The Issue The issue in this case is whether Elite Restoration and Construction, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers’ compensation, as alleged in the Stop-Work Order and Second Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees and corporate officers. Respondent is an active Florida corporation that was formed on August 28, 2009, with a principal address of 7185 West Village Drive, Homosassa, Florida 34446. Respondent was engaged in business operations in the state of Florida during the entire period of November 2, 2014, to November 1, 2016. Brian Johnson (Respondent’s owner or Mr. Johnson) is Respondent's sole shareholder, owning 100 percent of the stock. The Department's investigator, Michael Robinson, commenced a random worksite compliance investigation on November 1, 2016, at a gas station at 970 Atlantic Boulevard, Jacksonville, Florida 32225. He observed Respondent's owner, Mr. Johnson, and three others, Tim Neeld, Derrick Windier, and James Ingash, painting a metal canopy covering the gas pumps. Mr. Johnson told the investigator that his company, Elite Restoration & Construction, LLC, was a subcontractor for Aluminum Plus of DeLand, Florida. By searching the Division's Coverage and Compliance Automated System, the investigator determined that Brian Johnson obtained a workers' compensation exemption on October 12, 2016, or 20 days prior to the investigation, and further determined that an employee leasing contract previously held by Respondent terminated on January 15, 2015, which is more than nine months prior to the investigation. Mr. Johnson confirmed that Respondent had an exemption for himself, effective October 12, 2016, but did not have any workers' compensation insurance for its employees. On November 1, 2016, after consulting with a supervisor, the Department's investigator issued the Stop-Work Order, which was posted at Respondent's worksite and personally served upon Respondent’s owner. On the same day, the investigator also personally served the Request for Production, which requested business records to determine Respondent's payroll during the two-year penalty period proscribed by section 440.107(7)(d)1., which in this case is from November 2, 2014, to November 1, 2016. The Request for Production explicitly states that the requested records must be provided within 10 business days from receipt of the request. Respondent obtained an Agreed Order of Conditional Release from the Stop-Work Order on November 8, 2016, by terminating the three workers observed during the compliance investigation who did not have workers’ compensation coverage and paying the Department a $1,000 down payment toward the penalty that would be calculated in this case. Respondent produced business records for penalty calculation on November 17, 2016, and February 28, 2017, which is beyond the 10-day time period required by the Request for Production.2/ The Department's penalty auditor, Lynne Murcia, used those records to calculate a $21,475.30 penalty for failing to comply with the workers' compensation insurance requirements of chapter 440. On April 20, 2017, when Respondent’s owner came to the Department’s Jacksonville office, he was personally served with the Amended Penalty and advised of his right to seek administrative review of the Stop-Work Order and Amended Penalty. Mr. Johnson filed a petition for hearing on behalf of Respondent on May 5, 2017, stating that the penalty calculated was wrong because it included income earned in states other than Florida. Respondent produced additional business records on May 17, August 21, and August 31, 2017, for the purpose of demonstrating that a portion of his company’s payroll was derived from work completed at worksites outside of Florida, and arguing that the out-of-state payroll should not be included in the penalty calculation. The invoices showed $182,056.78 in total income, consisting of $77,268 from 14 jobs in Florida, and $104,788.60 for 14 jobs outside of the State of Florida. Upon initial review, the Department’s auditor declined to make any adjustments because the invoices did not provide information showing earnings of specific employees for jobs outside of Florida. Thereafter, Mr. Johnson produced additional records that allowed the Department’s auditor to trace out-of-state employment to transactions in Respondent’s general ledger. The Department's auditor reviewed Respondent's additional records and removed out-of-state payroll and per diem payments. In accordance with that review, the Department issued the 2nd Amended Penalty which reduced the penalty to $16,671.14. The 2nd Amended Penalty also reduced the 2016 payroll attributed to Respondent's owner. Respondent was an "employer" in the state of Florida, as that term is defined in section 440.02(16), from November 2, 2014, to November 1, 2016. Respondent did not secure the payment of workers' compensation insurance coverage, nor have others secured the payment of workers' compensation insurance coverage for the employees listed on the penalty worksheet of the 2nd Amended Penalty during the periods of noncompliance listed on the penalty worksheet. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty had a valid Florida workers' compensation coverage exemption during the periods of noncompliance listed on the penalty worksheet. In the past, Respondent had an employee leasing contract with Southeast Personnel Leasing, Inc. That contract was terminated on January 15, 2015, due to the leasing company’s concerns about out-of-state employment that would not be covered by the leasing company's workers' compensation insurance. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were "independent contractors" as that term is defined in section 440.02(15)(d)1. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were employees of a temporary labor company. Employees on the penalty worksheet of the 2nd Amended Penalty are correctly classified under Class Code 5474, painting, as defined in the "Scopes Manual" published by the National Council on Compensation Insurance, Inc. (NCCI), and adopted in Florida Administrative Code Rule 69L-6.021(2)(jj). The approved manual rates used in the penalty worksheet of the 2nd Amended Penalty, as defined by the NCCI Scopes Manual and adopted by the Office of Insurance Regulation, are the correct manual rates for the corresponding periods of noncompliance listed on the penalty worksheet. In calculating the 2nd Amended Penalty, the Department’s auditor used the worksheet required by rule 69L-6.027, along with Respondent’s bank statements, check images, general ledger, and tax returns filed with the Internal Revenue Service. The auditor capped Respondent’s owner’s pay for that portion of 2014 falling within the penalty period because his salary and dividend totaling $73,484 in 2014 exceeded the statewide average of $862.51 per week or $44,850.52 per year. She also adjusted the period of noncompliance for Mr. Johnson, pursuant to rule 69L-6.028(2), because he obtained an exemption from Florida’s Workers’ Compensation Law on October 12, 2016. The auditor explained that she used Respondent’s tax returns for 2014 and 2015 because she believed they were the most reliable indication of salaries and wages, officer compensation, and payroll for outside services and subcontractors. She further explained that she used Respondent’s tax returns and general ledger as the most accurate sources for determining payroll for 2016. The auditor’s explanation is reasonable and credited. Mr. Johnson questioned the auditor’s method of determining payroll and offered alternative methods using spreadsheets he created to identify what he called “member draws” and other summaries. The invoices provided by Respondent to the Department, however, do not match the summaries; and Respondent’s method of determining payroll, when compared to the method utilized by the Department, is not accurate or reliable. The auditor’s method reflected in the 2nd Amended Penalty appropriately applied approved manual rates corresponding to Class Code 5474, painting, to determine the evaded workers’ compensation insurance premium. Then, the evaded premium was properly multiplied by two in accordance with section 440.107(7)(d)1.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Elite Restoration and Construction, LLC. DONE AND ENTERED this 20th day of February, 2018, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of February, 2018.
The Issue The issues in this case are whether XKLUCIV Investment Group, LLC, (Respondent) violated the provisions of chapter 440, Florida Statutes (2014),1/ by failing to secure workers’ compensation coverage as alleged in the Stop-work Order issued against Respondent by the Department of Financial Services, Division of Workers’ Compensation (Petitioner) on August 28, 2014, and, if so, what penalty is appropriate.
