The Issue The issue is whether Respondent complied with the requirements of the Workers' Compensation Law and, if not, what is the appropriate penalty?
Findings Of Fact The Division is charged with the regulation of workers' compensation insurance in the State of Florida. Respondent, River City Roofing Sheet Metal, Inc. (River City Roofing), is a Florida corporation located in Jacksonville, Florida, and is engaged in the construction industry. Michael Robinson is an insurance analyst/compliance investigator employed by the Division. His duties include making site visits at locations where work is being conducted and determining whether the employers in the state are in compliance with the requirements of the workers' compensation law and related rules. On August 17, 2010, Mr. Robinson visited a residential job site at 4206 Katanga Drive, Jacksonville, Florida, and observed five individuals reroofing the property at the site. Mr. Robinson called up to the workers and asked them to come down from the roof so that he could speak to them. One of the workers identified himself as David Hannans, and informed Mr. Robinson that he and the others were employees of River City Roofing. Mr. Robinson proceeded to get the names of the other workers. However, during this time, one of the men wandered away and left the worksite without speaking to Mr. Robinson. Mr. Robinson inquired about the name of the worker who left the worksite, and was informed his name was "Shorty." During his conversation with Mr. Hannans, Mr. Robinson also learned that the worksite supervisor, Gary Pittman, had been at the worksite but left to go to the store. Mr. Robinson confirmed with Mr. Hannans that the men at the worksite, including Mr. Hannans, were employees of River City Roofing. Mr. Robinson inquired about the owner of the business and learned the owner is Robert Olszanowski. Mr. Robinson then called Mr. Olszanowski. According to Mr. Robinson, Mr. Olszanowski verified that three of the men at the worksite were his employees, but claimed not to know the other two men. Mr. Robinson advised Mr. Olszanowski to contact Mr. Pittman to find out who the other two men were. During a follow-up telephone call with Mr. Olszanowski, Mr. Robinson was told that one of the individuals was a friend of Mr. Hannans and the other was a man from the neighborhood. According to Mr. Robinson, Mr. Olszanowski informed him that he was unaware of the other two men. Mr. Robinson then inquired about what type of workers' compensation coverage had been procured and learned that Mr. Olszanowski held an exemption and used Phoenix Resources, Inc., a staffing company, to cover his employees. Mr. Robinson contacted Phoenix Resources and was informed that River City Roofing was a client and as of August 17, 2010, had four individuals on the payroll: Gary Pittman, Miguel Hernandez Lopez, Ancelmo Perez Fernandez, and Simon Aguilar Sanchez. Mr. Robinson requested written confirmation of this and received an e-mail communication from Phoenix Resources which provided written confirmation. David Hannans and "Shorty" were not listed. Mr. Robinson inquired as to whether Phoenix Resources carried workers' compensation coverage on the listed individuals, and learned that those listed employees were covered under a policy procured from Business Personnel Solutions. Mr. Robinson contacted Business personnel Solutions and verified that there was a policy that covered those employees of Phoenix Resources. Mr. Robinson again contacted Phoenix Resources and inquired as to whether it had received any new applications from River City Roofing, and learned that it had not received any new applications. Mr. Robinson then consulted the Department of State, Division of Corporations website, to find information concerning the corporate status of River City Roofing. He verified from the website that River City Roofing is an active corporation and that Robert Olszanowski is the Chief Executive Officer. Mr. Robinson then consulted the Division's Coverage and Compliance Automated System (CCAS) database, which is routinely used by the Department and contains both the workers' compensation policy information for each employer that has a Florida policy, as well as all information concerning workers' compensation exemptions that have been applied for and issued to individuals by the Department. Mr. Robinson learned that Respondent previously had a policy that expired on August 25, 2008, and confirmed that Mr. Olszanowski held an exemption. Based upon his investigative findings, Mr. Robinson concluded that Mr. Hannans and "Shorty" were employees of River City Roofing who were not covered by a workers' compensation policy or a valid exemption in violation of chapter 440, Florida Statutes. On August 18, 2010, Mr. Robinson issued Stop-Work Order No. 10-253-D1 to Respondent and issued a Request for Production of Business Records for Penalty Assessment Calculation. Both were personally served by Mr. Robinson on Mr. Olszanowski. The Request for Production of Business Records requested records for the time period August 26, 2008 through August 18, 2010. Respondent did not produce business records as requested. Cathe Ferguson is a Penalty Calculator for the Division. She reviews business records such as payroll, bank statements, and copies of checks, and calculates the amount of penalty for non-compliance with workers' compensation laws. As required by Chapter 440, Ms. Ferguson imputed Respondent's payroll as a result of Respondent's failure to provide business records. Mr. Robinson then issued and served by certified mail an Amended Order of Penalty Assessment to Respondent in the amount of $116,240.82. Subsequent to this and subsequent to Respondent's request for an administrative hearing, Ms. Ferguson determined there was an internal error and amended the penalty amount downward. On February 7, 2011, Mr. Robinson issued a second Amended Order of Penalty Assessment in the amount of $71,028.94. In calculating the penalty for failure to comply with chapter 440, Ms. Ferguson first sought to determine the amount of premium that Respondent would have paid had Respondent obtained the proper workers' compensation insurance in place for the period of August 26, 2008 through August 17, 2010. In determining the premium that Respondent avoided by not obtaining workers' compensation insurance coverage for all of its employees, Ms. Ferguson utilized a penalty worksheet. Ms. Ferguson identified the individual employees of Respondent not covered by a workers' compensation policy or an exemption