The Issue Whether Respondents,1/ David Feliciano, d/b/a D and S Handyman, Inc., a Dissolved Florida Corporation, and D and S Handyman, Inc., 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. The testimony and evidence substantiates that D and S Handyman, Inc., a Dissolved Florida Corporation, is engaged in the construction industry in Florida as D and S Handyman, Inc., and that David Feliciano is its sole proprietor. On September 7, 2016, Investigator Murvin conducted a random jobsite workers’ compensation compliance investigation (Compliance Investigation). Investigator Murvin spoke with Mr. Feliciano who was working at a jobsite at 713 Lake Cummings Boulevard, Lake Alfred, Florida. During their discussion, Mr. Feliciano stated he had his own corporation (Respondent), and that Respondent was a subcontractor of ANS Plumbing to this job. Respondent was to install the plumbing at this jobsite. Mr. Feliciano claimed he had an exemption. Investigator Murvin checked the Florida Department of State, Division of Corporations’, Sunbiz website to verify Respondent’s status. Mr. Murvin determined that David Feliciano, d/b/a D and S Handyman, Inc., was no longer an active corporation but that when it was active, Mr. Feliciano was the sole corporate officer and registered agent. Investigator Murvin then checked the Department’s Coverage and Compliance Automated System (CCAS) to see whether Respondent had a workers’ compensation insurance policy or any current exemptions. 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. Investigator Murvin’s CCAS search revealed that Respondent had no workers’ compensation coverage or exemptions during the relevant period. An exemption is a method by which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. Mr. Feliciano held an exemption as Respondent’s owner from December 11, 2013, until it expired on December 11, 2015. Investigator Murvin then contacted ANS Plumbing and confirmed that Respondent was subcontracted to install the plumbing at the jobsite. ANS Plumbing also confirmed that Mr. Feliciano of Respondent had an “exemption on file.”3/ Finding no insurance in place, Investigator Murvin contacted his supervisor, who directed him to issue the SWO. The SWO was issued and served on Mr. Feliciano/Respondent on September 7, 2016. Additionally, a business records request (BRR) was also served on Mr. Feliciano for Respondent’s business records. This BRR sought additional information concerning Respondent’s construction business between December 12, 2015 (the day after Mr. Feliciano’s exemption expired), through September 7, 2016 (the date the SWO issued). Respondent did not provide any business records to the Department in response to the BRR. The lack of business records compelled the Department to use the imputation formula to determine Respondent’s payroll. The Department assigned PA Richardson to calculate the appropriate penalty. For the penalty assessment calculation, PA Richardson consulted the classification codes listed in the 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 the calculation of workers’ compensation insurance premiums. Based on the information obtained from the jobsite, PA Richardson assigned the appropriate class code for plumbing, 5183.4/ PA Richardson determined the gross payroll for Respondent for the entire period of non-compliance, which included two separate periods of non-compliance, i.e., December 12, 2015, through December 31, 2015, and January 1 through September 2016. There were different rates for each period. PA Richardson then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. PA Richardson 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 of $6,859.70. The Department has demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry (specifically plumbing) in Florida between December 12, 2015, and September 7, 2016; that Respondent employed Mr. Feliciano; and that Respondent did not have the requisite workers’ compensation insurance or an exemption to cover Mr. Feliciano during the applicable period.
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 imposing a penalty of $6,859.70 against Respondent, David Feliciano, d/b/a D and S Handyman, Inc., a Dissolved Florida Corporation, and D and S Handyman, Inc. DONE AND ENTERED this 28th day of February, 2017, 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 28th day of February, 2017.
The Issue The issues in this case are whether Respondent, Raul A. Correa, M.D. (Dr. Correa), failed to provide workers' compensation coverage, and if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107, Florida Statutes (2013). That section mandates, in relevant part, that employers in Florida secure workers’ compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, Dr. Correa was a Florida small business engaged in the practice of medicine, with his principal office located at 2505 Manatee Avenue West, Bradenton, Florida. Dr. Correa is not incorporated. On February 12, 2014, Ms. Green conducted an on-site workers’ compensation compliance investigation (compliance investigation) of Dr. Correa’s office. After identifying herself to the receptionist, Ms. Green met Dr. Correa and explained the reason for her presence, a compliance investigation. Dr. Correa telephoned his wife who handles his office management from their residence. Mrs. Correa immediately faxed a copy of the liability insurance policy to the office. However, that liability policy did not include workers’ compensation coverage. After a telephonic consultation with her supervisor, Ms. Green served a Request for Production of Business Records (Request) on Dr. Correa at 11:50 a.m. on February 12, 2014. This Request encompassed records from October 1, 2013, through February 12, 2014, for all of Dr. Correa’s payroll documents, account documents, disbursements, and workers’ compensation coverage policies. Ms. Green consulted the Department’s Coverage and Compliance Automated System (CCAS) database to determine whether Dr. Correa had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees. CCAS is a database Ms. Green consults during the course of her investigations. Ms. Green determined from CCAS that Dr. Correa did not have any current workers’ compensation coverage for his employees and he did not have an exemption from such coverage from the Department. The records reflected that Dr. Correa’s last active workers’ compensation coverage was in 2004. Dr. Correa obtained workers’ compensation coverage on February 20, 2014. Approximately one month later, Ms. Green served a Request for Production of Business Records for Penalty Assessment Calculation on Dr. Correa. Dr. Correa produced the requested records. These records were given to Lynne Murcia, one of the Department’s penalty auditors, to calculate the penalty. Ms. Murcia determined that the appropriate classification code for Dr. Correa’s employees was 8832, which incorporates physicians and clerical workers. This code was derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers’ compensation. The manual is produced by the National Council on Compensation Insurance, Inc., the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. Dr. Correa listed seven employees on the Florida Department of Revenue Unemployment Compensation Tax (UCT-6) form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida’s Unemployment Compensation Law. Ms. Murcia reasonably relied upon the UCT-6 filings for the relevant time period to calculate Dr. Correa’s gross payroll in Florida. Using Dr. Correa’s payroll chart, the UCT reports, and the classification codes for each employee, Ms. Murcia calculated the penalty assessment for the three-year penalty period preceding the investigation. This three-year period is the allocated time for reviewing coverage for those who do not have the appropriate workers’ compensation coverage. On April 9, 2014, Ms. Murcia determined the penalty to be $4,287.12. However, upon receipt of additional information regarding a former employee of Dr. Correa, an Amended Order of Penalty Assessment of $3,898.77 was issued on July 28, 2014. Dr. Correa’s position is that his practice is a small “mom and pop” operation. He employs members of his family to run the business side of his practice. His daughter, Antonia, works as Dr. Correa’s “doctor’s assistant.” She works at the various nursing homes that Dr. Correa services. Antonia believed that the nursing homes’ liability insurance would cover her, and she was not subject to workers’ compensation coverage. However, she was, in fact, paid by Dr. Correa. Dr. Correa’s daughter-in-law, Valeria, works from her home computer completing the medical billing for her father-in- law. She has been