The Issue Whether KP Roofing Masters, LLC ("Respondent"), failed to secure the payment of workers' compensation coverage for its employees, and if so, whether the Department of Financial Services, Division of Workers' Compensation ("Department"), correctly calculated the penalty imposed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440 that employers in Florida secure workers' compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent was a business providing services in the construction industry. Its principal office is located at 7100 Northwest 12th Street, Suite 210, Miami, Florida 33126. The Investigation. On September 26, 2014, the Department's compliance investigator, Cabrera, observed two individuals performing roofing work on a house in Coral Gables, Florida. Investigator Cabrera interviewed the individuals, identified as Rodolfo Moscoso and Jairo Alvarado. Both men informed Cabrera that they worked for Respondent. Cabrera then checked the permit board located at the jobsite and confirmed that Respondent pulled the permit for the roofing work. After gathering the information at the jobsite, Cabrera consulted the Division of Corporations’ website to determine, inter alia, the identity of Respondent's corporate officers. Cabrera found that Jorge Cappelleti ("Cappelleti") was Respondent's sole corporate officer. Cabrera then consulted the Department's Coverage and Compliance Automated System ("CCAS") for proof of workers' compensation coverage and for exemptions associated with Respondent. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. (2014). CCAS is the Department's internal database that contains workers' compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Cabrera's CCAS search revealed that Respondent did not have a workers' compensation policy or an employee leasing policy. Cabrera additionally discovered that Cappelleti had a valid exemption. Cabrera then called Cappelleti who confirmed that the two men at the jobsite were his employees and that the employees were not covered by workers' compensation insurance. Based on the information gathered, on September 26, 2014, Cabrera issued Respondent a Stop-Work Order and Order of Penalty Assessment. On September 29, 2014, Cabrera served Respondent with the Stop-Work Order and Order of Penalty Assessment. Cabrera simultaneously served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation ("BRR"). The BRR requested documents that would enable the Department to determine Respondent's payroll for the time period of September 27, 2012, through September 26, 2014. In response to the BRR, Respondent ultimately provided the Department with bank statements, check details, a general ledger, and other records. Penalty Calculation. In October 2014, the Department assigned Penalty Auditor Ruzzo to calculate the penalty assessed against Respondent. Ruzzo reviewed the business records produced by Respondent and properly identified the amount of gross payroll paid to Respondent's employees on which workers' compensation premiums had not been paid. Ruzzo researched Respondent and Respondent's subcontractors to determine those periods when they were not compliant with chapter 440 during the audit period. Ruzzo determined that Respondent was not compliant for the period of September 27, 2012, through September 26, 2014. However, Respondent's corporate officer was not included in the penalty for the periods in which he had an exemption. Additionally, Respondent's compliant subcontractors were not included in the penalty. The business records ultimately produced by Respondent were sufficient for Ruzzo to calculate a penalty for the entire audit period, except for September 26, 2014. For that day, Ruzzo imputed the payroll. On June 2, 2015, based on Ruzzo's calculations, the Department issued a 4th Amended Order of Penalty Assessment to Respondent. On September 1, 2015, the 4th Amended Order of Penalty Assessment was served on Respondent. The 4th Amended Order of Penalty Assessment assessed a penalty of $68,525.42. For the penalty assessment calculation, Ruzzo consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department of Financial Services through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist in the calculation of workers' compensation insurance premiums. Ruzzo assigned the class codes based on information provided to him by Cappelleti. Ruzzo then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. Ruzzo applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)l. and rules 69L-6.027 and 69L-6.028 to determine the penalty. The Penalty Associated With Subcontractor Emerald. Respondent only disputes the portion of the penalty associated with its subcontractor, Emerald, in the amount of $8,434.86 for the period of non-compliance from January 1, 2014, through April 8, 2014. Section 440.10(1) provides in relevant part: In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment. A contractor shall require a subcontractor to provide evidence of workers’ compensation insurance. A subcontractor who is a corporation and has an officer who elects to be exempt as permitted under this chapter shall provide a copy of his or her certificate of exemption to the contractor. Noticeably absent from the statute is the time period within which this evidence of coverage must be provided to the contractor or the nature of the required evidence. Rule 69L-6.032(1) provides: In order for a contractor who is not securing the payment of compensation pursuant to Section 440.38(1)(a), F.S. to satisfy its obligation to obtain evidence of workers’ compensation insurance or a Certificate of Election to Be Exempt from a subcontractor pursuant to Section 440.10(1)(c), F.S., such contractor shall obtain and provide to the Department, when requested, the evidence specified in subsections (2), (3), (4) or (5) herein. (Emphasis added). Rule 69L-6.032 sets forth the contractor requirements for obtaining evidence that the subcontractor possesses workers' compensation insurance. If a subcontractor is a client company of a leasing company, such as Emerald, rule 69L-6.032(3) specifies that the evidence shall be a Certificate of Liability Insurance ("Certificate"). According to the deposition testimony of Cappelleti (Exhibit 11, offered into evidence by the Department), when Emerald began providing services to Respondent in January 2014, Emerald represented that its workers were covered by a policy through an employee leasing company. In fact, a Certificate, obtained by Respondent sometime before it was requested by the Department, indicates that Emerald had coverage for the period of January 1, 2014, through December 31, 2014. This period encompasses the period of time for which the Department now seeks to penalize Respondent. Although Respondent obtained proof of coverage from Emerald, this occurred after Emerald was paid by Respondent for work occurring between January 1, 2014, and April 8, 2014. Ruzzo checked the CCAS and found that the Certificate for Emerald was inaccurate. Emerald apparently did not join the leasing company insurance policy until April 9, 2014. Although a contractor does not have a duty to further investigate when presented with what appears to be a valid Certificate, Ruzzo's calculations penalized Respondent for the period of non-compliance of Emerald because Respondent did not seek the proof of coverage until after Emerald's workers were already on the job for Respondent. The Department has demonstrated by clear and convincing evidence that Respondent employed Mr. Moscoso and Mr. Alvarado on September 26, 2014; that Respondent was engaged in the construction industry in Florida during the period of September 27, 2012, to September 26, 2014; and that Respondent failed to carry workers' compensation insurance to cover its employees as required by Florida's Workers' Compensation Law from September 27, 2012, to September 26, 2014. The Department has demonstrated by clear and convincing evidence that Ruzzo correctly utilized the methodology specified in section 440.107(7)(d)l. However, the Department failed to show by clear and convincing evidence that a penalty for Emerald's period of non-compliance, in the amount of $8,434.86, should be included in the total penalty assessment of $68,525.42.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent, KP Roofing Masters, LLC, violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage, and imposing upon it a total penalty assessment of $60,090.56. DONE AND ENTERED this 2nd day of March, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of March, 2016.
