be an excavation activity, but would no longer be excavation when the dump truck arrived at another site (or at another location on the same site) with the fill. That interpretation is illogical. No evidence was introduced to support a finding that typical operation of a dump truck in preconstruction was classified by a different code in the Scopes Manual. It is found that Ms. Jackson properly applied the Scopes Manual in assigning code 6217 to the work being performed by Mr. Adams on the site. Having no payroll records from Gulf Coast, Ms. Jackson had to impute the statewide average weekly wage as Respondent’s payroll for Mr. Adams and his subcontractor, Mr. Gibson. The average weekly wages were calculated based on the Workers’ Compensation and Employers Liability approved rate manual also published by NCCI and adopted by the Department by administrative rule. Ms. Jackson calculated a penalty of two times the workers’ compensation insurance premiums that would have applied to the purchase of insurance for Mr. Adams and Mr. Gibson during periods of non-compliance during the penalty. The period of non-compliance for Mr. Adams was April 15, 2013 to February 11, 2014, during which time his exemption had lapsed. The period of non-compliance for Mr. Gibson was February 16, 2015 to March 27, 2015, during which his exemption had expired. § 440.107(7)(e), Fla. Stat. Utilizing the penalty calculation worksheet adopted by Florida Administrative Code Rule 69L-6.027, Ms. Scogland calculated a penalty of $12,181.42. On May 20, 2015, the Department issued an Amended Order of Penalty Assessment against Gulf Coast in the amount of $12,181.42. The Department correctly calculated the penalty based on the statutory formulas and adopted rules governing workers’ compensation insurance.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order upholding the Stop-Work Order and Amended Penalty Assessment against Respondent, Gulf Coast Site Prep., Inc., for its failure to secure and maintain required workers’ compensation insurance for its employees. DONE AND ENTERED this 14th day of January, 2016, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of January, 2016.
The Issue The issues to be resolved in this proceeding concern whether the Respondent was an employer in the State of Florida, required to secure the payment of workers' compensation insurance coverage pursuant to the appropriate provisions of Chapter 440, Florida Statutes (2007); whether the Respondent secured such coverage, if required; and whether the proposed penalty, if any, is warranted.
Findings Of Fact The Department is an agency of the State of Florida charged with enforcing the various requirements of Chapter 440 Florida Statutes. This includes the requirement, in Section 440.107(3) Florida Statutes, that employers in the State of Florida, as defined by statute, secure the payment of workers' compensation coverage for all employees, as provided in Sections 440.10(1)(a), 440.38(1), and 440.107(2), Florida Statutes (2007). The Respondent is a closely held Florida corporation with a principal business address of record at 1815 West Detroit Boulevard, Pensacola, Florida 32534. The president of the Respondent Corporation is Richard Longoria. On October 29, 2008, an investigator for the Department, Michelle Newcomer, observed construction work being conducted at a site at 4111 Baisden Road in Pensacola, Florida. Ms. Newcomer stopped at that address and encountered Richard Longoria, the Respondent's president. In the course of their conversation, Mr. Longoria told Investigator Newcomer that he was sanding and caulking window frames in preparation for painting them. He also was engaged in painting shutters at that address. The so-called "Scopes Manual" is a manual published by the National Counsel on Compensation Insurance, Inc. (NCCI). In that manual are certain codes, related to the construction industry and trades considered to be within that industry. Painting is considered to be "construction" under the relevant codes in this manual. The manual, with its codes and classifications is relied upon in the insurance industry and has been adopted by the State of Florida, and the Department, in Florida Administrative Code Rule 69L-6.021. The preparation of surfaces for painting is contemplated as being included in the construction trade or industry in that manual, under the painting classification code. Mr. Longoria performs a significant amount of painting, but also does general construction, wallpapering, general maintenance and carpentry work. He has three different occupational licenses: maintenance, carpentry and painting/wallpapering. The trades or types of work Mr. Longoria had disclosed in the course of obtaining his construction industry exemption, which was effective April 13, 2006, through April 12, 2008, included paperhanging, wallpapering and carpentry. During his conversation with Investigator Newcomer, Mr. Longoria disclosed that he did not have workers' compensation coverage because he had an exemption from such coverage. He provided her with a workers' compensation Exemption card for the construction industry. Ms. Newcomer observed that the workers' compensation exemption held by Mr. Longoria, as an officer of the Respondent, had actually expired some months previously, on April 12, 2008. Ms. Newcomer consulted the Department's automated database, called the Coverage and Compliance Automated System (CCAS). That system is routinely used and lists workers' compensation insurance policy information for each corporation, which insurance companies are required to provide to the Department, as well as the workers' compensation exemptions for corporate officers, if any. The database confirmed that Mr. Longoria's most recent exemption had expired on April 12, 2008. He thus did not have a current workers' compensation exemption on October 29, 2008, when he encountered Investigator Newcomer. That database also revealed that there was no record of a workers' compensation insurance policy in effect for the Respondent, and this was confirmed by Mr. Longoria's testimony during his deposition (in evidence). Corporate officers who qualify for a workers' compensation coverage exemption are not automatically exempt, but must submit a Notice of Election to Be Exempt. They submit a form, along with a $50 fee, to apply for an exemption. Upon receipt of a Notice of Election to Be Exempt, the Department makes a determination as to whether the applicant for the exemption meets the relevant eligibility requirements. The exemption request is then processed by the Department and a Notice of Granting the Exemption, or denial, or a Notice of Incompletion, and the necessity for more information, is sent to the applicant. A workers' compensation exemption