The Issue The issue is whether Petitioner properly issued a Stop-Work Order and 3rd Amended Order of Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers' compensation coverage requirements pursuant to section 440.107. At all times relevant to this proceeding, USA was a corporation registered to do business in Florida. Respondent is a company engaged in the construction industry and was active during the two-year audit period from August 27, 2013, through August 26, 2015. On August 26, 2015, Julio Cabrera ("investigator" or Cabrera"), compliance investigator for the Division, conducted a random construction compliance check at the residential job site, 741 Harbor Drive in Key Biscayne ("residential home"). Cabrera observed two men on Respondent's scaffold plastering the exterior wall of the residential home. Cabrera interviewed the two men working on the scaffold. The workers told the investigator that they were employed by Respondent. They also identified Garcia as the Respondent's owner and provided Garcia's contact information to Cabrera. After interviewing the two workers, Cabrera checked the Department's Coverage and Compliance Automated System for proof of workers' compensation coverage and for exemptions associated with USA. Cabrera's search revealed Garcia had an active exemption, but Respondent did not have a workers' compensation insurance policy or an employee leasing policy for its employees. Cabrera also confirmed that Respondent did not have any type of workers' compensation coverage for its employees by examining the National Council on Compensation Insurance database. Next, Cabrera placed a telephone call to Garcia and interviewed him. Garcia informed Cabrera that the two workers were USA's employees and that Respondent did not have workers' compensation insurance coverage for the workers.1/ After interviewing Garcia, the investigator returned to the two USA employees and requested their identification. Silvano Antonio Delgado Reyes provided his identification and the other USA male employee fled from the job site. That same day Cabrera issued Respondent a Stop-Work Order on behalf of the Division for Respondent's failure to secure the required workers' compensation insurance coverage. Petitioner also served Respondent a Request of Business Records for Penalty Assessment Calculation ("Request") asking for documentation to enable the Division to determine payroll for the audit period of August 27, 2013, through August 26, 2015. USA responded to the Request for records and provided the Division with verification of its business records on several different occasions. Ultimately, Respondent provided bank statements and corresponding check images for most of the two- year audit period. Christopher Richardson ("auditor" or "Richardson"), penalty auditor for the Division, was assigned to USA's investigation. Richardson reviewed the business records produced by Respondent and determined those persons employed by USA during the audit period without workers' compensation insurance. Richardson properly recalculated the penalty amount each time new records were provided by Respondent. USA did not provide sufficient records to determine payroll for February 1, 2014, through December 31, 2014, and August 1, 2015, through 25, 2015, and Richardson properly utilized the computation formula to determine the payroll for the aforementioned audit period without adequate records. Richardson concluded his audit by properly calculating the workers' compensation amount USA owed in workers' compensation insurance for the audit period using the Class Code 5022 for masonry work. Richardson applied the approved manual rates and methodology specified in section 440.107(7)(d) and concluded USA owed a penalty amount of $52,489.24. On March 28, 2016, the Division served Respondent the 3rd Amended Order of Penalty Assessment in the amount of $52,489.24 naming those persons employed by USA during the audit period. On June 30, 2015, Respondent challenged the Stop-Work Order and penalty assessment and requested a formal hearing.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, issue a final order affirming the Stop-Work Order and 3rd Amended Order of Penalty Assessment in the amount of $52,489.24. DONE AND ENTERED this 15th day of July, 2016, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of July, 2016.
The Issue Whether Respondent, G and G General Contracting, Inc., failed to comply with the coverage requirements of the Workers’ Compensation Law, chapter 440, Florida Statutes, by not obtaining workers’ compensation insurance for its employees, and, if so, what penalty should be assessed against Respondent pursuant to section 440.107, Florida Statutes (2014).
Findings Of Fact 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. G and G General Contracting, Inc. (Respondent or G and G), is a domestic business corporation organized on July 5, 2013, pursuant to the laws of the State of New York. Respondent’s primary business address is 88 Lincoln Avenue, Ardsley, New York. Gino Uli is Respondent’s President. Respondent is not a Florida corporation. On December 4, 2014, the Department’s investigator, Aysia Elliott, conducted a random workers’ compensation compliance check at a worksite in Naples, Florida. Ms. Elliott observed seven men at the worksite engaged in interior and exterior painting of a newly-constructed residence. The residence was but one in a large residential subdivision under construction. The central issue in this case, and one that is fiercely contested, is whether the painters Ms. Elliott observed at the worksite were employees of G and G. In response to her verbal inquiries to the painters on site, Ms. Elliott testified that the workers first identified Pacific Construction as their employer. Ms. Elliott attempted to contact Pacific Construction, but her calls to that company were not returned. Ms. Elliott testified that upon her further inquiry, one of the painters, Leonardo Gudiel, stated he was an employee of G and G. At this point, Ms. Elliott was unsure which company to investigate for workers’ compensation coverage for the painters at the worksite. The permit sign at the worksite identified Minto Communities as the general contractor. Ms. Elliott contacted Minto Communities via telephone to determine the name of the company to which painting had been subcontracted. At hearing, Ms. Elliott was unable to recall the names of any of the companies identified by Minto Communities as subcontractors for the job. Ms. Elliott did recall that at least two subcontractors were identified by Minto. Mr. Gudiel gave Ms. Elliott a telephone number for a man named “Edison,” alleged to be the foreman. Ms. Elliott called Edison, and testified that he informed her