The Issue Whether Petitioner properly issued a Stop-Work Order and Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact Petitioner is the state agency responsible for enforcing the Florida Workers' Compensation Law, chapter 440, Florida Statutes, including those provisions that require employers to secure and maintain payment of workers? compensation insurance for their employees who may suffer work- related injuries. Respondent is an active Florida limited liability company, having been organized in 2006. Howard?s Famous Restaurant is a diner-style restaurant located at 488 South Yonge Street, Ormond Beach, Florida. It seats approximately 60 customers at a time, and is open for breakfast and lunch. In 2006, Edward Kraher and Thomas Baldwin jointly purchased Howard?s Famous Restaurant. They were equal partners. Mr. Baldwin generally handled the business aspects of the restaurant, while Mr. Kraher was responsible for the food. At the time the restaurant was purchased, Mr. Baldwin organized That?s Right Enterprises, LLC, to hold title to the restaurant and conduct the business of the restaurant. Mr. Baldwin and Mr. Kraher were both identified as managing members of the company.1/ On June 27, 2007, a 2007 Limited Liability Company Annual Report for That?s Right Enterprises, LLC, was filed with the Secretary of State. The Annual Report bore the signature of Mr. Kraher, and contained a strike-through of the letter that caused the misspelling of Mr. Kraher?s name. Mr. Kraher testified that the signature on the report appeared to be his, but he had no recollection of having seen the document, or of having signed it. He suggested that Mr. Baldwin may have forged his signature, but offered no explanation of why he might have done so. Although Mr. Kraher could not recall having signed the annual report, and may have had little understanding of its significance, the evidence supports a finding that Mr. Kraher did, in fact, sign the annual report for That?s Right Enterprises, LLC, as a managing member of the business entity. From March 9, 2009, through March of 2011, Mr. Kraher and Mr. Baldwin received salaries as officers, rather than employees, of That?s Right Enterprises, LLC. Their pay was substantially equivalent during that period. The paychecks were issued by the company?s accountant. Mr. Kraher denied having specific knowledge that he was receiving a salary as an officer of That?s Right Enterprises, LLC. Since Mr. Baldwin left the company, Mr. Kraher has continued to use the same accountant, and has continued to receive his salary as an officer of That?s Right Enterprises, LLC. On March 24, 2011, after having bought out Mr. Baldwin?s interest in the company by paying certain company- related debt owed by Mr. Baldwin, Mr. Kraher filed an annual report for That?s Right Enterprises, LLC. In the annual report, which was prepared and filed at his request, Mr. Kraher assumed control as the sole member and registered agent of the company. Mr. Baldwin was removed as a managing member and registered agent, and other changes were made consistent therewith. Mr. Kraher denied any understanding of the significance of his operating as the same corporate entity, but rather thought he was “buying a new LLC.” On March 8, 2012, Petitioner's investigator, Carolyn Martin, conducted an inspection of Howard?s Famous Restaurant. Ms. Martin introduced herself to one of the waitresses working at the restaurant. The waitress called Mr. Kraher from the kitchen to speak with Ms. Martin. Mr. Kraher identified himself as the owner of the restaurant for the past six years. Ms. Martin asked Mr. Kraher for evidence that Respondent?s employees were covered by workers? compensation insurance. Mr. Kraher retrieved a folder containing the restaurant?s insurance policies and information. Ms. Martin reviewed the folder, and determined that Respondent did not have workers? compensation insurance. Mr. Kraher, who was very cooperative with Ms. Martin throughout the inspection, was genuinely surprised that the restaurant employees were not covered by workers? compensation insurance. He had taken out “a million-dollar insurance policy” that he thought covered everything he needed to have. While Ms. Martin was at the restaurant, Mr. Kraher called his insurance agent who, after reviewing his file, confirmed that Respondent did not have workers? compensation insurance. Mr. Kraher immediately asked his agent to bind a policy, and paid his first six-month premium using a business credit card. A copy of the policy was quickly faxed by the agent to Ms. Martin. Ms. Martin took the names of Respondent?s employees, which included two kitchen staff and four wait staff. Some of the employees worked in excess of 30 hours per week, while others worked part-time. Ms. Martin went to her vehicle and completed a Field Interview Worksheet. Ms. Martin reviewed the Coverage and Compliance Automated System (CCAS), which is the statewide database for workers? compensation information, to confirm Respondent?s status in the workers? compensation system. Using the CCAS, Ms. Martin confirmed that Respondent had no workers? compensation coverage on file for any employee of the company. She also accessed the Florida Division of Corporations website to ascertain Respondent?s corporate status. After having gathered the information necessary to determine Respondent?s status, Ms. Martin contacted her supervisor and received authorization to issue a consolidated Stop-Work Order and Order of Penalty Assessment. The Stop-Work Order required Respondent to cease all business operations statewide. The Order of Penalty Assessment assessed a penalty, pursuant to section 440.107(7)(d), equal to 1.5 times the amount the employer would have paid in premium when applying the approved manual rates to the employer's payroll for the preceding three-year period. The consolidated order was hand- delivered to Mr. Kraher on behalf of Respondent at 11:00 a.m. on March 8, 2012. At the time she delivered the consolidated Stop-Work Order and Order of Penalty Assessment, Ms. Martin also hand- delivered a Request for Production of Business Records for Penalty Assessment Calculation. The Request required that Respondent produce business records for the preceding three-year period, from March 9, 2009, through March 8, 2012. Respondent was given five days in which to provide the records. On or about March 12, 2012, Mr. Kraher produced three boxes of business records to Ms. Martin. Those records were forwarded by Ms. Martin, and placed in the queue for review by the penalty auditor. The records were reviewed by Petitioner?s penalty auditor, Lynne Murcia, and were found to be insufficient to establish the actual compensation paid to Respondent?s employees for the preceding three year period. Therefore, pursuant to section 440.107(7)(e), salaries were imputed for each of the six employees based on the statewide average weekly wage. Ms. Murcia used the “Scopes Manual” published by the National Council on Compensation Insurance to ascertain the classification of Respondent?s business, based upon the nature of the goods and services it provided. Class code 9082, titled “Restaurant NOC,” is described as “the „traditional? restaurant that provides wait service.” Ms. Murcia correctly determined that Howard?s Famous Restaurant fell within class code 9082. The salaries of Respondent?s six employees, as employees of a class code 9082 restaurant, were imputed as though they worked full-time for the full three-year period from March 9, 2009, to March 8, 2012, pursuant to section 440.107(7)(e). The total imputed gross payroll amounted to $1,130,921.64. The penalty for Respondent?s failure to maintain workers? compensation insurance for its employees is calculated as 1.5 times the amount Respondent would have paid in premium for the preceding three-year period. The National Council on Compensation Insurance periodically issues a schedule of workers? compensation rates per $100 in salary, which varies based on the Scopes Manual classification of the business. The workers? compensation insurance premium was calculated by multiplying one percent of the imputed gross payroll ($11,309.21) by the approved manual rate for each quarter (which varied from $2.20 to $2.65, depending on the quarterly rate), which resulted in a calculated premium of $26,562.06. The penalty was determined by multiplying the calculated premium by 1.5, resulting in the final penalty of $39,843.18. On March 28, 2012, Petitioner issued an Amended Order of Penalty Assessment assessing a monetary penalty amount of $39,843.18 against Respondent. Respondent subsequently provided Petitioner with additional payroll records regarding the six employees. The records had been in the possession of Respondent?s accountant. The records, which included Respondent?s bank statements and payroll records for the six employees, were determined to be adequate to calculate the actual employee salaries for the preceding three-year period. Ms. Murcia revised her penalty worksheet to reflect that payroll was now based on records, rather than being imputed.2/ Respondent?s total payroll for the three-year period in question was determined to be $154,079.82. Applying the same formula as that applied to determine the penalty amount reflected in the Amended Penalty Assessment, the premium was calculated to have been $3,624.33, with a resulting penalty of $5,436.64. On April 24, 2012, Petitioner issued a 2nd Amended Order of Penalty Assessment reducing Respondent's penalty from $39,843.18 to $5,436.64.