The Issue The issues are whether Respondent failed to secure the payment of workers' compensation insurance, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the agency charged with enforcing the provisions of Chapter 440, Florida Statutes. Respondent is a Florida limited-liability company, organized in 2004. Salvador Rivera is one of the company's managers/officers. On or about February 27, 2009, Respondent secured workers' compensation insurance for its employees. The carrier was Guarantee Insurance Co. In a Notice of Termination of Workers' Compensation Insurance dated August 10, 2009, Guarantee Insurance Co. advised Petitioner and Respondent that Respondent's workers' compensation insurance would be cancelled on August 25, 2009. Guarantee Insurance Co. issued the notice because Respondent had not paid its insurance premium. Some time after receiving the notice from its insurer, Respondent received a check from Brantley Custom Homes. Mr. Rivera deposited the check into Respondent's bank account. Mr. Rivera then wrote a check to Guarantee Insurance Co. for the workers' compensation insurance premium. Mark Piazza is one of Petitioner's compliance investigators. On September 25, 2009, Mr. Piazza conducted a routine compliance check in the Southwood subdivision of Tallahassee, Florida. During the compliance check, Mr. Piazza noticed a new home under construction. He saw two men, Gilberto Torres and Saturino Gonzalez, doing carpentry work at the building site. Under the Scopes Manual, carpentry is identified as construction work under the class code 5645. During an interview with the two men, Mr. Piazza learned that they were employed by Respondent. Mr. Rivera confirmed by telephone that Respondent employed the two men. Mr. Rivera believed that Respondent had workers' compensation coverage on September 25, 2009. Mr. Rivera was not aware that the check from Brantley Custom Homes had bounced, resulting in insufficient funds for Respondent's bank to pay Respondent's check to Guarantee Insurance Co. Mr. Piazza then contacted Respondent's local insurance agent and checked Petitioner's Coverage and Compliance Automated System (CCAS) database to verify Mr. Rivera's claim that Respondent had workers' compensation insurance. Mr. Piazza subsequently correctly concluded that Respondent's insurance policy had been cancelled on August 25, 2009, due to the failure to pay the premium. On September 25, 2009, Mr. Piazza served Respondent with a Stop-work Order and Order of Penalty Assessment. The penalty assessment was 1.5 times the amount of the insurance premium that Respondent should have paid from August 25, 2009, to September 24, 2009. After receiving the Stop-work Order on September 25, 2009, Brantley Custom Homes gave Respondent another check. Mr. Rivera then sent Guarantee Insurance Co. a second check to cover the premium with the understanding that there would be no lapse in coverage. On September 28, 2009, Guarantee Insurance Co. provided Respondent with a notice of Reinstatement or Withdrawal of Policy Termination. The notice states as follows: Our Notice of Termination, filed with the insured and the Department of Labor and Employment Security effective 8/25/2009 and or dated 8/10/2009, is hereby voided and coverage remains in effect for the employer identified below. There is no evidence to show whether Respondent had to sign a no-loss affidavit and submit it to Guarantee Insurance Co. before the insurer would reinstate the policy with no lapse. Such an affidavit usually states that the insured had no claims during the uninsured period, On September 29, 2009, Mr. Piazza served a second copy of the Stop-work Order and Order of Penalty Assessment on Respondent. At that time, Mr. Piazza also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Respondent subsequently provided Petitioner with the records. On October 6, 2009, Mr. Piazza served Respondent with an Amended Order of Penalty Assessment. The assessed penalty was $3,566.27. The assessed penalty was based on Respondent's business records showing the following: (a) Respondent's total payroll from August 25, 2009, through September 24, 2009, was $15,280.00; (b) the total workers' compensation premium that Respondent should have paid for its employees during the relevant time period was $2,377.56; and (c) multiplying $2,377.56 by the statutory factor of 1.5 results in a penalty assessment in the amount of $3,566.37. On October 6, 2009, Petitioner and Respondent entered into a Payment Agreement Schedule for Periodic Payment of Penalty. Respondent gave Petitioner $1,000 as a down payment on the assessed penalty. The balance of the penalty is to be paid in 60 monthly payments in the amount of $42.77 per month, with the exception of the last payment in the amount of $42.64 on November 1, 2014. On October 6, 2009, Petitioner issued an Order of Conditional Release from Stop-work Order. The conditional release states that it will be in place until Respondent pays the assessed penalty in full.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, issue a final order affirming the Stop- work Order and Amended Order of Penalty Assessment in the amount of $3,566.37. DONE AND ENTERED this 19th day of March, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 2010. COPIES FURNISHED: Salvador Rivera Rivera Construction of North Florida, LLC 931 Rosemary Terrace Tallahassee, Florida 32303 Paige Billings Shoemaker, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399
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 Professional Staffing and Payroll Services, LLC, failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes (2014), and, if so, the penalty that should be imposed.
Findings Of Fact Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation insurance coverage for their employees, pursuant to chapter 440, Florida Statutes. Respondent, Professional Staffing and Payroll Services, LLC, is a registered Florida limited liability company. At all times relevant to this proceeding, its business address was 1400 Colonial Boulevard, Suite 260, Fort Myers, Florida. Respondent actively engaged in business during the period from February 1, 2015, to June 17, 2015. On June 2, 2015, Petitioner's compliance investigator, Jack Gumph, conducted a workers' compensation compliance investigation at a worksite located at 8530 Palacio Terrace North, Lot 67, Hacienda Lakes, Naples, Florida. At the worksite, Gumph observed five workers nailing down plywood on the trusses of the roof of a house under construction. One of the workers, Fernando Fernandez, identified himself as the job foreman. Mr. Fernandez and the other four workers were employed by J.S. Valdez, Inc. ("JSV"). These workers were engaged in carpentry work installing plywood. This type of carpentry work is classified as National Council on Compensation Insurance ("NCCI") class code 5403 and is considered a type of construction activity under Florida Administrative Code Rule 69L-6.021(2)(cc). The evidence established that JSV was a client company of Global Staffing Services, LLC ("GSS"), and that GSS supplied the workers to JSV. The evidence further established that all five workers Gumph observed at the Palacio Terrace jobsite were employees of GSS. Using the State of Florida's Coverage and Compliance Automated System ("CCAS") computer database, Gumph determined that JSV did not have workers' compensation insurance covering any of its employees, and that GSS had workers' compensation coverage only for two secretarial/clerical employees. Through research in the Florida Department of State, Division of Corporations Sunbiz database ("Sunbiz"), Gumph discovered that GSS was part of three related——as Gumph characterized it, "commingled"——business entities; these entities were GSS, Global Staffing Payroll, LLC ("GSP"), and