and listed them on the penalty worksheet. For each individual listed on the penalty worksheet, Ms. Ferguson assigned a class code reflecting the work done by each employee as observed by Mr. Robinson (i.e., the class code for roofing). The amount of the penalty was imputed using the Average Weekly Wage as determined by the Agency for Workforce Innovation, across the entire period of non-compliance. Ms. Ferguson imputed the penalty because Respondent did not produce business records from which the Division could have calculated the gross payroll from the employees in question. Ms. Ferguson then took 1/100th of the payroll and multiplied that figure by the approved manual rate applicable to the applicable class code, as adopted by the Office of Insurance Regulation. Ms. Ferguson then took the previously obtained product and multiplied it by 1.5 to determine the penalty for the period of August 26, 2008 through August 17, 2010, the time period requested in the business records request. Based upon her calculations, Ms. Ferguson determined the appropriate penalty to be assessed against Respondent to be $71,028.94. Respondent disputed portions of the penalty worksheet attached to the Amended Order of Penalty Assessment, which gave rise to this proceeding. Specifically, Respondent wrote the word "Dispute" next to David Hannans and "Shorty's" names for all time periods on the penalty worksheet except for the time period July 1, 2010 through August 17, 2010, next to which Respondent wrote "not disputed". Thus, in its request for hearing, Respondent did not dispute that Hannans and "Shorty" were employees of Respondent; rather, Respondent disputed that they were employees during most of the periods of time listed on the penalty worksheet.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That the Division of Workers' Compensation enter a Final Order upholding the Second Amended Order of Penalty Assessment, assigning a penalty of $71,028.94, and the Stop-Work Order issued to Respondent on August 8, 2010. DONE AND ENTERED this 29th day of March, 2011, 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 29th day of March, 2011. COPIES FURNISHED: Jamila Georgette Gooden, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Robert L. Olszanowski River City Roofing Sheet Metal, Inc. 10650 Haverford Road, Suite 2 Jacksonville, Florida 32218 Honorable Jeff Atwater Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 P. J. Jameson, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact 12. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on February 22, 2011, the Amended Order of Penalty Assessment issued on March 24, 2011, and the 2nd Amended Order of Penalty Assessment, issued on March 8, 2012, attached as “Exhibit A,” “Exhibit B,” and Exhibit “D” respectively, 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 AMSTARR, INC., the Stop-Work Order and Order of Penalty Assessment, the Amended Order of Penalty Assessment, and the 2nd Amended Order of Penalty Assessment, and being otherwise fully advised in the premises, hereby finds that: 1. On February 22, 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. 11-060-1A to AMSTARR, INC. The Stop-Work Order and Order of Penalty Assessment included a Notice of Rights wherein AMSTARR, 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 February 22, 2011, the Stop-Work Order and Order of Penalty Assessment was served by personal service on AMSTARR, INC. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On March 24, 2011, the Department issued an Amended Order of Penalty Assessment to AMSTARR, INC. The Amended Order of Penalty Assessment assessed a total penalty of $80,945.25 against AMSTARR, INC. The Amended Order of Penalty Assessment included a Notice of Rights wherein AMSTARR, 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. 4, On October 27, 2011, the Amended Order of Penalty Assessment was served by personal service via a process server on AMSTARR, INC. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On November 28, 2011, AMSTARR, INC. timely filed a request for administrative hearing with the Department. The petition for administrative review was forwarded to the Division of Administrative Hearings on January 6, 2012, and the matter was assigned DOAH Case No. 12-0080. A copy of the petition is attached hereto as “Exhibit C” and incorporated herein by reference. 6. On March 8, 2012, the Department issued a 2nd Amended Order of Penalty Assessment to AMSTARR, INC. The Amended Order of Penalty Assessment assessed a total penalty of $2,256.78 against AMSTARR, INC. The 2nd Amended Order of Penalty Assessment included a Notice of Rights wherein AMSTARR, INC. was advised that any request for an administrative proceeding to challenge or contest the 2nd Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the 2nd 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. 7. On March 13, 2011, the 2nd Amended Order of Penalty Assessment was served by electronic mail on AMSTARR, INC. A copy of the 2nd Amended Order of Penalty Assessment is attached hereto as “Exhibit D” and incorporated herein by reference. 8. On March 26, 2012, AMSTARR, INC., entered into a Settlement Agreement with the Department. The Settlement Agreement stated that AMSTARR, INC. must accept service of the 2nd Amended Order of Penalty Assessment. The Settlement Agreement also stated that AMSTARR, INC. must pay the penalty in full, or pay a down-payment of $1,000.00 and enter into a Payment Agreement Schedule for Periodic Payment within thirty days of the execution of the Settlement Agreement. Additionally, AMSTARR, INC. agreed that upon execution of the Settlement Agreement his Petition shall be deemed dismissed with prejudice. A copy of the Executed Settlement Agreement is attached hereto as “Exhibit E” and incorporated herein by reference. 9. On March 26, 2012, the Department filed a Notice of Settlement with the Division of Administrative Hearings. A copy of the Notice of Settlement is attached hereto as “Exhibit F” and incorporated herein by reference. 10. On April 2, 2012, the Administrative Law Judge issued an Order Closing File and Relinquishing Jurisdiction. A copy of the Order Closing File and Relinquishing Jurisdiction is attached hereto as “Exhibit G” and incorporated herein by reference. ll. As of the date of this Final Order, AMSTARR, INC. has failed to comply with the conditions of the Settlement Agreement. AMSTARR, INC. has neither paid the penalty amount in full, nor has AMSTARR, INC. entered into a Payment Agreement Schedule for Periodic Payment.
