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 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 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.
The Issue The issue is whether the Stop-Work Order and 2nd Amended Order of Penalty Assessment issued by Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), on July 1, 2015, and February 29, 2016, respectively, should be upheld.
Findings Of Fact The Department is the state agency responsible for enforcing the various requirements of chapter 440. Respondent is a Florida corporation with offices located at 1904 28th Avenue North, St. Petersburg, Florida. The company is engaged in the construction business, and its activities fall within the statutory definition of "construction industry." See § 440.02(8), Fla. Stat. Respondent also does business under the name of M & M Construction of South Florida, but both are the same corporate entity with the same Federal Employer Identification Number and use the same bank accounts. Respondent's assertion that the two are separate and work done under the "d/b/a" name cannot be used to establish liability under chapter 440 is rejected. On July 1, 2015, Munal Abedrabbo, a Department compliance inspector, made a random inspection of a job site at 4115 East Busch Boulevard, Tampa, where remodeling work on a commercial building was being performed. When he entered the premises, Mr. Abedrabbo observed Bernard Reed on a ladder painting an interior ceiling. After identifying himself, he informed Mr. Reed that he needed to verify his insurance coverage. Mr. Abedrabbo was directed to Mr. Cook, Respondent's vice-president and part owner, who acknowledged that he was the general contractor on the job and had three employees/painters working that day, Reed, James Dabnes, and John Russell. Mr. Cook informed the inspector that the three employees were leased from Paychek, Inc., an employee leasing company, and that firm provided workers' compensation coverage for the leased employees. Mr. Abedrabbo returned to his vehicle and accessed on his computer the Department of State, Division of Corporations, Sunbiz website to verify Respondent's status as a corporation. After verifying that it was an active corporation, he then checked the Department's Coverage and Compliance Automated System to verify whether Respondent had a workers' compensation policy or any exemptions. He was unable to find any active policy for Respondent, as the most recent policy had lapsed in January 2013. Mr. Cook has an exemption, covering the period October 20, 2014, through October 19, 2016, but the exemption is with a different company, Thomas Cook Carpenter, LLC. Mr. Abedrabbo spoke again with Mr. Cook and informed him that Department records showed no insurance coverage for his employees. Mr. Cook telephoned Paychek, Inc., and then confirmed that the three painters had no workers' compensation insurance. Mr. Cook explained that before he allowed Mr. Reed to begin work, Mr. Reed had shown him an insurance certificate that turned out to be "falsified," and then "conveniently lost it" when the inspector appeared. He also explained his firm "was caught with our pants down once before" and he did not want it to happen again. For that reason, he contended he was especially careful in hiring leased employees. Even so, he does not deny that Respondent has had no insurance in place since January 2013 and Paychek, Inc., failed to provide coverage. The Department issued a Stop Work Order and Penalty Assessment the same day. To determine the amount of Respondent's unsecured payroll for purposes of assessing a penalty in accordance with section 440.107(7)(d)(1), Florida Statutes, the Department requested Respondent to provide business records for the preceding two years. This period of non-compliance is appropriate, as Respondent was actively working in the construction industry during that time period without securing insurance. The request informed Mr. Cook that if complete records were not provided, the Department would use the imputation formula found in section 440.107(7)(e) to calculate the penalty. After reviewing the information provided by Respondent, on August 18, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $114,144.52 for the period July 7, 2014, through June 30, 2015. Based on two depositions of Mr. Cook, a 2nd Amended Order of Penalty Assessment in the amount of $105,663.48 was issued on February 29, 2016. The Department penalty auditor calculated the final penalty assessment using the "imputed" method because insufficient business records were provided to determine Respondent's payroll for all relevant time periods, except the month of October 2014. In addition to missing bank statements and check images, Respondent failed to provide its entire second bank account. Although Mr. Cook contends some records were in the possession of M & M Construction of South Florida, and he could not access them in a timely manner, this does not excuse Respondent's failure to timely produce all relevant records. Under the imputed method, the penalty auditor used the average weekly wage ($841.57) times two to determine Respondent's payroll for the imputed portions. See Fla. Admin. Code R. 69L-6.028(2); § 440.107(7)(e), Fla. Stat. The gross payroll was then divided by 100 in order to be multiplied by the applicable approved manual rates. The Department applied the proper methodology in computing the penalty assessment. A class code is a numerical code, usually four digits, assigned to differentiate between the various job duties or scope of work performed by the employees. The codes were derived from the Scopes Manual Classifications (Manual), a publication that 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., an authoritative data collecting and disseminating organization for workers' compensation. The Manual provides that class code 5474 applies to painters who perform painting activities. Reed, Dabnes, and Russell were assigned this code. Mr. Cook agrees this code is correct. Mr. Cook was assigned class code 5606 (construction executive) and placed on the penalty assessment because he is an owner of the corporation and was managing the work. Although Mr. Cook argues he had an exemption and should not be placed on the assessment, Department records reflect that Mr. Cook had an exemption with a different company during the audit period. Therefore, his inclusion in the employee census was correct. Because Respondent's business records included checks written to Kerry Francum for tile work, he was assigned class code 5348 (tile work) and placed on the penalty assessment as an employee. At his deposition, Mr. Cook acknowledged that Francum performed tile work for his firm and was an employee. At hearing, Mr. Cook changed his testimony and contended Francum was only a material supplier, not a subcontractor, and should not be on the penalty assessment. This assertion has not been accepted. Mr. Francum's inclusion on the assessment is appropriate. Respondent's business records also indicated a check was written to Kerry Randall, a tile subcontractor. At hearing, however, Mr. Cook established, without contradiction, that because of Mr. Randall's violent temper, he was paid a one-time fee of $1,000.00 and let go before he performed any work. Mr. Randall should be removed from the assessment. The Department has demonstrated by clear and convincing evidence that the 2nd Amended Order of Penalty Assessment is correct, less any amount owed for Mr. Randall.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order assessing Respondent the penalty in the 2nd Amended Order of Penalty Assessment, less any amount owed for Mr. Randall. DONE AND ENTERED this 21st day of November, 2016, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER 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 21st day of November, 2016.
The Issue The issues are whether Respondent violated Chapter 440, Florida Statutes, by failing to obtain workers' compensation insurance, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees as required by Section 440.107, Florida Statutes (2008). Respondent is a Florida Corporation that engages in the painting business. Abner Gonzalez is Respondent's President. Painting is a workplace operation that satisfies the criteria of the term "construction industry" as set forth in the Basic Manual of the National Council on Compensation Insurance, Inc. (NCCI). On May 15, 2009, Petitioner's investigator, Allen DiMaria conducted an investigation at the intersection of Normandy Boulevard and Guardian Drive in Jacksonville, Florida. Mr. DiMaria observed one worker on a ladder and another worker on the ground painting a block and masonry entrance to a development. The workers at the site identified themselves to Mr. DiMaria as Abner Gonzalez and César Silvestre. Mr. Gonzalez stated that Respondent had a contract to paint the wall and that he and Mr. Silvestre were Respondent's employees. Mr. Gonzalez stated that, as a corporate officer, he had an exemption for workers' compensation. Mr. Gonzalez admitted that Respondent had not secured workers' compensation for Mr. Silvestre. Mr. DiMaria was able to confirm that Mr. Gonzalez had a current valid construction exemption, specifically for painting. However, Mr. Gonzalez did not have a painting exemption for the entirety of the prior three years. On May 15, 2009, Mr. DiMaria issued and personally served on Respondent a Stop-Work Order and Order of Penalty Assessment for failure to comply with statutory requirements. Mr. DiMaria also issued Respondent a Request for Production of Business Records for Penalty Assessment Calculation. Because Respondent did not promptly provide Petitioner with the requested business records, Petitioner's staff imputed Respondent's payroll and calculated the penalty as the average weekly wage rate multiplied by 1.5. pursuant to Section 440.107, Florida Statutes. Petitioner then issued the Amended Order of Penalty Assessment in the amount of $26,180.24 on June 11, 2009. Respondent subsequently provided Petitioner with business records. The records included Respondent's bank statements for the prior three years and Respondent's 2007 Employer's Quarterly Federal Tax Returns. The records also showed that Respondent provided employment without workers' compensation insurance to persons other than Mr. Gonzalez and Mr. Silvestre during the prior three years. On June 26, 2009, Petitioner issued the Second Amended Order of Penalty Assessment based upon Respondent's business records in the amount of $7,641.14. The Second Amended Order of Penalty Assessment, showing the reduced penalty, was served on Respondent by certified mail.