he was on another call and would have to call her back. Edison did not return Ms. Elliott’s call. Ms. Elliott next received a phone call from Mr. Uli. Ms. Elliott testified that, during that phone conversation, Mr. Uli identified the painters at the worksite as employees of his company, G and G. Mr. Uli denied having ever told Ms. Elliott the painters were his employees. Mr. Uli provided Ms. Elliott with the certificate of insurance demonstrating workers’ compensation insurance coverage for employees of G and G. Mr. Uli told Ms. Elliott he would be in Florida in a few days and would meet with Ms. Elliott in person. Ms. Elliott verified the existence of G and G through the State of New York Division of Corporations’ website. Ms. Elliott then verified, through the Department’s Coverage and Compliance Automated System, that G and G had no workers’ compensation coverage in Florida, nor any exemption from coverage requirements for any of its corporate officers. Ms. Elliott also contacted the New York insurance carrier identified by Mr. Uli and confirmed that the carrier did not cover any G and G employees in Florida. On December 8, 2014, Ms. Elliott reviewed the results of her December 4, 2014, workers’ compensation investigation with Maria Seidler, the Ft. Myers district Supervisor. A determination was made that sufficient evidence and information existed to issue a Stop-Work Order against G and G for failure to provide workers’ compensation insurance, as required by chapter 440. Ms. Elliott met with Mr. Uli on December 8, 2014. Ms. Elliott personally served Mr. Uli with a Stop-Work Order for the construction site in Naples and a request for specified business records on which to base the penalty calculation. Mr. Uli did not provide any records to the Department in response to the records request. The Department’s penalty auditor, Lyna Ty, was assigned to calculate the penalty to be assessed against G and G for failure to secure workers’ compensation insurance during the penalty period. The penalty period was for the two years prior to the date the Stop-Work Order was issued: December 9, 2012 to December 8, 2014. Having no employer records from G and G, Mr. Ty imputed the statewide average weekly wage as Respondent’s payroll for the seven painters at the worksite on December 4, 2014. Mr. Ty calculated a penalty of two times the workers’ compensation insurance premium that would have applied to the purchase of insurance for those specific employees during the penalty period. § 440.107(7)(e), Fla. Stat. Mr. Ty assigned NCCI code 5474, which is the classification code for painting contractors according to the SCOPES manual adopted by the Department for imputing wages associated with various occupations. On January 9, 2015, the Department issued an Amended Order of Penalty Assessment against G and G in the amount of $254,697.38 However, because G and G was not formed until July 5, 2013, the original penalty calculation was based on an incorrect penalty period. Mr. Ty recalculated the penalty based on a penalty period from July 5, 2013 through December 8, 2014. On May 26, 2015, the Department issued a Second Amended Order of Penalty Assessment against G and G in the amount of $185,354.68. Mr. Uli’s testimony provided no more clarity than Ms. Elliott’s as to the identity of the employer for the painters at the worksite on December 4, 2014. Mr. Uli previously lived in Florida for seven years and was engaged in “restaurant business.” Mr. Uli met Leonardo Gudiel, a contractor, while he was living in Florida. While living in Florida, Mr. Uli also met James Cartisano, the purported owner of Facility Construction. When Mr. Uli relocated to New York, he stayed in touch with Mr. Gudiel. According to Mr. Uli, he planned to give to Mr. Gudiel any work G and G obtained in Florida and asked Mr. Gudiel to “be registered as a vendor with [him].” Mr. Uli testified that Mr. Cartisano contacted him in New York and told him that he had been engaged by Minto Communities (Minto) to paint a model home in a new residential neighborhood under construction in Naples, Florida. Presumably, if Mr. Cartisano’s work was satisfactory to Minto, Facility Construction would be hired for the larger job. According to Mr. Uli, he referred Mr. Cartisano to Mr. Gudiel to supply painters for the job. Mr. Uli described himself as the “middle man.” Upon inquiry from the undersigned as to how Mr. Uli or G and G construction would profit from his position as the middle man, Mr. Uli stated, “No arrangement as per se on paper, Judge, but this is on – on [Mr. Cartisano’s] word to me; that if you get me the right guys down there that can do this for me, I’ll take care of you.”1/ On December 4, 2014, when Ms. Elliott conducted her random worksite inspection, Mr. Uli received a telephone call from Mr. Gudiel informing him that Ms. Elliott was onsite asking questions about workers’ compensation insurance. According to Mr. Uli, he called Mr. Cartisano, who “did not want to deal with this.”2/ Mr. Uli explained that he telephoned Ms. Elliott on December 4, 2014, to explain that the guys onsite were painting a model home for Minto, and if Minto was satisfied, Facility Construction would get the overall job (estimated at 700 houses). At hearing, Mr. Uli strongly denied that he told Ms. Elliott the workers were his employees, either on the phone on December 4, 2014, or when he met with her in person on December 8, 2014. The evidence, or lack thereof, leaves the undersigned with many unresolved questions: Why would Facility Construction contact a contractor in New York to provide painters for a job in Florida? Why did Mr. Uli supply Ms. Elliott with a copy of his certificate of insurance for workers’ compensation insurance in New York? Moreover, if the painters were not his employees, why did Mr. Uli travel to Florida from New York and meet with Ms. Elliott? From the evidence as a whole, it can be inferred that Mr. Uli had a significant interest in the work being done at the Naples worksite on December 4, 2014. However, it cannot be inferred that G and G was the employer of the painters at the worksite. That fact must be proven by the Department.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order dismissing the Stop-Work Order and Second Amended Penalty Assessment against Respondent, G and G Contracting, Inc., for its failure to secure and maintain required workers’ compensation insurance for its employees. DONE AND ENTERED this 13th day of November, 2015, 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 13th day of November, 2015. 1/ T.83:12-15.
The Issue The issues in this case are whether SDPhotonics, LLC (Respondent), failed to provide workers' compensation coverage; and, if so, what penalty should be imposed.
Findings Of Fact The Department is the state agency responsible for enforcing section 440.107, Florida Statutes. Section 440.107 mandates, in relevant part, that employers in Florida must secure workers’ compensation insurance coverage for their employees. § 440.107(3), Fla. Stat. At all times relevant, Respondent was a limited liability company, organized under the laws of the State of Florida, with its principal office currently located at 4304 Scorpius Street, UCF High Technology Incubator, Orlando, Florida. Dennis Deppe is the founder and CEO of SDPhotonics, LLC, which is a research and development company. Respondent is a non-construction type entity. Mr. Marquez is an insurance analysist II/investigator for the Department in the central part of the state. He has 12 years of experience in this position. His duties include making sure that businesses comply with the workers’ compensation laws of Florida. In order to perform his duties, Mr. Marquez has several methods to check for particular workers’ compensation coverage. Initially, Mr. Marquez may check the Division of Corporations website, “Sunbiz.org,” to obtain the name of the corporation; its federal identification number; the mailing and principle address(es), the registered agent; and corporate officer information. With this information, Mr. Marquez may check Petitioner’s internal database called: coverage and compliance automated system (CCAS). Using a corporate name, Mr. Marquez could check CCAS to see whether a corporation has workers’ compensation coverage. Insurance companies are also required to submit workers’ compensation coverage information, and Mr. Marquez could check that registry. Corporate officers may request an exemption from workers’ compensation coverage; however, the officer must apply for the exemption. Mr. Marquez could check that registry as well. In mid-December 2015, Mr. Marquez was assigned to check on Respondent’s workers’ compensation coverage. Mr. Marquez checked Petitioner’s CCAS system and determined that Respondent did not have a workers’ compensation policy or any active exemptions for its officers. On December 16, 2015, Mr. Marquez went to Respondent’s physical location and discovered that no one was present. He left a business card with a written request for someone to contact him. On December 17, 2015, Dr. Deppe contacted Mr. Marquez via telephone. Mr. Marquez identified himself and explained the reason for the call to Dr. Deppe. As was his custom, Mr. Marquez requested the name of Respondent’s workers’ compensation insurance carrier, the policy number and the effective date of the coverage. Dr. Deppe thought there was coverage through Paychex,3/ but he was unable to provide the requested information. Dr. Deppe stated he would look into it and return the call. On December 18, 2016, Mr. Marquez spoke with Dr. Deppe again. During that conversation, Dr. Deppe confirmed that Respondent did not have workers’ compensation coverage, but that he was working to have it by the end of the day. Later that same morning, Mr. Marquez met with Dr. Deppe and again requested the name of Respondent’s workers’ compensation insurance carrier, the policy number and the effective date of the coverage. Dr. Deppe was unable to provide the requested information, although he did provide the name of his insurance agent. Additionally, Dr. Deppe provided the names of Respondent’s five employees: James Beadsworth, Jason Leshin, Nick Cox, Jeremy Leshin, and Dennis Deppe. Mr. Marquez then stepped outside to his vehicle, and via his computer consulted the CCAS database to determine whether Respondent had secured workers’ compensation coverage or an exemption from the requirements for coverage for his employees. At that time, Mr. Marquez determined that Respondent did not have any current workers’ compensation coverage for its employees and Respondent did not have an exemption from such coverage from the Department. Mr. Marquez telephoned his supervisor, Robert Cerrone, who authorized the service of a Stop-Work Order along with a Request for Production of Business Records (Request) on Dr. Deppe on December 18, 2015. Both were served on Respondent at approximately 11:30 a.m. on December 18, 2015. The following Monday, Dr. Deppe presented to Petitioner’s Orlando field office, paid $1,000.00 towards the penalty and provided proof of coverage with the Hartford Casualty Insurance Company. Ms. Proano confirmed that the appropriate classification code for Respondent’s CEO was 8810 (for a clerical position) and for Respondent’s employees was 4511 (for “analytical laboratories, including laboratory, outside employees, collectors of samples”). These codes were 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. The corresponding approved manual rates for the classification codes 8810 and 4511 were applied using the methodology specified in section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027 to determine the appropriate penalty. Petitioner is statutorily authorized to use an audit period of two years from the issuance of the Stop-Work Order. Respondent employed less than four employees during 2013 and 2014, and did not have to have worker’s compensation cover. Petitioner only computed the penalty for 2015 because Respondent had five employees during that time. Petitioner has demonstrated by clear and convincing evidence that Respondent failed to secure workers’ compensation for its employees as required by chapter 440, Florida Statutes. Petitioner determined the appropriate penalty using section 440.107(7)(d)1. The amount of Respondent’s penalty, $6,092.10, is subject to a reduction of $3,843.23, which is the amount it paid to obtain the appropriate insurance. The amended penalty amount is $2,248.87.
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 assess a penalty in the amount of $2,248.87.5/ DONE AND ENTERED this 22nd day of July, 2016, 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 22nd day of July, 2016.
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 issue is whether Petitioner violated Chapter 440, Florida Statutes, by not having workers’ compensation insurance coverage, and if so, what penalty should be imposed.