Findings Of Fact The Department of Financial Services, Division of Workers’ Compensation (Petitioner) is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation insurance coverage for the benefit of their employees and corporate officers. Robert Feehrer has been a compliance investigator with Petitioner since April 2011. Mr. Feehrer has participated in over 1,000 site visit inspections during his tenure with Petitioner. The primary purpose of a site inspection is to ensure that employers have workers’ compensation coverage for their employees. On August 28, 2014, Mr. Feehrer conducted a site inspection at a residence located at 15772 85th Road, Loxahatchee, Florida. The residence was being remodeled (the subject job). For approximately ten minutes, Mr. Feehrer watched two men paint the exterior of the residence. When he approached the men, he learned that one was Anthony Lucombe and the other was a man named Wesley Roper. Mr. Lucombe, who appeared to be in charge of the project, told Mr. Feehrer that he was “running this job.” Mr. Feehrer was not able to ascertain any information from Wesley Roper because Mr. Roper did not want to get involved. Mr. Roper refused to provide any form of identification to Mr. Feehrer or to otherwise cooperate. Mr. Lucombe told Mr. Feehrer that he had been working on the subject job for two days, that he did not know how much he would be paid for the job, and that he had agreed to pay Mr. Roper $100.00 for one day’s work. Mr. Lucombe credibly testified that he had not worked with Mr. Roper before or after the subject job. Mr. Lucombe told Mr. Feehrer that he had been hired by a man with the last name of Diamond who did business as Diamond Painting.2/ After Mr. Lucombe had worked a day, Diamond Painting walked off the job without paying Mr. Lucombe. Mr. Lucombe told Mr. Feehrer that he had no company, and that he was hired by the general contractor to finish painting the house after Diamond Painting walked off the job. A Georgia entity named Master Craft was the general contractor for the remodeling project. After talking to Mr. Lucombe and after talking by telephone to Jay York, an employee of Master Craft, Mr. Feehrer asked Mr. Lucombe whether he had a company. In response to that question, Mr. Lucombe truthfully answered in the affirmative and gave Mr. Feehrer the name XKLUCIV Investment Group, LLC. Based on that information, Mr. Feehrer concluded that the corporate Respondent had subcontracted to paint the residence after Diamond Painting walked off the job. Mr. Lucombe never told Mr. Feehrer that he was working as an employee of his company. Respondent was organized as a limited liability company pursuant to the provisions of chapter 608, Florida Statutes (2012), for “any and all lawful business” effective July 22, 2012, by Mr. Lucombe, a cousin (Rosemond Lucombe), and his wife (Cryselda Lucombe). Mr. Lucombe was designated the manager of the company. Mr. Lucombe credibly testified that the corporation was formed for the purposes of making investments in real estate. Mr. Lucombe also credibly testified that due to the state of the economy, the company had lost its investments and that he worked odd jobs as a handyman. Mr. Lucombe posted his availability to work as a handyman on Craig’s List and worked various jobs, including house painting, for persons who responded to the posting. Petitioner failed to establish by clear and convincing evidence that the corporate Respondent acted as a painting subcontractor on August 28, 2014.3/ While at the job site, Mr. Feehrer determined that the corporate Respondent had no workers’ compensation coverage and that Mr. Roper and the three principals of the corporate Respondent had no exemption from the workers’ compensation coverage requirements. Mr. Feehrer, on Petitioner’s behalf, issued a Stop-work Order 14-325-D2 (Stop-work Order) to the corporate Respondent on August 28, 2014, pursuant to section 440.107, Florida Statutes, for its failure to comply with Florida’s Workers’ Compensation Law. The Stop-work Order contained an order of penalty assessment that described how the penalty assessment would be calculated without stating the amount of the penalty assessment.4/ While Mr. Feehrer was preparing the Stop-work Order, Mr. Lucombe and Mr. Roper packed up the painting equipment, loaded them in Mr. Lucombe’s truck, and left the worksite in Mr. Lucombe’s truck. Mr. Lucombe appeared to be in charge of the painting equipment. Mr. Feehrer thereafter posted the Stop-work Order at the jobsite. On September 12, 2014, Mr. Lucombe went to Petitioner’s district office where he was personally served with the Stop-work Order and with a request for production of business records for penalty assessment calculation (request to produce). Both the Stop-work Order and the request to produce were directed to Respondent. In response to the request to produce, Mr. Lucombe produced certain bank records pertaining to Respondent’s bank accounts. Eric Ruzzo, an experienced penalty calculator employed by Petitioner, reviewed the bank records produced by Mr. Lucombe. The bank records were insufficient to determine Respondent’s payroll for the applicable penalty period. The two-year penalty period for this matter started August 29, 2012, and ended August 28, 2014. Based on Mr. Ruzzo’s calculations, Petitioner issued an Amended Order of Penalty Assessment against the corporate Respondent on October 13, 2014. The amount of the assessment totaled $106,003.26. Mr. Ruzzo calculated this penalty by imputing Respondent’s payroll during the penalty period. The calculation assumed that Respondent’s three principals would have been paid as painters during the penalty period. On December 5, 2014, Petitioner entered its Second Amended Order of Penalty Assessment, which assessed a total penalty in the amount of $141,337.68. Mr. Ruzzo calculated this penalty by imputing Respondent’s payroll during the penalty period. The calculation assumed that Respondent’s three principals and Mr. Roper would have been paid as painters during the penalty period.
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 rescind both the Stop-work Order issued August 28, 2014, and the Second Amended Order of Penalty Assessment issued December 5, 2014. DONE AND ENTERED this 13th day of February, 2015, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON 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 13th day of February, 2015.
The Issue Whether Petitioner failed to comply with coverage requirements of the workers' compensation law, Chapter 440, Florida Statutes, and if so, what penalty should be imposed.
