The Issue The issues are whether Respondent, Deck King Corp., failed to secure workers’ compensation coverage for its employees, and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (“Department”) correctly calculated the penalty assessment imposed against Respondent.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of its employees. Respondent was a business providing services in the construction industry with its principal office located at 2200 Northwest 22nd Court, Miami, Florida 33142. On June 29, 2015, Marilyn Victores, the Department’s compliance investigator, observed Ivan Lopez Avila and Robert Jordan performing construction work on a job site at 150 South Hibiscus Drive, Miami Beach, Florida 33139. She learned from the individuals working that they were performing the job on behalf of Respondent, Deck King Corp. After gathering the information at the job site, Ms. Victores spoke with her supervisor, Ms. Scarlett Aldana, and an investigation was performed. The Division of Corporations’ website was consulted to determine, among other things, the identity of Respondent’s corporate officers. Mses. Victores and Aldana learned that Respondent had three corporate officers and directors listed, Derek Barnick, Thomas Barnick, and Fausto Lopez. They also learned that the corporation was “active.” Ms. Victores consulted the Department’s Coverage and Compliance Automated System (“CCAS”) for proof of workers’ compensation coverage and for any exemptions associated with Respondent. An exemption is a method whereby a corporate officer can be relieved of the responsibility of the requirements of chapter 440, Florida Statutes, pursuant to section 440.05. CCAS is the Department’s internal database that contains workers’ compensation insurance policy and exemption information. Insurance providers are required to report insurance coverage information to the Department which is then inputted into CCAS. Ms. Victores’ CCAS search revealed that Respondent did not have a workers’ compensation policy or an employee leasing policy. Additionally, she discovered that no active exemptions were associated with Respondent. Based upon the information she gathered, Ms. Victores issued and served Respondent with a Stop-Work Order on June 29, 2015. Ms. King simultaneously issued and served Respondent a Request for Production of Business Records for Penalty Assessment Calculation (the “Request for Production”). The Request for Production sought documents to enable the Department to determine Respondent’s payroll for the time period of June 30, 2013, through June 29, 2015. In response to the Request for Production, Respondent provided the Department only bank statements. Ms. Eunika Jackson, a penalty auditor with the Department, was assigned to calculate the penalty to be assessed against Respondent. Ms. Jackson believed the business records produced by Respondent were insufficient to calculate a penalty for the entire audit period as they did not specify payroll or payments made to employees other than two specific checks, which were credited against the penalty ultimately assessed against Respondent. Based upon Ms. Jackson’s calculations, on October 9, 2015, the Department issued an Amended Order of Penalty Assessment to Respondent which was served on Respondent on that date. The Amended Order of Penalty Assessment imposed a penalty of $148,923.16. To make the penalty assessment determination, Ms. Jackson consulted the codes listed in the National Council on Compensation Insurance’s (NCCI) Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist in the calculation of workers’ compensation insurance premiums. Based upon Ms. Victores’ description of the activities Respondent’s workers were performing and the descriptions listed in the NCCI Scopes® Manual, Ms. Jackson determined that the proper classification for employees of Respondent was 5403. Ms. Jackson then utilized the corresponding manual rates for that classification code and the related periods of the alleged non- compliance. Based upon the information provided to her by Mses. Victores and Aldana, Ms. Jackson utilized the appropriate methodology specified in section 440.107(7)(d)1. and rules 69L-6.027 and 69L-6.028, to determine the penalty of $148,923.16. The business records supplied by Respondent in response to the Department’s Request for Production consisted of two years’ worth of bank statements. No tax records, such as W-2s, W-4s, 1099s, or tax returns of Respondent, were provided to the Department to allow it to determine whether any of the workers were independent contractors, what salaries, if any, they were paid, or in any way to mitigate the penalty assessed by the Department. By not appearing at hearing or attempting to file any documents in explanation or mitigation of the penalty assessed against it, Respondent gave the Department nothing upon which to reach any conclusion of payroll other than through imputation. Using the Penalty Calculation Worksheet, Ms. Jackson determined the penalty to be assessed against Respondent. She imputed the income for Derek Barnick, Thomas Barnick, Ivan Lopez Avila, Robert Lopez, and Fausto Lopez, and used actual records provided by Respondent to determine the income of an individual identified only as “Mili” who received $105 in April 2014. Working through the calculations called for by the worksheet included the class code, period(s) of non-compliance, gross payroll, a divisor of 100 which was then multiplied by the approved manual rate, and then multiplied by two to calculate the penalty. The result was a penalty assessment of $148,923.16. By not appearing at hearing or offering any evidence to contradict the penalty assessed by the Department, Respondent waived its opportunity to prove the Department’s data used and calculations made were performed improperly. The Department properly determined the penalty using the worksheet prescribed by its statutes and rules.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $148,923.16 against Respondent. DONE AND ENTERED this 15th day of March, 2016, 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 15th day of March, 2016. COPIES FURNISHED: Tabitha G. Harnage, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Deck King Corp. 2200 Northwest 22nd Court Miami, Florida 33142 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 The issues in this case are whether Respondent, Axiom Construction Design Corporation (Axiom), failed to provide workers' compensation coverage, and, if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing the various requirements of chapter 440, Florida Statutes. Section 440.107(3) mandates, in relevant part, that employers in Florida must secure workers’ compensation insurance coverage for their employees. At all times relevant, Axiom was a small Florida corporation engaged in the construction industry, principally installing drywall. Axiom’s principal office is located at 1067 Walt Williams Road, Lakeland, Florida. Mr. Pratt is Axiom’s owner, sole corporate officer, and registered agent. On July 23, 2014, Randall Durham conducted a job site workers’ compensation compliance investigation (Compliance Investigation). Mr. Durham spoke with Mr. Pratt at a job site at 109 Cattleman Road, the new Sarasota mall. Mr. Pratt and Al Lappohn were working the job site at the new mall. Mr. Pratt had a workers’ compensation policy in place with Southeast Personnel Leasing. Mr. Lappohn did not have an exemption from workers’ compensation coverage, and he was not covered by Axiom’s Southeast Personnel Leasing policy. On July 23, 2014, Mr. Pratt, as Axiom’s representative, was hand-served a Stop-Work Order1/ and a Request for Production of Business Records for Penalty Assessment Calculation (Request). This Request encompassed all of Axiom’s payroll documents, account documents, disbursements, workers’ compensation coverage policies, and professional employer organization records from January 4, 2013, through July 23, 2014. Mr. Pratt provided the certificates of liabilities, payroll and tax records for 2013, and additional business records to the Department. These records were given to Mr. Knopke to calculate the penalty. In reviewing the records, Mr. Knopke determined that Mr. Pratt, Mr. Lappohn and Frank Cutts were employees of Axiom, and that Axiom did not provide workers’ compensation coverage for them. Mr. Cutts worked for Axiom at a Family Dollar Store build-out in Orlando in early 2014. Mr. Cutts swept up after the drywall was installed in the store, and was paid $125. Axiom conceded it owed the workers’ compensation penalty based on the work Mr. Lappohn and Mr. Cutts performed. The business records provided that during the audit period Mr. Pratt had dual employment, payment being paid outside of leasing. Dual employment is when a business has a leasing policy and there is extraneous payroll that is paid outside of the leasing policy. Payments received outside of a leasing policy are considered unsecured payroll for the purposes of calculating a penalty against an employer. Mr. Knopke included Mr. Pratt’s outside distributions in the penalty calculation. The “Scopes Manual” is published by the National Council on Compensation Insurance, Inc. (NCCI), the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. The manual contains certain codes related to the construction industry and trades considered to be within that industry. The installation of drywall, wallboard, sheetrock, plasterboard or cement board is considered to be “construction” under the relevant codes in the manual. The manual, with its codes and classifications, is relied upon in the insurance industry and has been adopted by the Department in Florida Administrative Code Rule 69L-6.021. Mr. Knopke, using the manual, determined the appropriate classification code for Respondent’s employees was 5445. Mr. Knopke applied the correct rates and used the methodology found in section 440.107(7)(d)1., and Florida Administrative Code Rules 69L-6.027 and 69L-6.028 to calculate the penalty assessment. Based upon the testimony and exhibits, the 3rd Amended Penalty Assessment in the amount of $20,221.62 is accurate and correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the 3rd Amended Order of Penalty Assessment, and assess a penalty in the amount of $20,221.62. DONE AND ENTERED this 2nd day of June, 2015, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of June, 2015.
