The Issue Whether Respondents violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers' compensation coverage, as alleged in the Stop-Work Orders, and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440, Florida Statutes, that employers in Florida secure workers' compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondents are gas station/convenience stores located in South Florida. Northlake was created by Nazma Akter on May 6, 2014. MB was created by Ms. Akter on March 23, 2010. Congress Valero was created by Muhammad Saadat on July 21, 2011. Hena was created by Ms. Akter and Abu Ahsan on December 14, 2011. Hayma was created by Ms. Akter on December 14, 2011. Blue Heron was created by Ms. Akter on August 4, 2009. At all times relevant hereto, Respondents were duly-licensed to conduct business in the state of Florida. On February 2, 2015, the Department's Compliance Investigator Robert Feehrer, began a workers' compensation compliance investigation of Gardenia, LLC. Investigator Feehrer called the number listed for Gardenia, LLC, and was provided with a corporate office address. On February 10, 2015, upon arrival at Gardenia, LLC's, corporate office located at 165 US Highway 1, North Palm Beach, Florida, 33408, Investigator Feehrer spoke with Operations Manager Mohammad Hossain. Mr. Hossain stated that Gardenia, LLC, was a paper corporation and existed only for the purpose of paying unemployment taxes on the "six stores." Mr. Hossain went on to provide Investigator Feehrer with a list of Respondents and names of the employees that worked at each store. As an employee of Gardenia, LLC, and Respondents, Mr. Hossain's statements are party opponent admissions and bind Respondents. Lee v. Dep't of Health & Rehab. Servs., 698 So. 2d 1194, 1200 (Fla. 1997). With Mr. Hossain's statements and the list of Respondents' employees, Investigator Feehrer then consulted the Division of Corporations website, www.sunbiz.org, and confirmed that Respondents were current, active Florida companies. Investigator Feehrer then consulted the Department's Coverage and Compliance Automated System ("CCAS") for proof of workers' compensation coverage and exemptions associated with Respondents. Investigator Feehrer's CCAS search revealed that Respondents had no workers' compensation policies and no exemptions. On February 24, 2015, Investigator Feehrer conducted site visits at each of the six stores. Ms. Akter and Mr. Hossain accompanied Investigator Feehrer during these site visits. At all times material hereto, Ms. Akter was a corporate officer or managing member of each of the six Respondents. Muhammed Saadat and Abu Ahsan were corporate officers or managing members of Congress Valero, Hena, and Blue Heron. Kazi Ahamed was a corporate officer or managing member of Congress Valero and Hayma. Kazi Haider and Mohammed Haque were managing members of Hayma. All received compensation from the companies with which they were involved. Although Investigator Feehrer only personally observed one employee working at each location during his site visits, the payroll records revealed that at least four employees (including corporate officers or managing members without exemptions) received compensation for work at each location during the relevant period. Investigator Feehrer required additional information to determine compliance, and with Respondents' permission, contacted Respondents' accountant. Investigator Feehrer met with the accountant at least two times to obtain relevant information prior to March 30, 2015. Upon Ms. Akter's authorization, the accountant provided tax returns and payroll information for Respondents' employees. Information from Ms. Akter and Mr. Hossain also confirmed the specific employees at each of the six stores during the period of March 30, 2013, through March 30, 2015. On March 30, 2015, based on his findings, Investigator Feehrer served six Stop-Work Orders and Orders of Penalty Assessment. The Stop-Work Orders were personally served on Ms. Akter. Mr. Hossain was present as well and confirmed the lists of employees for each of the six stores were accurate. In April 2015, the Department assigned Penalty Auditor Christopher Richardson to calculate the six penalties assessed against Respondents. Respondent provided tax returns for the audit period and payroll transaction details were provided, as well as general ledgers/breakdowns, noting the employees for each Respondent company. Based on Investigator Feehrer's observations of the six stores on February 24, 2015, Auditor Richardson used the classification code 8061 listed in the Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rule 69L-6.021(1). Classification code 8061 applies to employees of gasoline stations with convenience stores. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance to assist in the calculation of workers' compensation insurance premiums. In the penalty assessment, Auditor Richardson applied the corresponding approved manual rate for classification code 8061 for the related periods of non-compliance. The corresponding approved manual rate was correctly utilized using the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027 to determine the final penalties. The Department correctly determined Respondents' gross payroll pursuant to the procedures required by section 440.107(7)(d) and rule 69L-6.027. On January 14, 2016, the Department served the six Amended Orders of Penalty Assessment on Respondents, assessing penalties of $1,367.06 for Northlake, $9,687.00 for MB, $12,651.42 for Congress Valero, $18,508.88 for Hena, $7,257.48 for Hayma, and $4,031.60 for Blue Heron. The Department has demonstrated by clear and convincing evidence that Respondents were engaged in the gasoline station, self-service/convenience store industry in Florida during the periods of noncompliance; that Respondents failed to secure the payment of workers' compensation for their employees, as required by Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. to determine the appropriate penalties.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a consolidated final order upholding the Stop-Work Orders and the Amended Orders of Penalty Assessment in the amounts of $1,367.06 for Northlake Mobile Enterprises, Inc.; $9,687.00 for MB Food and Beverage, Inc.; $12,651.42 for Congress Valero, Inc.; $18,508.88 for Hena Enterprises, Inc.; $7,257.48 for Hayma Enterprises, Inc.; and $4,031.60 for Blue Heron BP, Inc. DONE AND ENTERED this 16th day of June, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 16th day of June, 2016.
The Issue The issue in this case is whether Respondents violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers? compensation as alleged in the Stop-Work Order and Amended Order of Penalty Assessment, and if so, what penalty is appropriate.
Findings Of Fact Petitioner, Department of Financial Services, Division of Workers' Compensation (the Department), is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation for their employees. Mr. Alfred Strange was a managing member of Respondent Al?s Painting Service, LLC (the LLC), which had been created at least as early as 2004. The LLC was administratively dissolved on September 24, 2010, for failure to file an Annual Report. After this date, no further Annual Reports were filed. As a managing member of the LLC, Mr. Strange had initially obtained an exemption from workers? compensation coverage beginning on October 21, 2004, which was renewed once for a two-year period and finally expired on October 20, 2008. Mr. Frederick Crutchfield, another managing member of the LLC, had an exemption which expired on November 20, 2008. After this date, no further Requests for Exemption were filed by the company or its officers. Mr. Strange and Mr. Crutchfield did not have exemptions in effect from January 8, 2010, until September 24, 2010, when the LLC was dissolved. Mr. Carl Woodall is a senior investigator with the Division of Workers? Compensation. Mr. Woodall was appointed as an investigator on July 2, 2007, and was appointed as a senior investigator, Position Number 43003044, on September 1, 2012. He has been involved with over 400 enforcement cases under chapter 440. The position description for Position Number 43003044, effective September 1, 2012, provides in relevant part: The incumbent in this position is responsible for conducting investigations for the purpose of ensuring employer compliance with the workers? compensation requirements; entering and inspecting any place of business at any reasonable time for purpose of investigating employer compliance; examining and copying business records; and issuing, serving, and enforcing stop-work orders, penalty assessment orders, and any other orders required under s. 440.107 F.S. On January 7, 2013, Investigator Woodall conducted a site visit to a commercial building at 20721 Central Avenue East, Blountstown, Florida. Outside this address, there was a van with advertising on its side showing a man painting with a paint roller, the words “Al?s Painting,” and a phone number. Inside, he encountered Mr. Strange painting the east wall of the building. Investigator Woodall was wearing a shirt displaying a seal with the words “State of Florida Workers? Compensation Investigator” emblazoned on it. Investigator Woodall showed Mr. Strange his identification, which contained his name and identification number 03044, and indicated that he was a senior compliance investigator with the Division of Workers? Compensation. In response to questions from Investigator Woodall, Mr. Strange provided identification in the form of his driver?s license and stated that he had been working at the Central Avenue address for a few days and was painting only part of the building. Mr. Strange stated that he was being paid $15.00 per hour and that he had been paid once by check. Mr. Strange provided a business card to Investigator Woodall. Investigator Woodall testified that Mr. Strange may have told him that he had an old card in the van and Investigator Woodall remembered that Mr. Strange did go to the van and look for something. The business card that was provided to Investigator Woodall was printed with “Al?s Painting Service, LLC.” It is not clear that Mr. Strange ever held himself out as doing business under the name “Al?s Painting Service, LLC” in obtaining the work at Central Avenue or at any time after the LLC was dissolved. Investigator Woodall checked workers? compensation information for Al?s Painting Service, LLC, by accessing the Coverage and Compliance Automated System (CCAS) maintained by the Department. The database indicated no workers? compensation coverage was in effect for the LLC. It indicated that Mr. Strange and Mr. Crutchfield were managing members of the LLC but that their exemptions had expired in 2008. Information in the CCAS is submitted by insurance companies and the National Council of Compensation Insurance (NCCI). Investigator Woodall also accessed the Department of State, Division of Corporations? website. That database indicated that Al?s Painting Service, LLC, had been dissolved on September 24, 2010. On January 7, 2013, at approximately 12:40 p.m., Investigator Woodall personally served a Stop-Work Order and Order of Penalty Assessment on Mr. Strange and the LLC, along with a Request for Production of Business Records for Penalty Assessment Calculation. Mr. Strange was actively involved in business operations in Florida during the period of January 8, 2010, through January 7, 2013, inclusively. Mr. Strange operated within the construction industry during the period of January 8, 2010, through January 7, 2013, inclusively. Mr. Strange was an "employer" during the time period of January 8, 2010, through January 7, 2013, inclusively, as that term is defined in section 440.02(16). Mr. Strange neither obtained workers' compensation insurance coverage under chapter 440 for any of the individuals listed on the Penalty Worksheet, nor verified that any of those individuals or corporations had workers' compensation coverage before contracting with them for construction services at any point in time during the period of January 8, 2010, through January 7, 2013, inclusively. Class Code 5474, used on the penalty worksheet attached to the Amended Order of Penalty Assessment, and as defined by the NCCI SCOPES Manual, is the correct occupational classification for Alfred Strange, d/b/a Al's Painting Service, LLC, a Dissolved Florida Limited Liability Company. None of the employees listed on the Penalty Worksheet of Exhibit C were covered by workers' compensation insurance obtained through an employee leasing company for the period of January 8, 2010, through January 7, 2013. Alfred Strange and Frederick Crutchfield were "employees" of Alfred Strange, d/b/a Al's Painting Service, LLC, a Dissolved Florida Limited Liability Company, as that term is defined in section 440.02(15), during the period of January 8, 2010, through January 7, 2013, whether continuously or not. Neither Alfred Strange nor Frederick Crutchfield was an independent contractor of Alfred Strange, d/b/a Al's Painting Service, LLC, a Dissolved Florida Limited Liability Company, as that term is defined in section 440.02(15), during the period of January 8, 2010, through January 7, 2013. Remuneration was paid to Alfred Strange and Frederick Crutchfield during January 8, 2010, through January 7, 2013. The Request for Admission that the approved manual rates applied on the Penalty Worksheet attached to the Amended Order of Penalty Assessment were correct was deemed admitted pursuant to Florida Rule of Civil Procedure 1.370.1/ The penalty shown in column „g? of the Penalty Worksheet attached to the Amended Order of Penalty Assessment is the correct penalty for the employees listed there. Mr. Strange did not provide the Department any of the records requested in the Request for Production of Business Records for Penalty Assessment Calculation. The imputed salary amounts for each employee listed on the penalty worksheet of the Amended Order of Penalty Assessment equal the statewide average weekly wage multiplied by 1.5.