Recommendation Based on the 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 of $5,436.64 against Respondent, That?s Right Enterprises, LLC, for its failure to secure and maintain required workers? compensation insurance for its employees. DONE AND ENTERED this 31st day of August, 2012, 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 31st day of August, 2012.
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 are whether Respondent was required to obtain workers' compensation coverage for himself pursuant to Section 440.107, Florida Statutes (2002), during the penalty period designated in the Amended Order of Penalty Assessment; and, if so, whether Petitioner should impose a penalty against Respondent in the amount of $120,467.88.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. § 440.107, Fla. Stat. (2002). On February 9, 2004, while conducting a random site inspection, Department investigator, Eric Duncan, observed three men performing construction work in the form of carpentry and house-framing at 720 Southwest 10th Street, Cape Coral, Florida. One of the workers on the site was Respondent, Jeremy Butzler, a sole proprietor who had employed the other two workers. Mr. Duncan interviewed Mr. Butzler at the site and requested proof of workers' compensation coverage, which Mr. Butzler was unable to provide. Mr. Duncan then issued the first Stop Work and Penalty Assessment Order, directing Mr. Butzler to cease work and pay a civil penalty of $1000.00. Also on February 9, 2004, Mr. Duncan served Mr. Butzler with a "Request for Production of Business Records," seeking copies of business records to determine whether Mr. Butzler had secured workers' compensation coverage, whether he had a current valid workers' compensation exemption, and to determine any civil penalties that may be owed for failing to secure workers' compensation coverage. Mr. Butzler complied in a very limited way. Mr. Duncan testified that most of the documents provided by Mr. Butzler were records of electronic transfer of funds that did not identify their recipients. No company checkbook or ledger was produced. After the penalty was calculated, the Department issued the First Amended Stop Work and Penalty Assessment Order, which increased the assessed penalty to $132,027.64. This assessment was later reduced to $120,467.88 after the Department corrected the workers' compensation premium rate it employed to calculate the penalty. At the time the Stop Work Order was issued and pursuant to Subsection 440.107(5), Florida Statutes (2002), the Department had adopted Florida Administrative Code Rule 4L-6.015,1/ which stated, in relevant part: In order for the Division to determine that an employer is in compliance with the provisions of Chapter 440, F.S., every business entity conducting business within the state of Florida shall maintain for the immediately preceding three year period true and accurate records. Such business records shall include original documentation of the following, or copies, when originals are not in the possession of or under the control of the business entity: All workers’ compensation insurance policies of the business entity, and all endorsements, notices of cancellation, nonrenewal, or reinstatement of such policies. * * * Records indicating for every pay period a description of work performed and amount of pay or description of other remuneration paid or owed to each person by the business entity, such as time sheets, time cards, attendance records, earnings records, payroll summaries, payroll journals, ledgers or registers, daily logs or schedules, time and materials listings. All contracts entered into with a professional employer organization (PEO) or employee leasing company, temporary labor company, payroll or business record keeping company. If such services are not pursuant to a written contract, written documentation including the name, business address, telephone number, and FEIN or social security number of all principals if an FEIN is not held, of each such PEO, temporary labor company, payroll or business record keeping company; and For every contract with a PEO: a payroll ledger for each pay period during the contract period identifying each worker by name, address, home telephone number, and social security number or documentation showing that the worker was eligible for employment in the United States during the contract for his/her services, and a description of work performed during each pay period by each worker, and the amount paid each pay period to each worker. A business entity may maintain such records or contract for their maintenance by the PEO to which the records pertain. * * * All check ledgers and bank statements for checking, savings, credit union, or any other bank accounts established by the business entity or on its behalf; and All federal income tax forms prepared by or on behalf of the business and all State of Florida, Division of Unemployment Compensation UCT-6 forms and any other forms or reports prepared by the business or on its behalf for filing with the Florida Division of Unemployment Compensation. During the period in question, Respondent was a "sole proprietor," as that term was defined in Subsection 440.02(25), Florida Statutes (2002): "Sole proprietor" means a natural person who owns a form of business in which that person owns all the assets of the business and is solely liable for all the debts of the business. Subsection 440.02(15)(c)1., Florida Statutes (2002), in effect during the penalty assessment period, stated, in relevant part: "Employee" includes a sole proprietor . . . Partners or sole proprietors actively engaged in the construction industry are considered employees unless they elect to be excluded from the definition of employee by filing written notice of the election with the department as provided in s. 440.05 . . . A sole proprietor or partner who is actively engaged in the construction industry and who elects to be exempt from this chapter by filing a written notice of the election with the department as provided in s. 440.05 is not an employee. (Emphasis added). Section 440.05, Florida Statutes (2002), allowed an individual to apply for election to be exempt from workers' compensation benefits. Only the named individual on the application was exempt from carrying workers' compensation insurance coverage. The Department maintains a database of all workers' compensation exemptions in the State of Florida. Mr. Duncan's review of this database revealed that, although Respondent had a valid workers' compensation exemption from November 18, 1999, to November 15, 2001, there were no exemptions for Respondent for 2002, the year constituting the penalty period in this case. At the hearing, Respondent admitted that he did not obtain an exemption for the year 2002. Mr. Duncan's investigation also revealed that Respondent did not have workers compensation insurance coverage during the year 2002. During the investigation, Respondent informed Mr. Duncan that he had contracted with an employee leasing company, Southeast Personnel Services, Inc., that was responsible for paying the salaries of and providing workers' compensation insurance coverage for Respondent and his workers. Pursuant to Subsection 468.520(5), Florida Statutes (2002),2/ an employee leasing company is a business entity engaged in employee leasing. "Employee leasing" is an arrangement whereby a leasing company assigns its employees to a client and allocates the direction of, and control over, the leased employees between the leasing company and the client. § 68.520(4), Fla. Stat. (2002). When the employee leasing company accepts a client, the client becomes an employee of the leasing company. An employee leasing company is the employer of the leased employees and is responsible for providing workers' compensation pursuant to Chapter 440, Florida Statutes (2002). § 468.529(1), Fla. Stat. (2002). Additionally, an employee leasing company assumes responsibility for the payment of wages to the leased employees without regard to payments by the client and for the payment of payroll taxes and collection of taxes from the payroll of leased employees. § 468.525(4)(b) and (c), Fla. Stat. (2002). At the hearing, Respondent demonstrated that he had workers' compensation coverage as an employee of the employee leasing company. However, the Department did not utilize any payments made through the leasing company in its penalty calculation. The evidence demonstrated that Respondent received compensation directly from Holiday Builders, Inc., in the amount of $185,006.50, and Gatco Construction, in the amount of $10,590.00. These amounts, totaling $195,596.50, were utilized by the Department to calculate Respondent's penalty. Mr. Duncan explained that in order for workers' compensation coverage to apply through the employee leasing company, companies such as Gatco Construction would have to make payments to the leasing company, not directly to Respondent. The leasing company would then pay a salary to Respondent, as its employee, and Respondent would be covered by the employee leasing company's workers' compensation insurance. Payments made directly to Respondent would not be secured by the workers' compensation coverage obtained through the employee leasing company. Respondent claimed that the Division utilized the incorrect gross income amount in calculating the penalty. To support this claim, Respondent attempted to introduce what he claimed was his personal income tax return for the year 2002. Respondent claimed this return had been prepared and filed by his bookkeeper some time in February 2004, subsequent to the Department's investigation. However, the return produced at hearing was unsigned and indicated that it had been self- prepared by Respondent. Respondent could not recall the bookkeeper's name without prodding from his counsel. Respondent offered no proof that this return had ever been completed or filed with the Internal Revenue Service. The purported 2002 tax return was not admitted into evidence, and Respondent's testimony as to the information contained on the return is not reliable. The Department correctly calculated the penalty assessment based on the money paid to Respondent as a sole proprietor "employee" who failed to file for a workers' compensation exemption for the year 2002. The Department calculated the total penalty based on Respondent's gross payroll, the class code assigned to Respondent utilizing the SCOPES Manual (a standard classification tool published by the National Council on Compensation Insurance), and the statutory guidelines in Subsection 440.107(7), Florida Statutes (2002). Based on that calculation, the correct penalty assessment in this case is $120,467.88.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order confirming the Amended Stop Work Order and imposing a penalty in the amount of $120,467.88. DONE AND ENTERED this 5th day of May, 2005, 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 5th day of May, 2005.