working in this capacity for approximately 14- 16 years, and it never occurred to her that she needed workers’ compensation coverage. She was paid by Dr. Correa. Dr. Correa’s brother-in-law, Mr. Collado, runs all the errands for the practice. He may go to the bank, take care of car maintenance, buy office supplies or fix things, all in support of Dr. Correa’s practice. Mr. Collado receives regular pay checks from Dr. Correa. Dr. Correa testified that his wife is his office manager and has been since he opened the practice in 1978. Mrs. Correa works from their home, in a small home office. She does all the paper work related to the practice. Dr. Correa firmly believed that he did not require workers’ compensation coverage because some of his employees were “independent contractors” or never worked in his office, but at other locations (individual homes, nursing homes, or just outside the office). Dr. Correa believed his insurance agent who did not think Dr. Correa needed the workers’ compensation coverage. Based upon the testimony and exhibits, the amended penalty assessment in the amount of $3,898.77 is accurate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the Amended Order of Penalty Assessment, and assessing a penalty in the amount of $3,898.77. DONE AND ENTERED this 24th day of September, 2014, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of September, 2014.
The Issue The issues to be determined in this case are whether Respondent Lockhart Builders, Inc., violated state laws applicable to workers’ compensation insurance coverage by failing to secure coverage for three employees and failing to produce records requested by Petitioner Department of Financial Services, Division of Workers’ Compensation (Department) and, if so, what penalty should be assessed for the violations.
Findings Of Fact Petitioner is the state agency responsible for the enforcement of the workers’ compensation insurance coverage requirements established in Chapter 440, Florida Statutes (2007).1 Respondent is a Florida corporation with its office in Bradenton. William Lockhart is Respondent’s president. Respondent is licensed to engage in construction activity in Florida. Respondent was engaged to construct a two-story duplex at 2315 Gulf Drive in Bradenton. Respondent began work at the job site on or about February 21, 2007. On August 22, 2007, Lockhart received a proposal from Burak Yavalar, owner of BY Construction, to do the exterior stucco work on the duplex building for a flat fee of $10,750. The proposal was accepted by Respondent on August 23, 2007. Yavalar presented Lockhart with a certificate of liability insurance which indicated that he had obtained workers’ compensation coverage for his employees. The certificate was issued by Employee Leasing Solutions, Inc. (ELS), a professional leasing company in Bradenton. ELS provides mainly payroll services and workers’ compensation insurance coverage for its clients. Lockhart did not ask for, and Yavalar did not provide Lockhart with, a list of the names of the BY Construction employees who were covered by the insurance. Lockhart made a call to ELS to verify that BY Construction had workers’ compensation insurance coverage, but he did not ask for a list of BY Construction employees covered by its insurance policy. BY Construction began work at Respondent’s job site on or about September 10 or 11, 2007. On September 12, 2007, BY Construction had eight employees at the job site. One employee, Justin Ormes, had previously worked for BY Construction, had quit for a while, and had just returned. Two other employees, Carlos Lopez and Jaime Alcatar, had been working on a nearby job site and were asked by Yavalar to come to work at Respondent’s job site. Yavalar claims that on the morning of September 12, 2007, Ormes, Lopez, and Alcatar had not yet been employed or authorized to start work for BY Construction. On September 12, 2007, Petitioner’s investigators Germaine Green and Colleen Wharton performed a random compliance check at Respondent’s job site. Without being specific about what particular work was being performed at the site by Ormes, Lopez, and Alcatar, the investigators testified that when they arrived at the job site they observed all eight men performing stucco work. The investigators spoke to Yavalar, Lockhart and the workers at the job site to determine their identities and employment status. Yavalar told the investigators his eight employees had workers’ compensation insurance coverage through ELS. However, upon checking relevant records, the investigators determined that insurance coverage for Ormes, Lopez, and Alcatar had not been secured by either BY Construction or Respondent. Wharton issued a statewide stop-work order to BY Construction for its failure to obtain workers’ compensation coverage for the three employees. After the stop work order was issued, Yavalar left the job site with Lopez and Alcatar to complete their paperwork to obtain insurance coverage through ELS. Yavalar’s wife was able to re-activate Ormes’ insurance coverage with ELS over the telephone. By the end of the day on September 12, 2007, insurance coverage was secured by BY Construction for Ormes, Lopez, and Alcatar. The business records of BY Construction produced for the Department indicated that Ormes had been paid by BY Construction in the period from March to July 2007, and then on September 12, 2007; Lopez had been paid on August 24, 2007, and then on September 12, 2007; Alcatar had been paid on September 12, 2007. All three men were paid only $28 on September 12, 2007. This evidence supports the testimony of Yavalar that these three had arrived at Respondent’s job site for the first time on September 12, 2008. BY Construction was later served with an amended order of penalty for its failure to obtain workers’ compensation coverage for the three employees. It arranged with the Department to pay the penalty through installments and was conditionally released from the stop-work order. When the Department's investigators were at the job site on September 12, 2007, they informed Lockhart about the stop-work order being issued to BY Construction and gave Lockhart a Request for Production of Business Records for the purpose of determining whether Respondent had obtained proof of workers’ compensation insurance coverage from BY Construction before BY Construction commenced work at Respondent’s job site. Respondent produced the requested records. As discussed in the Conclusions of Law, Florida law charges a contractor with the duty to secure workers’ compensation insurance coverage for any uninsured employees of its subcontractors. On this basis, the Department served Respondent with a Stop-Work Order and an Order of Penalty Assessment on September 21, 2007, for failing to secure coverage for Ormes, Lopez, and Alcatar. On September 21, 2007, the Department served a Request for Production of Business Records for Penalty Assessment Calculation to Respondent. The Department’s request asked Respondent to produce records for the preceding three years, including payroll records, tax returns, and proof of insurance. Respondent produced some records in response to this second request, which the Department deemed insufficient to calculate a penalty. However, the evidence shows Respondent produced the only records that it possessed regarding its association with BY Construction. The Department’s proposed penalty does not include an assessment based solely on Respondent’s failure to produce requested records. When an employer fails to provide requested business records within 15 days of the request, the Department is authorized to assess a penalty by imputing the employer's payroll using "the statewide average weekly wage as defined in Section 440.12(2), multiplied by l.5." § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028. Imputing the gross payroll for Ormes, Lopez and Alcatar for the years 2004, 2005, 2006, and 2007, by using the average weekly wage for the type of work, the Department assessed Respondent with a penalty of $138,596.67 and issued an Order of Penalty Assessment to Respondent on October 31, 2007. Petitioner later amended the penalty to $70,272.51, based on the fact that BY Construction was not incorporated until January 1, 2006, and issued a Second Amended Order of Penalty Assessment on December 20, 2007.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order that amends its penalty assessment to reflect one day of non-compliance by Respondent. DONE AND ENTERED this 31st day of March, 2008, in Tallahassee, Leon County, Florida. BRAM D. E. CANTER 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 31st day of March, 2008.