Professional Staffing and Payroll Services, LLC, the named Respondent in this case. Ivan Hernandez was shown in Sunbiz as being the managing member of GSS and GSP. At that time, the managing member of Respondent was shown as being Martha Coloma. Gumph suspected that Respondent was leasing construction workers, who are engaged in hazardous work, through a staffing company that was characterized as a secretarial/clerical business (NCCI code 8810)——a substantially less hazardous occupation. The effect of classifying of these business as "secretarial/clerical" is that a much lower workers' compensation premium rate applies.2/ Gumph prepared requests for production of business records ("RPBR") for each of the related business entities and visited the business address listed in Sunbiz for GSS to personally serve them on Hernandez. The business was located in a strip mall that housed various types of businesses. As he was entering the business, he noted that the name shown at the entrance was "Professional Staffing." The business manager explained that GSS was opened in 2013, and that on February 1, 2015, the business name had been changed to Professional Staffing and Payroll Services——the named Respondent in this proceeding. Upon inquiry, Gumph was told that Hernandez was "out of state." Almost as soon as he left Respondent's business office, Gumph received a call from Hernandez, who confirmed that he was the owner and chief executive officer of both GSS and Respondent. Gumph scheduled an appointment with Hernandez for June 16, 2015. However, Hernandez did not keep that appointment or call Gumph back to reschedule the appointment. It was obvious to Gumph that Hernandez was avoiding him. In researching the Sunbiz records for Respondent, Gumph also noted that on June 16, 2015, the managing member's name had been changed from Martha Coloma to Ivan Hernandez. He also rechecked the CCAS and NCCI databases for Respondent and noted that only a few days before, a workers' compensation policy had been issued for Respondent. The policy listed the business as "secretarial/clerical" and had a total exposure of $143,000 to cover four secretarial/clerical employees. He also noted that GSS had a workers' compensation policy that was effective from August 15, 2014, to August 15, 2015, and that this policy did not cover any additional insured entities, so its coverage did not extend to Respondent or its employees. Gumph contacted Martha Coloma, who was employed by All Florida Financial Services, LLC, a payroll preparation and bookkeeping firm. Coloma told Gumph that in January 2015, Hernandez had asked her to amend the Sunbiz records for Respondent to be shown as Respondent's managing member. Coloma also told Gumph that Hernandez requested that she find a Professional Employer Organization ("PEO") leasing company that would secure workers' compensation coverage for approximately 40 to 50 of his employees who were engaged in construction work.3/ Coloma was unsuccessful, so Hernandez directed her to obtain another policy for secretarial/clerical employees. She obtained the policy covering the four secretarial/clerical employees. Thereafter, Gumph spoke directly with Hernandez, who confirmed that he employed 40 to 50 construction workers. He told Gumph that he had tried to obtain a policy but had been unable to do so. On June 17, 2015, Gumph issued a Stop-Work Order and Order of Penalty Assessment to Respondent, and also served a RPBR on Respondent. In response, Respondent provided business records consisting of bank statements from a Regions Bank account covering the period from February 1, 2015, to February 28, 2015. Respondent did not provide any copies of checks written during this period. Respondent also provided business records consisting of bank statements and copies of checks from a Fifth Third Bank payroll account for Respondent for the period of March 1, 2015, through June 17, 2015. The evidence establishes that between February 1, 2015, and June 12, 2015, Respondent employed 437 employees—— the great majority of whom worked in construction jobs——for whom Respondent failed to secure workers' compensation insurance coverage. For the period between June 13, 2015, and June 17, 2015, Respondent secured workers' compensation coverage for four secretarial/clerical employees. Based on the business records provided, Lynne Murcia, Petitioner's penalty auditor, calculated the penalty to be assessed against Respondent. Pursuant to section 440.107(7)(d)1., the penalty for failing to secure workers' compensation is equal to two times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during the period for which the employer failed to secure coverage during the two-year period preceding issuance of the Stop-Work Order. Here, because Respondent became a business entity on or about February 1, 2015, the penalty period applicable to this proceeding commenced on February 1, 2015, and ran through June 17, 2015, the date on which the Stop-Work Order and Penalty Assessment were served on Respondent.4/ Respondent did not obtain any exemptions from the workers' compensation coverage requirement for the period between February 1, 2015, and June 17, 2015. The business records Respondent provided in response to the RPBR were not sufficient to enable Petitioner to calculate Respondent's payroll for the period commencing on February 1, 2015, and ending on February 28, 2015. Accordingly, Petitioner imputed the gross payroll for Respondent's employees identified in the taxable wage report for the period covering February 1, 2015, through February 28, 2015, the statewide average weekly wage effective at the time of the Stop-Work Order, multiplied by two. The imputed wages for these employees over this period amounted to $2,544,907.68. For the period commencing on March 1, 2015, and ending on June 17, 2015, Respondent provided records sufficient to enable Petitioner to determine Respondent's actual gross payroll. For this period, Respondent's gross payroll amounted to $1,202,781.88. The evidence shows that for the period from February 1, 2015, through June 12, 2015, Respondent failed to secure workers' compensation coverage for any of its employees. On June 13, 2015, Respondent secured workers' compensation covering four secretarial/clerical employees. This coverage did not extend to Respondent's employees engaged in work other than secretarial/clerical work. For the period from June 13, 2015, to June 17, 2015, Respondent's gross payroll was calculated as $22,507.37. In calculating the applicable penalty, Respondent received a credit of $923.98 for the premium paid on the policy secured on June 12, 2015. This amount was deducted from the penalty owed. In calculating the penalty, Murcia determined the NCCI class code applicable to each employee according to his or her job, and applied the pertinent approved NCCI rates to determine the amount of the evaded premium for each employee. Pursuant to this method, Murcia calculated a total penalty of $645,019.36, which was reflected in the Amended Order of Penalty Assessment. In sum, Petitioner demonstrated, by clear and convincing evidence, that Respondent failed to secure workers' compensation coverage for its employees, in violation of chapter 440. The clear and convincing evidence further establishes that Petitioner correctly calculated a penalty of $645,019.36 to be assessed against Respondent pursuant to sections 440.107(7)(d)1. and 440.107(7)(e) and rule 69L-6.028.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent Professional Staffing and Payroll Services, LLC, violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage and imposing a penalty of $645,019.36. DONE AND ENTERED this 10th day of February, 2016, 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 10th day of February, 2016.
The Issue The issues in this proceeding are whether Respondent, Mark Dunlap, d/b/a Mark Dunlap Masonry of Central Florida, Inc., a dissolved Florida corporation, and Mark Dunlap Masonry of Central Florida, Inc. ("Respondent") failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees; and whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the workers' compensation law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107(3), Fla. Stat. Respondent operates a masonry business located in Paisley, and is therefore engaged in the construction industry. On January 8, 2010, Hector Beauchamp, the Department's investigator, received a referral alleging that Respondent was working at 1601 Tillery Drive in Deltona, in violation of the Workers' Compensation Law. Mr. Beauchamp visited the plans examiner for the City of Deltona, who confirmed that a building permit had been issued for the cited address. Mr. Beauchamp drove to 1601 Tillery Drive in Deltona, where he found four people behind the house building a block wall as part of an addition to the single-family house at that address. Mark Dunlap was on the site, and told Mr. Beauchamp that the four men worked for his business, Mark Dunlap Masonry of Central Florida, Inc. Mr. Dunlap subsequently identified the four persons working on the site as Wayne Sochocki, Kevin Copeland, Annie Blackburn, and David Allen Baxley. Mr. Beauchamp researched the database maintained by the Department of State, Division of Corporations (accessible at www.sunbiz.org) and learned that Mark Dunlap Masonry of Central Florida, Inc. had been administratively dissolved for failure to file an annual report on September 25, 2009. Mr. Beauchamp also learned that Mr. Dunlap had owned another Florida corporation, Mark Dunlap Masonry, Inc., that had been administratively dissolved for failure to file an annual report on September 16, 2005. According to the Division of Corporations' information, both Mark Dunlap Masonry of Central Florida, Inc., and Mark Dunlap Masonry, Inc., had the same Federal Employer Identification Number ("FEIN") of 030531755. Mr. Dunlap claimed to Mr. Beauchamp that he was himself exempted from carrying workers' compensation coverage, but admitted that he had not secured coverage for the four employees building the block wall at 1601 Tillery Drive. Mr. Beauchamp consulted the Department's Coverage and Compliance Automated System ("CCAS") database, which lists the workers' compensation insurance policy information for each business as provided by the insurance companies, as well as any workers' compensation exemptions for corporate officers. CCAS indicated that in previous years Respondent had secured workers' compensation insurance through a leasing arrangement with Employee Leasing Solutions ("ELS"). In an employee leasing arrangement, the leasing company hires an employer's workers and leases them back to the employer. The leasing company provides payroll services and workers' compensation insurance coverage to the leased employees in exchange for a fee paid by the employer. However, only those employees specifically placed in the leasing arrangement by the employer and accepted as employees by the leasing company are covered by the leasing company's workers' compensation insurance. Mr. Beauchamp's investigation confirmed that Respondent's workers' compensation coverage obtained through the leasing agreement with ELS had been terminated as of July 8, 2008. The CCAS database confirmed that Mr. Dunlap had an active exemption from the requirement to obtain workers' compensation coverage. It also confirmed that none of the four employees whom Mr. Beauchamp found building the block wall at 1601 Tillery Drive were exempt. Mr. Beauchamp concluded that Respondent had failed to secure workers' compensation insurance coverage that met the requirements of chapter 440. Mr. Beauchamp therefore issued an SWO to Respondent on January 8, 2010, and personally served the SWO on Mr. Dunlap on the same date. Also on January 8, 2010, Mr. Beauchamp served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation. The purpose of this request was to obtain the business records necessary to determine the appropriate penalty to be assessed against Respondent for violating the coverage requirements of chapter 440. Because section 440.107(7)(d)1. provides that the Department's assessment of a penalty covers the preceding three-year period, the request for production asked for Respondent's business records from January 9, 2007, through January 8, 2010. If an employer fails to produce business records sufficient to allow for the calculation of the appropriate penalty, the Department must calculate the applicable penalty by imputing the employer's payroll using the statewide average weekly wage for the type of work performed by the employee and multiplying that payroll by 1.5. The statewide average wage is derived by use of the occupation classification codes established by the proprietary Scopes Manual developed by the National Council on Compensation Insurance, Inc. ("NCCI"). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.031(6). For Respondent's employees, Mr. Beauchamp applied the occupation classification code 5022, for masonry. Fla. Admin. Code R. 69L- 6.031(6)(b)9. The Department's Amended Order, assessing an imputed penalty in the amount of $121,001.30 against Respondent, was issued on February 12, 2010, and served on Mr. Dunlap by process server on March 5, 2010. Following service of the Amended Order, Respondent supplied the Department with additional business records, including Respondent's payroll runs from ELS and W-2's for the year 2007. However, even these records were not sufficient to permit the Department to calculate a penalty based on Respondent's actual payroll. The additional business records produced by Respondent did show that Mark Dunlap Masonry, Inc., had a policy of workers' compensation insurance in place with Business First Insurance Company from September 9, 2004, through February 22, 2008. Mr. Beauchamp had not previously found this coverage because the FEIN number listed by the Division of Corporations for Mark Dunlap Masonry, Inc., was incorrect. The Department issued the Second Amended Order on August 18, 2010, lowering the penalty assessment to $64,315.28. Although the Business First Insurance Company policy had been issued to Mark Dunlap Masonry, Inc., and not to Respondent, the Department nonetheless concluded that the policy brought Respondent into compliance with chapter 440 until February 22, 2008, and adjusted the penalty assessment accordingly. Respondent's workers' compensation coverage through the leasing agreement with ELS became effective on March 20, 2008, and was terminated on July 7, 2008. Of the four workers whom Mr. Beauchamp found at the work site on January 8, 2010, only Wayne Sochocki was listed on the ELS employee roster. Thus, Respondent was in compliance with respect to Mr. Sochocki for the period from March 20, 2008, through July 7, 2008. However, the records indicate that Respondent was not in compliance through the ELS leasing agreement with respect to its employees Kevin Copeland, Annie Blackburn, or David Allen Baxley because they had never been tendered to ELS as leased employees. The Department correctly imputed the penalty against Respondent for the four employees found at the work site on January 8, 2010, for all periods of noncompliance. The Department correctly determined the period of noncompliance for Mr. Sochocki to run from July 8, 2008 to January 8, 2010, and for Mr. Copeland, Ms. Blackburn and Mr. Baxley to run from February 22, 2008, to January 8, 2010. The Department utilized the correct occupation classification code for the four employees. The Department correctly utilized the procedure set forth by section 440.107(7)(d) and (e), and the penalty calculation worksheet incorporated by reference into Florida Administrative Code Rule 69L-6.027(1), to calculate the penalty assessed against Respondent by the Second Amended Order.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $64,315.28 against Respondent. DONE AND ENTERED this 22nd day of March, 2011, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 March, 2011. COPIES FURNISHED: Mark Dunlap Mark Dunlap Masonry, Inc. 45806 Lake Street Paisley, Florida 32767 Justin H. Faulkner, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 P. K. Jameson, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Honorable Jeff Atwater Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399
The Issue The issue is whether Petitioner properly issued a Stop Work Order (SWO) and Second Amended Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of Chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to Section 440.107, Florida Statutes. Nobel is a corporation operating as a moving business in Florida. Nobel was incorporated in 2004 and has been operating with an active status since its inception. Yaniv Dalei is the sole owner and president of Nobel. On June 9, 2009, Petitioner's investigator, Cesar Tolentino, visited 18255 Northeast 4th Court, North Miami, Florida ("business site"), after being referred to the location to investigate Respondent for compliance with the Florida Workers' Compensation Law. At the business site, Petitioner's investigator spoke to the manager, and saw the bookkeeper and the receptionist during the visit. Respondent was not at the business site, but was out of the country in Panama when Tolentino visited. Respondent spoke to Tolentino by telephone. Respondent informed Tolentino that he had five employees and that he "was in the process of obtaining workers' compensation insurance." While at the business site, Tolentino, used the Department of Financial Services' Coverage and Compliance Automated System (CCAS), and confirmed Respondent lacked insurance for the payment of workers' compensation coverage. Additionally, Petitioner's investigator verified through the CCAS that Nobel had not secured an employee leasing company to secure workers' compensation insurance for its employees as well as found that no exemptions from workers' compensation had been issued in connection with Nobel. Petitioner's investigator also performed a National Council on Compensation Insurance search on Nobel while at the business site. The search revealed that Nobel's employees had not had workers' compensation insurance in the past. On June 9, 2009, Petitioner's investigator issued a SWO and posted it at the business site. The SWO required Respondent to cease all business operations. On June 10, 2009, Respondent obtained a certificate of insurance for workers' compensation coverage with the effective date being the same. The policy was issued by One-Stop Insurance Agency. Respondent provided the certificate to Tolentino upon receipt. On June 12, 2009, Petitioner's investigator issued to Respondent a Division of Workers' Compensation Request for Production of Business Records for Penalty Assessment Calculation ("Request"). Soon thereafter, Respondent responded to the Request and provided Petitioner's investigator with the requested records. Petitioner's investigator forwarded the documents to Jorge Pinera, Petitioner's penalty calculator, for review. On or about July 17, 2009, Petitioner issued an Amended Order of Penalty Assessment assessing a penalty of $74,794.38 against Respondent. On August 10, 2009, Respondent entered into a payment agreement with the Division. Respondent provided the Division a $7,480.00 cashier's check and agreed to pay the remainder of the assessed penalty in monthly installments. As a result, Petitioner issued an Order of Conditional Release for Nobel to operate. On March 3, 2010, Respondent supplied an employee list with position descriptions to Petitioner. After reviewing the document, Petitioner changed some employee class codes to indicate a lower rate for some occupations and recalculated the penalty amount owed with the new class codes. For the recalculation, Petitioner's penalty calculator, Russell Gray, used the following calculation from the penalty worksheet: (a) Respondent's total gross payroll from June 10, 2006, through June 9, 2009, was $1,010,001.32; (b) the total workers' compensation premium that Respondent should have paid for its employees during the relevant time period was $45,483.96; and (c) the premium was multiplied by the statutory factor of 1.5 resulting in a penalty assessment in the amount of $68,224.81. The new calculation superseded the Amended Order and a Second Amended Order of Penalty Assessment was issued March 3, 2010, reducing Respondent's penalty to $68,224.81.1 During the hearing, Respondent admitted not having workers' compensation coverage for his employees. He said, "Yes, you're right I needed to have workers' compensation but as I said . . . I never knew that I needed to have workers' compensation . . . I'm here to ask for forgiveness."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop Work Order and Second Amended Order of Penalty Assessment in the amount of $68,224.81. DONE AND ENTERED this 20th day of April, 2010, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 2010.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2016), by failing to secure the payment of workers' compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Respondent sells roof coating and provides installation services in the Bradenton, Florida, area. The Investigation On April 20, 2015, the Department received a public referral that Respondent was operating without a roofing license or workers' compensation coverage. The case was assigned by the Department to Compliance Investigator Germaine Green ("Green"). Green first checked the Florida Department of State, Division of Corporations, Sunbiz website to verify Respondent's status as an active corporation. Green then checked the Department's Coverage and Compliance Automated System ("CCAS") to see whether Respondent had a workers' compensation policy or any exemptions. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. 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. Green's CCAS search revealed that Respondent had no coverage or exemptions during the relevant period. Because Green was not aware of any specific job site at which Respondent was working, she issued a Business Records Request ("BRR") No. 1 to Respondent seeking records for an audit period of January 1, 2015, through April 29, 2015, to determine compliance. Respondent provided payroll records and bank statements. Respondent's president, Felecia Bly ("Bly"), contacted Green and described the nature of the business as a roof coating business that sells a sealant that coats roofs to seal leaks and extend their longevity. Bly explained that Respondent used commissioned salesmen to review the county assessor's website to determine the square footage of a residence. The salesman then contacted property owners to determine whether they experienced leaks and offered the product and installation. The salesmen did not go on the roofs. Respondent considered its salesmen independent contractors to whom they issued IRS Forms 1099. Respondent used subcontractors to perform the installations. According to Respondent, these workers had their own businesses or exemptions. Respondent also used the services of part-time workers for a short period that addressed and sent post cards marketing Respondent's business. Based on her conversation with Bly, Green determined that the business should be categorized as "roofing," which is classified as National Council on Compensation Insurance ("NCCI") class code 5551 and is considered a type of construction activity under Florida Administrative Code Rule 69L-6.021(2)(cc). Green also determined Respondent was non-compliant with the obligation to secure workers' compensation coverage for its workers. The corporate officers did not have exemptions, and several individuals, identified as sales and roofing subcontractors, did not have their own businesses or exemptions and, therefore, were employees. Petitioner did not issue a Stop-work Order because Respondent came into compliance on June 22, 2015, by securing exemptions for the corporate officers. Petitioner issued a BRR No. 5 for additional records from July 1, 2013, through June 21, 2015, to make a penalty calculation for the two-year period of non-compliance. Penalty Calculation The Department assigned Penalty Auditor Christopher Richardson ("Richardson") to calculate the penalty assessed against Respondent. Richardson reviewed the business records produced by Respondent and properly identified the amount of gross payroll paid to Respondent's workers on which workers' compensation premiums had not been paid. Richardson researched Respondent's corporate officers and Respondent's subcontractors to determine those periods when they were not compliant with chapter 440 during the audit period. Richardson determined that Respondent was not compliant for the period of June 22, 2013, through June 21, 2015. Respondent's compliant subcontractors (those with their own workers' compensation insurance or exemptions) were not included in the penalty. The business records ultimately produced by Respondent were sufficient for Richardson to calculate a penalty for the entire audit period. The initial OPA was in the amount of $257,321.16. After receiving and reviewing additional records supplied by Respondent, an Amended OPA was issued in the amount of $51,089.52. After a deposition of Bly's assistant, Sueann Rafalski ("Rafalski"), who provided additional details regarding those individuals and businesses identified in the Amended OPA, a 2nd Amended OPA was issued on July 18, 2016, in the amount of $43,542.16. During the hearing, Respondent disputed a few items that the Department subsequently voluntarily removed in the 3rd Amended OPA. The Department's Motion for Leave to Amend Order of Penalty Assessment was granted on September 29, 2016. Respondent disputed the inclusion of referral fees to Hicks and Campbell, a customer reimbursement payment to Robert Nyilas, payment to House Medic for work done on the Bly's home, and a loan repayment to the Bly's son, Brian Bly. The Department correctly removed any penalties associated with Hicks, Campbell, Robert Nyilas, House Medic, and Brian Bly. The Department also removed $14,200.00 from the penalty that Respondent disputed as repayments toward a $150,000.00 loan from its corporate officers. Respondent continues to dispute the penalty calculation for all others identified in the 3rd Amended OPA, except for the inclusion of the payment to Unexpected Blessings. For the penalty assessment calculation, Richardson consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department of Financial Services through rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist the calculation of workers' compensation insurance premiums. Richardson assigned the class codes based on information provided by Bly. Richardson then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. 