The Issue The issues are whether Respondent failed to provide workers' compensation insurance for its employees, whether the "Stop-Work" Order was warranted, and, whether Petitioner correctly calculated the assessed penalty.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following facts were established by clear and convincing evidence: Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. Respondent, Harold's Plumbing, Inc., a Florida corporation, was engaged in business operations from January 23, 2005, through January 19, 2008. A Stop-Work Order was issued to Respondent on January 22, 2008, after Harold Whitfield advised Petitioner's investigator that Respondent did not have workers' compensation insurance coverage. Petitioner's Coverage and Compliance Automated System database confirmed the lack of coverage. The initial Order of Penalty Assessment was issued on January 22, 2008, and served on Respondent the next day. Based on additional documentation provided by Whitfield and a human resources out-sourcing organization, Gevity HR, which had provided some insurance coverage until it severed its business relationship with Respondent, the Order of Penalty Assessment was amended; the last amendment is dated October 13, 2008. The total penalty, $29,688.72, is accurate and reflects the result of a detailed assessment of Respondent's employee payroll records and application of the classification codes, published by the National Council on Compensation Insurance, Inc., and incorporated into Florida law in Florida Administrative Code Rule 69L-6.021.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Department of Financial Services, Division of Workers' Compensation, enter a final order: Finding that Respondent, Harold's Plumbing, Inc., failed to secure the payment of workers' compensation for its employees, in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Respondent in the amount of $29,668.72, which is equal to 1.5 times the evaded premium based on Petitioner's records and the applicable approved manual rate and classification code. DONE AND ENTERED this 17th day of December, 2008, in Tallahassee, Leon County, Florida. S JEFF B. CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 2008. COPIES FURNISHED: Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Kristian E. Dunn, Esquire Justin H. Faulkner, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street, 6th Floor Tallahassee, Florida 32399-4229 Harold Whitfield 1125 5th Street Southwest Winter Haven, Florida 33880
The Issue At issue in this proceeding is whether the Respondent, Marvin's Electric Service, Inc. ("Marvin's Electric"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes (2014), by not obtaining workers' compensation insurance for its employees, and, if so, whether the Petitioner, Department of Financial Services, Division of Workers' Compensation ("Department"), properly assessed a penalty against the Respondent pursuant to section 440.107.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Marvin's Electric is a corporation based in Cantonment, Florida. The Division of Corporations' "Sunbiz" website indicates that Marvin's Electric was first incorporated on December 15, 2003, and remained an active corporation until September 23, 2011, when it was administratively dissolved for failure to file an Annual Report. The corporation continued to hold itself out as eligible to do business throughout the period relevant to this proceeding. Sunbiz records indicate that the corporation filed new articles of incorporation on April 9, 2015, and is currently an active corporation. The principal office of Marvin's Electric is at 2647 Stefani Road in Cantonment. Marvin's Electric is solely owned and operated by Marvin Mobley. It has no regular employees aside from Mr. Mobley. Marvin's Electric was actively engaged in performing electrical work during the two-year audit period from November 19, 2012, through November 18, 2014. Kali King is a Department compliance investigator assigned to Escambia County. Ms. King testified that her job includes driving around the county conducting random compliance investigations and investigating referrals made to her office by members of the public. On November 18, 2014, Ms. King drove to a residence off Pale Moon Drive in Pensacola to investigate a public referral made against a different business entity that happened to be working on the same single-family residence as Mr. Mobley. Ms. King testified that when she arrived at the residence, she saw Mr. Mobley and two other workers on the site before she ever spoke to the employees of the business she was there to investigate. Mr. Mobley and the two other men were digging a shallow trench from the home to a shed on the back of the property. The homeowner told Ms. King that Mr. Mobley was installing electricity in the shed. Ms. King approached the three men and identified herself. She asked who was in charge, who hired them, and whether they were working as a business. Mr. Mobley replied that he was in charge, he had been hired by the homeowner, and he was working in the name of his business, Marvin's Electric. Ms. King asked how he was providing workers' compensation insurance for his business. Mr. Mobley answered that he had an exemption for himself and that he did not have insurance for the other two workers because they were not employees of his business. One of the men was his foster child who was working for Mr. Mobley in exchange for room and board. The other man was returning a favor to Mr. Mobley, who had helped the man with some construction work on his property in Alabama. The other men confirmed Mr. Mobley's story when Ms. King separately interviewed them. Ms. King went inside the house to speak with the contractor she had been sent out to investigate, then she returned to her vehicle to perform computer research on Marvin's Electric. She consulted the Sunbiz website for information about the company and its officers. Her search confirmed that Marvin's Electric was an inactive Florida corporation, having been administratively dissolved for failure to file an Annual Report in 2011. Marvin Mobley was listed as its registered agent and as president of the corporation. No other corporate officers were listed. Ms. King also checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Marvin's Electric had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Marvin's Electric had no active workers' compensation insurance coverage for its employees and that no insurance had ever been reported to the state for Marvin's Electric. There was no evidence that Marvin's Electric used an employee leasing service. Mr. Mobley had, in the past, elected an exemption as an officer of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012, but the exemption had expired as of the date of the investigation. Based on his jobsite interviews with the employees and Mr. Mobley, and her Sunbiz and CCAS computer searches, Ms. King concluded that as of November 18, 2014, Marvin's Electric had three employees working in the construction industry and that the company had failed to procure workers' compensation coverage for these employees in violation of chapter 440. Ms. King, consequently, issued a Stop-Work Order that she personally served on Mr. Mobley on November 18, 2014. Also on November 18, 2014, Ms. King served Marvin's Electric with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers' compensation insurance coverage, and other business records to enable the Department to determine the appropriate penalty owed by Marvin's Electric. Ms. King testified that Mr. Mobley provided records in response to the Request for Production. The records were scanned into the Department's internal auditing system, and the file was placed into a queue to be assigned to a penalty calculator, who reviews the records and calculates the penalty imposed on the business. Ms. King could not recall the name of the person assigned to calculate the penalty in this case. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two-year period preceding the Stop-Work Order, which in this case was the period from November 19, 2012, through November 18, 2014. § 440.107(7)(d), Fla. Stat. Because Mr. Mobley had no payroll records for the two men who worked for him on November 18, 2014, the penalty calculator lacked sufficient business records to determine the company's actual gross payroll on that date. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer's actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications ("Scopes Manual") published by the National Council on Compensation Insurance ("NCCI"). The Scopes Manual has been adopted by reference in rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L- 6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5190, titled "Electrical Wiring—-Within Buildings & Drivers," which "applies to the installation of electrical wiring systems within buildings." The corresponding rule provision is rule 69L-6.021(2)(u). The penalty calculator used the approved manual rates corresponding to Class Code 5190 for the periods of non-compliance to calculate the penalty. On February 3, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $1,381.58, based upon Mr. Mobley's actual wages during the penalty period, plus an imputation of wages for the date of November 18, 2014, for Mr. Mobley and the two men who were working for him on that date. After Mr. Mobley clarified that one item treated as payroll by the Department was actually a refund to a customer, the Department on June 10, 2015, was able to issue a Second Amended Order of Penalty Assessment in the amount of $1,373.56, based on the mixture of actual payroll information and imputation referenced above. Ms. Proano persuasively testified that the administrative dissolution of the corporate status of Marvin's Electric had no bearing on the question of the company's responsibility to provide workers' compensation insurance for its employees or to establish an exemption. After dissolution, the company continued to hold itself out as a corporate entity prepared to do business and, in fact, accepted work and was paid as a corporation. Therefore, the Department investigated Marvin's Electric as a corporate entity. In any event, under the facts of this case, the penalty calculation would have been the same had the Department treated Mr. Mobley as a sole proprietor, rather than as the president of a corporate entity. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Second Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Marvin's Electric was in violation of the workers' compensation coverage requirements of chapter 440. Justice Kirchhevel and Wayne Richardson were employees of Marvin's Electric on November 18, 2014, performing services in the construction industry without valid workers' compensation insurance coverage.2/ The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates, business records provided by Marvin's Electric, and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. Ms. Proano's recalculation of the penalty confirmed the correctness of the penalty calculator's work. Marvin's Electric could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Mr. Mobley testified that he has always been the sole proprietor of Marvin's Electric and that he has never had to pay employees. The two men with him on November 18, 2014, were there because Mr. Mobley was in poor health and needed help digging the trench from the house to the shed. He testified that he never received notice from the Department that his exemption was expiring and that, in the midst of several major surgeries, he forgot that it was time to renew his exemption. Mr. Mobley's testimony was eloquent and credible, but the equitable considerations that he raised have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $1,373.56 against Marvin's Electric Service, Inc. DONE AND ENTERED this 19th day of August, 2015, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of August, 2015.