The Issue Whether Thompson Enterprises of Jacksonville, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers' compensation, as alleged in the Stop-Work Order and 2nd Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing workers' compensation coverage requirements applicable to employers under Florida law. Respondent is a Florida limited-liability company organized on October 25, 2011. The managing members listed on Respondent’s State of Florida Articles of Organization are Thomas Thompson, Michael Thompson, and Vicky Thompson. In May 2016, Department Compliance Investigator Ann Johnson was assigned to conduct a job site visit on Respondent’s business because its name appeared on the Department’s Bureau of Compliance’s “lead list.” The “lead list” is one of the Department’s databases listing employers that are potentially out of compliance with Florida's workers' compensation insurance requirements. Prior to the job site visit, Investigator Johnson reviewed the Division of Corporations website, www.sunbiz.org, and confirmed Respondent's address, managing members' names, and that Respondent was a current, active Florida company. Respondent’s website advertised towing, wrecker, mechanic, and body shop services. On May 6, 2016, Investigator Johnson visited Respondent's principal address located at 7600 Bailey Body Road, Jacksonville, Florida 32216. She noted a large commercial sign near Respondent’s address that advertised towing and wrecker services. During her visit, Investigator Johnson spoke with Vicky Thompson and Michael Thompson, both of whom advised that they were owners of Respondent. The Thompsons informed Investigator Johnson that Respondent had six employees, including the three listed as managers on Respondent’s Articles of Organization. When Investigator Johnson asked for proof of workers’ compensation coverage, Michael Thompson admitted that Respondent had no such coverage. Under Florida law, employers in the non-construction industry, such as Respondent, must secure workers' compensation insurance if "four or more employees are employed by the same employer." §§ 440.02(17)(b) and 440.107, Fla. Stat. On the same day as her site visit, Investigator Johnson confirmed Respondent’s lack of insurance with a search of the Department's internal database, Coverage and Compliance Automated System. At the time, Respondent had no active exemptions from the requirements of obtaining workers’ compensation for its three managing members. Based on her investigation, Investigator Johnson served Respondent with the Stop-Work Order and a Request for Production on May 6, 2016. Upon serving the documents, Investigator Johnson explained the effect and purpose of the documents and how Respondent could come into compliance. Respondent came into compliance that same day by paying a $1,000 down payment, reducing Respondent's workforce to three employees, applying for exemptions for its three managing members, and executing an agreed Order of conditional release with the Department. Respondent subsequently complied with the Department’s Request for Production. In June 2016, the Department assigned Penalty Auditor Eunika Jackson to review records obtained from Respondent and calculate the penalty to be assessed against Respondent. In accordance with applicable law, the Department's audit spanned the preceding two-year period, starting from the date of the Stop-Work Order. See § 440.107(7)(d)1., Fla. Stat. The audit period in this case was from May 7, 2014, through May 6, 2016. Based on information obtained during the investigation, Auditor Jackson assigned classification codes 7219, 8380, and 8810 to those identified as employees working for Respondent during the audit period. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance ("NCCI") to assist in the calculation of workers' compensation insurance premiums. Classification code 8810 applies to clerical office employees, code 7219 applies to trucking and "towing companies," and code 8380 applies to automobile service or repair centers. According to Respondent, it was out of compliance with the coverage requirements of chapter 440 for only "368 days" during the two-year audit period. Respondent's records, however, do not support this contention. Respondent provided a detailed "Employee Earnings Summary" for each employee stating the employee’s name, pay rate, and pay period. Respondent's payroll records reflect that Respondent employed "four or more employees" during the audit period. Throughout the two-year audit period, Respondent employed four or more employees with the following duties: Anna Lee, mechanic/bodywork; Cedric Blake, mechanic/bodywork; David Raynor, mechanic/bodywork; James Budner, mechanic/bodywork; Jason Leighty, mechanic; Kevin Croker, Jr., porter/detailer; Nicholas Conway, bodywork; Ralph Tenity, bodywork; Rebecca Thompson, secretary/office help; Stephen Collins, shop helper/porter; Todd Gatshore, tow truck driver/shop helper; and Williams Reeves, tow truck driver/shop helper. Evidence further demonstrated that, during the audit period, managing member Michael Thompson worked as a wrecker truckdriver, and worked with the Sheriff's Office to clear traffic accidents. He was assigned class code 7219 — tow truck driver. Managing member Vicky Thompson was given the clerical class code 8810 because she was observed working in the office during Investigator Johnson's site visit. Managing member Thomas Thompson was assigned the clerical class code 8810 based upon the fact that he occasionally does office work for the business. The corresponding approved manual rates for classification codes 8810, 7219, and 8380 were correctly applied to each employee for the related periods of non-compliance to determine the final penalty. In accordance with the Request for Production, Respondent provided the Department payroll summary reports, tax reports, and unemployment tax reports. The payroll summary reports and records provided by Respondent listed the payroll and duties for each employee. The gross payroll amounts for each employee reflected in the penalty in this case were derived from those documents. Upon receiving those reports and records, the Department correctly determined the gross payroll for Respondent's employees. On June 13, 2016, the Department served the Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,788.90. A portion of the first penalty was based on imputed payroll for Respondent’s three managing members. After service of the Amended Order of Penalty Assessment, Respondent provided additional records showing the payroll of its three managing members, and the 2nd Amended Order of Penalty Assessment was calculated after removing the imputed payroll. On August 22, 2016, the Department served the 2nd Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,112.44, which was correctly calculated in accordance with section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027(1). In sum, the clear and convincing evidence demonstrated that Respondent was a tow truck company engaged in the wrecker/tow truck and body shop mechanic industries in Florida during the periods of noncompliance; that Respondent failed to secure the payment of workers' compensation for its employees in violation of Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027(1) to determine the appropriate penalty of $33,112.44.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Thompson Enterprises of Jacksonville, LLC. DONE AND ENTERED this 27th day of April, 2017, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of April, 2017.
