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.
Findings Of Fact 13. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on February 11, 2009, the Amended Order of Penalty Assessment issued on March 5, 2009, the 2"4 Amended Order of Penalty Assessment issued on March 11, 2009 and the 3 Amended Order of Penalty Assessment issued on October 30, 2009, which are fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Alex Sink, Chief F inancial Officer of the State of Florida, or her designee, having considered the record in this case, including the Stop- Work Order and Order of Penalty Assessment and the Amended Orders of Penalty Assessment served in Division of Workers’ Compensation Case No. 09-036-D1, and being otherwise fully advised in the premises, hereby finds that: 1. On February 11, 2009, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 09-036-D1 to BEST WELDING AND FABRICATION, INC. 2. On February 11, 2009, the Stop-Work Order and Order of Penalty Assessment was served by personal service on BEST WELDING AND FABRICATION, INC. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On March 5, 2009, the Department issued an Amended Order of Penalty Assessment in Case No. 09-036-D1 to BEST WELDING AND FABRICATION, INC. The Amended Order of Penalty Assessment assessed a total penalty of $196,980.30 against BEST WELDING AND FABRICATION, INC. 4. On March 16, 2009, the Amended Order of Penalty Assessment was served by certified mail on BEST WELDING AND FABRICATION, INC. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On March 11, 2009, the Department issued a 2°4 Amended Order of Penalty Assessment in Case No. 09-036-D1 to BEST WELDING AND FABRICATION, INC. The an Amended Order of Penalty Assessment assessed a total penalty of $50,968.94 against BEST WELDING AND FABRICATION, INC. . 6. On March 26, 2009, the 2°4 Amended Order of Penalty Assessment was served by certified mail on BEST WELDING AND FABRICATION, INC. A copy of the 2"! Amended Order of Penalty Assessment is attached hereto as “Exhibit C” and incorporated herein by reference. 7. The Employer requested a formal hearing on April 6, 2009. A copy of the Request for Hearing is attached hereto as “Exhibit D” and incorporated herein by reference. 8. On April 21, 2009, the request for formal hearing was forwarded to the Division of Administrative Hearings for assignment of an Administrative Law Judge. The matter was assigned to Administrative Law Judge Barbara Staros and given case number 09-2138. 9. On October 30, 2009, the Department issued a 3rd Amended Order of Penalty Assessment in Case No. 09-036-D1 to BEST WELDING AND FABRICATION, INC. The 3rd Amended Order of Penalty Assessment assessed a total penalty of $10,179.61 against BEST WELDING AND FABRICATION, INC. 10. On October 30, 2009, the 3™ Amended Order of Penalty Assessment was served on legal counsel for BEST WELDING AND FABRICATION, INC. A copy of the 3" Amended Order of Penalty Assessment is attached hereto as “Exhibit E” and incorporated herein by reference. 11. On November 9, 2009, BEST WELDING AND FABRICATION, INC. filed a Notice of Voluntary Dismissal. A copy of the Notice of Voluntary Dismissal is attached hereto as “Exhibit F” and incorporated herein by reference. 12. On November 12, 2009, an Order Closing File was entered. The Order Closing File relinquished jurisdiction to the Department. A copy of the Order Closing File is attached hereto as “Exhibit G” and incorporated herein by reference.
The Issue The issue is whether Petitioner properly issued a Stop Work Order (SWO) and Second Amended Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of Chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to Section 440.107, Florida Statutes. Nobel is a corporation operating as a moving business in Florida. Nobel was incorporated in 2004 and has been operating with an active status since its inception. Yaniv Dalei is the sole owner and president of Nobel. On June 9, 2009, Petitioner's investigator, Cesar Tolentino, visited 18255 Northeast 4th Court, North Miami, Florida ("business site"), after being referred to the location to investigate Respondent for compliance with the Florida Workers' Compensation Law. At the business site, Petitioner's investigator spoke to the manager, and saw the bookkeeper and the receptionist during the visit. Respondent was not at the business site, but was out of the country in Panama when Tolentino visited. Respondent spoke to Tolentino by telephone. Respondent informed Tolentino that he had five employees and that he "was in the process of obtaining workers' compensation insurance." While at the business site, Tolentino, used the Department of Financial Services' Coverage and Compliance Automated System (CCAS), and confirmed Respondent lacked insurance for the payment of workers' compensation coverage. Additionally, Petitioner's investigator verified through the CCAS that Nobel had not secured an employee leasing company to secure workers' compensation insurance for its employees as well as found that no exemptions from workers' compensation had been issued in connection with Nobel. Petitioner's investigator also performed a National Council on Compensation Insurance search on Nobel while at the business site. The search revealed that Nobel's employees had not had workers' compensation insurance in the past. On June 9, 2009, Petitioner's investigator issued a SWO and posted it at the business site. The SWO required Respondent to cease all business operations. On June 10, 2009, Respondent obtained a certificate of insurance for workers' compensation coverage with the effective date being the same. The policy was issued by One-Stop Insurance Agency. Respondent provided the certificate to Tolentino upon receipt. On June 12, 2009, Petitioner's investigator issued to Respondent a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation ("Request"). Soon thereafter, Respondent responded to the Request and provided Petitioner's investigator with the requested records. Petitioner's investigator forwarded the documents to Jorge Pinera, Petitioner's penalty calculator, for review. On or about July 17, 2009, Petitioner issued an Amended Order of Penalty Assessment assessing a penalty of $74,794.38 against Respondent. On August 10, 2009, Respondent entered into a payment agreement with the Division. Respondent provided the Division a $7,480.00 cashier's check and agreed to pay the remainder of the assessed penalty in monthly installments. As a result, Petitioner issued an Order of Conditional Release for Nobel to operate. On March 3, 2010, Respondent supplied an employee list with position descriptions to Petitioner. After reviewing the document, Petitioner changed some employee class codes to indicate a lower rate for some occupations and recalculated the penalty amount owed with the new class codes. For the recalculation, Petitioner's penalty calculator, Russell Gray, used the following calculation from the penalty worksheet: (a) Respondent's total gross payroll from June 10, 2006, through June 9, 2009, was $1,010,001.32; (b) the total workers' compensation premium that Respondent should have paid for its employees during the relevant time period was $45,483.96; and (c) the premium was multiplied by the statutory factor of 1.5 resulting in a penalty assessment in the amount of $68,224.81. The new calculation superseded the Amended Order and a Second Amended Order of Penalty Assessment was issued March 3, 2010, reducing Respondent's penalty to $68,224.81.1 During the hearing, Respondent admitted not having workers' compensation coverage for his employees. He said, "Yes, you're right I needed to have workers' compensation but as I said . . . I never knew that I needed to have workers' compensation . . . I'm here to ask for forgiveness."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop Work Order and Second Amended Order of Penalty Assessment in the amount of $68,224.81. DONE AND ENTERED this 20th day of April, 2010, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 2010.