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent issue a final order affirming the Stop-Work Order and Second Amended Order of Penalty Assessment in the amount of $7,641.14. DONE AND ENTERED this 14th day of October, 2009, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 2009. COPIES FURNISHED: Paige Billings Shoemaker, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Abner Gonzales 1924 Firefly Drive Green Cove Springs, Florida 32043 Tracy Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue At issue in this proceeding is whether the Respondent, George Washington Beatty, III, failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for himself and/or his employees, and, if so, whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. George Washington Beatty, III, is a sole proprietor who works as a painter and general construction handyman in the vicinity of Panama City. The types of work performed by Mr. Beatty are properly considered construction industry work. Mr. Beatty’s business is not incorporated. He has no regular employees other than himself. His Form 1099-MISC tax forms indicate that he was actively engaged in performing construction work during the two-year audit period from September 9, 2012, through September 8, 2014. Carl Woodall is a Department compliance investigator based in Panama City. On September 8, 2014, Mr. Woodall drove up to 1803 New Hampshire Avenue in Lynn Haven, a vacant house where he saw a “for sale” sign and indications of work being performed on the house: the garage door was open and contained a great deal of painting materials such as drop cloths and paint buckets. A work van and a pickup truck were parked in the driveway. Mr. Woodall testified that as he walked up to the front door, he could see someone inside on a ladder, painting the ceiling. As Mr. Woodall started to go in the front door, he was met by Mr. Beatty on his way out the door. Mr. Woodall introduced himself and gave Mr. Beatty his business card. Mr. Woodall asked him the name of his business and Mr. Beatty stated that he did not know what Mr. Woodall was talking about. Mr. Beatty then told Mr. Woodall that he worked for Brush Stroke Painting but that he was not working this job for Brush Stroke. Mr. Beatty told Mr. Woodall that he was helping out a friend. Mr. Woodall asked whether Mr. Beatty had workers’ compensation insurance coverage, and Mr. Beatty again stated that he did not know what Mr. Woodall was talking about. He was just there helping out his friend, the owner of the house. Mr. Woodall asked Mr. Beatty to give him the owner’s name and phone number. Mr. Beatty went out to his van to retrieve the information. While Mr. Beatty was out of the house, Mr. Woodall took the opportunity to speak with the three other men working in the house. The first man, whom Mr. Woodall approached, was immediately hostile. He said that he was not working for anyone, that he was just helping someone out. He walked out of the house and never returned while Mr. Woodall was there. Mr. Woodall walked into the kitchen and spoke to a man who was on a ladder, painting. The man identified himself as Dennis Deal and stated that he was working for Mr. Beatty for eight dollars an hour in cash. He told Mr. Woodall that he helped out sometimes when Mr. Beatty needed help. Before Mr. Woodall could speak to the third person, Mr. Beatty came back into the house with the owner’s contact information. Mr. Beatty continued to deny that he was paying anyone to work in the house. With Mr. Beatty present, Mr. Woodall spoke with the third man, Michael Leneave, who stated that Mr. Beatty was paying him ten dollars an hour in cash. Mr. Woodall then took Mr. Beatty over to Mr. Deal, who reiterated that Mr. Beatty was paying him eight dollars an hour. Mr. Beatty responded that he could not believe the men were saying that because he had never told them a price. Mr. Woodall asked Mr. Beatty to identify the man who left the house, and Mr. Beatty told him it was Tommy Mahone. Mr. Beatty stated that Mr. Mahone had a bad temper and probably left to get a beer. After speaking with Mr. Beatty and the other men, Mr. Woodall phoned Brian Daffin (Mr. Daffin), the owner of the house. Mr. Woodall knew Mr. Daffin as the owner of an insurance company in Panama City. Mr. Daffin told Mr. Woodall that Mr. Beatty was painting his house, but was evasive as to other matters. Mr. Woodall stated that as the owner of an insurance company, Mr. Daffin was surely familiar with workers’ compensation insurance requirements and that he needed a straight answer as to whether Mr. Daffin had hired Mr. Beatty to paint the house. Mr. Daffin stated that he did not want to get Mr. Beatty in trouble, but finally conceded that he had hired Mr. Beatty to paint the house. Of the other three men, Mr. Daffin was familiar only with Mr. Mahone. He told Mr. Woodall that he had hired Mr. Beatty alone and did not know the details of Mr. Beatty’s arrangements with the other three men. At the hearing, Mr. Beatty testified that he was asked by Mr. Daffin to help him paint his house as a favor. Mr. Beatty had met Mr. Daffin through James Daffin, Mr. Daffin’s father and Mr. Beatty’s friend. No one was ever paid for anything. Mr. Beatty stated that he took the lead in speaking to Mr. Woodall because he was the only one of the four men in the house who was sober. He told Mr. Woodall that he was in charge because Mr. Daffin had asked him to oversee the work. None of the three men alleged to have been working for Mr. Beatty testified at the hearing. Mr. Daffin did not testify. Mr. Beatty’s testimony is thus the only direct evidence of the working arrangement, if any, which obtained between Mr. Beatty and the three other men present at the house on September 8, 2014. The only evidence to the contrary was Mr. Woodall’s hearsay testimony regarding his conversations with the three men and with Mr. Daffin. Mr. Woodall checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Mr. Beatty had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Mr. Beatty had no exemption or workers' compensation insurance coverage for himself or any employees. There was no evidence that Mr. Beatty used an employee leasing service. Based on his jobsite interviews with the alleged employees and Mr. Beatty, his telephone conversation with Mr. Daffin, and his CCAS computer search, Mr. Woodall concluded that as of September 8, 2014, Mr. Beatty had three employees working in the construction industry and that he had failed to procure workers’ compensation coverage for himself and these employees in violation of chapter 440. Mr. Woodall consequently issued a Stop-Work Order that he personally served on Mr. Beatty on September 8, 2014. Also on September 8, 2014, Mr. Woodall served Mr. Beatty with a Request for Production of Business Records for Penalty Assessment Calculation, asking for payroll and accounting records to enable the Department to determine Mr. Beatty’s payroll and an appropriate penalty for the period from September 9, 2012, through September 8, 2014. Mr. Beatty provided the Department with no documents in response to the Request for Production. On September 24, 2014, the Department issued an Amended Order of Penalty Assessment that assessed a total penalty of $141,790.96. The Amended Order of Penalty Assessment was served on Mr. Beatty via hand-delivery on October 16, 2014. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two- year period preceding the Stop-Work Order, which in this case was the period from September 9, 2012, through September 8, 2014. § 440.107(7)(d), Fla. Stat. Because Mr. Beatty initially provided no payroll records for himself or the three men alleged to have worked for him on September 8, 2014, the penalty calculator lacked sufficient business records to determine an actual gross payroll on that date. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer’s actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5474, titled “Painting NOC & Shop Operations, Drivers,” which is defined in part as “the general painting classification. It contemplates exterior and interior painting of residential or commercial structures that are constructed of wood, concrete, stone or a combination thereof regardless of height.” The corresponding rule provision is rule 69L-6.021(2)(jj). The penalty calculator used the approved manual rates corresponding to Class Code 5474 for the periods of non-compliance to calculate the penalty. Subsequent to issuance of the Amended Order of Penalty Assessment, Mr. Beatty submitted to the Department, IRS Wage and Income Transcripts for the tax years of 2011, 2012, and 2013, but not for tax year 2014. These Transcripts consisted of Form 1099-MISC forms completed by the business entities for which Mr. Beatty had performed work during the referenced tax years. The Department used the Transcripts to calculate the penalty for the 2012 and 2013 portions of the penalty period and imputed Mr. Beatty’s gross payroll for the 2014 portion pursuant to the procedures required by section 440.107(7)(e) and rule 69L-6.028. On August 25, 2015, the Department issued a Second Amended Order of Penalty Assessment in the amount of $58,363.88, based on the mixture of actual payroll information and imputation referenced above. At the final hearing convened on November 3, 2015, Mr. Beatty stated that he now had the Wage and Income Transcript for tax year 2014 and would provide it to the Department. At the close of hearing, the undersigned suggested, and the Department agreed, that