Recommendation Upon consideration of the above Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Financial Services, Division of Workers? Compensation, enter a final order determining that Respondent Mr. Alfred T. Strange violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage, and imposing upon him a total penalty assessment of $28,175.64. DONE AND ENTERED this 22nd day of August, 2013, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD 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 August, 2013.
The Issue Whether Respondent failed to obtain workers' compensation insurance that meets the requirements of chapter 440, Florida Statutes, and, if so, the appropriate penalty.
Findings Of Fact Petitioner is the state agency responsible for enforcing the Florida Workers' Compensation Law, chapter 440, Florida Statutes, including those provisions that require employers to secure and maintain payment of workers’ compensation insurance for their employees who may suffer work- related injuries. Respondent is a Florida limited-liability company, having been organized on May 2, 2007. Mike Hawryluk has been the sole manager of the company. The company is engaged in roofing in the construction industry. When Respondent was established, a checking account was opened in the company name. Respondent maintained workers’ compensation insurance from June 1, 2007, until June 1, 2009. Mr. Hawryluk filed a notice of election to be exempt from the provisions of chapter 440. That exemption became effective on November 2, 2007. Mr. Hawryluk held three construction licenses: a general contractor license, #CGC1517558; a building contractor license, #CBC1254280; and a roofing contractor license, #CCC1328252. A general contractor is “a contractor whose services are unlimited as to the type of work which he or she may do, who may contract for any activity requiring licensure under this part, and who may perform any work requiring licensure under this part.” § 489.105(3)(a), Fla. Stat. A building contractor is “a contractor whose services are limited to construction of commercial buildings and single- dwelling or multiple-dwelling residential buildings, which do not exceed three stories in height, and accessory use structures in connection therewith or a contractor whose services are limited to remodeling, repair, or improvement of any size building if the services do not affect the structural members of the building.” § 489.105(3)(e), Fla. Stat. A roofing contractor is “a contractor whose services are unlimited in the roofing trade.” § 489.105(3)(e), Fla. Stat. Due to declines in the economy, Respondent became insolvent in 2010, and the company went inactive. Respondent did not take formal steps to end its existence, but stopped filing annual reports. On September 23, 2011, Respondent was administratively dissolved by the Department of State, Division of Corporations for failing to file an annual report. No business was conducted by Respondent after the date of dissolution, until its reinstatement as discussed herein. In conjunction with the dissolution of the company, Mr. Hawryluk allowed his workers’ compensation owner’s exemption to expire on November 1, 2011. Mr. Hawryluk continued to use the CBC Roofing Company bank account as a personal bank account. That decision was made as a matter of personal convenience, and does not demonstrate that Respondent continued to either conduct business or engage its defunct corporate existence in any way. As the economy improved, and as his alternative job of selling internet domain names failed to pan out, Mr. Hawryluk decided to re-enter the construction business. The Division produced a series of building permits issued by Volusia County to Mr. Hawryluk under any of his three construction licenses, or to other companies under his control. The permits were obtained by Mr. Etheredge on June 10, 2015, in preparation for the final hearing. The permits were as follows: Applicant Parcel Address Permit Type Last Activity Mike Hawryluk 21 Julie Dr., Ormond Beach Residential 03/29/2010 Mike Hawryluk 54 Palm Dr., Ormond Beach Re-roof repair 04/08/2010 Mike Hawryluk 1712 Derbyshire Rd., Holly Hill Re-roof replace 05/15/2012 Mike Hawryluk 3 John Bulow Cir., Ormond Beach Re-roof 05/06/2014 CBC Roofing Co. Mike Hawryluk Mike Hawryluk 36 Seabreeze Dr., Ormond Beach Roof/combination 05/29/2014 Mike Hawryluk 80 Carol Rd., Ormond Beach Re-roof replace 05/29/2014 Mike Hawryluk 3070 Whisper Blvd., DeLand Re-roof repair 06/13/2014 Mike Hawryluk 3070 Whisper Blvd., DeLand Re-roof replace 06/20/2014 Mike Hawryluk 1313 Fairway Ave., Ormond Beach Re-roof replace 07/11/2014 Mike Hawryluk 225 Seminole Dr., Ormond Beach Re-roof replace 09/09/2014 Bruce A. Fizell 10 Dunes Cir., Ormond Beach Roofing 02/20/2015 Mike Hawryluk Subcontractor Mike Hawryluk 2577 John Anderson Dr., Ormond Beach Re-roof replace 03/12/2015 Mike Hawryluk 3296 Relay Rd., Ormond Beach Re-roof 03/18/2015 CBC Roofing Co. Mike Hawryluk Mike Hawryluk 309 Navajo Dr., Ormond Beach Re-roof replace 04/17/2015 There were no permits issued for the period from January 13, 2013 to November 8, 2013, the period during which Respondent was legally dissolved, and during which Respondent was not engaged in construction contracting.1/ The evidence in this case, including the permit record, provides clear and convincing evidence that Respondent was not conducting business, and was thus not an “employer” during the period from January 13, 2013 to November 8, 2013. Respondent was reinstated on November 8, 2013, and has remained active since. On November 13, 2013, Mr. Hawryluk reinstated his workers’ compensation owner’s exemption. On January 12, 2015, Petitioner's investigator, Robert Etheredge, conducted an inspection at a residential construction site at 225 Seminole Drive, Ormond Beach, Florida. He observed three people removing siding from the residence, identified as William Evans, Thomas Vance, and Marcos Proveda. There were two trucks parked at the site, one of which had a CBC Roofing sign affixed. Mr. Hawryluk was also at the site. Mr. Hawryluk stated that the three employees had been there for approximately one hour, and were being paid at a rate of $8.00 per hour. Mr. Etheredge asked Mr. Hawryluk for evidence that Respondent’s employees were covered by workers’ compensation insurance. There was none. Mr. Etheredge reviewed the Compliance and Coverage Automated System (CCAS), which is the statewide database for workers’ compensation information, to confirm Respondent’s status in the workers’ compensation system. Using the CCAS, Mr. Etheredge confirmed that Respondent had no workers’ compensation coverage on file for any employee of the company. He further noted that Mr. Hawryluk held an exemption from workers’ compensation for the period from November 13, 2013 to November 13, 2015. Mr. Etheredge also accessed the Florida Division of Corporations website to ascertain Respondent’s corporate status. He noted that Respondent had previously been dissolved, and then reinstated on November 8, 2013. After having gathered the information necessary to determine Respondent’s status, Mr. Etheredge contacted his supervisor and received authorization to issue a Stop-Work Order and Order of Penalty Assessment. The Stop-Work Order required Respondent to cease all business operations statewide. The Order of Penalty Assessment assessed a penalty, pursuant to section 440.107(7)(d), “[e]qual to 2 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it has failed to secure the payment of compensation within the preceding 2-year period.” The consolidated order was hand- delivered to Mr. Hawryluk, on behalf of Respondent, at 11:45 a.m. on January 12, 2015. The Stop-Work Order and the Order of Penalty Assessment, as amended, named CBC Roofing Company Mike Hawryluk, LLC, as the employer. The Stop-Work Order and the Order of Penalty Assessment, as amended, did not name Mr. Hawryluk as having violated the workers’ compensation law, either individually or “doing-business-as” CBC Roofing Company Mike Hawryluk, LLC. The Stop-Work Order was accompanied by a Request for Production of Business Records for Penalty Assessment Calculation, which required Respondent to “produce business records for examination and copying, for the period of 01/13/2013 through 01/12/2015.” On January 14, 2015, Respondent advised the Division, by letter, that it had terminated the three employees observed at the construction site, with the three having been paid a total of $25.50. In response to the Request for Production of Business Records, Respondent produced all records that it had for the period during which it was conducting business prior to January 1, 2015, consisting of bank records for the period of November 13, 2013 through December 31, 2014. Respondent did not produce records for the period from January 1, 2015 through January 12, 2015. The records provided for the period of November 13, 2013 through December 31, 2014, were sufficient to allow the Division to determine that there was no violation of workers’ compensation for that period. Thus, the Second Amended Order of Penalty Assessment did not calculate or assess penalties for that period. There were no business records produced for the period from January 13, 2013 to November 13, 2013, because Respondent was defunct, and business records did not and could not exist. Although section 440.107(7)(e) requires salaries of employees to be imputed for a period of the previous two years, Mr. Etheredge testified that Petitioner’s construction of the law has resulted in the situation in which: Sometimes I come across companies that only started six months ago. We do not go back further, that wouldn't make any sense. We only go to the inception of the company or two years, whichever happens to be greater. THE COURT: All right. And had the company started on November of 2013, would these records have been sufficient, the records provided to you been sufficient to calculate a penalty without the information? THE WITNESS: If there was also an accompanying record to indicate that the company actually started November 2013, then that would have been adequate, correct. Petitioner’s application of the law applies with equal force in this case, in which the evidence demonstrates conclusively that, for all practical purposes, Respondent “started” on November 8, 2013, after a period of dissolution and inactivity. In that regard, it makes no more sense to impute wages for non-existent employees while a company is defunct and demonstrably inactive than it does to impute wages for non-existent employees before a company is in existence.2/ The records were reviewed by Petitioner’s penalty auditor, Lyna Ty. Mr. Ty determined that the records were insufficient to establish the compensation paid to Respondent’s employees for the periods from January 13, 2013 to November 13, 2013, and from January 1, 2015 to January 12, 2015. Therefore, pursuant to section 440.107(7)(e), salaries were imputed for each of the three employees, and for Mr. Hawryluk for the period before the reactivation of his owner’s exemption, based on the statewide average weekly wage for the period for which “inadequate” records were provided. Mr. Ty used the “Scopes Manual” published by the National Council on Compensation Insurance to ascertain the classification of Respondent’s business, based upon the nature of the goods and services it provided. Mr. Ty originally determined that Respondent’s construction business fell within Class Code 5551 - Roofing. During the course of this proceeding, the Division determined that the more accurate Scopes Manual classification code for Respondent’s business was Class Code 5645, Carpentry - Construction of Residential Dwellings Not Exceeding Three Stories in Height. The calculations described herein are those that applied the correct class code, and which resulted in the 2nd Amended Order of Penalty Assessment that forms the basis for this proceeding. The salaries of Respondent’s three employees, as employees of a class code 5645 business, were imputed as though they worked full-time for Respondent from January 13, 2013 to November 13, 2013, and from January 1, 2015 to January 12, 2015, the periods for which “inadequate” records were provided. In addition, salary was imputed to Mr. Hawryluk for the period from January 13, 2013 to November 13, 2013, since his exemption had expired, and had not yet been reinstated. Since the records provided for the period of November 13, 2013 through December 31, 2014, were sufficient to demonstrate that Respondent did not fail to secure the payment of compensation, salaries were not imputed by the Division for that period. The imputed wages were then multiplied by two, pursuant to section 440.107(7)(e), resulting in a total imputed gross payroll of $292,385.44. The penalty for Respondent’s failure to maintain workers’ compensation insurance for its employees is calculated as “2 times the amount Respondent would have paid in premium when applying approved manual rates to the employer’s payroll during periods for which it failed to secure the payment of workers’ compensation required by this chapter within the preceding 2-year period or $1,000, whichever is greater.” The National Council on Compensation Insurance periodically issues a schedule of workers’ compensation rates per $100 in salary, which varies based on the Scopes Manual classification of the business. The workers’ compensation insurance premium was calculated by multiplying one percent of the $292,385.44 imputed gross payroll ($2,923.85) by the approved manual rate (which varied from $15.71 to $15.91, depending on the quarter), which resulted in a calculated premium of $46,162.35. The penalty was determined by multiplying the calculated premium by two, resulting in the final penalty of $92,324.70. On June 10, 2015, the Division prepared its 2nd Amended Order of Penalty Assessment assessing a monetary penalty in that amount against Respondent. The overwhelming weight of the evidence in this case demonstrates that Respondent ceased operation as a business engaged in construction contracting no later than September 23, 2011, and took no further action to conduct business until it filed for reinstatement on November 8, 2013. The Division failed to establish that Respondent was an “employer” for workers’ compensation purposes from January 13, 2013 to November 8, 2013. Respondent was not, during that period, “carrying on any employment” and, during the period of dissolution, had no employees. The Division established that Respondent was an "employer" for workers' compensation purposes beginning on November 8, 2013, because it was engaged in the construction industry and had one or more employees working for the company. Applying imputed wages in accordance with the formula described above, the penalty for the period from November 8, 2013 through November 12, 2013, is calculated by first applying the average weekly wage of $841.57 for each of the four employees, including Mr. Hawryluk, for a period of one week (though there is absolutely no evidence that the three employees observed on January 12, 2015, were employees from November 8, 2013 to November 12, 2013), which comes to $3,366.28.3/ Multiplying $3,366.28 by two, pursuant to section 440.107(7)(e), equals a gross payroll for the period of $6,732.56. One percent of the gross payroll ($67.33) times the approved manual rate for that quarter ($15.71) produces a premium amount of $1,057.75. That amount times two, pursuant to section 440.107(7)(d)1., results in a penalty of $2,115.50. The penalty correctly established in the 2nd Amended Order of Penalty Assessment Penalty Calculation Worksheet for the period from January 1, 2015 to January 12, 2015, is $2,754.36. The appropriate penalty for the full lawful period of imputation is $4,869.86.
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 assessing a penalty of $4,869.86 against Respondent, CBC Roofing Company Mike Hawryluk, LLC, for its failure to secure and maintain required workers’ compensation insurance for its employees for the periods of time set forth herein. DONE AND ENTERED this 11th day of September, 2015, in Tallahassee, Leon County, Florida. S E. GARY EARLY 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 11th day of September, 2015.
The Issue Whether KP Roofing Masters, LLC ("Respondent"), failed to secure the payment of workers' compensation coverage for its employees, and if so, whether the Department of Financial Services, Division of Workers' Compensation ("Department"), correctly calculated the penalty imposed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440 that employers in Florida secure workers' compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent was a business providing services in the construction industry. Its principal office is located at 7100 Northwest 12th Street, Suite 210, Miami, Florida 33126. The Investigation. On September 26, 2014, the Department's compliance investigator, Cabrera, observed two individuals performing roofing work on a house in Coral Gables, Florida. Investigator Cabrera interviewed the individuals, identified as Rodolfo Moscoso and Jairo Alvarado. Both men informed Cabrera that they worked for Respondent. Cabrera then checked the permit board located at the jobsite and confirmed that Respondent pulled the permit for the roofing work. After gathering the information at the jobsite, Cabrera consulted the Division of Corporations’ website to determine, inter alia, the identity of Respondent's corporate officers. Cabrera found that Jorge Cappelleti ("Cappelleti") was Respondent's sole corporate officer. Cabrera then consulted the Department's Coverage and Compliance Automated System ("CCAS") for proof of workers' compensation coverage and for exemptions associated with Respondent. An exemption is a method in which a corporate officer can exempt himself from the requirements of chapter 440. See § 440.05, Fla. Stat. (2014). CCAS is the Department's internal database that contains workers' compensation insurance policy information and exemption information. Insurance providers are required to report coverage and cancellation information, which is then input into CCAS. Cabrera's CCAS search revealed that Respondent did not have a workers' compensation policy or an employee leasing policy. Cabrera additionally discovered that Cappelleti had a valid exemption. Cabrera then called Cappelleti who confirmed that the two men at the jobsite were his employees and that the employees were not covered by workers' compensation insurance. Based on the information gathered, on September 26, 2014, Cabrera issued Respondent a Stop-Work Order and Order of Penalty Assessment. On September 29, 2014, Cabrera served Respondent with the Stop-Work Order and Order of Penalty Assessment. Cabrera simultaneously served Respondent with the Request for Production of Business Records for Penalty Assessment Calculation ("BRR"). The BRR requested documents that would enable the Department to determine Respondent's payroll for the time period of September 27, 2012, through September 26, 2014. In response to the BRR, Respondent ultimately provided the Department with bank statements, check details, a general ledger, and other records. Penalty Calculation. In October 2014, the Department assigned Penalty Auditor Ruzzo to calculate the penalty assessed against Respondent. Ruzzo reviewed the business records produced by Respondent and properly identified the amount of gross payroll paid to Respondent's employees on which workers' compensation premiums had not been paid. Ruzzo researched Respondent and Respondent's subcontractors to determine those periods when they were not compliant with chapter 440 during the audit period. Ruzzo determined that Respondent was not compliant for the period of September 27, 2012, through September 26, 2014. However, Respondent's corporate officer was not included in the penalty for the periods in which he had an exemption. Additionally, Respondent's compliant subcontractors were not included in the penalty. The business records ultimately produced by Respondent were sufficient for Ruzzo to calculate a penalty for the entire audit period, except for September 26, 2014. For that day, Ruzzo imputed the payroll. On June 2, 2015, based on Ruzzo's calculations, the Department issued a 4th Amended Order of Penalty Assessment to Respondent. On September 1, 2015, the 4th Amended Order of Penalty Assessment was served on Respondent. The 4th Amended Order of Penalty Assessment assessed a penalty of $68,525.42. For the penalty assessment calculation, Ruzzo consulted the classification codes listed in the Scopes® Manual, which has been adopted by the Department of Financial Services through Florida Administrative Code Rules 69L-6.021 and 69L-6.031. Classification codes are assigned to various occupations to assist in the calculation of workers' compensation insurance premiums. Ruzzo assigned the class codes based on information provided to him by Cappelleti. Ruzzo then utilized the corresponding approved manual rates for those classification codes and the related periods of non-compliance. Ruzzo applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)l. and rules 69L-6.027 