The Issue The issue is whether Petitioner violated Chapter 440, Florida Statutes, by not having workers’ compensation insurance coverage, and if so, what penalty should be imposed.
Findings Of Fact Petitioner operates a gas station and convenience store in Winter Garden. Mohammad Sultan is Petitioner’s owner and president. On November 2, 2006, Margaret Cavazos conducted an unannounced inspection of Petitioner’s store. Ms. Cavazos is a workers’ compensation compliance investigator employed by the Department. Petitioner had nine employees, including Mr. Sultan and his wife, on the date of Ms. Cavazos' inspection. Petitioner had more than four employees at all times over the three-year period preceding Ms. Cavazos' inspection. Petitioner did not have workers’ compensation insurance coverage at the time of Ms. Cavazos’ inspection, or at any point during the three years preceding the inspection. On November 2, 2006, the Department served a Stop-Work Order and Order of Penalty Assessment on Petitioner, and Ms. Cavazos requested payroll documents and other business records from Petitioner. On November 6, 2006, the Department served an Amended Order of Penalty Assessment,1 which imposed a penalty of $70,599.78 on Petitioner. The penalty was calculated by Ms. Cavazos, using the payroll information provided by Petitioner and the insurance premium rates published by the National Council on Compensation Insurance. The parties stipulated at the final hearing that the gross payroll attributed to Mr. Sultan for the period of January 1, 2006, through November 2, 2006, should have been $88,000, rather than the $104,000 reflected in the penalty worksheet prepared by Ms. Cavazos. The net effect of this $16,000 correction in the gross payroll attributed to Mr. Sultan is a reduction in the penalty to $68,922.18.2 On November 3, 2006, Mr. Sultan filed a notice election for exemption from the Workers’ Compensation Law. His wife did not file a similar election because she is not an officer of Petitioner. The election took effect on November 3, 2006. On November 6, 2006, Petitioner obtained workers’ compensation insurance coverage through American Home Insurance Company, and Petitioner also entered into a Payment Agreement Schedule for Periodic Payment of Penalty in which it agreed to pay the penalty imposed by the Department over a five-year period. On that same date, the Department issued an Order of Conditional Release from Stop-Work Order. Petitioner made the $7,954.30 “down payment” required by the Payment Agreement Schedule, and it has made all of the required monthly payments to date. The payments required by the Payment Agreement Schedule are $1,044.09 per month, which equates to approximately $12,500 per year. Petitioner was in compliance with the Workers’ Compensation Law at the time of the final hearing. Petitioner reported income of $54,358 on gross receipts in excess of $3.1 million in its 2005 tax return. Petitioner reported income of $41,728 in 2004, and a loss of $8,851 in 2003. Petitioner had total assets in excess of $750,000 (including $540,435 in cash) at the end of 2005, and even though Petitioner had a large line of credit with Amsouth Bank, its assets exceeded its liabilities by $99,041 at the end of 2005. Mr. Sultan has received significant compensation from Petitioner over the past four years, including 2003 when Petitioner reported a loss rather than a profit. He received a salary in excess of $104,000 in 2006, and he was paid $145,333 in 2005, $63,750 in 2004, and $66,833 in 2003. Mr. Sultan’s wife is also on Petitioner’s payroll. She was paid $23,333.40 in 2006, $25,000 in 2005, and $12,316.69 in 2004. Mr. Sultan characterized 2005 as an “exceptional year,” and he testified that his business has fallen off recently due to an increase in competition in the area. Todd Baldwin, Petitioner’s accountant, similarly testified that 2006 was not as good of a year as 2005, but no corroborating evidence on this issue (such as Petitioner’s 2006 tax return) was presented at the final hearing. Mr. Sultan testified that payment of the penalty imposed by the Department adversely affects his ability to run his business. The weight given to that testimony was significantly undercut by the tax returns and payroll documents that were received into evidence, which show Petitioner’s positive financial performance and the significant level of compensation paid to Mr. Sultan and his wife over the past several years. The effect of the workers’ compensation exemption elected by Mr. Sultan is that his salary will no longer be included in the calculation of the workers’ compensation insurance premiums paid by Petitioner. If his salary had not been included in Ms. Cavazos’ calculations, the penalty imposed on Petitioner would have been $40,671.36. Ms. Cavazos properly included Mr. Sultan’s salary in her penalty calculations because he was being paid by Petitioner and he did not file an election for exemption from the Workers' Compensation Law until after her inspection.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $68,922.18 on Petitioner to be paid in accordance with a modified payment schedule reflecting the reduced penalty and the payments made through the date of the final order. DONE AND ENTERED this 22nd day of August, 2007, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 22nd day of August, 2007.