The Issue The issue in this case is whether Respondent had a sufficient amount of workers’ compensation coverage during the time period in question; and, if not, what penalty should be imposed.
Findings Of Fact The Division is the state agency responsible for enforcing the requirement in chapter 440, Florida Statutes (2015),1/ that employers in Florida secure workers’ compensation coverage for their employees. While an exemption can be obtained for up to three corporate officers, any employer in the construction industry with at least one employee must have workers’ compensation coverage. § 440.02(15), Fla. Stat. Kent Howe works for the Division as a compliance investigator based in Orlando, Florida. As part of his job responsibilities, Mr. Howe visits construction sites in order to verify that employers in the construction industry have obtained workers’ compensation coverage for their employees. Mr. Kehr was the owner and sole corporate officer of JNK. Mr. Howe visited a construction site in Port Orange, Florida, on the morning of December 10, 2015, and saw Mr. Kehr and two other men building the interior walls/frames of a house. Mr. Howe talked to the two men (James Hicks and James Garthwait) working with Mr. Kehr, and they reported that Mr. Kehr was paying them approximately $8.00 an hour. Mr. Kehr told Mr. Howe that Messrs. Hicks and Garthwait had been working for him for approximately two hours that morning. Mr. Kehr also stated that he had not obtained workers’ compensation coverage for Messrs. Hicks and Garthwait. Following those conversations, Mr. Howe returned to his car and accessed the Division’s Coverage and Compliance Automated System (“CCAS”) and learned that JNK had no workers’ compensation coverage. Mr. Howe also determined from CCAS that Mr. Kehr had obtained an exemption from workers’ compensation coverage that had been in effect from November 18, 2014, through November of 2016.2/ After relaying that information to his supervisor, Mr. Howe received authorization to serve Mr. Kehr with a Stop- Work Order, and he did so on December 10, 2015. That Stop-Work Order required JNK to “cease all business operations for all worksites in the State” based on the Division’s determination that JNK had failed to obtain workers’ compensation coverage. In addition, the Stop-Work Order stated that JNK would be penalized an amount “[e]qual to 2 times the amount [JNK] would have paid in premium when applying approved manual rates to the employer’s payroll during periods for which it [had] failed to secure the payment of compensation within the preceding 2-year period.” Along with the Stop-Work Order, Mr. Howe also served a “Request for Production of Business Records for Penalty Assessment Calculation” (“the BRR”) on Mr. Kehr. In order to ascertain JNK’s payroll disbursements during the relevant time period and the resulting penalty for JNK’s failure to obtain workers’ compensation coverage, the BRR requested that JNK remit several different types of business records covering the period from November 10, 2014, through December 10, 2015. Mr. Howe explained during the final hearing that the Division usually reviews business records pertaining to the two years preceding the Stop Work Order.3/ Because JNK came into existence on November 10, 2014, the Division’s review was limited to examining the period between November 10, 2014, and December 10, 2015. The business records sought by the Division included items such as time sheets, payroll summaries, check journals, certificates of exemption, and evidence that any JNK subcontractors had obtained workers’ compensation coverage. Section 440.107(7)(e) provides that if an employer fails to provide business records sufficient to enable the Department to ascertain the employer’s actual payroll for the time period in question, then the Division will estimate the employer’s actual payroll for that time period by imputing the employer’s payroll based on the statewide average weekly wage. The Division then multiplies that amount by two. JNK did not provide business records typically sought by the Division. Instead, JNK responded to the BRR by producing a written statement from Mr. Kehr indicating that he founded JNK in November of 2014, but did no work until July of 2015. That initial job involved fixing a set of stairs for $200. Afterwards, Mr. Kehr performed three separate small jobs between July and November of 2015, earning approximately $550. Because the Division could not ascertain JNK’s actual payroll from the documentation provided by JNK, the Division imputed JNK’s payroll for the time period in question and issued an Amended Order of Penalty Assessment on January 19, 2016, seeking to impose a penalty of $61,424.04. Phillip Sley calculated the aforementioned penalty amount by filling out a worksheet that has been adopted by the Division through Florida Administrative Code Rule 69L-6.027. The first step in completing the worksheet required Mr. Sley to assign a classification code to the type of work that Mr. Howe witnessed Messrs. Kehr, Hicks and Garthwait performing at the Port Orange worksite on December 10, 2015. Classification codes come from the Scopes® Manual, which has been adopted by the Department through rule 69L-6.021. Each code within the Scopes® Manual pertains to an occupation or type of work, and each code has an approved manual rate used by insurance companies to assist in the calculation of workers’ compensation insurance premiums. The imputed weekly payroll for each employee and corporate officer “shall be assigned to the highest rated workers’ compensation classification code for an employee based upon records or the investigator’s physical observation of that employee’s activities.” See Fla. Admin. Code. R. 69L-6.028(3)(d). In the instant case, Mr. Sley determined “5645” was the appropriate classification code. According to the Scopes Manual, [w]hen all of the carpentry work in connection with the construction of residential dwellings not exceeding three stories in height is performed by employees of the same carpentry contractor or general contractor responsible for the entire dwelling construction project, the work is assigned to Code 5645. This includes the construction of the sill, rough framework, rough floor, wood or light-gauge steel studs, wood or lighted-gauge steel joists, rafters, roof deck, all types of roofing materials, sidewall sheathing, siding, doors, wallboard installation, lathing, windows, stairs, finished flooring, cabinet installation, fencing, detached structures, and all interior wood trim. Mr. Sley’s next step in calculating the penalty amount was to determine the period of non-compliance. With regard to Mr. Kehr, the Department asserted that JNK failed to have workers’ compensation coverage between the date of JNK’s inception (November 10, 2014) and the date that Mr. Kehr received an exemption from the workers’ compensation coverage requirement (November 18, 2014). Despite having no evidence that Messrs. Hicks and Garthwait worked for JNK on any day other than December 10, 2015, the Division’s penalty calculation was based on an assumption that Messrs. Hicks and Garthwait worked for JNK from November 10, 2014, through December 10, 2015. Mr. Sley’s next step was to calculate JNK’s gross payroll for the time period in question. Because JNK did not provide the Division with business records that would have enabled the Division to calculate JNK’s actual payroll, Mr. Sley based JNK’s payroll on the statewide average weekly wage determined by the Department of Economic Opportunity for the time period in question.4/ Mr. Sley then multiplied that amount by two.5/ After converting the payroll numbers into a percentage, Mr. Sley multiplied the payroll amounts by the approved manual rate. As noted above, every classification code is associated with a particular manual rate determined by the Office of Insurance Regulation, and a manual rate corresponds to the risk associated with a particular occupation or type of work. Manual rates associated with potentially dangerous activities will have higher manual rates than activities with little or no potential danger. Mr. Sley’s next step was to calculate a premium for obtaining workers compensation coverage for Messrs. Kehr, Hicks, and Garthwait. Mr. Sley then multiplied that premium by two in order to calculate the individual penalties resulting from JNK not having workers’ compensation coverage for Messrs. Kehr, Hicks, and Garthwait. The sum of those amounts was $61,424.04. The evidence produced at the final hearing established that Mr. Sley utilized the correct class code, average weekly wage, and manual rates in his calculation of the penalty set forth in the Amended Order of Penalty Assessment. The Division has demonstrated by clear and convincing evidence that JNK was in violation of the workers’ compensation coverage requirements of chapter 440. In particular, the Division proved by clear and convincing evidence that Mr. Kehr had no workers’ compensation coverage for himself and no exemption from November 10, 2014, through November 17, 2014. However, the Division did not demonstrate by clear