The Issue Did Respondent, John McCary General Contractor, Inc. (McCary), fail to secure workers’ compensation insurance for employees as required by chapter 440, Florida Statutes (2016)?1/ If so, what is the appropriate penalty?
Findings Of Fact The Division is the state agency responsible for enforcing the statutory requirement that employers secure workers’ compensation insurance for the benefit of their employees. § 440.107(3), Fla. Stat. McCary is a roofing contractor owned and operated by John McCary. It is in the construction industry. On November 18, 2016, Mr. Howe, a compliance investigator for the Division, visited a house where McCary was tearing off the roof. Mr. Howe recorded the names of each employee. He conducted an investigation that included speaking to Mr. McCary, re-interviewing the employees, checking with the employee leasing company that McCary used, and checking the Davison database of insured individuals. Mr. Howe could not find a record of workers’ compensation coverage for at least one employee. This triggered further investigation that resulted in Mr. Howe issuing a Stop-Work Order to McCary on November 18, 2016, for failure to secure workers’ compensation insurance in violation of sections 440.10(1), 440.38(1) and 440.107(2). After that, the Division followed its usual practice of requesting documents, reviewing its databases, soliciting information and explanations from the employer, and analyzing the information and documents obtained. Division Exhibit 9 shows that the Division asked McCary for business records on November 21, 2016, and that McCary did not provide them until December 12, 2016. The Division’s investigation and analysis resulted in the evidence admitted in this proceeding. The evidence proved the allegations of the Division’s Third Amended Order of Penalty Assessment, including its attached Penalty Calculation Worksheet. McCary did not comply with workers’ compensation insurance coverage requirements for the period May 1 through November 18, 2016. During that period, McCary employed Arcenio Rosado, Domingo Esteves, Javier Restrepo, Jose Alfredo Fuentes, Carlos Toledo, Edwin Valle, Kelly Alvarez, Kyle Shiro, Claudia Florez, and Nelson Geovany Melgar Rodenzo and that they performed work for it. McCary would have paid $4,744.06 in insurance premiums to provide workers’ compensation coverage for these employees during that period. During that period, McCary also used the services of two subcontractors, Star Debris Removal and E C Roofing, LLC. These subcontractors did not have workers’ compensation insurance for their employees during the May 1 through November 18, 2016, period. Premiums to provide coverage to the employees of the two subcontractors who worked on McCary’s projects would have totaled $100,771.09. From May 1 to November 18, 2016, McCary made cash payments of $195,856.02 that its documents could not confirm to be for a valid business expense. Florida Administrative Code Rule 69L-6.035(1)(k) requires that 80 percent of that amount be deemed wages or salaries paid employees when calculating the premiums used to determine the ultimate penalty. Eighty percent of McCary’s unaccounted-for cash payments is $156,684.82. That amount is legally deemed to be a payroll expense. McCary would have paid $29,143.38 to provide coverage for the employees represented by the cash payments. Altogether, McCary would have paid $134,658.53 to provide workers’ compensation coverage to the uncovered employees represented by the actual and deemed payroll during the May 1 to November 18, 2016, period.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order finding that John McCary General Contractor, Inc., failed to secure payment of required workers’ compensation insurance coverage from May 1 to November 18, 2016, in violation of section 440.107, Florida Statutes, and imposing a penalty of $269,317.06, reduced by $1,000.00. DONE AND ENTERED this 17th day of July, 2018, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 2018.
The Issue The issues in this case are whether Respondent violated chapter 440, Florida Statutes (2014),1/ by failing to secure the payment of workers' compensation coverage as alleged in the Stop-work Order and 2nd Amended Order of Penalty Assessment, and if so, the amount of the penalty that should be assessed.
Findings Of Fact The Parties Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the requirement in chapter 440 that employers in the state of Florida secure the payment of workers' compensation insurance covering their employees. Respondent, Bargain Bob's Carpets, Inc., is a corporation registered to do business in Florida. Its principal business address is 3954 Byron Drive, Riviera Beach, Florida. The Compliance Investigation As the result of an anonymous referral, Petitioner's compliance investigator, Peter Sileo, investigated Respondent to determine whether it had secured workers' compensation coverage for its employees as required by chapter 440. Before Sileo visited Respondent's business location, he checked the State of Florida Coverage and Compliance Automated System ("CCAS") computer database, which contains information regarding workers' compensation insurance policies that have been obtained by employers. The CCAS database showed no record of any workers' compensation policies covering Respondent's employees having been issued. On Sileo's first visit to Respondent's business location, he observed a man loading carpeting into a van. Upon being questioned, the man identified himself as Gary Persad. He told Sileo that he was a carpet installation subcontractor for Respondent. Sileo checked CCAS and determined that Persad was covered by workers' compensation insurance. On January 23, 2015, Sileo again visited Respondent's business location, which is a warehouse housing large rolls of carpeting and other flooring materials. There, Sileo met John Charles, an owner and corporate officer of Respondent. Charles claimed that he did not know that Respondent was required to have workers' compensation coverage for its employees. Charles told Sileo that Respondent sold flooring but did not install it and that all installation was performed by subcontractors. At the time of the inspection, Sileo determined that Respondent employed five employees: Charles and Calideen, each of whom own more than ten percent of Respondent's business; Alex Stark; Peter Phelps; and Anthony Frenchak. Sileo served a Stop-work Order, ordering Respondent to cease all business operations in the state pending demonstrating compliance with the workers' compensation coverage requirement. Sileo also served a Request for Production of Business Records for Penalty Assessment Calculation. Respondent subsequently demonstrated compliance with the workers' compensation coverage requirement, and Petitioner lifted the Stop-work Order.2/ Respondent also produced business records consisting of spreadsheets showing quarterly payroll, transaction listings, affidavits, insurance coverage documents, and other records. The Penalty Assessment Eric Ruzzo, a penalty auditor with Petitioner, used these records to calculate the penalty to be assessed against Respondent. The $31,061.68 penalty is reflected in the 2nd Amended Order of Penalty Assessment, issued April 23, 2015, that is the subject of this proceeding. To calculate the applicable penalty, Petitioner determines the employer's gross payroll for the two-year period preceding the noncompliance determination——the so-called "penalty period"——from a review of the employer's business records. For days during the penalty period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the penalty period commenced on January 24, 2013, and ended on January 23, 2015, the day on which the compliance inspection was conducted, and Respondent was determined to not be in compliance with the workers' compensation coverage requirement. Initially, Respondent produced payroll records that did not identify the subcontractors Respondent hired to install the carpeting. Ruzzo identified the subcontractors using Respondent's transaction records. Respondent subsequently provided information, including affidavits and certificates of exemption regarding the subcontractors it had hired during the penalty period. At all times during the penalty period, Respondent employed four or more non-construction employees, including Charles and Calideen.3/ Based on the business records produced, Ruzzo compiled a list of the persons, including the subcontractors and non-construction employees who were on Respondent's payroll, but not covered by workers' compensation insurance during the penalty period. This list of employees and the penalty computation for each is set forth on the Penalty Calculation Worksheet attached to the 2nd Amended Order of Penalty Assessment. Using the National Council on Compensation Insurance ("NCCI") workers' compensation insurance occupation class codes set forth in the NCCI Scopes Manual, Ruzzo determined the occupation class code applicable to each employee listed on the Penalty Calculation Worksheet. Respondent's subcontractors were classified in NCCI class code 5478, which is the class code for the flooring installation industry. This is consistent with Florida's construction industry class code rule, Florida Administrative Code Rule 69L-6.021(2)(kk), which identifies the installation of carpet and other floor covering as NCCI class code 5478. Alex Stark, Amber Krembs, Jacquelyn Skwarek, and Monica Stahl were classified in NCCI class code 8018, which applies to workers engaged in selling merchandise, including carpeting and linoleum, at the wholesale level. Calideen, Frenchak, and Phelps were classified in NCCI class code 8742, which applies to outside salespersons primarily engaged in sales off of the employer's premises. Charles was classified in NCCI class code 8810, which applies to clerical office employees. Ruzzo then determined the period of Respondent's noncompliance for each employee listed on the Penalty Calculation Worksheet. For each of these employees, Ruzzo determined the gross payroll paid to that employee for the period during which Respondent was noncompliant, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupation class code. This calculation yielded the workers' compensation coverage premium for that specific employee for which Respondent was noncompliant