Findings Of Fact 12. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on November 17, 2011, the Amended Order of Penalty Assessment issued on December 5, 2011, and the 2"! Amended Order of Penalty Assessment issued on February 20, 2012, attached as exhibits and fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Jeff Atwater, Chief Financial Officer of the State of Florida, or his designee, having considered the. record in this case, including the request for administrative hearing received from J & S CONCRETE, INC., the Stop-Work Order and Order of Penalty Assessment, the Amended Order of Penalty Assessment, and the 2™ Amended Order of Penalty Assessment, and being otherwise fully advised in the premises, hereby finds that: 1. On November 17, 2011, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 11-313-D7 to J & S CONCRETE, INC. The Stop-Work Order and Order of Penalty Assessment included a Notice of Rights wherein J & S CONCRETE, INC. was advised that any request for an administrative proceeding to challenge or contest the Stop-Work Order and Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Stop-Work Order and Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 2. On November 17, 2011, the Stop-Work Order and Order of Penalty Assessment was served by personal service on J & S CONCRETE, INC. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On November 23, 2011, J & S CONCRETE, INC. timely filed a request for administrative hearing (hereinafter “Petition”) with the Department. A copy of the petition is attached hereto as “Exhibit B” and incorporated herein by reference. 4. On December 5, 2011, the Department issued an Amended Order of Penalty Assessment to J & S CONCRETE, INC. The Amended Order of Penalty Assessment assessed a total penalty of $45,720.65 against J & S CONCRETE, INC. The Amended Order of Penalty Assessment included a Notice of Rights wherein J & S CONCRETE, INC. was advised that any request for an administrative proceeding to challenge or contest the Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Amended Order of _ Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 5. On December 7, 2011, the Department served by personal service the Amended Order of Penalty Assessment to J & S CONCRETE, INC. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit C” and incorporated herein by reference. 6. On January 20, 2012, the Department referred the matter to the Division of Administrative Hearings for assignment to an Administrative Law Judge. 7. On February 20, 2012, the Department issued a 2"! Amended Order of Penalty Assessment to J & S CONCRETE, INC. The 2™ Amended Order of Penalty assessed a total penalty of $6,416.73 against J & S CONCRETE, INC. The 2"? Amended Order of Penalty Assessment included a Notice of Rights wherein J & S CONCRETE, INC. was advised that any request for an administrative proceeding to challenge or contest the 2"? Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the 2" Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 8. On May 24, 2012, J & S CONCRETE, INC. entered into a Settlement Agreement. Under the Settlement Agreement, J & S CONCRETE, INC. must pay a total penalty of $6,413.73, or enter into a Periodic Payment Agreement within thirty (30) days of the execution of the Settlement Agreement. The Agreement also provides that the petition be dismissed with prejudice upon the execution of the Settlement Agreement. A copy of the Settlement Agreement is attached hereto as “Exhibit D” and incorporated herein by reference. 9. On May 24, 2012, Administrative Law Judge Lynne A. Quimby-Pennock issued an Order Closing File and Relinquishing Jurisdiction as a result of the executed Settlement Agreement. A copy. of the Order is attached hereto as “Exhibit E” and incorporated herein by reference. 10. On May 29, 2012, the 2"! Amended Order of Penalty was served via certified mail on Michael J. Rich, Esq., counsel for J & S CONCRETE, INC. A copy of the 2" Amended Order of Penalty is attached hereto as “Exhibit F” and incorporated herein by reference. 11. As of the date of this Final Order, J & S CONCRETE, INC. has failed to comply with the conditions of the Settlement Agreement. The Department has received no payment from J & S CONCRETE, INC. in this matter, nor has J & S CONCRETE, INC. entered into a Periodic Payment Agreement at this time.