and 69L-6.028 to determine the penalty. The Penalty Associated With Subcontractor Emerald. Respondent only disputes the portion of the penalty associated with its subcontractor, Emerald, in the amount of $8,434.86 for the period of non-compliance from January 1, 2014, through April 8, 2014. Section 440.10(1) provides in relevant part: In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment. A contractor shall require a subcontractor to provide evidence of workers’ compensation insurance. A subcontractor who is a corporation and has an officer who elects to be exempt as permitted under this chapter shall provide a copy of his or her certificate of exemption to the contractor. Noticeably absent from the statute is the time period within which this evidence of coverage must be provided to the contractor or the nature of the required evidence. Rule 69L-6.032(1) provides: In order for a contractor who is not securing the payment of compensation pursuant to Section 440.38(1)(a), F.S. to satisfy its obligation to obtain evidence of workers’ compensation insurance or a Certificate of Election to Be Exempt from a subcontractor pursuant to Section 440.10(1)(c), F.S., such contractor shall obtain and provide to the Department, when requested, the evidence specified in subsections (2), (3), (4) or (5) herein. (Emphasis added). Rule 69L-6.032 sets forth the contractor requirements for obtaining evidence that the subcontractor possesses workers' compensation insurance. If a subcontractor is a client company of a leasing company, such as Emerald, rule 69L-6.032(3) specifies that the evidence shall be a Certificate of Liability Insurance ("Certificate"). According to the deposition testimony of Cappelleti (Exhibit 11, offered into evidence by the Department), when Emerald began providing services to Respondent in January 2014, Emerald represented that its workers were covered by a policy through an employee leasing company. In fact, a Certificate, obtained by Respondent sometime before it was requested by the Department, indicates that Emerald had coverage for the period of January 1, 2014, through December 31, 2014. This period encompasses the period of time for which the Department now seeks to penalize Respondent. Although Respondent obtained proof of coverage from Emerald, this occurred after Emerald was paid by Respondent for work occurring between January 1, 2014, and April 8, 2014. Ruzzo checked the CCAS and found that the Certificate for Emerald was inaccurate. Emerald apparently did not join the leasing company insurance policy until April 9, 2014. Although a contractor does not have a duty to further investigate when presented with what appears to be a valid Certificate, Ruzzo's calculations penalized Respondent for the period of non-compliance of Emerald because Respondent did not seek the proof of coverage until after Emerald's workers were already on the job for Respondent. The Department has demonstrated by clear and convincing evidence that Respondent employed Mr. Moscoso and Mr. Alvarado on September 26, 2014; that Respondent was engaged in the construction industry in Florida during the period of September 27, 2012, to September 26, 2014; and that Respondent failed to carry workers' compensation insurance to cover its employees as required by Florida's Workers' Compensation Law from September 27, 2012, to September 26, 2014. The Department has demonstrated by clear and convincing evidence that Ruzzo correctly utilized the methodology specified in section 440.107(7)(d)l. However, the Department failed to show by clear and convincing evidence that a penalty for Emerald's period of non-compliance, in the amount of $8,434.86, should be included in the total penalty assessment of $68,525.42.
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 determining that Respondent, KP Roofing Masters, LLC, violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage, and imposing upon it a total penalty assessment of $60,090.56. DONE AND ENTERED this 2nd day of March, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of March, 2016.
The Issue The issues in this case are whether Respondent failed to provide workers' compensation coverage, and, if so, what penalty should be imposed.
Findings Of Fact Abash is a Florida corporation engaged in the business of demolition. James McCarthy (Mr. McCarthy) is the president and only officer of Abash. The Department received a call from the City of Fort Myers that Abash was doing demolition work at the location of a former Publix on Cleveland Avenue in Fort Myers, Florida, and that it was believed that Abash did not have workers' compensation coverage. Carol Porter, the supervisor for District 7 of the Department, assigned Jack Gumph (Mr. Gumph), a compliance investigator for the Department, to investigate the matter. On September 10, 2010, Mr. Gumph went to 3255 South Cleveland Avenue, where the former Publix was located. On arriving at 9:55 a.m., he saw a large truck at the site with the name Abash on its side. He went inside the structure and observed two Abash employees at work with a lift truck. One employee, Vincent Canzone (Mr. Canzone), was taking down light fixtures, and another employee, Dan Myers (Mr. Myers), was operating the truck. Mr. Gumph consulted the Coverage and Compliance Automated System (CCAS) to determine if Abash had workers' compensation coverage. The database showed that Abash had had workers' compensation coverage effective June 2, 2010, but that coverage had been cancelled September 7, 2010. Mr. Gumph checked the Department of State records and learned that Mr. McCarthy was the sole officer and director of Abash. Mr. Gumph again checked CCAS and learned that there was no exemption from coverage for Mr. McCarthy.2/ Mr. Gumph checked the database for the National Council of Compensation Coverage and learned that Abash had had workers' compensation coverage with National Union Fire Insurance Company of Pittsburg, Pa. (National Union Fire), but that the coverage had been cancelled September 7, 2010. Mr. McCarthy had received a notice of cancellation from National Union Fire, but he thought that they would give Abash a grace period and allow Abash to pay for back-coverage as long as Abash did not have any claims for the period in which there was no coverage in place. He was looking into alternative methods of coverage, including using a payroll service. Mr. McCarthy conceded at the final hearing that if an employee had been injured during the non-covered period that National Union Fire would not have honored the claim. Abash did enter into an employee leasing contract with Southeast Personnel Leasing on September 10, 2010; however, no evidence was presented establishing the time of day that Abash entered into the employee leasing contract, and the contract with the employee leasing company does not specify the time of day when Abash entered into the contract. The list of employees covered by the employee leasing contract does not include Mr. Myers, who was working for Abash when Mr. Gumph visited the work site. Mr. Gumph issued a Stop-Work Order and posted it on the job site the day that he visited the site. He called Abash and spoke with a secretary who advised that Mr. McCarthy was not in the office. Mr. Gumph mailed a copy of the Stop-Work Order and a Request for Production of Business Records for Penalty Assessment Calculation to Abash on September 10, 2010. Abash received the documents on September 14, 2010. Abash produced copies of its businesses records to the Department. Lynne Murcia (Ms. Murcia), a penalty calculator for the Department, calculated the penalty assessment based on Abash's business records. She reviewed Abash's records for the past three years and determined that the period in which there was no workers' compensation coverage was September 7 to September 10, 2010. Abash's financial records did not reveal that Mr. Canzone and Mr. Myers had been employees for Abash other than the day that Mr. Gumph visited the job site. The financial records identified seven other employees during the period of non-coverage, but there were no transactions listed for these employees for September 10, 2010. Ms. Murcia assigned a class code to each employee based on the type of work they did. The class codes are specified in the Florida Contracting Classification Premium Adjustment Program, which is published in the Florida exception pages of the National Council on Compensation Insurance, Inc. (NCCI), Basic Manual (October 2005 ed.). For seven employees, Ms. Murcia assigned a class code of 5445, which is for the installation of wallboard within buildings. Although the work was demolition of wallboards, the same class code applies. For two employees, a class code of 8742 was assigned. This class code deals with outside sales. One employee was assigned class code 5221, which deals with concrete work. Mr. McCarthy agreed at the final hearing that the class codes assigned were appropriate. The gross payroll is determined for each employee and divided by 100.3/ The resulting quotient is multiplied by the approved minimum rate for the class code to determine the premium that should have been paid for coverage. Ms. Murcia listed the premium that should have been paid for the non-covered period for all Abash employees, which was $170.48. The premium was multiplied by 1.5 to determine the penalty assessment for each employee, which Ms. Murcia determined was $255.75; however, section 440.107(7)(d)1. provides that the minimum penalty that can be assessed is $1,000.00. Because the employee leasing contract provided coverage for Mr. Canzone on September 10, 2010, the penalty calculation should exclude Mr. Canzone. There was no coverage for Mr. Myers on September 10, 2010. The penalty assessment for Mr. Myers and Mr. Canzone was $16.88 each. The penalty assessments based on the remaining employees were for days other than September 10, 2010. Excluding Mr. Canzone from the penalty assessment results in a penalty assessment of $238.87. However, the statutory minimum assessment is $1,000.00. On September 15, 2010, Mr. McCarthy went to District 7's office, where he was personally served with the Stop-Work Order, and an Amended Order of Penalty Assessment, assessing the penalty at $1,000.00 Mr. McCarthy paid the penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Abash failed to secure workers' compensation coverage and assessing a penalty of $1,000.00, which has been paid by Abash. DONE AND ENTERED this 22nd day of July, 2011, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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, 2011.