has a duration of two years from its effective date. Its effective date is the date that is entered into the CCAS system. The only Notice of Election to Be Exempt the Department received from Mr. Longoria, as of the October 29, 2008, inspection date, was the application received on April 10, 2006. It became effective on April 13, 2006, and thus was effective until April 13, 2008. Before October 29, 2008, Mr. Longoria had three construction industry exemptions which were renewed. One exemption was as a sole proprietor and was effective from July 4, 1993, through July 4, 1995. He had another exemption extending from April 13, 2004, through April 13, 2006, and then an exemption from April 13, 2006, through April 12, 2008. Mr. Longoria stated to Ms. Newcomer, in their conversation on October 29, 2008, that he had not received notice of his April 13, 2006 exemption's expiration prior to the expiration date of April 13, 2008. Ms. Newcomer thereupon consulted the CCAS system to determine when the notification of expiration of the exemption had been sent to Mr. Longoria or the Respondent. That database revealed that a letter notifying him of the expiration of his exemption had been sent on January 29, 2008. The CCAS entry shows that the expiration notice had been mailed out to Mr. Longoria to his address of record, 1815 West Detroit Boulevard, Pensacola, Florida 32354. That is the same address which had been shown on Mr. Longoria's exemption certificate, effective on April 13, 2006. Mr. Longoria's wife was stricken with cancer. She is a veteran and sought treatment and therapy for her cancer at a Veteran's Administration facility in Tennessee. Consequently, Mr. and Mrs. Longoria moved to Tennessee in May 2006, soon after the effective date of his exemption. Mr. Longoria filed a mail-forwarding form with the United States Postal Service in Pensacola so that his mail would be forwarded to his residence and address in Tennessee. Mail was forwarded for approximately one year, but no mail originally sent to his Pensacola address was forwarded to his address in Tennessee after sometime in August 2007. Mr. Longoria did not notice this fact until April 2008. None of the later mail addressed to the Pensacola address was forwarded to Tennessee, even after he renewed his forwarding application with the postal service in April of 2008. In fact, he testified that "99 percent of whatever mail was sent to the Florida address between 2007 and April 2008 was never forwarded to [Mr. Longoria] in Tennessee." Mr. Longoria, however, did not file a change of address notification with the Department prior to submitting his new Notice of Election to be Exempt, which he filed on October 31, 2008. The Respondent did not change his mailing address with the Florida Department of State, Division of Corporations until April 9, 2008. On October 29, 2008, after the discussion between Mr. Longoria and Investigator Newcomer, concerning the matter of workers' compensation coverage, Ms. Newcomer issued a Stop Work Order and Order of Penalty Assessment, and served it on Mr. Longoria and the Respondent. These were issued because of the Respondent's failure to secure payment of workers' compensation in purported violation of Sections 440.10(1), 440.38(1) and 440.107(2), Florida Statutes. Upon issuance of the Stop Work Order, Mr. Longoria promptly complied. Investigator Newcomer also requested production of certain business records in order to perform the relevant penalty assessment calculations. Mr. Longoria promptly provided the necessary business records to the Department. The parties stipulated that work was being performed by the Respondent between the dates of April 12, 2008, and October 29, 2008. This was the period of time when the exemption was in an expired state. Based upon the Respondent's records, Investigator Newcomer calculated an amended penalty, for the period of noncompliance with the workers' compensation law (the period of expiration of the exemption) using the penalty calculation worksheet adopted in Florida Administrative Code Rule 69L-6.027. The total penalty based upon that formula resulted in an assessment of less than $1,000. The penalty assessed was therefore $1,000, pursuant to Section 440.107(7)(d), Florida Statutes, which provides that the penalty to be assessed will be based on the formula provided in the referenced provision of Section 440.107, Florida Statutes, and the above-cited rule, or a minimum of $1,000, whichever is greater. The parties stipulated that the penalty assessed is accurate, if it is ultimately determined that the penalty was properly and lawfully assessed. After being served with the Amended Order of Penalty Assessment on October 31, 2008, Mr. Longoria promptly paid the penalty in full, in the form of a cashier's check. He submitted a new Notice of Election to Be Exempt for himself, as a corporate officer of the Respondent, which exemption became effective on that same date. The Respondent was subsequently issued an Order of Release from the Stop Work Order and an Amended Order of Penalty Assessment, which allowed the Respondent to resume working. The expiration of the exemption, for the number of months referenced above, occurred because the Respondent, through Mr. Longoria, inadvertently failed to renew the exemption. Mr. Longoria had not been reminded of his expiration because he had not received the Notice of Impending Expiration from the Department. There is no dispute that Mr. Longoria and the Respondent corporation qualified for the exemption and were thus not required to secure the payment of workers' compensation, if the exemption had been effective at times pertinent hereto. This is because of the corporate business entity under which the Respondent and Mr. Longoria operated, with Mr. Longoria as the sole employee and sole corporate officer and owner.
Recommendation Having considered the foregoing findings of fact, conclusions of law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties it is, therefore, Recommended that a Final Order be entered by the Department of Financial Services, Division of Workers' Compensation, finding that the Respondent failed to properly secure workers' compensation insurance coverage for its employee in violation of Sections 440.10(1)(a) and 440.38(1), Florida Statutes, and that a penalty in the amount of $1,000 be assessed, as mandated by Section 440.107(7), Florida Statutes. DONE AND ENTERED this 28th day of May, 2009, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 2009. COPIES FURNISHED: Tracey Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Samuel W. Bearman, Esquire Law Office of Samuel W. Bearman, L.C. 820 North 12th Avenue Pensacola, Florida 32501
The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of August, 2005.