The Issue Whether Gio & Sons, Inc. (Respondent) violated Sections and 440.38, Florida Statutes, and if so, what penalty should be imposed. References to sections are to the Florida Statutes (2004).
Findings Of Fact Petitioner is the state agency responsible for enforcing provisions of Florida law, specifically Chapter 440, Florida Statutes, which require that employers secure workers’ compensation coverage for their employees. Respondent, whose principal is Giovanny Martinez, Jr. (Mr. Martinez), is in the business of providing drywall installation services. At all times material to this case, Respondent is an employer within the meaning of Section 440.02(16)(a), Florida Statutes. At all times material to this case, Respondent was legally obligated to provide workers' compensation insurance in accordance with the provisions of Chapter 440, Florida Statutes, for all persons employed by Respondent to provide drywall installation services within Florida. In particular, Chapter 440 requires that the premium rates for such coverage be set pursuant to Florida law. At all times material to this case, Respondent failed to obtain workers' compensation coverage on behalf of over 150 employees. It is undisputed that Respondent had not furnished the required coverage, and that there was no valid exemption from this requirement. Accordingly, on February 26, 2004, the Stop Work Order was properly entered. Thereafter, Petitioner reviewed Respondent's payroll records, which revealed that Respondent employed the individuals referred to in paragraph 5, whose identities are not in dispute, under circumstances which obliged Respondent to provide workers' compensation coverage for their benefit. Based upon Respondent’s payroll records, Petitioner correctly calculated the penalty amount imposed by law under all the circumstances of the case, and issued the Amended Order imposing a penalty assessment in the amount of $107,885.71. Mr. Martinez does not dispute the factual or legal merits of Petitioner's case.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order that affirms the Amended Order in the amount of $107,885.71. DONE AND ENTERED this 15th day of December, 2004, in Tallahassee, Leon County, Florida. S FLORENCE SNYDER RIVAS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of December, 2004. COPIES FURNISHED: Joe Thompson, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Giovanny Martinez, Jr. Gio & Sons, Inc. 6910 Southwest 18th Court Pompano Beach, Florida 33068 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florid a 32399-0300 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue in this case is whether Respondent had a sufficient amount of workers’ compensation coverage during the time period in question; and, if not, what penalty should be imposed.
Findings Of Fact The Division is the state agency responsible for enforcing the requirement in chapter 440, Florida Statutes (2015),1/ that employers in Florida secure workers’ compensation coverage for their employees. While an exemption can be obtained for up to three corporate officers, any employer in the construction industry with at least one employee must have workers’ compensation coverage. § 440.02(15), Fla. Stat. Kent Howe works for the Division as a compliance investigator based in Orlando, Florida. As part of his job responsibilities, Mr. Howe visits construction sites in order to verify that employers in the construction industry have obtained workers’ compensation coverage for their employees. Mr. Kehr was the owner and sole corporate officer of JNK. Mr. Howe visited a construction site in Port Orange, Florida, on the morning of December 10, 2015, and saw Mr. Kehr and two other men building the interior walls/frames of a house. Mr. Howe talked to the two men (James Hicks and James Garthwait) working with Mr. Kehr, and they reported that Mr. Kehr was paying them approximately $8.00 an hour. Mr. Kehr told Mr. Howe that Messrs. Hicks and Garthwait had been working for him for approximately two hours that morning. Mr. Kehr also stated that he had not obtained workers’ compensation coverage for Messrs. Hicks and Garthwait. Following those conversations, Mr. Howe returned to his car and accessed the Division’s Coverage and Compliance Automated System (“CCAS”) and learned that JNK had no workers’ compensation coverage. Mr. Howe also determined from CCAS that Mr. Kehr had obtained an exemption from workers’ compensation coverage that had been in effect from November 18, 2014, through November of 2016.2/ After relaying that information to his supervisor, Mr. Howe received authorization to serve Mr. Kehr with a Stop- Work Order, and he did so on December 10, 2015. That Stop-Work Order required JNK to “cease all business operations for all worksites in the State” based on the Division’s determination that JNK had failed to obtain workers’ compensation coverage. In addition, the Stop-Work Order stated that JNK would be penalized an amount “[e]qual to 2 times the amount [JNK] would have paid in premium when applying approved manual rates to the employer’s payroll during periods for which it [had] failed to secure the payment of compensation within the preceding 2-year period.” Along with the Stop-Work Order, Mr. Howe also served a “Request for Production of Business Records for Penalty Assessment Calculation” (“the BRR”) on Mr. Kehr. In order to ascertain JNK’s payroll disbursements during the relevant time period and the resulting penalty for JNK’s failure to obtain workers’ compensation coverage, the BRR requested that JNK remit several different types of business records covering the period from November 10, 2014, through December 10, 2015. Mr. Howe explained during the final hearing that the Division usually reviews business records pertaining to the two years preceding the Stop Work Order.3/ Because JNK came into existence on November 10, 2014, the Division’s review was limited to examining the period between November 10, 2014, and December 10, 2015. The business records sought by the Division included items such as time sheets, payroll summaries, check journals, certificates of exemption, and evidence that any JNK subcontractors had obtained workers’ compensation coverage. Section 440.107(7)(e) provides that if an employer fails to provide business records sufficient to enable the Department to ascertain the employer’s actual payroll for the time period in question, then the Division will estimate the employer’s actual payroll for that time period by imputing the employer’s payroll based on the statewide average weekly wage. The Division then multiplies that amount by two. JNK did not provide business records typically sought by the Division. Instead, JNK responded to the BRR by producing a written statement from Mr. Kehr indicating that he founded JNK in November of 2014, but did no work until July of 2015. That initial job involved fixing a set of stairs for $200. Afterwards, Mr. Kehr performed three separate small jobs between July and November of 2015, earning approximately $550. Because the Division could not ascertain JNK’s actual payroll from the documentation provided by JNK, the