The Issue The issues in this case are: (1) whether Respondent, PFR Services Corp., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes (2017)2/; and (2) if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation insurance covering their employees, pursuant to chapter 440. Respondent is a Florida corporation. At all times relevant to this proceeding, its business address was 8040 Northwest 95th Street, Hialeah, Florida. The evidence establishes that Respondent was actively engaged in business during the two-year audit period, from October 17, 2015, through October 16, 2017, pertinent to this proceeding.3/ The Compliance Investigation On October 16, 2017, Petitioner's compliance investigator, Cesar Tolentino, conducted a workers' compensation compliance investigation at a business located at 8040 Northwest 95th Street, Hialeah, Florida. The business was being operated as a restaurant, to which National Council on Compensation Insurance ("NCCI") class code 9082 applies. Tolentino observed Maria Morales, Gabriela Nava, and Geraldine Rodriquez performing waitressing job duties and Rafael Briceno performing chef job duties. The evidence established that these four persons were employed by Respondent. Additionally, the evidence established that corporate officers Rosanna Gutierrez and Mary Pineda were employed by Respondent.4/ The evidence established that neither had elected to be exempt from the workers' compensation coverage requirement. In sum, the evidence established that Respondent employed six employees, none of whom were independent contractors, and none of whom were exempt from the workers' compensation coverage requirement. Tolentino conducted a search of Petitioner's Coverage and Compensation Compliance Automated System, which consists of a database of workers' compensation insurance coverage policies issued for businesses in Florida, and all elections of exemptions filed by corporate officers of businesses in Florida. Tolentino's search revealed that Respondent had never purchased workers' compensation coverage for its employees; that its corporate officers had not elected to be exempt from the workers' compensation coverage requirement; and that Respondent did not lease employees from an employee leasing company. Gutierrez acknowledged that Respondent had not purchased workers' compensation coverage for its employees, and told Tolentino that she did not know it was required. Based on Tolentino's investigation, on October 16, 2017, Petitioner served Stop-Work Order No. 17-384 ("Stop-Work Order") on Respondent. At the time Tolentino served the Stop-Work Order, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner a receipt of the amount paid to activate the policy within 28 days of issuance of the Stop-Work Order, Respondent's penalty would be reduced by the amount paid to activate the policy. On October 16, 2017, Petitioner, through Tolentino, also served on Respondent a Request for Production of Business Records for Penalty Assessment Calculation ("Business Records Request"), requesting Respondent provide several categories of business records covering the two-year audit period from October 16, 2015, to October 16, 2017. Specifically, Petitioner requested that Respondent provide its payroll documents consisting of time sheets, time cards, attendance records, earnings records, check stubs, check images, and payroll summaries, as applicable. Petitioner also requested that Respondent provide, as applicable, its federal income tax documents; account documents, including business check journals and statements and cleared checks for all open or closed business accounts; cash and check disbursements records; workers' compensation coverage records; and independent contractor records. At the time Tolentino served the Business Records Request, he informed Gutierrez that if Respondent obtained a workers' compensation policy and provided Petitioner the complete business records requested within ten business days, Respondent's penalty would be reduced by 25 percent. The evidence establishes that Respondent did not provide any business records within that time period, so is not entitled to receive that penalty reduction. On November 16, 2017, Petitioner issued an Amended Order of Penalty Assessment, assessing a total penalty of $35,262.32 against Respondent for having failed to secure workers' compensation coverage for its employees during the audit period. On December 14, 2017, Gutierrez met with Tolentino and, at that time, provided documentation to Petitioner showing that Respondent had acquired workers' compensation coverage for its employees, effective October 28, 2017, and had paid $3,966.00 for the policy. At the December 14, 2017, meeting, Gutierrez presented an envelope postmarked October 30, 2017, showing that Respondent had mailed Petitioner proof of having obtained the workers' compensation coverage within 28 days of the date the Stop-Work Order was issued; however, this mail was returned, so Petitioner did not receive such proof within 28 days. The evidence established that this mail was returned to Respondent on December 4, 2017——several days after the 28-day period had expired, and too late for Respondent to take additional steps to deliver to Petitioner the proof of its having purchased the workers' compensation policy.5/ Because Petitioner did not receive Respondent's proof of having purchased a workers' compensation policy within 28 days of issuance of the Stop-Work Order, it did not reduce the penalty imposed on Respondent by the amount that Respondent had paid for the premium. The evidence also establishes that at the December 14, 2017, meeting, Respondent tendered to Petitioner a cashier's check in the amount of $1,000.00. As a result of having received proof of workers' compensation coverage for Respondent's employees, Petitioner issued an Agreed Order of Conditional Release from Stop-Work Order ("Order of Conditional Release") on December 14, 2017, releasing Respondent from the Stop-Work Order. The Order of Conditional Release expressly recognized that Respondent "paid $1,000.00 as a down payment for a penalty calculated pursuant to F.S. 440.107(7)(d)1." Additionally, page 1 of 3 of the Penalty Calculation Worksheet attached to the Amended Order of Penalty Assessment admitted into evidence at the final hearing reflects that Respondent paid $1,000.00 toward the assessed penalty of $35,262.32. This document shows $34,262.32 as the "Balance Due." Calculation of Penalty to be Assessed Petitioner penalizes employers based on the amount of workers' compensation insurance premiums the employer has avoided paying. The amount of the evaded premium is determined by reviewing the employer's business records. In the Business Records Request served on October 16, 2017, Petitioner specifically requested that Respondent provide its payroll documents, federal income tax documents, disbursements records, workers' compensation coverage records, and other specified documents. When Gutierrez met with Tolentino on December 14, 2017, she provided some, but not all, of the business records that Petitioner had requested. Respondent subsequently provided additional business records to Petitioner, on the eve of the final hearing. Petitioner reviewed all of the business records that Respondent provided. However, these business records were incomplete because they did not include check images, as specifically required to be maintained and provided to Petitioner pursuant to Florida Administrative Code Rule 69L-6.015(6). Check images are required under Florida Administrative Code Rule 69L-6.015(6) because such images reveal the payees, which can help Petitioner identify the employees on the employer's payroll at any given time. This information is vital to determining whether the employer complied with the requirement to have workers' compensation coverage for all of its employees. Because Respondent did not provide the required check images, the records were insufficient to enable Petitioner to calculate Respondent's payroll for the audit period. Under section 440.107(7)(e), business records provided by the employer are insufficient to enable Petitioner to calculate the employer's payroll for the period for which the records are requested, Petitioner is authorized to impute the weekly payroll for each employee as constituting the statewide average weekly wage multiplied by 1.5. To calculate the amount of the penalty due using the imputed method, Petitioner imputes the gross payroll for each employee for each period during which that employee was not covered by required workers' compensation insurance. To facilitate calculation, Petitioner divides the gross payroll amount for each employee for the specific non-compliance period by 100.6/ Petitioner then multiplies this amount by the approved NCCI Scopes Manual rate——here, 2.34, which applies to restaurants——to determine the amount of the avoided premium for each employee for each non-compliance period. This premium amount is then multiplied by two to determine the penalty amount to be assessed for each employee not covered by required workers' compensation insurance for each specific period of non- compliance. Performing these calculations, Petitioner determined that a penalty in the amount of $35,262.32 should be assessed against Respondent for failing to provide workers' compensation insurance for its employees, as required by chapter 440, for the period from October 17, 2015, through October 16, 2017. As discussed above, on December 14, 2017, Respondent paid a down payment of $1,000.00 toward the penalty, and this was expressly recognized in the Stop-Work Order that was issued that same day. Thus, the amount of the penalty to be assessed against Respondent should be reduced by $1,000.00, to $34,262.32. As previously noted, this amount is identified on page 1 of 3 of the Amended Order of Penalty Assessment as the "Balance Due." As discussed in paragraphs 17 and 18, above, the evidence establishes that Respondent purchased a workers' compensation policy to cover its employees within 11 days of issuance of the Stop-Work Order, and mailed to Petitioner proof of having purchased such policy on October 30, 2017——well within the 28-day period for providing such proof. However, as discussed above, this mail was returned to Respondent on December 4, 2017——too late for Respondent to take additional steps to provide such proof to Petitioner within the 28-day period. There is no evidence in the record showing that failure of the mailed proof to be received by Petitioner was due to any fault on Respondent's part. Respondent's Defenses On behalf of Respondent, Gutierrez testified that Respondent did everything that Tolentino had told them to do. Respondent purchased workers' compensation insurance and provided proof to Petitioner that its employees were covered.7/ Gutierrez also testified that although Respondent's business was created in May 2013, it did not begin operating and, therefore, did not have any employees, until January 2016.8/ However, as previously noted, the persuasive evidence does not support this assertion.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that PFR Services Corp. violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage for its employees during the audit period, and imposing a penalty of $30,296.32. DONE AND ENTERED this 14th day of January, 2019, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of January, 2019.
The Issue The issue is whether Respondent is liable for a penalty of $4,741.76 for the alleged failure to maintain workers’ compensation insurance for its employees in violation of Chapter 440, Florida Statutes (2008).1
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees in accordance with the requirements of Section 440.107. Respondent is a Florida corporation engaged in the construction business. The corporate officers of Respondent in 2007 were: Julie Magill, Glen Magill, Jamie Guerrero, and Richard Magill. The corporate officers after amendment on June 12, 2008, were: Julie Magill, Albert Farradaz, and Farid O’Campo. Corporate officers are eligible to obtain exemption from the requirements of workers’ compensation through the process described in Section 440.05. Construction exemptions are valid for a period of two years. The expiration date of each exemption is printed on an exemption card issued to each card holder. Julie Magill, Glen Magill, and Jaime Guererro obtained construction exemptions as officers of Respondent, pursuant to Section 440.05. Julie Magill acknowledged receiving a card for each exemption with the expiration date printed on each exemption card. The exemption for Julie Magill expired on June 2, 2008. The exemption for Glen Magill expired on May 29, 2008, and the exemption for Jaime Guererro expired on May 29, 2008. Petitioner notifies exemption holders at least 60 days prior to the expiration date. Petitioner sent the Notice of Expiration to Julie Magill at Respondent's current mailing address. On October 5, 2009, an investigator for Petitioner interviewed Mr. Cliff Chavaria, an installer and repairer of air-conditioner units. Mr. Chavaria was an employee of Respondent. Respondent did not maintain workers’ compensation insurance coverage for Mr. Chavaria in violation of Chapter 440. It is undisputed that Mr. Chavaria did not have any type of coverage for workers’ compensation insurance. Mr. Jaime Guererro and Mr. Glen Magill also had no exemptions and no workers’ compensation insurance coverage. Respondent offered tax records for 2007 as Exhibit 8 at the hearing to show gross payroll for Julie and Richard Magill. The offered exhibit was an attempt to re-create tax information from an internet website. Respondent was given 10 days following the date of the hearing to produce an authenticated version of this document. No documentation was received.
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 imposing a penalty assessment in the amount of $4,741.76. DONE AND ENTERED this 15th day of April, 2010, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 April, 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 following statutory provisions: Sections 626.561(1), 626.611(5), 626.611(7), 626.611(8), 626.611(9), 626.611(10), 626.611(13), 626.621(2), 626.621(4), 626.621(6), 626.9521, and 626.9541(1)(o)1., Florida Statutes, and if so what discipline should be imposed.