Findings Of Fact 12. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on October 31, 2008, the Amended Order of Penalty Assessment issued on November 26, 2008, the Second Amended Order of Penalty Assessment issued on May 4, 2009, and the Third Amended Order of Penalty Assessment issued on August 5, 2009, which are fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Alex Sink, Chief Financial Officer of the State of Florida, or her designee, having considered the record in this case, including the Stop- Work Order and Order of Penalty Assessment and the Third Amended Order of Penalty Assessment served in Division of Workers’ Compensation Case No. 08-327-D2, and being otherwise fully advised in the premises, hereby finds that: 1. On October 31, 2008, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 08-327-D2 to CONNIE ARGUELLO, D.D.S. P.A. The Stop-Work Order and Order of Penalty Assessment included a Notice of Rights wherein CONNIE ARGUELLO, D.D.S. P.A. was advised that any request for an administrative proceeding to challenge or contest the Stop-Work Order and Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Stop-Work Order and Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes. 2. On November 3, 2008, the Stop-Work Order and Order of Penalty Assessment was served by personal service on CONNIE ARGUELLO, D.D.S. P.A. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On November 26, 2008, the Department issued an Amended Order of Penalty Assessment in Case No. 08-327-D2 to CONNIE ARGUELLO, D.D.S. P.A. The Amended Order of Penalty Assessment assessed a total penalty of $4,318.14 against CONNIE ARGUELLO, D.D.S. P.A. The Amended Order of Penalty Assessment included a Notice of Rights wherein CONNIE ARGUELLO, D.D.S. P.A. was advised that any request for an administrative proceeding to challenge or contest the Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes. 4. On December 2, 2008, the Amended Order of Penalty Assessment was served by personal service to CONNIE ARGUELLO, D.D.S. P.A. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On December 24, 2008, the Department received a letter from CONNIE ARGUELLO, D.D.S. P.A. requesting an administrative-hearing. The Department subsequently issued a Final Order Denying Petition as Untimely on January 30, 2009. 6. After the Final Order Denying Petition as Untimely was entered, CONNIE ARGUELLO, D.D.S. P.A. demonstrated that a timely petition for administrative review had previously been filed with the Department, and an Order Withdrawing Final Order Denying Petition as Untimely was entered on March 26, 2009. The petition for administrative review was then forwarded to the Division of Administrative Hearings on April 23, 2009, and the matter was assigned DOAH Case No. 09-2189. 7. On May 4, 2009, the Department issued a Second Amended Order of Penalty Assessment in Case No. 08-327-D2 to CONNIE ARGUELLO, D.D.S. P.A. The Second Amended Order of Penalty Assessment assessed a total penalty of $4,116.63 against CONNIE ARGUELLO, D.D.S. P.A. The Second Amended Order of Penalty Assessment was served on CONNIE ARGUELLO, D.D.S. P.A. through the Division of Administrative Hearings. A copy of the Second Amended Order of Penalty Assessment is attached hereto as “Exhibit C” and is incorporated herein by reference. 8. On August 5, 2009, the Department issued a Third Amended Order of Penalty Assessment in Case No. 08-327-D2 to CONNIE ARGUELLO, D.D.S. P.A. The Third Amended Order of Penalty Assessment assessed a total penalty of $3,744.47 against CONNIE ARGUELLO, D.D.S. P.A. The Third Amended Order of Penalty Assessment was served on CONNIE ARGUELLO, D.D.S. P.A. through the Division of Administrative Hearings. A copy of the Third Amended Order of Penalty Assessment is attached hereto as “Exhibit D” and is incorporated herein by reference. 9. On August 14, 2009, CONNIE ARGUELLO, D.D.S. P.A. signed a Payment Agreement Schedule for Periodic Payment of Penalty in Case No. 08-327-D2. A copy of the Payment Agreement Schedule for Periodic Payment of Penalty is attached hereto as “Exhibit E” and incorporated herein by reference. 10. On August 14, 2009, the Department issued an Order of Conditional Release from Stop-Work Order in Case No. 08-327-D2 to CONNIE ARGUELLO, D.D.S. P.A. A copy of the Order of Conditional Release from Stop-Work Order is attached hereto as “Exhibit F.” 11. On November 4, 2009, a Joint Stipulation for Dismissal was filed in DOAH Case No. 09-2189. Subsequently, on November 9, 2009, the Administrative Law Judge issued an Order Closing File which relinquished jurisdiction to the Department for final agency action. A copy of the Order Closing File is attached hereto as “Exhibit G” and incorporated herein by reference.
The Issue The issues are as follows: (a) whether Respondent failed to secure the payment of workers’ compensation for its employees; and if so, (b) whether Petitioner assessed an appropriate penalty.
Findings Of Fact Petitioner is the state agency that is responsible for enforcing the requirements Chapter 440, Florida Statutes, requiring employers to secure the payment of workers’ compensation for their employees. At all times relevant here, Respondent has been an active Florida corporation. Respondent’s business involves the installation of acoustic ceiling tiles. Respondent’s work in this regard constitutes construction. On March 16, 2010, Carl Woodall, Petitioner’s workers’ compensation compliance investigator, conducted a random compliance check at a construction site. The site was located at 707 Jenks Avenue in Panama City, Florida. Upon his arrival in the construction site, Mr. Woodall observed two individuals, Robin and Todd Calhoun, installing acoustic ceiling tiles in a commercial office building. The individuals informed Mr. Woodall that they were working for Jackie Shores. The individuals provided Mr. Woodall with contact information for Mr. Shores. Mr. Woodall initially contacted Mr. Shores by phone. Later, Mr. Woodall and Mr. Shores spoke in person at the construction site. Mr. Shores informed Mr. Woodall that he was employed by Respondent as a job supervisor. Mr. Shores also identified Robin and Todd Calhoun as Respondent’s employees. Mr. Shores informed Mr. Woodall that Respondent used Southeast Employee Leasing for workers’ compensation coverage, but that Robin and Todd Calhoun had not been signed up for coverage. Mr. Woodall then contacted George Kaspers from Southeast Employee Leasing to verify whether Respondent had secured workers’ compensation for Robin and Todd Calhoun. Mr. Kaspers confirmed that the Calhouns were not covered and that they did not have pending employee applications. On March 16, 2010, Mr. Kaspers faxed Mr. Woodall a list of Respondent’s employees that were covered by workers’ compensation insurance. The list did not name the Calhouns. Mr. Woodall next searched Petitioner’s Coverage and Compliance Automated System (CCAS) for proof of a workers’ compensation policy or officer exemptions. CCAS is a database that lists workers’ compensation insurance policy information and all workers’ compensation exemptions. The database did not list a current policy for Respondent or any valid exemptions. Mr. Woodall also reviewed the website maintained by the Florida Department of State, Division of Corporations. The review showed that Respondent had been an active corporation since May 7, 2002. Based on his investigation, Mr. Woodall determined that Respondent had not secured workers’ compensation coverage for all of its employees as required by Chapter 440, Florida Statutes. On March 16, 2010, Petitioner issued, and served on Respondent, a Stop-Work Order and Order of Penalty Assessment, together with a Request for the Production of Business Records for Penalty Assessment Calculation. The business records request applied to the period of March 17, 2007, through March 16, 2010. The request sought production of payroll records, workers’ compensation policy documents, employee leasing documents, temporary labor service documents, and workers’ compensation exemption documents. Mr. Woodall did not initially request subcontractor payroll and workers’ compensation documentation from Respondent because he did not see any subcontractors on site. He did not want to burden Respondent with a request for more documents that were necessary to determine a proper penalty. However, after Respondent failed to produce the requested records within the required time-period, the case was assigned to Monica Moye, Respondent’s penalty calculator, to prepare a penalty based on Respondent’s imputed payroll. On April 8, 2010, Mr. Woodall personally served an Amended Order of Penalty Assessment on Respondent. The Order assessed a total penalty in the amount of $77,492.93 against Respondent for failure to secure workers’ compensation coverage for its employees. On April 5, 2010, and April 7, 2010, Respondent provided bank records with check images to Petitioner for the period of March 1, 2007, through March 31, 2010. Ms. Moye used these records to calculate a 2nd Amended Order of Penalty Assessment. The second order was based on payments to employees and subcontractors that were not covered by workers’ compensation insurance or an exemption there from. The second order assessed a penalty in the amount of $13,018.63. After service of the 2nd Amended Order of Penalty Assessment, Ms. Moye received additional information from Respondent regarding a subcontractor that was covered by its own workers’ compensation policy. After confirming the subcontractor's coverage, Ms. Moye removed all payments to that subcontractor from Respondent's penalty. Mr. Woodall