The Issue The issues in this case are whether Respondent failed to secure workers' compensation coverage for its employees, as Petitioner alleges; and, if so, whether a penalty based upon the unpaid premium should be assessed against Respondent.
Findings Of Fact Petitioner Department of Financial Services, Division of Workers' Compensation ("DFS" or the "Department"), is the state agency responsible, among other things, for the enforcement of the workers' compensation insurance coverage requirements established in chapter 440, Florida Statutes. Respondent Ameribuild Construction Management, Inc. ("Ameribuild"), is a Florida corporation having its principal office in Boca Raton, Florida. Brandon L. Roth ("Roth") is the owner and qualifier, and a corporate officer, of Ameribuild. At all relevant times, Ameribuild was licensed to engage in construction activity in the state of Florida. In the instant case, DFS alleges that Ameribuild, as the general contractor for a construction project in Miami, failed to secure workers' compensation insurance for Roth and six employees (the "Workers") of CJ Meeko, LLC ("CJM"), a business which, DFS alleges, was a subcontractor of Ameribuild on the project in question. In its defense against this allegation of noncompliance, Ameribuild raises two disputes of material fact, asserting that, contrary to DFS's preliminary determinations, (i) Roth did not perform services for remuneration for Ameribuild, and (ii) CJM was not Ameribuild's subcontractor but was, rather, in a direct contractual relationship with Prestige Imports Outparcel LLC ("Prestige"), the owner of the project. Based on these exculpatory (but disputed) factual allegations, Ameribuild argues that, as a matter of law, neither Roth nor any of the Workers was a statutory "employee" (a term of art in this context) of Ameribuild, and thus, to the point, Ameribuild was not obligated to secure compensation for these individuals. Of the material facts in dispute, the question of whether CJM was a subcontractor of Ameribuild is by far the most significant, as the Workers account for $132,593.32 (or 96 percent) of the $137,719.54 penalty that DFS seeks to impose. The Department, which has the burden of proving the affirmative of this crucial question, relies largely (although not entirely) on the hearsay statements of Roth and Eugene Parker ("Parker"), the latter an employee of Ameribuild at all material times who was foreman or superintendent of the subject project. These statements are admissible as substantive evidence under the "admissions" exception to the hearsay rule.1/ DFS introduced the statements of Roth and Parker through its investigator, Anthony Vinci, to whom (according to Mr. Vinci) the statements were made. Mr. Vinci also testified about statements made to him by Jack Rosales, the owner of CJM (and one of the six Workers mentioned above). To the extent offered for the truth of the matters asserted, Mr. Rosales's out-of-court statements to Mr. Vinci constitute hearsay that does not fall within any recognized exception. The undersigned has not made any findings of fact based, in whole or in part, on Mr. Rosales's hearsay statements.2/ Roth and Mr. Rosales testified at hearing. Both men denied that CJM had been Ameribuild's subcontractor, contradicting the section 90.803, Florida Statutes, admissions to which Mr. Vinci attested. Because the resolution of this particular dispute turns on credibility determinations, the undersigned will discuss the testimony itself in somewhat more detail than is usually warranted. On May 31, 2017, Mr. Vinci performed a random worksite inspection at 15050 Biscayne Boulevard, North Miami Beach, Florida, where an automobile dealership was being constructed on a site that had been occupied by a drugstore. He immediately observed several men performing drywall work and debris removal. The first person to whom Mr. Vinci spoke was Mr. Rosales, who identified himself as the owner of CJM and confirmed that the five laborers presently at work were CJM's employees. Mr. Vinci immediately conducted on online database search and discovered that Mr. Rosales did not have an active exemption for himself or workers' compensation coverage for any of CJM's employees at the worksite. Parker, the Ameribuild employee, was present at the worksite, too, when Mr. Vinci arrived. As the project foreman, his duties included coordinating the job and making sure that the work flow continued. Parker told CJM's employees what to do. He opened and closed the worksite daily, coordinated all the subcontractors, and kept a log of persons entering and leaving the area. Parker, in short, was "in charge" on site. Mr. Vinci interviewed Parker, who acknowledged being an employee of Ameribuild and identified CJM as Ameribuild's subcontractor. Parker named Roth as Ameribuild's owner and gave Mr. Vinci Roth's name and number. Before calling Roth, Mr. Vinci went to his car and conducted an online search of Ameribuild's records. He learned that Ameribuild had workers' compensation coverage through a leasing company, which showed coverage for Parker. The leasing roster, however, did not cover Roth or any of CJM's employees. Mr. Vinci then got Roth on the phone to notify him that Ameribuild had not secured workers' compensation coverage for all of its employees and that, consequently, the Department would enforce compliance, including through the issuance of a Stop-Work Order ("SWO"). At hearing, Roth denied having spoken to Mr. Vinci at this time.3/ Mr. Vinci's contemporaneous notes, however, corroborate his recollection of the discussion at issue, and, equally important, the conversation fits comfortably into the undisputed chain of events, whereas its nonexistence would be harder, albeit not impossible, to reconcile with the parties' subsequent conduct. The undersigned finds that, in fact, Mr. Vinci and Roth spoke on the telephone on the afternoon of May 31, 2017. As recounted by Mr. Vinci, the ensuing discussion was, for the most part, about what you'd expect. After introducing himself, Mr. Vinci asked Roth about CJM and whether its Workers were covered. When Roth replied that Mr. Rosales had an exemption from workers' compensation, which he (Roth) had seen, Mr. Vinci informed him that, actually, Mr. Rosales did not have one. Asked whether he (Roth) had an exemption, Roth answered that he would need to check. In response to another of Mr. Vinci's inquiries, Roth told the investigator (according to the latter's contemporaneous notes) that he (Roth) did not receive any remuneration from Ameribuild. According to Mr. Vinci, whose testimony in this regard is hotly disputed, Roth stated that he had hired Mr. Rosales's company, CJM, as Ameribuild's subcontractor on the project in question. Armed with this information, DFS prepared a SWO for issuance to Ameribuild, which commanded Ameribuild to cease all business operations at the worksite and assessed a monetary penalty (exact amount to be determined) equal to two times the premium Ameribuild would have paid to provide the required coverage during the preceding two years. Mr. Vinci called Roth to tell him about the SWO and make arrangements for the service thereof. (Roth's denial of his participation in this conversation is rejected as unpersuasive.) Roth was informed of the requirements for obtaining a conditional release from the SWO so that Ameribuild could resume operations at the worksite pending a final release upon compliance and payment in full of the assessed penalty. Roth agreed to meet Mr. Vinci the following day at the Department's Miami office. That meeting took place as scheduled. Mr. Vinci personally served Roth with the SWO and a Request for Production of Business Records for Penalty Assessment Calculation ("BRR"). Roth then paid $1,000.00 towards the penalty, which had yet to be calculated, and delivered a signed "reduction-of-workforce" letter, i.e., a sworn statement, on Ameribuild letterhead, promising DFS that "Ameribuild Construction Management will no longer permit CJ Meeko LLC or his employees [to] work on the jobsite @ 15050 Biscayne Blvd., North Miami Beach, FL 33132 until CJ Meeko LLC is in compliance with Florida State Law." Upon receipt of Ameribuild's check and reduction-of-workforce letter, the Department executed an Agreed Order of Conditional Release from Stop-Work Order, which authorized Ameribuild to resume operations at the worksite. There is no evidence suggesting that, during this meeting on June 1, 2017, Mr. Vinci or anyone else interrogated Roth, who could have remained silent and refused to comment on DFS's allegations, given that it would be DFS's burden to prove the charges, were Ameribuild to request a hearing. Roth, however, volunteered his opinion that if CJM lacked coverage (as DFS alleged), then Mr. Rosales must have made an "honest mistake" because he (Roth) sincerely believed that Mr. Rosales had applied for and obtained an exemption. The point of this statement, obviously, was not to deny the violation, but to minimize it as having been neither knowing nor intentional. Roth, it appears, was offering up facts that he probably hoped would mitigate the penalty. Regardless, more telling is what Roth——in responding to the accusation that Ameribuild was responsible for its subcontractor's (CJM's) failure to secure compensation——did not say. If CJM really were not Ameribuild's subcontractor, it would be expected that Roth would protest the Department's misunderstanding of this basic fact, and state that, in fact, CJM was Prestige's contractor. While Roth's silence in this regard perhaps does not rise to the level of an evidentiary admission,4/ the undersigned finds that his failure then (or later) to inform the Department of the "true" contractual relationships is suspiciously inconsistent with Ameribuild's current litigating position. If Ameribuild did not have a contract with CJM, then Roth, if he were not going to keep quiet, should have been making that point early and often. In the months that followed, Ameribuild provided documents to DFS responsive to the BRR, which DFS deemed insufficient for purposes of determining Ameribuild's payroll for the audit period of June 1, 2015, through May 31, 2017. In such situations, where the records are insufficient to establish actual payroll, the Department is authorized to base its penalty assessment upon an "imputed payroll." Consequently, using the methodology specified in section 440.107(7)(d)1. and (e) and Florida Administrative Code Rule 69L-6.027, DFS determined (for the entire audit period) Ameribuild's imputed payroll, which is the compensation that Ameribuild is deemed to have paid the Workers and Roth. It is unnecessary in this case to make detailed findings regarding the assumptions behind Ameribuild's imputed payroll figures because Ameribuild does not dispute them or the amount of the resulting penalty ($137,719.54), which was set forth in an Amended Order of Penalty Assessment served on November 6, 2017. Rather, Ameribuild maintains that DFS has failed to prove the alleged violations, meaning there can be no penalty, which makes the imputed payroll irrelevant. If, on the other hand, Ameribuild were found to have violated a duty to secure compensation for Roth and Workers, which Ameribuild of course believes should not happen, then Ameribuild would concede that the imputed payroll and concomitant penalty are correct. As mentioned above, it is Ameribuild's contention that the Workers were not "employees" of Ameribuild for workers' compensation purposes because CJM was under contract, not to Ameribuild, but to the owner of the project, Prestige. Both Roth and Mr. Rosales testified about this purported contract; under the CJM-Prestige agreement as they described it,5/ the Workers might not have been Ameribuild's employees.6/ Ameribuild sought to introduce a copy of the contract as proof of the fact that CJM was Prestige's contractor. The Department objected because Ameribuild had not disclosed the contract as an exhibit until a few days before the hearing, long past the deadline established in the Order of Pre-hearing Instructions. Ameribuild could provide no explanation for the late disclosure. Wanting to avoid the exclusion of evidence that could be dispositive, but unwilling to countenance the prejudice DFS might suffer if the surprise exhibit were admitted, the undersigned ruled that the document would be received on the condition that the hearing be recessed for a reasonable, but brief, period so that DFS could depose the appropriate person(s) at Prestige about the purported CJM-Prestige agreement, and then supplement the record with the deposition(s). Ameribuild, however, elected to withdraw the exhibit to prevent the Department from obtaining Prestige's testimony about the alleged contract. Thus, Ameribuild neither offered (nor proffered) the purported CJM-Prestige agreement, which, accordingly, is not in the evidentiary record. The undersigned probably would be permitted to draw an adverse inference from Ameribuild's counterintuitive failure to introduce the written agreement, which was obviously available and within Ameribuild's immediate control, and which (if genuine) would be, if not dispositive, certainly persuasive exculpatory evidence directly rebutting the Department's case-in-chief. The undersigned reasonably could infer from the totality of the circumstances that Ameribuild had reason to believe Prestige would not recognize and authenticate the purported contract if asked about it under oath in deposition, which reason being (need it be said?) that the purported contract is a fake. The undersigned declines to draw such an inference. Instead, the undersigned finds that, without the contract as corroborating evidence, Ameribuild has failed to present proof sufficient to undermine the strength of the Department's prima facie case. DFS has carried its burden of proving, by clear and convincing evidence, that CJM was Ameribuild's subcontractor. On the question of whether Roth was an employee of Ameribuild for compensation purposes during the period when his name did not appear on the coverage roster, however, the undersigned finds that the Department failed to carry its burden of proof. Roth testified at hearing that he had received no remuneration from Ameribuild during the months in 2016 and 2017 when he was not included in the company's compensation coverage, which testimony was consistent with his prior statement to Mr. Vinci in this regard. Other documentation in evidence shows that in 2015, when Roth received remuneration from Ameribuild, he was also provided workers' compensation coverage, through South East Personnel, Inc., a leasing company. While the evidence fails clearly to establish that Roth did not receive remuneration from Ameribuild, it fails clearly and convincingly to prove that he did. It is determined, therefore, that Roth was not an uncovered employee during the audit period. The proposed penalty must be adjusted to remove the amount attributable to Roth——$5,126.22. Ameribuild's penalty for noncompliance, based on the Workers' imputed payroll, should be $132,593.32.
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 Ameribuild Construction Management, Inc., in violation of its obligation to secure workers' compensation and imposing a penalty of $132,593.32 for such noncompliance. DONE AND ENTERED this 6th day of September, 2018, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of September, 2018.
The Issue Whether Fantastic Construction of Daytona, Inc. (“Respondent”), failed to secure the payment of workers’ compensation coverage for its employees; and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (“Petitioner” or “Department”), correctly calculated the penalty to be assessed against Respondent.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440, Florida Statutes, that employers in Florida secure workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent is a corporation engaged in the construction industry with headquarters in Daytona Beach, Florida. On November 19, 2015, the Department’s compliance investigator, Scott Mohan, observed five individuals framing a single-family house at 173 Botefuhr Avenue in Daytona, Florida. Mr. Mohan interviewed the individuals he observed working at the jobsite and found they were working for Respondent on lease from Convergence Leasing (“Convergence”). Mr. Mohan contacted Convergence and found that all of the workers on the jobsite were employees of Convergence, except Scott Barenfanger. Mr. Mohan also confirmed that the workers’ compensation policy for Convergence employees was in effect. Mr. Mohan reviewed information in the Coverage and Compliance Automated System, or CCAS, for Respondent. CCAS indicated Respondent’s workers were covered for workers’ compensation by Convergence and that Respondent’s contract with Convergence was active. Mr. Mohan also confirmed, through CCAS, that Foster Coleman, Respondent’s president, had previously obtained an exemption from the workers’ compensation requirement, but that his exemption expired on July 18, 2015. Mr. Mohan then contacted Mr. Coleman via telephone and informed him that one of the workers on the jobsite was not on the active employee roster for Convergence, thus Respondent was not in compliance with the requirement to obtain workers’ compensation insurance for its employees. Mr. Coleman reported to the jobsite in response to Mr. Mohan’s phone call. Mr. Coleman admitted that Mr. Barenfanger was not on the Convergence employee leasing roster. Mr. Coleman subsequently obtained an application from Convergence for Mr. Barenfanger and delivered it to his residence. Mr. Mohan served Mr. Coleman at the jobsite with a Stop-Work Order and a Request for Production of Business Records for Penalty Assessment Calculation (“BRR”). In response to the BRR, Respondent provided to the Department business bank statements, check stubs, copies of checks, certificates of liability insurance for various suppliers and subcontractors, and an employee leasing roster for most of the audit period from November 20, 2013, to November 19, 2015.1/ Respondent did not produce any check stubs for November and December 2013. Mr. Coleman testified, credibly, that his bookkeeper during that time period did not keep accurate records. Mr. Coleman did produce his business bank statements and other records for that time period. Based on the review of initial records received, the Department calculated a penalty of $17,119.80 and issued an Amended Order of Penalty Assessment in that amount on February 18, 2016. On March 17, 2016, Respondent supplied the Department with additional records. Altogether, Respondent submitted over 400 pages of records to the Department. The majority of the records are copies of check stubs for checks issued on Respondent’s business bank account. The check stubs are in numerical order from 1349 to 1879, and none are missing. The check stubs were hand written by Mr. Coleman, who is 78 years old. Some of his writing on the check stubs is difficult to discern. On April 4, 2016, following review of additional records received, the Department issued a Second Amended Order of Penalty Assessment in the amount of $9,629.36. The Department assigned penalty auditor Sarah Beal to calculate the penalty assessed against Respondent. Identification of Employees Ms. Beal reviewed the business records produced by Respondent and identified Respondent’s uninsured employees first by filtering out payments made to compliant individuals and businesses, and payments made for non-labor costs. However, the evidence demonstrated that the Department included on its penalty calculation worksheet (“worksheet”) payments made to individuals who were not Respondent’s employees. Neal Noonan is an automobile mechanic. Mr. Noonan was neither an employee of, nor a subcontractor for, Respondent for any work performed by Respondent during the audit period. Mr. Noonan performed repairs on Mr. Coleman’s personal vehicles during the audit period. Checks issued to Mr. Noonan during the audit period were for work performed on Mr. Coleman’s personal vehicles. The Department’s worksheet included a “David Locte” with a period of noncompliance from June 19, 2014, through December 31, 2014. The basis for including Mr. Locte as an employee was a check stub written on December 10, 2014, to a business name that is almost indiscernible, but closely resembles “Liete & Locke” in the amount of $100. The memo reflects that the check was written for “architect plans.” Mr. Coleman recognized the worksheet entry of David Locte as pertaining to David Leete, an architect in Daytona. Mr. Leete has provided architectural services to Respondent off and on for roughly five years. Mr. Leete signs and seals plans for, among others, a draftsman named Dan Langley. Mr. Langley provides drawings and plans for Respondent’s projects. When Respondent submits plans to a local governing body which requires architectural drawings to accompany permit applications, Mr. Leete reviews and signs the plans. Mr. Leete was neither an employee of, nor a subcontractor for, Respondent during the audit period. The single payment made to Mr. Leete by Respondent during the audit period was for professional architectural services rendered. Mr. Langley was neither an employee of, nor a subcontractor for, Respondent during the audit period. Payments made to Mr. Langley during the audit period were for professional drafting services rendered. Among the names on the Department’s worksheet is R.W. Kicklighter. Mr. Kicklighter is an energy consultant whose office is located in the same building with Mr. Leete. Mr. Kicklighter prepares energy calculations, based on construction plans, to determine the capacity of heating and air-conditioning systems needed to serve the planned construction. Mr. Kicklighter was neither an employee of, nor a subcontractor for, Respondent during the audit period. Payments made to Mr. Kicklighter during the audit period were for professional services rendered. Respondent made a payment of $125 on September 15, 2014, to an entity known as Set Material. Set Material is a company that rents dumpsters for collection of concrete at demolition and reconstruction sites. Removal and disposal of the concrete from the jobsite is included within the rental price of the dumpster. The Department included on the worksheet an entry for “Let Malereal.” The evidence revealed the correct name is Set Material and no evidence was introduced regarding the existence of a person or entity known as Let Malereal. Set Material was neither an employee of, nor a subcontractor for, Respondent during the audit period. The single payment made to Set Material during the audit period was for dumpster rental. The Department’s worksheet contains an entry for “CTC” for the penalty period of January 1, 2014, through May 1, 2014. Respondent made a payment to “CTC” on April 11, 2014, in connection with a job referred to as “964 clubhouse.” The records show Respondent made payments to Gulfeagle Supply, Vern’s Insulation, John Wood, Bruce Bennett, and Ron Whaley in connection with the same job. At final hearing, Mr. Coleman had no recollection what CTC referred to. Mr. Coleman’s testimony was the only evidence introduced regarding identification of CTC. CTC could have been a vendor of equipment or supplies for the job, just as easily as an employee. The evidence is insufficient to support a finding that CTC was an employee of, or a subcontractor for, Respondent during the audit period. The check stub for check 1685 does not indicate to whom the $60 payment was made. The stub reads “yo for Doug.” The Department listed “Doug” as an employee on its worksheet and included the $60 as wages to “Doug” for purposes of calculating workers’ compensation premiums owed. At hearing, Mr. Coleman was unable to recall ever having employed anyone named Doug, and had no recollection regarding the January 7, 2015, payment. The evidence was insufficient to establish that “Doug” was either Respondent’s employee or subcontractor during the audit period. Ken’s Heating and Air was not an employee of, nor a subcontractor to, Respondent for any work undertaken by Respondent during the audit period. Ken’s Heating and Air conducted repairs on, and maintenance of, Mr. Coleman’s personal residence during the audit period. Checks issued to Ken’s Heating and Air during the audit period were payments for work performed at Mr. Coleman’s personal residence. Barry Smith is an electrical contractor. Mr. Smith was neither an employee of, nor subcontractor to, Respondent for any work performed by Respondent during the audit period. Mr. Smith did make repairs to the electrical system at Mr. Coleman’s personal residence during the audit period. Checks issued to Mr. Smith during the audit period were payments for work performed at Mr. Coleman’s personal residence. The remaining names listed on the Department’s penalty calculation worksheet were accurately included as Respondent’s employees.2/ Calculation of Payroll Mr. Coleman’s exemption certificate expired on July 18, 2015, approximately four months shy of the end of the audit period. Payments made by Respondent to Mr. Coleman during the time period for which he did not have a valid exemption (the penalty period) were deemed by the Department as wages paid to Mr. Coleman by Respondent. Respondent’s business records show seven checks written either to Mr. Coleman or to cash during that time period in the total amount of $3,116.52. The Department included that amount on the worksheet as wages paid to Mr. Coleman. Check 1873 was written to cash, but the check stub notes that the payment of $1,035.69 was made to Compliance Matters, Respondent’s payroll company. Check 1875 was written to cash, but the check stub notes that the payment of $500 was made to Daytona Landscaping. The evidence does not support a finding that checks 1873 and 1875 represented wages paid to Mr. Coleman. The correct amount attributable as wages paid to Mr. Coleman during the penalty period is $1,796.52. Respondent’s employees Tyler Eubler, Brian Karchalla, Keith Walsh, and John Strobel, were periodically paid by Respondent during the audit period in addition to their paychecks from Convergence. Mr. Coleman testified that the payments were advances on their wages. He explained that when working on a job out of town, the crew would arrive after Convergence had closed for the day, and Mr. Coleman would pay them cash and allow them to reimburse him from their paychecks the following day. Unfortunately for Respondent, the evidence did not support a finding that these employees reimbursed Mr. Coleman for the advances made. The Department correctly determined the payroll amount attributable to these employees. The Department attributed $945 in payroll to “James Sharer.” The Department offered no evidence regarding how they arrived at the name of James Sharer as Respondent’s employee or the basis for the payroll amount. James Shores worked off-and-on for Respondent. Mr. Coleman recognized the worksheet entry of “James Sharer” as a misspelling of Mr. Shores’ name. Respondent’s records show payments totaling $535 to Mr. Shores during the audit period. The correct amount of payroll attributable to Mr. Shores from Respondent during the audit period is $535. The Department included wages totaling $10,098.84 to Mr. Barenfanger during the period of noncompliance from November 20, 2013, to December 31, 2013. The Department imputed the average weekly wage to Mr. Barenfanger for that period because, in the Department’s estimation, Respondent did not produce records sufficient to establish payroll for those two months in 2013. See § 440.107(7)(e), Fla. Stat. The voluminous records produced by Respondent evidenced not a single payment made to Mr. Barenfanger between January 2014, and November 19, 2015. Even if Mr. Coleman had not testified that he did not know or employ Mr. Barenfanger before November 19, 2015, it would be ludicrous to find that he worked weekly for Respondent during the last two months of 2013. Mr. Coleman testified, credibly, that Mr. Barenfanger worked the jobsite for Respondent on November 18 and 19, 2015, but not prior to those dates. The evidence does not support a finding that the worksheet entry for Mr. Barenfanger in the amount of $10,098.84 accurately represents wages attributable to Mr. Barenfanger during the period of noncompliance. The Department’s worksheet includes an employee by the name of Ren W. Raly for the period of noncompliance from January 1, 2014, through May 1, 2014, and a Ronnie Whaley for the period of noncompliance from June 19, 2014 through December 31, 2014. Mr. Coleman testified that he never had an employee by the name of Raly and he assumed the first entry was a misspelling of Ronnie Whaley’s name. Mr. Coleman testified that Ronnie Whaley was a concrete finisher and brick layer who did work for Respondent. Mr. Coleman testified that he submitted to the Department a copy of Mr. Whaley’s “workers’ comp exempt,” but that they must not have accepted it. The records submitted to the Department by Respondent do not contain any exemption certificate for Ronnie Whaley. However, in the records submitted to the Department from Respondent is a certificate of liability insurance dated February 25, 2014, showing workers’ compensation and liability coverage issued to Direct HR Services, Inc., from Alliance Insurance Solutions, LLC. The certificate plainly states that coverage is provided for “all leased employees, but not subcontractors, of Ronald Whaley Masonry.” The certificate shows coverage in effect from February 1, 2013, through February 1, 2015. Petitioner did not challenge the reliability of the certificate or otherwise object to its admissibility.3/ In fact, the document was moved into evidence as Petitioner’s Exhibit P1. Petitioner offered no testimony regarding whether the certificate was insufficient proof of coverage for Mr. Whaley during the periods of noncompliance listed on the worksheet. The evidence does not support a finding that Mr. Whaley was an uninsured individual during the periods of noncompliance. Thus, the wages attributed to Mr. Whaley by the Department were incorrect. Ms. Beal assigned the class code 5645—Carpentry to the individuals correctly identified as Respondent’s uninsured employees because this code matched the description of the job being performed by the workers on the jobsite the day of the inspection. Ms. Beal correctly utilized the corresponding approved manual rates for the carpentry classification code and the related periods of noncompliance to determine the gross payroll to the individuals correctly included as Respondent’s uninsured employees. Calculation of Penalty For the employees correctly included as uninsured employees, Ms. Beal applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7)(d)1. and Florida Administrative Code Rules 69L-6.027 and 69L-6.028 to determine the penalty to be imposed. For the individuals correctly included as uninsured employees, and for whom the correct payroll was calculated, the correct penalty amount is $2,590.06. The correct penalty for payments made to Mr. Coleman during the penalty period is $571.81. The correct penalty for payments made to James Shores is $170.24. The correct total penalty to be assessed against Respondent is $3,332.11. The Department demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry in Florida during the audit period and that Respondent failed to carry workers’ compensation insurance for its employees at times during the audit period as required by Florida’s workers’ compensation law. The Department demonstrated by clear and convincing evidence that Respondent employed the employees named on the Second Amended Order of Penalty Assessment, with the exception of Ken’s Heating and Air, CTC, Don Langly, Ren W. Raly, R.W. Kicklighter, Dave Locte, Let Malereal, Ronnie Whaley, and “Doug.” The Department did not demonstrate by clear and convincing evidence that it correctly calculated the gross payroll attributable to Mr. Coleman and Mr. Shores. The Department demonstrated by clear and convincing evidence that Ms. Beal correctly utilized the methodology specified in section 440.107(7)(d)1. to determine the appropriate penalty for each of Respondent’s uninsured employees. The Department did not demonstrate by clear and convincing evidence that the correct penalty is $9,629.36. The evidence demonstrated that the correct penalty to be assessed against Respondent for failure to provide workers’ compensation insurance for its employees during the audit period is $3,332.11.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers’ Compensation, finding that Fantastic Construction of Daytona, Inc., violated the workers’ compensation insurance law and assessing a penalty of $3,332.11. DONE AND ENTERED this 18th day of August, 2016, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of August, 2016.