the proceeding should be stayed to give the Department an opportunity to review the new records and recalculate the proposed penalty assessment. On December 21, 2015, the Department issued a Third Amended Order of Penalty Assessment in the amount of $9,356.52. Ms. Proano herself calculated this penalty. The Third Amended Order assessed a total penalty of $9,199.98 for work performed by Mr. Beatty during the penalty period, based on the Wage and Income Transcripts that Mr. Beatty submitted. The Third Amended Order assessed a total penalty of $156.54 for work performed by Messrs. Mahone, Deal, and Leneave on September 8, 2014. This penalty was imputed and limited to the single day on which Mr. Woodall observed the men working at the house in Lynn Haven. Mr. Beatty’s records indicated no payments to any employee, during the penalty period or otherwise. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Third Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Mr. Beatty was in violation of the workers' compensation coverage requirements of chapter 440. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates, business records provided by Mr. Beatty, and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. However, the Department did not demonstrate by clear and convincing evidence that Tommy Mahone, Dennis Deal, and Michael Leneave were employees of Mr. Beatty on September 8, 2014. There is direct evidence that Mr. Woodall saw the men working in the house, but the only evidence as to whether or how they were being paid are the hearsay statements of the three men as relayed by Mr. Woodall. The men were not available for cross-examination; their purported statements to Mr. Woodall could not be tested in an adversarial fashion. Mr. Beatty’s testimony that the men were not working for him and that he was merely supervising their work as a favor to Mr. Daffin is the only sworn, admissible evidence before this tribunal on that point. Mr. Beatty was adamant in maintaining that he did not hire the men, and his testimony raises sufficient ambiguity in the mind of the factfinder to preclude a finding that Messrs. Mahone, Deal, and Leneave were his employees. Mr. Beatty could point to no exemption or insurance policy that would operate to lessen or extinguish the assessed penalty as to his own work. The Department has demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry in Florida during the period of September 9, 2012, through September 8, 2014, and that Respondent failed to carry workers’ compensation insurance for himself as required by Florida’s Workers’ Compensation Law from September 9, 2012, through September 8, 2014. The penalty proposed by the Third Amended Order of Penalty Assessment should be reduced to $9,199.98, the amount sought to be imposed on Mr. Beatty himself.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $9,199.98 against George Washington Beatty, III. DONE AND ENTERED this 6th day of July, 2016, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of July, 2016.
The Issue The Principal issues in this matter are whether the Department of Financial Services, Division of Workers’ Compensation acted appropriately and within its’ statutory authority when it entered the Second Amended Order of Penalty Assessment and Stop-Work Order against the Petitioner for failing to secure workers’ compensation insurance for their employees when 4 tequired by Florida law, and whether any provisions of the Florida Workers’ Compensation Law provide for the mitigation or rescission of penalties against the Petitioner. 1 PRELIMINARY STATEMENT. This proceeding arose out of the requirement in Florida workers’ compensation law that employers must secure the payment of workers’ compensation insurance for the protection of their employees. The Petitioner in this matter is a Florida corporation currently doing business as a neighborhood food and convenience store in Fort Walton Beach, Florida. On April 26, 2011, Larry Eaton, a Compliance Investigator for the Florida Department of Financial Services, Division of Workers’ Compensation conducted a random job site workers’ compensation compliance investigation at the Petitioner’s place of business. After concluding the Petitioner had four (4) employees and did not maintain workers’ compensation insurance, the Department issued a Stop-Work Order and delivered a request for the production of business records. The Petitioner and their accountant cooperated with the Department’s investigation and provided records that were used to determine the mandated statutory monetary penalty for failing to maintain workers’ compensation insurance. The Petitioner then executed a penalty payment plan with the Department and also came into compliance with Florida’s Workers’ Compensation Law. The Petitioner has consistently objected to the Departments mandated statutory penalty as excessive, in violation of both the Florida and Federal Constitution, and contrary to the “principle of proportionality”. The Department originally referred this matter to this Hearing Officer for a F.S. 120.57(2) informal hearing, but that matter was closed when the Parties agreed a disputed issue of fact existed. This matter was then forwarded to the Florida Division of Administrative Hearings to hold a formal hearing pursuant to F.S. 120.57(1), and after discovery, the Administrative Law Judge closed his file after a finding there were no disputed issues of material fact. This matter was again assigned to this Hearing Officer to hold a telephonic informal hearing pursuant to Section 120.57(2), Florida Statutes, which occurred on November 1, 2011. Both Parties timely submitted Proposed Recommended Orders. EXHIBITS AND WITNESSES The Department submitted Eleven (11) Exhibits that are admitted into evidence without objection and include the following: Respondents Exhibit |: A copy of the Petitioner’s corporate status as contained within the Florida Secretary of State Records, dated April 26, 2010, the same day as the Departments random workers’ compliance Investigation. Respondent’s Exhibit 2: A two (2) page April 26, 2010, printout from the Department’s Financial Services Coverage and Compliance Automated System (“CCAS”) database for Mubarak Trading Corporation, Inc. teflecting no evidence of workers’ compensation insurance coverage and no exemptions from coverage. Respondent’s Exhibit 3: A copy of the Department’s hand delivered April 26, 2010 Stop- Work Order. Respondents Exhibit 4: A copy of the Department’s hand delivered April 26, 2011, Request for Production of Business Records for Penalty Assessment Calculation. Respondents Exhibit 5: A twenty six (26) page composite exhibit of the Petitioner’s payroll and -business records provided to the Department’s workers’ compensation compliance investigator. Respondent’s Exhibit 6: A copy of the Department’s May 12, 2010 Amended Order of Penalty Assessment hand delivered to the Petitioner on May 13, 2010. Respondent’s Exhibit 7: A copy of the Department’s’ Payment Agreement Schedule for Periodic Payment of Penalty executed by the Petitioner on May 13, Respondent's Exhibit 8: Respondent’s Exhibit 9: Respondent’s Exhibit 10: Respondent’s Exhibit 11: 2010, wherein the Petitioner paid Eighteen Hundred ($1,800.00) dollars as a ten percent (10%) down-payment on the Department’s Administrative Penalty. A copy of the Department’s Order of Conditional Release From Stop-Work Order dated May 13, 2010, that was entered after the execution and payment reflected in Respondent's Exhibit 7. A copy of the Department’s Second Amended Order of Penalty Assessinent dated February 2, 2011. A five (5) page excerpt from the National Council on Compensation Insurance, Inc. (“NCCI”) Scopes Manual description of Classification Code 8017 (Retail Store). A forty-nine (49) page excerpt of NCCI approved Manual Rates for Classification Code 8017, used in the calculation of the Department’s May 12, 2010, Amended Order for Penalty Assessment and February 2, 2011, Second Amended Order of Penalty Assessment. The Petitioner submitted two (2) exhibits that were admitted into evidence and consist of the following: Petitioner’s Exhibit 1: Petitioner’s Exhibit 2. A two (2) page copy of the Petitioner’s timely filed request for an informal proceeding to contest his administrative penalty, pursuant to Section 120.57(2), Florida Statutes, A four (4) page May 5, 2011, letter of tax representation from Mr. Chris Marsh and Mr. James Marsh, who provide accounting and tax services for and on behalf of Mubarak ‘Trading Corporation, Inc. The Department called two (2) witnesses to testify at the telephonic informal hearing, including Mr. Larry Eaton, a workers’ compensation compliance investigator for the Department, and Mrs. Michelle Newcomer, a workers’ compensation penalty calculator for the Department. The Petitioner offered the testimony of its’ President Ziad (“Mike”) Mubarak, as well as their tax advisors, Mr. Christopher Marsh, and Mr. James Marsh. Both Parties submitted Proposed Recommended Orders. FINDINGS OF FACT. Pursuant to Section 440.107, Florida Statutes, the Respondent is the state agency tesponsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees. The Petitioner is a Florida corporation that first registered with the Florida Department of State on July 15, 1993, and was in good-standing on April 26, 2010, the date on which the Department conducted their random workers’ compensation compliance investigation. (Respondent’s Exhibit 1.) On April 26, 2011, the Respondents Workers’ Compensation Compliance Investigator, Mr. Larry Eaton, conducted a random compliance investigation at the Principal Business Address of Mubarak Trading Corporation, Inc., in Fort Walton Beach, Florida. (Respondent’s Exhibit’s 2, 3, and 4.) Upon entering the Petitioner’s work-place on April 26, 2011, the Department’s compliance investigator conducted a field interview, as well as a database search to confirm the existence of four (4) employees of Mubarak Trading Corporation, Inc., and the lack of either workers’ compensation insurance or exemptions from workers? compensation insurance coverage. (Respondent’s Exhibits 2, 3, and 4.) Upon finding four (4) employees and no workers’ compensation insurance coverage for those employees, the Department’s compliance investigator hand delivered an April 26, 2010, Stop Work Order, as well as a Request for Production of Business Records for Penalty Assessment Calculation seeking payroll information for the past three (3) years. (Respondent’s Exhibits 3 and 4.) The Petitioner provided business records to the Department in response to their Request, and based on those records, an Amended Order of Penalty Assessment was hand delivered to the Petitioner on May 13, 2010, in the amount of Seventeen Thousand Seven Hundred Ninety One and 76/100 Dollars ($17,791.76). (Respondent’s Exhibits 5 and 6.) Under protest, and in the effort to remove the Department’s April 26, 2010, Stop Work Order, the Petitioner executed a Payment Agreement Schedule for Periodic Payment of Penalty on May 13, 2010, paying Eighteen Hundred Dollars ($1,800.00) to the Department as a ten percent (10%) down-payment of the administrative penalty. (Respondent’s Exhibit 7.) The Petitioner did not purchase a policy of workers’ compensation insurance, but instead the Corporation’s President obtained an exemption from the requirement of being covered by workers’ compensation insurance. With only three (3) remaining non- exempt employees, Florida law does not require an underlying worker’s compensation insurance policy, and Mubarak Trading Corporation, Inc., was no longer in violation of Florida Workers’ Compensation Law. , Mrs. Michelle Newcomb, Penalty Calculator for the Florida Department of Financial Services, Division of Workers’ Compensation, Bureau of Compliance, was assigned the task of calculating the statutory penalty to be assessed against Mubarak Trading Corporation, Inc., for failing to secure workers’ compensation insurance. Utilizing NCCI Class Code 8017 for retail stores, the appropriate NCCI premium pages for Class Code 8017, and the documentation provided by the Petitioner, the Department calculated the mandated statutory penalty of Seventeen Thousand Seven Hundred Ninety One and 76/100 ($17,791.76) in their May 12, 2010, Amended Order for Penalty Assessment (Respondent’s Exhibit 6, 10 and 11.) The Department’s administrative penalty was ultimately adjusted downward to Sixteen Thousand, Four Hundred Twenty Nine and 44/100 Dollars ($16,429.76), as reflected in the Department’s February 2, 2011, Second Amended Order of Penalty Assessment. (Respondents Exhibit 9.) There are no disputed issues of material fact in this matter. The Petitioner’s Proposed Recommended Order acknowledges “[t]he calculation of the Section 440.107(7)(d) penalty is not in question...” The Petitioner has consistently objected to the “excessive” amount of the Department’s penalty, challenged the Department’s authority to assess unconstitutional penalties, and argues the penalty assessed violates the “principle of proportionality.”
Conclusions Christopher O. Marsh, Econotax 139 Beal Parkway SE, Ste. 102 ne Fort Walton Beach, Florida 32548 f Representative for Mubarak Trading Corp, Inc. Jamila Georgette Gooden, Esq. Florida Department of Financial Services Division of Legal Services Tallahassee, Florida 32399-4429 Attorney for the Florida Department of Financial Services, Division of Workers’ Compensation
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that a Final Order be entered affirming the Division of Workers’ Compensation Second Amended Order of Penalty Assessment in the amount of Sixteen Thousand Four Hundred Twenty Nine and 44/100 Dollars ($16, 429.44). Respectfully submitted this 19" day of December, 2011. Department of Financial Services 3700 Lifford Circle Tallahassee, Florida 32309 Phone: (850)668-9820 Fax: (850)668-9825 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the above and foregoing Recommended Order has been provided by US Mail to: Mr. Christopher Marsh, Econotax, on behalf of Mubarak Trading Corporation, Inc., 139 Deal Parkway, SE, Suite 102, Fort Walton Beach, Florida 32548 and via hand delivery in the interests of judicial economy to Alexander Brick, Esq. Department of Financial Services, Division of Legal Services, 200 East Gaines Street, Tallahassee, FL 32399-4429 this 19" day of December, 2011. Alan J. ~ 2h -13-
Findings Of Fact 19. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on March 25, 2008, the Amended Order of Penalty Assessment issued on April 3, 2008, the 2°4 Amended Order of Penalty Assessment issued on April 11, 2008, the 34 Amended Order of Penalty Assessment issued on July 8, 2008, the 4" Amended Order of Penalty Assessment issued on August 12, 2008, and the 5 Amended Order of Penalty Assessment issued on September 24, 2008, which are attached hereto as Exhibit A, Exhibit B, Exhibit C, Exhibit D, Exhibit E and Exhibit F, respectively, and fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