subsequently issued a 3rd Amended Order of Penalty Assessment to Respondent, assessing a penalty in the amount of $7,105.35. Later, Ms. Moye received information from Respondent, indicating that two additional subcontractors had workers’ compensation coverage for their employees. This information resulted in the issuance of a 4th Amended Order of Penalty Assessment, assessing a penalty in the amount of $6,675.91. Classification codes are four digit codes assigned to occupation by the National Council on Compensation Insurance, Inc. (NCCI) to assist in the calculation of workers’ compensation insurance premiums. The codes are listed in the Scopes® Manual, which Petitioner has adopted by rule. After discovery was completed in this case, Petitioner determined that some of Respondent’s employees had been assigned an improper construction classification code of 5348 on the 4th Amended Order of Penalty Assessment. Code 5348 encompasses ceramic tile, indoor stone, and marble installation. The proper code for Respondent’s employees was 5020, which encompasses the installation of suspended acoustical ceilings. Based on information provided by Respondent during discovery, Petitioner also determined that one of Respondent’s clerical employees should be assigned classification code 8810 rather than construction code 5348. Additionally, Petitioner discovered that payments to two entities were payments for material rather than labor. Based on information learned during discovery, Petitioner prepared a 5th Amended Order of Penalty Assessment, assessing a total penalty in the amount of $8,621.46. To calculate the penalty of the 5th Amended Order of Penalty Assessment, Petitioner totaled the gross payroll paid to Respondent’s employees and subcontractors that were not covered by workers’ compensation for each period of non-compliance. Respondent conceded that all of the individuals and entities listed on the penalty worksheet performed services for Respondent during the time periods listed. Respondent also conceded that the gross payroll amounts were correctly calculated, that none of the individuals listed had secured an exemption, and that none of the payments to employees or subcontractors included in the penalty calculation were covered by a workers’ compensation policy. Approved manual rates are established by NCCI and adopted by Petitioner. The approved manual rates are calculated upon the risk assigned to the type of employment reflected by each classification code. Using the penalty calculation worksheet, Petitioner divided the gross payroll amount for each employee and subcontractor in each period of non-compliance by 100 and multiplied that figure by the approved manual rate for the classification code assigned to that employee or subcontractor. The product was the amount of workers’ compensation premium Respondent should have paid for each employee and subcontractor if Respondent had been compliant. The premium amounts were then multiplied by 1.5 to arrive at the penalty for each employee and subcontractor. The penalties for each employee and subcontractor for each period of non-compliance were then added together to come up with a total penalty of $8,621.48.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, enter a final order, affirming, approving, and adopting the 5th Amended Order of Penalty Assessment. DONE AND ENTERED this 10th day of December, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 2010. COPIES FURNISHED: Jackie Shores M & M Coop Construction Co., Inc. 1401 Minnesota Avenue Lynn Haven, Florida 32444 Holly R. Werkema, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CP, FRP Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services’ The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether the Respondent, Steve Mundine Construction, Inc., timely challenged the Second Amended Order of Penalty Assessment and, if not, whether pursuant to the doctrine of equitable tolling Respondent’s untimely filed challenge should be accepted.
Findings Of Fact The Petitioner is the state agency charged with the responsibility of enforcing and assuring 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, the Respondent was doing business in Florida and was subject to the requirements of the law. On May 6, 2015, Stephanie Scarton, an investigator employed by the Petitioner, stopped at one of the Respondent’s construction sites and initiated an investigation as to whether the Respondent maintained appropriate workers’ compensation for the two employees found at the job site. After determining that the requisite documentation for workers’ compensation coverage was not produced, Ms. Scarton issued a Stop-Work Order (Petitioner’s Exhibit A). The Stop- Work Order advised the Respondent that he, Steven Mundine, d/b/a, Steve Mundine Construction, Inc., was in violation of Florida law by “failing to obtain coverage that meets the requirements of chapter 440, F.S., and the Insurance Code.” Petitioner’s Exhibit A included a Notice of Rights that provided, in part: You have a right to administrative review of this action by the Department under sections 120.569 and 120.57, Florida Statutes. * * * FAILURE TO FILE A PETITION WITHIN THETWENTY-ONE (21) DAYS CONSTITUTES A WAIVER OF YOUR RIGHT TO ADMINISTRATIVE REVIEW OF THEAGENCY ACTION. [Emphasis in original] In response to the Stop-Work Order, the Respondent met with Cathy Nunez on May 7, 2016, and executed an Agreed Order of Conditional Release from Stop-Work Order (Petitioner’s Exhibit B). In addition to signing the agreed order, the Respondent submitted an affidavit that provided: I Steve Mundine have terminated Bill Busch and Karl G. Kerr. I am no longer conducting business as Steve Mundine Const. Inc. I have opened a new company Paradigm Building, LLC but will not work til we applied and received exemptions. Including Richard Hans. Under the terms of the Agreed Order of Conditional Release from Stop-Work Order the Respondent represented that he would remit periodic payments of the remaining penalty amount pursuant to a Payment Agreement Schedule for Periodic Payment of Penalty with the Department or pay the remaining penalty amount in full within 28 days after the service of the Stop-Work Order. As a condition of receiving the conditional release the Respondent remitted $1,000.00 toward the penalty amount. In order to assist the Petitioner with the accurate calculation of the penalty that would be due, the Respondent was advised that he needed to submit records. When the Respondent asked Cathy Nunez if he needed to retain a lawyer, she did not tell him that he did not need a lawyer. She advised him that a lawyer was not required to produce the records that were needed to make the penalty calculation. The Respondent did produce records to the Petitioner and in turn an Amended Order of Penalty Assessment (Petitioner’s Exhibit C) was completed that advised the Respondent that he owed a total penalty of $63,837.82. Cathy Nunez hand-delivered the Amended Order of Penalty Assessment to the Respondent on July 24, 2015. Included was a second Notice of Rights that advised the Respondent of his right to challenge the assessment. Additionally, the Respondent was advised that a petition to seek administrative review of the action had to be filed within twenty-one days. After considering additional records submitted by the Respondent, the Petitioner prepared a Second Amended Order of Penalty Assessment (Petitioner’s Exhibit D) to itemize the revised amount owed by the Respondent. The Second Amended Order of Penalty Assessment ordered the Respondent to pay a total penalty of $47,006.28. Stephanie Scarton delivered the Second Amended Order of Penalty Assessment to the Respondent on December 22, 2015. At the same time (December 22, 2015), Ms. Scarton presented the Respondent with a Payment Agreement Schedule for Periodic Payment of Penalty (Petitioner’s Exhibit E). The payment agreement acknowledged that the Respondent had previously remitted $1,000.00 toward his penalty and allowed for the remaining $46,006.28 to be repaid over the course of 60 monthly payments. The Respondent did not agree to sign the payment agreement. Accordingly, a blank agreement was left with the Respondent, not the one providing for the payments previously described. On December 22, 2015, the Respondent disagreed with the repayment amount and believed the penalty had been incorrectly calculated. On December 22, 2015, the Respondent knew he had a limited amount of time to challenge the Second Amended Order of Penalty Assessment. On December 22, 2015, Ms. Scarton hand-delivered to the Respondent the Second Amended Order of Penalty Assessment including a Notice of Rights. The only documents not left with the Respondent on December 22, 2015, were copies of the payment agreement signed by Ms. Scarton. On December 22, 2015, the Notice of Rights provided to the Respondent was identical to the Notice of Rights previously provided to him. Before leaving the Respondent on December 22, 2015, Ms. Scarton reminded the Respondent he had a limited amount of time to file a petition seeking administrative review of the agency action. The Petitioner did not misrepresent the procedural requirements to challenge the agency action, did not lull the Respondent into a false sense of security or inaction, and did not advise the Respondent as to whether he should retain a lawyer in connection with an administrative review of the penalty assessment. The weight of the credible evidence supports the finding that when the Respondent eventually filed a petition to challenge the agency action, it was beyond the 21 days allowed by law.