Division imputed JNK’s payroll for the time period in question and issued an Amended Order of Penalty Assessment on January 19, 2016, seeking to impose a penalty of $61,424.04. Phillip Sley calculated the aforementioned penalty amount by filling out a worksheet that has been adopted by the Division through Florida Administrative Code Rule 69L-6.027. The first step in completing the worksheet required Mr. Sley to assign a classification code to the type of work that Mr. Howe witnessed Messrs. Kehr, Hicks and Garthwait performing at the Port Orange worksite on December 10, 2015. Classification codes come from the Scopes® Manual, which has been adopted by the Department through rule 69L-6.021. Each code within the Scopes® Manual pertains to an occupation or type of work, and each code has an approved manual rate used by insurance companies to assist in the calculation of workers’ compensation insurance premiums. The imputed weekly payroll for each employee and corporate officer “shall be assigned to the highest rated workers’ compensation classification code for an employee based upon records or the investigator’s physical observation of that employee’s activities.” See Fla. Admin. Code. R. 69L-6.028(3)(d). In the instant case, Mr. Sley determined “5645” was the appropriate classification code. According to the Scopes Manual, [w]hen all of the carpentry work in connection with the construction of residential dwellings not exceeding three stories in height is performed by employees of the same carpentry contractor or general contractor responsible for the entire dwelling construction project, the work is assigned to Code 5645. This includes the construction of the sill, rough framework, rough floor, wood or light-gauge steel studs, wood or lighted-gauge steel joists, rafters, roof deck, all types of roofing materials, sidewall sheathing, siding, doors, wallboard installation, lathing, windows, stairs, finished flooring, cabinet installation, fencing, detached structures, and all interior wood trim. Mr. Sley’s next step in calculating the penalty amount was to determine the period of non-compliance. With regard to Mr. Kehr, the Department asserted that JNK failed to have workers’ compensation coverage between the date of JNK’s inception (November 10, 2014) and the date that Mr. Kehr received an exemption from the workers’ compensation coverage requirement (November 18, 2014). Despite having no evidence that Messrs. Hicks and Garthwait worked for JNK on any day other than December 10, 2015, the Division’s penalty calculation was based on an assumption that Messrs. Hicks and Garthwait worked for JNK from November 10, 2014, through December 10, 2015. Mr. Sley’s next step was to calculate JNK’s gross payroll for the time period in question. Because JNK did not provide the Division with business records that would have enabled the Division to calculate JNK’s actual payroll, Mr. Sley based JNK’s payroll on the statewide average weekly wage determined by the Department of Economic Opportunity for the time period in question.4/ Mr. Sley then multiplied that amount by two.5/ After converting the payroll numbers into a percentage, Mr. Sley multiplied the payroll amounts by the approved manual rate. As noted above, every classification code is associated with a particular manual rate determined by the Office of Insurance Regulation, and a manual rate corresponds to the risk associated with a particular occupation or type of work. Manual rates associated with potentially dangerous activities will have higher manual rates than activities with little or no potential danger. Mr. Sley’s next step was to calculate a premium for obtaining workers compensation coverage for Messrs. Kehr, Hicks, and Garthwait. Mr. Sley then multiplied that premium by two in order to calculate the individual penalties resulting from JNK not having workers’ compensation coverage for Messrs. Kehr, Hicks, and Garthwait. The sum of those amounts was $61,424.04. The evidence produced at the final hearing established that Mr. Sley utilized the correct class code, average weekly wage, and manual rates in his calculation of the penalty set forth in the Amended Order of Penalty Assessment. The Division has demonstrated by clear and convincing evidence that JNK was in violation of the workers’ compensation coverage requirements of chapter 440. In particular, the Division proved by clear and convincing evidence that Mr. Kehr had no workers’ compensation coverage for himself and no exemption from November 10, 2014, through November 17, 2014. However, the Division did not demonstrate by clear and convincing evidence that Messrs. Hicks and Garthwait were employees of JNK on any day other than December 10, 2015. Mr. Kehr testified during the final hearing that Messrs. Hicks and Garthwait were working for him on December 10, 2015. He also testified that he was paying them at a rate of $8.00 an hour. However, Mr. Kehr persuasively testified that Messrs. Hicks and Garthwait had not worked for him at any other time between November 10, 2014, and December 10, 2015. The undersigned finds Mr. Kehr’s testimony on this point to be credible. Messrs. Hicks and Garthwait did not testify during the final hearing in this matter. There is no evidence that Messrs. Hicks and Garthwait worked for JNK at any time other than December 10, 2015. Because there is no evidence indicating that Messrs. Hicks and Garthwait were employees of JNK at any time other than December 10, 2015, during the time period in question, the undersigned finds that the Department failed to carry its burden of proving that $61,424.04 is the appropriate penalty. Based on the above findings, the undersigned finds that the correct penalty resulting from Mr. Kehr’s lack of coverage is $627.48. The worksheet completed by Mr. Sley indicates that is the amount of the $61,424.04 penalty associated with Mr. Kehr’s lack of coverage. As for the penalties associated with the lack of coverage for Messrs. Hicks and Garthwait on December 10, 2015, the undersigned multiplied the average weekly wage utilized by the Division ($841.57) by two. That results in a weekly gross payroll amount of $1,683.14. Dividing $1,683.14 by five results in a daily gross payroll amount of $336.63. Dividing $336.63 by 100 and then multiplying the result by 15.91 (the approved manual rate utilized by the Division for the period from January 1, 2015, through December 10, 2015) yields a daily premium of $53.62. Multiplying $53.62 by two results in a penalty of $107.23. Multiplying $107.23 by two yields $214.46, JNK’s penalty for not having workers’ compensation coverage for Messrs. Hicks and Garthwait on December 10, 2015. JNK’s total penalty is $841.94. Because section 440.107(7)(d)1. mandates a minimum penalty of $1,000, the undersigned finds that $1,000 is the correct penalty for the instant case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a final order imposing impose a $1,000 penalty on Donald Kehr, d/b/a JNK Framing Inc., a Dissolved Florida Corporation. DONE AND ENTERED this 10th day of August, 2016, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of August, 2016.
The Issue The 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)
The Issue Whether Respondent violated chapter 440, Florida Statutes (2017), by failing to secure payment of workers’ compensation coverage, as alleged in the Stop-Work Order (“SWO”) and Amended Order of Penalty Assessment (“Amended Penalty Assessment”); and, if so, whether Petitioner correctly calculated the proposed penalty assessment against Respondent.
Findings Of Fact Based on the oral and documentary evidence admitted at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: Background The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that requires employers to secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. The Department is also responsible for conducting random inspections of jobsites and investigating complaints concerning potential violations of workers’ compensation rules. At all times material to this matter, Native Cuts was a for-profit limited liability company engaged in business in the State of Florida. Native Cuts was organized as a business on January 19, 2010, and engaged in the business of construction and landscaping. Earl Lee, Jr. and Virginia Brown are Respondent’s managers. Earl Lee, Jr. is Respondent’s registered agent, with a mailing address of 316 North Lake Avenue, Leesburg, Florida 34748. Investigation On July 27, 2017, the Department’s investigator, Chuck Mays, conducted a random workers’ compensation compliance inspection at 27746 Cypress Glen Court, Yalaha, Florida 34797. At that time, Mr. Mays observed three men performing work. Mr. Mays testified that one man was observed operating a Bobcat utility vehicle (small tractor) to transport dirt from the front to the back of the structure, which was under construction. The two other men were removing debris, e.g., cut tree limbs, from the jobsite. Mr. Mays approached the man on the Bobcat and identified himself as an investigator. Mr. Mays began interviewing the Bobcat driver who reported that he and the other two workers at the jobsite were employees of Native Cuts, which the two men confirmed. Mr. Mays ultimately identified the three men at the jobsite as Rodolfo Ramirez, Mitchel Pike, and Dave Herrington. Based on his observations, Mr. Mays determined that the three men were performing construction-related work. Mr. Mays called Respondent’s manager, Mr. Lee, who identified the three men working at the jobsite as his employees. Mr. Mays asked Mr. Lee about the rate of pay and the length of employment for the employees and Mr. Lee referred Mr. Mays to Virginia Brown to obtain the information. Ms. Brown confirmed the three employees, and a fourth employee who was not present at the jobsite. Following the interviews on July 27, 2017, Mr. Mays researched the Division of Corporations system and established that Native Cuts was an active business. He then conducted a search of the Department’s Coverage Compliance Automated System (“CCAS”) and found Respondent did not have workers’ compensation coverage for its employees. Mr. Mays also conducted a further search of CCAS and discovered that Mr. Lee previously had an exemption, which expired on October 30, 2016. Based on his investigation and after consultation with his supervisor, Mr. Mays issued SWO No. 17-246-D4, and posted it at the jobsite. On July 28, 2017, Mr. Mays met with Ms. Brown at her home and personally served the SWO and Request for Production of Business Records for Penalty Assessment Calculation (“Business Records Request”). The Business Records Request directed Respondent to produce business records for the time period of July 28, 2015, through July 27, 2017 (“Audit Period”), within 10 business days from the receipt of the Business Records Request. On August 11, 2017, Respondent provided business records, including bank statements, checks, and receipts. The records were deemed sufficient to apply a 25-percent discount to Respondent for timely production of records. Penalty Calculation Generally, the Department uses business records to calculate the penalty assessment. Lynne Murcia, a Department penalty auditor, was assigned to review the calculation of the penalty assessment for Respondent. To calculate the penalty assessment, the Department uses a two-year auditing period looking back from the date of the SWO, July 27, 2017, also known as the look-back period. Penalties for workers' compensation insurance violations are based on doubling the amount of insurance premiums that would have been paid during the look-back period. § 440.107(7)(d), Fla. Stat. Ms. Murcia testified as to the process of penalty calculation. Ms. Murcia reviewed the business records submitted by Respondent, as well as notes, worksheets, and summaries from the original auditor.1/ Based on her review of the records, Ms. Murcia identified the individuals who received payments from Respondent as employees during the Audit Period. Ms. Murcia deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Based on Mr. Mays’ observations at the jobsite, the Department assigned either NCCI classification (“class”) code 0042, entitled “Landscaping, Gardening, & Drivers” or class code 9102, entitled “Lawn Maintenance-Commercial or Domestic & Drivers.” The class code 0042 “applies to work involving new landscaping installations whereas class code 9102 applies to work involving maintenance of existing landscaping and/or lawn maintenance.” Mr. Mays testified that class code 0042 is considered construction work, whereas class code 9102 is considered nonconstruction work for workers’ compensation purposes. Generally, if a business provides proper payroll records to support a division, the appropriate code and correlating rate would apply based on the work performed. If the payroll records are not maintained to support the division of the work performed between class code 0042 and class code 9102, the highest rate of the two classifications is applied to the employee. Ms. Murcia testified that class code 0042 and class code 9102 were applied to Native Cuts employees due to the mixed work performed (Landscaping and Lawn Maintenance) by Respondent. However, class code 9102 was applied to most of the employees. Utilizing the statutory formula for penalty calculation specified in section 440.107(7)(d)1. and rule 69L- 6.027, the total penalty was calculated based on periods of non- compliance for employees based on the dates they received payments from Respondent and were not covered for workers’ compensation. Since Mr. Lee’s exemption expired on October 30, 2016, the calculation for his work performed was limited to the period after the expiration of his exemption, November 1, 2016, through July 27, 2017. Regarding records designated as cash payments, the Department determined that the Native Cuts’ records and receipts did not validate the payroll and expenses that corresponded with the company’s cash withdrawals. Pursuant to rule 69L- 6.035(1)(k), the Department included 80 percent of cash withdrawals as wages or salaries to employees. Penalty Calculation for Imputed Payroll The Department determined the calculated penalty for Rudolfo Ramirez, David Harrington, and Mitchel Pike, the workers who were identified at the jobsite as employees on July 27, 2017. Mr. Lee was also included in the calculation of penalty for the imputed payroll. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll for these employees during the investigation period, thus, the Department used the statutory formula to impute payroll to these employees. The Department correctly assigned a class code of 0042 and calculated a penalty of $149.20 against Respondent for failure to secure payment of workers’ compensation insurance for each of these employees. The Department also calculated the penalty for Ms. Brown, who was not at the jobsite but participated in the investigation on July 27, 2017. The Department applied a classification code 9102 to Ms. Brown. However, the evidence presented at hearing demonstrated Ms. Brown maintained records for the business and was the person identified as maintaining the wage rate information for employees. The evidence of record does not support a finding that Ms. Brown provided any landscaping or construction services to Respondent. Ms. Brown’s work, at best, could be described as clerical work. The Department introduced no evidence of an appropriate NCCI class code for Ms. Brown. Thus, the Department did not prove by clear and convincing evidence that the imputed payroll related to Ms. Brown should be included for purposes of calculating the penalty. The Department did not prove by clear and convincing evidence that the penalty in the amount of $19.60 attributed to Ms. Brown should be included in the penalty assessment. Penalty Calculation for Uninsured Labor Ms. Murcia testified that the class code 0042 was applied to the general category of uninsured labor, as the work performed could not be determined from the payroll records. Thus, the highest rate, class code 0042, of the two classifications for work performed by Native Cuts, is applied to these individuals. The Department correctly calculated a penalty of $17,015.10 for these employees. Penalty Calculation for Remaining Employees In addition to the penalty calculated for the imputed payroll (excluding Ms. Brown) and uninsured labor, the Department applied the appropriate class code for the work performed and correctly calculated the penalty for Native Cut employees2/ in the amount of $52,350.10. Total Penalty Calculation Ms. Murcia calculated a total penalty of $69,534.34 against Respondent for failure to secure payment of workers’ compensation insurance for each of its employees during the audit period. The amount of the penalty should be reduced by the amount attributed to Ms. Brown in the amount of $19.60. Thus, the total penalty amount that should be assessed against Native Cuts is $69,514.40. Mr. Lee paid a $1,000.00 down payment for the penalty assessed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $68,514.74 against Native Cuts Property Management, LLC. DONE AND ENTERED this 31st day of May, 2019, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of May, 2019.
The Issue The issue is whether Respondent, Department of Financial Services, Division of Workers' Compensation, properly assessed a penalty of $90,590.42 against Petitioner, S.A.C., LLC.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure payment of workers' compensation for the benefit of their employees pursuant to Section 440.107, Florida Statutes. At all times relevant to this proceeding, Petitioner, S.A.C., LLC, was a corporation domiciled in Florida. S.A.C.'s 2007 Limited Liability Company Annual Report lists its principal place of business as 626 Lafayette Court, Sarasota, Florida, 34236, and its mailing address as Post Office Box 49075, Sarasota, Florida 34230. At all times relevant to this proceeding, William R. Suzor was the president and managing member of S.A.C. Collen Wharton is an Insurance Analyst II with the Department. In this position, Ms. Wharton conducts inspections to ensure that employers are in compliance with the law. On June 20, 2007, Ms. Wharton conducted a compliance check at 2111 South Osprey Avenue in Sarasota, Florida. During the compliance check, Ms. Wharton observed three males working at that location. The three men were framing a single-family house that was under construction. This type of work is carpentry, which is considered construction. During the compliance check, Ms. Wharton asked David Crawford, one of the men working at the site, who was their employer. Mr. Crawford told Ms. Wharton that he and the other two men worked for S.A.C., but were paid by a leasing company. Mr. Crawford told Ms. Wharton that the company was owned by Mr. Suzor and, in response to Ms. Wharton's inquiry, he gave her Mr. Suzor's telephone number. In addition to Mr. Crawford, the other workers at the site were identified as Terry Jenkins and Frank Orduno. By checking the records the Department maintains in a computerized database, Ms. Wharton determined that S.A.C. did not carry workers' compensation insurance, but had coverage on its employees through Employee Leasing Solutions, an employee leasing company. She also determined, by consulting the Department's database, that none of the men had a workers' compensation exemption. Ms. Wharton telephoned Employee Leasing Solutions, which advised her that two of the workers at the site, Mr. Crawford and Mr. Jenkins, were on the roster of employees that the company maintained. The company advised her that the other worker, Mr. Orduno, was not on its roster of employees. This information was verified by an employee list that the leasing company provided to Ms. Wharton. On June 20, 2007, after determining that one worker at the work site had no workers' compensation coverage, Mr. Wharton prepared a Stop-Work Order. She then telephoned Mr. Suzor, told him that he had one worker at the site who did not have workers' compensation coverage and requested that he come to the work site. During the conversation, Mr. Suzor advised Ms. Wharton that Mr. Crawford was in charge at the work site, that she could give the Stop-Work Order to Mr. Crawford, and that he (Mr. Suzor) would meet her the following day. Ms. Wharton, after she telephoned Mr. Suzor, she conferred with her supervisor and then issued Stop-Work Order No. 07-125-D3, posting it at the work site and serving it on Mr. Crawford. On June 21, 2007, Mr. Suzor met with Ms. Wharton at her office. During that meeting, Ms. Wharton served a copy of Stop-Work Order No. 07-125-D3 on Mr. Suzor. She also served him with a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Business Records"). The Request for Business Records listed specific records that Mr. Suzor/S.A.C. should provide to the Department so that the Department could determine the workers who S.A.C. paid during the period of June 19, 2004, through June 20, 2007. The Request for Business Records notes that the requested records must be produced within five business days of receipt. According to the Request for Business Records, if no records are provided or the records provided are insufficient to enable the Department to determine the payroll for the time period requested for the calculation of the penalty in Subsection 440.107(7)(d), Florida Statutes, "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 1.5." S.A.C. did not respond to the Department's Request for Business Records. On July 17, 2007, the Department had received no records from S.A.C. Without any records, Ms. Wharton had no information from which she could determine an accurate assessment of S.A.C.'s payroll for the previous three years. Therefore, Ms. Wharton calculated the penalty based on an imputed payroll. In her calculations, Ms. Wharton assumed that Mr. Orduno worked from June 21, 2004, through June 20, 2007, and that he was paid 1.5 times the state-wide average weekly wage for the class code assigned to the work he performed for each year or portion of the year. The Department then applied the statutory formula set out in Subsection 440.107(7)(d), Florida Statutes. Based on that calculation, the Department correctly calculated S.A.C.'s penalty assessment as $90,590.42, as specified in the Amended Order of Penalty Assessment dated July 17, 2007. The Amended Order of Penalty Assessment reflecting the correct penalty amount was served on S.A.C.'s attorney, John Myers, Esquire, by hand-delivery, on July 17, 2007.3/ On July 21, 2007, S.A.C., through its former counsel, filed a Petition for Hearing.
Recommendation Based upon the Findings of Fact and Conclusions of Law, RECOMMENDED that Respondent, Department of Financial Services, Division of Workers' Compensation, enter a final order which affirms the Amended Order of Penalty Assessment issued July 17, 2007, assessing a penalty of $90,590.42, and the Stop-Work Order issued to Petitioner, S.A.C., LLC, on June 20, 2007. DONE AND ENTERED this 25th day of March, 2008, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 25th day of March, 2008.
The Issue The issue is whether Respondent is subject to assessed penalties as set forth in the Amended Stop Work and Penalty Assessment Order dated March 11, 2003.
Findings Of Fact Petitioner is the agency charged with enforcing statutory requirements that employers secure the payment of workers' compensation for their employees. Respondent is a Florida corporation, Federal Employer Identification No. 592489849, located in Ocala, Florida, that provides livestock transportation services. Henry Hayes Hudson, III, is Respondent's president. Martha Hudson is Respondent's vice president. Henry and Martha Hudson are Respondent's only officers and shareholders. On or about March 3, 2003, Petitioner received a complaint alleging that Respondent did not carry workers' compensation coverage. That same day, Petitioner's investigator, William Pangrass, conducted a compliance inspection at Respondent's principal place of business, 5879 West County Road 326, Ocala, Florida. During the investigation, Mr. Pangrass interviewed Martha Hudson and Respondent's bookkeeper, Kelly Hadsock. The investigation revealed that Respondent had no proof of workers' compensation for the prior three years. Petitioner personally served Respondent with a Stop Work and Penalty Assessment Order, No. 03-191-D1, on March 3, 2003. The Order required Respondent to cease all business activities. The Order also assessed the minimum statutory penalty in the amount of $100.00 under Section 440.107(5) and $1,000.00 under Section 440.107(7)(b). Martha Hudson refused to sign the Order. Next, Petitioner personally served a Request for Business Owner Affidavit and Production of Business Records on March 3, 2003. Martha Hudson also refused to sign this document. Respondent subsequently provided Petitioner with copies of its payroll records. The records included Respondent's payroll from March 3, 2000, through March 3, 2003. For all or part of that period, Respondent employed 52 individuals. Petitioner used the payroll records to calculate the penalty assessment for the three-year period of time that Respondent did not provide its employees with workers' compensation. On March 11, 2003, Petitioner issued the Amended Stop Work and Penalty Assessment Order, No. 03-191-D1-2. The Amended Order required Respondent to cease all business operations and to pay a penalty in the amount of $109,500.00, pursuant to Section 440.107(5), and a penalty in the amount of $325,045.57, pursuant to Section 440.107(7)(a). The total assessed penalty was $434,545.57. In a telephone conference on July 11, 2003, the parties stipulated that Respondent had no workers' compensation coverage for the period of time at issue here. They also stipulated that the only remaining issue involved the accuracy of the assessed penalty. During the hearing, Petitioner presented competent evidence to support the accuracy of the assessed penalty. More importantly, Respondent stipulated to the accuracy of the assessed penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order affirming the Amended Stop Work Penalty Assessment Order and directing Respondent to pay a penalty in the amount of $434,545.57. DONE AND ENTERED this 10th day of November, 2003, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of November, 2003. COPIES FURNISHED: Larry Collins, Esquire 202 South Magnolia, Suite 3 Ocala, Florida 34474 Eric Lloyd, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue is whether the Stop-Work Order and Order of Penalty Assessment entered by Petitioner on July 15, 2009, and subsequently amended twice, should be upheld.