The Issue At issue in this proceeding is whether the Respondent, Brevard Management, LLC, (Brevard Management) 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 Petitioner properly assessed a penalty against 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, Fla. Stat. On July 31, 2008, Eugene Wyatt, an insurance analyst working for the Department, visited the River Palm Motel in Melbourne to investigate the workers' compensation insurance status of several contractors performing renovations on the property. The River Palm Motel is owned by Brevard Management, whose principal owner is Albert Segev. During his visit, Mr. Wyatt spoke to Michael Cole, the hotel's manager, regarding the workers' compensation coverage of the hotel itself. Mr. Cole told Mr. Wyatt that the hotel used Automatic Data Processing, Inc. (ADP), a third-party payroll services provider, to provide workers' compensation insurance coverage. Brevard Management began operating the River Palm Motel on June 18, 2008. On June 19, 2008, Brevard Management entered into an agreement with ADP for the provision of payroll services, including the filing of payroll taxes, using Easy Pay, ADP's proprietary payroll management service. On August 25, 2008, Mr. Wyatt received an anonymous referral alleging that the River Palm Motel was not carrying workers' compensation insurance for its employees. Later that day, Mr. Wyatt returned to the River Palm Motel, this time to investigate the workers' compensation status of the motel itself. Upon his arrival at the motel, Mr. Wyatt spoke with Mr. Cole, who disclosed that Brevard Management owned the motel. Mr. Wyatt conducted a search of the Division of Corporation's website and learned that Mr. Segev was the principal owner of Brevard Management. Mr. Cole provided Mr. Wyatt with invoices for the last payroll period for the River Palm Motel. The invoices indicated that the company had more than ten employees, which led Mr. Wyatt to conclude that the company was required to secure workers' compensation insurance. At his deposition, Mr. Cole confirmed that River Palm Motel had between ten and twelve employees on August 25, 2008. Mr. Cole believed that Brevard Management had secured workers' compensation insurance coverage through ADP. However, the payroll invoices that Mr. Cole provided to Mr. Wyatt showed no deductions for any insurance. Mr. Wyatt 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 Brevard Management had no workers' compensation insurance policy in place and no current, valid exemptions. Mr. Cole provided Mr. Wyatt with a copy of the June 19, 2008, payroll agreement between Brevard Management and ADP, which gave no indication that workers' compensation insurance was included. The evidence at the hearing established that ADP does not automatically provide workers' compensation insurance coverage to entities that enroll for its payroll services. ADP provides such insurance coverage, but only as part of a separate transaction. After receiving authorization from the acting supervisor in the Department's Orlando office, Mr. Wyatt issued the SWO to Brevard Management on August 25, 2008, and personally served it on Mr. Segev on August 26, 2008. On August 25, 2008, Mr. Wyatt gave Mr. Cole a request to produce business records, for the purpose of making a penalty assessment calculation. In response, Mr. Cole provided an employee roster from ADP showing the payroll entries for every Brevard Management employee from the opening of the motel in June 2008 through August 25, 2008. After Mr. Wyatt's visit, Mr. Cole contacted ADP and spoke to Elizabeth Bowen, a workers' compensation sales agent with ADP Insurance Services. Ms. Bowen faxed forms to Mr. Cole to complete in order to obtain a workers' compensation insurance policy. Mr. Cole completed the paperwork and obtained a workers' compensation insurance policy through NorGUARD Insurance Company, effective August 25, 2008. Mr. Cole testified that he believed in good faith that he had obtained workers' compensation insurance at the time he signed up for payroll services with ADP sales representative Clinton Stanley in June 2008. It was only Mr. Wyatt's investigation that alerted Mr. Cole to the fact that Brevard Management did not have the required coverage. Mr. Stanley recalled that Mr. Cole had requested workers' compensation insurance, recalled telling Mr. Cole that his request had to be routed to ADP's separate insurance division, and recalled having forwarded the request to the insurance division. Mr. Stanley had no explanation for why the insurance division did not follow up with Mr. Cole in June 2008. Because he never heard from Mr. Cole again, he assumed that Brevard Management had obtained the requested workers' compensation coverage. It is accepted that Mr. Cole believed that he had purchased the workers' compensation coverage as part of the ADP payroll services; however, the evidence established that Mr. Cole should reasonably have known that this was not the case. Nothing in the June 2008 contractual documentation with ADP indicated that Brevard Management had obtained workers' compensation insurance coverage, and the subsequent ADP payroll registers showed no deductions for workers' compensation insurance. Using the proprietary Scopes Manual developed by the National Council on Compensation Insurance, Inc. (NCCI), Mr. Wyatt assigned Brevard Management's employees the occupation classification code 9052, "Hotel: All Other Employees & Sales Persons, Drivers." This was the same code assigned by Ms. Bowen when she completed the policy paperwork for Brevard Management. Ms. Bowen described this classification as "all inclusive" with respect to hotel employees. Mr. Wyatt calculated an amended penalty based on the payroll records provided by Mr. Cole, from the date Brevard Management became an active limited liability company, June 3, 2008, to the date the SWO was issued, August 25, 2008. Mr. Wyatt divided the total payroll by 100, then multiplied that figure by NCCI's approved manual rate for insurance coverage in 2008 for classification code 9052. That product was then multiplied by 1.5 to arrive at the penalty for the stated period. The total penalty for all employees was $2,112.03. The Amended Order was served on Brevard Management on August 26, 2008, along with the SWO. On August 26, 2008, Mr. Wyatt met with Mr. Cole and Mr. Segev, who produced a copy of the application for workers' compensation insurance placed through NorGUARD Insurance Company and tendered a cashier's check for the full amount of the penalty. The SWO was released on the same day.
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 $2,112.03 against Brevard Management, LLC. DONE AND ENTERED this 17th day of April, 2009, 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 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 2009. COPIES FURNISHED: Tracy Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Ben Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Justin H. Faulkner, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Albert Segev Brevard Management, LLC, d/b/a River Palm Hotel 420 South Harbor City Boulevard Melbourne, Florida 32901
The Issue The issues to be determined in this case are whether Respondent Lockhart Builders, Inc., violated state laws applicable to workers’ compensation insurance coverage by failing to secure coverage for three employees and failing to produce records requested by Petitioner Department of Financial Services, Division of Workers’ Compensation (Department) and, if so, what penalty should be assessed for the violations.