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. Penalty for the Blys Respondent admits that during the audit period, the business did not carry workers' compensation insurance coverage, and its corporate officers, Glenn and Felecia Bly ("the Blys"), did not have workers' compensation exemptions. Because neither Mr. nor Mrs. Bly was engaged in the application of the roofing materials, the Department correctly assigned class code 8742, for sales and marketing, to them. However, the Department miscalculated the gross income of the Blys. Respondent provided check stubs and its accountant's itemization of payments to the Blys, which constituted repayment of loans from Respondent to the Blys. No evidence to the contrary was presented to indicate these sums were anything other than loan repayments. The Department erroneously included these sums in its calculation of gross payroll to the Blys. Although the Department made a $14,000.00 deduction from gross income for the Blys during this period as "loan repayments," no explanation was provided regarding how this sum was ascertained and why the Department disregarded the information of Respondent's accountant showing repayments during the relevant period in the amount of $19,200.00. The Department obviously accepted the testimony of Bly that, in fact, a portion of what the Department previously concluded was gross income to the Blys, was rather repayments for loans made to Respondent. Accordingly, in the absence of any evidence by the Department of how it parceled out which portion of money paid to the Blys constituted wages and which portion was loan repayments, the Department failed to demonstrate clearly and conclusively that the penalty associated with payments to the Blys is accurate.2/ Penalty for Postcard Mailers Three women, Meghan Saulino, Kimberly Kalley, and Stacy Boettner, were identified by Bly as independent contractors she hired to address and mail postcards for Respondent. According to Bly and Rafalski, these workers were college students who did the work at home, on their own time, and were paid by the job. This arrangement did not last long because the women did not like the work, and the task was transferred to Minuteman, a printing and copying business. These women are included in the Second Amended OPA and are assigned class code 8742 for sales and marketing. Respondent contends they should not be included because they were not employees. No evidence was presented to refute that these three women were merely casual workers whose duties (addressing and mailing postcards) were not in the course of the trade, business, profession, or occupation of Respondent (selling and installing roof coating). Accordingly, the amount included in the penalty for their work, $78.18, should be excluded from the 3rd Amended OPA. Penalty for Commissioned Salesmen Respondent contends that its commissioned sales people are all independent contractors who performed jobs for others. These salespeople included Kevin Kalley, Robert Patton, Gino Barone, Scott De Alessandro, Scott Black, and Tim Paige. However, no evidence was presented of the independent contractor agreements for these individuals, certificates of exemption for them for the penalty period, or evidence that these individuals owned their own businesses. As such, the Department was correct in including the amounts received by the salespeople as gross income for purposes of the penalty calculations. Penalty for Roof Coating Installers Respondent similarly argues that its roof coating installers were independent contractors. The roof coating installers included Bill Boettner, owner of Unexpected Blessings who did not have an exemption during the penalty period, and his business, Unexpected Blessings. Again, no evidence was presented of certificates of exemption for the penalty period or evidence that Unexpected Blessings had coverage. As such, the Department was correct in including the amounts received by the roof coating installers as gross income for purposes of the penalty calculations. Penalty for Other Independent Contractors Respondent argues that Rafalski and Bobby McGranahan ("McGranahan") should not be included in the penalty calculation because they were independent contractors not directly associated with Respondent's business. Rafalski was hired by Bly to help with personal errands and to respond to the audit which serves as a basis for this action. McGranahan is alleged to have run errands for the roof coating installers and acted as a handyman for Respondent before becoming a salesperson for Respondent. It is undisputed that Rafalski and McGranahan performed duties directly related to Respondent's business. Although Rafalski testified at her deposition that she considered herself an independent contractor, it was clear she worked on-site and was the individual most familiar with Respondent's business operations and internal accounting practices. McGranahan's duties, of shopping for supplies for the roofing installers, and then selling for Respondent, were directly related to Respondent's business. No evidence was presented demonstrating that either Rafalski or McGranahan owned their own business or had an exemption. Accordingly, they were properly included in the Department's 3rd Amended OPA.
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 assessing a penalty against Respondent in the amount of $34,552.20. DONE AND ENTERED this 12th day of October, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of October, 2016.
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees and, if so, what penalty should be assessed.
Findings Of Fact Petitioner, Department of Financial Services, Division of Workers' Compensation ("Division") is the state agency responsible for enforcing the requirement within the state that employers cover employees with workers' compensation insurance. § 440.107, Fla. Stat. (2009). Respondent, Jurgenson Trading Corporation, is owned, in part, by Julio Raudsett, and operates a "Subway" sandwich restaurant franchise in Hialeah, Florida. It is a family-owned business with a total of five employees, three of whom are related. Cesar Tolentino, an investigator for the Division, conducted a field interview of Raudsett, who admitted that he did not carry workers' compensation insurance. Tolentino checked the database in the Coverage and Compliance Automated System ("CCAS"), and there were no records showing workers' compensation coverage for the Subway employees, nor any notices of applicable exemptions. Martha Aguilar, Tolentino's supervisor authorized the issuance of a Stop-Work Order that was personally served on Raudsett by Tolentino by hand-delivery on April 17, 2009. At the same time, Tolentino served a Request for Production of Business Records for Penalty Assessment Calculation. Raudsett provided his business records, including payroll journals and unemployment tax returns. Based on Aguilar's review of the business records, the Division issued its Amended Order of Penalty Assessment ("Order") on June 8, 2009, with an assessed penalty of $19,873.79. Aguilar determined the amount of the penalty, using the following steps: (1) assigning each employee the National Council on Compensation Insurance (NCCI) class code that was applicable for restaurant workers; (2) determining how much the employee had been paid from April 2006 to April 2009 (the period of non-coverage); and (3) assigning the rate to the gross pay to calculate the insurance premium that should have been paid, then multiplying that by 1.5, as required by rule. The NCCI class codes for employees administrative staff as compared to restaurant workers are lower and, therefore, their workers' compensation insurance premiums would be lower. The business records available to Aguilar did not distinguish among employee's responsibilities. Absent that information, the penalty is, by law, calculated using the highest NCCI class code associated with that kind of business, and was correctly done in this case. Raudsett has entered into a payment plan with the Division. He objected only to that portion of the penalty that was based on his earnings, and those of his wife, Maribel Medina, who works part-time, and his father-in-law, Rolando Medina. He claims an exemption for the three of them as owners and managers of the corporation. Excluding their salaries and associated penalties, according to Joseph Cabanas, Respondent's accountant, would reduce the penalty by $10,267.67, to $9,606.12. Cabanas testified that Raudsett, an immigrant from Venezuela, was not aware of workers' compensation laws, and that was why the three owners/officers of the Respondent's corporation failed to file a Notice of Elections to be Exempt from coverage until after the Division's investigation began.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, that upholds the assessment of a penalty of $19,873.79. DONE AND ENTERED this 15th day of December, 2009, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER 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 December, 2009. COPIES FURNISHED: 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 Douglas D. Dolan, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Joseph Cabanas 10520 Northwest 26 Street, Suite C-201 Doral, Florida 33172
The Issue The issues to determine in this matter are whether Respondent Alpha and Omega Builders of Jacksonville, Inc., failed to secure workers’ compensation coverage for its employees; and, if so, whether Petitioner Department of Financial Services, Division of Workers’ Compensation (Department), correctly calculated the penalty assessment it imposed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440 that employers in Florida secure workers’ compensation insurance coverage for their employees. See § 440.107(3), Fla. Stat. Respondent is a corporation located in Jacksonville, Florida, engaged in the roofing industry. Ms. Beckstrom, the Jacksonville supervisor for workers’ compensation compliance investigators, testified at the final hearing. Ms. Beckstrom largely read from the January 30, 2018, investigative report and narrative completed by Investigator Frank Odom, who did not testify at the final hearing.1/ Ms. Beckstrom did not perform the investigation of Respondent, but authorized Mr. Odom to do so. On January 30, 2018, Mr. Odom investigated the worksite at 5065 Soutel Drive, Jacksonville, Florida, which is the J. Fralin Funeral Home, a commercial business (the Soutel Drive site). Mr. Odom’s narrative stated, “[a]s I approached the site I observed 3 individuals on the roof installing shingles.” Much of the remaining portions of Mr. Odom’s narrative, which ultimately led to his determination that Respondent employed these three individuals without workers’ compensation insurance, is inadmissible hearsay. Although Ms. Beckstrom testified extensively on what Mr. Odom wrote in the investigative report and narrative, the undersigned cannot base findings of fact on inadmissible hearsay unless it explains or supplements other evidence. In contrast, Mr. Jessie, the owner of Respondent, testified at the final hearing that Mr. Odom contacted him the morning of January 30, 2018, by telephone. When Mr. Odom asked if Respondent had three individuals working on the Soutel Drive site, Mr. Jessie testified that he told Mr. Odom that these individuals were not supposed to be working.2/ Mr. Jessie stated that when he arrived at the Soutel Drive site after receiving the call from Mr. Odom, the three individuals had left. On cross-examination, Mr. Jessie did not recognize the names of Roberto Flores, Alex Alvarado, or Dagoberto Lopez, who Mr. Odom identified in the investigative report and narrative as the three individuals working on the roof at the Soutel Drive site. Mr. Jessie testified that he normally employs workers through an organization called Action Labor, who in turn secures the applicable workers’ compensation insurance for them. Mr. Jessie testified that he had arranged, through Action Labor, for three individuals to work on the Soutel Drive site, and that Action Labor had provided him a “ticket” for three individuals to work at the site. His testimony is credited. Although not crystal clear from his testimony, the undersigned understood Mr. Jessie to refer to Action Labor as an employee leasing company.3/ Mr. Jessie further testified that after meeting with Mr. Odom at the Soutel Drive site, he received a Stop-Work Order and Order of Penalty Assessment, as well as a Request for Production of Business Records for Penalty Assessment Calculation (Request for Production). The Request for Production requested several categories of business records from Respondent, for the time period of January 31, 2016, through January 30, 2018, to determine Respondent’s payroll during that time period (audit period). The Request for Production requested that Respondent provide all payroll documents, account documents, disbursements, workers’ compensation coverage, temporary labor service and day labor service records, subcontractors, and documentation of subcontractors’ workers’ compensation insurance coverage. At the final hearing, Ms. Murcia, the Department’s penalty auditor, testified that because Respondent had not timely provided sufficient records in response to the Request for Production, the Department issued the Amended Order. Ms. Murcia testified that the Department received some records requested pursuant to the Request for Production in February 2019 (which was well after the response deadline of 10 business days), but that they were incomplete and thus not sufficient to calculate a penalty. Because Respondent failed to provide sufficient records in response to the Request for Production, the Department calculated the Amended Order based on a completely imputed payroll. Ms. Murcia explained that the Department calculates a gross payroll for an employer (who provides insufficient records) at the statewide average weekly wage multiplied by 1.5 for each employee for the period requested for the calculation of the penalty. Based on this imputation calculation, the Amended Order imposed a penalty in the amount of $166,791.18. The evidence presented at the final hearing was insufficient to establish that the three individuals observed at the Soutel Drive site on January 30, 2018, were Respondent’s employees or subcontractors on that day or at any time during the audit period. The evidence presented at the final hearing established that Respondent failed to timely present sufficient records pursuant to the Request for Production.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, the undersigned recommends that the Department enter a final order dismissing the Stop-Work Order and Order of Penalty Assessment, and the Amended Order of Penalty Assessment, against Respondent. DONE AND ENTERED this 3rd day of April, 2019, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER 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 3rd day of April, 2019.
The Issue Whether Petitioner, Department of Financial Services, Division of Workers’ Compensation (“Division”), properly issued a Stop-Work Order and 4th Amended Penalty Assessment against Respondent, Best Affordable Contractors, LLC (“Respondent”), for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact On July 31, 2020, the parties filed a Joint Pre-hearing Stipulation, by which the parties stipulated to the facts set forth in the following paragraphs 2 through 17. Stipulated Findings The Division is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees and corporate officers. Respondent was engaged in business operations in Florida during the entire period of January 4, 2017, through January 3, 2019. On January 3, 2019, the Division’s investigator, Deryck Gallegos, commenced a workers’ compensation compliance investigation at Respondent’s work site at 1203 Dancy St., Jacksonville, Florida 32205. On January 3, 2019, Respondent had a paid subcontractor, Terry Wayne Lyons, Sr., performing roofing work at 1203 Dancy St., Jacksonville, Florida 32205. On January 3, 2019, Respondent’s subcontractor, Terry Wayne Lyons, Sr., had five paid employees performing roofing work at 1203 Dancy St., Jacksonville, Florida 32205: Terry Wayne Lyons, Sr.; Jahru Li-Ly Campbell; Kevin Lee Hagan; Terry Wayne Lyons, Jr.; and Jonathan Wayne McCall. On January 3, 2019, Respondent’s subcontractor, Terry Wayne Lyons, Sr., had no workers’ compensation exemptions and no workers’ compensation insurance coverage. On January 3, 2019, Respondent had no workers’ compensation exemptions and no workers’ compensation insurance coverage. On January 3, 2019, the Division issued a Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment to Respondent. The Division served the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment on Respondent by personal service on January 4, 2019. The Division served a Request for Production of Business Records for Penalty Assessment Calculation on Respondent on January 4, 2019. On February 1, 2019, the Division issued an Amended Order of Penalty Assessment to Respondent. The Division served the Amended Order of Penalty Assessment on Respondent on February 7, 2019. The Amended Order of Penalty Assessment imposed a penalty of $353,349.72. On June 3, 2020, the Division issued a 2nd Amended Order of Penalty Assessment to Respondent. The Division served the 2nd Amended Order of Penalty Assessment on Respondent on June 11, 2020. The 2nd Amended Order of Penalty Assessment imposed a penalty of $68,705.29. On July 30, 2020, the Division served a 3rd Amended Order of Penalty Assessment to Respondent. The 3rd Amended Order of Penalty Assessment imposed a penalty of $46,805.02. Throughout the penalty period, Respondent was an “employer” in the state of Florida, as that term is defined in section 440.02(16). Respondent did not obtain exemptions from workers’ compensation insurance coverage requirements for the entries listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment as “Employer’s Payroll” during the penalty period. Respondent did not secure the payment of workers’ compensation insurance coverage, nor did others secure the payment of workers’ compensation insurance coverage, for the entries listed on the penalty worksheet of the 3rd Amended Order of Penalty Assessment as “Employer’s Payroll” during the periods of non-compliance listed on the penalty worksheet. The manual rates, class codes, and gross payroll identified on the penalty worksheet of the 3rd Amended Order of Penalty Assessment are correct to the extent a penalty is due. Evidentiary Findings Based on business records received from Respondent, the Division has recalculated the assessed penalty. The proposed penalty has been reduced to $27,553.78. Respondent has paid $1,000.00 for the release of the Stop Work Order, leaving a remaining penalty of $26,553.78. In determining the penalty, the Division reviewed Respondent’s business and financial records for a period of two years, from January 4, 2017, through January 3, 2019. Respondent was cooperative and forthcoming with the Division in providing its business and financial records. Penalties are calculated first by establishing the nature of the work being performed by employees. That is done by comparing the work to descriptions provided in the National Council of Compensation Insurance (NCCI) SCOPES® Manual. As relevant to this proceeding, the work being performed by persons who were employees of Respondent was as described in SCOPES® Manual class codes 5551 (Roofing - All Kinds & Drivers); 8227 (Construction or Erection Permanent Yard); 5213 (Concrete Construction NOC); and 8810 (Clerical Office Employees NOC). Workers’ compensation insurance premium rates are established based on the risk of injury associated with a particular class code. The greater the risk of injury, the greater the premium rate to insure that risk. Work such as roofing entails a significant risk of injury, and the approved manual rate is thus very high. Office and clerical work entails a very low risk of injury, and the approved manual rate is correspondingly very low. When work is performed but it is not specifically identified, e.g., laborer, the highest rated classification code for the business being audited is assigned to the employee. In this case, the highest rated classification code applicable to Respondent is class code 5551, for roofing. The 4th Amended Order of Penalty Assessment reveals payroll for individuals engaged in work described in class codes as follows: Anthony Wright - class code 5551 Donnell Eugene Johnson - class code 5551 Edward Tipton - class code 8227 Eugene Monts - class code 5213 James Dunlap - class code 5551 James Walters - class code 5551 Jorel Golden - class code 5551 Kelvin Morrison - class code 5551 Matthew Robinson - class code 5551 Vincent Marino - class code 8810 Jahru Li-Ly Campbell - class code 5551 Kevin Lee Hagan - class code 5551 Jonathan Wayne McCall - class code 5551 Terry Lyons, Jr. - class code 5551 Terry Lyons, Sr. - class code 5551 Mr. Lyons, Sr., was retained by Respondent as a subcontractor. Mr. Lyons, Sr., previously held an exemption from workers’ compensation as an officer of his company, but it had expired on December 27, 2017. Mr. Lyons, Sr., was working at the 1203 Dancy Street worksite on January 3, 2019. The evidence was sufficient to establish that Mr. Lyons, Sr., was appropriately assigned as class code 5551. His exemption was accepted up to its date of expiration, so the period applicable to the penalty calculation for Mr. Lyons, Sr., was from December 28, 2017, to January 3, 2019. Mr. Lyons, Sr.’s employees who were working at the 1203 Dancy Street worksite on January 3, 2019, were Mr. Campbell, Mr. Hagan, Mr. McCall, and Mr. Lyons, Jr. The evidence was sufficient to establish that they were employees of Respondent’s uninsured subcontractor, and that they were appropriately assigned as class code 5551. Mr. Wright and Mr. Robinson were listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- roofing.” Respondent was not able to demonstrate that they were covered by workers’ compensation. The evidence was sufficient to establish that Mr. Wright and Mr. Robinson were appropriately included in the penalty calculation, and that they were appropriately assigned as class code 5551. Mr. Johnson, Mr. Dunlap, and Mr. Morrison were listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- laborer.” Respondent was not able to demonstrate that they were covered by workers’ compensation. The evidence was sufficient to establish that Mr. Johnson, Mr. Dunlap, and Mr. Morrison were appropriately included in the penalty calculation, and that they were appropriately assigned as the highest rated classification code applicable to Respondent, class code 5551. Mr. Tipton was listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- handyman, yard work/clean up, truck detail.” Mr. Monts was listed on Respondent’s Profit & Loss Detail Sheet as “subcontract labor -- laborer.” Ms. Murcia testified that Mr. Marino provided information that Mr. Monts did concrete work, rather than roofing. Respondent was not able to demonstrate that they were covered by workers’ compensation. Mr. Marino indicated that Mr. Tipton and Mr. Monts should have been identified as his personal expenses, performing work at his home. However, they were identified in Respondent’s records as subcontract labor, and the payments to them were reported on Respondent’s 2017 income tax return as business expenses. They each received multiple payments over an extended period. The evidence was sufficient to establish that Mr. Tipton and Mr. Monts were employees of Respondent. The evidence was sufficient to establish that Mr. Tipton was appropriately assigned as class code 8227, and that Mr. Monts was appropriately assigned as class code 5213. Nonetheless, payments to the two were reduced by 20 percent to account for expenditures for materials, with the remaining 80 percent constituting payroll. Fla. Admin. Code R. 69L-6.035(1)(i). Mr. Marino was not an on-site employee of Respondent, but rather performed administration and clerical functions for Respondent. Mr. Marino previously had workers’ compensation, but it had been cancelled on February 28, 2015. The evidence was sufficient to establish that Mr. Marino was appropriately assigned as class code 8810. Mr. Marino obtained an exemption from workers’ compensation as an officer of Respondent on January 4, 2019. The evidence established that James Walters performed repairs to Respondent’s truck. The evidence was not clear and convincing that Mr. Walters was an employee of Respondent. Jorel Golden was identified solely as the payee on a single check image. He did not appear on Respondent’s Profit & Loss Detail Sheet, and there was no evidence as to why Mr. Golden was being paid. The evidence was not clear and convincing that Mr. Golden was an employee of Respondent. The salaries of the employees were calculated based on Respondent’s business records. The total gross payroll amounted to $170,139.07. Except for the amount of payments to Mr. Walters and Mr. Golden, that figure is supported by clear and convincing evidence. The penalty for Respondent’s failure to maintain workers’ compensation insurance for its employees is calculated as 2.0 times the amount Respondent would have paid in premiums for the preceding two-year period. The NCCI periodically issues a schedule of workers’ compensation rates per $100 in salary, which varies based on the SCOPES® Manual classification of the business. The NCCI submits the rates to the Florida Office of Insurance Regulation, which approves the rates to be applied to the calculation of premiums in Florida. The workers’ compensation insurance premium was calculated by multiplying one percent of the gross payroll ($17,013.91) by the approved manual rate for each quarter (which varied depending on the quarterly rate), which resulted in a calculated premium of $18,369.19. Clear and convincing evidence supports a finding that the Division applied the correct rates in calculating the premium. The penalty was determined by multiplying the calculated premium by 2.0, resulting in a final penalty of $36,738.38. In recognition of Respondent’s cooperation in the investigation and the timely submission of its business records, the Division applied a 25 percent reduction in the penalty ($9,184.60), resulting in a total penalty of $27,553.78. The evidence established that the Division gave every benefit of the doubt to Respondent to reduce the penalty, and its effect on Respondent, to the extent allowed within the confines of the law and the records provided.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation enter a final order assessing a penalty of $27,553.78, against Respondent, Best Affordable Contractors, LLC, for its failure to secure and maintain required workers’ compensation insurance for its employees and subcontracted labor, subject to recalculation as provided herein, and subject to Respondent’s previous payment of $1,000.00. DONE AND ENTERED this 15th day of September, 2020, in Tallahassee, Leon County, Florida. S E. GARY EARLY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of September, 2020. COPIES FURNISHED: Vincent Marino Best Affordable Contractors, LLC 1348 Clements Woods Lane Jacksonville, Florida 32211 (eServed) Leon Melnicoff, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