Findings Of Fact Respondent is the state agency responsible for enforcing provisions of Florida law which require that employers secure workers’ compensation insurance coverage for their employees. At all times material to this case, Petitioners owned and operated a business which provides marine-based services, including general diving and bridge demolition services. On or about February 28, 2003, Petitioners, in the course and scope of operating their marine service business, employed welders to perform welding and related services on a public construction project, specifically, the Jensen Beach Causeway Bridge in Jensen Beach, Florida. Petitioners were legally obligated to provide workers' compensation insurance for these welders in accordance with the provisions of Chapter 440. By way of defense, Petitioners argued that Chapter 440 is unconstitutional as applied to the facts and circumstances of this case. More specifically, Petitioners contend that this forum and the Respondent lack the authority to enforce Chapter 440 against Petitioners because of federal preemption under the Longshoremen and Harbor Workers’ Compensation Act (LAHCA). The tribunal has carefully considered this argument and finds it contrary to controlling case law. The parties have stipulated that if the Stop Work and Penalty Assessment Order is valid, the correct amount of the penalty to be imposed by law is $150,968.00, based upon appropriate supporting tax and payroll records.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Respondent enter a Final Order confirming the Amended Stop Work and Penalty Assessment Order in the amount of $150,968.00. DONE AND ENTERED this 10th day of September, 2003, in Tallahassee, Leon County, Florida. S FLORENCE SNYDER RIVAS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of September, 2003. COPIES FURNISHED: Richard W. Glenn, Esquire 4 Harvard Circle, Suite 600 West Palm Beach, Florida 33409 Colin M. Roopnarine, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact 13. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on April 7, 2010, the Amended Order of Penalty Assessment issued on April 19, 2010, the 2" Amended Order of Penalty Assessment issued on June 2, 2010, and the 3K Amended Order of Penalty Assessment issued on September 1, 2010, attached as “Exhibit A”, “Exhibit B”, “Exhibit D”, and “Exhibit E”, respectively, and fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Alex Sink, Chief Financial _ Officer of the State of Florida, or her designee, having considered the record in this case, including the request for administrative hearing received from TOM HINDS, INC., the Stop- Work Order and Order of Penalty Assessment, the Amended Order of Penalty Assessment, the 2nd Amended Order of Penalty Assessment, and the 3" Amended Order of Penalty Assessment, and being otherwise fully advised in the premises, hereby finds that: 1. On April 7, 2010, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 10-169-D3 to TOM HINDS, INC. The Stop-Work Order and Order of Penalty Assessment included a Notice of Rights wherein TOM HINDS, INC. was advised that any request for an administrative proceeding to challenge or contest the Stop-Work Order and Order of Penalty Assessment must be filed within twenty- one (21) days of receipt of the Stop-Work Order and Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 2. On April 7, 2010, the Stop-Work Order and Order of Penalty Assessment was personally served on TOM HINDS, INC. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On April 19, 2010, the Department issued an Amended Order of Penalty Assessment to TOM HINDS, INC. The Amended Order of Penalty Assessment assessed a total penalty of $47,827.66 against TOM HINDS, INC. The Amended Order of Penalty Assessment included a Notice of Rights wherein TOM HINDS, INC. was advised that any request for an administrative proceeding to challenge or contest the Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 4. On August 5, 2010, the Amended Order of Penalty Assessment was filed with the Division of Administrative Hearings. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On May 18, 2010, the Department received a request for administrative hearing (“Petition”) from TOM HINDS, INC. A copy of the Petition is attached hereto as “Exhibit C”. 6. On June 2, 2010, the Department issued a 2°4 Amended Order of Penalty Assessment to TOM HINDS, INC. The 2™ Amended Order of Penalty Assessment reduced the penalty assessed against TOM HINDS, INC. to $5,744.16. 7. On June 19, 2010, the 2"! Amended Order of Penalty Assessment was served by certified mail to TOM HINDS, INC. A copy of the 2nd Amended Order of Penalty Assessment is attached hereto as “Exhibit D” and incorporated herein by reference. 8. On August 5, 2010, the Petition from TOM HINDS, INC. was forwarded to the Division of Administrative Hearings and assigned DOAH Case No. 10-7165. 9. On September 1, 2010, the Department issued a 3° Amended Order of Penalty Assessment to TOM HINDS, INC. The 3 Amended Order of Penalty Assessment reduced the penalty assess against TOM HINDS, INC. to $5,733.10. 10. On September 3, 2010, the Department filed with the Division of Administrative Hearings a Motion to Amend Order of Penalty Assessment. A copy of the 3rd Amended Order of Penalty Assessment is attached hereto as “Exhibit E” and incorporated herein by reference. 1. On October 24, 2010, TOM HINDS, INC. informed the Department that TOM HINDS, INC. did not wish to proceed to an administrative hearing in DOAH Case No. 10-7165. 12. On October 27, 2010, the Department filed a Joint Motion to Relinquish Jurisdiction with the Division of Administrative Hearings. As a result, on November 18, 2010, Administrative Law Judge, R. Bruce McKibben, entered an Order Closing File, relinquishing jurisdiction of this matter to the Department. A copy of the Order Closing File is attached hereto as “Exhibit F”.
The Issue The issues in this case are whether Respondent violated chapter 440, Florida Statutes, and Florida Administrative Code Chapter 69L-6, by failing to maintain workers' compensation coverage for its employees, and if so, the penalty that should be imposed.
Findings Of Fact The Parties 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 coverage for their employees. § 440.107(3), Fla. Stat. Respondent, Door Depot of Palm Beach, Inc., is a Florida for-profit corporation engaged in the sale and installation of doors, which is encompassed within the construction industry.2/ Ms. Morris is Respondent's owner and sole corporate officer. Failure to Secure Workers' Compensation Coverage As a result of a public referral, Petitioner initiated an investigation to determine whether Respondent had the required workers' compensation coverage for its employees. Michelle Jimerson, a Compliance Investigator employed by Petitioner, researched Petitioner's Coverage and Compliance Automated System ("CCAS") internal database regarding workers' compensation coverage and compliance, and determined that Respondent did not have current workers' compensation coverage and had not previously secured coverage. Ms. Jimerson's research further revealed that Ms. Morris, as Respondent's sole corporate officer, had a current workers' compensation exemption covering herself, and that she had maintained such exemptions since August 2002. On May 11, 2011, Ms. Jimerson conducted an on-site visit to Respondent's place of business. At that time, Petitioner issued a Request for Business Records to Respondent, seeking copies of payroll documents; bank statements; business tax receipts; check stubs and check ledgers; names of subcontractors; records of payments or disbursements to subcontractors; contracts; and proof of workers' compensation coverage for, or exemptions held by, the subcontractors. Respondent produced the requested records. From a review of the records, Ms. Jimerson determined that Respondent had contracted with three subcontractors, Breeze Image, Inc.,3/ Mike Jacobs, and Ross Whitehouse, to provide construction industry services (specifically, door repair and installation work), between April 22, 2011, and May 10, 2011. Ms. Jimerson's review of Petitioner's CCAS database revealed that none of these subcontractors was exempt from the workers' compensation coverage requirement during the period in which they contracted with Respondent to provide construction industry services, that none had secured workers' compensation coverage for themselves, and that Respondent had not secured workers' compensation coverage for them during this period. Because Respondent came into compliance with chapter 440 during Petitioner's investigation and before initiation of this enforcement action, Petitioner did not issue a Stop-Work Order.4/ Nancy Morris testified on Respondent's behalf. She admitted that Respondent had not secured workers' compensation coverage for these subcontractors. She credibly testified that she had asked if they were exempt from the workers' compensation coverage requirement, that they had told her they were, and that she had believed them. Penalty Assessment On May 24, 2011, Petitioner issued to Respondent a Request for Production of Business Records for Penalty Assessment Calculation, seeking copies of payroll documents; bank statements; business tax receipts; check stubs and check ledgers; names of subcontractors; records of payments or disbursements to subcontractors; contracts; and proof of workers' compensation coverage for, or exemptions held by, the subcontractors. Respondent produced the requested documents. Using these documents, Petitioner's Penalty Calculator, Teo Morel, calculated the penalty assessment for Respondent. Section 440.107(7)(d)1., establishes a formula for determining the penalty to be assessed against an employer who fails to secure workers' compensation as required by chapter 440. Specifically, the penalty is one and a half (1.5) 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 within the preceding three-year period, or $1000, whichever is greater. Petitioner has adopted a penalty worksheet for calculating the penalty prescribed by section 440.107(7)(d)1. See Fla. Admin. Code R. 69L-6.027. Ms. Morel used the worksheet in calculating the penalty to be assessed against Respondent. Specifically, Ms. Morel identified the subcontractors for which Respondent had not secured workers' compensation and identified the applicable construction industry classification NCCI Manual code for each (here, classification code 5102). For each subcontractor, she identified the periods of noncompliance for the preceding three-year period as required by section 440.107(7)(d)1., determined the subcontractor's gross payroll amount and divided that amount by 100, then multiplied this amount by the NCCI Manual rate applicable to the 5102 classification code. This calculation yielded the workers' compensation premium Respondent should have paid for each subcontractor, had Respondent complied with chapter 440. The premium amount was then multiplied by 1.5 to determine the total penalty amount to be assessed. Pursuant to the information Respondent provided, and performing the statutorily prescribed calculation, Petitioner initially calculated the total penalty to be assessed as $20,266.59. Respondent subsequently provided additional business records consisting of raw job worksite notes. These documents showed that the subcontractors were paid a total contract amount for each job. However, the notes did not indicate the cost of materials per contract, and Respondent was unable to provide records containing this information. Because the cost of materials for each contract was indeterminable, pursuant to Florida Administrative Code Rule 69L-6.035(1)(i), Petitioner assumed that the materials cost constituted 20 percent of each contract, deducted this amount from each subcontractor's gross payroll, and recalculated the premium amount. As a result, the total penalty assessment was reduced by 20 percent, to $16,213.30. Respondent disputes the amount of the amended penalty assessment on the basis that materials costs for each contract constituted more than 20 percent of each contract's amount. However, Ms. Morris was unable to provide any evidence substantiating the cost of materials for each contract. Ms. Morris credibly testified that if Respondent is required to pay the assessed penalty of $16,213.30, it likely will be forced to go out of business. Ms. Morris fully cooperated with Petitioner throughout its compliance investigation leading to this enforcement action against Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of law, it is hereby RECOMMENDED that Petitioner enter a Final Order determining that Respondent violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage; imposing a total penalty assessment of $16,213.30; and providing that Petitioner will execute with Respondent a Payment Agreement Schedule for Periodic Payment of Penalty, pursuant to Florida Administrative Code Rule 69L-6.025, under which Respondent shall make a down payment to Petitioner of ten percent of the total assessed penalty amount, which is $1,621.33, and shall repay the remaining penalty in 60 consecutive monthly installments. DONE AND ENTERED this 30th day of January, 2012, 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 26th day of January, 2012.