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 the Respondent’s request for administrative review of the Second Amended Order of Penalty Assessment was not timely filed. DONE AND ENTERED this 27th day of May, 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 27th day of May, 2016. COPIES FURNISHED: Christopher Ivey Miller, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 (eServed) John Laurance Reid, Esquire Dickens Reid PLLC 517 East College Avenue Tallahassee, Florida 32301 (eServed) Young J. Kwon, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Michael Joseph Gordon, Esquire Florida Department of Financial Services Workers Compensation Compliance 200 East Gaines Street Tallahassee, Florida 32399 (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 KP Roofing Masters, LLC ("Respondent"), failed to secure the payment of workers' compensation coverage for its employees, and if so, whether the Department of Financial Services, Division of Workers' Compensation ("Department"), correctly calculated the penalty imposed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440 that employers in Florida secure workers' compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent was a business providing services in the construction industry. Its principal office is located at 7100 Northwest 12th Street, Suite 210, Miami, Florida 33126. The Investigation. On September 26, 2014, the Department's compliance investigator, Cabrera, observed two individuals performing roofing work on a house in Coral Gables, Florida. Investigator Cabrera interviewed the individuals, identified as Rodolfo Moscoso and Jairo Alvarado. Both men informed Cabrera that they worked for Respondent. Cabrera then checked the permit board located at the jobsite and confirmed that Respondent pulled the permit for the roofing work. After gathering the information at the jobsite, Cabrera consulted the Division of Corporations’ website to determine, inter alia, the identity of Respondent's corporate officers. Cabrera found that Jorge Cappelleti ("Cappelleti") was Respondent's sole corporate officer. Cabrera then consulted the Department's Coverage and Compliance Automated System ("CCAS") for proof of workers' compensation coverage and for exemptions associated with Respondent. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. (2014). CCAS is the Department's internal database that contains workers' compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Cabrera's CCAS search revealed that Respondent did not have a workers' compensation policy or an employee leasing policy. Cabrera additionally discovered that Cappelleti had a valid exemption. Cabrera then called Cappelleti who confirmed that the two men at the jobsite were his employees and that the employees were not covered by workers' compensation insurance. Based on the information gathered, on September 26, 2014, Cabrera issued Respondent a Stop-Work Order and Order of Penalty Assessment. On September 29, 2014, Cabrera served Respondent with the Stop-Work Order and Order of Penalty Assessment. Cabrera simultaneously served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation ("BRR"). The BRR requested documents that would enable the Department to determine Respondent's payroll for the time period of September 27, 2012, through September 26, 2014. In response to the BRR, Respondent ultimately provided the Department with bank statements, check details, a general ledger, and other records. Penalty Calculation. In October 2014, the Department assigned Penalty Auditor Ruzzo to calculate the penalty assessed against Respondent. Ruzzo reviewed the business records produced by Respondent and properly identified the amount of gross payroll paid to Respondent's employees on which workers' compensation premiums had not been paid. Ruzzo researched Respondent and Respondent's subcontractors to determine those periods when they were not compliant with chapter 440 during the audit period. Ruzzo determined that Respondent was not compliant for the period of September 27, 2012, through September 26, 2014. However, Respondent's corporate officer was not included in the penalty for the periods in which he had an exemption. Additionally, Respondent's compliant subcontractors were not included in the penalty. The business records ultimately produced by Respondent were sufficient for Ruzzo to calculate a penalty for the entire audit period, except for September 26, 2014. For that day, Ruzzo imputed the payroll. On June 2, 2015, based on Ruzzo's calculations, the Department issued a 4th Amended Order of Penalty Assessment to Respondent. On September 1, 2015, the 4th Amended Order of Penalty Assessment was served on Respondent. The 4th Amended Order of Penalty Assessment assessed a penalty of $68,525.42. For the penalty assessment calculation, Ruzzo consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department of Financial Services through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist in the calculation of workers' compensation insurance premiums. Ruzzo assigned the class codes based on information provided to him by Cappelleti. Ruzzo then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. Ruzzo applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)l. and rules 69L-6.027 and 69L-6.028 to determine the penalty. The Penalty Associated With Subcontractor Emerald. Respondent only disputes the portion of the penalty associated with its subcontractor, Emerald, in the amount of $8,434.86 for the period of non-compliance from January 1, 2014, through April 8, 2014. Section 440.10(1) provides in relevant part: In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment. A contractor shall require a subcontractor to provide evidence of workers’ compensation insurance. A subcontractor who is a corporation and has an officer who elects to be exempt as permitted under this chapter shall provide a copy of his or her certificate of exemption to the contractor. Noticeably absent from the statute is the time period within which this evidence of coverage must be provided to the contractor or the nature of the required evidence. Rule 69L-6.032(1) provides: In order for a contractor who is not securing the payment of compensation pursuant to Section 440.38(1)(a), F.S. to satisfy its obligation to obtain evidence of workers’ compensation insurance or a Certificate of Election to Be Exempt from a subcontractor pursuant to Section 440.10(1)(c), F.S., such contractor shall obtain and provide to the Department, when requested, the evidence specified in subsections (2), (3), (4) or (5) herein. (Emphasis added). Rule 69L-6.032 sets forth the contractor requirements for obtaining evidence that the subcontractor possesses workers' compensation insurance. If a subcontractor is a client company of a leasing company, such as Emerald, rule 69L-6.032(3) specifies that the evidence shall be a Certificate of Liability Insurance ("Certificate"). According to the deposition testimony of Cappelleti (Exhibit 11, offered into evidence by the Department), when Emerald began providing services to Respondent in January 2014, Emerald represented that its workers were covered by a policy through an employee leasing company. In fact, a Certificate, obtained by Respondent sometime before it was requested by the Department, indicates that Emerald had coverage for the period of January 1, 2014, through December 31, 2014. This period encompasses the period of time for which the Department now seeks to penalize Respondent. Although Respondent obtained proof of coverage from Emerald, this occurred after Emerald was paid by Respondent for work occurring between January 1, 2014, and April 8, 2014. Ruzzo checked the CCAS and found that the Certificate for Emerald was inaccurate. Emerald apparently did not join the leasing company insurance policy until April 9, 2014. Although a contractor does not have a duty to further investigate when presented with what appears to be a valid Certificate, Ruzzo's calculations penalized Respondent for the period of non-compliance of Emerald because Respondent did not seek the proof of coverage until after Emerald's workers were already on the job for Respondent. The Department has demonstrated by clear and convincing evidence that Respondent employed Mr. Moscoso and Mr. Alvarado on September 26, 2014; that Respondent was engaged in the construction industry in Florida during the period of September 27, 2012, to September 26, 2014; and that Respondent failed to carry workers' compensation insurance to cover its employees as required by Florida's Workers' Compensation Law from September 27, 2012, to September 26, 2014. The Department has demonstrated by clear and convincing evidence that Ruzzo correctly utilized the methodology specified in section 440.107(7)(d)l. However, the Department failed to show by clear and convincing evidence that a penalty for Emerald's period of non-compliance, in the amount of $8,434.86, should be included in the total penalty assessment of $68,525.42.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent, KP Roofing Masters, LLC, violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage, and imposing upon it a total penalty assessment of $60,090.56. DONE AND ENTERED this 2nd day of March, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of March, 2016.
The Issue Whether Petitioner properly issued a Stop Work Order and Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact Petitioner is the state agency responsible for enforcing the Florida Workers' Compensation Law, chapter 440, Florida Statutes, including those provisions that employers shall be liable for, and shall secure and maintain payment of compensation for their employees who suffer work-related injuries. Respondent is an active Florida for-profit corporation, having been first incorporated on November 18, 2004. Respondent has been certified as a Building Contractor by the Department of Business and Professional Regulation, Construction Industry Licensing Board, and holds license No. CBC1253639. On March 28, 2011, Petitioner's investigator, Allen DiMaria, conducted a random inspection of a worksite at 3434 Atlantic Boulevard, Jacksonville, Florida 32207. Mr. DiMaria noticed an individual at the site cutting wood with a circular saw. He introduced himself to the individual and produced identification. Mr. DiMaria then asked the individual what he was doing and for whom he worked. The individual identified himself as Mickey Larry Griffis, Jr., stated that he was cutting wood to replace rotted wood on a privacy fence, and indicated that he was employed by Respondent. He stated that it was his first day working for Respondent, but that he had worked for Respondent in the past. Mr. DiMaria proceeded to call Respondent, as the contractor on the project, and spoke with Robert Miranda. Mr. Miranda indicated that he hired Mr. Griffis to watch work at the site, but not to do the work. Despite Mr. Miranda?s explanation, Mr. DiMaria correctly determined that Mr. Griffis was engaged in “construction” activity for which workers? compensation insurance coverage was required. Mr. DiMaria returned to his office, and consulted the Coverage and Compliance Automated System (CCAS), the statewide database for workers? compensation information, to determine Respondent?s status in the workers? compensation system. Using the CCAS, Mr. DiMaria determined that Respondent had no workers? compensation coverage on file for any employee of the company. Rather, Respondent had an exemption, which is issued by Petitioner to officers of companies, and which serves to exempt said officers from the requirement to obtain workers? compensation insurance for themselves. Pursuant to section 440.05(3), exemptions apply only to the officers of a company, not to employees. Mr. DiMaria conferred with his supervisor, who authorized him to issue a Stop-Work Order and Penalty Assessment. The consolidated Stop-Work Order and Penalty Assessment was issued on March 28, 2011, and posted on the construction site. The Order required Respondent to cease all business operations statewide. The Order also assessed a penalty equal to 1.5 times the amount the employer would have paid in premium when applying the approved manual rates to the employer's payroll for the preceding three-year period, pursuant to section 440.107(7)(d). On March 29, 2011, Mr. DiMaria issued a Request for Production of Business Records for Penalty Assessment Calculation (hereinafter the "Request") to Respondent, requiring Respondent to produce business records for the period of March 29, 2008, through March 28, 2011. The records requested included, but were not limited to business licenses, banking and account records for payroll and disbursements, and records regarding subcontractors and other leased or temporary workers. In response to the Request, Respondent provided Petitioner with certain licenses, proposals, and contracts for work performed. Respondent also sent Certificates of Election to be Exempt from Florida Workers? Compensation Law that had been issued to Respondent by Petitioner. The certificates identified the scope of Respondent?s business as demolition, painting, framing, drywall, and “certified building contractor.” All records received by Mr. DiMaria were sent by him to Cathe Ferguson, who was responsible for performing penalty calculations. Ms. Ferguson reviewed the records in order to determine the appropriate penalty based on the information provided. The penalty worksheet prepared by Ms. Ferguson indicates that no payroll information was supplied to Petitioner by Respondent regarding Mr. Griffis, the employer on-site at the time of the inspection. Therefore, Mr. Griffis? payroll was imputed pursuant to section 440.107(7)(e). Ms. Ferguson used the “Scopes Manual” published by the National Council on Compensation Insurance, and adopted by Petitioner in Florida Administrative Code Rule 69L-6.021, to determine the appropriate level of imputed compensation to Mr. Griffis. She determined that the work being performed on the site fell within class code 6400. Class code 6400 is described in rule 69L-6.021(2)(yyy) as “Fence Installation and Repair - Metal, Vinyl, Wood or Prefabricated Concrete Panel Fence Installed By Hand.” Based on the evidence related to the inspection, which indicated that Mr. Griffis was engaged in the repair of a wooden privacy fence, the work being performed by Mr. Griffis falls within class code 6400. Mr. Griffis? salary was imputed for the full three- year period from March 30, 2008, to March 28, 2011, with a total imputed payroll of $183,327.82. The workers? compensation insurance premium was calculated by multiplying one percent of the gross payroll for that period by the approved manual rate for each quarter, which resulted in a calculated premium of $14,415.62. The penalty was determined by multiplying the calculated premium by 1.5, resulting in the final penalty of $21,623.46.1/ On April 8, 2011, Petitioner issued an Amended Order of Penalty Assessment assessing a monetary penalty amount of $21,623.46 against Respondent. Respondent subsequently provided Petitioner with additional records regarding Respondent?s employees, including a number of bank records. Ms. Ferguson revised her penalty worksheet to reflect that payroll was now based on records, rather than being imputed, included a number of additional employees for fixed periods of employment, and applied different class codes. Ms. Ferguson testified that her application of the class codes was based upon her review of employee records and check ledgers provided by Respondent. Petitioner did not appear at the hearing to offer evidence to the contrary. Ms. Ferguson?s determinations were supported by competent, substantial evidence, and it is found that her determination of the appropriate class code for each employee was accurate. Total payroll for the three-year period in question was determined to be $14,676.25. Applying the same formula as that applied to determine the penalty amount reflected in the Amended Penalty Assessment, the premium was calculated to have been $1,682.15, with a resulting penalty of $2,523.27. On August 11, 2011, Petitioner issued a 2nd Amended Order of Penalty Assessment reducing Respondent's penalty from $21,623.46 to $2,523.27. Petitioner subsequently removed Al Baukecht, Mack Plumbing, and “No Name” from the list of Respondent?s employees. With that change, total payroll for the three-year period in question was reduced to $14,092.00. The premium was calculated to have been $1,646.57, and the penalty reduced from $2,523.27 to $2,469.90. On September 21, 2011, Petitioner issued a 3rd Amended Order of Penalty Assessment reducing Respondent's penalty to $2,469.90.
Recommendation Based on the findings of fact and conclusions of law, it is RECOMMENDED that Petitioner enter a final order assessing a penalty of $2,469.90 against Respondent, Robert Miranda Construction, Inc., for its failure to secure and maintain required workers? compensation insurance for its employees. DONE AND ENTERED this 28th day of December, 2011, in Tallahassee, Leon County, Florida. S E. GARY EARLY 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 December, 2011.
The Issue The issues are whether, under section 440.107, Florida Statutes, Petitioner may calculate a penalty assessment for a failure to secure the payment of workers' compensation for one day as though the failure persisted over two years and whether Petitioner may calculate a penalty assessment based on double the statewide average weekly wage (AWW) when the lone uncovered employee earned $10 per hour.
Findings Of Fact Respondent was incorporated in 2008 by Ineido Soler, Sr., and his son, Ineido Soler, Jr. Since the corporation began operations, the wife of Mr. Soler, Jr., Idalmis Pedrero, has served as the office manager of this family-owned company. At all material times, Respondent has contracted with a personnel leasing company to handle employee matters, such as securing the payment of workers' compensation. Ms. Pedrero's responsibilities include informing the employee leasing company of new hires, so the company can obtain workers' compensation coverage, which typically starts the day following notification. On the afternoon of November 22, 2015, Mr. Soler, Jr., telephoned his wife and told her that he and his father had hired, at the rate of $10 per hour, a new employee, Geony Borrego Lee, who would start work the following morning. Customarily, Ms. Pedrero would immediately inform the employee leasing company. However, Ms. Pedrero was working at home because, six days earlier, she had delivered a baby by caesarian section, and she was still recuperating and tending to her newborn. A fatigued Ms. Pedrero did not notify the employee leasing company that day of the new hire. Late the next morning, Ms. Pedrero was awakened by a call from her husband, who asked her if she had faxed the necessary information to the employee leasing company. Ms. Pedrero admitted that she had not done so, but would do so right away. She faxed the information immediately, so that the employee leasing company could add Mr. Lee to the workers' compensation policy, effective the next day, November 24. Uncovered for November 23, Mr. Lee joined three other employees of Respondent and performed roofing work at a worksite. Late in the afternoon of November 23, one of Petitioner's investigators conducted a random inspection of Respondent's worksite and determined that Respondent had secured the payment of workers' compensation for the three other employees, but not for Mr. Lee. The investigator issued an SWO on the day of the inspection, November 23. The SWO contains three parts. First, the SWO orders Respondent to cease work anywhere in the state of Florida. Second, the SWO includes an Order of Penalty Assessment, which does not contain a specific penalty, but instead sets forth the formula by which Petitioner determines the amount of the penalty to assess. Tracking the statute discussed below, the formula included in the SWO is two times the premium that the employer would have paid when applying approved manual rates to the employer's payroll "during periods for which it has failed to secure the payment of compensation within the preceding 2-year period." Third, the SWO includes a Notice of Rights, which advises Respondent that it may request a chapter 120 hearing. On November 24, Petitioner released the SWO after Respondent had secured the payment of workers' compensation for Mr. Lee. On November 25, the investigator hand delivered to Respondent a Request for Production of Business Records for Penalty Assessment Calculation (Request). The Request covers November 24, 2013, through November 23, 2015, and demands records in eight categories: identification of employer, occupational licenses, payroll documents, account documents, disbursements, contracts for work, identification of subcontractors, and documentation of subcontractors' workers' compensation coverage. The Request identifies "payroll documents" as: all documents that reflect the payroll of the employer . . . including . . . time sheets, time cards, attendance records, earning records, check stubs and payroll summaries for both individual employees and aggregate records; [and] federal income tax documents and other documents reflecting the . . . remuneration paid or payable to each employee . . . . The Request adds: The employer may present for consideration in lieu of the requested records, proof of compliance with F.S. 440 by a workers' compensation policy or coverage through employee leasing for all periods of this request where such coverage existed. If the proof of compliance is verified by the Department the requested records for that time period will not be required. The Request warns: If the employer fails to provide the required business records sufficient to enable the . . . Division of Workers' Compensation to determine the employer's payroll for the period requested for the calculation of the penalty provided in section 440.107(7)(d), F.S., the imputed weekly payroll for each employee shall be the statewide average weekly wage as defined in section 440.12(2), F.S., multiplied by 2. The Department shall impute the employer's payroll at any time after ten, but before the expiration of twenty eight business days after receipt by the employer of [the Request]. (FAC 69L-6.028) . . . . On December 11, 2015, Respondent provided the following documents to Petitioner: itemized invoices, including for workers' compensation premiums, from the employee leasing company to Respondent and checks confirming payment, but the invoices and checks are from December 2011; an employee leasing agreement signed by Respondent on August 1, 2014, and signed by the employee leasing company on August 5, 2014; an employee leasing application for Mr. Lee dated November 23, 2015, showing his date of birth as November 20, 1996, his hourly pay as $10, and his hire date as November 23, 2015; and an employee census dated December 1, 2015, showing, for each employee, a date of hire and, if applicable, date of termination. Partially compliant with the Request, this production omitted any documentation of workers' compensation coverage prior to August 1, 2014, and any documentation of payroll except for Mr. Lee's rate of pay. On December 14, 2015, Respondent filed with Petitioner its request for a chapter 120 hearing. On December 30, 2016, Petitioner issued an Amended Order of Penalty Assessment (Amended Assessment), which proposes to assess a penalty of $63,434.48. On the same date, Petitioner transmitted the file to DOAH. Petitioner issued a Second Amended Order of Penalty Assessment on February 16, 2016, which is mentioned in, but not attached to, the Prehearing Stipulation that was filed on April 26, 2016, but the second amended assessment reportedly leaves the assessed penalty unchanged from the Amended Assessment. In determining the penalty assessment, Petitioner assigned class code 5551 from the National Council on Compensation Insurance because Mr. Lee was performing roofing work; determined that the entire two-year period covered in the Request was applicable; identified the AWW as $841.57 based on information provided by the Florida Department of Economic Opportunity for all employers subject to the Florida Reemployment Assistance Program Law, sections 443.01 et seq., Florida Statutes, for the four calendar quarters ending June 30, 2014; applied the appropriate manual rates for class code 5551 to $841.57, doubled, and divided the result by 100--all of which yielded a result of $31,717.24, which, doubled, results in a total penalty assessment of $63,434.48. There is no dispute that the classification code for Mr. Lee is code 5551, the AWW is $841.57, and the manual rates are 18.03 as of July 1, 2013, 18.62 as of January 1, 2014, and 17.48 as of January 1, 2015. Because Petitioner determined that Respondent had failed to provide sufficient evidence of its payroll, Petitioner calculated the penalty assessment by using the AWW of $841.57, doubled, instead of Mr. Lee's actual rate of $10 per hour. Petitioner's calculations are mathematically correct. For the 5.27 weeks of 2013, the penalty assessment is $3198.58 based on multiplying the AWW, doubled, by the manual rate of 18.03 divided by 100 multiplied by 2 and multiplied by 5.27. For the 52 weeks of 2014, the penalty assessment is $32,593.67 based on multiplying the AWW, doubled, by the manual rate of 18.62 divided by 100 multiplied by 2 and multiplied by 52. For the 46.44 weeks of 2015, the penalty assessment is $27,326.48 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 46.44. Adding these sums yields a total penalty assessment of $63,118.73, which approximates Petitioner's penalty assessment calculation of $63,434.48. (Mistranscription of difficult-to- read manual rates or a different rule for handling partial weeks may account for the small difference.) Respondent challenges two factors in the imputation formula: the two-year period of noncompliance for Mr. Lee instead of one day's noncompliance and the AWW, doubled, instead of Mr. Lee's $10 per hour rate of pay. Underscoring the differences between the two-year period of noncompliance and double the AWW and the actual period of noncompliance and Mr. Lee's real pay rate, at the start of the two-year period, Mr. Lee was three days past his 16th birthday and residing in Cuba, and Mr. Lee continues to earn $10 per hour as of the date of the hearing. The impact of Petitioner's use of the two-year period of noncompliance and double the AWW is significant. If the calculation were based on a single day, rather than two years, the assessed penalty would be less than the statutory minimum of $1000, which is described below, even if double the AWW were used. One day is 0.14 weeks, so the penalty assessment would be $82.38 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 0.14. If the calculation were based on the entire two years, rather than a single day, the assessed penalty would be about one-quarter of the proposed assessed penalty, if Mr. Lee's actual weekly rate of pay were used instead of double the AWW. Substituting $400 for twice the AWW in the calculations set forth in paragraph 15 above, the penalty would be $760.14 for 2013, $7746.92 for 2014, and $6494.17 for 2015 for a total of $15,001.23. Explaining why Petitioner treated one day of noncompliance as two years of noncompliance, one of Petitioner's witnesses referred to Mr. Lee as a "placeholder" because the real focus of the imputation formula is the employer. The same witness characterized the imputation formula as a "legal fiction," implying that the formula obviously and, in this case, dramatically departs from the much-smaller penalty that would result from calculating exactly how much premium that Respondent avoided by not covering the modestly paid Mr. Lee on his first day of work. Regardless of how Petitioner characterizes the imputation formula, the statutory mandate, as discussed below, is to determine the "periods" during which Respondent failed to secure workers' compensation insurance within the two-year period covered by the Request. The focus is necessarily on the employee found by the investigator to be uncovered and any other uncovered employees. Petitioner must calculate a penalty based on how long the employee found by the investigator on his inspection has been uncovered, determining how many other employees, if any, in the preceding two years have been uncovered, and calculating a penalty based on how long they were uncovered. There is evidence of one or two gaps in coverage during the relevant two years, but Petitioner has failed to prove such gaps by clear and convincing evidence. One of Petitioner's witnesses testified to a gap of one month "probably" from late January to late February 2015. This witness relied on Petitioner Exhibit 2, but it is completely illegible. Ms. Pedrero testified that Respondent had workers' compensation coverage since 2011, except for a gap, which she thought had occurred prior to August 2014, which is the start date of the current policy. This conflicting evidence does not establish by clear and convincing evidence any gap, and, even if a gap had been proved, no evidence establishes the number of uncovered employees, if any, during such a gap, nor would such a gap justify enlarging the period of noncompliance for Mr. Lee. Ms. Pedrero testified that her mother-in-law, Teresa Marquez cleaned the office and warehouse on an occasional basis, last having worked sometime in 2015. Respondent never secured workers' compensation coverage for Ms. Marquez, but she did no roofing work and appears to have been a casual worker, so her periods of employment during the two-year period covered by the Request would not constitute additional periods for which Respondent failed to secure workers' compensation insurance. Based on the foregoing, Petitioner has proved by clear and convincing evidence only a single day of noncompliance, November 23, concerning one employee, Mr. Lee, within the relevant two-year period for the purpose of calculating the penalty assessment. Likewise, Petitioner has proved by clear and convincing evidence a rate of pay of only $10 per hour for the purpose of calculating the penalty assessment. At no time has Respondent provided payroll records of all its employees for November 23, 2015. Respondent Exhibit E covers payroll for Respondent's employees for a two-week period commencing shortly after November 23, 2015. But the evidence establishes that Mr. Lee's rate of pay was $80 for the day, which, as discussed below, rebuts the statutory presumption of double the AWW.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order determining that Respondent has failed to secure the payment of workers' compensation for one employee for one day within the two-year period covered by the Request and imposing an administrative penalty of $1000. DONE AND ENTERED this 19th day of July, 2016, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 2016. COPIES FURNISHED: Jonathan Anthony Martin, Esquire Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Daniel R. Vega, Esquire Robert Paul Washington, Esquire Taylor Espino Vega & Touron, P.A. 2555 Ponce De Leon Boulevard, Suite 220 Coral Gables, Florida 33134 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
Findings Of Fact 12. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on October 17, 2011, the Amended Order of Penalty Assessment issued on November 4, 2011, and the 2"! Amended Order of Penalty Assessment issued on April 26, 2012, attached as exhibits and fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