Findings Of Fact Petitioner is the state agency responsible for the enforcement of the workers’ compensation insurance coverage requirements established in Chapter 440, Florida Statutes (2007).1 Respondent is a Florida corporation with its office in Bradenton. William Lockhart is Respondent’s president. Respondent is licensed to engage in construction activity in Florida. Respondent was engaged to construct a two-story duplex at 2315 Gulf Drive in Bradenton. Respondent began work at the job site on or about February 21, 2007. On August 22, 2007, Lockhart received a proposal from Burak Yavalar, owner of BY Construction, to do the exterior stucco work on the duplex building for a flat fee of $10,750. The proposal was accepted by Respondent on August 23, 2007. Yavalar presented Lockhart with a certificate of liability insurance which indicated that he had obtained workers’ compensation coverage for his employees. The certificate was issued by Employee Leasing Solutions, Inc. (ELS), a professional leasing company in Bradenton. ELS provides mainly payroll services and workers’ compensation insurance coverage for its clients. Lockhart did not ask for, and Yavalar did not provide Lockhart with, a list of the names of the BY Construction employees who were covered by the insurance. Lockhart made a call to ELS to verify that BY Construction had workers’ compensation insurance coverage, but he did not ask for a list of BY Construction employees covered by its insurance policy. BY Construction began work at Respondent’s job site on or about September 10 or 11, 2007. On September 12, 2007, BY Construction had eight employees at the job site. One employee, Justin Ormes, had previously worked for BY Construction, had quit for a while, and had just returned. Two other employees, Carlos Lopez and Jaime Alcatar, had been working on a nearby job site and were asked by Yavalar to come to work at Respondent’s job site. Yavalar claims that on the morning of September 12, 2007, Ormes, Lopez, and Alcatar had not yet been employed or authorized to start work for BY Construction. On September 12, 2007, Petitioner’s investigators Germaine Green and Colleen Wharton performed a random compliance check at Respondent’s job site. Without being specific about what particular work was being performed at the site by Ormes, Lopez, and Alcatar, the investigators testified that when they arrived at the job site they observed all eight men performing stucco work. The investigators spoke to Yavalar, Lockhart and the workers at the job site to determine their identities and employment status. Yavalar told the investigators his eight employees had workers’ compensation insurance coverage through ELS. However, upon checking relevant records, the investigators determined that insurance coverage for Ormes, Lopez, and Alcatar had not been secured by either BY Construction or Respondent. Wharton issued a statewide stop-work order to BY Construction for its failure to obtain workers’ compensation coverage for the three employees. After the stop work order was issued, Yavalar left the job site with Lopez and Alcatar to complete their paperwork to obtain insurance coverage through ELS. Yavalar’s wife was able to re-activate Ormes’ insurance coverage with ELS over the telephone. By the end of the day on September 12, 2007, insurance coverage was secured by BY Construction for Ormes, Lopez, and Alcatar. The business records of BY Construction produced for the Department indicated that Ormes had been paid by BY Construction in the period from March to July 2007, and then on September 12, 2007; Lopez had been paid on August 24, 2007, and then on September 12, 2007; Alcatar had been paid on September 12, 2007. All three men were paid only $28 on September 12, 2007. This evidence supports the testimony of Yavalar that these three had arrived at Respondent’s job site for the first time on September 12, 2008. BY Construction was later served with an amended order of penalty for its failure to obtain workers’ compensation coverage for the three employees. It arranged with the Department to pay the penalty through installments and was conditionally released from the stop-work order. When the Department's investigators were at the job site on September 12, 2007, they informed Lockhart about the stop-work order being issued to BY Construction and gave Lockhart a Request for Production of Business Records for the purpose of determining whether Respondent had obtained proof of workers’ compensation insurance coverage from BY Construction before BY Construction commenced work at Respondent’s job site. Respondent produced the requested records. As discussed in the Conclusions of Law, Florida law charges a contractor with the duty to secure workers’ compensation insurance coverage for any uninsured employees of its subcontractors. On this basis, the Department served Respondent with a Stop-Work Order and an Order of Penalty Assessment on September 21, 2007, for failing to secure coverage for Ormes, Lopez, and Alcatar. On September 21, 2007, the Department served a Request for Production of Business Records for Penalty Assessment Calculation to Respondent. The Department’s request asked Respondent to produce records for the preceding three years, including payroll records, tax returns, and proof of insurance. Respondent produced some records in response to this second request, which the Department deemed insufficient to calculate a penalty. However, the evidence shows Respondent produced the only records that it possessed regarding its association with BY Construction. The Department’s proposed penalty does not include an assessment based solely on Respondent’s failure to produce requested records. When an employer fails to provide requested business records within 15 days of the request, the Department is authorized to assess a penalty by imputing the employer's payroll using "the statewide average weekly wage as defined in Section 440.12(2), multiplied by l.5." § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028. Imputing the gross payroll for Ormes, Lopez and Alcatar for the years 2004, 2005, 2006, and 2007, by using the average weekly wage for the type of work, the Department assessed Respondent with a penalty of $138,596.67 and issued an Order of Penalty Assessment to Respondent on October 31, 2007. Petitioner later amended the penalty to $70,272.51, based on the fact that BY Construction was not incorporated until January 1, 2006, and issued a Second Amended Order of Penalty Assessment on December 20, 2007.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order that amends its penalty assessment to reflect one day of non-compliance by Respondent. DONE AND ENTERED this 31st day of March, 2008, in Tallahassee, Leon County, Florida. BRAM D. E. CANTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 2008.
The Issue Whether Respondent, Forgue General Contracting, Inc., violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation coverage; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing workers’ compensation coverage requirements in Florida, including the requirement that employers secure the payment of workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Respondent operates a construction company in Florida, and Respondent has been in business since 2004. On October 31, 2018, Margaret Cavazos, a compliance investigator with the Department, conducted a random workers’ compensation check at a worksite located at 1172 East State Road 434 in Winter Springs, Florida. The worksite is a two-story commercial building with five individual storefronts. Investigator Cavazos arrived at the worksite at 8:30 a.m. There, she observed four individuals who she believed were preparing the exterior of the building for painting. One person was covering a window with tape and brown construction paper. Two more individuals were standing in the bucket of a boom lift approximately 15 feet above the ground next to the building. They appeared to be placing blue tape over a sign of one of the businesses in the building. A fourth person was positioned by a truck supervising the activity. Investigator Cavazos further noticed that several of the business names had already been covered with construction paper and tape. Investigator Cavazos approached the person standing by the truck and introduced herself. He identified himself as Jose Luis Chachel. Mr. Chachel informed Investigator Cavazos that he and the other three individuals at the worksite were working for a company called RC Painting Services, Inc. (“RC Painting”). Mr. Chachel further stated that they were preparing the building to be painted. The other three individuals at the worksite identified themselves to Investigator Cavazos as Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Investigator Cavazos watched the four individuals work at the jobsite for about an hour, then they departed. Investigator Cavazos, however, did not obtain any information from Mr. Chachel or the other individuals concerning how long they had worked for RC Painting, when they had arrived at the jobsite, their rate of pay, or whether RC Painting had actually paid them for their work. At the final hearing, Investigator Cavazos testified that her duties for the Department include inspecting businesses and worksites to determine whether a business has obtained the required workers’ compensation insurance coverage. Investigator Cavazos explained that a business that performs construction- related work must have workers’ compensation coverage. Therefore, Investigator Cavazos believed that, prior to beginning the painting activities, RC Painting should have secured sufficient workers’ compensation coverage for all four individuals identified at the worksite. After learning the name of the business that arranged for the presence of the four individuals at the jobsite, Investigator Cavazos consulted the Department’s Coverage and Compliance Automated System (“CCAS”) database for information on RC Painting. CCAS is a Department