Findings Of Fact Petitioner is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of compensation for their employees who suffer work-related injuries. Respondent, on July 15, 2009, was operating in the construction industry as a for-profit corporation, with an active status. On July 15, 2009, Petitioner's investigator, John Wheeler, investigated Respondent for compliance with the Florida Workers' Compensation Law at 36 East Burgess Road, Pensacola, Florida 32504 (hereinafter "worksite") during a random inspection. On July 15, 2009, at the worksite, Petitioner's investigator interviewed and recorded the names of four individuals performing a roofing job as Benjamin H. Bell, Christopher T. Bell, Willie Lanier, and Curtis Jenkins. Utilizing the Scopes Manual published by the National Council on Compensation Insurance and adopted by Florida Administrative Code Rule 69L-6.021 as guidance, Petitioner's investigator determined that roofing is within the construction industry and assigned the appropriate class code (5551) to the activities being performed at the worksite. Petitioner's investigator determined that both Benjamin and Christopher Bell were officers of Respondent corporation, and had hired Mr. Lanier and Mr. Jenkins to work the roofing job with them. Petitioner's investigator, using the Department of Financial Services' Coverage and Compliance Automated System (CCAS), determined that while both Benjamin and Christopher Bell had valid Certificates of Election to be exempt from Florida Workers' Compensation Law, neither Mr. Lanier nor Mr. Jenkins had similar certificates of exemption. Using the CCAS, Petitioner's investigator was unable to locate proof of insurance securing the payment of workers' compensation coverage by Respondent that would cover Mr. Lanier or Mr. Jenkins for the job at issue. On July 15, 2009, Petitioner's investigator issued a Stop-Work Order and Order of Penalty Assessment to Petitioner for failure to meet the requirements of Chapter 440, Florida Statutes, and the Florida Insurance Code. The Order required Respondent to cease all business operations and 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 during periods for which it failed to secure the payment of workers' compensation against Respondent for the preceding three-year period, pursuant to Subsection 440.107(7)(d), Florida Statutes. On July 15, 2009, Petitioner's investigator issued to Respondent a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation (hereinafter "Request"). Respondent responded to the Request and provided Petitioner's investigator with the requested records on July 21, 2009. On August 6, 2009, Petitioner issued an Amended Order of Penalty Assessment assessing a new penalty of $48,689.27 against Respondent, based on Respondent's business records. On November 20, 2009, Petitioner issued a Second Amended Order of Penalty Assessment reducing Respondent's penalty to $10,492.94. Petitioner's investigator issued the Second Amended Order of Penalty Assessment after having learned from Respondent that many of the amounts considered for the penalty in the Amended Penalty Assessment should not be deemed payroll for uncovered or non-exempt workers. The roofing job at issue at 36 Burgess Road, resulted from a verbal contract entered into between Benjamin and Christopher Bell, on behalf of Respondent, and Larry Scapecchi, a Florida-certified roofing and general contractor. Respondent's president, Mr. Baehr, was not aware of the verbal contract entered into by Respondent's vice presidents, Benjamin and Christopher Bell, to perform the roofing job that gave rise to this proceeding. Mr. Baehr did not authorize the contract into which Benjamin and Christopher Bell entered. In his 30 years in the construction business, Mr. Baehr had never entered into a verbal contract to perform construction work. All of contracts for construction jobs were written. Benjamin and Christopher Bell, as officers of Respondent corporation, had real or apparent authority to enter into the contract for the roofing job, and Mr. Larry Scapecchi entered into the contract with them based upon his good-faith belief in their authority to contract on behalf of the corporation. Benjamin and Christopher Bell, on behalf of Respondent, allowed two workers, Willie Lanier and Curtis Jenkins, to be employed on the Burgess Road roofing job who were neither exempt from the requirements of Florida's Workers' Compensation Law nor covered by a policy of workers' compensation insurance for the work they were performing in Pensacola, Florida. In response to Petitioner's Request for Production of Documents, since no payroll information was supplied by Respondent to Petitioner for the two workers, Willie Lanier and Curtis Jenkins, their salary had to be imputed based upon the two days they were found to be performing roofing work at the worksite. The remainder of the salary used in calculating the penalty to be assessed was based upon the payroll records for non-exempt and non-covered employees from January 2007 until the date of the inspection, July 15, 2009. The premium due was calculated by multiplying one percent of the gross payroll times the approved manual rate which resulted in the amount of $6,995.28. The penalty was then determined by multiplying the amount of premium due by 1.5, resulting in the final penalty due of $10,492.92. Based upon the payroll records produced by Respondent in response to Petitioner's request, a penalty in the amount of $10,492.92 is due to Petitioner. This amount is $0.02 less than the amount calculated by Petitioner and may be the result of rounding errors.
Recommendation Based on the findings of fact and conclusions of law, it is RECOMMENDED that Petitioner enter a final order that adopts the Stop-Work Order and Second Amended Order of Penalty Assessment assessing a penalty of $10,492.92. DONE AND ENTERED this 9th day of December, 2009, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of December, 2009. COPIES FURNISHED: Timothy L. Newhall, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 John Baehr Carolina Realty and Development Company, Inc. 608 Sheppard Drive Pensacola, Florida 32507 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 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 32399-0307