during the penalty period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. Respondent did not provide records covering Charles, Calideen, Stark, Frenchak, or Phelps for the period between January 1, 2015, and January 23, 2015. For this period, Ruzzo imputed the gross payroll for each of these employees using the statewide average weekly wage as defined in section 440.12(2),4/ multiplied by two. Ruzzo then performed the same computations discussed above to determine the penalty amount to be imposed for Respondent's failure to provide workers' compensation for those employees during this time period. Ruzzo added the penalty determined for each employee using actual gross payroll and imputed payroll, as applicable, to arrive at the total penalty assessment amount of $31,061.68. Respondent's Defense Respondent is engaged in the retail sale of various types of flooring, such as carpeting, and hires subcontractors to install the flooring. The evidence did not establish that Respondent engaged in wholesale sales of flooring. Charles testified that Respondent had attempted to operate its business as a "cash and carry" operation in which Respondent would sell the flooring to retail customers, who would take the purchased flooring from Respondent's premises and would be solely responsible for securing their own installation services. In Charles' words, "[t]hat didn't work. The public demanded that we provide them, as part of the sale, installers—— I might be saying it wrong legally, but they demanded that it all be done in one shot." Thus, Respondent began hiring subcontractors to do the installation work. Charles explained that Respondent makes retail sales of flooring to customers, either on Respondent's premises or at the customer's premises through its outside sales people. The flooring is then cut from the roll on Respondent's premises and placed in the installer's vehicle. The installer transports the purchased flooring to, and installs it at, the customer's premises. Charles estimated that Respondent currently does approximately five percent of its business as "cash and carry" sales, and the remaining 95 percent consists of sales requiring installation. Charles testified that he and Calideen, as corporate officers of Respondent, previously had obtained exemptions from the workers' compensation coverage requirements for themselves; however, they were unaware that the exemptions had to be renewed, so their exemptions had expired. As of the date of the 2nd Amended Order of Penalty Assessment, neither Charles nor Calideen possessed valid certificates of exemption from the workers' compensation coverage requirement. Charles testified that Respondent always had tried to operate in compliance with the law. He was of the view that because he and Calideen were exempt from the worker's compensation coverage requirement, Respondent effectively employed only three employees——one fewer than the workers' compensation coverage requirement threshold of four employees applicable to non-construction industry businesses. Charles and Calideen testified that when Respondent initially hired subcontractors, they required copies of their insurance policies, including proof of workers' compensation coverage or exemption therefrom. Calideen testified that thereafter, he and Charles assumed that the subcontractors were in compliance with the workers' compensation laws, and they did not know that they needed to obtain updated certificates of workers' compensation exemption or coverage from the subcontractors. On that basis, Charles asserted that Respondent should not be required to "babysit" its subcontractors to ensure that they are in compliance with the workers' compensation law. Respondent thus asserts that it should not be responsible for securing workers' compensation coverage for subcontractors whose workers' compensation policies or exemptions had expired during the penalty period. The undisputed evidence establishes that Charles' employment entails clerical work. Calideen testified, credibly, that Stark's employment duties entail selling flooring on Respondent's business premises, and that he does not engage in sales off the premises. Calideen testified, credibly, that Frenchak and Phelps primarily are engaged in outside sales off of Respondent's premises. Calideen testified, credibly, that he performs clerical duties rather than sales duties. Calideen and Charles both testified, credibly, that employees Krembs, Skwarek, and Stahl performed computer-related duties for Respondent, such as entering business information into Respondent's computer databases, and that they did not work on Respondent's business premises. Calideen testified, credibly, that subcontractor Mike Smith was hired on a one-time basis to paint parking place stripes at the newly-repaved parking lot behind Respondent's business premises. Findings of Ultimate Fact The credible, persuasive evidence establishes that Respondent is engaged in the retail sale of carpeting and other flooring materials and that Respondent itself does not install the flooring. The credible, persuasive evidence establishes, and the parties stipulated, that Respondent is not a member of the construction industry. The credible, persuasive evidence establishes that at all times during the penalty period, Respondent employed more than four employees who were engaged in non-construction employment. Accordingly, Respondent was required to secure workers' compensation coverage for its employees, including Charles and Calideen, whose previously-issued certificates of exemption had expired and were not in effect during the penalty period. The undisputed evidence establishes that at certain times during the penalty period, Respondent employed subcontractors who performed floor installation. The evidence clearly establishes that the subcontractors, in installing the flooring, perform a service that is integral to Respondent's business and that they work specifically at Respondent's direction for each particular installation job. Even though Respondent is not classified as a member of the construction industry, it nonetheless is a "statutory employer" of its subcontractors, who are members of the construction industry. Thus, Respondent is responsible for securing workers' compensation coverage for its subcontractors who failed to secure an exemption or coverage for themselves.5/ The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to flooring installation subcontractors for which Respondent was noncompliant during the penalty period. However, the unrebutted evidence establishes that subcontractor Mike Smith was hired on a one-time basis to paint parking lot stripes in Respondent's parking lot. Thus, Petitioner's classification of Smith in NCCI class code 5478—— which is a construction industry code that applies to workers engaged in flooring installation——obviously is incorrect, and no evidence was presented showing the correct NCCI class code in which Smith should be classified. Accordingly, Smith should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Petitioner correctly calculated the penalty attributable to Respondent's noncompliance with respect to Charles, Frenchak, and Phelps during the penalty period. The credible, persuasive evidence establishes that Stark is engaged in retail sales on Respondent's business premises. However, in calculating the penalty, Petitioner classified Stark in NCCI class code 8018, which applies to salespersons engaged in selling merchandise at the wholesale level, rather than at the retail level. Thus, Petitioner incorrectly classified Stark in NCCI class code 8018. There is no evidence in the record identifying the correct NCCI class code in which Stark should be classified. Accordingly, Stark should not be included in Petitioner's calculation of the penalty to be assessed against Respondent. The credible, persuasive evidence establishes that Calideen performs clerical employment duties and does not perform sales duties, so he should be classified in NCCI class code 8810, rather than in class code 8742. Accordingly, Petitioner should recalculate the portion of the penalty attributable to Respondent's noncompliance for Calideen using NCCI class code 8810. The credible, persuasive evidence establishes that Krembs, Skwarek, and Stahl are not employed as salespersons at the wholesale level. Thus, Petitioner incorrectly classified these employees in NCCI class code 8018. In its Proposed Recommended Order, Petitioner contends that because Respondent disputes the classification of these employees in class code 8018, Respondent is responsible for identifying the correct applicable class code, which it has not done. This position disregards that in this proceeding, Petitioner bears the burden of proof, by clear and convincing evidence, to show that its proposed penalty assessment against Respondent is accurate. Thus, Petitioner——not Respondent——is responsible for correctly identifying the NCCI class codes applicable to Respondent's employees. Here, the credible, persuasive evidence establishes that in calculating the penalty, Petitioner incorrectly classified Krembs, Skwarek, and Stahl in class code 8018,6/ and no evidence was presented showing the correct NCCI class code applicable to these employees. Accordingly, Krembs, Skwarek, and Stahl should not be included in Petitioner's calculation of the penalty to be assessed against Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Department of Financial Services, Division of Workers' Compensation, issue a final order amending the penalty to be assessed against Respondent as follows: Subtracting the penalty assessed for subcontractor Mike Smith, as shown on the Penalty Calculation Worksheet; and Subtracting the penalties assessed for Respondent's alleged noncompliance with respect to employees Amber Krembs, Jacquelyn Skwarek, and Monica Stahl, as shown on the Penalty Calculation Worksheet; and Reclassifying employee Andy Calideen in NCCI class code 8810 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Calideen using this class code; and Reclassifying employee Alexander Stark in NCCI class code 5784 and recalculating the portion of the penalty attributable to Respondent's noncompliance for Stark using this class code. DONE AND ENTERED this 22 day of January, 2016, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22 day of January, 2016.
The Issue At issue in this proceeding is whether the Respondent, Forever Floors and More, Inc. ("Forever Floors"), failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes by not obtaining workers' compensation insurance for its employees, and, 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. Forever Floors is a Florida corporation. The Division of Corporations’ “Sunbiz” website indicates that Forever Floors was first incorporated on February 4, 2012, and remained active as of the date of the hearing. Forever Floors’s principal office is at 8205 Oak Bluff Road, Saint Augustine, Florida 32092. Forever Floors is solely owned and operated by Christopher Bohren. Mr. Bohren is the president and sole officer of the corporation. Forever Floors was actively engaged in performing tile installation during the two-year audit period from April 3, 2013, through April 2, 2015. John C. Brown is a government operations consultant for the Department. During the period relevant to this proceeding, Mr. Brown was a Department compliance investigator assigned to Duval County. Mr. Brown’s job included conducting random compliance investigations and investigating referrals made to his office by members of the public. Mr. Brown testified that as an investigator, he would enter worksites and observe the workers and the types of work they were doing. On April 2, 2015, Mr. Brown visited a worksite at 3714 McGirts Boulevard in Jacksonville. He observed two workers installing tile in a shower in an older single-family residence that was undergoing renovations. Mr. Brown identified himself to the two workers and then inquired as to their identities and employment. Mr. Bohren replied that he was the company officer and that his company had an exemption from the requirement to provide workers’ compensation insurance coverage. Mr. Bohren identified the other worker as Dustin Elliott and stated that Mr. Elliott had worked for Forever Floors for about eight months. Mr. Bohren told Mr. Brown that he paid Mr. Elliott sometimes by check and sometimes with cash. After speaking with Mr. Bohren, Mr. Brown returned to his vehicle to perform computer research on Forever Floors. He consulted the Sunbiz website for information about the company and its officers. His search confirmed that Forever Floors was an active Florida corporation and that Christopher Bohren was listed as its registered agent, and as president of the corporation. No other corporate officers were listed. Mr. Brown also checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Forever Floors 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 Forever Floors had no active workers' compensation insurance coverage for its employees and that no insurance had ever been reported to the state for Forever Floors. There was no evidence that Forever Floors used an employee leasing service. Mr. Bohren had an active exemption as an officer of the corporation pursuant to section 440.05 and Florida Administrative Code Rule 69L-6.012, effective September 24, 2013, through September 24, 2015. There was no exemption noted for Dustin Elliott. Based on his jobsite interviews with the employees and Mr. Bohren, and his Sunbiz and CCAS computer searches, Mr. Brown concluded that as of April 2, 2015, Forever Floors had an exemption for Mr. Bohren but had failed to procure workers’ compensation coverage for its employee, Dustin Elliott, in violation of chapter 440. Mr. Brown consequently issued a Stop- Work Order that he personally served on Mr. Bohren on April 2, 2015. Also on April 2, 2015, Mr. Brown served Forever Floors with a Request for Production of Business Records for Penalty Assessment Calculation, asking for documents pertaining to the identification of the employer, the employer's payroll, business accounts, disbursements, workers' compensation insurance coverage records, professional employer organization records, temporary labor service records, documentation of exemptions, documents relating to subcontractors, documents of subcontractors' workers’ compensation insurance coverage, and other business records, to enable the Department to determine the appropriate penalty owed by Forever Floors. Mr. Brown testified, and Mr. Bohren confirmed, that Mr. Bohren provided no records in response to the Request for Production. The case file was assigned to a penalty calculator, who reviews the records and calculates the penalty imposed on the business. Mr. Brown did not state the name of the person assigned to calculate the penalty in this case. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two- year period preceding the Stop-Work Order, which in this case was the period from April 3, 2013, through April 2, 2015. § 440.107(7)(d), Fla. Stat. Because Mr. Bohren had no payroll records for himself or Mr. Elliott on April 2, 2015, the penalty calculator lacked sufficient business records to determine the company’s actual gross payroll on that date. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer’s actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L- 6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5348, titled “Ceramic Tile, Indoor Stone, Marble, or Mosaic Work,” which “applies to specialist contractors who perform tile, stone, mosaic, or marble work.” The corresponding rule provision is rule 69L- 6.021(2)(aa). The penalty calculator used the approved manual rates corresponding to Class Code 5348 for the periods of non- compliance to calculate the penalty. On May 22, 2015, the Department issued an Amended Order of Penalty Assessment in the amount of $23,538.34, based on Mr. Bohren’s imputed wages for the periods not covered by his exemption and the imputed wages for Mr. Elliott for the entire penalty period. Mr. Bohren was served with the Amended Order of Penalty Assessment on June 8, 2015. 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 Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Forever Floors was in violation of the workers' compensation coverage requirements of chapter 440. Dustin Elliott was an employee of Forever Floors on April 2, 2015, performing services in the construction industry without valid workers' compensation insurance coverage. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. Ms. Proano’s recalculation of the penalty confirmed the correctness of the penalty calculator’s work. Forever Floors could point to no exemption, insurance policy, or employee leasing arrangement that would operate to lessen or extinguish the assessed penalty. At the hearing, Christopher Bohren testified that he is the sole proprietor of Forever Floors and that Mr. Elliott had only worked for him for six-to-eight months, mostly on a part-time basis, as of April 2, 2015. He stated that the penalty assessed in this case is more than he has made from his start-up business. After his discussion with Mr. Brown, he immediately procured workers’ compensation insurance coverage for Mr. Elliott and intends to stay within the ambit of the law in the future. Mr. Bohren testified that he was unable to access his business records because they were with his ex-wife, from whom he had an apparently acrimonious departure. Mr. Bohren’s testimony elicited sympathy, but the equitable considerations that he raised have no effect on the operation of chapter 440 or the imposition of the penalty assessed pursuant thereto.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $23,538.34 against Forever Floors and More, Inc. DONE AND ENTERED this 28th day of October, 2015, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 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 October, 2015.
The Issue Whether the Respondent committed the violations alleged in the Second Amended Order of Penalty Assessment filed May 11, 2009,1 and, if so, the penalty that should be imposed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of Section 440.107, Florida Statutes, that employers in Florida secure workers' compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. C.S.E Paving is a Florida corporation located in Delray Beach, Florida. Stephen Warden is the owner of C.S.E Paving, which engages in the business of paving. On November 24, 2008, Germaine Greer, a compliance investigator employed by the Department, observed two workers repairing and reinstalling concrete brick pavers at a Best Western Hotel. She learned that these workers were employed by C.S.E Paving. After her visit on November 24, 2008, the compliance investigator conducted research through the Coverage and Compliance Automated System database, which provides information on workers' compensation insurance coverage and exemptions. The investigator's research revealed that, during the three-year period from November 24, 2005, and November 24, 2008, C.S.E Paving had workers' compensation insurance coverage for its employees from July 25, 2006, through July 28, 2007; from July 16, 2007, through July 16, 2008; and from July 16, 2008, through August 6, 2008, when the policy was cancelled. Mr. Warden did not have an exemption from the requirement to have workers' compensation insurance coverage. Mr. Warden provided the compliance investigator with the payroll and other records requested in the business records request. Based on these records, the compliance investigator calculated the penalty to be imposed on C.S.E Paving for its failure to have workers' compensation insurance coverage during the approximately six-month period in 2005 and 2006 and the approximately four-month period in 2008. The penalty assessed in the Second Amended Order of Penalty Assessment was $13,487.64, which assessment superseded the $21,290.11 penalty assessed in the Amended Order of Penalty Assessment dated December 22, 2008. The compliance investigator looked to the NCCI SCOPES Basic Manual of Classifications ("SCOPES Manual") for classification codes attributable to the workplace operations of the persons working for C.S.E Paving. The classification code assigned by the compliance investigator to the workmen employed by C.S.E Paving between November 24, 2005, and November 24, 2006, who engaged in paving activities was Code 5221. According to the SCOPES Manual and to Florida Administrative Code Rule 69L-6.021(1)(w), Code 5221 is a code applicable to the construction industry and covers "Concrete or Cement Work Floors, Driveways, Yards, and Sidewalks & Drivers." The approved NCCI Manual rate in Florida effective January 1, 2006, for Code 5221 was $10.37 per $100.00 of payroll; and the approved NCCI Manual rate in Florida effective January 1, 2008, for Code 5221 was $6.97 per $100.00 of payroll. The classification code found in the SCOPES Manual assigned by the compliance investigators to the clerical workers employed by C.S.E Paving between November 24, 2005, and November 24, 2006, was Code 8810. According to the SCOPES Manual, Code 8810 covers "Clerical Office Employees." The approved NCCI Manual rate in Florida effective January 1, 2006, for Code 8810 was $.58 per $100.00 of payroll; and the approved NCCI Manual rate in Florida effective January 1, 2008, for Code 8810 was $.37 per $100.00 of payroll. The classification code assigned by the compliance investigator to Stephen Warden, the owner of C.S.E Paving, was Code 5606. According to the SCOPES Manual, Code 5606 covers "Contractor - Project Manager, Construction Executive, Construction Manager or Construction Superintendent." The approved NCCI Manual rate in Florida effective January 1, 2006, for Code 5606 was $3.84 per $100.00 of payroll; and the approved NCCI Manual rate in Florida effective January 1, 2008, for Code 5606 was $2.74 per $100.00 of payroll. The compliance investigator calculated the total penalty attributable to C.S.E Paving's failure to provide workers' compensation insurance coverage for its employees during the covered time periods. She obtained the names of each of the individuals included in her calculations and the amount of the gross payroll for each individual from the payroll information provided by Mr. Warden in response to the business records request. The compliance investigator calculated the penalty as follows: She listed C.S.E Paving's employees on the Penalty Worksheet; assigned each employee a classification code based on the definitions of workplace operations that most closely described the work they performed for C.S.E Paving; set out the dates during which C.S.E Paving did not provide workers' compensation insurance coverage; entered the annual or pro-rated gross payroll for each employee during the period of non- compliance; divided the gross payroll for each employee by 100; set out the approved manual rate for each employee during the period of non-compliance in accordance with his or her classification code; determined the premium that C.S.E Paving would have paid for workers' compensation insurance coverage for each employee during the period of non-compliance by multiplying the approved manual rate and one one-hundredth of the gross payroll for each employee; calculated the penalty attributable to each employee during the period of non-compliance by multiplying the premium for each employee by 1.5; and, finally, calculated the total penalty owed by C.S.E Paving attributable to its failure to secure workers' compensation insurance coverage for its employees during the time periods at issue.
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 finding that C.S.E Paving of South Florida Inc., failed to secure workers' compensation insurance coverage for its employees in violation of Section 440.38(1), Florida Statutes, from January 1, 2006, through July 25, 2006, and from August 6, 2008, through November 24, 2008, and imposing a penalty in the amount of $13,487.64 for the failure to provide the required workers' compensation insurance coverage. DONE AND ENTERED this 28th day of September, 2009, in Tallahassee, Leon County, Florida. PATRICIA M. HART 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 September, 2009.
The Issue The issues are whether Respondent failed to secure the payment of workers' compensation insurance, and if so, what penalty should be imposed.
Findings Of Fact Petitioner is the agency charged with enforcing the provisions of Chapter 440, Florida Statutes. Respondent is a Florida limited-liability company, organized in 2004. Salvador Rivera is one of the company's managers/officers. On or about February 27, 2009, Respondent secured workers' compensation insurance for its employees. The carrier was Guarantee Insurance Co. In a Notice of Termination of Workers' Compensation Insurance dated August 10, 2009, Guarantee Insurance Co. advised Petitioner and Respondent that Respondent's workers' compensation insurance would be cancelled on August 25, 2009. Guarantee Insurance Co. issued the notice because Respondent had not paid its insurance premium. Some time after receiving the notice from its insurer, Respondent received a check from Brantley Custom Homes. Mr. Rivera deposited the check into Respondent's bank account. Mr. Rivera then wrote a check to Guarantee Insurance Co. for the workers' compensation insurance premium. Mark Piazza is one of Petitioner's compliance investigators. On September 25, 2009, Mr. Piazza conducted a routine compliance check in the Southwood subdivision of Tallahassee, Florida. During the compliance check, Mr. Piazza noticed a new home under construction. He saw two men, Gilberto Torres and Saturino Gonzalez, doing carpentry work at the building site. Under the Scopes Manual, carpentry is identified as construction work under the class code 5645. During an interview with the two men, Mr. Piazza learned that they were employed by Respondent. Mr. Rivera confirmed by telephone that Respondent employed the two men. Mr. Rivera believed that Respondent had workers' compensation coverage on September 25, 2009. Mr. Rivera was not aware that the check from Brantley Custom Homes had bounced, resulting in insufficient funds for Respondent's bank to pay Respondent's check to Guarantee Insurance Co. Mr. Piazza then contacted Respondent's local insurance agent and checked Petitioner's Coverage and Compliance Automated System (CCAS) database to verify Mr. Rivera's claim that Respondent had workers' compensation insurance. Mr. Piazza subsequently correctly concluded that Respondent's insurance policy had been cancelled on August 25, 2009, due to the failure to pay the premium. On September 25, 2009, Mr. Piazza served Respondent with a Stop-work Order and Order of Penalty Assessment. The penalty assessment was 1.5 times the amount of the insurance premium that Respondent should have paid from August 25, 2009, to September 24, 2009. After receiving the Stop-work Order on September 25, 2009, Brantley Custom Homes gave Respondent another check. Mr. Rivera then sent Guarantee Insurance Co. a second check to cover the premium with the understanding that there would be no lapse in coverage. On September 28, 2009, Guarantee Insurance Co. provided Respondent with a notice of Reinstatement or Withdrawal of Policy Termination. The notice states as follows: Our Notice of Termination, filed with the insured and the Department of Labor and Employment Security effective 8/25/2009 and or dated 8/10/2009, is hereby voided and coverage remains in effect for the employer identified below. There is no evidence to show whether Respondent had to sign a no-loss affidavit and submit it to Guarantee Insurance Co. before the insurer would reinstate the policy with no lapse. Such an affidavit usually states that the insured had no claims during the uninsured period, On September 29, 2009, Mr. Piazza served a second copy of the Stop-work Order and Order of Penalty Assessment on Respondent. At that time, Mr. Piazza also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Respondent subsequently provided Petitioner with the records. On October 6, 2009, Mr. Piazza served Respondent with an Amended Order of Penalty Assessment. The assessed penalty was $3,566.27. The assessed penalty was based on Respondent's business records showing the following: (a) Respondent's total payroll from August 25, 2009, through September 24, 2009, was $15,280.00; (b) the total workers' compensation premium that Respondent should have paid for its employees during the relevant time period was $2,377.56; and (c) multiplying $2,377.56 by the statutory factor of 1.5 results in a penalty assessment in the amount of $3,566.37. On October 6, 2009, Petitioner and Respondent entered into a Payment Agreement Schedule for Periodic Payment of Penalty. Respondent gave Petitioner $1,000 as a down payment on the assessed penalty. The balance of the penalty is to be paid in 60 monthly payments in the amount of $42.77 per month, with the exception of the last payment in the amount of $42.64 on November 1, 2014. On October 6, 2009, Petitioner issued an Order of Conditional Release from Stop-work Order. The conditional release states that it will be in place until Respondent pays the assessed penalty in full.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers’ Compensation, issue a final order affirming the Stop- work Order and Amended Order of Penalty Assessment in the amount of $3,566.37. DONE AND ENTERED this 19th day of March, 2010, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 2010. COPIES FURNISHED: Salvador Rivera Rivera Construction of North Florida, LLC 931 Rosemary Terrace Tallahassee, Florida 32303 Paige Billings Shoemaker, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399
The Issue Whether Millenium Homes, Inc. (Petitioner) conducted operations in the State of Florida without obtaining workers’ compensation coverage which meets the requirements of Chapter 440, Florida Statutes (2008), in violation of Subsection 440.107(2), Florida Statutes (2008)1, as alleged in the Stop-Work Order and Order and Penalty Assessment and the Fifth Amended Order of Penalty Assessment. If so, what penalty should be assessed by the Department of Financial Services, Division of Workers’ Compensation (Respondent), pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Respondent is the state agency charged with the responsibility of enforcing the requirements of Chapter 440, Florida Statutes, that employers in Florida secure the payment of workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Workers’ compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. The payment of workers’ compensation coverage may be secured via three non-mutually exclusive methods: 1) the purchase of a workers’ compensation insurance policy; 2) arranging for the payment of wages and workers’ compensation coverage through an employee leasing company; and 3) applying for and receiving a certificate of exemption from workers’ compensation coverage if certain statutorily mandated criteria are met. On September 4, 2008, Maria Seidler, a compliance investigator employed by Respondent, was making random site visits at the Bella Vida development in North Fort Myers. Seidler observed eight workers unloading a truck, taking measurements, and performing various tasks on new homes under construction. All eight of the men were engaged in some type of activity on the job site. None were merely standing around, sitting in a truck, or otherwise idle. Seidler had all eight men stand in front of her, spoke to them in Spanish, and recorded their names on her field interview worksheet. All eight men advised Seidler, in Spanish, that they worked for Millenium Homes. None of the men advised Seidler that they did not work for Petitioner, nor that they were present in hopes of applying for a job. The individual apparently in charge at the job site, did not advise Seidler that not all of the men present were working for Petitioner. The evidence demonstrated that D.R. Horton was the general contractor for the project, and that D.R. Horton had contracted with Petitioner to frame out the housing units at the project. The eight men, who were present on the job site and who identified themselves as employees of Petitioner, confirmed that they were present on September 4, 2008, to perform framing. Framing is a construction activity as contemplated by Subsection 440.02(8), Florida Statutes, and Florida Administrative Code Rule 69L-6.021. James Loubert, president and sole shareholder of Petitioner, was not on the job site at the time of Seidler’s arrival, and she initially spoke with him by telephone. Loubert arrived at the job site a short time later. Loubert advised Seidler that Petitioner had secured workers’ compensation coverage for its employees through an employee leasing arrangement with Employee Leasing Solutions (ELS). This coverage was later confirmed by Seidler. However, of the eight workers found on the job site, three workers, Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar, were not named on the ELS list of Petitioner’s active, covered employees. Seidler was very definite and precise in her testimony that she observed Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar wearing hard hats and engaging in work activities upon her arrival at the job site. Her testimony is found to be credible. When Loubert arrived at the job site, he informed Seidler that two of the workers, not listed on Petitioner’s active employee roster, were to have been sent home to pick up their Social Security cards, and that he had called in the third worker, Josue Sanchez Bautista, to ELS. Loubert did not inform Seidler that Osorio, Bautista, and Aguilar were not employees of Petitioner and were merely present at the job site in hopes of applying for a job. The Pre-hearing Stipulation signed by counsel for the parties and filed with the DOAH clerk on December 8, 2009, contained the following statements of admitted facts in section E: Respondent’s [sic] employees Josue Sanchez Bautista, Luis Aguilar, and Juan Perez had not been called into and accepted as employees by ELS as of September 4, 2008. Respondent [sic] was not in compliance with the coverage requirements of Chapter 440, Florida Statutes, as of September 4, 2008.2 At the hearing, both Javier Perez and Loubert testified that Osorio, Bautista, and Aguilar were not employees of Petitioner, but rather were waiting on site for Loubert to arrive, so that they could ask for jobs. However, they were all wearing hard hats. The testimony of Perez and Loubert is inconsistent with the observations of Seidler, as well as the statements made to Seidler by Loubert at the job site on September 8, 2008, and is, therefore, not credible. Petitioner had no workers’ compensation coverage other than that provided though ELS, and no active exemptions. James Loubert is the only officer of Petitioner, and did not have an exemption from coverage as of September 4, 2008. At the work-site, a Stop-Work Order 08-234-D7 was issued and personally served upon James Loubert based upon Petitioner’s failure to secure the payment of workers’ compensation for its employees Josue Sanchez Bautista, Luis Aguilar, and Alejandro Osorio. A business records request was also served on Loubert in order to obtain the records necessary to calculate and assess a penalty on Petitioner based upon its failure to comply with the coverage requirements of Chapter 440, Florida Statutes. Pursuant to Section 440.107(5), Florida Statutes, Petitioner’s business records were requested back to September 5, 2005, or three years prior to the issuance of the Stop-Work Order. Petitioner produced the register for its primary checking account to Respondent on September 4, 2008, in response to Respondent’s request for business records. Lynne Murcia is a compliance specialist for Respondent. She reviews business records produced by employers to determine the amount of payroll on which workers’ compensation premium was not paid, in order to calculate an appropriate penalty for violations of the coverage requirements of Chapter 440, Florida Statutes. Upon review of the business records initially produced by Petitioner, it was determined that the register from one of Petitioner’s two business checking accounts was missing. The records initially produced by Petitioner were, therefore, insufficient for the calculation of an appropriate penalty. It was requested that Petitioner produce the register for the second checking account, and those records were quickly produced. Thereafter, a 45-page summary of all transactions potentially meeting the definitions of payroll set forth in Florida Administrative Code Rule 69L-6.035 (the Rule), was prepared and an Order of Penalty Assessment issued. In determining which payments should potentially be considered payroll, pursuant to the Rule, all payments made by Petitioner directly to its employees that did not pass through ELS were included. To the extent that those direct payments meet the definition of payroll, they were subject to workers’ compensation premium and would be properly included in an assessed penalty. Petitioner also made direct “per diem” payments to reimburse its employees for the cost of meals and lodging which they incurred during the times that they were required to travel away from home to perform their jobs. The per diem rates were calculated pursuant to Internal Revenue Service guidelines, and were deducted as a business expense on Petitioner’s income tax returns for the years 2005-2007. The Rule requires that expense reimbursements by an employer to employees be included as payroll subject to workers’ compensation premium to the extent that the business records of the employer do not confirm that the expenses were incurred as valid business expenses. All per diem payments made by Petitioner to its employees were included in the calculations, because Petitioner did not produce the receipts reflecting that its employees had actually incurred meal and lodging expenses in those amounts. However, following the December 15, 2009, hearing, Respondent examined the issue further and concluded that Petitioner’s per diem payments to its employees were properly documented as business expenses on Petitioner’s income tax returns. Respondent thereafter sought leave to file its Fifth Amended Order of Penalty Assessment deleting all per diem payments from the assessed penalty. Petitioner made numerous payments to third parties who provided construction, maintenance, or janitorial services at the homes of James Loubert, his father, Adrian Loubert, and his wife, April White, or who provided child care services for the Loubert family. For example, Petitioner paid $1,500.00 for tile work performed at James Loubert’s residence; $478.00 to Alex Ortiz, Antonio Elias, and Candy Ortiz for pressure-washing the homes of James Loubert and April White; $2,548.14 to Pedro Delgano for building cabinets for the homes of James Loubert and his father; $11,326.40 to Rick Wilson for painting the houses of James and Adrian Loubert; and beginning August 23, 2007, through December 20, 2007, $1,433.66 to Diane Berger for cleaning James Loubert’s home. Petitioner also paid $3,402.00 to Cinta Smollis for babysitting services provided to Loubert. These individuals do not appear on the penalty work sheet of the Fifth Amended Order of Penalty Assessment, since they do not meet the statutory definition of employees. Petitioner also paid large sums of money to Adrian Loubert for the purchase of a farm in Canada. In addition, James Loubert testified that some of the payments to his father represented expense reimbursements, suggesting that, at some point, Adrian Loubert had been an employee of Petitioner. Petitioner did not introduce any exhibits into evidence reflecting the nature or amount of the reimbursements allegedly being made to Adrian Loubert. James Loubert was actively involved in the carpentry work performed by Petitioner, on the project on which the stop- work order was issued as well as on prior projects. Nevertheless, he received only a minimal salary through Petitioner’s employee leasing company, ELS. In 2007, Loubert received a total salary of $11,000.00 through ELS. In 2008, he received a total salary through ELS of only $7,200.00. Any payments that James Loubert received directly from Petitioner, that meet the definition of payroll set forth in the Rule, were subject to workers’ compensation premium, and are therefore subject to penalty. During the three-year penalty period specified by the statute, Petitioner made many cash payments to, or for the benefit of, James Loubert. The business records produced by Petitioner indicate that these cash payments were made to payees such as Blockbuster Video, Toys-R-Us, and PetsMart, as well as for vacation expenses. In addition, James Loubert took large amounts of cash from Petitioner to facilitate his hobby of racing cars. Throughout the penalty period, Petitioner also made numerous payments to Loubert’s wife, April White, and to his daughter, Alexa Seagate. Petitioner also made numerous payments to Gary White, his father-in-law and one of Petitioner’s employees. James Loubert testified that the payments made to, or on behalf of, family members, the payments made to third- party payees, and the cash payments which he took from Petitioner reflected shareholder distributions. However, the memo lines on those payment entries do not indicate that those payments were intended to be shareholder distributions. Petitioner’s business records reflect that the memo line on a check would indicate that it was a shareholder distribution, if that was what it was intended to be. This was the practice on other transactions. In addition, James Loubert testified that the memos for his Quick Books entries reflect “exactly what” each payment was for. Presumably those memo entries are the same as the memo entries on the corresponding checks. The payments made by Petitioner to third parties from which it appears that Petitioner did not receive services or a benefit, including but not limited to the payments made to family members of James Loubert, and the cash payments made by Petitioner to finance James Loubert’s auto racing hobby, do not constitute legitimate business expenses. Petitioner frequently made loans or wage advances to its employees. Although Loubert testified that those loans were repaid to him, he later acknowledged that a $2,000.00 loan to employee Rachel Broulet was never paid back, and that a $975.00 loan to Nicholas Susa was never repaid. Petitioner did not produce business records or documentary evidence at the hearing that indicates that any of the loans which it made to employees were repaid. The State of Florida has adopted a classification code developed by the National Council of Compensation Insurance (NCCI), which assigns individual four digit codes to various classes of labor. This classification code is utilized to segregate different categories of labor by risk and to determine appropriate workers’ compensation premiums for those classes of labor in Florida. Fla. Admin. Code R. 69L-6.021. As noted above, Petitioner was performing framing work at the time of the September 4, 2008, inspection. Because Petitioner’s employees were observed at work constructing residential homes, classification code 5645, detached one or two family dwellings, was correctly applied to Petitioner’s employees directly engaged in construction activities. This includes Javier Perez, as he was working along with and directly supervising the other seven carpenters who were working on site when the inspection took place. Classification code 8742, outside sales, has been applied to James Loubert, as he was not observed working on September 4, 2008. However, Loubert did testify at his deposition that he usually performed construction work along side Petitioner’s other employees, but Respondent did not apply the construction code to him in the Fifth Amended Order of Penalty Assessment. Classification code 8810 was correctly applied to those employees of Petitioner who performed clerical work in the office. The appropriate manual rates for each year of the penalty period of September 5, 2005, through September 4, 2008, was applied for each classification code assigned to Petitioner’s employees. In preparing the Fifth Amended Order of Penalty Assessment, the amount of unsecured payroll attributable to each employee of Petitioner listed on the penalty worksheet was correctly calculated. From the evidence, Luis Aguilar and Alejandro Osorio were to be paid $10.00 per hour. There was no evidence that Aguilar and Osorio had worked prior to the issuance of the Stop-Work Order, and therefore, earnings of $80.00 assigned, reflecting eight hours at $10.00 per hour for September 4, 2008, was correct. Petitioner failed to provide any business records or other information concerning the rate of pay for Josue Sanchez Bautista, the third non-compliant worker. Bautista’s wages for September 4, 2008, can be imputed utilizing the statewide average wage pursuant to Subsection 440.107(7)(e), Florida Statutes.
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 finding that Millenium Homes, Inc., failed to secure the payment of workers’ compensation insurance coverage for its employees, in violation of Section 440.38(1), Florida Statutes, and that a penalty in the amount of $66,099.37 should be imposed for the failure to provide the required workers’ compensation insurance coverage. DONE AND ORDERED this 28th day of May, 2010, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 2010.
The Issue The issues in this case are whether Respondent, Raul A. Correa, M.D. (Dr. Correa), failed to provide workers' compensation coverage, and if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107, Florida Statutes (2013). That section mandates, in relevant part, that employers in Florida secure workers’ compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, Dr. Correa was a Florida small business engaged in the practice of medicine, with his principal office located at 2505 Manatee Avenue West, Bradenton, Florida. Dr. Correa is not incorporated. On February 12, 2014, Ms. Green conducted an on-site workers’ compensation compliance investigation (compliance investigation) of Dr. Correa’s office. After identifying herself to the receptionist, Ms. Green met Dr. Correa and explained the reason for her presence, a compliance investigation. Dr. Correa telephoned his wife who handles his office management from their residence. Mrs. Correa immediately faxed a copy of the liability insurance policy to the office. However, that liability policy did not include workers’ compensation coverage. After a telephonic consultation with her supervisor, Ms. Green served a Request for Production of Business Records (Request) on Dr. Correa at 11:50 a.m. on February 12, 2014. This Request encompassed records from October 1, 2013, through February 12, 2014, for all of Dr. Correa’s payroll documents, account documents, disbursements, and workers’ compensation coverage policies. Ms. Green consulted the Department’s Coverage and Compliance Automated System (CCAS) database to determine whether Dr. Correa had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees. CCAS is a database Ms. Green consults during the course of her investigations. Ms. Green determined from CCAS that Dr. Correa did not have any current workers’ compensation coverage for his employees and he did not have an exemption from such coverage from the Department. The records reflected that Dr. Correa’s last active workers’ compensation coverage was in 2004. Dr. Correa obtained workers’ compensation coverage on February 20, 2014. Approximately one month later, Ms. Green served a Request for Production of Business Records for Penalty Assessment Calculation on Dr. Correa. Dr. Correa produced the requested records. These records were given to Lynne Murcia, one of the Department’s penalty auditors, to calculate the penalty. Ms. Murcia determined that the appropriate classification code for Dr. Correa’s employees was 8832, which incorporates physicians and clerical workers. This code was derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers’ compensation. The manual is produced by the National Council on Compensation Insurance, Inc., the nation’s most authoritative data collecting and disseminating organization for workers’ compensation. Dr. Correa listed seven employees on the Florida Department of Revenue Unemployment Compensation Tax (UCT-6) form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida’s Unemployment Compensation Law. Ms. Murcia reasonably relied upon the UCT-6 filings for the relevant time period to calculate Dr. Correa’s gross payroll in Florida. Using Dr. Correa’s payroll chart, the UCT reports, and the classification codes for each employee, Ms. Murcia calculated the penalty assessment for the three-year penalty period preceding the investigation. This three-year period is the allocated time for reviewing coverage for those who do not have the appropriate workers’ compensation coverage. On April 9, 2014, Ms. Murcia determined the penalty to be $4,287.12. However, upon receipt of additional information regarding a former employee of Dr. Correa, an Amended Order of Penalty Assessment of $3,898.77 was issued on July 28, 2014. Dr. Correa’s position is that his practice is a small “mom and pop” operation. He employs members of his family to run the business side of his practice. His daughter, Antonia, works as Dr. Correa’s “doctor’s assistant.” She works at the various nursing homes that Dr. Correa services. Antonia believed that the nursing homes’ liability insurance would cover her, and she was not subject to workers’ compensation coverage. However, she was, in fact, paid by Dr. Correa. Dr. Correa’s daughter-in-law, Valeria, works from her home computer completing the medical billing for her father-in- law. She has been working in this capacity for approximately 14- 16 years, and it never occurred to her that she needed workers’ compensation coverage. She was paid by Dr. Correa. Dr. Correa’s brother-in-law, Mr. Collado, runs all the errands for the practice. He may go to the bank, take care of car maintenance, buy office supplies or fix things, all in support of Dr. Correa’s practice. Mr. Collado receives regular pay checks from Dr. Correa. Dr. Correa testified that his wife is his office manager and has been since he opened the practice in 1978. Mrs. Correa works from their home, in a small home office. She does all the paper work related to the practice. Dr. Correa firmly believed that he did not require workers’ compensation coverage because some of his employees were “independent contractors” or never worked in his office, but at other locations (individual homes, nursing homes, or just outside the office). Dr. Correa believed his insurance agent who did not think Dr. Correa needed the workers’ compensation coverage. Based upon the testimony and exhibits, the amended penalty assessment in the amount of $3,898.77 is accurate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order upholding the Amended Order of Penalty Assessment, and assessing a penalty in the amount of $3,898.77. DONE AND ENTERED this 24th day of September, 2014, in Tallahassee, Leon County, Florida. S LYNNE A. QUIMBY-PENNOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of September, 2014.
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees and, if so, what penalty should be assessed.
Findings Of Fact Petitioner, Department of Financial Services, Division of Workers' Compensation ("Division") is the state agency responsible for enforcing the requirement within the state that employers cover employees with workers' compensation insurance. § 440.107, Fla. Stat. (2009). Respondent, Jurgenson Trading Corporation, is owned, in part, by Julio Raudsett, and operates a "Subway" sandwich restaurant franchise in Hialeah, Florida. It is a family-owned business with a total of five employees, three of whom are related. Cesar Tolentino, an investigator for the Division, conducted a field interview of Raudsett, who admitted that he did not carry workers' compensation insurance. Tolentino checked the database in the Coverage and Compliance Automated System ("CCAS"), and there were no records showing workers' compensation coverage for the Subway employees, nor any notices of applicable exemptions. Martha Aguilar, Tolentino's supervisor authorized the issuance of a Stop-Work Order that was personally served on Raudsett by Tolentino by hand-delivery on April 17, 2009. At the same time, Tolentino served a Request for Production of Business Records for Penalty Assessment Calculation. Raudsett provided his business records, including payroll journals and unemployment tax returns. Based on Aguilar's review of the business records, the Division issued its Amended Order of Penalty Assessment ("Order") on June 8, 2009, with an assessed penalty of $19,873.79. Aguilar determined the amount of the penalty, using the following steps: (1) assigning each employee the National Council on Compensation Insurance (NCCI) class code that was applicable for restaurant workers; (2) determining how much the employee had been paid from April 2006 to April 2009 (the period of non-coverage); and (3) assigning the rate to the gross pay to calculate the insurance premium that should have been paid, then multiplying that by 1.5, as required by rule. The NCCI class codes for employees administrative staff as compared to restaurant workers are lower and, therefore, their workers' compensation insurance premiums would be lower. The business records available to Aguilar did not distinguish among employee's responsibilities. Absent that information, the penalty is, by law, calculated using the highest NCCI class code associated with that kind of business, and was correctly done in this case. Raudsett has entered into a payment plan with the Division. He objected only to that portion of the penalty that was based on his earnings, and those of his wife, Maribel Medina, who works part-time, and his father-in-law, Rolando Medina. He claims an exemption for the three of them as owners and managers of the corporation. Excluding their salaries and associated penalties, according to Joseph Cabanas, Respondent's accountant, would reduce the penalty by $10,267.67, to $9,606.12. Cabanas testified that Raudsett, an immigrant from Venezuela, was not aware of workers' compensation laws, and that was why the three owners/officers of the Respondent's corporation failed to file a Notice of Elections to be Exempt from coverage until after the Division's investigation began.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, that upholds the assessment of a penalty of $19,873.79. DONE AND ENTERED this 15th day of December, 2009, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of December, 2009. COPIES FURNISHED: Julie Jones, CP, FRP, Agency Clerk Department of Financial Services Division of Legal 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 Douglas D. Dolan, Esquire Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Joseph Cabanas 10520 Northwest 26 Street, Suite C-201 Doral, Florida 33172