The Issue Whether Respondent violated chapter 440, Florida Statutes (2017), by failing to secure payment of workers’ compensation coverage, as alleged in the Stop-Work Order (“SWO”) and Amended Order of Penalty Assessment (“Amended Penalty Assessment”); and, if so, whether Petitioner correctly calculated the proposed penalty assessment against Respondent.
Findings Of Fact Based on the oral and documentary evidence admitted at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: Background The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that requires employers to secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. The Department is also responsible for conducting random inspections of jobsites and investigating complaints concerning potential violations of workers’ compensation rules. At all times material to this matter, Native Cuts was a for-profit limited liability company engaged in business in the State of Florida. Native Cuts was organized as a business on January 19, 2010, and engaged in the business of construction and landscaping. Earl Lee, Jr. and Virginia Brown are Respondent’s managers. Earl Lee, Jr. is Respondent’s registered agent, with a mailing address of 316 North Lake Avenue, Leesburg, Florida 34748. Investigation On July 27, 2017, the Department’s investigator, Chuck Mays, conducted a random workers’ compensation compliance inspection at 27746 Cypress Glen Court, Yalaha, Florida 34797. At that time, Mr. Mays observed three men performing work. Mr. Mays testified that one man was observed operating a Bobcat utility vehicle (small tractor) to transport dirt from the front to the back of the structure, which was under construction. The two other men were removing debris, e.g., cut tree limbs, from the jobsite. Mr. Mays approached the man on the Bobcat and identified himself as an investigator. Mr. Mays began interviewing the Bobcat driver who reported that he and the other two workers at the jobsite were employees of Native Cuts, which the two men confirmed. Mr. Mays ultimately identified the three men at the jobsite as Rodolfo Ramirez, Mitchel Pike, and Dave Herrington. Based on his observations, Mr. Mays determined that the three men were performing construction-related work. Mr. Mays called Respondent’s manager, Mr. Lee, who identified the three men working at the jobsite as his employees. Mr. Mays asked Mr. Lee about the rate of pay and the length of employment for the employees and Mr. Lee referred Mr. Mays to Virginia Brown to obtain the information. Ms. Brown confirmed the three employees, and a fourth employee who was not present at the jobsite. Following the interviews on July 27, 2017, Mr. Mays researched the Division of Corporations system and established that Native Cuts was an active business. He then conducted a search of the Department’s Coverage Compliance Automated System (“CCAS”) and found Respondent did not have workers’ compensation coverage for its employees. Mr. Mays also conducted a further search of CCAS and discovered that Mr. Lee previously had an exemption, which expired on October 30, 2016. Based on his investigation and after consultation with his supervisor, Mr. Mays issued SWO No. 17-246-D4, and posted it at the jobsite. On July 28, 2017, Mr. Mays met with Ms. Brown at her home and personally served the SWO and Request for Production of Business Records for Penalty Assessment Calculation (“Business Records Request”). The Business Records Request directed Respondent to produce business records for the time period of July 28, 2015, through July 27, 2017 (“Audit Period”), within 10 business days from the receipt of the Business Records Request. On August 11, 2017, Respondent provided business records, including bank statements, checks, and receipts. The records were deemed sufficient to apply a 25-percent discount to Respondent for timely production of records. Penalty Calculation Generally, the Department uses business records to calculate the penalty assessment. Lynne Murcia, a Department penalty auditor, was assigned to review the calculation of the penalty assessment for Respondent. To calculate the penalty assessment, the Department uses a two-year auditing period looking back from the date of the SWO, July 27, 2017, also known as the look-back period. Penalties for workers' compensation insurance violations are based on doubling the amount of insurance premiums that would have been paid during the look-back period. § 440.107(7)(d), Fla. Stat. Ms. Murcia testified as to the process of penalty calculation. Ms. Murcia reviewed the business records submitted by Respondent, as well as notes, worksheets, and summaries from the original auditor.1/ Based on her review of the records, Ms. Murcia identified the individuals who received payments from Respondent as employees during the Audit Period. Ms. Murcia deemed payments to each of the individuals as gross payroll for purposes of calculating the penalty. In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Based on Mr. Mays’ observations at the jobsite, the Department assigned either NCCI classification (“class”) code 0042, entitled “Landscaping, Gardening, & Drivers” or class code 9102, entitled “Lawn Maintenance-Commercial or Domestic & Drivers.” The class code 0042 “applies to work involving new landscaping installations whereas class code 9102 applies to work involving maintenance of existing landscaping and/or lawn maintenance.” Mr. Mays testified that class code 0042 is considered construction work, whereas class code 9102 is considered nonconstruction work for workers’ compensation purposes. Generally, if a business provides proper payroll records to support a division, the appropriate code and correlating rate would apply based on the work performed. If the payroll records are not maintained to support the division of the work performed between class code 0042 and class code 9102, the highest rate of the two classifications is applied to the employee. Ms. Murcia testified that class code 0042 and class code 9102 were applied to Native Cuts employees due to the mixed work performed (Landscaping and Lawn Maintenance) by Respondent. However, class code 9102 was applied to most of the employees. Utilizing the statutory formula for penalty calculation specified in section 440.107(7)(d)1. and rule 69L- 6.027, the total penalty was calculated based on periods of non- compliance for employees based on the dates they received payments from Respondent and were not covered for workers’ compensation. Since Mr. Lee’s exemption expired on October 30, 2016, the calculation for his work performed was limited to the period after the expiration of his exemption, November 1, 2016, through July 27, 2017. Regarding records designated as cash payments, the Department determined that the Native Cuts’ records and receipts did not validate the payroll and expenses that corresponded with the company’s cash withdrawals. Pursuant to rule 69L- 6.035(1)(k), the Department included 80 percent of cash withdrawals as wages or salaries to employees. Penalty Calculation for Imputed Payroll The Department determined the calculated penalty for Rudolfo Ramirez, David Harrington, and Mitchel Pike, the workers who were identified at the jobsite as employees on July 27, 2017. Mr. Lee was also included in the calculation of penalty for the imputed payroll. The Department maintains that the business records submitted by Respondent were insufficient to determine Respondent’s payroll for these employees during the investigation period, thus, the Department used the statutory formula to impute payroll to these employees. The Department correctly assigned a class code of 0042 and calculated a penalty of $149.20 against Respondent for failure to secure payment of workers’ compensation insurance for each of these employees. The Department also calculated the penalty for Ms. Brown, who was not at the jobsite but participated in the investigation on July 27, 2017. The Department applied a classification code 9102 to Ms. Brown. However, the evidence presented at hearing demonstrated Ms. Brown maintained records for the business and was the person identified as maintaining the wage rate information for employees. The evidence of record does not support a finding that Ms. Brown provided any landscaping or construction services to Respondent. Ms. Brown’s work, at best, could be described as clerical work. The Department introduced no evidence of an appropriate NCCI class code for Ms. Brown. Thus, the Department did not prove