and convincing evidence that Messrs. Hicks and Garthwait were employees of JNK on any day other than December 10, 2015. Mr. Kehr testified during the final hearing that Messrs. Hicks and Garthwait were working for him on December 10, 2015. He also testified that he was paying them at a rate of $8.00 an hour. However, Mr. Kehr persuasively testified that Messrs. Hicks and Garthwait had not worked for him at any other time between November 10, 2014, and December 10, 2015. The undersigned finds Mr. Kehr’s testimony on this point to be credible. Messrs. Hicks and Garthwait did not testify during the final hearing in this matter. There is no evidence that Messrs. Hicks and Garthwait worked for JNK at any time other than December 10, 2015. Because there is no evidence indicating that Messrs. Hicks and Garthwait were employees of JNK at any time other than December 10, 2015, during the time period in question, the undersigned finds that the Department failed to carry its burden of proving that $61,424.04 is the appropriate penalty. Based on the above findings, the undersigned finds that the correct penalty resulting from Mr. Kehr’s lack of coverage is $627.48. The worksheet completed by Mr. Sley indicates that is the amount of the $61,424.04 penalty associated with Mr. Kehr’s lack of coverage. As for the penalties associated with the lack of coverage for Messrs. Hicks and Garthwait on December 10, 2015, the undersigned multiplied the average weekly wage utilized by the Division ($841.57) by two. That results in a weekly gross payroll amount of $1,683.14. Dividing $1,683.14 by five results in a daily gross payroll amount of $336.63. Dividing $336.63 by 100 and then multiplying the result by 15.91 (the approved manual rate utilized by the Division for the period from January 1, 2015, through December 10, 2015) yields a daily premium of $53.62. Multiplying $53.62 by two results in a penalty of $107.23. Multiplying $107.23 by two yields $214.46, JNK’s penalty for not having workers’ compensation coverage for Messrs. Hicks and Garthwait on December 10, 2015. JNK’s total penalty is $841.94. Because section 440.107(7)(d)1. mandates a minimum penalty of $1,000, the undersigned finds that $1,000 is the correct penalty for the instant case.
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 imposing impose a $1,000 penalty on Donald Kehr, d/b/a JNK Framing Inc., a Dissolved Florida Corporation. DONE AND ENTERED this 10th day of August, 2016, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of August, 2016.
The Issue The issue in this case is whether Elite Restoration and Construction, 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 the payment of workers' compensation for the benefit of their employees and corporate officers. Respondent is an active Florida corporation that was formed on August 28, 2009, with a principal address of 7185 West Village Drive, Homosassa, Florida 34446. Respondent was engaged in business operations in the state of Florida during the entire period of November 2, 2014, to November 1, 2016. Brian Johnson (Respondent’s owner or Mr. Johnson) is Respondent's sole shareholder, owning 100 percent of the stock. The Department's investigator, Michael Robinson, commenced a random worksite compliance investigation on November 1, 2016, at a gas station at 970 Atlantic Boulevard, Jacksonville, Florida 32225. He observed Respondent's owner, Mr. Johnson, and three others, Tim Neeld, Derrick Windier, and James Ingash, painting a metal canopy covering the gas pumps. Mr. Johnson told the investigator that his company, Elite Restoration & Construction, LLC, was a subcontractor for Aluminum Plus of DeLand, Florida. By searching the Division's Coverage and Compliance Automated System, the investigator determined that Brian Johnson obtained a workers' compensation exemption on October 12, 2016, or 20 days prior to the investigation, and further determined that an employee leasing contract previously held by Respondent terminated on January 15, 2015, which is more than nine months prior to the investigation. Mr. Johnson confirmed that Respondent had an exemption for himself, effective October 12, 2016, but did not have any workers' compensation insurance for its employees. On November 1, 2016, after consulting with a supervisor, the Department's investigator issued the Stop-Work Order, which was posted at Respondent's worksite and personally served upon Respondent’s owner. On the same day, the investigator also personally served the Request for Production, which requested business records to determine Respondent's payroll during the two-year penalty period proscribed by section 440.107(7)(d)1., which in this case is from November 2, 2014, to November 1, 2016. The Request for Production explicitly states that the requested records must be provided within 10 business days from receipt of the request. Respondent obtained an Agreed Order of Conditional Release from the Stop-Work Order on November 8, 2016, by terminating the three workers observed during the compliance investigation who did not have workers’ compensation coverage and paying the Department a $1,000 down payment toward the penalty that would be calculated in this case. Respondent produced business records for penalty calculation on November 17, 2016, and February 28, 2017, which is beyond the 10-day time period required by the Request for Production.2/ The Department's penalty auditor, Lynne Murcia, used those records to calculate a $21,475.30 penalty for failing to comply with the workers' compensation insurance requirements of chapter 440. On April 20, 2017, when Respondent’s owner came to the Department’s Jacksonville office, he was personally served with the Amended Penalty and advised of his right to seek administrative review of the Stop-Work Order and Amended Penalty. Mr. Johnson filed a petition for hearing on behalf of Respondent on May 5, 2017, stating that the penalty calculated was wrong because it included income earned in states other than Florida. Respondent produced additional business records on May 17, August 21, and August 31, 2017, for the purpose of demonstrating that a portion of his company’s payroll was derived from work completed at worksites outside of Florida, and arguing that the out-of-state payroll should not be included in the penalty calculation. The invoices showed $182,056.78 in total income, consisting of $77,268 from 14 jobs in Florida, and $104,788.60 for 14 jobs outside of the State of Florida. Upon initial review, the Department’s auditor declined to make any adjustments because the invoices did not provide information showing earnings of specific employees for jobs outside of Florida. Thereafter, Mr. Johnson produced additional records that allowed the Department’s auditor to trace out-of-state employment to transactions in Respondent’s general ledger. The Department's auditor reviewed Respondent's additional records and removed out-of-state payroll and per diem payments. In accordance with that review, the Department issued the 2nd Amended Penalty which reduced the penalty to $16,671.14. The 2nd Amended Penalty also reduced the 2016 payroll attributed to Respondent's owner. Respondent was an "employer" in the state of Florida, as that term is defined in section 440.02(16), from November 2, 2014, to November 1, 2016. Respondent did not secure the payment of workers' compensation insurance coverage, nor have others secured the payment of workers' compensation insurance coverage for the employees listed on the penalty worksheet of the 2nd Amended Penalty during the periods of noncompliance listed on the penalty worksheet. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty had a valid Florida workers' compensation coverage exemption during the periods of noncompliance listed on the penalty worksheet. In the past, Respondent had an employee leasing contract with Southeast Personnel Leasing, Inc. That contract was terminated on January 15, 2015, due to the leasing company’s concerns about out-of-state employment that would not be covered by the leasing company's workers' compensation insurance. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were "independent contractors" as that term is defined in section 440.02(15)(d)1. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were employees of a temporary labor company. Employees on the penalty worksheet of the 2nd Amended Penalty are correctly classified under Class Code 5474, painting, as defined in the "Scopes Manual" published by the National Council on Compensation Insurance, Inc. (NCCI), and adopted in Florida Administrative Code Rule 69L-6.021(2)(jj). The approved manual rates used in the penalty worksheet of the 2nd Amended Penalty, as defined by the NCCI Scopes Manual and adopted by the Office of Insurance Regulation, are the correct manual rates for the corresponding periods of noncompliance listed on the penalty worksheet. In calculating the 2nd Amended Penalty, the Department’s auditor used the worksheet required by rule 69L-6.027, along with Respondent’s bank statements, check images, general ledger, and tax returns filed with the Internal Revenue Service. The auditor capped Respondent’s owner’s pay for that portion of 2014 falling within the penalty period because his salary and dividend totaling $73,484 in 2014 exceeded the statewide average of $862.51 per week or $44,850.52 per year. She also adjusted the period of noncompliance for Mr. Johnson, pursuant to rule 69L-6.028(2), because he obtained an exemption from Florida’s Workers’ Compensation Law on October 12, 2016. The auditor explained that she used Respondent’s tax returns for 2014 and 2015 because she believed they were the most reliable indication of salaries and wages, officer compensation, and payroll for outside services and subcontractors. She further explained that she used Respondent’s tax returns and general ledger as the most accurate sources for determining payroll for 2016. The auditor’s explanation is reasonable and credited. Mr. Johnson questioned the auditor’s method of determining payroll and offered alternative methods using spreadsheets he created to identify what he called “member draws” and other summaries. The invoices provided by Respondent to the Department, however, do not match the summaries; and Respondent’s method of determining payroll, when compared to the method utilized by the Department, is not accurate or reliable. The auditor’s method reflected in the 2nd Amended Penalty appropriately applied approved manual rates corresponding to Class Code 5474, painting, to determine the evaded workers’ compensation insurance premium. Then, the evaded premium was properly multiplied by two in accordance with section 440.107(7)(d)1.
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 Elite Restoration and Construction, LLC. DONE AND ENTERED this 20th day of February, 2018, 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 20th day of February, 2018.
The Issue The issue is whether the Stop-Work Order and 2nd Amended Order of Penalty Assessment issued by Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), on July 1, 2015, and February 29, 2016, respectively, should be upheld.
Findings Of Fact The Department is the state agency responsible for enforcing the various requirements of chapter 440. Respondent is a Florida corporation with offices located at 1904 28th Avenue North, St. Petersburg, Florida. The company is engaged in the construction business, and its activities fall within the statutory definition of "construction industry." See § 440.02(8), Fla. Stat. Respondent also does business under the name of M & M Construction of South Florida, but both are the same corporate entity with the same Federal Employer Identification Number and use the same bank accounts. Respondent's assertion that the two are separate and work done under the "d/b/a" name cannot be used to establish liability under chapter 440 is rejected. On July 1, 2015, Munal Abedrabbo, a Department compliance inspector, made a random inspection of a job site at 4115 East Busch Boulevard, Tampa, where remodeling work on a commercial building was being performed. When he entered the premises, Mr. Abedrabbo observed Bernard Reed on a ladder painting an interior ceiling. After identifying himself, he informed Mr. Reed that he needed to verify his insurance coverage. Mr. Abedrabbo was directed to Mr. Cook, Respondent's vice-president and part owner, who acknowledged that he was the general contractor on the job and had three employees/painters working that day, Reed, James Dabnes, and John Russell. Mr. Cook informed the inspector that the three employees were leased from Paychek, Inc., an employee leasing company, and that firm provided workers' compensation coverage for the leased employees. Mr. Abedrabbo returned to his vehicle and accessed on his computer the Department of State, Division of Corporations, Sunbiz website to verify Respondent's status as a corporation. After verifying that it was an active corporation, he then checked the Department's Coverage and Compliance Automated System to verify whether Respondent had a workers' compensation policy or any exemptions. He was unable to find any active policy for Respondent, as the most recent policy had lapsed in January 2013. Mr. Cook has an exemption, covering the period October 20, 2014, through October 19, 2016, but the exemption is with a different company, Thomas Cook Carpenter, LLC. Mr. Abedrabbo spoke again with Mr. Cook and informed him that Department records showed no insurance coverage for his employees. Mr. Cook telephoned Paychek, Inc., and then confirmed that the three painters had no workers' compensation insurance. Mr. Cook explained that before he allowed Mr. Reed to begin work, Mr. Reed had shown him an insurance certificate that turned out to be "falsified," and then "conveniently lost it" when the inspector appeared. He also explained his firm "was caught with our pants down once before" and he did not want it to happen again. For that reason, he contended he was especially careful in hiring leased employees. Even so, he does not deny that Respondent has had no insurance in place since January 2013 and Paychek, Inc., failed to provide coverage. The Department issued a Stop Work Order and Penalty Assessment the same day. To determine the amount of Respondent's unsecured payroll for purposes of assessing a penalty in accordance with section 440.107(7)(d)(1), Florida Statutes, the Department requested Respondent to provide business records for the preceding two years. This period of non-compliance is appropriate, as Respondent was actively working in the construction industry during that time period without securing insurance. The request informed Mr. Cook that if complete records were not provided, the Department would use the imputation formula found in section 440.107(7)(e) to calculate the penalty. After reviewing the information provided by Respondent, on August 18, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $114,144.52 for the period July 7, 2014, through June 30, 2015. Based on two depositions of Mr. Cook, a 2nd Amended Order of Penalty Assessment in the amount of $105,663.48 was issued on February 29, 2016. The Department penalty auditor calculated the final penalty assessment using the "imputed" method because insufficient business records were provided to determine Respondent's payroll for all relevant time periods, except the month of October 2014. In addition to missing bank statements and check images, Respondent failed to provide its entire second bank account. Although Mr. Cook contends some records were in the possession of M & M Construction of South Florida, and he could not access them in a timely manner, this does not excuse Respondent's failure to timely produce all relevant records. Under the imputed method, the penalty auditor used the average weekly wage ($841.57) times two to determine Respondent's payroll for the imputed portions. See Fla. Admin. Code R. 69L-6.028(2); § 440.107(7)(e), Fla. Stat. The gross payroll was then divided by 100 in order to be multiplied by the applicable approved manual rates. The Department applied the proper methodology in computing the penalty assessment. A class code is a numerical code, usually four digits, assigned to differentiate between the various job duties or scope of work performed by the employees. The codes were derived from the Scopes Manual Classifications (Manual), a publication that 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., an authoritative data collecting and disseminating organization for workers' compensation. The Manual provides that class code 5474 applies to painters who perform painting activities. Reed, Dabnes, and Russell were assigned this code. Mr. Cook agrees this code is correct. Mr. Cook was assigned class code 5606 (construction executive) and placed on the penalty assessment because he is an owner of the corporation and was managing the work. Although Mr. Cook argues he had an exemption and should not be placed on the assessment, Department records reflect that Mr. Cook had an exemption with a different company during the audit period. Therefore, his inclusion in the employee census was correct. Because Respondent's business records included checks written to Kerry Francum for tile work, he was assigned class code 5348 (tile work) and placed on the penalty assessment as an employee. At his deposition, Mr. Cook acknowledged that Francum performed tile work for his firm and was an employee. At hearing, Mr. Cook changed his testimony and contended Francum was only a material supplier, not a subcontractor, and should not be on the penalty assessment. This assertion has not been accepted. Mr. Francum's inclusion on the assessment is appropriate. Respondent's business records also indicated a check was written to Kerry Randall, a tile subcontractor. At hearing, however, Mr. Cook established, without contradiction, that because of Mr. Randall's violent temper, he was paid a one-time fee of $1,000.00 and let go before he performed any work. Mr. Randall should be removed from the assessment. The Department has demonstrated by clear and convincing evidence that the 2nd Amended Order of Penalty Assessment is correct, less any amount owed for Mr. Randall.
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 assessing Respondent the penalty in the 2nd Amended Order of Penalty Assessment, less any amount owed for Mr. Randall. DONE AND ENTERED this 21st day of November, 2016, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER 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 21st day of November, 2016.
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 fence construction industry and employs four people. Petitioner's investigator identified three people preparing a worksite for the erection of a privacy fence at 3000 Majestic Oaks Lane South in Jacksonville, Florida. The investigator then contacted Respondent and confirmed that the three identified individuals in addition to Respondent, were employed by Respondent for a total of four employees. The investigator determined none of the employees had workers’ compensation exemptions nor had Respondent secured the payment of workers’ compensation to his employees. On April 27, 2005, the investigator served a SWO on Respondent. The SWO required Respondent to cease all business operations in Florida. At the same time, the investigator served a Request for Business Records for Penalty Calculation on Respondent, requesting payroll records from Respondent for the period April 27, 2002, through April 27, 2005 (the audit period for penalty calculation). Respondent provided no records to the investigator. On May 23, 2005, the investigator determined 520 days had passed between the beginning of the audit period and September 30, 2003, and the penalty for noncompliance during this period was $52,000.00. The investigator also determined that during the period October 1, 2003, through the end of the audit period, the statewide average weekly wage paid by employers was $651.38; Respondent had four (4) employees; the imputed weekly payroll for Respondent’s employees was $320,848.00; using approved manual rates Respondent should have paid $97,969.40 in workers’ compensation premium; and the penalty for noncompliance during this period was calculated to be $146,954.12. On May 26, 2005, Investigator Bowman served the Amended Order of Penalty Assessment on Respondent. The Amended Order assessed Respondent with a penalty for the entire audit period in the amount of $198,954.12. The investigator obtained records created by Respondent demonstrating Respondent placed a bid on a job on June 1, 2005, and Respondent completed the job on July 1, 2005. On July 19, 2005, the investigator served a Corrected Amended Order of Penalty Assessment on Respondent, which assessed a penalty in the amount of $3,000.00 for violating the terms of the SWO. Respondent violated the SWO on two separate days, the day of the bid and the day the work was completed. No competent substantial evidence was presented regarding intervening business operations.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order affirming the Stop Work Order and Order of Penalty Assessment, Amended Order of Penalty Assessment, and Corrected Amended Order of Penalty Assessment, requiring Respondent to pay a penalty in the amount of $200,594.12 to Petitioner, and requiring Respondent to cease all business operations in Florida. DONE AND ENTERED this 15th day of September, 2005, 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 15th day of September, 2005. COPIES FURNISHED: John M. Iriye, Esquire Department of Financial Services Division of Workers Compensation 200 East Gaines Street Tallahassee, Florida 32399-422 Martin D. Snyder 10367 Allene Road Jacksonville, Florida 32219 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carols G. Muniz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue is whether The Department of Financial Services properly imposed a Stop Work Order and Amended Order of Penalty Assessment pursuant to the requirements of Chapter 440, Florida Statutes.
Findings Of Fact The Division is charged with the regulation of workers' compensation insurance in the State of Florida. Respondent Clark Green, d/b/a/ Clark W. Green Painting, is a sole proprietor located in Jacksonville, Florida, and is engaged in the business of painting, which is a construction activity. Katina Johnson is an investigator employed by the Division. Her duties include investigating businesses to ensure that the employers in the state are in compliance with the requirements of the workers' compensation law and related rules. On February 22, 2005, Ms. Johnson visited a job site in the Northside subdivision in Jacksonville, Florida, and observed two workers coming out of a new construction home. The two workers appeared to have been painting, as they had paint on their clothes, arms, and hands. This visit was a random site check. Ms. Johnson interviewed the two workers, Tikos Johnson and Ricky Reed. As a result of that interview, Ms. Johnson contacted Mr. Clark Green. Shortly thereafter, the file was transferred to another investigator, Donald Bowman. Mr. Bowman checked the database in the Coverage and Compliance Automated System and found no proof of coverage for Mr. Green. Mr. Bowman did find in the records of the Division that Mr. Green had an exemption as a sole proprietor, but that it had expired December 31, 1999. After conferring with his supervisor, Mr. Bowman issued a Stop-Work Order and Order of Penalty Assessment to Respondent on February 25, 2005, along with a request for business records for the purpose of calculating a penalty for lack of coverage. Respondent did not produce business records as requested. On March 22, 2005, Mr. Bowman issued an Amended Order of Penalty Assessment to Respondent for $126,393.87. Attached to the Amended Order of Penalty Assessment is a penalty worksheet with a list of names under the heading, "Employee Name," listing the names of Tikos Johnson, Rickey Reed, and Mr. Green. The amount of the penalty was imputed using the Florida average weekly wage that was in effect at the time of the issuance of the stop-work order. Through imputation of payroll for the purported employees, the Department calculated a penalty for the time period of February 25, 2002 through February 25, 2005. Mr. Bowman assigned a class code to the type of work performed by Respondent utilizing the SCOPES manual, multiplied the approved manual rate with the imputed payroll per one hundred dollars, then multiplied all by 1.5. Penalties are calculated by determining the premium amount the employer would have paid based on his or her Florida payroll and multiplying by a factor of 1.5. The payroll was imputed back to October 1, 2003. For the period prior to October 1, 2003, Mr. Bowman assessed a penalty of $100 per day for each calendar day of noncompliance. Mr. Bowman also requested business records from Engle Homes, which had subcontracted with Respondent to provide services at the work site investigated by the Division, in an effort to determine whether Respondent was actually performing services for Engle Homes. While he eventually received records from Engle Homes, Mr. Bowman did not use them in his calculation of the penalty, as they were not received directly from Respondent and were received more than 45 days after his request. On April 21, 2006, a second Amended Order of Penalty Assessment was issued reducing the amount of the penalty to $80,931.29. This reduction in penalty was the result of the Department's removing Tikos Johnson and Rickey Reed from the penalty calculation, as they had been served stop-work orders and had separate penalty assessments assessed to them. Respondent's Exemption On or about November 28, 1996, Respondent was issued a "Construction Industry Certificate of Exemption from Florida Workers' Compensation Law" card. The exemption card bears no expiration date. At the time Respondent received his exemption card, such exemptions were valid "until the sole proprietor . . . revokes his exemption." Section 440.05(3), Florida Statutes (1995). Consequently, the exemptions issued at that time were considered "lifetime" exemptions. Gregory Mills is a Senior Management Analyst I Supervisor. His duties are to supervise and manage the exemption process for the Division. He has been in this position for over two years and prior to this position was employed by the Division as a workers' compensation investigator. He was an investigator, and therefore not in charge of the exemption process, at the time the law changed in 1999. There is a memorandum in evidence entitled "Notice of Change to Exemption Process" dated October 9, 1998. The memorandum is addressed to "Holders of BCM-204s (Construction Industry Exemptions). The stated purpose of this memorandum is to advise holders of construction industry exemptions of recent changes in the laws which affected the exemption holder's rights and responsibilities. The Notice contained the following language in bold print: EFFECTIVE JANUARY 1, 1999: construction industry exemptions issued after 1/1/99 will expire two years after the effective date of the exemption. A construction industry exemption issued prior to 1/1/99 (BCM-204) will expire on the last day of the birth month of the exemption holder in the year 1999. The Notice also compared the then current process with the process after January 1, 1999, advising exemption holders that their exemptions would expire in 1999 on the last day of the birth month of the exemption holder, and that exemptions issued after January 1, 1999, would expire every two years. Mr. Mills believes that this letter was mailed to all exemption holders, including Respondent, in October 1998 to their addresses of record. However, because the Division's record retention policy is to retain documents for five years, and because Mr. Mills was not in charge of exemptions at the time of the law change, he cannot say with complete certainty that a copy of this notice was mailed to Mr. Green. Mr. Green insists that he did not receive a copy of this notice and that had he received it, he would have complied. Mr. Green's testimony in this regard is accepted as credible. Whether the Division mailed a copy of the notice to Respondent or not, Mr. Green did not receive it. Further, since the date of this notice and the change in the law, Mr. Green presented his exemption card to general contractors for whom he performed painting work. The general contractors all accepted his card.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That the Division of Workers' Compensation enter a Final Order affirming the Amended Order of Penalty Assessment issued April 17, 2006, and the Stop Work Order issued to Respondent on February 25, 2005. DONE AND ENTERED this 2nd day of November, 2006, in Tallahassee, Leon County, Florida. S BARBARA J. STAROS 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 2nd day of November, 2006.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation as alleged in the Stop-Work Order and 3rd Amended Order of Penalty Assessment, and if so, what penalty is appropriate.
Findings Of Fact The parties agree to the following facts as set forth in the Joint Pre-hearing Stipulation: The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees and corporate officers. Respondent, a Florida corporation, was engaged in business operations in the state of Florida from November 16, 2010, through November 15, 2013. Respondent received a Stop-Work Order and Order of Penalty Assessment from the Department on November 15, 2013. Respondent received a Request for Production of Business Records for Penalty Assessment Calculation from the Department on November 15, 2013. Respondent received a 3rd Amended Order of Penalty Assessment from the Department on March 11, 2014. Throughout the penalty period, Respondent was an “employer” in the state of Florida, as that term is defined in section 440.02(16), Florida Statutes (2013).1/ All of the individuals listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment were “employees” in the state of Florida (as that term is defined in section 440.02(15)) of Respondent during the periods of non-compliance listed on the penalty worksheet. None of the individuals listed on the penalty worksheet attached to the 3rd Amended Order of Penalty Assessment had a valid Florida workers' compensation coverage exemption at any time during the periods of non-compliance listed on the penalty worksheet. Respondent did not secure the payment of workers' compensation insurance coverage, nor have others secured the payment of workers' compensation insurance coverage, for any of the individuals named on the penalty worksheet attached to the 3rd Amended Order of Penalty Assessment during the periods of non-compliance listed on the penalty worksheet. None of the individuals listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment were “independent contractors” (as that term is defined in section 440.02(15)(d)1.) hired by Respondent for any portion of the periods of non- compliance listed on the penalty worksheet. Wages or salaries were paid by Respondent to the individuals listed on the penalty worksheet, whether continuously or not, during the corresponding periods of noncompliance listed on the penalty worksheet. The gross payroll amounts (column “c” of the penalty worksheet of the 3rd Amended Order of Penalty Assessment) for the employees listed on the penalty worksheet are correct. Respondent was engaged in business operations in the state of Florida as an auto recycling store from November 16, 2010, through November 15, 2013. The store operated by Respondent is called A&A Auto Recycling and is located at 5507 9th Street East, Bradenton, Florida. The store consists of an enclosed retail area and an open yard area where vehicles are kept. John Austerman is the business owner and president. Respondent employed at least ten employees at any given time during the period from November 16, 2010, through November 15, 2013. Employees working in the retail area check inventory on the computer, perform customer service, and sell parts. Employees working in the retail area also “mark parts,” such as fenders, when customers bring them in for purchase from the area on Respondent’s property where vehicles are kept (the yard). Respondent does not dispute the assignment of classification code 3821 to the employees identified as such on the penalty worksheet of the 3rd Amended Order of Penalty Assessment. Respondent does dispute, however, that classification code 3821 should be assigned to John Austerman. John Austerman conducts physical inventories of approximately 100 vehicles a month that arrive at the store for recycling. Mr. Austerman’s inventories include opening the doors and popping the engine hoods of the vehicles. Mr. Austerman walks the auto salvage yard approximately once per week for ten to fifteen minutes so as to ensure that the property is being properly maintained. In addition to vehicle and property inspections, Mr. Austerman also performs customer service, accounting, and clerical work for the business. The National Council of Compensation Insurance (“NCCI”), is the rating bureau that establishes class codes for the workers' compensation industry in Florida. NCCI classification code 3821 provides as follows: Code 3821 contemplates dismantling or wrecking of used automobiles, motorcycles and trucks for the salvaging of parts. Auto dismantling may consist of the simple removal of saleable parts by means of hand tools and retaining the frames and bodies for future sale to outside scrap collectors. Some dismantlers will also break up stripped chassis and bodies with acetylene torches or shears to be sold in the form of iron or steel scrap. In addition to the dismantling work, salvaged parts may be reconditioned or repaired and sold over the counter. New parts may also be stocked. In the case of larger risks, a number of other functions may often be performed such as auto repairing, gas station operations, glass reconditioning, brake relining, cylinder re-boring, piston grinding, and battery or tire repair. * * * Special Conditions: Store employees who do not engage in other operations and have no yard exposure are classified to Code 8046. NCCI classification code 8046 provides as follows: Code 8046 applies to those employees of automobile recyclers who are engaged in store operations and have no yard exposure to the yard. Duties conducted by these store employees include but are not limited to greeting and assisting customers, checking inventory on computers, pulling smaller parts from an inside parts warehouse an [sic] taking payments. These store employees may appear to have clerical duties but are properly classified to Code 8046. Refer to Code 3821 for all other employees of automobile recyclers. NCCI classification code 8046 applies to auto salvage employees who only work in the retail area of the store and have no yard exposure. For auto salvage employees, like John Austerman, who engage in other salvage related operations and who have exposure to the yard, code 3821 is the proper classification for such employees. Respondent asserts that all employees assigned the classification code of 8046 on the 3rd Amended Order of Penalty Assessment should be classified as code 8810 because these employees have clerical duties. The credible evidence does not support such a finding.2/ As previously noted, NCCI classification code 8046 provides: “These store employees may appear to have clerical duties but are properly classified to Code 8046.” Petitioner correctly assigned Respondent’s employees appearing on the 3rd Amended Order of Penalty Assessment to classification code 8046. Petitioner assigned the proper classification codes to each of Respondent’s employees. Respondent, in its Proposed Recommended Order, makes no argument with respect to the approved manual rates and only argues that the 3rd Amended Order of Penalty Assessment be amended “to reflect that all employees on the penalty calculation worksheet not classified as ‘3821’ [be] properly classified as ‘8810.’” Given that there is no dispute regarding whether Petitioner applied the appropriate approved manual rates, it is determined that Petitioner assigned the appropriate approved manual rates to assess the workers' compensation insurance coverage premium amounts that Respondent would have paid during the penalty period had Respondent obtained workers' compensation insurance coverage.
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 assessing a penalty in the amount of $99,571.67 against Respondent, Austerman, Inc., for its failure to secure and maintain required workers’ compensation insurance for its employees. DONE AND ENTERED this 28th day of October, 2014, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN 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 October, 2014.
The Issue The issues are whether, under section 440.107, Florida Statutes, Petitioner may calculate a penalty assessment for a failure to secure the payment of workers' compensation for one day as though the failure persisted over two years and whether Petitioner may calculate a penalty assessment based on double the statewide average weekly wage (AWW) when the lone uncovered employee earned $10 per hour.
Findings Of Fact Respondent was incorporated in 2008 by Ineido Soler, Sr., and his son, Ineido Soler, Jr. Since the corporation began operations, the wife of Mr. Soler, Jr., Idalmis Pedrero, has served as the office manager of this family-owned company. At all material times, Respondent has contracted with a personnel leasing company to handle employee matters, such as securing the payment of workers' compensation. Ms. Pedrero's responsibilities include informing the employee leasing company of new hires, so the company can obtain workers' compensation coverage, which typically starts the day following notification. On the afternoon of November 22, 2015, Mr. Soler, Jr., telephoned his wife and told her that he and his father had hired, at the rate of $10 per hour, a new employee, Geony Borrego Lee, who would start work the following morning. Customarily, Ms. Pedrero would immediately inform the employee leasing company. However, Ms. Pedrero was working at home because, six days earlier, she had delivered a baby by caesarian section, and she was still recuperating and tending to her newborn. A fatigued Ms. Pedrero did not notify the employee leasing company that day of the new hire. Late the next morning, Ms. Pedrero was awakened by a call from her husband, who asked her if she had faxed the necessary information to the employee leasing company. Ms. Pedrero admitted that she had not done so, but would do so right away. She faxed the information immediately, so that the employee leasing company could add Mr. Lee to the workers' compensation policy, effective the next day, November 24. Uncovered for November 23, Mr. Lee joined three other employees of Respondent and performed roofing work at a worksite. Late in the afternoon of November 23, one of Petitioner's investigators conducted a random inspection of Respondent's worksite and determined that Respondent had secured the payment of workers' compensation for the three other employees, but not for Mr. Lee. The investigator issued an SWO on the day of the inspection, November 23. The SWO contains three parts. First, the SWO orders Respondent to cease work anywhere in the state of Florida. Second, the SWO includes an Order of Penalty Assessment, which does not contain a specific penalty, but instead sets forth the formula by which Petitioner determines the amount of the penalty to assess. Tracking the statute discussed below, the formula included in the SWO is two times the premium that the employer would have paid when applying approved manual rates to the employer's payroll "during periods for which it has failed to secure the payment of compensation within the preceding 2-year period." Third, the SWO includes a Notice of Rights, which advises Respondent that it may request a chapter 120 hearing. On November 24, Petitioner released the SWO after Respondent had secured the payment of workers' compensation for Mr. Lee. On November 25, the investigator hand delivered to Respondent a Request for Production of Business Records for Penalty Assessment Calculation (Request). The Request covers November 24, 2013, through November 23, 2015, and demands records in eight categories: identification of employer, occupational licenses, payroll documents, account documents, disbursements, contracts for work, identification of subcontractors, and documentation of subcontractors' workers' compensation coverage. The Request identifies "payroll documents" as: all documents that reflect the payroll of the employer . . . including . . . time sheets, time cards, attendance records, earning records, check stubs and payroll summaries for both individual employees and aggregate records; [and] federal income tax documents and other documents reflecting the . . . remuneration paid or payable to each employee . . . . The Request adds: The employer may present for consideration in lieu of the requested records, proof of compliance with F.S. 440 by a workers' compensation policy or coverage through employee leasing for all periods of this request where such coverage existed. If the proof of compliance is verified by the Department the requested records for that time period will not be required. The Request warns: If the employer fails to provide the required business records sufficient to enable the . . . Division of Workers' Compensation to determine the employer's payroll for the period requested for the calculation of the penalty provided in section 440.107(7)(d), F.S., the imputed weekly payroll for each employee shall be the statewide average weekly wage as defined in section 440.12(2), F.S., multiplied by 2. The Department shall impute the employer's payroll at any time after ten, but before the expiration of twenty eight business days after receipt by the employer of [the Request]. (FAC 69L-6.028) . . . . On December 11, 2015, Respondent provided the following documents to Petitioner: itemized invoices, including for workers' compensation premiums, from the employee leasing company to Respondent and checks confirming payment, but the invoices and checks are from December 2011; an employee leasing agreement signed by Respondent on August 1, 2014, and signed by the employee leasing company on August 5, 2014; an employee leasing application for Mr. Lee dated November 23, 2015, showing his date of birth as November 20, 1996, his hourly pay as $10, and his hire date as November 23, 2015; and an employee census dated December 1, 2015, showing, for each employee, a date of hire and, if applicable, date of termination. Partially compliant with the Request, this production omitted any documentation of workers' compensation coverage prior to August 1, 2014, and any documentation of payroll except for Mr. Lee's rate of pay. On December 14, 2015, Respondent filed with Petitioner its request for a chapter 120 hearing. On December 30, 2016, Petitioner issued an Amended Order of Penalty Assessment (Amended Assessment), which proposes to assess a penalty of $63,434.48. On the same date, Petitioner transmitted the file to DOAH. Petitioner issued a Second Amended Order of Penalty Assessment on February 16, 2016, which is mentioned in, but not attached to, the Prehearing Stipulation that was filed on April 26, 2016, but the second amended assessment reportedly leaves the assessed penalty unchanged from the Amended Assessment. In determining the penalty assessment, Petitioner assigned class code 5551 from the National Council on Compensation Insurance because Mr. Lee was performing roofing work; determined that the entire two-year period covered in the Request was applicable; identified the AWW as $841.57 based on information provided by the Florida Department of Economic Opportunity for all employers subject to the Florida Reemployment Assistance Program Law, sections 443.01 et seq., Florida Statutes, for the four calendar quarters ending June 30, 2014; applied the appropriate manual rates for class code 5551 to $841.57, doubled, and divided the result by 100--all of which yielded a result of $31,717.24, which, doubled, results in a total penalty assessment of $63,434.48. There is no dispute that the classification code for Mr. Lee is code 5551, the AWW is $841.57, and the manual rates are 18.03 as of July 1, 2013, 18.62 as of January 1, 2014, and 17.48 as of January 1, 2015. Because Petitioner determined that Respondent had failed to provide sufficient evidence of its payroll, Petitioner calculated the penalty assessment by using the AWW of $841.57, doubled, instead of Mr. Lee's actual rate of $10 per hour. Petitioner's calculations are mathematically correct. For the 5.27 weeks of 2013, the penalty assessment is $3198.58 based on multiplying the AWW, doubled, by the manual rate of 18.03 divided by 100 multiplied by 2 and multiplied by 5.27. For the 52 weeks of 2014, the penalty assessment is $32,593.67 based on multiplying the AWW, doubled, by the manual rate of 18.62 divided by 100 multiplied by 2 and multiplied by 52. For the 46.44 weeks of 2015, the penalty assessment is $27,326.48 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 46.44. Adding these sums yields a total penalty assessment of $63,118.73, which approximates Petitioner's penalty assessment calculation of $63,434.48. (Mistranscription of difficult-to- read manual rates or a different rule for handling partial weeks may account for the small difference.) Respondent challenges two factors in the imputation formula: the two-year period of noncompliance for Mr. Lee instead of one day's noncompliance and the AWW, doubled, instead of Mr. Lee's $10 per hour rate of pay. Underscoring the differences between the two-year period of noncompliance and double the AWW and the actual period of noncompliance and Mr. Lee's real pay rate, at the start of the two-year period, Mr. Lee was three days past his 16th birthday and residing in Cuba, and Mr. Lee continues to earn $10 per hour as of the date of the hearing. The impact of Petitioner's use of the two-year period of noncompliance and double the AWW is significant. If the calculation were based on a single day, rather than two years, the assessed penalty would be less than the statutory minimum of $1000, which is described below, even if double the AWW were used. One day is 0.14 weeks, so the penalty assessment would be $82.38 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 0.14. If the calculation were based on the entire two years, rather than a single day, the assessed penalty would be about one-quarter of the proposed assessed penalty, if Mr. Lee's actual weekly rate of pay were used instead of double the AWW. Substituting $400 for twice the AWW in the calculations set forth in paragraph 15 above, the penalty would be $760.14 for 2013, $7746.92 for 2014, and $6494.17 for 2015 for a total of $15,001.23. Explaining why Petitioner treated one day of noncompliance as two years of noncompliance, one of Petitioner's witnesses referred to Mr. Lee as a "placeholder" because the real focus of the imputation formula is the employer. The same witness characterized the imputation formula as a "legal fiction," implying that the formula obviously and, in this case, dramatically departs from the much-smaller penalty that would result from calculating exactly how much premium that Respondent avoided by not covering the modestly paid Mr. Lee on his first day of work. Regardless of how Petitioner characterizes the imputation formula, the statutory mandate, as discussed below, is to determine the "periods" during which Respondent failed to secure workers' compensation insurance within the two-year period covered by the Request. The focus is necessarily on the employee found by the investigator to be uncovered and any other uncovered employees. Petitioner must calculate a penalty based on how long the employee found by the investigator on his inspection has been uncovered, determining how many other employees, if any, in the preceding two years have been uncovered, and calculating a penalty based on how long they were uncovered. There is evidence of one or two gaps in coverage during the relevant two years, but Petitioner has failed to prove such gaps by clear and convincing evidence. One of Petitioner's witnesses testified to a gap of one month "probably" from late January to late February 2015. This witness relied on Petitioner Exhibit 2, but it is completely illegible. Ms. Pedrero testified that Respondent had workers' compensation coverage since 2011, except for a gap, which she thought had occurred prior to August 2014, which is the start date of the current policy. This conflicting evidence does not establish by clear and convincing evidence any gap, and, even if a gap had been proved, no evidence establishes the number of uncovered employees, if any, during such a gap, nor would such a gap justify enlarging the period of noncompliance for Mr. Lee. Ms. Pedrero testified that her mother-in-law, Teresa Marquez cleaned the office and warehouse on an occasional basis, last having worked sometime in 2015. Respondent never secured workers' compensation coverage for Ms. Marquez, but she did no roofing work and appears to have been a casual worker, so her periods of employment during the two-year period covered by the Request would not constitute additional periods for which Respondent failed to secure workers' compensation insurance. Based on the foregoing, Petitioner has proved by clear and convincing evidence only a single day of noncompliance, November 23, concerning one employee, Mr. Lee, within the relevant two-year period for the purpose of calculating the penalty assessment. Likewise, Petitioner has proved by clear and convincing evidence a rate of pay of only $10 per hour for the purpose of calculating the penalty assessment. At no time has Respondent provided payroll records of all its employees for November 23, 2015. Respondent Exhibit E covers payroll for Respondent's employees for a two-week period commencing shortly after November 23, 2015. But the evidence establishes that Mr. Lee's rate of pay was $80 for the day, which, as discussed below, rebuts the statutory presumption of double the AWW.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order determining that Respondent has failed to secure the payment of workers' compensation for one employee for one day within the two-year period covered by the Request and imposing an administrative penalty of $1000. DONE AND ENTERED this 19th day of July, 2016, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 19th day of July, 2016. COPIES FURNISHED: Jonathan Anthony Martin, Esquire Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Daniel R. Vega, Esquire Robert Paul Washington, Esquire Taylor Espino Vega & Touron, P.A. 2555 Ponce De Leon Boulevard, Suite 220 Coral Gables, Florida 33134 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