Findings Of Fact Petitioner operates a gas station and convenience store in Winter Garden. Mohammad Sultan is Petitioner’s owner and president. On November 2, 2006, Margaret Cavazos conducted an unannounced inspection of Petitioner’s store. Ms. Cavazos is a workers’ compensation compliance investigator employed by the Department. Petitioner had nine employees, including Mr. Sultan and his wife, on the date of Ms. Cavazos' inspection. Petitioner had more than four employees at all times over the three-year period preceding Ms. Cavazos' inspection. Petitioner did not have workers’ compensation insurance coverage at the time of Ms. Cavazos’ inspection, or at any point during the three years preceding the inspection. On November 2, 2006, the Department served a Stop-Work Order and Order of Penalty Assessment on Petitioner, and Ms. Cavazos requested payroll documents and other business records from Petitioner. On November 6, 2006, the Department served an Amended Order of Penalty Assessment,1 which imposed a penalty of $70,599.78 on Petitioner. The penalty was calculated by Ms. Cavazos, using the payroll information provided by Petitioner and the insurance premium rates published by the National Council on Compensation Insurance. The parties stipulated at the final hearing that the gross payroll attributed to Mr. Sultan for the period of January 1, 2006, through November 2, 2006, should have been $88,000, rather than the $104,000 reflected in the penalty worksheet prepared by Ms. Cavazos. The net effect of this $16,000 correction in the gross payroll attributed to Mr. Sultan is a reduction in the penalty to $68,922.18.2 On November 3, 2006, Mr. Sultan filed a notice election for exemption from the Workers’ Compensation Law. His wife did not file a similar election because she is not an officer of Petitioner. The election took effect on November 3, 2006. On November 6, 2006, Petitioner obtained workers’ compensation insurance coverage through American Home Insurance Company, and Petitioner also entered into a Payment Agreement Schedule for Periodic Payment of Penalty in which it agreed to pay the penalty imposed by the Department over a five-year period. On that same date, the Department issued an Order of Conditional Release from Stop-Work Order. Petitioner made the $7,954.30 “down payment” required by the Payment Agreement Schedule, and it has made all of the required monthly payments to date. The payments required by the Payment Agreement Schedule are $1,044.09 per month, which equates to approximately $12,500 per year. Petitioner was in compliance with the Workers’ Compensation Law at the time of the final hearing. Petitioner reported income of $54,358 on gross receipts in excess of $3.1 million in its 2005 tax return. Petitioner reported income of $41,728 in 2004, and a loss of $8,851 in 2003. Petitioner had total assets in excess of $750,000 (including $540,435 in cash) at the end of 2005, and even though Petitioner had a large line of credit with Amsouth Bank, its assets exceeded its liabilities by $99,041 at the end of 2005. Mr. Sultan has received significant compensation from Petitioner over the past four years, including 2003 when Petitioner reported a loss rather than a profit. He received a salary in excess of $104,000 in 2006, and he was paid $145,333 in 2005, $63,750 in 2004, and $66,833 in 2003. Mr. Sultan’s wife is also on Petitioner’s payroll. She was paid $23,333.40 in 2006, $25,000 in 2005, and $12,316.69 in 2004. Mr. Sultan characterized 2005 as an “exceptional year,” and he testified that his business has fallen off recently due to an increase in competition in the area. Todd Baldwin, Petitioner’s accountant, similarly testified that 2006 was not as good of a year as 2005, but no corroborating evidence on this issue (such as Petitioner’s 2006 tax return) was presented at the final hearing. Mr. Sultan testified that payment of the penalty imposed by the Department adversely affects his ability to run his business. The weight given to that testimony was significantly undercut by the tax returns and payroll documents that were received into evidence, which show Petitioner’s positive financial performance and the significant level of compensation paid to Mr. Sultan and his wife over the past several years. The effect of the workers’ compensation exemption elected by Mr. Sultan is that his salary will no longer be included in the calculation of the workers’ compensation insurance premiums paid by Petitioner. If his salary had not been included in Ms. Cavazos’ calculations, the penalty imposed on Petitioner would have been $40,671.36. Ms. Cavazos properly included Mr. Sultan’s salary in her penalty calculations because he was being paid by Petitioner and he did not file an election for exemption from the Workers' Compensation Law until after her inspection.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $68,922.18 on Petitioner to be paid in accordance with a modified payment schedule reflecting the reduced penalty and the payments made through the date of the final order. DONE AND ENTERED this 22nd day of August, 2007, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 22nd day of August, 2007.
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 Thompson Enterprises of Jacksonville, 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 2nd 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 workers' compensation coverage requirements applicable to employers under Florida law. Respondent is a Florida limited-liability company organized on October 25, 2011. The managing members listed on Respondent’s State of Florida Articles of Organization are Thomas Thompson, Michael Thompson, and Vicky Thompson. In May 2016, Department Compliance Investigator Ann Johnson was assigned to conduct a job site visit on Respondent’s business because its name appeared on the Department’s Bureau of Compliance’s “lead list.” The “lead list” is one of the Department’s databases listing employers that are potentially out of compliance with Florida's workers' compensation insurance requirements. Prior to the job site visit, Investigator Johnson reviewed the Division of Corporations website, www.sunbiz.org, and confirmed Respondent's address, managing members' names, and that Respondent was a current, active Florida company. Respondent’s website advertised towing, wrecker, mechanic, and body shop services. On May 6, 2016, Investigator Johnson visited Respondent's principal address located at 7600 Bailey Body Road, Jacksonville, Florida 32216. She noted a large commercial sign near Respondent’s address that advertised towing and wrecker services. During her visit, Investigator Johnson spoke with Vicky Thompson and Michael Thompson, both of whom advised that they were owners of Respondent. The Thompsons informed Investigator Johnson that Respondent had six employees, including the three listed as managers on Respondent’s Articles of Organization. When Investigator Johnson asked for proof of workers’ compensation coverage, Michael Thompson admitted that Respondent had no such coverage. Under Florida law, employers in the non-construction industry, such as Respondent, must secure workers' compensation insurance if "four or more employees are employed by the same employer." §§ 440.02(17)(b) and 440.107, Fla. Stat. On the same day as her site visit, Investigator Johnson confirmed Respondent’s lack of insurance with a search of the Department's internal database, Coverage and Compliance Automated System. At the time, Respondent had no active exemptions from the requirements of obtaining workers’ compensation for its three managing members. Based on her investigation, Investigator Johnson served Respondent with the Stop-Work Order and a Request for Production on May 6, 2016. Upon serving the documents, Investigator Johnson explained the effect and purpose of the documents and how Respondent could come into compliance. Respondent came into compliance that same day by paying a $1,000 down payment, reducing Respondent's workforce to three employees, applying for exemptions for its three managing members, and executing an agreed Order of conditional release with the Department. Respondent subsequently complied with the Department’s Request for Production. In June 2016, the Department assigned Penalty Auditor Eunika Jackson to review records obtained from Respondent and calculate the penalty to be assessed against Respondent. In accordance with applicable law, the Department's audit spanned the preceding two-year period, starting from the date of the Stop-Work Order. See § 440.107(7)(d)1., Fla. Stat. The audit period in this case was from May 7, 2014, through May 6, 2016. Based on information obtained during the investigation, Auditor Jackson assigned classification codes 7219, 8380, and 8810 to those identified as employees working for Respondent during the audit period. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance ("NCCI") to assist in the calculation of workers' compensation insurance premiums. Classification code 8810 applies to clerical office employees, code 7219 applies to trucking and "towing companies," and code 8380 applies to automobile service or repair centers. According to Respondent, it was out of compliance with the coverage requirements of chapter 440 for only "368 days" during the two-year audit period. Respondent's records, however, do not support this contention. Respondent provided a detailed "Employee Earnings Summary" for each employee stating the employee’s name, pay rate, and pay period. Respondent's payroll records reflect that Respondent employed "four or more employees" during the audit period. Throughout the two-year audit period, Respondent employed four or more employees with the following duties: Anna Lee, mechanic/bodywork; Cedric Blake, mechanic/bodywork; David Raynor, mechanic/bodywork; James Budner, mechanic/bodywork; Jason Leighty, mechanic; Kevin Croker, Jr., porter/detailer; Nicholas Conway, bodywork; Ralph Tenity, bodywork; Rebecca Thompson, secretary/office help; Stephen Collins, shop helper/porter; Todd Gatshore, tow truck driver/shop helper; and Williams Reeves, tow truck driver/shop helper. Evidence further demonstrated that, during the audit period, managing member Michael Thompson worked as a wrecker truckdriver, and worked with the Sheriff's Office to clear traffic accidents. He was assigned class code 7219 — tow truck driver. Managing member Vicky Thompson was given the clerical class code 8810 because she was observed working in the office during Investigator Johnson's site visit. Managing member Thomas Thompson was assigned the clerical class code 8810 based upon the fact that he occasionally does office work for the business. The corresponding approved manual rates for classification codes 8810, 7219, and 8380 were correctly applied to each employee for the related periods of non-compliance to determine the final penalty. In accordance with the Request for Production, Respondent provided the Department payroll summary reports, tax reports, and unemployment tax reports. The payroll summary reports and records provided by Respondent listed the payroll and duties for each employee. The gross payroll amounts for each employee reflected in the penalty in this case were derived from those documents. Upon receiving those reports and records, the Department correctly determined the gross payroll for Respondent's employees. On June 13, 2016, the Department served the Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,788.90. A portion of the first penalty was based on imputed payroll for Respondent’s three managing members. After service of the Amended Order of Penalty Assessment, Respondent provided additional records showing the payroll of its three managing members, and the 2nd Amended Order of Penalty Assessment was calculated after removing the imputed payroll. On August 22, 2016, the Department served the 2nd Amended Order of Penalty Assessment on Respondent, assessing a penalty of $33,112.44, which was correctly calculated in accordance with section 440.107(7)(d)1. and Florida Administrative Code Rule 69L-6.027(1). In sum, the clear and convincing evidence demonstrated that Respondent was a tow truck company engaged in the wrecker/tow truck and body shop mechanic industries in Florida during the periods of noncompliance; that Respondent failed to secure the payment of workers' compensation for its employees in violation of Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027(1) to determine the appropriate penalty of $33,112.44.
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 Thompson Enterprises of Jacksonville, LLC. DONE AND ENTERED this 27th day of April, 2017, 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 27th day of April, 2017.
The Issue The issue is whether Respondent is liable for a penalty of $44,794.51 for the alleged failure to maintain workers' compensation insurance for two employees in violation of Chapter 440, Florida Statutes (2008).1
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation insurance for the benefit of their employees in accordance with Section 440.107. Respondent is a Florida corporation engaged in the construction business. Respondent utilizes a payroll service company, identified in the record as Frank Crum Leasing (Frank Crum). Frank Crum pays Respondent's employees and collects premiums for workers' compensation insurance based on payroll and employee hours that Respondent reports to Frank Crum each week. Frank Crum maintains a list of the reported employees that is updated weekly (the weekly Frank Crum list). Respondent reports payroll and employee hours to Frank Crum in arrears. On Wednesday afternoon of each week, Respondent reports payroll and employee hours to Frank Crum for the preceding Wednesday through Tuesday. Frank Crum publishes a weekly Frank Crum list each Thursday. New employees that begin work on Wednesday through Tuesday appear on the next weekly Frank Crum list. For example, new employees that began work anytime from Wednesday, February 18, 2009, through Tuesday, February 24, 2009, are reported on February 25, 2009, and appear on the weekly Frank Crum list dated February 26, 2009. New employees that began work anytime from Wednesday, February 25, 2009, through Tuesday, March 3, 2009, are reported on March 4, 2009, and appear on the weekly Frank Crum list dated March 5, 2009.2 Frank Crum collects workers' compensation insurance premiums from Respondent in arrears based on the payroll and employee hours reported each Wednesday for the previous week. The reporting of payroll and employee hours and the payment of insurance premiums in arrears has been Respondent's customary business practice for the past 13 years. On February 26, 2009, one of Petitioner's investigators conducted a random construction site visit at 6417 Grand Island Road, Apollo Beach, Florida. Four workers, who are identified by name in exhibits of record, were laying a concrete sidewalk at the site. The four workers laying the sidewalk were employees of Respondent. Two of the workers were on the weekly Frank Crum list dated February 26, 2006. The other two workers were not on the same list. The two workers who were not on the Frank Crum list dated February 26, 2006, are identified in the record as Mr. Ricardo Hurtado and Mr. Evelio Bueno. On February 26, 2009, Petitioner issued a Stop-Work Order and Penalty Assessment and requested business records from Respondent. Petitioner reviewed the business records and, on April 10, 2009, issued an Amended Order of Penalty Assessment in the amount of $44,794.51 for failure to maintain workers' compensation insurance coverage for the two workers who were not listed on the weekly Frank Crum list dated February 26, 2009, and identified in record as Mr. Hurtado and Mr. Bueno. Respondent does not dispute the accuracy of the penalty calculation. However, Respondent does dispute that Respondent is liable for the penalty assessment. Respondent maintains that the two unlisted workers were covered by workers' compensation insurance on February 26, 2009. The two unlisted workers began their employment with Respondent on February 25, 2009. On March 4, 2009, Respondent reported the new employees to Frank Crum. Respondent paid premiums to Frank Crum for workers' compensation insurance covering the two workers for the dates of employment on February 25 and 26, 2009. The two unlisted workers were covered by workers' compensation insurance on February 25 and 26, 2009. The weekly Frank Crum lists in Petitioner's exhibits are not clear and convincing evidence of the effective date of workers' compensation insurance coverage. The testimony of Respondent's witness at the hearing was clear and convincing that the two workers were covered by workers' compensation insurance in accordance with the customary business practice of Respondent and Frank Crum for the last 16 years. The terms of the workers' compensation insurance policies would have assisted the fact-finder in resolving any evidential conflicts concerning the effective date of workers' compensation insurance coverage. However, Petitioner did not submit copies of the insurance policies and did not submit the testimony of a representative of the workers' compensation insurance company. In support of Petitioner's assertion that Mr. Hurtado and Mr. Bueno were not covered by workers' compensation insurance, Petitioner cites, in paragraph number 13 of its PRO, the testimony of the general counsel of Frank Crum. Petitioner points to the deposition testimony of the general counsel which, in relevant part, states that she did not know whether the insurance company covered the two unlisted workers. The general counsel explained that such a determination would be up to the insurance company and not the general counsel for Frank Crum. The general counsel is correct. Petitioner submitted no evidence to show that the general counsel of Frank Crum is competent to testify for the insurance company. The evidence is clear that Respondent paid insurance premiums in arrears. The evidence is less than clear that insurance coverage was not in effect before the payment of the premium.3 The pretermitted insurance policy or competent testimony from an insurance representative may have clarified the issue. However, the only testimony concerning the effective date of workers' compensation coverage for the two unlisted workers comes from Respondent's live witness. The fact-finder finds her testimony to be credible and persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner issue a final order dismissing the Stop-Work Order and Amended Order of Penalty Assessment. DONE AND ENTERED this 4th day of August, 2009, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 4th day of August, 2009.
The Issue The issues in this proceeding are whether Respondent, Mark Dunlap, d/b/a Mark Dunlap Masonry of Central Florida, Inc., a dissolved Florida corporation, and Mark Dunlap Masonry of Central Florida, Inc. ("Respondent") 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 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(3), Fla. Stat. Respondent operates a masonry business located in Paisley, and is therefore engaged in the construction industry. On January 8, 2010, Hector Beauchamp, the Department's investigator, received a referral alleging that Respondent was working at 1601 Tillery Drive in Deltona, in violation of the Workers' Compensation Law. Mr. Beauchamp visited the plans examiner for the City of Deltona, who confirmed that a building permit had been issued for the cited address. Mr. Beauchamp drove to 1601 Tillery Drive in Deltona, where he found four people behind the house building a block wall as part of an addition to the single-family house at that address. Mark Dunlap was on the site, and told Mr. Beauchamp that the four men worked for his business, Mark Dunlap Masonry of Central Florida, Inc. Mr. Dunlap subsequently identified the four persons working on the site as Wayne Sochocki, Kevin Copeland, Annie Blackburn, and David Allen Baxley. Mr. Beauchamp researched the database maintained by the Department of State, Division of Corporations (accessible at www.sunbiz.org) and learned that Mark Dunlap Masonry of Central Florida, Inc. had been administratively dissolved for failure to file an annual report on September 25, 2009. Mr. Beauchamp also learned that Mr. Dunlap had owned another Florida corporation, Mark Dunlap Masonry, Inc., that had been administratively dissolved for failure to file an annual report on September 16, 2005. According to the Division of Corporations' information, both Mark Dunlap Masonry of Central Florida, Inc., and Mark Dunlap Masonry, Inc., had the same Federal Employer Identification Number ("FEIN") of 030531755. Mr. Dunlap claimed to Mr. Beauchamp that he was himself exempted from carrying workers' compensation coverage, but admitted that he had not secured coverage for the four employees building the block wall at 1601 Tillery Drive. Mr. Beauchamp consulted the Department's Coverage and Compliance Automated System ("CCAS") database, which lists the workers' compensation insurance policy information for each business as provided by the insurance companies, as well as any workers' compensation exemptions for corporate officers. CCAS indicated that in previous years Respondent had secured workers' compensation insurance through a leasing arrangement with Employee Leasing Solutions ("ELS"). In an employee leasing arrangement, the leasing company hires an employer's workers and leases them back to the employer. The leasing company provides payroll services and workers' compensation insurance coverage to the leased employees in exchange for a fee paid by the employer. However, only those employees specifically placed in the leasing arrangement by the employer and accepted as employees by the leasing company are covered by the leasing company's workers' compensation insurance. Mr. Beauchamp's investigation confirmed that Respondent's workers' compensation coverage obtained through the leasing agreement with ELS had been terminated as of July 8, 2008. The CCAS database confirmed that Mr. Dunlap had an active exemption from the requirement to obtain workers' compensation coverage. It also confirmed that none of the four employees whom Mr. Beauchamp found building the block wall at 1601 Tillery Drive were exempt. Mr. Beauchamp concluded that Respondent had failed to secure workers' compensation insurance coverage that met the requirements of chapter 440. Mr. Beauchamp therefore issued an SWO to Respondent on January 8, 2010, and personally served the SWO on Mr. Dunlap on the same date. Also on January 8, 2010, Mr. Beauchamp served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation. The purpose of this request was to obtain the business records necessary to determine the appropriate penalty to be assessed against Respondent for violating the coverage requirements of chapter 440. Because section 440.107(7)(d)1. provides that the Department's assessment of a penalty covers the preceding three-year period, the request for production asked for Respondent's business records from January 9, 2007, through January 8, 2010. If an employer fails to produce business records sufficient to allow for the calculation of the appropriate penalty, the Department must calculate the applicable penalty by imputing the employer's payroll using the statewide average weekly wage for the type of work performed by the employee and multiplying that payroll by 1.5. The statewide average wage is derived by use of the occupation classification codes established by the proprietary Scopes Manual developed by the National Council on Compensation Insurance, Inc. ("NCCI"). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.031(6). For Respondent's employees, Mr. Beauchamp applied the occupation classification code 5022, for masonry. Fla. Admin. Code R. 69L- 6.031(6)(b)9. The Department's Amended Order, assessing an imputed penalty in the amount of $121,001.30 against Respondent, was issued on February 12, 2010, and served on Mr. Dunlap by process server on March 5, 2010. Following service of the Amended Order, Respondent supplied the Department with additional business records, including Respondent's payroll runs from ELS and W-2's for the year 2007. However, even these records were not sufficient to permit the Department to calculate a penalty based on Respondent's actual payroll. The additional business records produced by Respondent did show that Mark Dunlap Masonry, Inc., had a policy of workers' compensation insurance in place with Business First Insurance Company from September 9, 2004, through February 22, 2008. Mr. Beauchamp had not previously found this coverage because the FEIN number listed by the Division of Corporations for Mark Dunlap Masonry, Inc., was incorrect. The Department issued the Second Amended Order on August 18, 2010, lowering the penalty assessment to $64,315.28. Although the Business First Insurance Company policy had been issued to Mark Dunlap Masonry, Inc., and not to Respondent, the Department nonetheless concluded that the policy brought Respondent into compliance with chapter 440 until February 22, 2008, and adjusted the penalty assessment accordingly. Respondent's workers' compensation coverage through the leasing agreement with ELS became effective on March 20, 2008, and was terminated on July 7, 2008. Of the four workers whom Mr. Beauchamp found at the work site on January 8, 2010, only Wayne Sochocki was listed on the ELS employee roster. Thus, Respondent was in compliance with respect to Mr. Sochocki for the period from March 20, 2008, through July 7, 2008. However, the records indicate that Respondent was not in compliance through the ELS leasing agreement with respect to its employees Kevin Copeland, Annie Blackburn, or David Allen Baxley because they had never been tendered to ELS as leased employees. The Department correctly imputed the penalty against Respondent for the four employees found at the work site on January 8, 2010, for all periods of noncompliance. The Department correctly determined the period of noncompliance for Mr. Sochocki to run from July 8, 2008 to January 8, 2010, and for Mr. Copeland, Ms. Blackburn and Mr. Baxley to run from February 22, 2008, to January 8, 2010. The Department utilized the correct occupation classification code for the four employees. The Department correctly utilized the procedure set forth by section 440.107(7)(d) and (e), and the penalty calculation worksheet incorporated by reference into Florida Administrative Code Rule 69L-6.027(1), to calculate the penalty assessed against Respondent by the Second Amended Order.
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 $64,315.28 against Respondent. DONE AND ENTERED this 22nd day of March, 2011, 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 22nd day of March, 2011. COPIES FURNISHED: Mark Dunlap Mark Dunlap Masonry, Inc. 45806 Lake Street Paisley, Florida 32767 Justin H. Faulkner, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Julie Jones, Agency Clerk Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 P. K. Jameson, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399 Honorable Jeff Atwater Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399
The Issue Whether Respondent was required and failed to obtain workers' compensation insurance coverage for his employees during the period from March 7, 1997 through March 7, 2000, and, if so, what penalty should be assessed, pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with enforcing the requirement that employers secure workers' compensation insurance for the benefit of their employees. On March 7, 2001, one of Petitioner's investigators observed two individuals, Worker 1 and Worker 2,3 painting a sidewalk, curb stops, and lines in the parking lot of a 7-Eleven store in Lake Worth, Florida. At that time, the investigator performed an on-site inspection. The investigator interviewed the two workers and completed a worksheet to determine if they were independent contractors. Worker 1 and Worker 2, among other things, worked for and were paid weekly by Respondent as painters, did not maintain a separate business from Respondent, did not control the means of performing their work, did not incur the expenses of their work, and did not incur the principal expenses related to their work. The investigator determined that the two workers were not independent contractors but were employees of Respondent. Neither Worker 1 nor Worker 2 was granted a workers' compensation exemption. Both workers were unprotected by workers' compensation insurance. Respondent provided to Petitioner's investigator federal tax Form 1099s for the years 1998 and 1999, pertaining to Worker 1 and Worker 2 and a handwritten note indicating the compensation paid to them during the year 2000. The documents indicated that Respondent paid the workers for the years 1998 through 2000 the following: Worker 1--$9,685 for 1998, $19,180 for 1999, and $3,330 for 2000; and Worker 2--$2,790 for 1999, and $240 for 2000. A compilation of approved classifications that groups employers according to their operations is published by the National Council of Compensation Insurance (NCCI). The publication is Scopes Manual, Scopes of Basic Manual Classifications (Scopes Manual). NCCI is a rating organization in Florida, which represents workers' compensation carriers. NCCI seeks approval from Florida's Department of Insurance of rates charged by workers' compensation carriers. NCCI and Professional Insurance Associates, as well as other sources, publish tables of approved rates for each classification code. It is undisputed that NCCI's publication of class codes and rates is relied upon and used by Petitioner to determine an employer's class code and the workers' compensation insurance rate. On March 7, 2000, Petitioner's investigator issued a SWO to Respondent. On March 8, 2000, Petitioner issued a NPAO to Respondent, indicating an assessment and penalty of $18,824. The investigator determined that, based upon what he had observed and the information that he had obtained, the work being performed by Worker 1 and Worker 2 was painting and was classified under Scopes Manual Code 5474. The investigator determined the evaded premium, or the premium that Respondent would have paid had he secured workers’ compensation insurance, by multiplying the gross compensation to employees each year by the premium rate for that Code for that year. The statutory penalty on the evaded premium is twice the evaded premium. The calculated penalty was $18,724. Added to the $18,724 was $100, which represented the penalty for the one day, March 7, 2000, that Respondent was not in compliance with the workers’ compensation requirement. On October 20, 2000, Petitioner issued a Second Amended Notice and Penalty Assessment Order, which was the final assessment, against Respondent assessing a penalty of $69,569, which included the $100 penalty. Pursuant to an agreement, Respondent performs general maintenance and preventative maintenance (GMPM) for Southland Corporation at 100 or more 7-Eleven stores in Dade, Broward, and Palm Beach counties. Petitioner was able to interview 13 of Respondent's employees, Worker 1 through Worker 13.4 As not a part of the GMPM agreement, Respondent's employees paint curbs, bumpers, and lines in the parking lot of each 7-Eleven store once each year. Respondent’s employees also engaged in the following: painting of buildings’ exterior and interior, parking lots, and loading docks; hanging drywall; setting of tile; paving of parking lots; repairing stucco and concrete; minor plumbing; carpentry, including trim, installation of doors and locks; filling potholes; and installing walls and cabinets. For example, Worker 10, who was employed with Respondent between June 1996 and January 1998, initially performed a daily activity of painting lines and curbs in parking lots at 7-Eleven stores. He could be assigned three stores in one day performing this activity. Later, Worker 10 performed under the GMPM agreement doing the following: painting the exterior and interior of stores, which could be the entire outside or a storeroom; tiling floors and ceilings; patching blacktop and repairing asphalt; and engaging in carpentry work, including putting up wooden shelves in storage rooms, cutting, nailing and screwing boards, and operating saws. Worker 10 also assisted Worker 6, who was a carpenter, repairing enclosures for dumpsters. The repairs consisted of sinking four-by-four posts into the ground, replacing slats, and occasionally replacing the entire enclosure due to damage caused by a truck backing into the enclosure. As another example, Worker 11 was employed with Respondent during 1998 and 1999 for 14 months and worked under the GMPM agreement. Worker 11 performed all activities under the agreement in maintaining the 7-Eleven stores, except for electrical and internal plumbing. The work to which he was assigned generally lasted four days a week, but for one day a week, he was assigned to handling service calls or performing line striping. Worker 11 performed the following: resurfacing asphalt; painting the entire parking lot, including lines for parking spaces and curbs; replacing or repairing ceiling and floor tile; laying tar on the roof; performing carpentry, including building shelves in storing rooms, reinforcing shelving, hanging new doors, replacing door hardware, and performing carpentry alongside Worker 6; and repairing enclosures for dumpsters by re-hanging doors, replacing slats, and replacing four-by-four posts. Even though Respondent stated that he subcontracted the repair of roofs and dumpsters, the installation of doors and electrical and plumbing work, he failed to present evidence showing to whom and when the work was subcontracted.5 Petitioner presented evidence demonstrating that Respondent’s employees performed all of the work described, except for electrical work. The work performed by Respondent’s employees included multiple class codes. NCCI requires the assignment of the highest rated classification under such circumstances. Carpentry is the highest-rated classification for all the work performed by Respondent’s employees, and the Scopes Manual Code for carpentry is 5403. Scopes Manual Code 5403 is also the code for the enclosure of a dumpster and the installation of a pre-hung door. The corresponding rate per $100 of payroll assigned to Scopes Manual Code 5403 is different for the applicable years 1997 through 2000. The rate for 1997 was 29.77; for 1998 was 29.09; for 1999 was 26.66; and 2000 was 27.96. Worker 1 through Worker 13 did not maintain a separate business from Respondent, did not control the means of performing their work, did not incur the expenses of their work, and did not incur the principal expenses related to their work. None of Respondent’s 13 employees had a valid workers’ compensation exemption. None of them were protected by workers’ compensation insurance. Respondent’s usual and customary practice was to pay his employees on a weekly basis. His usual and customary practice was to employ four or more employees during a weekly pay period. Respondent’s usual and customary practice was to employ four or more employees during any payroll period. Respondent asserts that he relied upon subcontractors for some of the work. The identity of the subcontractors, the service performed, and the frequency of their work are unknown. Whether the subcontractors had workers’ compensation insurance is also unknown. As a result, a determination cannot be made as to what Respondent’s responsibility, if any, was to the subcontractors as to workers’ compensation insurance, which in turn would affect an assessed penalty under worker’s compensation. To establish what his payroll was for the three years preceding the issuance of the SWO on March 7, 2000, Respondent used federal tax Form 1099s and cancelled business checks. For the years 1997 through 2000, Respondent’s payroll was as follows: Worker 1--1998 was $9,685, 1999 was $19,180, and 2000 was $3,330; Worker 2--1999 was $2,790, and 2000 was $240; Worker 3--1997 was $2,100, 1999 was $2,035, and 2000 was $3,045; Worker 4--1999 was $2,100; Worker 5--1997 was $1,900; Worker 6--1997 was $4,620, 1998 was $15,965, 1999 was $5,100, and 2000 was $3,303; Worker 7- -1999 was $610; Worker 8--1997 was $1,380, 1998 was $5,640, 1999 was $7,640, and 2000 was $350; Worker 9--1997 was $3,120; Worker 10--1997 was $8,450, and 1998 was $960; Worker 11--1998 was $7,095, and 1999 was $7,225; Worker 12--1998 was $2,883; and Worker 13--1999 was $2,675. Consequently, Respondent’s total payroll for 1997 was $21,570, for 1998 was $42,228, for 1999 was $49,355, and for 2000 was $10,268. Respondent’s payroll of $21,570 for 1997, was for the entire year. Petitioner made no reduction for the time period in the year 1997 prior to March 8, 1997, which would have been three years prior to the SWO on March 7, 2000. The statutory penalty assessed by Petitioner in its Second Amended Notice and Assessment Order against Respondent was $69,569, which included the penalty of $100. Petitioner’s assessment should be reduced to compensate for the Respondent’s payroll during the period of January 1, 1997 through March 7, 1997.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Labor and Employment Security, Division of Workers' Compensation, Bureau of Compliance enter a final order against Gregory Dennis Nelly: Sustaining the Stop Work Order. Sustaining the penalty assessed in the Second Amended Notice and Penalty Assessment Order minus the calculation for the payroll during the period of January 1, 1997 through March 7, 1997. DONE AND ENTERED this 5th day of June, 2001, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of June, 2001.