by clear and convincing evidence that the imputed payroll related to Ms. Brown should be included for purposes of calculating the penalty. The Department did not prove by clear and convincing evidence that the penalty in the amount of $19.60 attributed to Ms. Brown should be included in the penalty assessment. Penalty Calculation for Uninsured Labor Ms. Murcia testified that the class code 0042 was applied to the general category of uninsured labor, as the work performed could not be determined from the payroll records. Thus, the highest rate, class code 0042, of the two classifications for work performed by Native Cuts, is applied to these individuals. The Department correctly calculated a penalty of $17,015.10 for these employees. Penalty Calculation for Remaining Employees In addition to the penalty calculated for the imputed payroll (excluding Ms. Brown) and uninsured labor, the Department applied the appropriate class code for the work performed and correctly calculated the penalty for Native Cut employees2/ in the amount of $52,350.10. Total Penalty Calculation Ms. Murcia calculated a total penalty of $69,534.34 against Respondent for failure to secure payment of workers’ compensation insurance for each of its employees during the audit period. The amount of the penalty should be reduced by the amount attributed to Ms. Brown in the amount of $19.60. Thus, the total penalty amount that should be assessed against Native Cuts is $69,514.40. Mr. Lee paid a $1,000.00 down payment for the penalty assessed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $68,514.74 against Native Cuts Property Management, LLC. DONE AND ENTERED this 31st day of May, 2019, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of May, 2019.
The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes, by failing to secure payment of workers’ compensation coverage, as alleged in the Second Amended Order of Penalty Assessment; and, if so, the appropriate penalty.
Findings Of Fact Jurisdiction The Department is the state agency responsible for enforcing the requirement of chapter 440 that employers in Florida secure workers’ compensation coverage for their employees and corporate officers, pursuant to section 440.107. Patrick Hoffman was the owner and sole corporate officer for American. At all times material to this proceeding, American sold materials for window screens, patio sliding doors, screws, and spline screening; and it provided window and screen installation services. Investigation On June 29, 2016, the Department commenced an investigation following the observation of Patrick Hoffman and Timothy Barnett (also known as Adam Barnett) performing window installation services at a residential property. Kent Howe, an investigator in the Department’s compliance division, conducted an investigation regarding American’s operation of its business without proper workers’ compensation coverage. On June 29, 2016, Mr. Howe personally served a Stop-Work Order requiring American to cease all business operations and Order of Penalty Assessment on Mr. Hoffman. On June 29, 2016, Mr. Howe also served Mr. Hoffman with a Request for Production of Business Records for Penalty Calculation, requesting records to enable the Department to calculate the appropriate penalty for the period of June 30, 2014, through June 29, 2016. On June 30, 2016, the Department issued a conditional release from the Stop-Work Order. The conditional release required Respondent to pay $1,000, and agree to pay the penalty assessment within 28 days after the penalty calculation. American paid the $1,000 payment but it disputed the calculated penalty amount. An employer is required to maintain workers’ compensation coverage for employees unless there is an exemption from coverage. In the construction industry, a company must maintain coverage if it employs one or more persons. In the non-construction industry, a company is required to maintain coverage if it employs three or more persons. A contractor serving as a corporate officer in the construction industry may obtain an exemption from coverage requirements. See § 440.05, Fla. Stat. A contractor must demonstrate compliance with the workers’ compensation requirements or produce a copy of an employee leasing agreement or exemption for each employee. If an employee is a subcontractor without their own workers’ compensation coverage or an exemption, the individual is considered an employee of the contractor. American did not dispute that Timothy Barnett and Roger Wilson were employees of the company. American also did not dispute that it did not have workers’ compensation coverage for the employees as required by chapter 440. As a corporate officer, Mr. Hoffman elected to be exempted from workers’ compensation coverage. Penalty Calculation The Department assigned Eunika Jackson, a Department penalty auditor, to calculate the appropriate penalty for American. Ms. Jackson conducts penalty audits for construction and non-construction employers. Ms. Jackson testified that workers’ compensation coverage penalties are calculated based on a statutory formula in which the auditor calculates two-times the amount of the insurance premium the employer would have paid for each employee over the two-year period preceding the Stop-Work Order. The two-year period is commonly referred to as the look-back period. The penalty calculation is based on the employer’s payroll, the classification code for the industry of operation during the audit period, and the manual rate assigned to that classification code. To determine the appropriate code, the auditor uses the classification code in the Scopes® Manual, which has been adopted by Petitioner through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Ms. Jackson used business records Mr. Hoffman provided to determine the appropriate industry code and the penalty amount for each employee. Ms. Jackson reviewed bank statements to determine the gross payroll paid to Mr. Wilson and Mr. Barnett during the two-year non-compliance period. The records demonstrated that Roger Wilson received payment during the period of June 30, 2014, through December 31, 2015. Timothy (Adam) Barnett received payment during the period of January 1, 2015, through June 29, 2016. Ms. Jackson determined that American operated in the construction industry and initially assigned each employee a classification code of 5102. On August 11, 2016, the Department issued the Amended Order that assessed a total penalty of $10,785.04. The Amended Order was personally served on Mr. Hoffman on August 16, 2016. In response to the Amended Order, Respondent disputed the classification code assigned to Mr. Wilson. Mr. Hoffman testified that Mr. Wilson did not perform construction work, but rather worked as a retail employee selling merchandise in the store front. Mr. Hoffman further testified that contractors purchased items at American for use in their businesses. Mr. Hoffman’s description of Mr. Wilson’s job responsibilities and description of merchandise sold at American clearly demonstrates that Mr. Wilson did not perform construction work. Ms. Jackson correctly determined that the classification code 8018, which applies to retail and wholesale salespersons, was the appropriate code for Mr. Wilson. The classification code change resulted in a manual rate reduction and a reduced assessment applied to Mr. Wilson. On November 18, 2016, the Department filed a Motion for Leave to Amend Order of Penalty Assessment, which the undersigned granted. The Second Amended Order reduced the penalty assessment to $6,818.00. During the hearing, American continued to dispute the calculation of the penalty for Mr. Hoffman because he maintained an exemption as a corporate officer. The Department ultimately agreed to remove Mr. Hoffman from the penalty assessment worksheet and reduced the penalty assessment to $6,764.96. At hearing, there was no dispute regarding the penalty assessment related to Mr. Barnett. However, Respondent argued in the post-hearing statement for the first time that Timothy Barnett had an exemption. There was no evidence to support Respondent’s assertion. Therefore, Ms. Jackson correctly included payment to Mr. Barnett as payroll for purposes of calculating the penalty. Regarding Mr. Wilson, Mr. Hoffman argued that Mr. Wilson had an exemption from workers’ compensation coverage when he began working for American.1/ However, Mr. Hoffman could not produce a copy of the exemption and Mr. Wilson was not present at the hearing for testimony. Ms. Jackson conducted research using the Coverage Compliance Automated System (“CCAS”), a database used by the Department to maintain information regarding workers’ compensation policies, employee leasing plans, and exemptions for employees. Ms. Jackson found no record of an exemption for Mr. Wilson in CCAS. While Ms. Jackson did not exhaust all efforts to locate an exemption for Mr. Wilson, it was American’s burden to produce evidence of an exemption. Mr. Hoffman’s testimony with nothing more was insufficient to demonstrate that Mr. Wilson had an exemption and as such, Ms. Jackson appropriately included payments to Mr. Wilson as payroll to calculate the penalty. The calculation of the penalty for Mr. Wilson in the amount of $2,784.58 is correct. However, the penalty calculation for Mr. Barnett is incorrect. The amount should be $3,872.27. Therefore, the amount of the penalty should be reduced to $6,656.85. Ultimate Findings of Fact American was actively involved in business operations within the construction industry during the audit period of June 30, 2014, through June 29, 2016. Based upon the description of American’s business and the duties performed, Mr. Wilson was properly classified with a code 8018. Ms. Jackson used the correct manual rates and methodology to determine the appropriate penalty.
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, American Aluminum Concepts, Inc., violated the requirement in chapter 440, by failing to secure workers’ compensation coverage for its employees; and Imposing a total penalty assessment of $6,656.85. DONE AND ENTERED this 16th day of December, 2016, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of December, 2016.
The Issue Whether Respondent, G and F Renovations, Inc. (Respondent), timely challenged Petitioner's proposed agency action; and, if not, whether pursuant to the doctrine of equitable tolling Respondent is entitled to an administrative hearing to challenge the proposed agency action.
Findings Of Fact Petitioner is the state agency charged with the responsibility of enforcing and ensuring employers meet the requirements of chapter 440, Florida Statutes. The law in Florida requires employers to maintain appropriate workers' compensation coverage for their employees. At all times material to this case, Respondent was doing business in Florida and was represented by Pedro Malaret, attorney at law. Prior to May 1, 2014, Michael Robinson, a compliance investigator employed by Petitioner, visited a job site wherein workers were engaged in the business of construction/roofing. Robinson was advised by the workers at the site that they were employed by Respondent. Robinson then investigated the matter to determine whether the persons at the job site were covered by Respondent's workers' compensation insurance. To do so, he spoke to the supervisor at the site and others to whom he was referred. After verifying the persons on the job site were not on the list of Respondent's covered employees, and consulting with his supervisor, Robinson posted a Stop-Work Order at the job site. The Stop-Work Order provided, in pertinent part: You have a right to administrative review of this action by the Department under sections 120.569 and 120.57, Florida Statutes. To obtain review, you must file a written petition requesting review. If you dispute a material fact contained in this action, you are entitled to a hearing under Sections 120.569 and 120.57(1), Florida Statutes, at which you may be represented by counsel, present evidence and argument on the issue(s), examine witnesses, submit a proposed recommended order, and file exceptions to the recommended order of the Administrative Law Judge. If you do not dispute a material fact contained in this action, you are entitled to a hearing under section 120.57(2), Florida Statutes, at which you may be represented by counsel, present documentary evidence, and present a written statement in opposition to this action. * * * You must file the petition for hearing so that it is received by the Department within twenty-one (21) days of your receipt of this agency action. The petition must be filed with Julie Jones, DFS Agency Clerk, Department of Financial Services, 612 Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0390. FAILURE TO FILE A PETITION WITH THE TWENTY-ONE(21) DAYS CONSTITUTES A WAIVER OF YOUR RIGHT TO ADMINISTRATIVE REVIEW OF THE AGENCY ACTION. The Stop-Work Order and an Order of Penalty Assessment was served on Respondent's corporate agent, or authorized agent, by a process server. Respondent did not timely file a petition challenging the agency's proposed action. Instead, by email only, Respondent's counsel directed a letter to Robinson that provided: This firm has the pleasure of representing G & F Renovations, Inc. All papers to be served on G & F should be mailed or delivered to this office. My client wishes to resolve all issues relating to the matter amicably and as quickly as possible. As such, please forward a list of all documents needed to my office so that I may get them to you as soon as possible. Should you require any further documentation, please feel free to contact me either at my office or on my cell . . . I look forward to working with your [sic] to resolve this matter. Contrary to the offer to provide documents to Petitioner, Respondent did not provide business records. Eventually, an Amended Order of Penalty Assessment was issued and provided by email to Respondent's counsel at his email address of record. The Amended Order of Penalty Assessment was sent to counsel on or about October 6, 2014. Respondent did not timely file a petition to challenge the proposed agency action. Respondent did not timely challenge the Stop-Work Order and did not timely challenge the Amended Order of Penalty Assessment. Respondent did not provide any assistance to resolve the issues presented by the Stop-Work Order. When Respondent failed to timely respond to the Petitioner's requests for information, refused certified mail addressed to its office or corporate representative, and failed to timely challenge Petitioner's proposed action, a final order was entered on or about July 8, 2015. Thereafter, Respondent filed an appeal claiming Petitioner had not properly served notice of its proposed action. This case was initiated in response to the appeal to address the issue of whether the Petitioner lulled the Respondent into inaction and thereby tolled the time within which to file an administrative challenge to the proposed agency action. At no time did Respondent deny allegations pertinent to the instant case, including whether the workers at the construction job site were employed by Respondent. If the workers at the construction job site were appropriately covered by workers' compensation insurance or were exempt from coverage, Respondent did not assert such defense. In fact, Respondent did not cooperate to provide any information to Petitioner that would "resolve all issues relating to the matter amicably and as quickly as possible." Petitioner provided notice to Respondent of the procedural requirements to challenge the agency action and did not lull Respondent into a false sense of security or inaction. To the contrary, Respondent attempted to circumvent its legal responsibilities by refusing certified mail and failing to provide business records in a timely manner. Respondent seeks to benefit from its inaction. Had Respondent provided documents to support any defense to the Stop-Work Order and initial assessment of administrative fine, the issues could have been resolved. The weight of the credible evidence supports the finding that Respondent did not timely challenge the proposed agency action within the 21 days allowed by law. In short, Respondent ignored the Stop-Work Order and the legal claims it presented.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent failed to timely file a petition to challenge the agency's proposed action and its failure to do so was not the result of equitable tolling. DONE AND ENTERED this 6th day of December, 2016, in Tallahassee, Leon County, Florida. S J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of December, 2016. COPIES FURNISHED: Michael Joseph Gordon, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Kelli B. Hastings, Esquire Law Office of Kelli B. Hastings, PLLC 4005 North Orange Blossom Trail Orlando, Florida 32804 (eServed) Pedro Malaret, Esquire Malaret Law Firm, PLC 732 North Thorton Avenue Orlando, Florida 32803 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue At issue in this proceeding is whether the Respondent, George Washington Beatty, III, failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for himself and/or his employees, and, if so, whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. George Washington Beatty, III, is a sole proprietor who works as a painter and general construction handyman in the vicinity of Panama City. The types of work performed by Mr. Beatty are properly considered construction industry work. Mr. Beatty’s business is not incorporated. He has no regular employees other than himself. His Form 1099-MISC tax forms indicate that he was actively engaged in performing construction work during the two-year audit period from September 9, 2012, through September 8, 2014. Carl Woodall is a Department compliance investigator based in Panama City. On September 8, 2014, Mr. Woodall drove up to 1803 New Hampshire Avenue in Lynn Haven, a vacant house where he saw a “for sale” sign and indications of work being performed on the house: the garage door was open and contained a great deal of painting materials such as drop cloths and paint buckets. A work van and a pickup truck were parked in the driveway. Mr. Woodall testified that as he walked up to the front door, he could see someone inside on a ladder, painting the ceiling. As Mr. Woodall started to go in the front door, he was met by Mr. Beatty on his way out the door. Mr. Woodall introduced himself and gave Mr. Beatty his business card. Mr. Woodall asked him the name of his business and Mr. Beatty stated that he did not know what Mr. Woodall was talking about. Mr. Beatty then told Mr. Woodall that he worked for Brush Stroke Painting but that he was not working this job for Brush Stroke. Mr. Beatty told Mr. Woodall that he was helping out a friend. Mr. Woodall asked whether Mr. Beatty had workers’ compensation insurance coverage, and Mr. Beatty again stated that he did not know what Mr. Woodall was talking about. He was just there helping out his friend, the owner of the house. Mr. Woodall asked Mr. Beatty to give him the owner’s name and phone number. Mr. Beatty went out to his van to retrieve the information. While Mr. Beatty was out of the house, Mr. Woodall took the opportunity to speak with the three other men working in the house. The first man, whom Mr. Woodall approached, was immediately hostile. He said that he was not working for anyone, that he was just helping someone out. He walked out of the house and never returned while Mr. Woodall was there. Mr. Woodall walked into the kitchen and spoke to a man who was on a ladder, painting. The man identified himself as Dennis Deal and stated that he was working for Mr. Beatty for eight dollars an hour in cash. He told Mr. Woodall that he helped out sometimes when Mr. Beatty needed help. Before Mr. Woodall could speak to the third person, Mr. Beatty came back into the house with the owner’s contact information. Mr. Beatty continued to deny that he was paying anyone to work in the house. With Mr. Beatty present, Mr. Woodall spoke with the third man, Michael Leneave, who stated that Mr. Beatty was paying him ten dollars an hour in cash. Mr. Woodall then took Mr. Beatty over to Mr. Deal, who reiterated that Mr. Beatty was paying him eight dollars an hour. Mr. Beatty responded that he could not believe the men were saying that because he had never told them a price. Mr. Woodall asked Mr. Beatty to identify the man who left the house, and Mr. Beatty told him it was Tommy Mahone. Mr. Beatty stated that Mr. Mahone had a bad temper and probably left to get a beer. After speaking with Mr. Beatty and the other men, Mr. Woodall phoned Brian Daffin (Mr. Daffin), the owner of the house. Mr. Woodall knew Mr. Daffin as the owner of an insurance company in Panama City. Mr. Daffin told Mr. Woodall that Mr. Beatty was painting his house, but was evasive as to other matters. Mr. Woodall stated that as the owner of an insurance company, Mr. Daffin was surely familiar with workers’ compensation insurance requirements and that he needed a straight answer as to whether Mr. Daffin had hired Mr. Beatty to paint the house. Mr. Daffin stated that he did not want to get Mr. Beatty in trouble, but finally conceded that he had hired Mr. Beatty to paint the house. Of the other three men, Mr. Daffin was familiar only with Mr. Mahone. He told Mr. Woodall that he had hired Mr. Beatty alone and did not know the details of Mr. Beatty’s arrangements with the other three men. At the hearing, Mr. Beatty testified that he was asked by Mr. Daffin to help him paint his house as a favor. Mr. Beatty had met Mr. Daffin through James Daffin, Mr. Daffin’s father and Mr. Beatty’s friend. No one was ever paid for anything. Mr. Beatty stated that he took the lead in speaking to Mr. Woodall because he was the only one of the four men in the house who was sober. He told Mr. Woodall that he was in charge because Mr. Daffin had asked him to oversee the work. None of the three men alleged to have been working for Mr. Beatty testified at the hearing. Mr. Daffin did not testify. Mr. Beatty’s testimony is thus the only direct evidence of the working arrangement, if any, which obtained between Mr. Beatty and the three other men present at the house on September 8, 2014. The only evidence to the contrary was Mr. Woodall’s hearsay testimony regarding his conversations with the three men and with Mr. Daffin. Mr. Woodall checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Mr. Beatty 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 Mr. Beatty had no exemption or workers' compensation insurance coverage for himself or any employees. There was no evidence that Mr. Beatty used an employee leasing service. Based on his jobsite interviews with the alleged employees and Mr. Beatty, his telephone conversation with Mr. Daffin, and his CCAS computer search, Mr. Woodall concluded that as of September 8, 2014, Mr. Beatty had three employees working in the construction industry and that he had failed to procure workers’ compensation coverage for himself and these employees in violation of chapter 440. Mr. Woodall consequently issued a Stop-Work Order that he personally served on Mr. Beatty on September 8, 2014. Also on September 8, 2014, Mr. Woodall served Mr. Beatty with a Request for Production of Business Records for Penalty Assessment Calculation, asking for payroll and accounting records to enable the Department to determine Mr. Beatty’s payroll and an appropriate penalty for the period from September 9, 2012, through September 8, 2014. Mr. Beatty provided the Department with no documents in response to the Request for Production. On September 24, 2014, the Department issued an Amended Order of Penalty Assessment that assessed a total penalty of $141,790.96. The Amended Order of Penalty Assessment was served on Mr. Beatty via hand-delivery on October 16, 2014. 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 September 9, 2012, through September 8, 2014. § 440.107(7)(d), Fla. Stat. Because Mr. Beatty initially provided no payroll records for himself or the three men alleged to have worked for him on September 8, 2014, the penalty calculator lacked sufficient business records to determine an 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 Florida Administrative Code 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 5474, titled “Painting NOC & Shop Operations, Drivers,” which is defined in part as “the general painting classification. It contemplates exterior and interior painting of residential or commercial structures that are constructed of wood, concrete, stone or a combination thereof regardless of height.” The corresponding rule provision is rule 69L-6.021(2)(jj). The penalty calculator used the approved manual rates corresponding to Class Code 5474 for the periods of non-compliance to calculate the penalty. Subsequent to issuance of the Amended Order of Penalty Assessment, Mr. Beatty submitted to the Department, IRS Wage and Income Transcripts for the tax years of 2011, 2012, and 2013, but not for tax year 2014. These Transcripts consisted of Form 1099-MISC forms completed by the business entities for which Mr. Beatty had performed work during the referenced tax years. The Department used the Transcripts to calculate the penalty for the 2012 and 2013 portions of the penalty period and imputed Mr. Beatty’s gross payroll for the 2014 portion pursuant to the procedures required by