database that tracks workers’ compensation insurance coverage. CCAS contains coverage data from insurance carriers, as well as any workers’ compensation exemptions on file with the Department. Insurance providers are required to report coverage and cancellation information, which the Department uses to update CCAS. CCAS had no record that RC Painting carried any workers’ compensation coverage for the four individuals Investigator Cavazos observed at the worksite. While reviewing CCAS, Inspector Cavazos also noted that the Department did not have on file any request from RC Painting for an “exemption” from workers’ compensation coverage. An exemption is a method by which a business’s corporate officer may exempt him or herself from the requirements of chapter 440. See § 440.05, Fla. Stat. CCAS also revealed to Investigator Cavazos that on the date of her inspection, RC Painting had an active employee leasing agreement with SouthEast Personnel Leasing (“SouthEast Leasing”), an employee staffing company. At the final hearing, Inspector Cavazos explained that a business is not required to obtain workers’ compensation insurance for its employees if coverage is properly provided by or through an employee leasing company’s workers’ compensation policy. However, in order for an employee leasing company to become responsible for the workers’ compensation coverage of a particular employee, the business seeking coverage for that employee must ensure that the employee submits an application to the leasing company. Thereafter, if (and only if) the leasing company accepts the application, the leasing company becomes accountable for the workers’ compensation insurance coverage for that employee. Investigator Cavazos contacted SouthEast Leasing. SouthEast Leasing provided Investigator Cavazos an active roster of employees it leased to RC Painting. However, neither Mr. Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, nor Jenny Araque were listed on this roster. Therefore, Investigator Cavazos concluded that none of the four individuals she identified at the worksite were covered by workers’ compensation insurance under RC Painting’s leasing arrangement with SouthEast Leasing on October 31, 2018. After determining that neither CCAS nor SouthEast Leasing recorded any workers’ compensation coverage for the persons at the worksite, Investigator Cavazos contacted RC Painting’s owner, Roberto Chavez. (Mr. Chachel provided Investigator Cavazos with his phone number during her inspection.) Investigator Cavazos testified that, during their phone call, Mr. Chavez confirmed that the four individuals worked for him. Mr. Chavez further informed Investigator Cavazos that RC Painting had been hired by Respondent to paint the building. At that point, Investigator Cavazos called Respondent to inquire about workers’ compensation coverage for Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Investigator Cavazos spoke with one of Respondent’s employees, Anthony Gonzalez. Mr. Gonzalez confirmed that Respondent engaged RC Painting to paint the building. Continuing to search for active workers’ compensation coverage, Investigator Cavazos discovered that Respondent also had an employee leasing agreement with SouthEast Leasing. Investigator Cavazos reviewed SouthEast Leasing’s roster which recorded only two covered employees for Respondent, Anthony Gonzalez and Edward Forgue (Respondent’s president). As with RC Painting’s leasing agreement, Respondent’s leasing agreement with SouthEast Leasing did not cover Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, or Jenny Araque on October 31, 2018. As detailed below, under section 440.10(1), a contractor is liable for, and is required to secure, workers’ compensation coverage for all employees of a subcontractor to whom the contractor sublets work. (Section 440.10(1)(c) also directs the contractor to require a subcontractor to provide evidence of workers’ compensation insurance.) Therefore, as a contractor hiring a subcontractor for construction work, Respondent was required to exercise due diligence to ensure that all RC Painting’s employees who were painting the building were covered by workers’ compensation insurance. On October 31, 2018, based on her findings, Investigator Cavazos issued a Stop-Work Order to RC painting. Later that day, Mr. Chavez ventured to the Department’s local office to determine how his business could be released from the Stop-Work Order. There, he met with district supervisor, Salma Qureshi. Ms. Qureshi informed Mr. Chavez that, in order for his company to return to work, he needed to pay a $1,000 fine and complete an Affirmation. She explained to Mr. Chavez that on the Affirmation, he was to describe how RC Painting intended to come into full compliance with workers’ compensation coverage requirements. Mr. Chavez had, in fact, brought with him a cashier’s check for $1,000. (The amount was included on the Stop-Work Order.) Mr. Chavez then completed an Affirmation before Ms. Qureshi. On the Affirmation, Mr. Chavez wrote the names of the four individuals Investigator Cavazos identified at the jobsite. Next to each name, Mr. Chavez wrote “$20.” Below the names, he wrote “I am terminating.” Mr. Chavez then signed and dated the Affirmation. At the final hearing, Ms. Qureshi expressed that Mr. Chavez told her that he was going to pay each of the four individuals $20 for the day’s work they performed on October 31, 2018, and then he was terminating them. In addition to issuing the Stop-Work Order to RC Painting, on October 31, 2018, Investigator Cavazos issued a Stop-Work Order for Specific Worksite Only to Respondent, which was served on November 2, 2018. Investigator Cavazos also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Through this document, the Department requested several categories of business records from Respondent for the period of November 1, 2016, through October 31, 2018. The requested documents pertained to: employer identification, payroll documents, account documents, disbursements, workers’ compensation coverage, professional employer organization records, temporary labor service, exemptions, subcontractor records, and subcontractors’ workers’ compensation coverage. Based on Investigator Cavazos’s investigation, the Department determined that Respondent failed to secure adequate workers’ compensation coverage for its employees. Therefore, the Department proceeded to calculate a penalty based on Respondent’s lack of compliance with chapter 440. The Penalty Calculation: Nathaniel Hatten, the penalty auditor who determined the penalty the Department seeks to impose on Respondent, testified regarding his computation. Mr. Hatten explained that the penalty essentially consists of the “avoided” premium amount, or the actual premium the employer would have paid in workers’ compensation insurance for the uncovered employees, multiplied by two. To calculate the appropriate penalty for Respondent’s failure to secure workers’ compensation coverage, the Department first ascertained Respondent’s period of non-compliance. To determine this time frame, the Department referred to Florida Administrative Code Rule 69L-6.028(2), which directs that: The employer’s time period or periods of non-compliance means the time period(s) within the two years preceding the date the stop-work order was issued to the employer within which the employer failed to secure the payment of compensation pursuant to chapter 440, F.S., and must be either the same time period as set forth in the business records request for the calculation of penalty or an alternative time period or period(s) as determined by the Department, whichever is less. The employer may provide the Department with records from other sources, including, but not limited to, the Department of State, Division of Corporations, the Department of Business and Professional Regulation, licensing offices, and building permitting offices to show an alternative time period or period(s) of non- compliance. Based on these instructions, the Department deduced that Respondent’s period of non-compliance ran from November 1, 2016, through October 31, 2018, which was the two-year period preceding the date of the Stop-Work Order. (This two-year period was also the time for which the Department requested business records from Respondent.) After determining Respondent’s period of non- compliance, the Department then calculated the monetary penalty it should impose upon Respondent. In accordance with section 440.107(7)(d)1., the Department must assess against an employer: a penalty equal to 2 times the amount the employer would have paid in premium when applying approved manual rates to the employer’s payroll during periods for which it failed to secure the payment of workers’ compensation required by this chapter within the preceding 2-year period or $1,000, whichever is greater. Therefore, the Department reviewed the business records Respondent provided to ascertain the amount of Respondent’s payroll during the two-year period of non-compliance. In response to the Department’s request for documents, Respondent produced its client leasing agreement with SouthEast Leasing. This leasing agreement, however, only covered Mr. Forgue and Mr. Gonzalez. Further, the leasing agreement was only in effect from February 7, 2018, through October 30, 2018, for Mr. Forgue and February 21, 2018, through October 30, 2018 for Mr. Gonzalez. No evidence establishes that Respondent made any other payments for workers’ compensation insurance coverage outside of the SouthEast Leasing agreement. Consequently, the evidence in the record establishes that Respondent had no workers’ compensation coverage for any of its employees, officers, or subcontractor employees from November 1, 2016, through February 6, 2018. And, only Mr. Forgue and Mr. Gonzalez were covered from February 2018 through October 30, 2018. Further, Respondent did not provide any payroll information to the Department per its request for business records. Consequently, the