Findings Of Fact Respondent, Gus Jones, Jr., is currently and was at all times relevant to this proceeding a licensed insurance agent in this state doing business under the name of A. Maples Insurance Agency. In August, 1990, Jesus Escalera, who had a roofing business, came to Respondent to obtain workers' compensation insurance. Mr. Escalera's insurance was placed through the National Counsel on Compensation Insurance (NCCI) which is a pool for assigned risk insurance. Mr. Escalera's policy was with Aetna with coverage effective through October 26, 1991. On August 16, 1991, Mr. Escalera came to Respondent to renew his workers' compensation insurance. Mr. Escalera gave Respondent $409.00, which represented a down payment of one-half the premium for one year's coverage. The remainder of the premium was to be financed with Financial Industries, Inc. Aetna had withdrawn from the original risk insurance pool, therefore it was necessary to submit a new application to NCCI for placement of insurance for Mr. Escalera. Respondent sent the application to NCCI in October, 1991. Mr. Escalera's insurance was placed with United States Fidelity and Guaranty Company (USF&G) on November 13, 1991. Respondent kept a supply of blank drafts from Financial Industries, Inc. at his office. Respondent sent a Financial Industries, Inc.'s draft to NCCI for Mr. Escalera's insurance with USF&G. Financial Industries stopped payment on the draft because they had decided to discontinue financing workers' compensation insurance. Respondent attempted to finance Mr. Escalera's insurance through Premium Assignment Company (Premium). Respondent sent a premium draft to NCCI, but Premium stopped payment on the draft for Respondent's failure to send a transmittal to Premium. Mr. Escalera had called Respondent three or four times asking for his payment book so that he could make the installment payments for the insurance. Respondent advised Mr. Escalera that the payment book was in the mail. USF&G performed an audit on Mr. Escalera's payroll and determined that Mr. Escalera owed $13,724.00 for earned premiums. In January, 1992, Respondent contacted Mr. Escalera and advised him that USF&G intended to cancel the insurance effective February 16, 1992. On February 3, 1992, Mr. Escalera went to see Respondent. Respondent explained that he could not get financing for Mr. Escalera and requested Mr. Escalera to pay the balance of the premium of $817.00. Mr. Escalera paid $409.00 to Respondent and received a receipt for that amount. Respondent sent USF&G a check for $817.00. The policy was reinstated with coverage effective December 13, 1991. USF&G gave notice dated March 13, 1992 that Mr. Escalera's policy would be terminated April 13, 1992 for non-payment. By letter dated April 16, 1992, USF&G returned Respondent his check due to the second cancellation. By letters dated June 2, 1992, USF&G advised Respondent that Mr. Escalera owed a earned premium of $13,724.00. The policy was terminated effective April 13, 1993, because Mr. Escalera had failed to pay the earned premium. In April or May, 1992, Respondent placed the retuned check from USF&G in his trust account. Respondent did not advise Mr. Escalera that the premium had been returned. According to Mr. Escalera, he did not know at the time of the hearing who had the money. On February 6, 1993, Respondent called David Peters, a representative of USF&G and asked Mr. Peters what to do with the $817. Respondent let the money remain in the trust account and awaited further instruction from Mr. Peters. After Respondent received the administrative complaint, he called USF&G and spoke with Marilyn Bailey who was now handling the account on behalf of USF&G. Based on his conversation with Ms. Bailey, Respondent sent USF&G a cashier's check for $817 dated May 18, 1993.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer issue a Final Order finding Respondent guilty of a violation of Sections 626.561(1) and 626.621(2) and that Respondent be assessed an administrative fine of $500 and be placed on probation for a period of one year subject to such terms and restrictions as the Department may apply. DONE AND ENTERED this 19th day of October, 1993, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of October, 1993.
The Issue The issue is whether a retiree's forfeiture of Florida Retirement System (FRS) benefits authorizes Respondent to seize from unrelated remittals due Petitioner the sum of $18,271.75, which is the amount that Respondent had previously deducted from the retiree's pension benefits and remitted to Petitioner for the payment of the retiree's insurance premiums.
Findings Of Fact Employed by Petitioner in April 1974, Garfield Perry participated in the FRS pension plan. On or about October 31, 2009, Mr. Perry terminated his employment and began receiving his monthly FRS pension benefit. Two months earlier, Mr. Perry had entered into an agreement with Petitioner for it to provide post-retirement life insurance for Mr. Perry and medical and dental insurance for Mr. Perry and his wife with all three policies commencing in November 2009. While these policies were in effect, pursuant to an agreement between Petitioner and Respondent that is described below, Respondent remitted to Petitioner a portion of Mr. Perry's FRS pension benefit equal to $17,429.47 for medical and dental premiums and $842.28 for life insurance premiums, for a total of $18,271.75. Petitioner is a self-insurer for medical insurance, so, on receipt of medical insurance premiums, Petitioner pays a portion of the premiums to a third-party administrator for insurance-related services and reserves the remainder for the payment of claims. For dental and life insurance, Petitioner remits the premiums to the respective insurers. On May 7, 2014, Mr. Perry pleaded guilty to one count of bribery and extortion in the United States District Court, Southern District of Florida, in connection with his employment in Petitioner's Public Works Department. On or about July 29, 2014, the court adjudicated Mr. Perry guilty. By letter dated August 6, 2014, Respondent advised Mr. Perry that, pursuant to article II, section 8(d), of the Florida Constitution, and sections 112.3173 and 121.091(5), Florida Statutes, his FRS benefits were forfeited due to his guilty plea. Mr. Perry requested an administrative hearing on the forfeiture, and Respondent transmitted the file to DOAH, which designated the case as DOAH Case No. 14-4195. On December 31, 2014, Mr. Perry voluntarily dismissed his request for hearing prior to the final hearing, and, on January 9, 2015, Respondent issued a Final Order of Dismissal that finds, among other things, that Mr. Perry committed the criminal offenses "from in or about 2006 through in or about October 2009." The final order formally declares a forfeiture of Mr. Perry's FRS pension benefits, evidently including benefits already paid. Respondent did not provide Petitioner with a copy of the August 6, 2014, letter, the Final Order of Dismissal, or any of the pleadings in DOAH Case No. 14-4195. The present record does not indicate if Petitioner had actual notice of the forfeiture process. However, this case likely represents the first time that Respondent has attempted to recover insurance premiums that it has remitted to an agency or company following the retiree's forfeiture of retirement benefits, and it is unlikely that Petitioner was aware of its potential liability to repay these amounts until April 1, 2016, as described below. This potential liability arguably arises from a Payroll Deduction Agreement entered into by Petitioner and Respondent. The agreement allows a retiree to authorize Respondent to deduct monthly from his pension benefit an amount equal to his insurance premiums and to remit this sum to Petitioner, so that it can pay the retiree's premiums. In this case, Respondent remitted insurance premiums to Petitioner from November 2009 through October 2012 and allocated them in the manner set forth above in paragraph 2. Three and one-half years after the last remittal that included any sums for Mr. Perry's insurance premiums, almost two years after Mr. Perry's guilty plea, and about 15 months after the final order declaring the forfeiture, Respondent withheld $18,271.75 from Respondent's March 2016 consolidated remittal to Petitioner on the account of other retirees in an attempt to recover the remittals that Respondent had made to Petitioner to pay Mr. Perry's insurance premiums. The Payroll Deduction Agreement is a form prepared by Respondent that is signed by the agency or company seeking to receive remittals for its FRS retirees. Under the agreement, which has a signature line only for the agency or company and not Respondent, the agency or company agrees to preserve the confidentiality of the information, assume responsibility for the accuracy of the premium deductions, and notify Respondent timely of the discontinuation of this payroll deduction service. An employee of Petitioner signed the Payroll Deduction Agreement on April 27, 2009. The Payroll Deduction Agreement requires the agency or company to accept the "Procedures for Admitting Insurance Providers for Retired Payroll Deduction." The procedures document states that Respondent offers the convenience of payroll deduction of insurance premiums as a service to FRS pension recipients. Only two paragraphs of this document address post-deduction adjustments: 11. If a retiree's insurance premium is deducted incorrectly for any reason (i.e.-- overpayment of amount, policy cancelled, administrative error, etc.), the Insurance provider company or FRS agency is responsible for refunding the premium amount to the retiree. 13. [1] If a retirement benefit is cancelled by the Division of Retirement, the corresponding insurance premium that was deducted from that same dated payment is recovered from the following month's consolidated insurance payment. Reasons for cancellations include payee deaths, [sic] cancelling retirement. When determining the amount of insurance premiums to be reimbursed to families of deceased members, please note that the Division cannot determine when a death will be reported or when funds will be funds will be returned [sic] from banks (resulting in cancellations). [4] There are occasions when a report of death is received months after a retiree's death. [5] If payments for the deceased are still outstanding, they most likely will be cancelled. A common example follows: Example: Payee dies 1/5/09. Family reports death to the Division on 4/1/09. Retiree was only due payments through the month of January. Since the February and March payments are still outstanding, these paper checks are cancelled by the Division of Retirement. This cancellation action recovers the 2/27/09 and 3/31/09 premium deductions from the 4/30/09 consolidated payment. A credit entry will also appear on the April 2009 report of retiree insurance deductions. Please Note: We recommend that you contact the Division of Retirement to inquire about possible payment cancellations prior to processing premium reimbursements. Paragraph 11 of the Payroll Deduction Agreement requires that an agency or company repay the retiree any excessive premium deduction, so is irrelevant in the case of forfeiture. Paragraph 13 of the Payroll Deduction Agreement applies to the situation in which a premium deduction is unfunded because of the cessation of the pension benefit from which it is deducted. In its proposed recommended order, Petitioner argues that the application of paragraph 13 is prospective only, so it would not apply to a retroactive setoff of the type that has occurred in this case. The first sentence identifies the contingency of the cancelation of a retirement benefit and authorizes Respondent to recover its remittal of any premiums deducted from the cancelled pension benefit, but mentions a recovery or setoff only in the month following the cancelation. This establishes the kind of liability that Respondent seeks to impose on Petitioner, but only for the brief period of one month. Obviously, the willingness of an agency or company to assume this minor liability for the convenience of its retirees does not imply a willingness to assume a much larger liability spanning several months or even years of remittals. The second sentence cites two common reasons for cancelation: the death of the retiree and the cancellation of the pension benefit by the retiree. The use of "includes," as well as the insertion of a comma in place of "and" or "or," suggests that these two reasons are illustrative, not exhaustive. Even so, the second sentence does not add the reason of forfeiture, and, at this point in paragraph 13, the details of the parties' agreement concerning a forfeiture has not been explicitly addressed. The third and fourth sentences address only the contingency of the death of the retiree, in which case Respondent recovers unearned premiums that Respondent intends to remit to the estate of the retiree--in most cases, one assumes, indirectly to the families of the deceased member. Typically, insurers are not exposed to the risk of insured losses after the death of a retiree--even a life insurer's exposure ends after the insured's death and payment of the death benefits--so any premiums paid after death are unearned and should be refunded to the proper party. The warning that Respondent may not learn of the retiree's death for many months suggests a longer period may be available for retroactive adjustments, but this warning applies only to the contingency of death, again, where the insurers are obligated to refund unearned premiums. The fifth sentence also addresses only the contingency of the death of a retiree and seems to provide only that Respondent will cancel any pension benefits or premium remittals still outstanding at the time of the retiree's death. The example illustrates a three-month delay in the receipt of notification of a retiree's death followed by the cancellation of the pension benefits issued in the preceding two months, which presumably could not have been lawfully presented for payment by anyone besides the deceased retiree. In this case, Respondent would issue a corresponding credit entry on the next month's report of premium deductions made on account of the retiree. The procedures document thus fails to address the contingency of forfeiture. The provisions applicable to the contingencies of the death of the retiree and the retiree's cancellation of pension benefits are a poor fit for the contingency of forfeiture. Respondent has previously recovered income tax withheld on paid pension benefits following a forfeiture, but the recovery was limited to the period during which an amended personal income tax return could be filed--the effect being that the amount could be effectively recovered in the form of a tax refund from the Internal Revenue Service, rather than from an agency or company.
Recommendation It is RECOMMENDED that the Department of Management Services enter a final order dismissing the Petition Requesting an Administrative Hearing filed on August 17, 2016. DONE AND ENTERED this 8th day of February, 2017, 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 8th day of February, 2017. COPIES FURNISHED: Veronica E. Donnelly, Esquire Offices of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399-0950 (eServed) Joni A. Mosely, Esquire Assistant County Attorney Miami-Dade County Attorney's Office Stephen P. Clark Center, Suite 2810 111 Northwest 1st Street Miami, Florida 33128-1993 (eServed) Elizabeth Stevens, Director Division of Retirement Department of Management Services Post Office Box 9000 Tallahassee, Florida 32315-9000 (eServed) J. Andrew Atkinson, General Counsel Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160 Tallahassee, Florida 32399-0950 (eServed)