Conclusions THIS PROCEEDING came on for final agency action and Alex Sink, Chief Financial Officer of the State of Florida, or her designee, having considered the record in this case, including the Stop-Work Order and Order of Penalty Assessment, the Amended Order of Penalty Assessment, the 2"! Amended Order of Penalty Assessment, the 3 Amended Order of Penalty Assessment, the 4" Amended Order of Penalty Assessment and the 5 Amended Order of Penalty Assessment served in Division of Workers’ Compensation Case No. 08-1 17-1A, and being otherwise fully advised in the premises, hereby finds that: 1. On March 25, 2008, the Department of Financial Services, Division of Workers’ Compensation (hereinafter “Department”) issued to JOHN BICKNAS LLC a Stop-Work Order and Order of Penalty Assessment in Division of Workers’ Compensation Case No. 08-117-1A. The Stop-Work Order and Order of Penalty Assessment included.a Notice of Rights wherein JOHN BICKNAS LLC 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 March 25, 2008, the Stop-Work Order and Order of Penalty Assessment was served by personal service on JOHN BICKNAS LLC. A copy of the Stop-Work Order and Order of Penalty Assessment is attached hereto as “Exhibit A” and incorporated herein by reference. 3. JOHN BICKNAS LLC failed to answer the Stop-Work Order and Order of Penalty Assessment or request a proceeding in accordance with Sections 120.569 and 120.57, Florida Statutes. 4. On April 3, 2008, the Department issued an Amended Order of Penalty Assessment to JOHN BICKNAS LLC in Case No. 08-117-1A. The Amended Order of Penalty Assessment assessed a total penalty of $117,098.93 against JOHN BICKNAS LLC. The Amended Order of Penalty Assessment included a Notice of Rights wherein JOHN BICKNAS LLC 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. 5. On April 3, 2008, the Amended Order of Penalty Assessment was served on JOHN BICKNAS LLC by personal service. A copy of the Amended Order of Penalty Assessment is attached hereto as “Exhibit B” and incorporated herein by reference. 6. JOHN BICKNAS LLC failed to answer the Amended Order of Penalty Assessment or request a proceeding in accordance with Sections 120.569 and 120.57, Florida Statutes. 7. On April 11, 2008, the Department issued a 2" Amended Order of Penalty Assessment to JOHN BICKNAS LLC in Case No. 08-117-1A. The 2"? Amended Order of Penalty Assessment assessed a total penalty of $59,861.05 against JOHN BICKNAS LLC. 8. On April 11, 2008, the 2"! Amended Order of Penalty Assessment was served on JOHN BICKNAS LLC by personal service. A copy of the 2™4 Amended Order of Penalty Assessment is attached hereto as “Exhibit C” and incorporated herein by reference. 9. On May 2, 2008, JOHN BICKNAS LLC requested a proceeding based upon the 2™ Amended Order of Penalty Assessment, in accordance with Sections 120.569 and 120.57, Florida Statutes. 10. On May 8,-2008, the Department referred the matter to the Division of Administrative Hearings (hereinafter “DOAH”) for appointment of an administrative law judge, who would conduct a formal hearing. The case was assigned DOAH Case No. 08-2236. 11. On July 8, 2008, the Department issued a 3rd Amended Order of Penalty Assessment to JOHN BICKNAS LLC in Case No..08-117-1A. The 3rd Amended Order of Penalty Assessment assessed a total penalty of $74,362.20 against JOHN BICKNAS LLC. 12. On August 12, 2008, the Administrative Law Judge permitted the Department to amend the penalty assessment. As a result, the 3rd Amended Order of Penalty Assessment was entered in this matter. A copy of the 3rd Amended Order of Penalty Assessment is attached hereto as “Exhibit D” and incorporated herein by reference. 13. On August 12, 2008, the Department issued a 4th Amended Order of Penalty Assessment to JOHN BICKNAS LLC in Case No. 08-117-1A. The 4th Amended Order of Penalty Assessment assessed a total penalty of $169,896.64 against JOHN BICKNAS LLC. 14. On August 21, 2008, the Administrative Law Judge permitted the Department to amend the penalty assessment. As a result, the 4th Amended Order of Penalty Assessment was entered in this ection. A copy of the 4"" Amended Order of Penalty Assessment is attached hereto as “Exhibit E” and incorporated herein by reference. 15. On September 24, 2008, the Department issued a 5" Amended Order of Penalty Assessment to JOHN BICKNAS LLC in Case No. 08-117-1A. The 5" Amended Order of Penalty Assessment assessed a total penalty of $20,054.97 against JOHN BICKNAS LLC. 16. On September 25, 2008, this 5 Amended Order of Penalty Assessment was filed in DOAH Case’No. 08-2236. A copy of the 5"" Amended Order of Penalty Assessment is attached hereto as “Exhibit F” and incorporated herein by reference. 17. On September 25, 2008, based upon the 5" Amended Order of Penalty Assessment, JOHN BICKNAS LLC filed a Notice of Withdrawal of Claim in Division of Administrative Hearings case number 08-2236, attached hereto as “Exhibit G” and incorporated herein by reference. | 18. On September 29, 2008, the Administrative Law Judge issued an Order Closing File in Division of Administrative Hearings case number 08-2236, attached hereto as “Exhibit H” and incorporated herein by reference. |