documentation was not comprehensive enough for the Department to determine all the wages Respondent paid to its employees, or the work they performed for the period of November 1, 2016, through October 31, 2018. Therefore, the Department determined that Respondent did not provide business records sufficient for it to calculate Respondent’s complete payroll or the actual employee wages it paid over the two-year period of non-compliance. Accordingly, the Department exercised its option to “impute” Respondent’s weekly payroll from November 1, 2016, through October 31, 2018. To calculate Respondent’s imputed weekly payroll, section 440.107(7)(e) directs that the gross payroll for an employer who provides insufficient business records is imputed at the statewide average weekly wage, multiplied by 1.5, for each employee who worked during the period requested for the penalty calculation. Therefore, the Department obtained the statewide average weekly wage effective at the time of the Stop- Work Order ($917.00)2/ for each identified employee, corporate officer, and subcontractor, then multiplied that number by 1.5. See § 440.107(7)(e), Fla. Stat.; and Fla. Admin. Code R. 69L- 6.028(3)(a). The Department imputed the payroll for all four individuals Investigator Cavazos observed at the worksite on October 31, 2018 (Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque), for all periods of non- compliance (November 1, 2016 through October 31, 2018). No evidence established that these individuals were covered under a workers’ compensation policy either through Respondent, RC Painting, or SouthEast Leasing. The Department also included Mr. Forgue for a period of non-compliance from January 22, 2018, through February 8, 2018. The Department imputed his payroll during this period of time explaining that Respondent did not have an active workers’ compensation exemption on file for Mr. Forgue. Neither was he covered by SouthEast Leasing’s policy during this brief timeframe. Therefore, Respondent was required to carry workers’ compensation for Mr. Forgue from January 22, 2018, through February 8, 2018. See Fla. Admin. Code R. 69L-6.028(3)(b). To calculate a penalty based on the imputed payroll, the Department assigned Respondent’s employees the highest rated workers’ compensation classification code. The classification code is based on either the business records submitted or the investigator’s observation of the employees’ activities. In this case, the business records Respondent provided to the Department were not sufficient to categorize the exact type of work that the identified workers performed for Respondent over the two-year period of non-compliance. However, during her investigation of the jobsite on October 31, 2018, Investigator Cavazos observed the four employees engaging in activities associated with “painting.” According to the Scopes Manual issued by the National Council on Compensation Insurance, Inc. (“NCCI”), class code 5475 is applied to “painting contractors engaged in painting.”3/ Consequently, the Department used class code 5474 for all Respondent’s employees and corporate officer for the penalty period. See Fla. Admin. Code R. 69L-6.028(3)(b) and 69L- 6.021(2)(jj)(painting is classified as “construction activity”). Therefore, to calculate the premium amount for the workers’ compensation insurance Respondent should have paid for its “employees” (Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque) and officer (Mr. Forgue), the Department applied the manual rates corresponding to class code 5474. Thereafter, based on: 1) the total periods of non- compliance, 2) Respondent’s calculated payroll for the periods of non-compliance, and 3) the estimated premium for workers’ compensation insurance, the Department issued the Amended Order of Penalty Assessment (“Penalty Assessment”) on November 30, 2018, which was served on Respondent on February 28, 2019. The Penalty Assessment seeks to impose a penalty of $129,089.60 against Respondent. At the final hearing, Respondent argued that the individuals Investigator Cavazos identified at the worksite on October 31, 2018, were never hired by Respondent’s subcontractor, RC Painting. Therefore, they are not “employees” under chapter 440, and Respondent is not an “employer” for purposes of securing workers’ compensation coverage. Consequently, Respondent argues that the penalty the Department seeks to assess against Respondent is not warranted. Mr. Chavez testified at the final hearing for Respondent describing his employment relationship with Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque. Initially, Mr. Chavez confirmed that Respondent hired RC Painting to paint the exterior of the shopping plaza. Regarding the four individuals Investigator Cavazos identified at the jobsite, however, Mr. Chavez denied that they were “employees” of RC Painting on October 31, 2018. Mr. Chavez explained that he used SouthEast Leasing to “hire” his employees. Mr. Chavez asserted that before he puts someone to work, he requires them to complete an employment application with SouthEast Leasing. Only after SouthEast Leasing approved the employee would he allow the individual to work on a job. In this matter, Mr. Chavez denied that he had ever worked with Mr. Chachel before, or ever met the other three individuals that Mr. Chachel brought with him to the jobsite. Mr. Chavez maintained that he called Mr. Chachel on the evening of October 30, 2018, about the prospective painting job. He then asked Mr. Chachel to bring two other workers and meet him at the jobsite the following morning. Mr. Chavez testified that he instructed Mr. Chachel that he would need to send information to SouthEast Leasing before anyone actually started working on the project. Mr. Chavez further contended that he did not have any discussion with Mr. Chachel about wages or the rate of pay for the job. He declared that he never commits to paying any prospective employee before ascertaining what type of skills they possess. Mr. Chavez explained that, “anyone can tell you, ‘I’ve been painting all of my life,’ and they show up and don’t know how to paint, or they don’t know how to do anything.” In response to Inspector Cavazos’s testimony, Mr. Chavez exclaimed that he never told her that the four individuals were his “employees.” He merely relayed that they were “with” him. Mr. Chavez also insisted that he never authorized Mr. Chachel or his crew to start preparing the building for painting prior to meeting with him. Mr. Chavez further relayed that Respondent provided the boom lift for the job. But, he never instructed Mr. Chachel to begin using it. Mr. Chavez arrived at the shopping plaza around 9:30 a.m. However, by that time Investigator Cavazos had issued the Stop- Work Order, and only Mr. Chachel remained at the scene. Regarding the Affirmation he completed at the Department’s district office, Mr. Chavez testified that, other than Mr. Chachel, he did not know the names of individuals who Investigator Cavazos identified at the jobsite. He asserted that he wrote their names on the Affirmation only after Ms. Qureshi spelled them out for him on a sticky note. Mr. Chavez further professed that he only penned “$20” by each name because Ms. Qureshi told him that the Department would not release him from the Stop-Work Order until he added the wages he paid to each individual. Mr. Chavez claimed that Ms. Qureshi specifically instructed him to insert a number by each employee. Mr. Chavez declared that he felt like he had no choice but to include “$20” on the Affirmation if he wanted to return to work. In actuality, however, Mr. Chavez insisted that he did not pay Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, or Jenny Araque anything for their activities on October 31, 2018. Ms. Qureshi testified for the Department on rebuttal. She credibly voiced that she did not write out the names of the four “employees” for Mr. Chavez to list on his Affirmation. Neither did she suggest a wage amount for their work, or force Mr. Chavez to write that he “terminated” them. On the contrary, Ms. Qureshi attested, clearly and without hesitation, that Mr. Chavez independently completed his sworn Affirmation, and he did not ask for her assistance with the specific information he wrote down. Ms. Qureshi persuasively stated that Mr. Chavez knew the names of Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque when he composed the Affirmation. Further, Mr. Chavez expressly told her that he was going to pay the four individuals $20 for the day, and that he was terminating them. The competent substantial evidence in the record establishes that Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque were “employees” of RC Painting under section 440.02(15) on October 31, 2018. Based on this finding, the Department demonstrated, by clear and convincing evidence, that Respondent failed to secure workers’ compensation insurance coverage or a workers’ compensation exemption for four employees for the period of November 1, 2016, through October 31, 2018, as well as its corporate officer from January 22, 2018, through February 8, 2018. Accordingly, the Department met its burden of proving that Respondent violated chapter 440 and should be penalized.
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, Forgue General Contracting, Inc., violated the requirement in chapter 440 to secure workers’ compensation coverage, and imposing a total penalty of $129,089.60. DONE AND ENTERED this 18th day of October, 2019, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 2019.
The Issue At issue in this proceeding is whether the Respondent, Marvin's Electric Service, Inc. ("Marvin's Electric"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes (2014), by not obtaining workers' compensation insurance for its employees, and, if so, whether the Petitioner, Department of Financial Services, Division of Workers' Compensation ("Department"), properly assessed a penalty against the Respondent pursuant to section 440.107.
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, Fla. Stat. Marvin's Electric is a corporation based in Cantonment, Florida. The Division of Corporations' "Sunbiz" website indicates that Marvin's Electric was first incorporated on December 15, 2003, and remained an active corporation until September 23, 2011, when it was administratively dissolved for failure to file an Annual Report. The corporation continued to hold itself out as eligible to do business throughout the period relevant to this proceeding. Sunbiz records indicate that the corporation filed new articles of incorporation on April 9, 2015, and is currently an active corporation. The principal office of Marvin's Electric is at 2647 Stefani Road in Cantonment. Marvin's Electric is solely owned and operated by Marvin Mobley. It has no regular employees aside from Mr. Mobley. Marvin's Electric was actively engaged in performing electrical work during the two-year audit period from November 19, 2012, through November 18, 2014. Kali King is a Department compliance investigator assigned to Escambia County. Ms. King testified that her job includes driving around the county conducting random compliance investigations and investigating referrals made to her office by members of the public. On November 18, 2014, Ms. King drove to a residence off Pale Moon Drive in Pensacola to investigate a public referral made against a different business entity that happened to be working on the same single-family residence as Mr. Mobley. Ms. King testified that when she arrived at the residence, she saw Mr. Mobley and two other workers on the site before she ever spoke to the employees of the business she was there to investigate. Mr. Mobley and the two other men were digging a shallow trench from the home to a shed on the back of the property. The homeowner told Ms. King that Mr. Mobley was installing electricity in the shed. Ms. King approached the three men and identified herself. She asked who was in charge, who hired them, and whether they were working as a business. Mr. Mobley replied that he was in charge, he had been hired by the homeowner, and he was working in the name of his business, Marvin's Electric. Ms. King asked how he was providing workers' compensation insurance for his business. Mr. Mobley answered that he had an exemption for himself and that he did not have insurance for the other two workers because they were not employees of his business. One of the men was his foster child who was working for Mr. Mobley in exchange for room and board. The other man was returning a favor to Mr. Mobley, who had helped the man with some construction work on his property in Alabama. The other men confirmed Mr. Mobley's story when Ms. King separately interviewed them. Ms. King went inside the house to speak with the contractor she had been sent out to investigate, then she returned to her vehicle to perform computer research on Marvin's Electric. She consulted the Sunbiz website for information about the company and its officers. Her search confirmed that Marvin's Electric was an inactive Florida corporation, having been administratively dissolved for failure to file an Annual Report in 2011. Marvin Mobley was listed as its registered agent and as president of the corporation. No other corporate officers were listed. Ms. King also checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Marvin's Electric had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Marvin's Electric had no active workers' compensation insurance coverage for its employees and that no insurance had ever been reported to the state for Marvin's Electric. There was no evidence that Marvin's Electric used an employee leasing service. Mr. Mobley had, in the past, elected an exemption as an officer of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012, but the exemption had expired as of the date of the investigation. Based on his jobsite interviews with the employees and Mr. Mobley, and her Sunbiz and CCAS computer searches, Ms. King concluded that as of November 18, 2014, Marvin's Electric had three employees working in the construction industry and that the company had failed to procure workers' compensation coverage for these employees in violation of chapter 440. Ms. King, consequently, issued a Stop-Work Order that she personally served on Mr. Mobley on November 18, 2014. Also on November 18, 2014, Ms. King served Marvin's Electric with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers' compensation insurance coverage, and other business records to enable the Department to determine the appropriate penalty owed by Marvin's Electric. Ms. King testified that Mr. Mobley provided records in response to the Request for Production. The records were scanned into the Department's internal auditing system, and the file was placed into a queue to be assigned to a penalty calculator, who reviews the records and calculates the penalty imposed on the business. Ms. King could not recall the name of the person assigned to calculate the penalty in this case. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two-year period preceding the Stop-Work Order, which in this case was the period from November 19, 2012, through November 18, 2014. § 440.107(7)(d), Fla. Stat. Because Mr. Mobley had no payroll records for the two men who worked for him on November 18, 2014, the penalty calculator lacked sufficient business records to determine the company's actual gross payroll on that date. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer's actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ 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 rule 69L-6.021. Classification codes are four-digit codes 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." Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5190, titled "Electrical Wiring—-Within Buildings & Drivers," which "applies to the installation of electrical wiring systems within buildings." The corresponding rule provision is rule 69L-6.021(2)(u). The penalty calculator used the approved manual rates corresponding to Class Code 5190 for the periods of non-compliance to calculate the penalty. On February 3, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $1,381.58, based upon Mr. Mobley's actual wages during the penalty period, plus an imputation of wages for the date of November 18, 2014, for Mr. Mobley and the two men who were working for him on that date. After Mr. Mobley clarified that one item treated as payroll by the Department was actually a refund to a customer, the Department on June 10, 2015, was able to issue a Second Amended Order of Penalty Assessment in the amount of $1,373.56, based on the mixture of actual payroll information and imputation referenced above. Ms. Proano persuasively testified that the administrative dissolution of the corporate status of Marvin's Electric had no bearing on the question of the company's responsibility to provide workers' compensation insurance for its employees or to establish an exemption. After dissolution, the company continued to hold itself out as a corporate entity prepared to do business and, in fact, accepted work and was paid as a corporation. Therefore, the Department investigated Marvin's Electric as a corporate entity. In any event, under the facts of this case, the penalty calculation would have been the same had the Department treated Mr. Mobley as a sole proprietor, rather than as the president of a corporate entity. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Second Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Marvin's Electric was in violation of the workers' compensation coverage requirements of chapter 440. Justice Kirchhevel and Wayne Richardson were employees of Marvin's Electric on November 18, 2014, performing services in the construction industry without valid workers' compensation insurance coverage.2/ The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates, business records provided by Marvin's Electric, and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. Ms. Proano's recalculation of the penalty confirmed the correctness of the penalty calculator's work. Marvin's Electric could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Mr. Mobley testified that he has always been the sole proprietor of Marvin's Electric and that he has never had to pay employees. The two men with him on November 18, 2014, were there because Mr. Mobley was in poor health and needed help digging the trench from the house to the shed. He testified that he never received notice from the Department that his exemption was expiring and that, in the midst of several major surgeries, he forgot that it was time to renew his exemption. Mr. Mobley's testimony was eloquent and credible, but the equitable considerations that he raised have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
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 $1,373.56 against Marvin's Electric Service, Inc. DONE AND ENTERED this 19th day of August, 2015, 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 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of August, 2015.
The Issue Is Respondent obligated to pay $1,100.00, pursuant to a September 8, 2000, Notice of Penalty Assessment Order because on August 30, 2000, he was an employer engaged in the "construction industry" as that term is defined by Section 440.02(7), Florida Statutes (2000), and had one or more employees.
Findings Of Fact Petitioner is the state agency charged with enforcing the statutory requirement that employers secure workers' compensation insurance for their employees. On August 30, 2000, Lisa Lyonais, Petitioner's investigator, conducted an on-site inspection of a single-family residence under construction in Ocala, Florida. She was accompanied by investigators of the Department of Insurance. Ms. Lyonais observed three persons working inside the house. One person was cleaning-up and sweeping. Ms. Lyonais determined this person to be an employee of Nadeau Construction Unlimited, Inc. (Nadeau). Due to what the other two persons told her, Ms. Lyonais pursued an investigation of Respondent. The building permit posted on the job board outside the house listed Nadeau as the general contractor and as the owner of the house. Ms. Lyonais telephoned Mr. Nadeau. Mr. Nadeau came to the job site and spoke with Ms. Lyonais. Due to what Mr. Nadeau told her, Ms. Lyonais contacted Respondent. Ms. Lyonais interviewed Respondent when he arrived at the job site. Respondent admitted then, and at hearing, that he was laying tile in the house; that he did not have a workers' compensation exemption; and that he did not carry workers' compensation insurance. Respondent's sister-in-law had requested that Mr. Nadeau hire Respondent to lay the tile in the house which Mr. Nadeau was constructing for her. A price for the tile- setting had been agreed-upon between Mr. Nadeau and Respondent prior to Respondent's commencing the work. By his answers to Requests for Admission, Respondent admitted this agreement constituted a "contract." He enlisted the help of his "church brothers," Brown and Sims, who were the two men originally interviewed on the job site by Ms. Lyonais. On August 30, 2000, Ms. Lyonais served on Respondent a Request for Business Records, so that she could determine whether Respondent was required to provide workers' compensation insurance. Respondent provided no records. Petitioner is the state agency authorized to issue workers' compensation exemptions and to which insurance carriers report that they have issued workers' compensation insurance policies to employers. Petitioner's electronic data base of this information allows its investigators to determine whether a particular employer has obtained an exemption or secured workers' compensation insurance. Ms. Lyonais verified on this electronic data base that Respondent had not secured workers' compensation insurance. Based on her observations on the job site, the search results of Petitioner's data base, and her understanding of the Florida Workers' Compensation Law, Ms. Lyonais issued a Stop Work Order on August 30, 2000, for Respondent's failure to secure workers' compensation insurance for himself and his two employees, Brown and Sims. On September 7, 2000, Respondent signed an Employer Payroll Affidavit in which he declared that he was a sole proprietor, that he had employees, and that he did not currently have workers' compensation insurance. Respondent also completed an Employee Payroll Worksheet in which he indicated that he employed the other two tile workers, Brown and Sims, whom he would pay $300.00 and $80.00 respectively, once he was paid by Mr. Nadeau. Mr. Nadeau paid Respondent $1,800.00, by business check dated September 8, 2000, for ceramic tile labor. Respondent endorsed the check and used some of the proceeds to pay Brown and Sims. The National Council on Compensation Insurance (NCCI) classifies types of employment and prescribes workers' compensation insurance premium rates for those classifications. Petitioner has adopted NCCI's SCOPES Manual by rule. See Rule 38F-5.111, Florida Administrative Code. Tile setting is classified by the SCOPES Manual under class code 5348 (stone, mosaic or terrazzo or ceramic tile work). The premium rate for each $100.00 of compensation paid under class code 5348 is 0.116. Ms. Lyonais calculated the evaded premium, or the premium that Respondent would have paid had he secured workers' compensation insurance, by multiplying the gross compensation to employees by the premium rate, resulting in a total of $208.80. She calculated the statutory penalty as twice that amount ($417.60) or $1,000.00, whichever is greater, and assessed $100.00 for each day the employer operated in violation of the Workers' Compensation Law. There is some evidence that Respondent, Brown, and Sims worked more than one day at the job site. Although an assessment might have been made for every day which Respondent, Brown, and Sims worked the job site, Petitioner is satisfied with assessing a $100.00 penalty only for the one day of August 30, 2000. At hearing, Respondent did not refute the foregoing formula or Ms. Lyonais' calculations, noted that he had paid the $1,100.00 penalty to Petitioner when it was assessed and that to do so had been a hardship on his family. He asserted that he had made an honest mistake because he felt he was working for his sister-in-law, whom he believed to be the homeowner. Respondent's wife also testified that the house belonged to her sister. However, Respondent presented no corroborative documentary evidence that his sister-in-law, in fact, owned the house at any time material. He also did not present any documents to refute the building permit. (See Finding of Fact No. 4). Respondent did not suggest that he had filed proof with the Agency of his financial ability to pay compensation, which filing, under Chapter 440, Florida Statutes, is an alternative to securing coverage through an insurance company. Respondent did not suggest that he, Brown, or Sims had filed an election not to be covered by Chapter 440, Florida Statutes.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Labor and Employment Security, Division of Workers' Compensation enter a Final Order declaring Respondent to have been a statutory employer on August 30, 2000; ratifying the $1,100.00 penalty assessment; and denying Respondent any refund. DONE AND ENTERED this 30th day of March, 2001, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS 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 30th day of March, 2001.
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 The issue is whether Respondent is liable for a penalty of $44,794.51 for the alleged failure to maintain workers' compensation insurance for two employees in violation of Chapter 440, Florida Statutes (2008).1
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation insurance for the benefit of their employees in accordance with Section 440.107. Respondent is a Florida corporation engaged in the construction business. Respondent utilizes a payroll service company, identified in the record as Frank Crum Leasing (Frank Crum). Frank Crum pays Respondent's employees and collects premiums for workers' compensation insurance based on payroll and employee hours that Respondent reports to Frank Crum each week. Frank Crum maintains a list of the reported employees that is updated weekly (the weekly Frank Crum list). Respondent reports payroll and employee hours to Frank Crum in arrears. On Wednesday afternoon of each week, Respondent reports payroll and employee hours to Frank Crum for the preceding Wednesday through Tuesday. Frank Crum publishes a weekly Frank Crum list each Thursday. New employees that begin work on Wednesday through Tuesday appear on the next weekly Frank Crum list. For example, new employees that began work anytime from Wednesday, February 18, 2009, through Tuesday, February 24, 2009, are reported on February 25, 2009, and appear on the weekly Frank Crum list dated February 26, 2009. New employees that began work anytime from Wednesday, February 25, 2009, through Tuesday, March 3, 2009, are reported on March 4, 2009, and appear on the weekly Frank Crum list dated March 5, 2009.2 Frank Crum collects workers' compensation insurance premiums from Respondent in arrears based on the payroll and employee hours reported each Wednesday for the previous week. The reporting of payroll and employee hours and the payment of insurance premiums in arrears has been Respondent's customary business practice for the past 13 years. On February 26, 2009, one of Petitioner's investigators conducted a random construction site visit at 6417 Grand Island Road, Apollo Beach, Florida. Four workers, who are identified by name in exhibits of record, were laying a concrete sidewalk at the site. The four workers laying the sidewalk were employees of Respondent. Two of the workers were on the weekly Frank Crum list dated February 26, 2006. The other two workers were not on the same list. The two workers who were not on the Frank Crum list dated February 26, 2006, are identified in the record as Mr. Ricardo Hurtado and Mr. Evelio Bueno. On February 26, 2009, Petitioner issued a Stop-Work Order and Penalty Assessment and requested business records from Respondent. Petitioner reviewed the business records and, on April 10, 2009, issued an Amended Order of Penalty Assessment in the amount of $44,794.51 for failure to maintain workers' compensation insurance coverage for the two workers who were not listed on the weekly Frank Crum list dated February 26, 2009, and identified in record as Mr. Hurtado and Mr. Bueno. Respondent does not dispute the accuracy of the penalty calculation. However, Respondent does dispute that Respondent is liable for the penalty assessment. Respondent maintains that the two unlisted workers were covered by workers' compensation insurance on February 26, 2009. The two unlisted workers began their employment with Respondent on February 25, 2009. On March 4, 2009, Respondent reported the new employees to Frank Crum. Respondent paid premiums to Frank Crum for workers' compensation insurance covering the two workers for the dates of employment on February 25 and 26, 2009. The two unlisted workers were covered by workers' compensation insurance on February 25 and 26, 2009. The weekly Frank Crum lists in Petitioner's exhibits are not clear and convincing evidence of the effective date of workers' compensation insurance coverage. The testimony of Respondent's witness at the hearing was clear and convincing that the two workers were covered by workers' compensation insurance in accordance with the customary business practice of Respondent and Frank Crum for the last 16 years. The terms of the workers' compensation insurance policies would have assisted the fact-finder in resolving any evidential conflicts concerning the effective date of workers' compensation insurance coverage. However, Petitioner did not submit copies of the insurance policies and did not submit the testimony of a representative of the workers' compensation insurance company. In support of Petitioner's assertion that Mr. Hurtado and Mr. Bueno were not covered by workers' compensation insurance, Petitioner cites, in paragraph number 13 of its PRO, the testimony of the general counsel of Frank Crum. Petitioner points to the deposition testimony of the general counsel which, in relevant part, states that she did not know whether the insurance company covered the two unlisted workers. The general counsel explained that such a determination would be up to the insurance company and not the general counsel for Frank Crum. The general counsel is correct. Petitioner submitted no evidence to show that the general counsel of Frank Crum is competent to testify for the insurance company. The evidence is clear that Respondent paid insurance premiums in arrears. The evidence is less than clear that insurance coverage was not in effect before the payment of the premium.3 The pretermitted insurance policy or competent testimony from an insurance representative may have clarified the issue. However, the only testimony concerning the effective date of workers' compensation coverage for the two unlisted workers comes from Respondent's live witness. The fact-finder finds her testimony to be credible and persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner issue a final order dismissing the Stop-Work Order and Amended Order of Penalty Assessment. DONE AND ENTERED this 4th day of August, 2009, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of August, 2009.
