The Issue The issue is whether the Stop-Work Order and the Third Amended Order of Penalty Assessment entered by Petitioner on July 25, 2013, and August 13, 2013, respectively, should be upheld.
Findings Of Fact The Department is the state agency tasked with the responsibility of enforcing the requirement of section 440.107(3), Florida Statutes, that employers in Florida secure the payment of workers' compensation for their employees. Respondent, Mad Dog Marketing Group, Inc., is a corporation organized under chapter 607, Florida Statutes, and was registered with the Florida Department of State, Division of Corporations, throughout the period of July 26, 2010, to July 25, 2013. At all times relevant to this proceeding, Respondent was engaged in the operation of a hardware store business with three locations in Florida. On July 25, 2013, based upon an anonymous referral, Tracey Gilbert, the Department's compliance investigator, commenced a workers' compensation compliance investigation of Respondent by visiting the job site, an appliance parts store at 730 West Brandon Boulevard, Brandon, Florida, and interviewing Sharon Belcher. According to Ms. Gilbert, Ms. Belcher informed her that she had 11 employees at the time of the site visit and that she did not have workers' compensation coverage for them. Ms. Belcher showed Ms. Gilbert an application for workers' compensation insurance and said she had not taken action with it since the company wanted a $10,000 premium. She also showed Ms. Gilbert some OSHA and workplace posters, but not the typical "broken arm poster" that describes workers' compensation coverage for a place of business. Ms. Belcher then gave Ms. Gilbert a list of Respondent's 11 current employees. On her laptop computer, Ms. Gilbert consulted the Department's Coverage and Compliance Automated System (CCAS) database to determine whether Respondent had secured workers' compensation coverage or an exemption from the requirements for coverage for its employees. CCAS is the database Ms. Gilbert routinely consults during the course of her investigations. She determined from CCAS that Respondent neither had workers' compensation coverage for her employees nor had received an exemption from such coverage from the Department. Ms. Belcher's recollection of her meeting with Ms. Gilbert differs from Ms. Gilbert's. Ms. Belcher recalled that she had applied for insurance with ADP on July 11, 2013, received the "broken arm poster," and believed she was covered at the time Ms. Belcher conducted her investigation. She offered an exhibit showing photographs of posters (but not the "broken arm poster") on the office bulletin board. She also offered an exhibit she testified was the UPS label from the tube containing the "broken arm poster." No photograph of the "broken arm poster" was produced as an exhibit. Ms. Gilbert did not contact ADP to verify whether Respondent had coverage on the date of her site visit to the Brandon store. Ms. Gilbert issued a Stop-Work Order to Respondent and a concurrent Request for Production of Business Records for Penalty Assessment Calculation at 11:20 a.m. on July 25, 2013. Ms. Belcher first submitted an application for workers' compensation coverage on July 11, 2013, but coverage was not bound on that date. Ms. Belcher submitted the paperwork to bind her insurance coverage on the afternoon of July 25, 2013, according to Mark Cristillo, an employee of ADP Insurance. Mr. Cristillo testified that he had made several attempts during the month of July 2013 to obtain the signed documents from Ms. Belcher, including an attempt as late as July 23, 2013, at 11:45 a.m. Ms. Belcher told Mr. Cristillo at that time that she had not reviewed the quote package. At 11:20 a.m., the time Ms. Gilbert's issued the Stop-Work Order on July 25, 2013, Ms. Belcher had not bound her insurance coverage. When she submitted the payment with the signed documents to ADP later that afternoon, the coverage was bound effective 12:01 a.m. on July 25, 2013. The records produced by Ms. Belcher were given to Chad Mason, one of the Department's penalty auditors, to calculate the penalty. He reviewed the records and determined the amount of gross payroll paid to Respondent's employees during the three- year penalty period preceding the investigation during which Respondent was not in compliance with the workers' compensation coverage requirements. Using Respondent's bi-weekly payroll chart, Respondent's Florida Department of Revenue UCT-6 reports, and the classification codes for each employee, Mr. Mason calculated a Third Amended Order of Penalty Assessment of $42,251.43, based upon what Respondent would have paid in workers' compensation premiums had it been in compliance with Florida's Workers' Compensation Law. The order was issued on October 24, 2013. Mr. Mason determined that the appropriate codes for Respondent's employees were 8010 and 8810, which are hardware store employees and general clerical employees, respectively. These codes were derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers' compensation. The manual is produced by NCCI, the National Council on Compensation Insurance, Inc., the nation's most authoritative data collecting and disseminating organization for workers' compensation. The parties stipulated prior to hearing that all of the individuals listed on the penalty worksheet of the Amended Order of Penalty Assessment were "employees" in the state of Florida of Respondent during the periods of non-compliance listed on the penalty worksheets. However, Respondent claimed that some of the employees were out-of-state and not subject to Florida law. Ms. Belcher testified that, as of July 25, 2013, three of its employees, Fred Hasselman, Douglas Strickland, and Josh Hyers, were employees of the Tennessee store and not subject to a Florida penalty. Mr. Hyers was a Florida employee prior to July 1, according to Ms. Belcher. However, all three of the employees were listed on the Florida Department of Revenue's UCT-6 form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida's Unemployment Compensation Law. Mr. Mason reasonably relied upon the UCT-6 filings for the relevant time period to calculate Respondent's gross payroll in Florida. No evidence was produced to show them listed as Tennessee employees on that state's comparable tax form or any official document from outside Florida. The logical assumption is that they are Florida employees under the law. Accepting all the employees disclosed by Respondent as Florida employees led Mr. Mason to make his calculations of the penalty assessment using the appropriate codes from the Scopes Manual for hardware store and general clerical workers, 8010 and 8810. All the named employees on the Third Amended Order of Penalty Assessment were paid by Respondent in the amounts indicated on the penalty worksheet that accompanies that assessment during the penalty period of July 26, 2010, through July 25, 2013. Even though small discrepancies came up at the hearing regarding the classifications of some of Respondent's employees, the parties had stipulated to the accuracy of the classifications of those employees so those numbers will be accepted for purposes of this decision. Based upon the testimony at the hearing and the pre-hearing stipulations of the parties, the penalty assessment in the amount of $42,251.43 is accurate. Mr. Mason correctly applied the methodology for determining the amount of coverage required, determining that the appropriate premium for the three- year period would have been $28,167.50. When multiplied by the factor used to calculate the penalty, 1.5 times the premium, the total amount due is $42,251.43. The Department has proven by clear and convincing evidence that at the time the Stop-Work Order was issued and served on Respondent on the morning of July 25, 2013, Respondent had not secured workers' compensation coverage for its employees as required by chapter 440. On two occasions, August 2 and August 21, 2013, Ms. Gilbert returned to Respondent's Brandon location after the Stop-Work Order had been issued. The first was to serve the Amended Order of Penalty Assessment and the second was to serve the Second Amended Order of Penalty Assessment. On both occasions, the business was open in violation of the Stop-Work Order. A business under a Stop-Work Order may elect to enter into a payment plan after a ten percent down payment to keep the business open while a challenge to DOAH is under way. Respondent had not entered into such a plan. Therefore, the Department seeks $1,000 penalty for each of the days Ms. Gilbert visited the Brandon store and saw it open for business. This total additional penalty of $2,000 could have been greater had the Department further investigated whether the business remained open on other days after the Stop-Work Order had been imposed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order upholding the Stop-Work Order and Third Amended Order of Penalty Assessment, and assess a penalty in the amount of $42,251.43. It is further RECOMMENDED that the Department fine Respondent an additional $1,000 per day for the two days Respondent did not comply with the Stop-Work Order, resulting in a total penalty of $44,251.43. DONE AND ENTERED this 20th day of December, 2013, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of December, 2013. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Kristian Eiler Dunn, Esquire Dickens and Dunn, P.L. 517 East College Avenue Tallahassee, Florida 32301 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390
The Issue The issues are whether Petitioner has proved that Respondent failed to secure workers' compensation insurance, as required by section 440.10, Florida Statutes, and, if so, the amount of the penalty, pursuant to section 440.107.
Findings Of Fact On September 18, 2013, the owner and Jesus Rodriguez, representing Respondent, signed a permit application for reroofing of a single-family residence located at 4311 Southwest 15th Street, Miami. An official of the Miami-Dade County Department of Regulatory and Economic Resources approved the plans on September 27, 2013. The record does not disclose when work commenced. However, at about 9:00 a.m. on September 25, 2013, an investigator of the Division of Workers' Compensation was randomly canvassing the area, noticed roofing work at the subject address, and conducted an inspection. The investigator observed three persons on the roof engaged in roofing work. When the investigator asked the three workers for whom they worked, one of them replied, "Oval Construction," and added that it was owned by Pedro Alfaro and Jesus R. Rodriguez (Mr. J. Rodriguez). When asked for a phone number for the owners, the worker gave the investigator a cell number for Mr. Alfaro. Prior to calling Mr. Alfaro, while still at the work site, the investigator researched Oval Construction and learned that it was an active corporation with two corporate officers: Mr. Alfaro and Mr. J. Rodriguez. The investigator learned that the corporation showed no workers' compensation exemptions for the officers or any workers' compensation coverage. While still at the worksite, the investigator then called Mr. Alfaro and asked him if Oval Construction had workers' compensation insurance. Mr. Alfaro said that Mr. J. Rodriguez handled such matters, so the investigator told Mr. Alfaro to have Mr. J. Rodriguez call the investigator immediately. Mr. J. Rodriguez did so and informed the investigator that the three workers worked for him, but not under Oval Construction; they worked for Respondent, and Respondent had workers' compensation insurance. Mr. J. Rodriguez stated that he did not have the insurance information at the moment, but would call back with the information. In the meantime, the investigator researched Respondent and learned that it was an active corporation with two officers: Mr. J. Rodriguez and Mr. Alberto Rodriguez (Mr. A. Rodriguez), who were not related. (Mr. J. Rodriguez is deceased.) Both officers had current workers' compensation exemptions, and the database indicated that Respondent leased its employees from South East Personnel Leasing Company. The investigator contacted South East Personnel Leasing and learned that the leasing contract had terminated on July 24, 2013, and Respondent had no current workers' compensation coverage through South East Personnel Leasing. At this point, the investigator called Mr. J. Rodriguez, who repeated that the workers were employed by Respondent, not Oval Construction. Subsequently, the investigator tried unsuccessfully several times to speak to Mr. J. Rodriguez. A few days after the inspection, Mr. A. Rodriguez called the investigator and arranged for a meeting between the investigator and Mr. J. Rodriguez for October 1, 2013. On October 1, 2013, the investigator and Mr. J. Rodriguez met, and the investigator served on him, in the name of Respondent, a Request for Production of Business Records for Penalty Assessment Calculation for the three-year period ending on September 25, 2013. Respondent never produced any business records to Petitioner. On October 2, 2013, Mr. J. Rodriguez caused the transfer of the building permit for the roofing work from Respondent to Blue Panther Roofing. On October 1, 2013, Mr. J. Rodriguez signed a Hold Harmless agreement holding Miami-Dade County harmless and assuming responsibility for any work already performed under the building permit issued to Respondent. Mr. A. Rodriguez testified that he knew nothing about the subject job. But Mr. J. Rodriguez was the qualifying general contractor of Respondent, was an officer of Respondent, and owned 20% of Respondent. In fact, Mr. J. Rodriguez was the only licensed or certified contractor employed by Respondent and was the sole person who could obtain building permits for work to be performed by Respondent. Mr. A. Rodriguez's lack of knowledge of the subject job is therefore not dispositive because Mr. J. Rodriguez had the authority to, and did, apply for the building permit in the name of Respondent, and he had the authority to, and did, obligate Respondent to do the subject reroofing work. During the above-described three-year period, according to Petitioner Exhibit 6, page 20, Respondent had workers' compensation insurance from October 4, 2010, through January 1, 2013. Additionally, according to Petitioner Exhibit 6, page 23, Respondent had workers' compensation insurance through South East Personnel Leasing from October 18, 2012, through February 20, 2013, and March 7, 2013, through July 24, 2013. This is borne out by the testimony of the investigator. (Tr., pp. 99-101.) Respondent thus did not have workers' compensation coverage for a total of 85 days during the three years at issue, during which time Respondent actively performed construction work in Florida. The three periods of noncoverage during the three years at issue are September 26 through October 3, 2010, for a total of 8 days; February 21, 2013, through March 6, 2013, for a total of 14 days; and July 25, 2013, through September 25, 2013, for a total of 63 days. A conflict in the evidence prevented Petitioner from proving by clear and convincing evidence a fourth period of noncoverage: October 4 through 17, 2012. Additionally, Mr. J. Rodriguez was listed as secretary of Respondent and exempt from workers' compensation insurance from March 1, 2013, through March 1, 2015, so he would be counted as an employee during the noncoverage periods of September 26, through October 3, 2010, and February 21, 2013, through February 28, 2013. Mr. A. Rodriguez was listed as president of Respondent and exempt from workers' compensation insurance from October 22, 2012, through October 22, 2014, so he would be counted as an employee during the noncoverage period of September 26, 2010, through October 3, 2010. Mr. A. Rodriguez's wife, Yubanis Ibarra, was also a corporate officer and was not exempt during one week of one noncoverage period: September 26 to October 3, 2010. On October 30, 2013, Petitioner issued an Amended Order of Penalty Assessment assessing a penalty of $15,594.34 pursuant to section 440.107(7)(d). The Amended Order of Penalty Assessment is supported by a Penalty Calculation Worksheet, which based the penalty on the three employees found on the job on the day of the inspection as employees during all periods of noncoverage and the three above-identified corporate officers during their respective periods of nonexemption that occurred while they served as officers. Subject to two exceptions, the Amended Order of Penalty Assessment correctly calculates the gross payroll based on the statewide average weekly wage multiplied by 1.5, applies the correct manual rates to the gross payroll, determines the correct evaded premium, and determines the correct penalty based on the premium multiplied by 1.5. The first exception is that Petitioner failed to prove by clear and convincing evidence a lack of coverage for the above-described 13 days in October 2012. This failure of proof noted in the preceding paragraph concerns four employees who generated total penalties of $2510.88, so the corrected total penalty would be $13,084.46. The second exception concerns the proof of the duration of employment of the three employees working on the roof at the time of the inspection on September 25, 2013. Petitioner has proved by clear and convincing evidence their employment only during the noncoverage period of July 24, 2013, through September 25, 2013, as discussed in the Conclusions of Law. For the two other noncoverage periods--three, if the period noted in paragraph 15 already had not been rejected--the penalty of $3220.05 has not been established, leaving a net penalty of $9864.41.