The Issue The Principal issues in this matter are whether the Department of Financial Services, Division of Workers’ Compensation acted appropriately and within its’ statutory authority when it entered the Second Amended Order of Penalty Assessment and Stop-Work Order against the Petitioner for failing to secure workers’ compensation insurance for their employees when 4 tequired by Florida law, and whether any provisions of the Florida Workers’ Compensation Law provide for the mitigation or rescission of penalties against the Petitioner. 1 PRELIMINARY STATEMENT. This proceeding arose out of the requirement in Florida workers’ compensation law that employers must secure the payment of workers’ compensation insurance for the protection of their employees. The Petitioner in this matter is a Florida corporation currently doing business as a neighborhood food and convenience store in Fort Walton Beach, Florida. On April 26, 2011, Larry Eaton, a Compliance Investigator for the Florida Department of Financial Services, Division of Workers’ Compensation conducted a random job site workers’ compensation compliance investigation at the Petitioner’s place of business. After concluding the Petitioner had four (4) employees and did not maintain workers’ compensation insurance, the Department issued a Stop-Work Order and delivered a request for the production of business records. The Petitioner and their accountant cooperated with the Department’s investigation and provided records that were used to determine the mandated statutory monetary penalty for failing to maintain workers’ compensation insurance. The Petitioner then executed a penalty payment plan with the Department and also came into compliance with Florida’s Workers’ Compensation Law. The Petitioner has consistently objected to the Departments mandated statutory penalty as excessive, in violation of both the Florida and Federal Constitution, and contrary to the “principle of proportionality”. The Department originally referred this matter to this Hearing Officer for a F.S. 120.57(2) informal hearing, but that matter was closed when the Parties agreed a disputed issue of fact existed. This matter was then forwarded to the Florida Division of Administrative Hearings to hold a formal hearing pursuant to F.S. 120.57(1), and after discovery, the Administrative Law Judge closed his file after a finding there were no disputed issues of material fact. This matter was again assigned to this Hearing Officer to hold a telephonic informal hearing pursuant to Section 120.57(2), Florida Statutes, which occurred on November 1, 2011. Both Parties timely submitted Proposed Recommended Orders. EXHIBITS AND WITNESSES The Department submitted Eleven (11) Exhibits that are admitted into evidence without objection and include the following: Respondents Exhibit |: A copy of the Petitioner’s corporate status as contained within the Florida Secretary of State Records, dated April 26, 2010, the same day as the Departments random workers’ compliance Investigation. Respondent’s Exhibit 2: A two (2) page April 26, 2010, printout from the Department’s Financial Services Coverage and Compliance Automated System (“CCAS”) database for Mubarak Trading Corporation, Inc. teflecting no evidence of workers’ compensation insurance coverage and no exemptions from coverage. Respondent’s Exhibit 3: A copy of the Department’s hand delivered April 26, 2010 Stop- Work Order. Respondents Exhibit 4: A copy of the Department’s hand delivered April 26, 2011, Request for Production of Business Records for Penalty Assessment Calculation. Respondents Exhibit 5: A twenty six (26) page composite exhibit of the Petitioner’s payroll and -business records provided to the Department’s workers’ compensation compliance investigator. Respondent’s Exhibit 6: A copy of the Department’s May 12, 2010 Amended Order of Penalty Assessment hand delivered to the Petitioner on May 13, 2010. Respondent’s Exhibit 7: A copy of the Department’s’ Payment Agreement Schedule for Periodic Payment of Penalty executed by the Petitioner on May 13, Respondent's Exhibit 8: Respondent’s Exhibit 9: Respondent’s Exhibit 10: Respondent’s Exhibit 11: 2010, wherein the Petitioner paid Eighteen Hundred ($1,800.00) dollars as a ten percent (10%) down-payment on the Department’s Administrative Penalty. A copy of the Department’s Order of Conditional Release From Stop-Work Order dated May 13, 2010, that was entered after the execution and payment reflected in Respondent's Exhibit 7. A copy of the Department’s Second Amended Order of Penalty Assessinent dated February 2, 2011. A five (5) page excerpt from the National Council on Compensation Insurance, Inc. (“NCCI”) Scopes Manual description of Classification Code 8017 (Retail Store). A forty-nine (49) page excerpt of NCCI approved Manual Rates for Classification Code 8017, used in the calculation of the Department’s May 12, 2010, Amended Order for Penalty Assessment and February 2, 2011, Second Amended Order of Penalty Assessment. The Petitioner submitted two (2) exhibits that were admitted into evidence and consist of the following: Petitioner’s Exhibit 1: Petitioner’s Exhibit 2. A two (2) page copy of the Petitioner’s timely filed request for an informal proceeding to contest his administrative penalty, pursuant to Section 120.57(2), Florida Statutes, A four (4) page May 5, 2011, letter of tax representation from Mr. Chris Marsh and Mr. James Marsh, who provide accounting and tax services for and on behalf of Mubarak ‘Trading Corporation, Inc. The Department called two (2) witnesses to testify at the telephonic informal hearing, including Mr. Larry Eaton, a workers’ compensation compliance investigator for the Department, and Mrs. Michelle Newcomer, a workers’ compensation penalty calculator for the Department. The Petitioner offered the testimony of its’ President Ziad (“Mike”) Mubarak, as well as their tax advisors, Mr. Christopher Marsh, and Mr. James Marsh. Both Parties submitted Proposed Recommended Orders. FINDINGS OF FACT. Pursuant to Section 440.107, Florida Statutes, the Respondent is the state agency tesponsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation for the benefit of their employees. The Petitioner is a Florida corporation that first registered with the Florida Department of State on July 15, 1993, and was in good-standing on April 26, 2010, the date on which the Department conducted their random workers’ compensation compliance investigation. (Respondent’s Exhibit 1.) On April 26, 2011, the Respondents Workers’ Compensation Compliance Investigator, Mr. Larry Eaton, conducted a random compliance investigation at the Principal Business Address of Mubarak Trading Corporation, Inc., in Fort Walton Beach, Florida. (Respondent’s Exhibit’s 2, 3, and 4.) Upon entering the Petitioner’s work-place on April 26, 2011, the Department’s compliance investigator conducted a field interview, as well as a database search to confirm the existence of four (4) employees of Mubarak Trading Corporation, Inc., and the lack of either workers’ compensation insurance or exemptions from workers? compensation insurance coverage. (Respondent’s Exhibits 2, 3, and 4.) Upon finding four (4) employees and no workers’ compensation insurance coverage for those employees, the Department’s compliance investigator hand delivered an April 26, 2010, Stop Work Order, as well as a Request for Production of Business Records for Penalty Assessment Calculation seeking payroll information for the past three (3) years. (Respondent’s Exhibits 3 and 4.) The Petitioner provided business records to the Department in response to their Request, and based on those records, an Amended Order of Penalty Assessment was hand delivered to the Petitioner on May 13, 2010, in the amount of Seventeen Thousand Seven Hundred Ninety One and 76/100 Dollars ($17,791.76). (Respondent’s Exhibits 5 and 6.) Under protest, and in the effort to remove the Department’s April 26, 2010, Stop Work Order, the Petitioner executed a Payment Agreement Schedule for Periodic Payment of Penalty on May 13, 2010, paying Eighteen Hundred Dollars ($1,800.00) to the Department as a ten percent (10%) down-payment of the administrative penalty. (Respondent’s Exhibit 7.) The Petitioner did not purchase a policy of workers’ compensation insurance, but instead the Corporation’s President obtained an exemption from the requirement of being covered by workers’ compensation insurance. With only three (3) remaining non- exempt employees, Florida law does not require an underlying worker’s compensation insurance policy, and Mubarak Trading Corporation, Inc., was no longer in violation of Florida Workers’ Compensation Law. , Mrs. Michelle Newcomb, Penalty Calculator for the Florida Department of Financial Services, Division of Workers’ Compensation, Bureau of Compliance, was assigned the task of calculating the statutory penalty to be assessed against Mubarak Trading Corporation, Inc., for failing to secure workers’ compensation insurance. Utilizing NCCI Class Code 8017 for retail stores, the appropriate NCCI premium pages for Class Code 8017, and the documentation provided by the Petitioner, the Department calculated the mandated statutory penalty of Seventeen Thousand Seven Hundred Ninety One and 76/100 ($17,791.76) in their May 12, 2010, Amended Order for Penalty Assessment (Respondent’s Exhibit 6, 10 and 11.) The Department’s administrative penalty was ultimately adjusted downward to Sixteen Thousand, Four Hundred Twenty Nine and 44/100 Dollars ($16,429.76), as reflected in the Department’s February 2, 2011, Second Amended Order of Penalty Assessment. (Respondents Exhibit 9.) There are no disputed issues of material fact in this matter. The Petitioner’s Proposed Recommended Order acknowledges “[t]he calculation of the Section 440.107(7)(d) penalty is not in question...” The Petitioner has consistently objected to the “excessive” amount of the Department’s penalty, challenged the Department’s authority to assess unconstitutional penalties, and argues the penalty assessed violates the “principle of proportionality.”
Conclusions Christopher O. Marsh, Econotax 139 Beal Parkway SE, Ste. 102 ne Fort Walton Beach, Florida 32548 f Representative for Mubarak Trading Corp, Inc. Jamila Georgette Gooden, Esq. Florida Department of Financial Services Division of Legal Services Tallahassee, Florida 32399-4429 Attorney for the Florida Department of Financial Services, Division of Workers’ Compensation
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that a Final Order be entered affirming the Division of Workers’ Compensation Second Amended Order of Penalty Assessment in the amount of Sixteen Thousand Four Hundred Twenty Nine and 44/100 Dollars ($16, 429.44). Respectfully submitted this 19" day of December, 2011. