The Issue The issue in this case is whether Respondent, Ocala Exterior Solutions, Inc., failed to properly maintain workers' compensation insurance coverage for its employees, and, if so, what penalty should be assessed.
Findings Of Fact The Department is the state agency responsible for ensuring that all employers maintain workers' compensation insurance for themselves and their employees. It is the duty of the Department to make random inspections of job sites and to answer complaints concerning potential violations of workers' compensation rules. This case arose as a result of a random inspection. Respondent is a business created by Johnny Busciglio on or about October 16, 2012. At all times relevant hereto, Respondent was duly licensed to do business in the State of Florida. Its business address is 140 Southwest 74th Lane, Ocala, Florida 34476. On May 22, 2015, the Department’s investigator, William Pangrass, made a random site visit to a construction site located at a residence at 9189 Southwest 60th Terrace Road, Ocala, Florida. He saw two men installing soffit as part of the construction which was going on. Pangrass remembers the men identifying themselves as Derek McVey and Frank Deil. When Pangrass inquired as to their employer, the two men were initially not certain for whom they were working. One of the men made a telephone call and then told Pangrass they were employees of Sauer & Sons. Interestingly, Respondent said the two men on-site that day were McVey and a man named James Van Brunt. Pangrass contacted Sauer & Sons and were told that neither McVey nor Deil (or Van Brunt) were employees of that company. He was told by a representative of Sauer & Sons that the men were in fact employees of Respondent. Pangrass then verified that Respondent was a current, viable company and checked whether the company had workers’ compensation insurance coverage for its employees. He found that Respondent had a workers’ compensation insurance policy for a short time in 2014. Two of Respondent’s employees, however, did have exemptions from coverage. Those two were Johnny Busciglio and Anthony Wayne. Based on his findings, Pangrass issued a SWO which he posted at the work site he had visited. He posted the SWO on the permit board in front of the job site on May 26, 2015. On May 29, he served a Request for Production of Business Records on Respondent, seeking information concerning Respondent’s business for purposes of calculating a penalty for failure to have workers’ compensation insurance in place. Respondent emailed the requested business records to Pangrass. The Department requested additional records and clarification concerning some of the records which had been provided. Busciglio made a good faith effort to respond to each of the Department’s requests. After review of Respondent’s business records, the Department calculated a penalty and issued an amended OPA. That amended OPA was issued on September 8 and served on Busciglio (as agent for Respondent) on October 1, 2015. The amount of the penalty in the amended OPA was $9,896.32. Within a few days after receiving the amended Order, Busciglio obtained workers’ compensation insurance for his employees, paid a down payment of $1,000 to the Department, and Respondent was released to resume its work. The penalty in the amended OPA was based upon information obtained from Busciglio concerning Respondent. Using the bank records supplied by Busciglio, the Department determined that Respondent had the following employees: Eric McVey, Frank Dorneden, Jeff Burns, Jordan Anchondo, Anthony Wayne, Nikki Smith, Johnny Busciglio, and Jason Bridge. Their wages were used by the Department to calculate the penalty. The penalty was calculated by the Department as follows: The business was assigned class code 5645, construction on residential dwellings; The period of non-compliance was set at two years; The gross payroll amount for that two-year period was established at $30,905.14; The gross payroll amount was divided by 100, resulting in the sum of $309.05; The approved manual rate, i.e., the amount the employer would have paid if insurance was in place, was assigned for each employee; The gross payroll was multiplied by the manual rate; And the penalty amount was established, taking the figure in (f), above, and multiplying by two. Busciglio established by credible testimony, unrefuted by the Department, that Nikki Smith was a person from whom he bought tools; she was never an employee of Respondent. The same was true for the person listed as Jason Bridge (although his real name may have been Jason Woolridge). As for Eric McVey, he worked for Frank Dorneden, who paid McVey directly. There were no payroll records or checks from Respondent provided to the Department which were attributable to McVey. Dorneden had begun working for Respondent on December 22, 2014. On May 22, 2015, he was asked by Busciglio to visit the work site; he found McVey working there and Deil/Van Brunt was also on the site. Neither the Department nor Respondent offered any further explanation about Deil/Van Brunt, nor did the Department attribute any penalty to Van Brunt as a putative employee. His status in this matter is a mystery. When the penalties associated with McVey, Smith, and Bride are subtracted from the calculation, the amount of the penalty would be $9,454.22.
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 requiring Respondent, Ocala Exterior Solutions, Inc., to pay the sum of $9,454.22. DONE AND ORDERED this 20th day of November, 2015, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 November, 2015.
The Issue The issue is whether Petitioner properly issued a Stop-Work Order and 3rd Amended Order of Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to section 440.107. At all times relevant to this proceeding, USA was a corporation registered to do business in Florida. Respondent is a company engaged in the construction industry and was active during the two-year audit period from August 27, 2013, through August 26, 2015. On August 26, 2015, Julio Cabrera ("investigator" or Cabrera"), compliance investigator for the Division, conducted a random construction compliance check at the residential job site, 741 Harbor Drive in Key Biscayne ("residential home"). Cabrera observed two men on Respondent's scaffold plastering the exterior wall of the residential home. Cabrera interviewed the two men working on the scaffold. The workers told the investigator that they were employed by Respondent. They also identified Garcia as the Respondent's owner and provided Garcia's contact information to Cabrera. After interviewing the two workers, Cabrera checked the Department's Coverage and Compliance Automated System for proof of workers' compensation coverage and for exemptions associated with USA. Cabrera's search revealed Garcia had an active exemption, but Respondent did not have a workers' compensation insurance policy or an employee leasing policy for its employees. Cabrera also confirmed that Respondent did not have any type of workers' compensation coverage for its employees by examining the National Council on Compensation Insurance database. Next, Cabrera placed a telephone call to Garcia and interviewed him. Garcia informed Cabrera that the two workers were USA's employees and that Respondent did not have workers' compensation insurance coverage for the workers.1/ After interviewing Garcia, the investigator returned to the two USA employees and requested their identification. Silvano Antonio Delgado Reyes provided his identification and the other USA male employee fled from the job site. That same day Cabrera issued Respondent a Stop-Work Order on behalf of the Division for Respondent's failure to secure the required workers' compensation insurance coverage. Petitioner also served Respondent a Request of Business Records for Penalty Assessment Calculation ("Request") asking for documentation to enable the Division to determine payroll for the audit period of August 27, 2013, through August 26, 2015. USA responded to the Request for records and provided the Division with verification of its business records on several different occasions. Ultimately, Respondent provided bank statements and corresponding check images for most of the two- year audit period. Christopher Richardson ("auditor" or "Richardson"), penalty auditor for the Division, was assigned to USA's investigation. Richardson reviewed the business records produced by Respondent and determined those persons employed by USA during the audit period without workers' compensation insurance. Richardson properly recalculated the penalty amount each time new records were provided by Respondent. USA did not provide sufficient records to determine payroll for February 1, 2014, through December 31, 2014, and August 1, 2015, through 25, 2015, and Richardson properly utilized the computation formula to determine the payroll for the aforementioned audit period without adequate records. Richardson concluded his audit by properly calculating the workers' compensation amount USA owed in workers' compensation insurance for the audit period using the Class Code 5022 for masonry work. Richardson applied the approved manual rates and methodology specified in section 440.107(7)(d) and concluded USA owed a penalty amount of $52,489.24. On March 28, 2016, the Division served Respondent the 3rd Amended Order of Penalty Assessment in the amount of $52,489.24 naming those persons employed by USA during the audit period. On June 30, 2015, Respondent challenged the Stop-Work Order and penalty assessment and requested a formal hearing.
Recommendation Based on the forgoing 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 3rd Amended Order of Penalty Assessment in the amount of $52,489.24. DONE AND ENTERED this 15th day of July, 2016, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of July, 2016.
The Issue Whether Respondent, John H. Woods, d/b/a Woods Construction, conducted operations in the State of Florida without obtaining workers’ compensation coverage which meets the requirements of Chapter 440, Florida Statutes (2008)1, in violation of Subsection 440.107(2), Florida Statutes, as alleged in the Amended Stop-Work Order and Order of Penalty Assessment and Second Amended Order of Penalty Assessment. If so, what penalty should be assessed by Petitioner, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with the responsibility of enforcing the requirement of Section 440.107, Florida Statutes, that employers in Florida secure the payment of workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Workers’ compensation coverage is required if a business entity is engaged in the construction industry in Florida. Securing the payment of workers’ compensation coverage can be achieved via three different methods: purchase a workers’ compensation insurance policy; ensure that workers are paid and workers’ compensation coverage is provided by a third party entity called a Professional Employment Organization (PEO); or apply for a Certificate of Exemption from Workers’ Compensation Coverage (Exemption Certificate) assuming certain statutorily mandated criteria are met. These methods are not mutually exclusive of each other. On August 14, 2008, a workers’ compensation compliance investigator employed by Petitioner, visited a construction site in Lee County, Florida. On the site, she observed several groups of men conducting various construction activities including the laying of a sidewalk along Lexington Street in Fort Myers. The work performed involved construction activities as contemplated under the applicable agency rule. Fla. Admin. Code R. 69L-6.021. By a preponderance of evidence, it is determined that among the entities on the worksite was a group of three laborers who worked for Woods Construction. There was no proof of coverage for workers’ compensation for the Woods Construction Company, neither an insurance policy, nor any exemption certificate for the individuals encountered on the worksite. Woods Construction assumed that the three laborers were covered by Able Body Labor, a PEO. The evidence confirmed that two of the three laborers were covered. However, the third laborer, Filberto Castro, was unable to be included on the work roster due to his lack of corresponding documentation necessary for employment in the United States. Therefore, Castro was working without coverage. An SWO was issued and a Request for Production of Business Records for Penalty Calculation (BRR) was served on J. Woods Construction, Corp. [sic] on August 14, 2008. The SWO was later amended to conform to the correct name of the company, which is not a corporation. The amended SWO was served on John H. Woods on August 22, 2008, via certified mail. Pursuant to the BRR, Respondent provided business records to Petitioner. Petitioner’s Penalty Calculator’s duties are to receive records from the employer, and organize, identify, and audit those records which indicate payroll activities, while delineating other business activities, which may be related to the non-payroll activities of the business such as purchasing supplies, maintaining a place of business, etc. The characterization of the voluminous records received from Respondent were categorized into three distinct categories: reliable, somewhat reliable, and unreliable records. The records were characterized as “reliable” if they were records from an independent third party or the bank with whom Respondent conducted business, and were thus extremely difficult to alter without a high level of expertise. They are considered “source documentation.” The bank records capture the transactions as they occurred, to whom money was paid, and for what amount. The next category of records deemed “somewhat reliable” were those records which, on their face appear to be legitimate records, such as copies of the checks with corresponding amounts and dates to those in the “reliable” category. However, certain inconsistencies in these records demonstrated that they were less than reliable. These records were only used in select instances when there was corresponding source documentation supporting their veracity. A prime example, among many, is check number 1078 for $100.00 indicating a payment for a credit card; the corresponding checkstub indicates that the payment went to “Whitney,” a grand-child of John H. Woods. In toto, the documents illustrated that Respondent failed to follow generally accepted accounting principles by mislabeling or mischaracterizing funds on a regular basis. The third category of records were records which were considered “unreliable” as these records lacked any corresponding source documentation and they could not be considered in assessing the payroll activities of the firm. In the construction industry, there are instruments called “draw requests.” The draw request is an item that a subcontractor or builder will utilize to show partial completion of a project and concurrently request more funds (the draw) to complete the remaining portion of the project. The draw requests are often utilized at pre-measured stages of the project, e.g.: 25 percent completion, 50 percent completion, etc. The draw requests would have attached source documentation such as receipts from suppliers, servicers, and other miscellanea to show that the project is worked upon as opposed to the funds being siphoned off elsewhere. Nowhere, in the box full of records produced, was a proper draw request found with attached receipts. Therefore, none of the records produced could be considered as reliable documents. Many irregularities in Respondent’s methodology of accounting were also noted; as an example, there were numerous times that company checks from Respondent were deposited by an entity known as “Hendry Contracting,” without explanation. Respondent personally held the license as a General Contractor, and would utilize Hendry Contracting as a subcontractor. Hendry Contracting did not have any license whatsoever. It utilized Respondent’s license while performing construction activities. Brad Hendry, the principal of Hendry Contracting, is married to Janice Hendry, the daughter of John H. Woods, the owner of Respondent, Woods Construction. Janice Hendry administered Respondent’s company account and the company account of Hendry Contracting. The evidence is clear that no separation of duties was attempted. Furthermore, Hendry admitted that she did not exercise any sense of separation between the two different accounts (Woods Construction and/or Hendry Contracting). The two businesses were “commingled,” and the ability to retain any form of standard accounting requirement of checks and balances has been nullified. Numerous irregularities that defied “generally accepted accounting principles” appeared, including personal loans to family members, wholesale transfers of monies from Respondent to Hendry Contracting without explanation, and checks drafted to Brad Hendry (personally). Further, Woods testified that he exercised little or no control over his company in the last ten years. Hendry also confirmed the haphazard method of managing the two firms’ different accounts by writing checks from one firm to another, when the other firm’s account was running low. Hendry’s testimony regarding the financial cooperation of Respondent and Hendry Contracting is indicative of the commingling of accounts, as well. Hendry testified that each entity would draw on each other’s accounts depending on the cash levels within each respective account. Hendry also testified that Hendry Contracting was utilized for obtaining bank loans and utilizing Hendry’s name to purchase materials when the other accounts were depleted. By utilizing only the bank records, a general ledger for Respondent was constructed which derived the amounts that came into the business and the amounts paid out for labor. The fact that Respondent had no general ledger meant that some items would never be accounted for, such as building supply costs. Based on that caveat, Florida Administrative Code Rule 69L- 6.035(i) was applied to the total payroll derived from the bank records. This had the effect of reducing total payroll by twenty percent to account for building supplies (which were never accounted for due to the non-existent business ledger of Respondent). The amount of money flowing and commingling between the two firms (Respondent and Hendry Contracting) and among family members, numbered in the hundreds of thousands of dollars. The commingled money was utilized for all manners of payments: loans (not expected to be paid back) to family members, inflated wages to family members for de minimis services, or payment for services/goods for family members’ personal residences. A proposed penalty in the amount of $365,876.82 was originally assessed, as reflected in the AOPA, and served on Respondent on August 26, 2008. Based on further records produced and the understanding that Respondent was a construction firm but was unable to show any receipts of building supplies, the proposed penalty, utilizing Florida Administrative Code Rule 69L- 6.035(i), decreased the payroll by 20 percent to account for building supplies that were not documented. After consideration of the documents provided and application of the rule, a Second AOPA was prepared showing an assessment in the amount of $306,876.82. With Hendry as the sole financial officer of Respondent, approximately $351,632.43 of payroll was allocated to various family members. There was unambiguous testimony from Woods and Hendry that family members were employed in various roles, most notably the grand-daughters who were earning wages while conducting secretarial duties. A further $472,292.94 was paid to Hendry Contracting during the three-year audit time- period. Hendry Contracting never had any discernible workers’ compensation coverage for this amount of payroll, rendering Respondent liable for failure to secure workers’ compensation coverage for the monies paid. The remainder of the unsecured payroll assessed to Respondent was for various non-family workers for whom no proof of workers’ compensation coverage could be ascertained. The Second AOPA was computed by calculating Respondent’s payroll for the past three years using the business records Respondent provided. The payroll was then divided for each year by 100 and that figure was multiplied by an approved manual rate assigned to the classification codes (class codes) found in the National Council on Compensation Insurance’s Scope of Trade Manual (Scopes Manual). Class codes were assigned to the individuals listed on the penalty worksheet according to their historical duties. The grand-daughters and other female employees of Respondent were listed as clerical employees (classification code 8810), while the remaining names were listed as general carpentry workers (classification code 5645). Next, the product of the approved manual rate and the payroll for each year divided by 100 was then multiplied by 1.5, pursuant to statute, to derive the penalty for each year or part of a year. The penalties for each employee and year or part of a year were then added together to come up with a total penalty of $306,213.78. Based on the assessment of the financial records in conjunction with the documents admitted into evidence, the grand total of $306,213.78 is a true and correct penalty amount for Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Chief Financial Officer of the Department of Financial Services, Division of Workers’ Compensation, enter a final order: Finding that Respondent failed to secure the payment of workers’ compensation insurance coverage for its employees in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent in the amount of $306,213.78, which is equal to 1.5 times the evaded premium based on the payroll records provided by Respondent and on the applicable approved manual rates and classification codes for the period extending from August 15, 2005, through August 14, 2008, as provided in Subsection 440.107(7), Florida Statutes. DONE AND ENTERED this 17th day of July, 2009, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 July, 2009.
The Issue Whether Respondents,1/ David Feliciano, d/b/a D and S Handyman, Inc., a Dissolved Florida Corporation, and D and S Handyman, Inc., failed to provide workers’ compensation coverage; and, if so, what penalty should be imposed?
Findings Of Fact The Department is the state agency responsible for enforcing the various requirements of chapter 440, Florida Statutes. Section 440.107(3) mandates, in relevant part, that employers in Florida must secure workers’ compensation insurance coverage for their employees. The testimony and evidence substantiates that D and S Handyman, Inc., a Dissolved Florida Corporation, is engaged in the construction industry in Florida as D and S Handyman, Inc., and that David Feliciano is its sole proprietor. On September 7, 2016, Investigator Murvin conducted a random jobsite workers’ compensation compliance investigation (Compliance Investigation). Investigator Murvin spoke with Mr. Feliciano who was working at a jobsite at 713 Lake Cummings Boulevard, Lake Alfred, Florida. During their discussion, Mr. Feliciano stated he had his own corporation (Respondent), and that Respondent was a subcontractor of ANS Plumbing to this job. Respondent was to install the plumbing at this jobsite. Mr. Feliciano claimed he had an exemption. Investigator Murvin checked the Florida Department of State, Division of Corporations’, Sunbiz website to verify Respondent’s status. Mr. Murvin determined that David Feliciano, d/b/a D and S Handyman, Inc., was no longer an active corporation but that when it was active, Mr. Feliciano was the sole corporate officer and registered agent. Investigator Murvin then checked the Department’s Coverage and Compliance Automated System (CCAS) to see whether Respondent had a workers’ compensation insurance policy or any current exemptions. CCAS is the Department’s internal database that contains workers’ compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Investigator Murvin’s CCAS search revealed that Respondent had no workers’ compensation coverage or exemptions during the relevant period. An exemption is a method by which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. Mr. Feliciano held an exemption as Respondent’s owner from December 11, 2013, until it expired on December 11, 2015. Investigator Murvin then contacted ANS Plumbing and confirmed that Respondent was subcontracted to install the plumbing at the jobsite. ANS Plumbing also confirmed that Mr. Feliciano of Respondent had an “exemption on file.”3/ Finding no insurance in place, Investigator Murvin contacted his supervisor, who directed him to issue the SWO. The SWO was issued and served on Mr. Feliciano/Respondent on September 7, 2016. Additionally, a business records request (BRR) was also served on Mr. Feliciano for Respondent’s business records. This BRR sought additional information concerning Respondent’s construction business between December 12, 2015 (the day after Mr. Feliciano’s exemption expired), through September 7, 2016 (the date the SWO issued). Respondent did not provide any business records to the Department in response to the BRR. The lack of business records compelled the Department to use the imputation formula to determine Respondent’s payroll. The Department assigned PA Richardson to calculate the appropriate penalty. For the penalty assessment calculation, PA Richardson consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist the calculation of workers’ compensation insurance premiums. Based on the information obtained from the jobsite, PA Richardson assigned the appropriate class code for plumbing, 5183.4/ PA Richardson determined the gross payroll for Respondent for the entire period of non-compliance, which included two separate periods of non-compliance, i.e., December 12, 2015, through December 31, 2015, and January 1 through September 2016. There were different rates for each period. PA Richardson then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. PA Richardson applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)l. and rules 69L-6.027 and 69L-6.028 to determine the penalty of $6,859.70. The Department has demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry (specifically plumbing) in Florida between December 12, 2015, and September 7, 2016; that Respondent employed Mr. Feliciano; and that Respondent did not have the requisite workers’ compensation insurance or an exemption to cover Mr. Feliciano during the applicable period.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services imposing a penalty of $6,859.70 against Respondent, David Feliciano, d/b/a D and S Handyman, Inc., a Dissolved Florida Corporation, and D and S Handyman, Inc. DONE AND ENTERED this 28th day of February, 2017, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of February, 2017.
The Issue The issues in this case are whether Respondent, Raul A. Correa, M.D. (Dr. Correa), failed to provide workers' compensation coverage, and if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107, Florida Statutes (2013). That section mandates, in relevant part, that employers in Florida secure workers’ compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, Dr. Correa was a Florida small business engaged in the practice of medicine, with his principal office located at 2505 Manatee Avenue West, Bradenton, Florida. Dr. Correa is not incorporated. On February 12, 2014, Ms. Green conducted an on-site workers’ compensation compliance investigation (compliance investigation) of Dr. Correa’s office. After identifying herself to the receptionist, Ms. Green met Dr. Correa and explained the reason for her presence, a compliance investigation. Dr. Correa telephoned his wife who handles his office management from their residence. Mrs. Correa immediately faxed a copy of the liability insurance policy to the office. However, that liability policy did not include workers’ compensation coverage. After a telephonic consultation with her supervisor, Ms. Green served a Request for Production of Business Records (Request) on Dr. Correa at 11:50 a.m. on February 12, 2014. This Request encompassed records from October 1, 2013, through February 12, 2014, for all of Dr. Correa’s payroll documents, account documents, disbursements, and workers’ compensation coverage policies. Ms. Green consulted the Department’s Coverage and Compliance Automated System (CCAS) database to determine whether Dr. Correa had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees. CCAS is a database Ms. Green consults during the course of her investigations. Ms. Green determined from CCAS that Dr. Correa did not have any current workers’ compensation coverage for his employees and he did not have an exemption from such coverage from the Department. The records reflected that Dr. Correa’s last active workers’ compensation coverage was in 2004. Dr. Correa obtained workers’ compensation coverage on February 20, 2014. Approximately one month later, Ms. Green served a Request for Production of Business Records for Penalty Assessment Calculation on Dr. Correa. Dr. Correa produced the requested records. These records were given to Lynne Murcia, one of the Department’s penalty auditors, to calculate the penalty. Ms. Murcia determined that the appropriate classification code for Dr. Correa’s employees was 8832, which incorporates physicians and clerical workers. This code was derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers’ compensation. The manual is produced by the National Council on Compensation Insurance, Inc., the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. Dr. Correa listed seven employees on the Florida Department of Revenue Unemployment Compensation Tax (UCT-6) form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida’s Unemployment Compensation Law. Ms. Murcia reasonably relied upon the UCT-6 filings for the relevant time period to calculate Dr. Correa’s gross payroll in Florida. Using Dr. Correa’s payroll chart, the UCT reports, and the classification codes for each employee, Ms. Murcia calculated the penalty assessment for the three-year penalty period preceding the investigation. This three-year period is the allocated time for reviewing coverage for those who do not have the appropriate workers’ compensation coverage. On April 9, 2014, Ms. Murcia determined the penalty to be $4,287.12. However, upon receipt of additional information regarding a former employee of Dr. Correa, an Amended Order of Penalty Assessment of $3,898.77 was issued on July 28, 2014. Dr. Correa’s position is that his practice is a small “mom and pop” operation. He employs members of his family to run the business side of his practice. His daughter, Antonia, works as Dr. Correa’s “doctor’s assistant.” She works at the various nursing homes that Dr. Correa services. Antonia believed that the nursing homes’ liability insurance would cover her, and she was not subject to workers’ compensation coverage. However, she was, in fact, paid by Dr. Correa. Dr. Correa’s daughter-in-law, Valeria, works from her home computer completing the medical billing for her father-in- law. She has been working in this capacity for approximately 14- 16 years, and it never occurred to her that she needed workers’ compensation coverage. She was paid by Dr. Correa. Dr. Correa’s brother-in-law, Mr. Collado, runs all the errands for the practice. He may go to the bank, take care of car maintenance, buy office supplies or fix things, all in support of Dr. Correa’s practice. Mr. Collado receives regular pay checks from Dr. Correa. Dr. Correa testified that his wife is his office manager and has been since he opened the practice in 1978. Mrs. Correa works from their home, in a small home office. She does all the paper work related to the practice. Dr. Correa firmly believed that he did not require workers’ compensation coverage because some of his employees were “independent contractors” or never worked in his office, but at other locations (individual homes, nursing homes, or just outside the office). Dr. Correa believed his insurance agent who did not think Dr. Correa needed the workers’ compensation coverage. Based upon the testimony and exhibits, the amended penalty assessment in the amount of $3,898.77 is accurate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the Amended Order of Penalty Assessment, and assessing a penalty in the amount of $3,898.77. DONE AND ENTERED this 24th day of September, 2014, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of September, 2014.
The Issue The issues to be determined in this case are whether Respondent Lockhart Builders, Inc., violated state laws applicable to workers’ compensation insurance coverage by failing to secure coverage for three employees and failing to produce records requested by Petitioner Department of Financial Services, Division of Workers’ Compensation (Department) and, if so, what penalty should be assessed for the violations.
Findings Of Fact Petitioner is the state agency responsible for the enforcement of the workers’ compensation insurance coverage requirements established in Chapter 440, Florida Statutes (2007).1 Respondent is a Florida corporation with its office in Bradenton. William Lockhart is Respondent’s president. Respondent is licensed to engage in construction activity in Florida. Respondent was engaged to construct a two-story duplex at 2315 Gulf Drive in Bradenton. Respondent began work at the job site on or about February 21, 2007. On August 22, 2007, Lockhart received a proposal from Burak Yavalar, owner of BY Construction, to do the exterior stucco work on the duplex building for a flat fee of $10,750. The proposal was accepted by Respondent on August 23, 2007. Yavalar presented Lockhart with a certificate of liability insurance which indicated that he had obtained workers’ compensation coverage for his employees. The certificate was issued by Employee Leasing Solutions, Inc. (ELS), a professional leasing company in Bradenton. ELS provides mainly payroll services and workers’ compensation insurance coverage for its clients. Lockhart did not ask for, and Yavalar did not provide Lockhart with, a list of the names of the BY Construction employees who were covered by the insurance. Lockhart made a call to ELS to verify that BY Construction had workers’ compensation insurance coverage, but he did not ask for a list of BY Construction employees covered by its insurance policy. BY Construction began work at Respondent’s job site on or about September 10 or 11, 2007. On September 12, 2007, BY Construction had eight employees at the job site. One employee, Justin Ormes, had previously worked for BY Construction, had quit for a while, and had just returned. Two other employees, Carlos Lopez and Jaime Alcatar, had been working on a nearby job site and were asked by Yavalar to come to work at Respondent’s job site. Yavalar claims that on the morning of September 12, 2007, Ormes, Lopez, and Alcatar had not yet been employed or authorized to start work for BY Construction. On September 12, 2007, Petitioner’s investigators Germaine Green and Colleen Wharton performed a random compliance check at Respondent’s job site. Without being specific about what particular work was being performed at the site by Ormes, Lopez, and Alcatar, the investigators testified that when they arrived at the job site they observed all eight men performing stucco work. The investigators spoke to Yavalar, Lockhart and the workers at the job site to determine their identities and employment status. Yavalar told the investigators his eight employees had workers’ compensation insurance coverage through ELS. However, upon checking relevant records, the investigators determined that insurance coverage for Ormes, Lopez, and Alcatar had not been secured by either BY Construction or Respondent. Wharton issued a statewide stop-work order to BY Construction for its failure to obtain workers’ compensation coverage for the three employees. After the stop work order was issued, Yavalar left the job site with Lopez and Alcatar to complete their paperwork to obtain insurance coverage through ELS. Yavalar’s wife was able to re-activate Ormes’ insurance coverage with ELS over the telephone. By the end of the day on September 12, 2007, insurance coverage was secured by BY Construction for Ormes, Lopez, and Alcatar. The business records of BY Construction produced for the Department indicated that Ormes had been paid by BY Construction in the period from March to July 2007, and then on September 12, 2007; Lopez had been paid on August 24, 2007, and then on September 12, 2007; Alcatar had been paid on September 12, 2007. All three men were paid only $28 on September 12, 2007. This evidence supports the testimony of Yavalar that these three had arrived at Respondent’s job site for the first time on September 12, 2008. BY Construction was later served with an amended order of penalty for its failure to obtain workers’ compensation coverage for the three employees. It arranged with the Department to pay the penalty through installments and was conditionally released from the stop-work order. When the Department's investigators were at the job site on September 12, 2007, they informed Lockhart about the stop-work order being issued to BY Construction and gave Lockhart a Request for Production of Business Records for the purpose of determining whether Respondent had obtained proof of workers’ compensation insurance coverage from BY Construction before BY Construction commenced work at Respondent’s job site. Respondent produced the requested records. As discussed in the Conclusions of Law, Florida law charges a contractor with the duty to secure workers’ compensation insurance coverage for any uninsured employees of its subcontractors. On this basis, the Department served Respondent with a Stop-Work Order and an Order of Penalty Assessment on September 21, 2007, for failing to secure coverage for Ormes, Lopez, and Alcatar. On September 21, 2007, the Department served a Request for Production of Business Records for Penalty Assessment Calculation to Respondent. The Department’s request asked Respondent to produce records for the preceding three years, including payroll records, tax returns, and proof of insurance. Respondent produced some records in response to this second request, which the Department deemed insufficient to calculate a penalty. However, the evidence shows Respondent produced the only records that it possessed regarding its association with BY Construction. The Department’s proposed penalty does not include an assessment based solely on Respondent’s failure to produce requested records. When an employer fails to provide requested business records within 15 days of the request, the Department is authorized to assess a penalty by imputing the employer's payroll using "the statewide average weekly wage as defined in Section 440.12(2), multiplied by l.5." § 440.107(7)(e), Fla. Stat., and Fla. Admin. Code R. 69L-6.028. Imputing the gross payroll for Ormes, Lopez and Alcatar for the years 2004, 2005, 2006, and 2007, by using the average weekly wage for the type of work, the Department assessed Respondent with a penalty of $138,596.67 and issued an Order of Penalty Assessment to Respondent on October 31, 2007. Petitioner later amended the penalty to $70,272.51, based on the fact that BY Construction was not incorporated until January 1, 2006, and issued a Second Amended Order of Penalty Assessment on December 20, 2007.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order that amends its penalty assessment to reflect one day of non-compliance by Respondent. DONE AND ENTERED this 31st day of March, 2008, in Tallahassee, Leon County, Florida. BRAM D. E. CANTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 2008.
The Issue The issues in this matter are whether Countrywide Siding and Windows, Inc., failed to secure workers compensation that meets the requirements of Chapter 440, Florida Statutes, and, if so was correctly assessed a penalty for violating, the workers’ compensation laws of Florida.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation for the benefit of their employees. § 440.107, Fla. Stat. (2009). Respondent is a corporation domiciled in Florida and engaged in the construction industry. On February 13, 2009, Petitioner’s investigator, Carl Woodall, stopped to spot check a house in the Cabrille Lane area of Panama City, Florida, where he saw workers installing siding. Petitioner’s investigator is the only employee for Petitioner who investigated and developed the substantive evidence in this case. Other employees, who have no direct knowledge of the underlying facts, calculated the amounts of the proposed penalties. Mr. Woodall inquired of the workers and ascertained that they worked for Respondent. The investigator then contacted the Respondent to determine whether Respondent had secured or obtained workers’ compensation insurance under Florida’s workers’ compensation law. Respondent’s representative indicated that it maintained workers’ compensation insurance through Employee Leasing Service (ELS), an employee-leasing company. There is no dispute that in February 2009, Respondent leased its workers from ELS and that under the lease agreement, ELS provided workers’ compensation coverage to Respondent and its leased workers. Other evidence suggested that in past years, Respondent had leased its workers from other employee-leasing companies. The evidence was not specific as to who those companies were. The evidence, while not specific, also suggested that Respondent paid its leased employees bonuses and sometimes loaned them money.1/ In general, employee-leasing agreements provide clerical duties to client companies including tax deduction and workers’ compensation, in exchange for a fee. Client companies’ workers who are registered with the leasing company are employees of the leasing company, not the client company. In this case, the specific contract between ELS and Respondent was not introduced into evidence. Likewise, neither the contract nor the proof of coverage between ELS and its workers’ compensation insurer was introduced into evidence and it is unknown who the actual workers’ compensation insurer was or is. Therefore, there is no credible evidence regarding the specific terms of the contract between ELS, Respondent or the workers’ compensation insurer. Importantly, there is no evidence regarding any fee arrangement between ELS and Respondent showing that workers’ compensation coverage was provided based on payroll or that direct payments to Respondent’s workers constituted payroll under the terms of the lease contract for which workers’ compensation had not been secured. Petitioner’s investigator telephoned ELS and learned from some person (purportedly Ellen Clark) that it did have an employee-leasing contract with Respondent and did maintain workers’ compensation on Respondent’s workers. The investigator was also told that ELS intended to or had cancelled its employee-leasing contract with Respondent effective either February 14 or 15, 2009. No one from ELS testified at the hearing and the substance of the above conversation, as with all the testimony about purported ELS statements, constitutes hearsay that was not corroborated by other credible evidence in the record. As such, the substance of these conversations is not found as facts, other than to establish that Petitioner’s investigator had a conversation with a person purporting to Represent ELS. However, on February 14, 2010, the investigator did not take any action against Respondent since he felt Respondent was in compliance with Florida’s workers’ compensation law. On February 17, 2009, Mr. Woodall again returned to the Cabrille Lane area and observed Respondent’s workers installing siding on a house. One of the workers, Mike Moore, revealed to Mr. Woodall that he was a subcontractor of Respondent, but that the other worker, Ryan Grantham, was Respondent’s employee. The subcontractor was in compliance with Florida’s workers’ compensation laws. In order to find out if the other worker was covered by workers’ compensation insurance, Mr. Woodall met with Ronnie Creed, Respondent’s owner and officer, who was exempt under Florida’s workers’ compensation law. Mr. Creed was unaware of Respondent’s workers’ compensation status but put Mr. Woodall in contact with his wife, India Creed, who was also exempt from Florida’s workers’ compensation law. Ms. Creed told Mr. Woodall that Respondent had received a letter from ELS that day, purportedly notifying it that ELS intended to cancel or had cancelled its employee-leasing contract with Respondent. The letter was not introduced into evidence and it is unclear whether the letter discussed the workers’ compensation insurance coverage ELS maintained on its employees that it leased to Respondent. Again, no one from ELS or its workers’ compensation insurer testified at the hearing regarding its lease or which workers were covered under the lease. The record is devoid of any evidence that these employees were no longer employed by ELS and, more importantly, not covered by ELS’s workers’ compensation coverage on February 17, 2009.2/ Mr. Woodall also checked the Department’s Coverage and Compliance Automated System (CCAS) database. CCAS is a database that maintains information on business entities in Florida and whether they have secured workers’ compensation and /or whether exemptions from workers’ compensation have been granted to eligible company officers. CCAS did not reflect that Respondent had a workers’ compensation insurance policy in place. However, the investigator did not check to see if ELS or another employee-leasing company had such a policy. Similarly, the investigator did not investigate the terms of those contracts and whether those contracts considered any bonuses or loans paid by Petitioner to its employees to be payroll, and if it was, whether any workers’ compensation coverage was dependent on such payments being reported to these companies. As such, the information in that system is hearsay which may or may not indicate a need to investigate further. Moreover, CCAS is simply a database of information reported by others and maintained by the Petitioner. Its reliability is questionable in this case given the multiple contractual entities involved in the provision of workers’ compensation to Respondent and the lack of any direct evidence from those contractual entities. Therefore, the fact that CCAS did not reflect that Respondent had workers’ compensation insurance is not given weight in this Order and is neither clear nor convincing evidence demonstrating that Respondent failed to secure workers’ compensation insurance on February 17, 2009, or for prior years. Based on his belief that Respondent had not secured workers’ compensation on its workers, Mr. Woodall issued a Stop- Work Order and Order of Penalty Assessment and a Request for Production of Business Records for Penalty Assessment Calculation to Respondent (Request) asking for Respondent’s business and financial records related to Respondent’s business and employee leasing for the last 3 years. The records were requested to construct Respondent’s alleged payroll and determine the employees of Respondent. There was no evidence that there was any inquiry into past employment leasing companies that Petitioner contracted with or the terms of those contracts. As with the contract with ELS, there was no inquiry into whether loans or bonuses or any other money paid by Respondent to its workers was considered payroll, required to be reported, or had any impact on workers’ compensation coverage that the leasing companies provided on the employees they leased to Respondent. Respondent complied with the Request and provided the requested business records to Petitioner. Mr. Woodall forwarded the financial records to Petitioner’s penalty calculator, Monica Moye. Beyond checking CCAS, Ms. Moye was not responsible for factually determining whether Respondent had properly secured workers’ compensation insurance during the period under review. Using Respondent’s financial records, Ms. Moye calculated a penalty to be assessed to Respondent based on class code 5645 for siding installation as established by the National Council on Compensation Insurance in the Scopes Manual. She also separated Respondent’s periods of alleged noncompliance based on periodically changing approved manual rates. Approved manual rates are set by the National Council on Compensation Insurance and represent the amounts employers would pay in workers’ compensation premiums for tasks performed by their employees. On March 13, 2009, Petitioner issued an Amended Order of Penalty Assessment, assessing a penalty of $159,002.46 to Respondent. Based on additional records submitted by Respondent, Petitioner recalculated the previously-assessed penalty and issued a 2nd Amended Order of Penalty Assessment to Respondent on June 9, 2009, reducing the assessed penalty to $130,914.99. Additionally, following the hearing, the Department revised the assessed penalty and issued a 3rd Amended Order of Penalty Assessment (3rd Amended Order) reducing the assessed penalty to $130,135.03.3/ The list of employees attached to the 3rd Amended Order of Penalty Assessment contains several incidents of imputed employment listed as “cash,” “unknown” or “Star H.” There is nothing in the record that supports a finding that these amounts were paid for employment purposes. However, the evidence did not establish that Petitioner did not secure workers’ compensation coverage and the issues regarding the correctness of the amount of penalty assessed against Respondent is not addressed in this Recommended Order. Since the evidence did not establish that Respondent failed to secure workers’ compensation, the Stop-work order should be cancelled and the 3rd Amended Order of Penalty Assessment dismissed.
Recommendation Based on the findings of fact and conclusions of law, it is RECOMMENDED that the Department of Financial Services enter a Final Order that Petitioner failed to establish by clear and convincing evidence that Petitioner failed to secure workers’ compensation to its employees and canceling the Stop Work Order and dismissing the 3rd Amended Order of Penalty Assessment. DONE AND ENTERED this 2nd day of April, 2010, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of April, 2010.
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 The issues are whether Respondent failed to provide workers' compensation insurance for its employees, whether the "Stop-Work" Order was warranted, and, whether Petitioner correctly calculated the assessed penalty.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following facts were established by clear and convincing evidence: Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. Respondent, Harold's Plumbing, Inc., a Florida corporation, was engaged in business operations from January 23, 2005, through January 19, 2008. A Stop-Work Order was issued to Respondent on January 22, 2008, after Harold Whitfield advised Petitioner's investigator that Respondent did not have workers' compensation insurance coverage. Petitioner's Coverage and Compliance Automated System database confirmed the lack of coverage. The initial Order of Penalty Assessment was issued on January 22, 2008, and served on Respondent the next day. Based on additional documentation provided by Whitfield and a human resources out-sourcing organization, Gevity HR, which had provided some insurance coverage until it severed its business relationship with Respondent, the Order of Penalty Assessment was amended; the last amendment is dated October 13, 2008. The total penalty, $29,688.72, is accurate and reflects the result of a detailed assessment of Respondent's employee payroll records and application of the classification codes, published by the National Council on Compensation Insurance, Inc., and incorporated into Florida law in Florida Administrative Code Rule 69L-6.021.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Department of Financial Services, Division of Workers' Compensation, enter a final order: Finding that Respondent, Harold's Plumbing, Inc., failed to secure the payment of workers' compensation for its employees, in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent in the amount of $29,668.72, which is equal to 1.5 times the evaded premium based on Petitioner's records and the applicable approved manual rate and classification code. DONE AND ENTERED this 17th day of December, 2008, in Tallahassee, Leon County, Florida. S JEFF B. CLARK 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 December, 2008. COPIES FURNISHED: Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Kristian E. Dunn, Esquire Justin H. Faulkner, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street, 6th Floor Tallahassee, Florida 32399-4229 Harold Whitfield 1125 5th Street Southwest Winter Haven, Florida 33880
The Issue The issue to be determined is whether Respondent complied with coverage requirements of the workers' compensation law, Chapter 440, Florida Statutes. A determination of whether Respondent functioned as an employer is a preliminary issue to be resolved.
Findings Of Fact Petitioner is the agency of state government currently responsible for enforcing the requirement of Section 440.107, Florida Statutes, that employers secure the payment of compensation for their employees. Respondent works in the construction industry as a house framer. Petitioner's investigator received a report of a violation of the workers' compensation law on May 21, 2002. When the investigator arrived at the construction site located at 8225 Southwest 103rd Street Road, Ocala, Florida, he observed four men, including Respondent, installing trusses at a residence under construction. Respondent was identified by the other men as the person for whom they were working on the job. All four men told the investigator that they were employees of Dove Enterprises (DOVE). Upon further investigation, the owner of DOVE and also the general contractor of record, Steven Slocumb, stated to the investigator that DOVE operated as the subcontractor for Triple Crown Homes. Slocumb further stated that DOVE, through Slocumb, in turn subcontracted the work to Respondent on a piece rate or square foot basis. Respondent, according to Slocumb, in turn hired the other three men. When Petitioner's investigator returned to the construction site, the four men were gone. None of the four men had an exemption from coverage requirements of the workers' compensation law and none of them had workers' compensation insurance. Consequently, the investigator determined that Respondent was an employer both of himself and the three other workers and that all four were unprotected by workers' compensation insurance. On June 27, 2002, the investigator issued the Stop Work and Penalty Assessment Order at issue in this proceeding. The Order levied the minimum penalty under Section 440.107, Florida Statutes, of $1,100.00. Slocumb and Respondent appeared at the final hearing. Respondent's position was that he and the other three men were employees of DOVE. None of the men produced documentation of such an employment relationship. Rather, documentation presented shows that DOVE paid Respondent for equipment rental. Additionally, payments to Respondent from DOVE for the jobs in question did not include adjustments for employment taxes that would have applied had Respondent been an employee. Respondent's testimony is not credited. Slocumb confirmed the facts determined by the investigator. Slocumb's testimony was candid, direct and creditable.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order confirming the Stop Work and Penalty Assessment Order at issue in this proceeding. DONE AND ENTERED this 8th day of July, 2003, in Tallahassee, Leon County, Florida. S DON W. 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 8th day of July, 2003. COPIES FURNISHED: Lawrence Simon 1683 Southeast 160th Terrace Oklawaha, Florida 33379 David C. Hawkins, Esquire Department of Financial Services Division of Workers' Compensation 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, Lower Level 11 Tallahassee, Florida 32399-0300