Recommendation It is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order finding Respondent guilty of not securing workers' compensation and imposing a penalty of $9864.41. DONE AND ENTERED this 13th day of November, 2015, 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 13th day of November, 2015. COPIES FURNISHED: Leon Melnicoff, Qualified Representative Thomas Nemecek, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Mariem Josefina Paez, Esquire The Law Offices of Mariem J. Paez, PLLC 300 Sevilla Avenue, Suite 304 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)
The Issue Whether David Cooper’s Construction, Inc. (“Respondent”), failed to secure the payment of workers’ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (“Petitioner” or “Department”), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the statutory requirement that employers in Florida secure workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Respondent is a Florida corporation engaged in the business of residential construction in Port St. Joe, Florida. At all times relevant hereto, Carl Woodall was a workers’ compensation compliance investigator employed by the Department. Employers may comply with the workers’ compensation coverage requirement by obtaining a workers’ compensation insurance policy or an employee leasing agreement. Corporate officers and members of limited liability companies can elect an exemption from workers’ compensation coverage. See § 440.05, Fla. Stat. On August 12, 2016, Mr. Woodall made an unannounced, random inspection of a worksite at 2912 Garrison Avenue in Port St. Joe, Florida. Mr. Woodall observed two men on the roof of an existing structure at that address who appeared to be framing an addition to the structure. At Mr. Woodall’s request, the two men identified themselves as David Cooper and Macon Stewart. Mr. Cooper identified himself as Respondent’s owner and stated that Mr. Stewart was working for him. Mr. Cooper informed Mr. Woodall that he paid Mr. Stewart by check at the rate of $10 per hour. While at the worksite, Mr. Woodall checked the Coverage and Compliance Automated System (“CCAS”) database, which tracks workers’ compensation insurance coverage and exemption data for employers in Florida. Mr. Woodall’s search of CCAS revealed that Respondent did not have a workers’ compensation insurance policy to cover its employees nor an employee leasing agreement. The search also revealed that Mr. Stewart did not have an active workers’ compensation exemption. Mr. Woodall personally served Mr. Cooper with a Stop-Work Order (“SWO”) and Order of Penalty Assessment on August 12, 2016. Respondent complied with the SWO by making a $1,000 down payment toward the penalty assessment (which had yet to be calculated) and agreeing not to allow Mr. Stewart to work for Respondent until such time as Mr. Stewart obtained an exemption. The Order of Penalty Assessment includes a Request for Production of Business Records (“Request”) which could be used to calculate the amount of the penalty. In response to the Request, Mr. Cooper provided the Department with billing statements, handwritten time sheets, and certificates of exemption for certain employees. Lynne Murcia is a Department penalty auditor. She is tasked with reviewing business records provided by employers and calculating penalties for employers who have been notified they are in violation of workers’ compensation coverage requirements. Ms. Murcia was assigned to calculate the penalty to be assessed against Respondent. Ms. Murcia began by reviewing Respondent’s business records for the audit period, which is the two-year period immediately preceding the date of the SWO. See § 440.107(7)(d), Fla. Stat. The audit period in this case is from February 1, 2015, through January 31, 2017. The Department’s penalty is based on the employer’s payroll to employees during any periods during the audit period in which the employer did not provide workers’ compensation insurance coverage for its employees (“the period of non-compliance”). In this case, the period of non-compliance is the same as the audit period. An employer’s payroll is the amount of wages or other compensation made to employees during the period of non-compliance. See Fla. Admin. Code R. 69L-6.035. Transactions that are considered payroll include direct payment for services rendered, as well as outstanding loans, reimbursements, bonuses, and profit-sharing. Id. Based upon the records received from Respondent, Ms. Murcia identified Respondent’s employees during the period of non-compliance as Joseph Turner, Linda Cooper, and Macon Stewart.2 Compensation paid to those employees during the period of non- compliance was as follows: Joseph Turner, $11,740; Linda Cooper, $2,178; and Macon Stewart, $60. Thus, Respondent’s gross payroll for the period of non-compliance was $13,978. Next, Ms. Murcia consulted the Scopes Manual published by the National Council on Compensation Insurance (“NCCI”) to assign a class code to each employee. The class codes correspond with the type of work performed by an employee and establish the manual rate for workers’ compensation insurance for that type of work. Based upon Mr. Woodall’s observations of the work being performed at the worksite, Ms. Murcia assigned NCCI class code 5645, Carpentry, to Mr. Stewart. 2 Ms. Murcia initially identified additional employees whose wages were included in the Second and Third Amended Orders of Penalty Assessment. For purposes of this Recommended Order, the relevant payroll is that identified in the Fourth Amended Order of Penalty Assessment. Based on Ms. Cooper’s description of her job duties, Ms. Murcia assigned NCCI class code 8810, Clerical, to Ms. Cooper. Respondent’s records did not identify the type of work performed by Mr. Turner. When the business records do not identify the type of work performed by an employee, the Department must apply to the employee the highest manual rate associated with any employee’s activities based on the investigator’s personal observation of work activities. See Fla. Admin. Code R. 69L-6.035(4). Ms. Murcia assigned class code 5645, Carpentry, to Mr. Turner because that class code corresponds with a higher manual rate than 8810, Clerical. Using the gross payroll to each employee, multiplied by the applicable manual rate, Respondent would have paid $1,897.51 in workers’ compensation insurance premiums to cover its employees during the period of non-compliance (“the avoided premium”). The statutory penalty to be assessed is twice the avoided premium. See § 440.107(7)(d)1., Fla. Stat. Ms. Murcia calculated the penalty to be assessed as $3,795. Ms. Murcia applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7) and Florida Administrative Code Rules 69L-6.027 and 69L-6.035 to determine the penalty to be imposed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers’ Compensation, finding that David Cooper’s Construction, Inc., violated the workers’ compensation insurance statute and assessing a penalty of $3,795. DONE AND ENTERED this 26th day of January, 2021, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 2021. COPIES FURNISHED: David Cooper David Cooper’s Construction, Inc. 2449 Hayes Avenue Port St. Joe, Florida 32456 Diane Wint, Agency Clerk Division of Legal Services Department of Financial Service Room 612.14, Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0390 Rean Knopke, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399
The Issue Whether Respondent, G and F Renovations, Inc. (Respondent), timely challenged Petitioner's proposed agency action; and, if not, whether pursuant to the doctrine of equitable tolling Respondent is entitled to an administrative hearing to challenge the proposed agency action.
Findings Of Fact Petitioner is the state agency charged with the responsibility of enforcing and ensuring employers meet the requirements of chapter 440, Florida Statutes. The law in Florida requires employers to maintain appropriate workers' compensation coverage for their employees. At all times material to this case, Respondent was doing business in Florida and was represented by Pedro Malaret, attorney at law. Prior to May 1, 2014, Michael Robinson, a compliance investigator employed by Petitioner, visited a job site wherein workers were engaged in the business of construction/roofing. Robinson was advised by the workers at the site that they were employed by Respondent. Robinson then investigated the matter to determine whether the persons at the job site were covered by Respondent's workers' compensation insurance. To do so, he spoke to the supervisor at the site and others to whom he was referred. After verifying the persons on the job site were not on the list of Respondent's covered employees, and consulting with his supervisor, Robinson posted a Stop-Work Order at the job site. The Stop-Work Order provided, in pertinent part: You have a right to administrative review of this action by the Department under sections 120.569 and 120.57, Florida Statutes. To obtain review, you must file a written petition requesting review. If you dispute a material fact contained in this action, you are entitled to a hearing under Sections 120.569 and 120.57(1), Florida Statutes, at which you may be represented by counsel, present evidence and argument on the issue(s), examine witnesses, submit a proposed recommended order, and file exceptions to the recommended order of the Administrative Law Judge. If you do not dispute a material fact contained in this action, you are entitled to a hearing under section 120.57(2), Florida Statutes, at which you may be represented by counsel, present documentary evidence, and present a written statement in opposition to this action. * * * You must file the petition for hearing so that it is received by the Department within twenty-one (21) days of your receipt of this agency action. The petition must be filed with Julie Jones, DFS Agency Clerk, Department of Financial Services, 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0390. FAILURE TO FILE A PETITION WITH THE TWENTY-ONE(21) DAYS CONSTITUTES A WAIVER OF YOUR RIGHT TO ADMINISTRATIVE REVIEW OF THE AGENCY ACTION. The Stop-Work Order and an Order of Penalty Assessment was served on Respondent's corporate agent, or authorized agent, by a process server. Respondent did not timely file a petition challenging the agency's proposed action. Instead, by email only, Respondent's counsel directed a letter to Robinson that provided: This firm has the pleasure of representing G & F Renovations, Inc. All papers to be served on G & F should be mailed or delivered to this office. My client wishes to resolve all issues relating to the matter amicably and as quickly as possible. As such, please forward a list of all documents needed to my office so that I may get them to you as soon as possible. Should you require any further documentation, please feel free to contact me either at my office or on my cell . . . I look forward to working with your [sic] to resolve this matter. Contrary to the offer to provide documents to Petitioner, Respondent did not provide business records. Eventually, an Amended Order of Penalty Assessment was issued and provided by email to Respondent's counsel at his email address of record. The Amended Order of Penalty Assessment was sent to counsel on or about October 6, 2014. Respondent did not timely file a petition to challenge the proposed agency action. Respondent did not timely challenge the Stop-Work Order and did not timely challenge the Amended Order of Penalty Assessment. Respondent did not provide any assistance to resolve the issues presented by the Stop-Work Order. When Respondent failed to timely respond to the Petitioner's requests for information, refused certified mail addressed to its office or corporate representative, and failed to timely challenge Petitioner's proposed action, a final order was entered on or about July 8, 2015. Thereafter, Respondent filed an appeal claiming Petitioner had not properly served notice of its proposed action. This case was initiated in response to the appeal to address the issue of whether the Petitioner lulled the Respondent into inaction and thereby tolled the time within which to file an administrative challenge to the proposed agency action. At no time did Respondent deny allegations pertinent to the instant case, including whether the workers at the construction job site were employed by Respondent. If the workers at the construction job site were appropriately covered by workers' compensation insurance or were exempt from coverage, Respondent did not assert such defense. In fact, Respondent did not cooperate to provide any information to Petitioner that would "resolve all issues relating to the matter amicably and as quickly as possible." Petitioner provided notice to Respondent of the procedural requirements to challenge the agency action and did not lull Respondent into a false sense of security or inaction. To the contrary, Respondent attempted to circumvent its legal responsibilities by refusing certified mail and failing to provide business records in a timely manner. Respondent seeks to benefit from its inaction. Had Respondent provided documents to support any defense to the Stop-Work Order and initial assessment of administrative fine, the issues could have been resolved. The weight of the credible evidence supports the finding that Respondent did not timely challenge the proposed agency action within the 21 days allowed by law. In short, Respondent ignored the Stop-Work Order and the legal claims it presented.
Recommendation Based upon 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 failed to timely file a petition to challenge the agency's proposed action and its failure to do so was not the result of equitable tolling. DONE AND ENTERED this 6th day of December, 2016, in Tallahassee, Leon County, Florida. S J. D. PARRISH 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 6th day of December, 2016. COPIES FURNISHED: Michael Joseph Gordon, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Kelli B. Hastings, Esquire Law Office of Kelli B. Hastings, PLLC 4005 North Orange Blossom Trail Orlando, Florida 32804 (eServed) Pedro Malaret, Esquire Malaret Law Firm, PLC 732 North Thorton Avenue Orlando, Florida 32803 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue Whether Millenium Homes, Inc. (Petitioner) conducted operations in the State of Florida without obtaining workers’ compensation coverage which meets the requirements of Chapter 440, Florida Statutes (2008), in violation of Subsection 440.107(2), Florida Statutes (2008)1, as alleged in the Stop-Work Order and Order and Penalty Assessment and the Fifth Amended Order of Penalty Assessment. If so, what penalty should be assessed by the Department of Financial Services, Division of Workers’ Compensation (Respondent), pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Respondent is the state agency charged with the responsibility of enforcing the requirements of Chapter 440, Florida Statutes, that employers in Florida secure the payment of workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Workers’ compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. The payment of workers’ compensation coverage may be secured via three non-mutually exclusive methods: 1) the purchase of a workers’ compensation insurance policy; 2) arranging for the payment of wages and workers’ compensation coverage through an employee leasing company; and 3) applying for and receiving a certificate of exemption from workers’ compensation coverage if certain statutorily mandated criteria are met. On September 4, 2008, Maria Seidler, a compliance investigator employed by Respondent, was making random site visits at the Bella Vida development in North Fort Myers. Seidler observed eight workers unloading a truck, taking measurements, and performing various tasks on new homes under construction. All eight of the men were engaged in some type of activity on the job site. None were merely standing around, sitting in a truck, or otherwise idle. Seidler had all eight men stand in front of her, spoke to them in Spanish, and recorded their names on her field interview worksheet. All eight men advised Seidler, in Spanish, that they worked for Millenium Homes. None of the men advised Seidler that they did not work for Petitioner, nor that they were present in hopes of applying for a job. The individual apparently in charge at the job site, did not advise Seidler that not all of the men present were working for Petitioner. The evidence demonstrated that D.R. Horton was the general contractor for the project, and that D.R. Horton had contracted with Petitioner to frame out the housing units at the project. The eight men, who were present on the job site and who identified themselves as employees of Petitioner, confirmed that they were present on September 4, 2008, to perform framing. Framing is a construction activity as contemplated by Subsection 440.02(8), Florida Statutes, and Florida Administrative Code Rule 69L-6.021. James Loubert, president and sole shareholder of Petitioner, was not on the job site at the time of Seidler’s arrival, and she initially spoke with him by telephone. Loubert arrived at the job site a short time later. Loubert advised Seidler that Petitioner had secured workers’ compensation coverage for its employees through an employee leasing arrangement with Employee Leasing Solutions (ELS). This coverage was later confirmed by Seidler. However, of the eight workers found on the job site, three workers, Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar, were not named on the ELS list of Petitioner’s active, covered employees. Seidler was very definite and precise in her testimony that she observed Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar wearing hard hats and engaging in work activities upon her arrival at the job site. Her testimony is found to be credible. When Loubert arrived at the job site, he informed Seidler that two of the workers, not listed on Petitioner’s active employee roster, were to have been sent home to pick up their Social Security cards, and that he had called in the third worker, Josue Sanchez Bautista, to ELS. Loubert did not inform Seidler that Osorio, Bautista, and Aguilar were not employees of Petitioner and were merely present at the job site in hopes of applying for a job. The Pre-hearing Stipulation signed by counsel for the parties and filed with the DOAH clerk on December 8, 2009, contained the following statements of admitted facts in section E: Respondent’s [sic] employees Josue Sanchez Bautista, Luis Aguilar, and Juan Perez had not been called into and accepted as employees by ELS as of September 4, 2008. Respondent [sic] was not in compliance with the coverage requirements of Chapter 440, Florida Statutes, as of September 4, 2008.2 At the hearing, both Javier Perez and Loubert testified that Osorio, Bautista, and Aguilar were not employees of Petitioner, but rather were waiting on site for Loubert to arrive, so that they could ask for jobs. However, they were all wearing hard hats. The testimony of Perez and Loubert is inconsistent with the observations of Seidler, as well as the statements made to Seidler by Loubert at the job site on September 8, 2008, and is, therefore, not credible. Petitioner had no workers’ compensation coverage other than that provided though ELS, and no active exemptions. James Loubert is the only officer of Petitioner, and did not have an exemption from coverage as of September 4, 2008. At the work-site, a Stop-Work Order 08-234-D7 was issued and personally served upon James Loubert based upon Petitioner’s failure to secure the payment of workers’ compensation for its employees Josue Sanchez Bautista, Luis Aguilar, and Alejandro Osorio. A business records request was also served on Loubert in order to obtain the records necessary to calculate and assess a penalty on Petitioner based upon its failure to comply with the coverage requirements of Chapter 440, Florida Statutes. Pursuant to Section 440.107(5), Florida Statutes, Petitioner’s business records were requested back to September 5, 2005, or three years prior to the issuance of the Stop-Work Order. Petitioner produced the register for its primary checking account to Respondent on September 4, 2008, in response to Respondent’s request for business records. Lynne Murcia is a compliance specialist for Respondent. She reviews business records produced by employers to determine the amount of payroll on which workers’ compensation premium was not paid, in order to calculate an appropriate penalty for violations of the coverage requirements of Chapter 440, Florida Statutes. Upon review of the business records initially produced by Petitioner, it was determined that the register from one of Petitioner’s two business checking accounts was missing. The records initially produced by Petitioner were, therefore, insufficient for the calculation of an appropriate penalty. It was requested that Petitioner produce the register for the second checking account, and those records were quickly produced. Thereafter, a 45-page summary of all transactions potentially meeting the definitions of payroll set forth in Florida Administrative Code Rule 69L-6.035 (the Rule), was prepared and an Order of Penalty Assessment issued. In determining which payments should potentially be considered payroll, pursuant to the Rule, all payments made by Petitioner directly to its employees that did not pass through ELS were included. To the extent that those direct payments meet the definition of payroll, they were subject to workers’ compensation premium and would be properly included in an assessed penalty. Petitioner also made direct “per diem” payments to reimburse its employees for the cost of meals and lodging which they incurred during the times that they were required to travel away from home to perform their jobs. The per diem rates were calculated pursuant to Internal Revenue Service guidelines, and were deducted as a business expense on Petitioner’s income tax returns for the years 2005-2007. The Rule requires that expense reimbursements by an employer to employees be included as payroll subject to workers’ compensation premium to the extent that the business records of the employer do not confirm that the expenses were incurred as valid business expenses. All per diem payments made by Petitioner to its employees were included in the calculations, because Petitioner did not produce the receipts reflecting that its employees had actually incurred meal and lodging expenses in those amounts. However, following the December 15, 2009, hearing, Respondent examined the issue further and concluded that Petitioner’s per diem payments to its employees were properly documented as business expenses on Petitioner’s income tax returns. Respondent thereafter sought leave to file its Fifth Amended Order of Penalty Assessment deleting all per diem payments from the assessed penalty. Petitioner made numerous payments to third parties who provided construction, maintenance, or janitorial services at the homes of James Loubert, his father, Adrian Loubert, and his wife, April White, or who provided child care services for the Loubert family. For example, Petitioner paid $1,500.00 for tile work performed at James Loubert’s residence; $478.00 to Alex Ortiz, Antonio Elias, and Candy Ortiz for pressure-washing the homes of James Loubert and April White; $2,548.14 to Pedro Delgano for building cabinets for the homes of James Loubert and his father; $11,326.40 to Rick Wilson for painting the houses of James and Adrian Loubert; and beginning August 23, 2007, through December 20, 2007, $1,433.66 to Diane Berger for cleaning James Loubert’s home. Petitioner also paid $3,402.00 to Cinta Smollis for babysitting services provided to Loubert. These individuals do not appear on the penalty work sheet of the Fifth Amended Order of Penalty Assessment, since they do not meet the statutory definition of employees. Petitioner also paid large sums of money to Adrian Loubert for the purchase of a farm in Canada. In addition, James Loubert testified that some of the payments to his father represented expense reimbursements, suggesting that, at some point, Adrian Loubert had been an employee of Petitioner. Petitioner did not introduce any exhibits into evidence reflecting the nature or amount of the reimbursements allegedly being made to Adrian Loubert. James Loubert was actively involved in the carpentry work performed by Petitioner, on the project on which the stop- work order was issued as well as on prior projects. Nevertheless, he received only a minimal salary through Petitioner’s employee leasing company, ELS. In 2007, Loubert received a total salary of $11,000.00 through ELS. In 2008, he received a total salary through ELS of only $7,200.00. Any payments that James Loubert received directly from Petitioner, that meet the definition of payroll set forth in the Rule, were subject to workers’ compensation premium, and are therefore subject to penalty. During the three-year penalty period specified by the statute, Petitioner made many cash payments to, or for the benefit of, James Loubert. The business records produced by Petitioner indicate that these cash payments were made to payees such as Blockbuster Video, Toys-R-Us, and PetsMart, as well as for vacation expenses. In addition, James Loubert took large amounts of cash from Petitioner to facilitate his hobby of racing cars. Throughout the penalty period, Petitioner also made numerous payments to Loubert’s wife, April White, and to his daughter, Alexa Seagate. Petitioner also made numerous payments to Gary White, his father-in-law and one of Petitioner’s employees. James Loubert testified that the payments made to, or on behalf of, family members, the payments made to third- party payees, and the cash payments which he took from Petitioner reflected shareholder distributions. However, the memo lines on those payment entries do not indicate that those payments were intended to be shareholder distributions. Petitioner’s business records reflect that the memo line on a check would indicate that it was a shareholder distribution, if that was what it was intended to be. This was the practice on other transactions. In addition, James Loubert testified that the memos for his Quick Books entries reflect “exactly what” each payment was for. Presumably those memo entries are the same as the memo entries on the corresponding checks. The payments made by Petitioner to third parties from which it appears that Petitioner did not receive services or a benefit, including but not limited to the payments made to family members of James Loubert, and the cash payments made by Petitioner to finance James Loubert’s auto racing hobby, do not constitute legitimate business expenses. Petitioner frequently made loans or wage advances to its employees. Although Loubert testified that those loans were repaid to him, he later acknowledged that a $2,000.00 loan to employee Rachel Broulet was never paid back, and that a $975.00 loan to Nicholas Susa was never repaid. Petitioner did not produce business records or documentary evidence at the hearing that indicates that any of the loans which it made to employees were repaid. The State of Florida has adopted a classification code developed by the National Council of Compensation Insurance (NCCI), which assigns individual four digit codes to various classes of labor. This classification code is utilized to segregate different categories of labor by risk and to determine appropriate workers’ compensation premiums for those classes of labor in Florida. Fla. Admin. Code R. 69L-6.021. As noted above, Petitioner was performing framing work at the time of the September 4, 2008, inspection. Because Petitioner’s employees were observed at work constructing residential homes, classification code 5645, detached one or two family dwellings, was correctly applied to Petitioner’s employees directly engaged in construction activities. This includes Javier Perez, as he was working along with and directly supervising the other seven carpenters who were working on site when the inspection took place. Classification code 8742, outside sales, has been applied to James Loubert, as he was not observed working on September 4, 2008. However, Loubert did testify at his deposition that he usually performed construction work along side Petitioner’s other employees, but Respondent did not apply the construction code to him in the Fifth Amended Order of Penalty Assessment. Classification code 8810 was correctly applied to those employees of Petitioner who performed clerical work in the office. The appropriate manual rates for each year of the penalty period of September 5, 2005, through September 4, 2008, was applied for each classification code assigned to Petitioner’s employees. In preparing the Fifth Amended Order of Penalty Assessment, the amount of unsecured payroll attributable to each employee of Petitioner listed on the penalty worksheet was correctly calculated. From the evidence, Luis Aguilar and Alejandro Osorio were to be paid $10.00 per hour. There was no evidence that Aguilar and Osorio had worked prior to the issuance of the Stop-Work Order, and therefore, earnings of $80.00 assigned, reflecting eight hours at $10.00 per hour for September 4, 2008, was correct. Petitioner failed to provide any business records or other information concerning the rate of pay for Josue Sanchez Bautista, the third non-compliant worker. Bautista’s wages for September 4, 2008, can be imputed utilizing the statewide average wage pursuant to Subsection 440.107(7)(e), Florida Statutes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding that Millenium Homes, Inc., failed to secure the payment of workers’ compensation insurance coverage for its employees, in violation of Section 440.38(1), Florida Statutes, and that a penalty in the amount of $66,099.37 should be imposed for the failure to provide the required workers’ compensation insurance coverage. DONE AND ORDERED this 28th day of May, 2010, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 2010.
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 AFS, LLC. (AFS), is a corporation located in Jacksonville, Florida, and is involved in the construction industry, primarily framing houses. Braman Avery is the owner and manager of AFS. Lee Arsenault is a general contractor whose business is located in Jacksonville, Florida. Mr. Arsenault contracted with AFS to perform framing services at a construction site located at 1944 Copperstone Drive in Orange Park, Florida. At all times material to this proceeding, AFS maintained workers' compensation coverage for its employees through a licensed employee leasing company. AFS contracted with Greenleads Carpentry, Inc. (Greenleads) to perform work at the job site in question. Prior to subcontracting with Greenleads, Mr. Avery requested from Greenleads, among other things, a certificate of insurance showing that Greenleads had general liability coverage and workers' compensation insurance. Greenleads provided a certificate of insurance to Mr. Avery showing that Greenleads had workers' compensation coverage. The certificate of insurance contains a policy number, dollar limits, and effective and expiration dates of June 1, 2004 through June 1, 2005. Debra Cochran is office manager of Labor Finders, an employee leasing company. According to Ms. Cochran, Labor Finders' corporate office issued the certificate of insurance to Greenleads. At the time of issuance, the certificate of insurance was valid. Greenleads did not follow through on its obligations to Labor Finders in that Green Leads did not "run its workers through" Labor Finders. Consequently, Greenleads' workers were not covered by workers' compensation as indicated on the certificate of insurance. Labor Finders did not issue any document showing cancellation or voiding of the certificate of insurance previously issued. Mr. Avery relied upon the face of the certificate of insurance believing AFS to be in total compliance with statutory requirements regarding workers' compensation for subcontractors. That is, he believed that the Greenleads' workers were covered for workers' compensation as indicated on the face of the certificate of insurance. Mr. Avery was not informed by Labor Finders or Greenleads that Greenleads did not, after all, have workers' compensation coverage in place on the workers performing work under the contract between AFS and Greenleads on the worksite in question. Bobby Walton is president of Insure America and has been in the insurance business for 35 years. His company provides general liability insurance to AFS. According to Mr. Walton, Mr. Avery's reliance on Greenleads' presentation to him of a purportedly valid certificate of insurance is the industry standard. Further, Mr. Walton is of the opinion that there was no obligation on behalf of Mr. Avery to confirm coverage beyond receipt of the certificate of insurance provided by the subcontractor. That is, there is no duty on behalf of the contractor to confirm coverage beyond receipt of the certificate of insurance. Allen DiMaria is an investigator employed by the Division. His 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 January 5, 2005, Mr. DiMaria visited the job site in question and observed 13 workers engaged in construction activities. This visit was a random site check. Mr. DiMaria interviewed the owner of Greenleads and checked the Division's database. Mr. DiMaria determined that Greenleads did not have workers' compensation coverage. After conferring with his supervisor, Mr. DiMaria issued a stop-work order to Greenleads, along with a request for business records for the purpose of calculating a penalty for Greenleads. In response to the business records request, Greenleads submitted its check ledger along with an employee cash payment ledger, both of which were utilized in calculating a penalty for Greenleads. On January 11, 2005, Mr. DiMaria issued an Amended Order of Penalty Assessment to Greenleads for $45,623.34. Attached to the Amended Order of Penalty Assessment issued to Greenleads is a penalty worksheet with a list of names under the heading, "Employee Name", listing the names of the employees and amounts paid to each employee. During the investigation of Greenleads, Mr. DiMaria determined that Greenleads was performing subcontracting work for Respondent. This led to the Division's investigation of AFS. Mr. DiMaria spoke to Mr. Avery and determined that AFS paid remuneration to Greenleads for work performed at the worksite. He checked the Division's data base system and found no workers' compensation coverage for AFS. He determined that AFS had secured workers' compensation coverage through Southeast Personnel Services, Inc. (SPLI), also a licensed employee leasing company. However, the policy with SPLI did not cover the employees of Greenleads performing work at the job site. Mr. DiMaria requested business records from Mr. Avery. Mr. Avery fully complied with this request. He examined AFS' check registry and certificates of insurance from AFS. Other than the situation involving Greenleads on this worksite, Mr. DiMaria found AFS to be in complete compliance. On January 10, 2005, after consulting with his supervisor, Robert Lambert, Mr. DiMaria issued a Stop Work Order to AFS. A Stop Work Order issued by the Division requires the recipient to cease operations on a job site because the recipient is believed to be not in compliance with the workers' compensation law. The Stop Work Order issued by Mr. DiMaria was site specific to the work site in question. Based upon the records provided by Mr. Avery, Mr. DiMaria calculated a fine. 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. Mr. DiMaria's calculation of the fine imposed on AFS was based solely on the Greenleads' employees not having workers' compensation coverage. On February 16, 2005, Mr. DiMaria issued an Amended Order of Penalty in the amount of $45,643.87, the identical amount imposed upon Greenleads. A penalty worksheet was attached to the Amended Order of Penalty Assessment. The penalty worksheet is identical to the penalty worksheet attached to Greenleads' penalty assessment, with the exception of the business name at the top of the worksheet and the Division's case number. Greenleads partially paid the penalty by entering into a penalty payment agreement with the Division. Greenleads then received an Order of Conditional Release. Similarly, AFS entered into a penalty payment agreement with the Division and received an Order of Conditional Release on February 16, 2005. Moreover, AFS terminated its contract with Greenleads. Lee Arsenault is the general contractor involved in the work site in question. AFS was the sole framing contractor on this project, which Mr. Arsenault described as a "pretty significant project." He has hired AFS to perform framing services over the years. However, because the Stop Work Order was issued to AFS, Mr. Arsenault had to hire another company to complete the framing work on the project. Mr. Avery estimates economic losses to AFS as a result of losing this job to be approximately $150,000, in addition to the fine. Mr. Arsenault, Ms. Cochran, as well as the Division's investigator, Mr. DiMaria, all agree with Mr. Walton's opinion, that it is customary practice in the construction industry for a contractor who is subcontracting work to rely on the face of an insurance certificate provided by a subcontractor. Robert Lambert is a workers' compensation district supervisor for the Division. When asked under what authority the Division may impose a penalty on both Greenleads and AFS for the same infraction, he replied that it was based on the Division's policy and its interpretation of Sections 440.02, 440.10, and 440.107, Florida Statutes.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Division of Workers' Compensation rescind the Amended Order of Penalty Assessment issued February 16, 2005, and the Stop Work Order issued to Petitioner on January 10, 2005. DONE AND ENTERED this 26th day of August, 2005, 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 26th day of August, 2005. Endnote 1/ While this Recommended Order does not rely upon the case cited by Respondent in its Notice of Supplemental Authority, Respondent was entitled to file it. COPIES FURNISHED: Colin M. Roopnarine, Esquire Douglas D. Dolin, Esquire Department of Financial Services Division of Workers' Compensation East Gaines Street Tallahassee, Florida 32399 Mark K. Eckels, ESquire Boyd & Jenerette, P.A. North Hogan Street, Suite 400 Jacksonville, Florida 32202 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Carlos G. Muniz, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure payment of workers’ compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, the appropriate penalty.
Findings Of Fact Jurisdiction The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure workers’ compensation coverage for their employees and corporate officers, pursuant to section 440.107. Patrick Hoffman was the owner and sole corporate officer for American. At all times material to this proceeding, American sold materials for window screens, patio sliding doors, screws, and spline screening; and it provided window and screen installation services. Investigation On June 29, 2016, the Department commenced an investigation following the observation of Patrick Hoffman and Timothy Barnett (also known as Adam Barnett) performing window installation services at a residential property. Kent Howe, an investigator in the Department’s compliance division, conducted an investigation regarding American’s operation of its business without proper workers’ compensation coverage. On June 29, 2016, Mr. Howe personally served a Stop-Work Order requiring American to cease all business operations and Order of Penalty Assessment on Mr. Hoffman. On June 29, 2016, Mr. Howe also served Mr. Hoffman with a Request for Production of Business Records for Penalty Calculation, requesting records to enable the Department to calculate the appropriate penalty for the period of June 30, 2014, through June 29, 2016. On June 30, 2016, the Department issued a conditional release from the Stop-Work Order. The conditional release required Respondent to pay $1,000, and agree to pay the penalty assessment within 28 days after the penalty calculation. American paid the $1,000 payment but it disputed the calculated penalty amount. An employer is required to maintain workers’ compensation coverage for employees unless there is an exemption from coverage. In the construction industry, a company must maintain coverage if it employs one or more persons. In the non-construction industry, a company is required to maintain coverage if it employs three or more persons. A contractor serving as a corporate officer in the construction industry may obtain an exemption from coverage requirements. See § 440.05, Fla. Stat. A contractor must demonstrate compliance with the workers’ compensation requirements or produce a copy of an employee leasing agreement or exemption for each employee. If an employee is a subcontractor without their own workers’ compensation coverage or an exemption, the individual is considered an employee of the contractor. American did not dispute that Timothy Barnett and Roger Wilson were employees of the company. American also did not dispute that it did not have workers’ compensation coverage for the employees as required by chapter 440. As a corporate officer, Mr. Hoffman elected to be exempted from workers’ compensation coverage. Penalty Calculation The Department assigned Eunika Jackson, a Department penalty auditor, to calculate the appropriate penalty for American. Ms. Jackson conducts penalty audits for construction and non-construction employers. Ms. Jackson testified that workers’ compensation coverage penalties are calculated based on a statutory formula in which the auditor calculates two-times the amount of the insurance premium the employer would have paid for each employee over the two-year period preceding the Stop-Work Order. The two-year period is commonly referred to as the look-back period. The penalty calculation is based on the employer’s payroll, the classification code for the industry of operation during the audit period, and the manual rate assigned to that classification code. To determine the appropriate code, the auditor uses the classification code in the Scopes® Manual, which has been adopted by Petitioner through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Ms. Jackson used business records Mr. Hoffman provided to determine the appropriate industry code and the penalty amount for each employee. Ms. Jackson reviewed bank statements to determine the gross payroll paid to Mr. Wilson and Mr. Barnett during the two-year non-compliance period. The records demonstrated that Roger Wilson received payment during the period of June 30, 2014, through December 31, 2015. Timothy (Adam) Barnett received payment during the period of January 1, 2015, through June 29, 2016. Ms. Jackson determined that American operated in the construction industry and initially assigned each employee a classification code of 5102. On August 11, 2016, the Department issued the Amended Order that assessed a total penalty of $10,785.04. The Amended Order was personally served on Mr. Hoffman on August 16, 2016. In response to the Amended Order, Respondent disputed the classification code assigned to Mr. Wilson. Mr. Hoffman testified that Mr. Wilson did not perform construction work, but rather worked as a retail employee selling merchandise in the store front. Mr. Hoffman further testified that contractors purchased items at American for use in their businesses. Mr. Hoffman’s description of Mr. Wilson’s job responsibilities and description of merchandise sold at American clearly demonstrates that Mr. Wilson did not perform construction work. Ms. Jackson correctly determined that the classification code 8018, which applies to retail and wholesale salespersons, was the appropriate code for Mr. Wilson. The classification code change resulted in a manual rate reduction and a reduced assessment applied to Mr. Wilson. On November 18, 2016, the Department filed a Motion for Leave to Amend Order of Penalty Assessment, which the undersigned granted. The Second Amended Order reduced the penalty assessment to $6,818.00. During the hearing, American continued to dispute the calculation of the penalty for Mr. Hoffman because he maintained an exemption as a corporate officer. The Department ultimately agreed to remove Mr. Hoffman from the penalty assessment worksheet and reduced the penalty assessment to $6,764.96. At hearing, there was no dispute regarding the penalty assessment related to Mr. Barnett. However, Respondent argued in the post-hearing statement for the first time that Timothy Barnett had an exemption. There was no evidence to support Respondent’s assertion. Therefore, Ms. Jackson correctly included payment to Mr. Barnett as payroll for purposes of calculating the penalty. Regarding Mr. Wilson, Mr. Hoffman argued that Mr. Wilson had an exemption from workers’ compensation coverage when he began working for American.1/ However, Mr. Hoffman could not produce a copy of the exemption and Mr. Wilson was not present at the hearing for testimony. Ms. Jackson conducted research using the Coverage Compliance Automated System (“CCAS”), a database used by the Department to maintain information regarding workers’ compensation policies, employee leasing plans, and exemptions for employees. Ms. Jackson found no record of an exemption for Mr. Wilson in CCAS. While Ms. Jackson did not exhaust all efforts to locate an exemption for Mr. Wilson, it was American’s burden to produce evidence of an exemption. Mr. Hoffman’s testimony with nothing more was insufficient to demonstrate that Mr. Wilson had an exemption and as such, Ms. Jackson appropriately included payments to Mr. Wilson as payroll to calculate the penalty. The calculation of the penalty for Mr. Wilson in the amount of $2,784.58 is correct. However, the penalty calculation for Mr. Barnett is incorrect. The amount should be $3,872.27. Therefore, the amount of the penalty should be reduced to $6,656.85. Ultimate Findings of Fact American was actively involved in business operations within the construction industry during the audit period of June 30, 2014, through June 29, 2016. Based upon the description of American’s business and the duties performed, Mr. Wilson was properly classified with a code 8018. Ms. Jackson used the correct manual rates and methodology to determine the appropriate penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order determining that: Respondent, American Aluminum Concepts, Inc., violated the requirement in chapter 440, by failing to secure workers’ compensation coverage for its employees; and Imposing a total penalty assessment of $6,656.85. DONE AND ENTERED this 16th day of December, 2016, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of December, 2016.
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees, and, if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency responsible for, inter alia, monitoring businesses within the state to ensure that such businesses are providing the requisite workers' compensation insurance coverage for all employees. The Division's headquarters are located in Tallahassee, Florida, but its investigators are spread throughout the state in order to more effectively monitor businesses. Respondent is a construction company that has been operating in excess of 30 years. It is a small company and usually only has a few employees at any given time. The company is located in Charlotte Harbor, Florida. Workers' compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. Workers' compensation coverage may be secured via three non-mutually exclusive methods: 1) The purchase of a workers' compensation insurance policy; 2) Arranging for the payment of wages and workers' compensation coverage through an employee leasing company; or 3) Applying for and receiving a certificate of exemption from workers' compensation coverage, if certain statutorily-mandated criteria are met. On January 8, 2009, Ira Bender, investigator for the Division, was doing on-site inspections in Port Charlotte, Florida. Bender stopped at the site on Edgewater Drive where new construction was underway at a YMCA. Bender observed a man (later identified as Thomas Woodall) sweeping the floor. Bender questioned Woodall and was told that Woodall worked for Respondent. When asked about his workers' compensation insurance coverage, Woodall advised that his insurance was maintained through Frank Crum Leasing Company ("Crum"). Bender called Crum and found that although Woodall had been carried as an employee of Respondent in the past, he had been released from coverage. The reason for his release was that his employment had been terminated for lack of business. Bender called Respondent to inquire about workers' compensation coverage. He was told that Respondent did not realize Woodall had been dropped from the Crum insurance coverage and that he would be reinstated immediately. In fact, coverage was restarted on that same day. Based on his finding that an employee had been working without coverage, Bender called his supervisor and provided his findings. The supervisor authorized issuance of a SWO based on the findings. The SWO was served on Respondent via hand- delivery at 11:45 a.m., on January 8, 2009. The SWO was also posted at the work site. The Division then requested business records from Respondent in order to determine whether there were any violations. If there were violations, then the Division would ascertain the amount of penalty to assess. Respondent cooperated and submitted the business records, as requested. After review of the business records, the Division issued its first Amended Order of Penalty Assessment ("Order") on January 14, 2009. The process employed by the Division was to locate all uncovered employees, i.e., those working without workers' compensation insurance for any period of time. The employees were then assigned a class code from the National Council on Compensation Insurance (NCCI) publication. Each trade or type of employment is assigned a code which sets the rate to be applied to an individual depending on the type of work he/she is performing. The Division assigned codes to the employees, determined how much the employee had been paid during the period of non-coverage, assigned the rate to the gross pay, and calculated the insurance premium needed to cover the worker for the time in question. A penalty of 1.5 times the premium was then assigned. The Order assessed a total penalty of $21,165.98 against Respondent. Respondent objected to the amount and refused to sign it due to errors contained in the Penalty Worksheet attached to the Order. Signing the Order would have allowed Respondent to return to work, but he refused to sign because he knew it was not correct. Pursuant to discussions between the parties and "additional records received," the Division issued a second Order on January 16, 2009, assessing a penalty of $6,501.27. Respondent believed that the Division was still in error and provided yet additional information--some verbal--to the Division. A third Order was issued on January 21, 2009, reducing the penalty to $3,309.56. However, Respondent still believed the penalty worksheet contained errors. Again, Respondent refused to sign and provided additional information to the Division. The Division issued a fourth Order on January 28, 2009, assessing a penalty of $2,822.24. That Order had an error concerning the spelling of an employee's name, but the penalty amount was correct. Respondent would not sign the fourth Order, because he did not believe he had intentionally violated any statute or rule concerning workers' compensation coverage for his employees. A corrected (fifth amended) Order was ultimately issued on May 19, 2009.1 The fifth Order asserts the amount of penalty now in dispute, which is the same amount appearing in the fourth amended Order. Respondent signed the fifth Order and entered into a payment plan for payment of the penalty, paying a down payment of $1,000 and monthly payments of $30 until paid in full. Respondent takes great offense to the fact that the penalty assessments were not faxed to him more quickly. He maintains that he had every intention to resolve this matter as quickly as possible, but the Division delayed and dragged out the process. The penalty worksheet attached to the fifth Order listed nine "Employee Names" that are subject to the penalty assessment. Each will be discussed below. The first "employee" is listed as "Cash" and is assigned Class Code 5403. This "employee" represents checks found in Respondent's records with the payee listed as "cash- casual labor" totaling $2,178.00 in gross payroll. Code 5403 was assigned because that is the code used by Crum for Respondent's general business. The manual rate for Code 5403 is $24.74. A penalty of $808.26 was assessed for that employee. The second employee is Jacob Prewitt. Prewitt was assigned Class Code 5221, due to the word "driveway" appearing on a check issued to him. Driveway work falls under a lower approved manual rate ($10.37) than general construction. The gross payroll amount was $1,960, and the penalty assigned to Prewitt was $304.88. The third employee is Woodall, assigned a Class Code of 5606, with a manual rate of $3.84. That code is used for supervisors and is, again, not as dangerous an occupation as general construction. The gross payroll for this entry was $1,008, and the penalty assessed for Woodall was $58.07. Cash is the fourth employee and has been covered in the discussion in paragraph 16, above. Barry Lawrence is the fifth employee; he is assigned Class Code 5437 as a cabinet maker/installer with a manual rate of $13.01. Lawrence had a Verification Letter issued by the Division indicating he was exempt from workers' compensation coverage. However, that exemption was limited to cabinet- making. By installing the cabinets, Lawrence performed work outside his exemption status. The gross payroll for his work was $6,200, and the penalty assessed for Lawrence was $1,209.33. Respondent was completely unaware that the exemption letter did not cover installation and had, in fact, always allowed cabinet- makers to install the cabinets as well. Brunderman Builders is listed as the sixth employee. It is assigned Class Code 5403 with a manual rate of $14.39. The gross payroll for this entry was $550, resulting in a penalty assessment of $118.73. The seventh employee is Jorge Gonzolas, assigned Class Code 5403, the general contracting code. Gonzolas was the employee of a contractor who was subcontracting with Respondent. The contractor died unexpectedly, and Gonzolas was left without payment for the work he had performed. Respondent generously decided to pay Gonzolas for his work, thereby, effectively making Gonzolas a de facto employee. The amount paid Gonzolas was $599.00; the penalty assessed for Gonzolas was $129.30. Woodall is again listed as employee number eight, this time with Class Code 5610, reflecting casual labor he did on one date that his insurance was not in place. The payroll amount for this work was $37.50. The penalty assessed for Woodall was $4.02. The ninth employee was Julio Garcia, assigned Class Code 8742 for outside sales, with a manual rate of $.64. The payroll amount for Garcia was $1,300. His penalty assessment amount was $12.48. Garcia was another one of the deceased subcontractor's employees that Respondent volunteered to pay for work Garcia had performed. The total payroll at issue for Respondent was $14,477.50. The total premium for that amount of payroll would have been $1,881.48, and the penalty assessed was $2,822.84. This is a fairly insignificant portion of Respondent's $5.5 million annual payroll. Respondent did not intentionally attempt to avoid the payment of workers' compensation insurance for its employees. There is no pattern of avoidance or indication that non-payment was Respondent's goal. Rather, there are plausible and reasonable explanations about the unpaid premiums. For Woodall, Respondent believed he was still covered through the Crum policy. For Gonzolas and Garcia, Respondent was simply attempting to be a nice guy. For Prewitt, the employee's exemption had unknowingly lapsed. For Lawrence, Respondent relied upon a Verification Letter from the state, but misinterpreted its scope. The Division, on the other hand, only pursued Respondent based on an actual finding of non-coverage. But for Woodall's presence at a work site doing manual labor (sweeping the floor), the Division would not have looked at Respondent's records. There is no indication the Division acted other than in strict accordance to its governing rules.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, upholding the assessment of a penalty of $2,822.24 against Respondent, Brunderman Building Company, Inc. DONE AND ENTERED this 9th day of October, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of October, 2009.
The Issue Whether Leonard Smith, d/b/a Site Development & Pipeline Construction, Inc., violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation coverage for its employees; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing workers’ compensation coverage requirements in Florida, including the requirement that employers secure the payment of workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Leonard Smith is an 85-year-old retired contractor. Respondent’s corporate records with the Florida Division of Corporations record that Leonard Smith is Respondent’s owner, president, and registered agent. Respondent was incorporated in February 2014. The company was administratively dissolved in September 2015. However, Leonard Smith still does business using Respondent’s name. On June 13, 2017, Cristina Brigantty, a compliance investigator with the Department, conducted a random workers’ compensation check at a worksite located at 499 Lorraine Leland Street in Dunedin, Florida. At the site, Investigator Brigantty observed an individual operating a compact excavator/tractor commonly called a “Bobcat” (the manufacturer’s name). The Bobcat operator was moving soil and appeared to be grading the site in preparation for the pouring of concrete. Investigator Brigantty approached the individual operating the Bobcat and requested his name. The driver identified himself as Joe Smith. Joe Smith also relayed to Investigator Brigantty that he was just hired by Leonard Smith (no relation) to work on the site. Joe Smith added that he expected to work approximately ten hours and be paid around $2,000 from Leonard Smith for the job. Joe Smith then provided Investigator Brigantty with Leonard Smith’s business card and phone number. At the final hearing, Investigator Brigantty testified that her duties for the Department include inspecting businesses to determine whether the business has obtained the required workers’ compensation insurance coverage. Investigator Brigantty explained that a business that performs construction-related work must have workers’ compensation coverage. Therefore, Investigator Brigantty believed that Respondent should have secured sufficient workers’ compensation coverage for its employee (Joe Smith). After learning Leonard Smith’s name, Investigator Brigantty searched the Department’s Coverage and Compliance Automated System (“CCAS”) database. CCAS is a Department database that tracks workers’ compensation insurance coverage. CCAS contains coverage data from insurance carriers, as well as any workers’ compensation exemptions on file with the Department. Insurance providers are required to report coverage and cancellation information, which the Department uses to update CCAS. While reviewing CCAS, Inspector Brigantty initially noted that the Department did not have on file any request from Leonard Smith, Respondent’s owner-of-record, for an exemption from workers’ compensation coverage. An exemption is a method by which a business’s corporate officer may exempt him or herself from the requirements of chapter 440. See § 440.05, Fla. Stat. Thereafter, based on her research of the information in CCAS, Inspector Brigantty concluded that Respondent did not have a valid exemption for a corporate officer (Leonard Smith) on June 13, 2017. Neither did Respondent carry any workers’ compensation coverage for Joe Smith. After determining that Respondent had not obtained workers’ compensation coverage for Joe Smith on the date of her visit, Investigator Brigantty called Leonard Smith. In the ensuing conversation, Leonard Smith told her that Joe Smith was working for him at the jobsite. On June 22, 2017, Investigator Brigantty issued a Stop- Work Order to Respondent. With the Stop-Work Order, Investigator Brigantty also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Through this document, the Department requested several categories of business records from Respondent for the period of June 14, 2015, through June 13, 2017. The requested documents pertained to: employer identification, payroll documents, account documents, disbursements, workers’ compensation coverage, professional employer organization, temporary labor service, exemptions, subcontractors, and subcontractor’s workers’ compensation coverage. Based on its investigation, the Department determined that Respondent failed to secure adequate workers’ compensation coverage for its employees. Therefore, the Department proceeded to calculate a penalty based on Respondent’s lack of compliance with chapter 440. The Penalty Calculation: Lynne Murcia, the penalty auditor who determined the penalty the Department seeks to impose on Respondent, testified regarding her computation. Ms. Murcia explained that the penalty essentially consists of the “evaded” premium amount, or the actual amount the employer would have paid in workers’ compensation insurance for the uncovered employees, multiplied by two. To calculate the appropriate penalty for Respondent’s failure to secure workers’ compensation coverage, the Department first ascertained Respondent’s period of non-compliance. In determining this time frame, the Department referred to Florida Administrative Code Rule 69L-6.028(2), which directs that: The employer’s time period or periods of non- compliance means the time period(s) within the two years preceding the date the stop- work order was issued to the employer within which the employer failed to secure the payment of compensation pursuant to chapter 440, F.S., and must be either the same time period as set forth in the business records request for the calculation of penalty or an alternative time period or period(s) as determined by the Department, whichever is less. The employer may provide the Department with records from other sources, including, but not limited to, the Department of State, Division of Corporations, the Department of Business and Professional Regulation, licensing offices, and building permitting offices to show an alternative time period or period(s) of non-compliance. Based on these instructions, the Department deduced that Respondent’s period of non-compliance was from June 14, 2015, through June 13, 2017, which was the two-year period preceding the date of the Stop-Work Order.2/ (This two-year period was also the time for which the Department requested business records from Respondent.) After determining Respondent’s period of non- compliance, the Department then calculated the monetary penalty it should impose upon Respondent. In accordance with section 440.107(7)(d)1., the Department must assess against an employer: a penalty equal to 2 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 2-year period or $1,000, whichever is greater. Therefore, the Department reviewed the business records Respondent provided to ascertain the amount of Respondent’s payroll during the two-year period of non-compliance. In response to the Department’s request for documents, Respondent produced a number of financial records. These records consisted primarily of bank statements and cancelled checks. The documentation Respondent submitted, however, was not comprehensive enough for the Department to determine all the wages Respondent paid to its employees, or the work they performed for the period of June 13, 2015, through June 14, 2017. Specifically, Respondent failed to provide complete bank statements or the corresponding check images for the periods of January 1 through April 30, 2016; June 1 through July 31, 2016; and June 1 through June 13, 2017. Consequently, the Department determined that Respondent did not provide business records sufficient for it to calculate Respondent’s complete payroll or the actual employee wages it paid over the two-year period of non-compliance. Therefore, the Department exercised its option to “impute” Respondent’s weekly payroll from June 13, 2015, through June 14, 2017. In addition to Joe Smith, the Department imputed wages for several other individuals and entities it identified in Respondent’s business records. Based on Respondent’s financial records, between June 14, 2015, and June 13, 2017, Respondent made payments to Earl Cockeranoham, “J.M.L.,” Martin Moore, “Peterson,” and Robert Tamburan. The Department also identified a subcontractor Respondent paid in 2015 named Roger’s Dirt Works, Inc. The Department further determined that at the time of the transaction, Roger’s Dirt Works, Inc., had neither workers’ compensation coverage, nor an exemption for a corporate officer. (Roger’s Dirt Works, Inc., subsequently obtained a valid exemption.) Therefore, the Department included Roger’s Dirt Works, Inc., in the penalty for the period of June 14 through December 31, 2015. The Department also added to Respondent’s payroll “uninsured labor” for the full period of non-compliance. Ms. Murcia relayed that “uninsured labor” reflects undesignated cash transactions for which the recipient was not identified or “validated” by Respondent’s business records and receipts. See Fla. Admin. Code R. 69L-6.035(1)(k). Respondent’s financial records revealed four separate cash payments totaling $6,892. Finally, the Department included Leonard Smith in all periods of non-compliance. The Department explained that Leonard Smith was registered as a corporate officer of Respondent. However, he did not have an active workers’ compensation exemption on file. Therefore, Respondent was also required to carry workers’ compensation for himself. See Fla. Admin. Code R. 69L-6.028(3)(b). To calculate Respondent’s imputed weekly payroll, section 440.107(7)(e) directs that the gross payroll for an employer who provides insufficient business records is imputed at the statewide average weekly wage multiplied by 1.5 for each employee for the period requested for the calculation of the penalty. Therefore, the Department obtained the statewide average weekly wage effective at the time of the Stop-Work Order ($886.46)3/ for each identified employee, corporate officer, and subcontractor, then multiplied that number by 1.5. See § 440.107(7)(e), Fla. Stat.; and Fla. Admin. Code R. 69L- 6.028(3)(a). To calculate a penalty based on an imputed payroll, the Department assigns an employer’s employees the highest rated workers’ compensation classification code. The classification code is based on either the business records submitted or the investigator’s observation of the employees’ activities. In this case, the business records Respondent provided to the Department were not sufficient to categorize the exact type of work that Joe Smith, or any of the other identified employees, performed for Respondent over the two-year period of non-compliance. However, during her investigation of the jobsite on June 13, 2017, Investigator Brigantty observed Joe Smith engaging in activities consistent with excavating, such as filling, backfilling, and moving earth. According to the Scopes Manual issued by the National Council on Compensation Insurance, Inc. (“NCCI”), class code 6217 is the “Excavation and Drivers” classification.4/ Consequently, the Department applied class code 6217 to all Respondent’s employees and officer for the entire penalty period. See Fla. Admin. Code R. 69L-6.028(3)(b) and 69L-6.021(2)(mmm)(excavation is classified as “construction activity”). Therefore, to calculate the premium amount for the workers’ compensation insurance Respondent should have paid for its employees, the Department applied the manual rates corresponding to class code 6217. Thereafter, based on: 1) the total periods of non- compliance, 2) Respondent’s calculated payroll for the periods of non-compliance, and 3) the estimated premium for workers’ compensation insurance, the Department issued the Amended Order of Penalty Assessment (“Penalty Assessment”) on October 13, 2017. The Penalty Assessment imposed a penalty of $42,407.08 against Respondent. Ms. Murcia explained that the initial penalty amount was calculated without the benefit of Respondent’s business records. However, after Respondent began providing its financial records in October 2017, the Department reduced its penalty assessment three times. On November 30, 2018, the Department served a 2nd Amended Order of Penalty Assessment, which adjusted the penalty down to $11,958.46. On May 29, 2019 (following leave by the undersigned), the Department produced a 3rd Amended Order of Penalty Assessment, which further reduced the penalty to $8,443.96. Finally, at the final hearing (in light of Leonard Smith’s deposition), the Department introduced a 4th Amended Order of Penalty Assessment with a revised (and final) penalty amount of $8,366.44. At the final hearing, Leonard Smith was adamant that Joe Smith was not his employee on June 13, 2017, or at any point. Instead, Leonard Smith explained that he is just a “broker” to help place workers with construction projects. Leonard Smith claimed that for the last nine years, he simply does estimating and consulting for other small contractors. Consequently, because he no longer engages in construction work or employs any workers, Leonard Smith asserted that he does not need to carry workers’ compensation insurance. Regarding the work that Investigator Brigantty witnessed on June 13, 2017, Leonard Smith testified that a church contacted him about supplying, filling, and spreading dirt on its property. Leonard Smith explained that the church was to pay him $12,840.00 for the job. Leonard Smith referred to Joe Smith as a “private contractor.” Leonard Smith relayed that he met Joe Smith in June 2017. Joe Smith expressed that he was looking for work. Leonard Smith told him about the job in Dunedin, Florida. On June 13, 2017, Leonard Smith met Joe Smith, who had brought his Bobcat, at the church and discussed the job. Leonard Smith then left him to complete the work. Leonard Smith insisted that he never “paid” Joe Smith. Instead, he simply agreed to share the money the church was giving him for the job. Leonard Smith called his own portion a “consulting fee.” On June 23, 2017, after he had received the $12,840.00 from the church, Leonard Smith wrote a check to Joe Smith for $3,440.00. Joe Smith never worked for Respondent or Leonard Smith before or since June 13, 2017. Regarding the payment to Earl Cockeranoham recorded in Respondent’s business records, Leonard Smith testified that Mr. Cockeranoham never worked for him. Instead, the money he paid to Mr. Cockeranoham in 2015 ($460.00) was for work Mr. Cockeranoham performed for the same church. Regarding evidence of a payment to Martin Moore, Leonard Smith testified that he paid Mr. Moore $500.00 in 2016 for Mr. Moore’s rent. Leonard Smith denied that he paid Mr. Moore for construction work. Respondent further testified that Respondent had known Mr. Moore a long time. Joe Smith testified at the final hearing regarding his understanding of his employment relationship with Respondent on June 13, 2017. Initially, Joe Smith explained that he had been out of work for several months and was looking for a job when he met Leonard Smith in June 2017. Leonard Smith offered him the work at the church spreading soil. Joe Smith relayed that he owned the Bobcat and brought it with him to the jobsite. Joe Smith stated that, on June 13, 2017, he met Leonard Smith at the church. There, Leonard Smith informed him that he was to bring an area of land up to proper elevation. They also discussed how they would split payment for the job. Joe Smith understood that the church was going to pay Leonard Smith. Then, Leonard Smith was going to give him his share. Joe Smith confirmed that Leonard Smith sent him approximately $3,000.00 several weeks after the job. Joe Smith also conceded that he was not covered by workers’ compensation on June 13, 2017. Joe Smith further testified that Investigator Brigantty showed up at the worksite the day he started working. Finally, at the final hearing, Joe Smith was dismayed that he had created this issue regarding workers’ compensation coverage. He expressed that he was simply looking for work, and Leonard Smith was kind enough to help him out. Joe Smith did not want to get anyone in trouble. Based on the competent substantial evidence in the record, the Department demonstrated, by clear and convincing evidence, that Respondent failed to secure workers’ compensation insurance coverage or workers’ compensation exemptions for its “employees” for the periods of June 14, 2015, through June 13, 2017. Accordingly, the Department met its burden of proving that Respondent violated chapter 440 and should be penalized. (As more fully addressed below, the evidence in the record does not sufficiently establish that either Earl Cockeranoham or Martin Moore were “employees” of Respondent under chapter 440. Therefore, they should not be included in the penalty calculation.)
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, Leonard Smith, d/b/a Site Development & Pipeline Construction, Inc., violated the requirement in chapter 440 to secure workers’ compensation coverage, and imposing a total penalty of $8,219.06. DONE AND ENTERED this 13th day of September, 2019, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER 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 13th day of September, 2019.
The Issue Whether Royal Roofing and Restoration, Inc. (Respondent or Royal Roofing), failed to secure workers’ compensation insurance coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (Petitioner or Department), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement of chapter 440, that Florida employers secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a Florida for-profit corporation organized on July 28, 2015, and engaged in the business of roofing and storm damage restoration. The company was formed, and initially conducted business, in Tallahassee, Florida, but expanded to the Panama City area in 2016. Traci Fisher is Respondent’s President and Registered Agent, with a mailing address of 1004 Kenilworth, Tallahassee, Florida 32312. DOAH Case No. 17-0879 On May 4, 2016, Department Compliance Investigator Jesse Holman, conducted a routine workers’ compensation compliance inspection at 374 Brown Place in Crestview, Florida. Mr. Holman observed four men removing shingles from the roof of a residential structure at that address. Mr. Holman first interviewed a worker who identified himself as Dustin Hansel and reported that he and the other three workers on site were a new crew for Respondent, the permit for the job had not yet been pulled, and the workers were not aware of the rate of pay for the job. Mr. Hansel telephoned Respondent’s sales manager, Dillon Robinson, who then spoke directly with Mr. Holman via telephone. Mr. Robinson informed Mr. Holman that Respondent obtained workers’ compensation coverage through Payroll Management Inc. (PMI), an employee-leasing company. Mr. Holman identified the three remaining workers at the jobsite as Milton Trice, Winston Perrotta, and Kerrigan Ireland. Mr. Holman contacted PMI and secured a copy of Respondent’s then-active employee roster. None of the workers at the jobsite, including Mr. Hansel, were included on Respondent’s employee roster. Upon inquiry, Mr. Holman was informed that PMI had no pending employee applications for Respondent. Mr. Holman consulted the Department’s Coverage Compliance Automated System (CCAS) and found Respondent had no workers’ compensation insurance policy and no active exemptions. During Mr. Holman’s onsite investigation, the workers left the jobsite. Mr. Holman could not immediately reach Ms. Fisher, but did speak with her husband, Tim Fisher. Mr. Fisher informed Mr. Holman that the crew was on their way to the PMI Fort Walton office to be enrolled on Respondent’s employee roster. On May 5, 2016, based on his investigation, and after consultation with his supervisor, Mr. Holman issued Respondent Stop-Work Order (SWO) 16-148-1A, along with a Business Records Request (BRR) for records covering the audit period of July 27, 2015 through May 4, 2016. Later that day, Mr. Holman spoke to Ms. Fisher, who informed him the crew did not have permission to begin the work on that date, as she had not yet pulled the permit for the reroof. Ms. Fisher further explained that the crewmembers had been instructed to complete applications with PMI prior to departing Tallahassee for Crestview. Ms. Fisher confirmed the crewmembers were completing applications at PMI Fort Walton that same day. Mr. Holman met with Ms. Fisher the following day and personally served SWO 16-148-1A. Ms. Fisher delivered to Mr. Holman an updated employee roster from PMI which included Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter documenting Mr. Trice was not employed by Respondent; and a $1000 check as downpayment on the penalty. Respondent initially submitted business records in response to the BRR on May 23 and 25, 2017. DOAH Case No. 17-1558 On June 8, 2016, Mr. Holman conducted a random workers’ compensation compliance inspection at 532 Rising Star Drive in Crestview. The single-family home at that address was undergoing renovations and Mr. Holman observed three men on the roof removing shingles. None of the men on the roof spoke English, but a fourth man, who identified himself as Jose Manuel Mejia, appeared and stated he worked for Respondent, and that all the workers onsite were paid through PMI at a rate of $10.00 per hour. Mr. Mejia admitted that one of the worker’s onsite, Emelio Lopez, was not enrolled with PMI and explained that Mr. Mejia brought him to the worksite that day because he knew Mr. Lopez to be a good worker. The remaining workers onsite were identified as Juan Mencho and Ramon Gonzalez, both from Atlanta, Georgia. Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho. Mr. Mejia stated that he and his crews also received reimbursement checks directly from Respondent for gas, rentals, materials, and the like. Mr. Holman contacted PMI, who produced Respondent’s then-active employee roster. Mr. Mejia and Mr. Mencho were on the roster, but neither Mr. Gonzalez nor Mr. Lopez was included. Mr. Holman next contacted Ms. Fisher, who identified Mr. Mejia as a subcontractor, but was not familiar with any of the other men Mr. Holman encountered at the worksite. Mr. Holman consulted via telephone with his supervisor, who instructed him to issue an SWO to Respondent for failing to secure workers’ compensation coverage for its employees. Mr. Holman issued SWO 16-198-1A by posting the worksite on June 8, 2016. Department Facilitator Don Hurst, personally served Ms. Fisher with SWO 16-198-1A in Tallahassee that same day. SWO 16-148-1A Penalty Calculation1/ Department Penalty Auditor Eunika Jackson, was assigned to calculate the penalties associated with the SWOs issued to Respondent. On June 8, 2016, Ms. Jackson began calculating the penalty associated with SWO 16-148-1A. Ms. Jackson reviewed the documents submitted by Respondent in response to the BRR. The documents included Respondent’s Wells Fargo bank statements, check images, and PMI payroll register for the audit period.2/ Based on a review of the records, Ms. Jackson identified the following individuals as Respondent’s employees because they received direct payment from Respondent at times during the audit period: David Rosinsky, Dylan Robinson, Jarod Bell, Tommy Miller, and David Shields. Ms. Jackson determined periods of non-compliance for these employees based on the dates they received payments from Respondent and were not covered for workers’ compensation via PMI employment roster, separate policy, or corporate officer exemption. Ms. Jackson deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. Based upon Ms. Fisher’s deposition testimony, Ms. Jackson assigned National Council on Compensation Insurance (NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class code 5474, Painting, to Mr. Rosinsky; NCCI class code 8742, Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810, clerical office employee, to Mr. Shields. Utilizing the statutory formula for penalty calculation, Ms. Jackson calculated a total penalty of $191.28 associated with these five “employees.” Ms. Jackson next calculated the penalty for Dustin Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta, the workers identified at the jobsite as employees on May 4, 2016. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll to these “employees,” thus, Ms. Jackson used the statutory formula to impute payroll to these workers. Ms. Jackson calculated a penalty of $14,970.12 against Respondent for failure to secure payment of workers’ compensation insurance for each of these four “employees” during the audit period. The total penalty associated with these four “employees” is $59,880.48. Ms. Jackson calculated a total penalty of $60,072.96 to be imposed against Respondent in connection with SWO 16-148- 1A. Business Records In compliance with the Department’s BRR, Respondent submitted additional business records on several occasions-- March 21, May 3 and 31, June 7, and August 15 and 24, 2017--in order to establish its complete payroll for the audit period. While the Department admits that the final documents submitted do establish Respondent’s complete payroll, the Department did not issue amended penalty assessment based on those records in either case. The Department maintains Respondent did not timely submit records, pursuant to Florida Administrative Code Rule 69L-6.028(4), which allows an employer 20 business days after service of the first amended order of penalty assessment to submit sufficient records to establish payroll. All business records submitted by Respondent were admitted in evidence and included as part of the record. The undersigned is not limited to the record before the Department at the time the amended penalty assessments were imposed, but must determine a recommendation in a de novo proceeding. The undersigned has relied upon the complete record in arriving at the decision in this case. Penalty Calculation for Ireland, Trice, and Perrotta For purposes of workers’ compensation insurance coverage, an “employee” is “any person who receives remuneration from an employer” for work or services performed under a contract. § 440.02(15)(a), Fla. Stat. Respondent did not issue a single check to Mr. Ireland, Mr. Trice, or Mr. Perrotta during the audit period. Mr. Ireland, Mr. Trice, and Mr. Perrotta are not included on any PMI leasing roster included in the record for the audit period. The uncontroverted evidence, including the credible and unrefuted testimony of each person with knowledge, established that Mr. Ireland, Mr. Trice, and Mr. Perrotta were newly hired for the job in Crestview on May 4, 2016, and began working that day prior to submitting applications at PMI, despite Ms. Fisher’s directions otherwise. Petitioner did not prove that either Mr. Ireland, Mr. Trice, or Mr. Perrotta was Respondent’s employee at any time during the audit period. Petitioner did not correctly calculate the penalty of $44,911.26 against Respondent for failure to secure workers’ compensation insurance for Mr. Ireland, Mr. Trice, and Mr. Perrotta during the audit period. Penalty Calculation for Hansel Ms. Fisher testified that Mr. Hansel has owned several businesses with which Respondent has conducted business over the years. Originally, Mr. Hansel owned a dumpster rental business, now owned by his father. Mr. Hansel also owned an independent landscaping company with which Respondent occasionally transacted business. When Respondent expanded business into the Panama City area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise new crews in the area. The job on May 4, 2016, was his first roofing job. A review of Respondent’s records reveals Respondent issued the following checks to Mr. Hansel during the audit period: December 4, 2015, in the amount of $360, $300 of which was for “dumpster rental” and the remaining $60 for “sod”; May 4, 2016, in the amount of $200 for “sod repair”; May 6, 2016, in the amount of $925 as reimbursement for travel expenses; May 9, 2016, in the amount of $1,011.50 (with no memo); and May 21, 2016, in the amount of $100 for “7845 Preservation.” Mr. Hansel was included on Respondent’s PMI leasing roster beginning on May 13, 2016. Petitioner proved that Mr. Hansel was Respondent’s employee at times during the audit period. Petitioner did not prove that Respondent’s records were insufficient to determine payroll to Mr. Hansel during the audit period, which would have required an imputed penalty. Petitioner did not correctly calculate the penalty of $14,970.42 against Respondent for failure to secure workers’ compensation insurance coverage for Mr. Hansel during the audit period. Sod repair by Mr. Hansel is a service performed for Respondent during the audit period. Reimbursement of travel expenses is specifically included in the definition of payroll for purposes of calculating the penalty. See Fla. Admin. Code R. 69L- 6.035(1)(f) (“Expense reimbursements, including reimbursements for travel” are included as remuneration to employees “to the extent that the employer’s business records and receipts do not confirm that the expense incurred as a valid business expense.”). Dumpster rental is neither work performed on behalf of, nor service provided to, Respondent during the audit period. The correct uninsured payroll amount attributable to Mr. Hansel is $2,296.50. Petitioner correctly applied NCCI class code 5551, Roofing, to work performed by Mr. Hansel based on the observation of Mr. Holman at the worksite on May 4, 2016. With respect to Mr. Hansel’s services for sod and sod repair, Petitioner did not correctly apply NCCI class code 5551. Petitioner did not introduce competent substantial evidence of the applicable NCCI class code and premium amount for landscaping services performed during the audit period.3/ Uninsured payroll attributable to Mr. Hansel for roofing services during the audit period is $2,036.50. The approved manual rate for workers’ compensation insurance for NCCI class code 5551 during the period of non- compliance--May 9 and 21, 2016--is $18.60. The premium amount Respondent would have paid to provide workers’ compensation insurance for Mr. Hansel is $378.79 (One percent of Mr. Hansel’s gross payroll during the non-compliance period--$20.36--multiplied by $18.60). The penalty for Respondent’s failure to secure worker’s compensation coverage insurance for Mr. Hansel during the period of non-compliance is calculated as two times the amount Respondent would have paid in premium for the non- compliance period. The correct penalty for Respondent’s failure to maintain workers’ compensation coverage for Mr. Hansel during the period of non-compliance is $757.58. Penalty Calculation for Salesmen Independent contractors not engaged in the construction industry are not employees for purposes of enforcing workers’ compensation insurance requirements. See § 440.02(15)(d)1., Fla. Stat. Sales is a non-construction industry occupation. The Department calculated a penalty associated with payroll attributable to the following persons identified by Ms. Fisher as independent salesmen: Dylan Robinson, Kevin Miller, Marc Medley, Mike Rucker, Colby Fisher, David Jones, Jarod Bell, Matt Flynn, and Todd Zulauf. Section 440.02(15)(d)1. provides that an individual may be an independent contractor, rather than an employee, as follows: In order to meet the definition of independent contractor, at least four of the following criteria must be met: The independent contractor maintains a separate business with his or her own work facility, truck, equipment, materials, or similar accommodations; The independent contractor holds or has applied for a federal employer identification number, unless the independent contractor is a sole proprietor who is not required to obtain a federal employer identification number under state or federal regulations; The independent contractor receives compensation for services rendered or work performed and such compensation is paid to a business rather than to an individual; The independent contractor holds one or more bank accounts in the name of the business entity for purposes of paying business expenses or other expenses related to services rendered or work performed for compensation; The independent contractor performs work or is able to perform work for any entity in addition to or besides the employer at his or her own election without the necessity of completing an employment application or process; or The independent contractor receives compensation for work or services rendered on a competitive-bid basis or completion of a task or a set of tasks as defined by a contractual agreement, unless such contractual agreement expressly states that an employment relationship exists. If four of the criteria listed in sub- subparagraph a. do not exist, an individual may still be presumed to be an independent contractor and not an employee based on full consideration of the nature of the individual situation with regard to satisfying any of the following conditions: The independent contractor performs or agrees to perform specific services or work for a specific amount of money and controls the means of performing the services or work. The independent contractor incurs the principal expenses related to the service or work that he or she performs or agrees to perform. The independent contractor is responsible for the satisfactory completion of the work or services that he or she performs or agrees to perform. The independent contractor receives compensation for work or services performed for a commission or on a per-job basis and not on any other basis. The independent contractor may realize a profit or suffer a loss in connection with performing work or services. The independent contractor has continuing or recurring business liabilities or obligations. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures. Ms. Fisher testified that each of the above-named salesmen sold roofing jobs for her at various times during the audit period on a commission-only basis. The contractors inspect homeowner roofs, draft schematics, use their own equipment (e.g., drones), incur all of their own expenses, and handle the insurance filing for the homeowner’s insurance to pay on the claim. Ms. Fisher further testified that each of the salesmen also sells for other roofing contractors in the Tallahassee area. She pays the salesmen on a per-job basis. Ms. Fisher does not compensate the salesmen for the time involved in inspecting a roof, preparing schematics, or making the sale. Nor does Ms. Fisher reimburse the salesmen for travel to sales jobsites. Ms. Fisher’s testimony was credible, persuasive, and uncontroverted. Respondent introduced in evidence four “Independent Contractor Checklists” allegedly completed by Mr. Robinson, Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist follows the format of section 440.02(15)(d)1., listing the criteria set forth in subparagraphs a. and b. The forms indicate that they each meet all the criteria listed in subparagraph b.: they perform, or agree to perform services for a specific amount of money and control the means of performing the service; they incur the principal expenses related to the service performed; they are responsible for satisfactory completion of the services performed; they receive compensation for the services performed on a per-job or commission basis; they may realize a profit or suffer a loss in connection with performing the services; they have continuing and recurring business liabilities or obligations; and the success or failure of their business depends on the relationship of business receipts to expenditures.4/ In its Proposed Recommended Order, Petitioner conceded the nine men identified by Respondent as independent sales contractors “would not be considered employees of Respondent” because the “salesmen would seem to meet the majority of [the] requirements [of section 440.02(15)(d)1.b.].” Respondent issued Dylan Robinson, Mark Medley, Colby Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Jarod Bell, David Jones, and Todd Zulauf an IRS FORM 1099-MISC for income paid during the 2016 tax year. Respondent did not prove by clear and convincing evidence that the above-named salesmen were Respondent’s employees during the audit period. For SWO 16-148-1A, Respondent did not correctly calculate the penalty because Respondent included a penalty associated with Petitioner’s failure to provide workers’ compensation insurance coverage for Dylan Robinson and Jarod Bell. Penalty in the amount of $20.70 associated with Dylan Robinson and Jarod Bell should not be included in the total penalty. The correct penalty amount for SWO 16-148-1A, based on records submitted by Respondent on or before March 20, 2016, is $929.16. Draft Revised Second Amended Order of Penalty Assessment The additional records submitted by Respondent revealed payments made to persons during the audit period who were not included in the Department’s Second Amended Order of Penalty Assessment. The Department and Respondent disagreed at hearing whether the payments qualified as payroll. At hearing, Petitioner submitted a draft revised second amended penalty calculation for SWO 16-148-1A based on all records received from Respondent. The revised penalty is in the amount of $61,453.50. Ms. Jackson populated the spreadsheet with the name of every individual to whom a check was written on Respondent’s business bank account during the audit period, removing only those payments to individuals and entities which, to Petitioner’s knowledge, were not Respondent’s employees. Respondent’s calculations in the revised penalty suffer from some of the same errors as in the second amended penalty calculation--they include individuals Petitioner did not prove were Respondent’s employees, as well as payments which were not uninsured payroll. For the reasons explained herein, Petitioner did not prove that salesmen David Jones, Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer, and Colby Fisher were Respondent’s employees during the audit period. Respondent did not accurately calculate the penalty associated with those persons. Respondent made payments to David Shields during the audit period, which the Department argues should be included as payroll. The Department included payments to Mr. Shields in its draft revised second amended order of penalty assessment and assigned NCCI class code “8810” for clerical work. Mr. Shields is a licensed professional roofing contractor who acts as “qualifier” for Respondent’s business. A qualifier is a licensed professional who certifies plans for permit applications submitted by another business. Respondent pays Mr. Shields a flat fee per permit application qualified by him. The record evidence does not support a finding that Mr. Shields provides clerical services to Respondent. Mr. Shields provides some sort of professional services to Respondent, and is likely an independent contractor providing his own materials and supplies, maintaining his own business accounts, and liable for his own business success. Assuming Mr. Shields were Respondent’s employee, the Department introduced no evidence of an appropriate NCCI class code for Mr. Shields’ services. The Department did not prove that payments to Mr. Shields should be included as Respondent’s uninsured payroll during the audit period. Respondent paid Susan Swain a total of $258 during the audit period for clerical work. Ms. Fisher maintained Ms. Swain’s work was casual at first, and the payments reflect a time when she worked on-again, off-again, handling the paperwork for restoration insurance claims. Later, Ms. Swain came to work for Respondent full-time and was added to the PMI leasing roster. Section 440.02(15)(d)5. provides that a person “whose employment is both casual and not in the course of the trade, business, profession or occupation of the employer” is not an employee. The statute defines “casual” employment as work that is anticipated to be completed in 10 working days or less and at a total labor cost of less than $500. See § 440.02(5), Fla. Stat. In its Proposed Recommended Order, the Department argues Ms. Swain’s wages should be included as payroll because the “testimony regarding Ms. Swain does not suggest that she was employed for less than 10 days[.]” However, it was the Department’s burden to prove that Ms. Swain was a statutory employee. The Department did not prove that Ms. Swain’s wages should be included within Respondent’s uninsured payroll. The largest portion of the penalty assessed by the Department, as well as in the draft revised second amended penalty assessment, against Respondent is in connection with various roofers who were employed by Respondent at times during the audit period. Each of the roofers was included on Respondent’s PMI leasing roster, but received checks directly from Respondent in addition to PMI payroll checks. The Department included all the direct payments to those roofers as payroll for purposes of calculating a penalty in this case. As Ms. Fisher explained, the company bids a reroof on a per job basis--usually a per square foot price. Ms. Fisher adds each roofing contractor’s name to the PMI leasing roster to ensure that each roofer is covered by workers’ compensation insurance for the duration of the job. When the job is completed (which is a matter of just a few days), the contractor reports to Ms. Fisher what amount of the contract price was spent on materials, supplies, or other non-labor costs. Ms. Fisher cuts a check to the contractor for that amount and authorizes PMI to issue payroll checks for the “labor cost” (the difference between the contract price and the non-labor costs). Ms. Fisher refers to this process as “back-charging” the contractors for their materials, maintenance, tools, and other non-labor costs. The Department is correct that the direct payments are payroll to the roofing contractors. See Fla. Admin. Code R. 69L-6.035(1)(b) and (h) (remuneration includes “payments, including cash payments, made to employees by or on behalf of the employer” and “payments or allowances made by or on behalf of the employer for tools or equipment used by employees in their work or operations for the employer.”). The Department would be correct to include these payments in the penalty calculation if they represented uninsured payroll. However, the evidence supports a finding that the direct payments to the roofing contractors were made for the same jobs on which Respondent secured workers’ compensation coverage through PMI. The roofing contractors were covered for workers’ compensation throughout the job, even though they may have received partial payment for the job outside of the PMI payroll checks.5/ The direct payments were not for separate reroofs on which the roofers were not otherwise insured. The Department did not correctly calculate penalties associated with the following roofing contractors: Donald Tontigh, Joseph Howard, Keith Mills, Aaron Kilpatrick, Gustavo Tobias, Jose Mejia, and Tommy Miller. Ms. Fisher also received cash payments from Respondent during the audit period. These payments were made in addition to her payroll through PMI. Ms. Fisher described these payments as “cash tickets,” which were paid outside of her PMI payroll to reimburse her for investments made in the company. For purposes of calculating the penalty in this case, these “cash tickets” are clearly payroll, as that term is to be calculated pursuant to rule 69L-6.035. Similar to the issue with the roofing contractors, the question is whether the payments represent uninsured payroll. Ms. Fisher did not hold a corporate officer exemption at any time relevant hereto. Ms. Fisher testified that she was covered through PMI payroll leasing. In contrast to the roofing contractors, Ms. Fisher’s direct payments do not directly coincide with any particular job or specific time frame during which Ms. Fisher was covered for workers’ compensation insurance through PMI. The evidence was insufficient to determine that the amounts were insured payroll. The Department properly calculated a penalty associated with payroll attributable to Ms. Fisher. Respondent made one payment of $75 to Donald Martin during the audit period. The Department calculated a penalty of $27.90 associated with this payment to Mr. Martin. Ms. Fisher explained that Mr. Martin was a down-on-his-luck guy who came by the office one day complaining that Mr. Hansel owed him some money. Ms. Fisher offered to put him on a roofing crew and wrote him the $75 check to help him out. Ms. Fisher’s testimony was both credible and unrefuted. Mr. Martin was never hired by Respondent, put on any roofing crew, or added to the PMI leasing roster. Mr. Martin was not Respondent’s employee because he did not receive remuneration for the “performance of any work or service while engaged in any employment under any appointment or contract for hire” with Respondent. § 440.02(15)(a), Fla. Stat. Cale Dierking works for Respondent full-time in a clerical position. During the audit period, Respondent paid Mr. Dierking directly by check for $1,306.14. This payment was made outside of Mr. Dierking’s PMI payroll checks. Ms. Fisher testified that she paid Mr. Dierking directly on one occasion when “PMI’s payroll got stuck in Memphis, I believe it was a snow-in situation where payroll checks didn’t come.” Rather than ask her employee to go without a timely paycheck, she advanced his payroll. Ms. Fisher’s testimony was both credible and unrefuted. The payment to Mr. Dierking is clearly payroll. However, Mr. Dierking was covered for workers’ compensation through PMI for the period during which the check was issued. Thus, there is no evidence that it was uninsured payroll. The Department did not correctly calculate a penalty associated with payments to Mr. Dierking. The correct penalty to be assessed against Respondent for failure to secure workers’ compensation coverage for its employees during the audit period in connection with SWO 16-148- 1A is $770.60. Penalty Calculation for SWO 16-198-1A Ms. Jackson calculated a total penalty against Respondent in connection with SWO 16-198-1A in the amount of $19,115.84, as reflected in the Second Amended Order of Penalty Assessment. The Department correctly imputed penalty against Respondent in the amount of $91.68 each for uninsured payroll to Mr. Gonzalez and Mr. Lopez. The evidence supported a finding that these workers were Respondent’s statutory employees on June 8, 2016, and were not enrolled on the PMI leasing roster. The Department did not correctly calculate the penalty associated with salesmen Dylan Robinson, Jarod Bell, Kevin Miller, Mark Medley, Matt Flynn, and Todd Zulauf. The Department did not correctly calculate the penalty associated with roofing contractors Abraham Martinez- Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina-Agustin, Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy Miller. The Department did not correctly calculate the penalty against Respondent associated with Mr. Shields, Respondent’s qualifier. Based on a review of Respondent’s complete “untimely” records, the Department discovered direct payments made to additional employees not included on the Second Amended Order of Penalty Assessment. Respondent made a direct payment to Ethan Burch in the amount of $602.50 during the audit period. Ethan Burch is one of Respondent’s full-time clerical employees. The evidence is insufficient to determine whether the payment of $602.50 was insured or uninsured payroll. As such, the Department did not prove it correctly calculated the penalty associated with Mr. Burch. Respondent also made a direct payment to Chelsea Hansel in the amount of $965 during the audit period. Ms. Hansel is another clerical employee. Ms. Hansel’s PMI enrollment was delayed due to some background investigation. Respondent paid Ms. Hansel for work she completed prior to enrollment. The direct payment to Ms. Hansel constitutes uninsured payroll. The Department correctly calculated the penalty associated with the payment to Chelsea Hansel. The correct penalty amount to be imposed against Respondent for failure to secure payment of workers’ compensation coverage for its employees (Gonzalez, Lopez, and Chelsea Hansel) during the audit period in connection with SWO 16-198-1A is $187.80.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers’ Compensation, finding that Royal Roofing and Restoration, Inc., violated the workers’ compensation insurance law and, in DOAH Case No. 17-0879, assessing a penalty of $770.60; and in DOAH Case No. 17-1558, assessing a penalty of $187.80. DONE AND ENTERED this 24th day of January, 2018, 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 24th day of January, 2018.