section 440.107(7)(e) and rule 69L-6.028. On August 25, 2015, the Department issued a Second Amended Order of Penalty Assessment in the amount of $58,363.88, based on the mixture of actual payroll information and imputation referenced above. At the final hearing convened on November 3, 2015, Mr. Beatty stated that he now had the Wage and Income Transcript for tax year 2014 and would provide it to the Department. At the close of hearing, the undersigned suggested, and the Department agreed, that the proceeding should be stayed to give the Department an opportunity to review the new records and recalculate the proposed penalty assessment. On December 21, 2015, the Department issued a Third Amended Order of Penalty Assessment in the amount of $9,356.52. Ms. Proano herself calculated this penalty. The Third Amended Order assessed a total penalty of $9,199.98 for work performed by Mr. Beatty during the penalty period, based on the Wage and Income Transcripts that Mr. Beatty submitted. The Third Amended Order assessed a total penalty of $156.54 for work performed by Messrs. Mahone, Deal, and Leneave on September 8, 2014. This penalty was imputed and limited to the single day on which Mr. Woodall observed the men working at the house in Lynn Haven. Mr. Beatty’s records indicated no payments to any employee, during the penalty period or otherwise. 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 Third Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Mr. Beatty was in violation of the workers' compensation coverage requirements of chapter 440. 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 Mr. Beatty, and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. However, the Department did not demonstrate by clear and convincing evidence that Tommy Mahone, Dennis Deal, and Michael Leneave were employees of Mr. Beatty on September 8, 2014. There is direct evidence that Mr. Woodall saw the men working in the house, but the only evidence as to whether or how they were being paid are the hearsay statements of the three men as relayed by Mr. Woodall. The men were not available for cross-examination; their purported statements to Mr. Woodall could not be tested in an adversarial fashion. Mr. Beatty’s testimony that the men were not working for him and that he was merely supervising their work as a favor to Mr. Daffin is the only sworn, admissible evidence before this tribunal on that point. Mr. Beatty was adamant in maintaining that he did not hire the men, and his testimony raises sufficient ambiguity in the mind of the factfinder to preclude a finding that Messrs. Mahone, Deal, and Leneave were his employees. Mr. Beatty could point to no exemption or insurance policy that would operate to lessen or extinguish the assessed penalty as to his own work. The Department has demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry in Florida during the period of September 9, 2012, through September 8, 2014, and that Respondent failed to carry workers’ compensation insurance for himself as required by Florida’s Workers’ Compensation Law from September 9, 2012, through September 8, 2014. The penalty proposed by the Third Amended Order of Penalty Assessment should be reduced to $9,199.98, the amount sought to be imposed on Mr. Beatty himself.
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 $9,199.98 against George Washington Beatty, III. DONE AND ENTERED this 6th day of July, 2016, 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 6th day of July, 2016.
Findings Of Fact 1. On July 28, 2009, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 09-203-D3 to WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. The Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment included a Notice of Rights wherein WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY was advised that any request for an administrative proceeding to challenge or contest the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Stop- Work Order for Specific Worksite Only and Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 2. On July 28, 2009, the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment was served by personal service on WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. A copy of the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. On September 1, 2009, the Department issued an Amended Order of Penalty Assessment to WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. The Amended Order of Penalty Assessment assessed a total penalty of $32,022.75 against WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. The Amended Order of Penalty Assessment included a Notice of Rights wherein WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY was advised that. any request for an administrative proceeding to challenge or contest the Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 4. On June 15, 2010, the Amended Order of Penalty Assessment was served by process server on WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On August 10, 2009, WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY filed a Petition for Administrative Review Hearing (“Petition”) with the Department. On or about September 7, 2010, Counsel for the Respondent filed a supplemental Petition with the Department. This.second petition for administrative review was forwarded to the Division of Administrative Hearings on June 2, 2011, and the matter was assigned DOAH Case No. 11-2792. A copy of the petitions are attached hereto as composite “Exhibit C” and incorporated herein by reference. 6. On November 8, 2010, the Department issued a and Amended Order of Penalty Assessment to WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. The 2"™ Amended Order of Penalty Assessment assessed a total penalty of $28,085.27 against WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. The 2" Amended Order of Penalty Assessment included a Notice of Rights wherein WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY was advised that any request for an administrative proceeding to challenge or contest the 2"! Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the 2" Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 7. On December 9, 2010, the 2"! Amended Order of Penalty Assessment was served by certified mail on WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. A copy of the 2 Amended Order of Penalty Assessment is attached hereto as “Exhibit D” and incorporated herein by reference. 8. On September 7, 2011, the Department issued a 3 Amended Order of Penalty Assessment to WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. The 3" Amended Order of Penalty Assessment assessed a total penalty of $27,772.17 against) WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY. The 3 Amended Order of Penalty Assessment included a Notice of Rights wherein WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY was advised that any request for an administrative proceeding to challenge or contest the 3" Amended Order of Penalty Assessment must be filed within twenty-one (21) days of receipt of the 3 Amended Order of Penalty Assessment in accordance with Sections 120.569 and 120.57, Florida Statutes, and must conform to Rule 28-106.2015, Florida Administrative Code. 9. On October 4, 2011, the Petitioner and Respondent came to a Settlement Agreement. The Settlement Agreement is attached hereto as “Exhibit E” and incorporated herein by reference. 10. On October 13, 2011, the Administrative Law Judge issued an Order Closing File. A copy of the Order Closing File is attached hereto as “Exhibit F” and incorporated herein by reference. 11. On October 18, 2011, the 34 Amended Order of Penalty Assessment was served by the Department via facsimile on WAYNE FONTAN D/B/A WA YNE’S WINDOW COMPANY. Service was accepted by Mr. AJ Alvarez, Attorney for Respondent. A copy of the 3 Amended Order of Penalty Assessment is attached hereto as “Exhibit G” and incorporated herein by reference.
Conclusions THIS PROCEEDING came on for final agency action and Jeff Atwater, Chief Financial Officer of the State of Florida, or his designee, having considered the record in this case, including the Petition received from WAYNE FONTAN D/B/A WAYNE’S WINDOW COMPANY, as well as the Stop-Work Order for Specific Worksite Only and Order of Penalty Assessment, the Amended Order of Penalty Assessment, the 2" Amended Order of Penalty Assessment, and the 3“ Amended Order of Penalty Assessment, and being otherwise fully advised in the premises, hereby finds that:
