Findings Of Fact 12. The factual allegations in the Stop-Work Order and Order of Penalty Assessment issued on February 17 2009, and the Third Amended Order of Penalty Assessment issued on September 4, 2009, which are 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 Stop- Work Order and Order of Penalty Assessment and the Third Amended Order of Penalty Assessment served in Division of Workers’ Compensation Case No. 09-042-D7, and being otherwise fully advised in the premises, hereby finds that: 1. On February 17, 2009, 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. 09-042-D7 to ROYMO, INC. The Stop-Work Order and Order of Penalty Assessment included a Notice of rights wherein ROYMO, 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. 2. On February 17, 2009, the Stop-Work Order and Order of Penalty Assessment was served via personal service on ROYMO, 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 February 25, 2009, the Department issued an Amended Order of Penalty Assessment to ROYMO, INC. in Case No. 09-042-D7. The Amended Order of Penalty Assessment assessed a total penalty of $61,692.98 against ROYMO, INC. The Amended Order of Penalty Assessment included a Notice of Rights wherein ROYMO, 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. 4. The Amended Order of Penalty Assessment was served on ROYMO, INC. by personal service on February 25, 2009. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. On March 10, 2009, ROYMO, INC. filed a timely Petition for a formal administrative hearing in accordance with Sections 120.569 and 120.57, Florida Statutes. The Petition was forwarded to the Division of Administrative Hearings and assigned Case No. 09- 1388. 6. On September 4, 2009, the Department issued a Third Amended Order of Penalty Assessment to ROYMO, INC. in Case No. 09-042-D7. The Third Amended Order of Penalty Assessment assessed a total penalty of $29,911.26 against ROYMO, INC. The Third Amended Order of Penalty Assessment was served on ROYMO, INC. through the Division of Administrative Hearings. A copy of the Third Amended Order of Penalty Assessment is attached hereto as “Exhibit C” and is incorporated herein by reference. 7. On November 6, 2009, ROYMO, INC. filed a Notice of Voluntary Dismissal in DOAH Case No. 09-1388. A copy of the Notice of Voluntary Dismissal filed by ROYMO, INC. is attached hereto as “Exhibit D.” 8. On November 9, 2009 Administrative Law Judge Daniel M. Kilbride entered an Order Closing File, relinquishing jurisdiction to the Department. A copy of the November 9, 2009 Order Closing File is attached hereto as “Exhibit E.”
The Issue The issue is whether Respondent, Department of Financial Services, Division of Workers' Compensation, properly assessed a penalty of $90,590.42 against Petitioner, S.A.C., LLC.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure payment of workers' compensation for the benefit of their employees pursuant to Section 440.107, Florida Statutes. At all times relevant to this proceeding, Petitioner, S.A.C., LLC, was a corporation domiciled in Florida. S.A.C.'s 2007 Limited Liability Company Annual Report lists its principal place of business as 626 Lafayette Court, Sarasota, Florida, 34236, and its mailing address as Post Office Box 49075, Sarasota, Florida 34230. At all times relevant to this proceeding, William R. Suzor was the president and managing member of S.A.C. Collen Wharton is an Insurance Analyst II with the Department. In this position, Ms. Wharton conducts inspections to ensure that employers are in compliance with the law. On June 20, 2007, Ms. Wharton conducted a compliance check at 2111 South Osprey Avenue in Sarasota, Florida. During the compliance check, Ms. Wharton observed three males working at that location. The three men were framing a single-family house that was under construction. This type of work is carpentry, which is considered construction. During the compliance check, Ms. Wharton asked David Crawford, one of the men working at the site, who was their employer. Mr. Crawford told Ms. Wharton that he and the other two men worked for S.A.C., but were paid by a leasing company. Mr. Crawford told Ms. Wharton that the company was owned by Mr. Suzor and, in response to Ms. Wharton's inquiry, he gave her Mr. Suzor's telephone number. In addition to Mr. Crawford, the other workers at the site were identified as Terry Jenkins and Frank Orduno. By checking the records the Department maintains in a computerized database, Ms. Wharton determined that S.A.C. did not carry workers' compensation insurance, but had coverage on its employees through Employee Leasing Solutions, an employee leasing company. She also determined, by consulting the Department's database, that none of the men had a workers' compensation exemption. Ms. Wharton telephoned Employee Leasing Solutions, which advised her that two of the workers at the site, Mr. Crawford and Mr. Jenkins, were on the roster of employees that the company maintained. The company advised her that the other worker, Mr. Orduno, was not on its roster of employees. This information was verified by an employee list that the leasing company provided to Ms. Wharton. On June 20, 2007, after determining that one worker at the work site had no workers' compensation coverage, Mr. Wharton prepared a Stop-Work Order. She then telephoned Mr. Suzor, told him that he had one worker at the site who did not have workers' compensation coverage and requested that he come to the work site. During the conversation, Mr. Suzor advised Ms. Wharton that Mr. Crawford was in charge at the work site, that she could give the Stop-Work Order to Mr. Crawford, and that he (Mr. Suzor) would meet her the following day. Ms. Wharton, after she telephoned Mr. Suzor, she conferred with her supervisor and then issued Stop-Work Order No. 07-125-D3, posting it at the work site and serving it on Mr. Crawford. On June 21, 2007, Mr. Suzor met with Ms. Wharton at her office. During that meeting, Ms. Wharton served a copy of Stop-Work Order No. 07-125-D3 on Mr. Suzor. She also served him with a Request for Production of Business Records for Penalty Assessment Calculation ("Request for Business Records"). The Request for Business Records listed specific records that Mr. Suzor/S.A.C. should provide to the Department so that the Department could determine the workers who S.A.C. paid during the period of June 19, 2004, through June 20, 2007. The Request for Business Records notes that the requested records must be produced within five business days of receipt. According to the Request for Business Records, if no records are provided or the records provided are insufficient to enable the Department to determine the payroll for the time period requested for the calculation of the penalty in Subsection 440.107(7)(d), Florida Statutes, "the imputed weekly payroll for each employee, . . . shall be the statewide average weekly wage as defined in section 440.12(2), F.S. multiplied by 1.5." S.A.C. did not respond to the Department's Request for Business Records. On July 17, 2007, the Department had received no records from S.A.C. Without any records, Ms. Wharton had no information from which she could determine an accurate assessment of S.A.C.'s payroll for the previous three years. Therefore, Ms. Wharton calculated the penalty based on an imputed payroll. In her calculations, Ms. Wharton assumed that Mr. Orduno worked from June 21, 2004, through June 20, 2007, and that he was paid 1.5 times the state-wide average weekly wage for the class code assigned to the work he performed for each year or portion of the year. The Department then applied the statutory formula set out in Subsection 440.107(7)(d), Florida Statutes. Based on that calculation, the Department correctly calculated S.A.C.'s penalty assessment as $90,590.42, as specified in the Amended Order of Penalty Assessment dated July 17, 2007. The Amended Order of Penalty Assessment reflecting the correct penalty amount was served on S.A.C.'s attorney, John Myers, Esquire, by hand-delivery, on July 17, 2007.3/ On July 21, 2007, S.A.C., through its former counsel, filed a Petition for Hearing.
Recommendation Based upon the Findings of Fact and Conclusions of Law, RECOMMENDED that Respondent, Department of Financial Services, Division of Workers' Compensation, enter a final order which affirms the Amended Order of Penalty Assessment issued July 17, 2007, assessing a penalty of $90,590.42, and the Stop-Work Order issued to Petitioner, S.A.C., LLC, on June 20, 2007. DONE AND ENTERED this 25th day of March, 2008, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of March, 2008.
The Issue The issues in this case are whether Respondent 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. 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, All Florida was a Florida corporation engaged in the business of well drilling for water, a construction business, with its principal office located at 2250 Havana Avenue, Fort Myers, Florida. On August 3, 2010, Amy Thielen (Ms. Thielen), a compliance investigator for the Department, conducted an on-site investigation at a work site located at 129 Montrose Street, Fort Myers, Florida. Ms. Thielen observed a parked truck with the All Florida logo on it at this work site and an individual working nearby. After identifying herself to the individual, the individual identified himself as Edward Perez (Mr. Perez), an employee of and working for All Florida at that time. Ms. Thielen then consulted the Department's Coverage and Compliance Automated System (CCAS) database to determine if All Florida had workers' compensation coverage. The insurance companies report any workers' compensation coverage to the Department through this CCAS database, which is kept current. The CCAS showed that All Florida had two periods in which its workers' compensation coverage lapsed: March 3, 2009, through October 24, 2009, and a second period when the workers' compensation policy was cancelled from January 9, 2010, to August 3, 2010. Ms. Thielen contacted All Florida's last workers' compensation carrier and was informed that there was no workers' compensation policy in place. There was no workers' compensation coverage in effect on August 3, 2010, when Ms. Thielen confirmed that Mr. Perez was working for All Florida. Ms. Thielen testified that any construction company could obtain an exemption from having workers' compensation coverage through an application to the Department. All Florida did not have an exemption for any corporate officers.2/ Ms. Thielen checked the Department of State, Division of Corporations', records and learned that Robert Henshaw (Mr. Henshaw) was the president and only officer of All Florida. Based on her investigation, Ms. Thielen determined that All Florida did not have the requisite workers' compensation coverage at that time. After consulting with her supervisor, Ms. Thielen issued a Stop-Work Order to All Florida on August 11, 2010. A stop-work order is an enforcement action issued against employers that forces the employer to cease all business operations in Florida until they obtain the requisite workers' compensation coverage and return to full compliance. At the time Ms. Thielen served All Florida with the Stop-Work Order, she also served a request for production of business records for penalty assessment calculation to All Florida. This document requests certain business records from the employer for a three-year period in order for an audit to be performed to properly calculate the penalty assessment. All Florida produced the requested business records to the Department. Melissa Geissler (Ms. Geissler), a penalty calculator for the Department's Bureau of Compliance, calculated the penalty assessment based on All Florida's business records. Based on a review of the produced business records, the initial penalty assessment was $18,216.73. On September 8, 2010, Mr. Henshaw, acting on behalf of All Florida, executed a "payment agreement schedule for periodic payment of penalty" with the Department. Mr. Henshaw paid ten percent of the penalty assessment, put the remainder of the penalty assessment in a payment plan, and obtained the requisite worker's compensation coverage. The Department then issued an "Order of Conditional Release from Stop-Work Order," thus allowing All Florida to continue to operate while paying the remaining penalty assessment in specific increments. After the original penalty assessment order was issued, All Florida submitted additional business records, and the Department sought to and did revise the penalty assessment amount downward. As the case was already at the Division, the Department, with All Florida's consent, requested that a second amended order of penalty assessment be issued, reducing the penalty amount to $13,267.24. On October 20, 2010, the Division issued an Order allowing the second amended order of penalty assessment to be issued. In April 2011, after still more business records were delivered to the Department, the Department issued a third amended order of penalty assessment. This time the penalty assessment was reduced to $12,721.73. On August 24, 2011, the Department filed a motion to amend order of penalty assessment. There was insufficient time for All Florida to respond to the motion, and, at hearing, All Florida, through its president, Mr. Henshaw, voiced no objection to the reduction in the penalty assessment amount. Ms. Geissler's duties at the Department include reviewing financial documentation from employers, identifying payroll transactions, and verifying workers' compensation coverage. Ms. Geissler testified that she utilizes the CCAS database to confirm whether any employer has secured workers' compensation coverage. When she finds a payroll transaction that reflects such coverage, that transaction is not used in the penalty assessment calculation; otherwise, the transaction is used in calculating the coverage cost amount. Ms. Geissler also testified that she utilizes the penalty worksheet authorized in Florida Administrative Code Rule 69L-6.027 to aid in the penalty calculation process. Ms. Geissler conducted an audit of All Florida based on the business records it provided to the Department. Ms. Geissler determined the amount of workers' compensation premium that All Florida would have paid had it been in compliance with Florida law between August 12, 2007, and August 11, 2010 (excluding October 25, 2009, through January 8, 2010, when there was coverage). Ms. Geissler testified that, during this three-year period, All Florida was an active construction based employer. It was confirmed that there were four employees (including Mr. Henshaw) of All Florida. In order to calculate the appropriate penalty, Ms. Geissler took 1/100th of the gross payroll and multiplied that figure by the approved manual rate applicable to class code 6204 (the class code designated to specialist contractors engaged in drilling work as found in the approved Scopes Manual3/). The approved manual rates are determined by the National Council on Compensation Insurance, adopted by the Florida Office of Insurance Regulation, and represent the recent trends in workers' compensation loses associated with each individual class code. After reviewing all of the business records submitted by All Florida, and using the applicable formula, Ms. Geissler credibly testified that the final penalty assessment was $12,721.73. Ms. Geissler's calculations for the penalty assessment were performed in accordance with the requirements of section 440.107(7) and rule 69L-6.027. Mr. Henshaw did not provide any testimony during the proceeding, but rather made the statement that there was no point in fighting the allegation, "everything is correct."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that All Florida failed to secure workers' compensation coverage and assessing a penalty of $12,721.73 against All Florida. DONE AND ENTERED this 5th day of October, 2011, 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 5th day of October, 2011.
Findings Of Fact The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on April 1, 2011, and the Amended Order of Penalty Assessment issued on April 19, 2011, which are fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Jeff Atwater, Chief Financial Officer of the State of Florida, or his designee, having considered the record in this case, including the Stop-Work Order and Order of Penalty Assessment, and the Amended Order of Penalty Assessment, and being otherwise fully advised in the premises, hereby finds that: 1. On April 1, 2011, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 11-110-1A to LYNDA AGUAYO, DBA, LA FRAMING CONTRACTOR, INC., A DISSOLVED FLORIDA CORPORATION AND LA FRAMING CONTRACTOR, INC. The Stop-Work Order and Order of Penalty Assessment included a Notice of Rights wherein LYNDA AGUAYO, DBA, LA FRAMING CONTRACTOR, INC., A DISSOLVED FLORIDA CORPORATION AND LA FRAMING CONTRACTOR, 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 Section 120.569 and 120.57, Florida Statutes. 2. On April 1, 2011, the Stop-Work Order and Order of Penalty Assessment was personally served on LYNDA AGUAYO, DBA, LA FRAMING CONTRACTOR, INC., A DISSOLVED FLORIDA CORPORATION AND LA FRAMING CONTRACTOR, 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, 2011, the Department issued an Amended Order of Penalty Assessment in Division of Workers’ Compensation Case No. 11-110-1A to LYNDA AGUAYO, DBA, LA FRAMING CONTRACTOR, INC., A DISSOLVED FLORIDA CORPORATION AND LA FRAMING CONTRACTOR, INC. The Amended Order of Penalty Assessment assessed a total penalty of $12,985.36 against LYNDA AGUAYO, DBA, LA FRAMING CONTRACTOR, INC., A DISSOLVED FLORIDA CORPORATION AND LA FRAMING CONTRACTOR, INC. 4. On April 29, 2011, the Amended Order of Penalty Assessment was. personally served on LYNDA AGUAYO, DBA, LA FRAMING CONTRACTOR, INC., A DISSOLVED FLORIDA CORPORATION AND LA FRAMING CONTRACTOR, INC. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 5. LYNDA AGUAYO, DBA, LA FRAMING CONTRACTOR, INC., A DISSOLVED FLORIDA CORPORATION AND LA FRAMING CONTRACTOR, INC failed to answer the Stop-Work Order and Order of Penalty Assessment and the Amended Order of Penalty Assessment or request a proceeding in accordance with Sections 120.569 and 120.57, Florida Statutes.
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 are whether, under section 440.107, Florida Statutes, Petitioner may calculate a penalty assessment for a failure to secure the payment of workers' compensation for one day as though the failure persisted over two years and whether Petitioner may calculate a penalty assessment based on double the statewide average weekly wage (AWW) when the lone uncovered employee earned $10 per hour.
Findings Of Fact Respondent was incorporated in 2008 by Ineido Soler, Sr., and his son, Ineido Soler, Jr. Since the corporation began operations, the wife of Mr. Soler, Jr., Idalmis Pedrero, has served as the office manager of this family-owned company. At all material times, Respondent has contracted with a personnel leasing company to handle employee matters, such as securing the payment of workers' compensation. Ms. Pedrero's responsibilities include informing the employee leasing company of new hires, so the company can obtain workers' compensation coverage, which typically starts the day following notification. On the afternoon of November 22, 2015, Mr. Soler, Jr., telephoned his wife and told her that he and his father had hired, at the rate of $10 per hour, a new employee, Geony Borrego Lee, who would start work the following morning. Customarily, Ms. Pedrero would immediately inform the employee leasing company. However, Ms. Pedrero was working at home because, six days earlier, she had delivered a baby by caesarian section, and she was still recuperating and tending to her newborn. A fatigued Ms. Pedrero did not notify the employee leasing company that day of the new hire. Late the next morning, Ms. Pedrero was awakened by a call from her husband, who asked her if she had faxed the necessary information to the employee leasing company. Ms. Pedrero admitted that she had not done so, but would do so right away. She faxed the information immediately, so that the employee leasing company could add Mr. Lee to the workers' compensation policy, effective the next day, November 24. Uncovered for November 23, Mr. Lee joined three other employees of Respondent and performed roofing work at a worksite. Late in the afternoon of November 23, one of Petitioner's investigators conducted a random inspection of Respondent's worksite and determined that Respondent had secured the payment of workers' compensation for the three other employees, but not for Mr. Lee. The investigator issued an SWO on the day of the inspection, November 23. The SWO contains three parts. First, the SWO orders Respondent to cease work anywhere in the state of Florida. Second, the SWO includes an Order of Penalty Assessment, which does not contain a specific penalty, but instead sets forth the formula by which Petitioner determines the amount of the penalty to assess. Tracking the statute discussed below, the formula included in the SWO is two times the premium that the employer would have paid when applying approved manual rates to the employer's payroll "during periods for which it has failed to secure the payment of compensation within the preceding 2-year period." Third, the SWO includes a Notice of Rights, which advises Respondent that it may request a chapter 120 hearing. On November 24, Petitioner released the SWO after Respondent had secured the payment of workers' compensation for Mr. Lee. On November 25, the investigator hand delivered to Respondent a Request for Production of Business Records for Penalty Assessment Calculation (Request). The Request covers November 24, 2013, through November 23, 2015, and demands records in eight categories: identification of employer, occupational licenses, payroll documents, account documents, disbursements, contracts for work, identification of subcontractors, and documentation of subcontractors' workers' compensation coverage. The Request identifies "payroll documents" as: all documents that reflect the payroll of the employer . . . including . . . time sheets, time cards, attendance records, earning records, check stubs and payroll summaries for both individual employees and aggregate records; [and] federal income tax documents and other documents reflecting the . . . remuneration paid or payable to each employee . . . . The Request adds: The employer may present for consideration in lieu of the requested records, proof of compliance with F.S. 440 by a workers' compensation policy or coverage through employee leasing for all periods of this request where such coverage existed. If the proof of compliance is verified by the Department the requested records for that time period will not be required. The Request warns: If the employer fails to provide the required business records sufficient to enable the . . . Division of Workers' Compensation to determine the employer's payroll for the period requested for the calculation of the penalty provided in section 440.107(7)(d), F.S., the imputed weekly payroll for each employee shall be the statewide average weekly wage as defined in section 440.12(2), F.S., multiplied by 2. The Department shall impute the employer's payroll at any time after ten, but before the expiration of twenty eight business days after receipt by the employer of [the Request]. (FAC 69L-6.028) . . . . On December 11, 2015, Respondent provided the following documents to Petitioner: itemized invoices, including for workers' compensation premiums, from the employee leasing company to Respondent and checks confirming payment, but the invoices and checks are from December 2011; an employee leasing agreement signed by Respondent on August 1, 2014, and signed by the employee leasing company on August 5, 2014; an employee leasing application for Mr. Lee dated November 23, 2015, showing his date of birth as November 20, 1996, his hourly pay as $10, and his hire date as November 23, 2015; and an employee census dated December 1, 2015, showing, for each employee, a date of hire and, if applicable, date of termination. Partially compliant with the Request, this production omitted any documentation of workers' compensation coverage prior to August 1, 2014, and any documentation of payroll except for Mr. Lee's rate of pay. On December 14, 2015, Respondent filed with Petitioner its request for a chapter 120 hearing. On December 30, 2016, Petitioner issued an Amended Order of Penalty Assessment (Amended Assessment), which proposes to assess a penalty of $63,434.48. On the same date, Petitioner transmitted the file to DOAH. Petitioner issued a Second Amended Order of Penalty Assessment on February 16, 2016, which is mentioned in, but not attached to, the Prehearing Stipulation that was filed on April 26, 2016, but the second amended assessment reportedly leaves the assessed penalty unchanged from the Amended Assessment. In determining the penalty assessment, Petitioner assigned class code 5551 from the National Council on Compensation Insurance because Mr. Lee was performing roofing work; determined that the entire two-year period covered in the Request was applicable; identified the AWW as $841.57 based on information provided by the Florida Department of Economic Opportunity for all employers subject to the Florida Reemployment Assistance Program Law, sections 443.01 et seq., Florida Statutes, for the four calendar quarters ending June 30, 2014; applied the appropriate manual rates for class code 5551 to $841.57, doubled, and divided the result by 100--all of which yielded a result of $31,717.24, which, doubled, results in a total penalty assessment of $63,434.48. There is no dispute that the classification code for Mr. Lee is code 5551, the AWW is $841.57, and the manual rates are 18.03 as of July 1, 2013, 18.62 as of January 1, 2014, and 17.48 as of January 1, 2015. Because Petitioner determined that Respondent had failed to provide sufficient evidence of its payroll, Petitioner calculated the penalty assessment by using the AWW of $841.57, doubled, instead of Mr. Lee's actual rate of $10 per hour. Petitioner's calculations are mathematically correct. For the 5.27 weeks of 2013, the penalty assessment is $3198.58 based on multiplying the AWW, doubled, by the manual rate of 18.03 divided by 100 multiplied by 2 and multiplied by 5.27. For the 52 weeks of 2014, the penalty assessment is $32,593.67 based on multiplying the AWW, doubled, by the manual rate of 18.62 divided by 100 multiplied by 2 and multiplied by 52. For the 46.44 weeks of 2015, the penalty assessment is $27,326.48 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 46.44. Adding these sums yields a total penalty assessment of $63,118.73, which approximates Petitioner's penalty assessment calculation of $63,434.48. (Mistranscription of difficult-to- read manual rates or a different rule for handling partial weeks may account for the small difference.) Respondent challenges two factors in the imputation formula: the two-year period of noncompliance for Mr. Lee instead of one day's noncompliance and the AWW, doubled, instead of Mr. Lee's $10 per hour rate of pay. Underscoring the differences between the two-year period of noncompliance and double the AWW and the actual period of noncompliance and Mr. Lee's real pay rate, at the start of the two-year period, Mr. Lee was three days past his 16th birthday and residing in Cuba, and Mr. Lee continues to earn $10 per hour as of the date of the hearing. The impact of Petitioner's use of the two-year period of noncompliance and double the AWW is significant. If the calculation were based on a single day, rather than two years, the assessed penalty would be less than the statutory minimum of $1000, which is described below, even if double the AWW were used. One day is 0.14 weeks, so the penalty assessment would be $82.38 based on multiplying the AWW, doubled, by the manual rate of 17.48 divided by 100 multiplied by 2 and multiplied by 0.14. If the calculation were based on the entire two years, rather than a single day, the assessed penalty would be about one-quarter of the proposed assessed penalty, if Mr. Lee's actual weekly rate of pay were used instead of double the AWW. Substituting $400 for twice the AWW in the calculations set forth in paragraph 15 above, the penalty would be $760.14 for 2013, $7746.92 for 2014, and $6494.17 for 2015 for a total of $15,001.23. Explaining why Petitioner treated one day of noncompliance as two years of noncompliance, one of Petitioner's witnesses referred to Mr. Lee as a "placeholder" because the real focus of the imputation formula is the employer. The same witness characterized the imputation formula as a "legal fiction," implying that the formula obviously and, in this case, dramatically departs from the much-smaller penalty that would result from calculating exactly how much premium that Respondent avoided by not covering the modestly paid Mr. Lee on his first day of work. Regardless of how Petitioner characterizes the imputation formula, the statutory mandate, as discussed below, is to determine the "periods" during which Respondent failed to secure workers' compensation insurance within the two-year period covered by the Request. The focus is necessarily on the employee found by the investigator to be uncovered and any other uncovered employees. Petitioner must calculate a penalty based on how long the employee found by the investigator on his inspection has been uncovered, determining how many other employees, if any, in the preceding two years have been uncovered, and calculating a penalty based on how long they were uncovered. There is evidence of one or two gaps in coverage during the relevant two years, but Petitioner has failed to prove such gaps by clear and convincing evidence. One of Petitioner's witnesses testified to a gap of one month "probably" from late January to late February 2015. This witness relied on Petitioner Exhibit 2, but it is completely illegible. Ms. Pedrero testified that Respondent had workers' compensation coverage since 2011, except for a gap, which she thought had occurred prior to August 2014, which is the start date of the current policy. This conflicting evidence does not establish by clear and convincing evidence any gap, and, even if a gap had been proved, no evidence establishes the number of uncovered employees, if any, during such a gap, nor would such a gap justify enlarging the period of noncompliance for Mr. Lee. Ms. Pedrero testified that her mother-in-law, Teresa Marquez cleaned the office and warehouse on an occasional basis, last having worked sometime in 2015. Respondent never secured workers' compensation coverage for Ms. Marquez, but she did no roofing work and appears to have been a casual worker, so her periods of employment during the two-year period covered by the Request would not constitute additional periods for which Respondent failed to secure workers' compensation insurance. Based on the foregoing, Petitioner has proved by clear and convincing evidence only a single day of noncompliance, November 23, concerning one employee, Mr. Lee, within the relevant two-year period for the purpose of calculating the penalty assessment. Likewise, Petitioner has proved by clear and convincing evidence a rate of pay of only $10 per hour for the purpose of calculating the penalty assessment. At no time has Respondent provided payroll records of all its employees for November 23, 2015. Respondent Exhibit E covers payroll for Respondent's employees for a two-week period commencing shortly after November 23, 2015. But the evidence establishes that Mr. Lee's rate of pay was $80 for the day, which, as discussed below, rebuts the statutory presumption of double the AWW.
Recommendation It is RECOMMENDED that the Department of Financial Services enter a final order determining that Respondent has failed to secure the payment of workers' compensation for one employee for one day within the two-year period covered by the Request and imposing an administrative penalty of $1000. DONE AND ENTERED this 19th day of July, 2016, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 2016. COPIES FURNISHED: Jonathan Anthony Martin, Esquire Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Daniel R. Vega, Esquire Robert Paul Washington, Esquire Taylor Espino Vega & Touron, P.A. 2555 Ponce De Leon Boulevard, Suite 220 Coral Gables, Florida 33134 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue Whether Petitioner is entitled to file a Petition for hearing to challenge the Stop-Work Order (SWO) and Amended Order of Penalty Assessment (AOPA) more than 21 days from the date of the SWO and the AOPA?
Findings Of Fact Based on the evidence presented at the final hearing, the following findings of fact are made: Respondent is the state agency charged with the responsibility of enforcing the requirement that employers, in Florida, secure workers' compensation insurance coverage for their employees. § 440.107 (3) Fla. Stat. (2005).1 Petitioner, J and A Framing, Inc., during all times relevant to these proceedings, is a Florida for profit corporation, and is authorized to do business in this state. On October 20, 2005, Respondent's Investigator personally served a Request for Production of Business Records on a representative of Petitioner. On October 26, 2005, Respondent's Investigator personally served a SWO on Jorge Bernales, President of Petitioner. The SWO contained a Notice of Rights, on the second page, advising Petitioner, in bold print, that it had 21 days within which it may file a petition challenging the SWO. On October 31, 2005, Respondent's Investigator personally served an Amended Order of Penalty Assessment (AOPA) on Jorge Bernales, President of Petitioner, which also contained a Notice of Rights, on the second page, advising Petitioner, in bold print, that it had 21 days within which to file a petition challenging the AOPA. Marisol Hernandez, Bernales' girlfriend, who reads and speaks English fluently, was present when Respondent's Investigator served Bernales with the SWO and the AOPA. Petitioner filed its Petition with Respondent on March 6, 2006, which is more than 120 days from the date of the SWO and AOPA. Jorge Bernales testified that he was Petitioner's only corporate officer. Marisol Hernandez stated her only relationship with Petitioner was as the girlfriend of Jorge Bernales, its President, and that she is carrying Bernales' unborn child, and his income pays her rent and utilities. She was not employed by Petitioner. Counsel for Petitioner elicited testimony from Hernandez that she did "nothing" for the company and was not an employee or officer of Petitioner. The testimony of Bernales and Hernandez conflicts with the corporate records, admitted in evidence as a joint exhibit, and filed with the Florida Secretary of State, Division of Corporations. The accuracy of the corporate records has not been challenged. It is found that, the corporate records are more credible than the testimony of Bernales and Hernandez. Effective October 27, 2005, Hernandez was listed as the Vice President and therefore, was an employee of Petitioner. At all times material hereto, Bernales was the President and an employee of Petitioner. Petitioner's President and Vice President (collectively, "Officers") met with the Respondent's Investigator on several occasions. During their first meeting, Respondent served the Request for Production of Business Records (BRR) on Bernales. During Petitioner's second meeting with Respondent, Bernales and Hernandez were presented and received the SWO. Hernandez was able to read the Notice of Rights on the SWO, and did so at the final hearing when she read aloud, "[f]ailure to file a petition within 21 days of receipt of this Stop-Work Order constitutes a waiver of your right to request a hearing." During Petitioner's third meeting, the Officers received the AOPA. The Officers had every opportunity to read the AOPA, which contains a bold Notice of Rights, virtually identical to the one on the SWO. Bernales concentrated on raising enough money to pay the penalty. Bernales approached several banks, friends, and family members to get enough money in order to put a ten percent down payment on the assessment. Unable to secure sufficient funds, Bernales offered to pay Respondent a lesser amount in exchange for lifting the SWO. This request was denied. Bernales could understand and speak the English language, but was unable to read English. He knew and was present when Hernandez read and spoke English. Bernales did not seek Hernandez's assistance in understanding the SWO or the AOPA. Hernandez had actual possession of the SWO and the AOPA, but chose to read neither. The Officers went to Elisa Barron, Petitioner's accountant, to gather documents responsive to BRR. Both knew she could read and write English. Barron assisted Petitioner in collecting the documents requested on the BRR. Neither Officer asked Barron to assist them in understanding the terms of the SWO or the AOPA. Furthermore, the Officers had the SWO and AOPA with them, but did not show the SWO or the AOPA to Barron while they were at Barron's office. The Officers testified they were unable to recall whether Barron advised them to seek an attorney regarding the penalty assessment. However, Barron testified she advised Bernales to seek an attorney listed in the local Spanish language newspaper. Barron gave Bernales a copy of the newspaper. Barron's testimony is credible. In January 2006, Bernales retained Dan N. Godfrey, Esquire, to advise the company regarding the instant matter. Even after receiving the advice of counsel, Bernales waited until March 3, 2006, to request permission to file an untimely petition. On March 3, 2006, Petitioner filed a Petition for Hearing with Respondent requesting permission to file an untimely petition to challenge the SWO and AOPA. Petitioner presented no credible evidence that Respondent, or any of its employees, misled Petitioner or lulled it into inaction.
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 dismissing the Petition, which requests permission to file an untimely petition challenging the SWO and the AOPA. DONE AND ORDERED this 2nd day of February, 2007, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of February, 2007.
The Issue The issues are whether Petitioner was in violation of the workers' compensation requirements of Chapter 440, Florida Statutes (2006),1/ and, if so, what penalty should be assessed.
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. Respondent is a corporation, incorporated in the State of Florida, which conducted business operations in Florida during the period of February 8, 2004, through February 8, 2007. At all times relevant to this proceeding, David Griswold was the president, secretary, and registered agent of Griswold, Inc., as well as its sole employee. Lloyd Hillis is an investigator for the Department's Division of Workers' Compensation, Bureau for Compliance. As part of his job responsibilities, Mr. Hillis visits work sites of construction and non-construction businesses to determine if they are complying with applicable workers' compensation laws. On February 8, 2007, Mr. Hillis, on behalf of the Department, conducted a routine compliance check of all contractors in the Sunset Point Subdivision in Clearwater, Florida. During this compliance check, Mr. Hillis observed that Mr. Griswold was about to install kitchen cabinets at a house under construction at 2523 Colony Reed Lane. Cabinet installation is considered carpentry and is defined as construction work. As such, employees performing this work are required to have workers' compensation coverage unless they are exempted from such coverage. The type of work being performed by Mr. Griswold, cabinet installation or carpentry, has been designated by the SCOPES Manual as Class Code 5437. The Department has adopted the SCOPES Manual by reference in Florida Administrative Code Rule 69L-6.021. If and when there have been violations of the workers' compensation laws, the class codes are used in calculating the appropriate penalty. On the day of the inspection, Mr. Griswold told Mr. Hillis that he was employed by Griswold, Inc., that he was the sole employee of the corporation, and that he had an exemption from having workers' compensation coverage. Upon checking the computer database maintained by the Department, Mr. Hillis determined that Mr. Griswold did not have an exemption and had not had an exemption since 2002. Moreover, the same computer database showed that Griswold, Inc., did not have workers' compensation coverage. On February 8, 2007, Mr. Hillis issued a Stop Work Order against Griswold, Inc., after he determined that Mr. Griswold did not have workers' compensation insurance. That same day, Mr. Hillis issued to Mr. Griswold a Request for Production of Business Records for Penalty Assessment Calculation (hereinafter referred to as "Request for Production of Business Records") to determine the amount of the penalty assessment. In response to the Request for Production of Business Records, Mr. Griswold provided the Department with payroll documents for the period from 2004 to 2007 and an unsigned 2006 Federal Income Tax Return. The payroll documents submitted by Petitioner consisted of pay stubs, which reflected that Texwood Industries, a company in Texas, had issued payroll checks to Mr. Griswold as an employee of Petitioner. According to the records, during the time period from 2004 through 2007, the only employee who worked for Petitioner was Mr. Griswold. During this proceeding, Petitioner did not dispute that from February 8, 2004, through February 8, 2007, Mr. Griswold was not covered by workers' compensation coverage and did not have an exemption from such coverage. Mr. Hillis used the payroll documents provided to him by Mr. Griswold as the basis for calculating the penalty assessment for the period from February 8, 2004, through February 8, 2007. However, Mr. Hillis was unable to consider the 2006 Federal Income Tax Return because it was not signed.2/ Even if the 2006 Federal Income Tax Return had been signed, the 2004 and 2005 tax records were also needed. The tax records for all three years, if provided to the Department, would have been considered and may have affected or altered the amount of the penalty assessment. The Department correctly calculated the penalty assessment using the statutory guidelines in Subsection 440.107(7)(d), Florida Statutes. The calculation was based on the money paid to Petitioner's sole employee, Mr. Griswold; the class code assigned to the job being performed by Mr. Griswold, utilizing the SCOPES Manual; and the applicable approved manual rate. Based on that calculation, the correct penalty assessment in this case is $52,685.67.
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 that affirms the Stop Work Order issued February 8, 2007, and the Amended Order of Penalty Assessment issued February 21, 2007, which assigns a penalty of $52,685.67. DONE AND ENTERED this 7th day of November, 2007, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of November, 2007.
The Issue Has Respondent failed to secure payment of workers' compensation for his employees, Section 440.107(2), Florida Statutes (2005), justifying the entry of a stop-work order, Subsection 440.107(7)(a), Florida Statutes (2005), and the entry of a financial penalty against Respondent, Subsection 440.107(7)(d), Florida Statutes (2005), as imputed, Subsection 440.107(7)(e), Florida Statutes (2005)?
Findings Of Fact Michael Robinson is an investigator for Petitioner's Bureau of Compliance. His duties include job site visits to determine whether individuals on the site are employees, by whom those persons are employed and whether the employer has secured the payment of workers' compensation by obtaining necessary insurance coverage. Some site visits are made on a random basis. That was the case here. On August 11, 2005, Mr. Robinson went to an address in Lake City, Florida, referred to as 223 NW Sylvi Drive. There he observed three individuals laying sod in the yard of the private residence located at the address. Respondent, a fourth individual, was transporting sod from a trailer to the yard using equipment described as a Bobcat. The sod had been cut in squares and the squares were being matched and placed on the ground in the yard, where it was stepped on to secure it in the ground in a checker board pattern. Approximately three-quarters of the yard had sod placed. Mr. Robinson considered the activities on the site as involving a construction industry, with a classification, according to the National Council on Compensation, Inc. (NCCI), as class code 0042, landscape gardening and drivers, as reflected in Florida Administrative Code Rule 69L-6.021(1)(a). The NCCI classification codes for job descriptions were adopted by the rule. Mr. Robinson observed a permit board erected in the front yard of the property. There was no evidence that he saw which would indicate anyone was living in the home. The garage door was open. There was nothing in the garage. No blinds were on the windows. No evidence of any kind was observed that would indicate the house had been occupied. Altogether four persons were working at the site. Mr. Robinson interviewed each individual. After introducing himself, Mr. Robinson explained to Respondent the reason for the site visit and determined that Respondent was the employer for the other individuals, in addition to working on the job. Respondent told Mr. Robinson that he was a sub-contractor working for Earth Scapes, and had been hired to lay new sod in the yard. Respondent described his position as that of a sole proprietor. Respondent identified two of the other individuals as being his step-sons and the remaining individual was a family friend. Respondent explained that the basis for compensating the other employees was that Respondent "gave them running around money on Friday's." The other individuals indicated that they worked for Respondent part-time when he needed their help. To verify Respondent's statement that he was a sub- contractor assigned to the job, Mr. Robinson contacted the owner of Earth Scapes, who agreed with Respondent's recount of his assignment at the job location. Mr. Robinson was told Earth Scapes is a nursery that lays new sod and plants trees. Mr. Robinson inquired of Mr. Curry concerning workers' compensation coverage for the three employees. The answer was that Respondent did not have workers' compensation coverage through an insurance policy or through a leasing company or temporary labor service. Research into coverage and compliance through a Coverage and Compliance Automated System (CCAS) data base available to Petitioner did not reveal any information concerning Respondent and his business at 1259 SW County Road, 252-B, Lake City, Florida, that would relate to workers' compensation coverage. A similar search of a data base maintained by Petitioner in association with exemptions from the requirement to obtain workers' compensation coverage did not reveal any exemption for Respondent from the need for workers' compensation coverage. Having discovered the activity on the construction site in which work was done without workers' compensation coverage, Mr. Robinson discussed his findings with Robert Lambert, Petitioner's district supervisor in the Bureau of Compliance. Following that conversation Mr. Lambert authorized Mr. Robinson to issue a stop-work order to Respondent. A stop- work order was prepared on August 11, 2005. The stop-work order was served on Respondent on that date. The basis for its entry was the failure to secure payment of workers' compensation in violation of Section 440.107(2), Florida Statutes (2005), by failing to obtain coverage that would meet the requirements set forth in Chapter 440, Florida Statutes, and provisions of the Florida Insurance Code (the Insurance Code). On that same date, an Order of Penalty Assessment was served on Respondent under authority set for in Section 440.107(7)(d), Florida Statutes (2005). The Order of Penalty Assessment also reminded Respondent that the penalty might be amended based upon other information obtained, including the production of business records held by Respondent. These orders advised Respondent that he had the right to contest material facts in the stop-work order by filing a written petition for hearing under Sections 120.569 and 120.57, Florida Statutes (2005). On August 11, 2005, by a written document, Mr. Robinson requested production of business records maintained by Respondent that would assist in the calculation of a penalty assessment for the period August 11, 2002, through August 11, 2005, as contemplated by Section 440.107(7), Florida Statutes. The written request for production reminded Respondent that he must produce those records within five business days after receipt, to allow examination and copying, and that the failure to do so by quality of information sufficient to allow the determination of the payroll for the period in question, would allow the Petitioner to impute weekly payroll for the three employees and Respondent pursuant to the information derived using Section 440.12(2), Florida Statutes (2005), multiplied by 1.5. The document served on Respondent set out the various categories of information requested for production. These categories comport with Florida Administrative Code Rule 69L- 6.015. Respondent did not honor this request at any time.2/ Mr. Robinson not only provided the list of categories of information sought for production, he explained the categories found on the list to Respondent. Examples of information sought and explained included timesheets, time cards, payroll check stubs, check ledgers, income tax returns that would reflect the amount of remuneration paid or payable to each employee. On September 1, 2005, Mr. Robinson served Respondent with an Amended Order of Penalty Assessment that set forth an assessed penalty of $121,039.00, by imputation under Subsection 440.107(7)(d) and (e), Florida Statutes (2005), and by resort to Florida Administrative Code Rule 69L-6.028. That rule allows the imputation of payroll calculations after 15 business days following receipt by the employer of a written request to produce business records and the method will not be set aside after 45 days from receipt. The Amended Order of Penalty Assessment reminded Respondent that the stop-work order would remain in effect unless that order was released by Petitioner's further order. The necessary steps to set aside the stop-work order depended on obtaining coverage under the workers' compensation law and the payment of the penalty assessment. The approach for serving the Amended Order of Penalty Assessment was by certified mail return receipt requested. The receipt was returned following service. The Amended Order of Penalty Assessment provided the Respondent with the opportunity to dispute the material facts associated with the Amended Order of Penalty Assessment under procedures found in Sections 120.569 and 120.57, Florida Statutes (2005). As indicated, Respondent took advantage of the right to contest matters leading to the final hearing. The Amended Order of Penalty Assessment as set forth in Petitioner's Exhibit number six also reflects a worksheet that applies to the overall period in question. It demonstrates the calculations imputed related to Respondent, Tony Joe Brown, Collin Grimes, and Josh Grimes, persons on the job site when the random inspection took place on August 11, 2005. The calculations in the matrix for all parts, were in relation to the four workers under class code 0042, without the benefit of actual information provided by Respondent. The job class codes are derived from the Scopes Manual, an insurance industry publication.
Recommendation Upon the consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That a Final Order be entered keeping the stop-work order in effect pending Respondent's proof that he has obtained necessary workers' compensation coverage and the payment of the Amended Penalty Assessment in the amount of $121,039.00. DONE AND ENTERED this 28th day of June, 2006, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS 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 28th day of June, 2006.
The Issue Whether Fantastic Construction of Daytona, Inc. (“Respondent”), failed to secure the payment of workers’ compensation coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (“Petitioner” or “Department”), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440, Florida Statutes, that employers in Florida secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a corporation engaged in the construction industry with headquarters in Daytona Beach, Florida. On November 19, 2015, the Department’s compliance investigator, Scott Mohan, observed five individuals framing a single-family house at 173 Botefuhr Avenue in Daytona, Florida. Mr. Mohan interviewed the individuals he observed working at the jobsite and found they were working for Respondent on lease from Convergence Leasing (“Convergence”). Mr. Mohan contacted Convergence and found that all of the workers on the jobsite were employees of Convergence, except Scott Barenfanger. Mr. Mohan also confirmed that the workers’ compensation policy for Convergence employees was in effect. Mr. Mohan reviewed information in the Coverage and Compliance Automated System, or CCAS, for Respondent. CCAS indicated Respondent’s workers were covered for workers’ compensation by Convergence and that Respondent’s contract with Convergence was active. Mr. Mohan also confirmed, through CCAS, that Foster Coleman, Respondent’s president, had previously obtained an exemption from the workers’ compensation requirement, but that his exemption expired on July 18, 2015. Mr. Mohan then contacted Mr. Coleman via telephone and informed him that one of the workers on the jobsite was not on the active employee roster for Convergence, thus Respondent was not in compliance with the requirement to obtain workers’ compensation insurance for its employees. Mr. Coleman reported to the jobsite in response to Mr. Mohan’s phone call. Mr. Coleman admitted that Mr. Barenfanger was not on the Convergence employee leasing roster. Mr. Coleman subsequently obtained an application from Convergence for Mr. Barenfanger and delivered it to his residence. Mr. Mohan served Mr. Coleman at the jobsite with a Stop-Work Order and a Request for Production of Business Records for Penalty Assessment Calculation (“BRR”). In response to the BRR, Respondent provided to the Department business bank statements, check stubs, copies of checks, certificates of liability insurance for various suppliers and subcontractors, and an employee leasing roster for most of the audit period from November 20, 2013, to November 19, 2015.1/ Respondent did not produce any check stubs for November and December 2013. Mr. Coleman testified, credibly, that his bookkeeper during that time period did not keep accurate records. Mr. Coleman did produce his business bank statements and other records for that time period. Based on the review of initial records received, the Department calculated a penalty of $17,119.80 and issued an Amended Order of Penalty Assessment in that amount on February 18, 2016. On March 17, 2016, Respondent supplied the Department with additional records. Altogether, Respondent submitted over 400 pages of records to the Department. The majority of the records are copies of check stubs for checks issued on Respondent’s business bank account. The check stubs are in numerical order from 1349 to 1879, and none are missing. The check stubs were hand written by Mr. Coleman, who is 78 years old. Some of his writing on the check stubs is difficult to discern. On April 4, 2016, following review of additional records received, the Department issued a Second Amended Order of Penalty Assessment in the amount of $9,629.36. The Department assigned penalty auditor Sarah Beal to calculate the penalty assessed against Respondent. Identification of Employees Ms. Beal reviewed the business records produced by Respondent and identified Respondent’s uninsured employees first by filtering out payments made to compliant individuals and businesses, and payments made for non-labor costs. However, the evidence demonstrated that the Department included on its penalty calculation worksheet (“worksheet”) payments made to individuals who were not Respondent’s employees. Neal Noonan is an automobile mechanic. Mr. Noonan was neither an employee of, nor a subcontractor for, Respondent for any work performed by Respondent during the audit period. Mr. Noonan performed repairs on Mr. Coleman’s personal vehicles during the audit period. Checks issued to Mr. Noonan during the audit period were for work performed on Mr. Coleman’s personal vehicles. The Department’s worksheet included a “David Locte” with a period of noncompliance from June 19, 2014, through December 31, 2014. The basis for including Mr. Locte as an employee was a check stub written on December 10, 2014, to a business name that is almost indiscernible, but closely resembles “Liete & Locke” in the amount of $100. The memo reflects that the check was written for “architect plans.” Mr. Coleman recognized the worksheet entry of David Locte as pertaining to David Leete, an architect in Daytona. Mr. Leete has provided architectural services to Respondent off and on for roughly five years. Mr. Leete signs and seals plans for, among others, a draftsman named Dan Langley. Mr. Langley provides drawings and plans for Respondent’s projects. When Respondent submits plans to a local governing body which requires architectural drawings to accompany permit applications, Mr. Leete reviews and signs the plans. Mr. Leete was neither an employee of, nor a subcontractor for, Respondent during the audit period. The single payment made to Mr. Leete by Respondent during the audit period was for professional architectural services rendered. Mr. Langley was neither an employee of, nor a subcontractor for, Respondent during the audit period. Payments made to Mr. Langley during the audit period were for professional drafting services rendered. Among the names on the Department’s worksheet is R.W. Kicklighter. Mr. Kicklighter is an energy consultant whose office is located in the same building with Mr. Leete. Mr. Kicklighter prepares energy calculations, based on construction plans, to determine the capacity of heating and air-conditioning systems needed to serve the planned construction. Mr. Kicklighter was neither an employee of, nor a subcontractor for, Respondent during the audit period. Payments made to Mr. Kicklighter during the audit period were for professional services rendered. Respondent made a payment of $125 on September 15, 2014, to an entity known as Set Material. Set Material is a company that rents dumpsters for collection of concrete at demolition and reconstruction sites. Removal and disposal of the concrete from the jobsite is included within the rental price of the dumpster. The Department included on the worksheet an entry for “Let Malereal.” The evidence revealed the correct name is Set Material and no evidence was introduced regarding the existence of a person or entity known as Let Malereal. Set Material was neither an employee of, nor a subcontractor for, Respondent during the audit period. The single payment made to Set Material during the audit period was for dumpster rental. The Department’s worksheet contains an entry for “CTC” for the penalty period of January 1, 2014, through May 1, 2014. Respondent made a payment to “CTC” on April 11, 2014, in connection with a job referred to as “964 clubhouse.” The records show Respondent made payments to Gulfeagle Supply, Vern’s Insulation, John Wood, Bruce Bennett, and Ron Whaley in connection with the same job. At final hearing, Mr. Coleman had no recollection what CTC referred to. Mr. Coleman’s testimony was the only evidence introduced regarding identification of CTC. CTC could have been a vendor of equipment or supplies for the job, just as easily as an employee. The evidence is insufficient to support a finding that CTC was an employee of, or a subcontractor for, Respondent during the audit period. The check stub for check 1685 does not indicate to whom the $60 payment was made. The stub reads “yo for Doug.” The Department listed “Doug” as an employee on its worksheet and included the $60 as wages to “Doug” for purposes of calculating workers’ compensation premiums owed. At hearing, Mr. Coleman was unable to recall ever having employed anyone named Doug, and had no recollection regarding the January 7, 2015, payment. The evidence was insufficient to establish that “Doug” was either Respondent’s employee or subcontractor during the audit period. Ken’s Heating and Air was not an employee of, nor a subcontractor to, Respondent for any work undertaken by Respondent during the audit period. Ken’s Heating and Air conducted repairs on, and maintenance of, Mr. Coleman’s personal residence during the audit period. Checks issued to Ken’s Heating and Air during the audit period were payments for work performed at Mr. Coleman’s personal residence. Barry Smith is an electrical contractor. Mr. Smith was neither an employee of, nor subcontractor to, Respondent for any work performed by Respondent during the audit period. Mr. Smith did make repairs to the electrical system at Mr. Coleman’s personal residence during the audit period. Checks issued to Mr. Smith during the audit period were payments for work performed at Mr. Coleman’s personal residence. The remaining names listed on the Department’s penalty calculation worksheet were accurately included as Respondent’s employees.2/ Calculation of Payroll Mr. Coleman’s exemption certificate expired on July 18, 2015, approximately four months shy of the end of the audit period. Payments made by Respondent to Mr. Coleman during the time period for which he did not have a valid exemption (the penalty period) were deemed by the Department as wages paid to Mr. Coleman by Respondent. Respondent’s business records show seven checks written either to Mr. Coleman or to cash during that time period in the total amount of $3,116.52. The Department included that amount on the worksheet as wages paid to Mr. Coleman. Check 1873 was written to cash, but the check stub notes that the payment of $1,035.69 was made to Compliance Matters, Respondent’s payroll company. Check 1875 was written to cash, but the check stub notes that the payment of $500 was made to Daytona Landscaping. The evidence does not support a finding that checks 1873 and 1875 represented wages paid to Mr. Coleman. The correct amount attributable as wages paid to Mr. Coleman during the penalty period is $1,796.52. Respondent’s employees Tyler Eubler, Brian Karchalla, Keith Walsh, and John Strobel, were periodically paid by Respondent during the audit period in addition to their paychecks from Convergence. Mr. Coleman testified that the payments were advances on their wages. He explained that when working on a job out of town, the crew would arrive after Convergence had closed for the day, and Mr. Coleman would pay them cash and allow them to reimburse him from their paychecks the following day. Unfortunately for Respondent, the evidence did not support a finding that these employees reimbursed Mr. Coleman for the advances made. The Department correctly determined the payroll amount attributable to these employees. The Department attributed $945 in payroll to “James Sharer.” The Department offered no evidence regarding how they arrived at the name of James Sharer as Respondent’s employee or the basis for the payroll amount. James Shores worked off-and-on for Respondent. Mr. Coleman recognized the worksheet entry of “James Sharer” as a misspelling of Mr. Shores’ name. Respondent’s records show payments totaling $535 to Mr. Shores during the audit period. The correct amount of payroll attributable to Mr. Shores from Respondent during the audit period is $535. The Department included wages totaling $10,098.84 to Mr. Barenfanger during the period of noncompliance from November 20, 2013, to December 31, 2013. The Department imputed the average weekly wage to Mr. Barenfanger for that period because, in the Department’s estimation, Respondent did not produce records sufficient to establish payroll for those two months in 2013. See § 440.107(7)(e), Fla. Stat. The voluminous records produced by Respondent evidenced not a single payment made to Mr. Barenfanger between January 2014, and November 19, 2015. Even if Mr. Coleman had not testified that he did not know or employ Mr. Barenfanger before November 19, 2015, it would be ludicrous to find that he worked weekly for Respondent during the last two months of 2013. Mr. Coleman testified, credibly, that Mr. Barenfanger worked the jobsite for Respondent on November 18 and 19, 2015, but not prior to those dates. The evidence does not support a finding that the worksheet entry for Mr. Barenfanger in the amount of $10,098.84 accurately represents wages attributable to Mr. Barenfanger during the period of noncompliance. The Department’s worksheet includes an employee by the name of Ren W. Raly for the period of noncompliance from January 1, 2014, through May 1, 2014, and a Ronnie Whaley for the period of noncompliance from June 19, 2014 through December 31, 2014. Mr. Coleman testified that he never had an employee by the name of Raly and he assumed the first entry was a misspelling of Ronnie Whaley’s name. Mr. Coleman testified that Ronnie Whaley was a concrete finisher and brick layer who did work for Respondent. Mr. Coleman testified that he submitted to the Department a copy of Mr. Whaley’s “workers’ comp exempt,” but that they must not have accepted it. The records submitted to the Department by Respondent do not contain any exemption certificate for Ronnie Whaley. However, in the records submitted to the Department from Respondent is a certificate of liability insurance dated February 25, 2014, showing workers’ compensation and liability coverage issued to Direct HR Services, Inc., from Alliance Insurance Solutions, LLC. The certificate plainly states that coverage is provided for “all leased employees, but not subcontractors, of Ronald Whaley Masonry.” The certificate shows coverage in effect from February 1, 2013, through February 1, 2015. Petitioner did not challenge the reliability of the certificate or otherwise object to its admissibility.3/ In fact, the document was moved into evidence as Petitioner’s Exhibit P1. Petitioner offered no testimony regarding whether the certificate was insufficient proof of coverage for Mr. Whaley during the periods of noncompliance listed on the worksheet. The evidence does not support a finding that Mr. Whaley was an uninsured individual during the periods of noncompliance. Thus, the wages attributed to Mr. Whaley by the Department were incorrect. Ms. Beal assigned the class code 5645—Carpentry to the individuals correctly identified as Respondent’s uninsured employees because this code matched the description of the job being performed by the workers on the jobsite the day of the inspection. Ms. Beal correctly utilized the corresponding approved manual rates for the carpentry classification code and the related periods of noncompliance to determine the gross payroll to the individuals correctly included as Respondent’s uninsured employees. Calculation of Penalty For the employees correctly included as uninsured employees, Ms. Beal applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)1. and Florida Administrative Code Rules 69L-6.027 and 69L-6.028 to determine the penalty to be imposed. For the individuals correctly included as uninsured employees, and for whom the correct payroll was calculated, the correct penalty amount is $2,590.06. The correct penalty for payments made to Mr. Coleman during the penalty period is $571.81. The correct penalty for payments made to James Shores is $170.24. The correct total penalty to be assessed against Respondent is $3,332.11. The Department demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry in Florida during the audit period and that Respondent failed to carry workers’ compensation insurance for its employees at times during the audit period as required by Florida’s workers’ compensation law. The Department demonstrated by clear and convincing evidence that Respondent employed the employees named on the Second Amended Order of Penalty Assessment, with the exception of Ken’s Heating and Air, CTC, Don Langly, Ren W. Raly, R.W. Kicklighter, Dave Locte, Let Malereal, Ronnie Whaley, and “Doug.” The Department did not demonstrate by clear and convincing evidence that it correctly calculated the gross payroll attributable to Mr. Coleman and Mr. Shores. The Department demonstrated by clear and convincing evidence that Ms. Beal correctly utilized the methodology specified in section 440.107(7)(d)1. to determine the appropriate penalty for each of Respondent’s uninsured employees. The Department did not demonstrate by clear and convincing evidence that the correct penalty is $9,629.36. The evidence demonstrated that the correct penalty to be assessed against Respondent for failure to provide workers’ compensation insurance for its employees during the audit period is $3,332.11.
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, finding that Fantastic Construction of Daytona, Inc., violated the workers’ compensation insurance law and assessing a penalty of $3,332.11. DONE AND ENTERED this 18th day of August, 2016, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of August, 2016.
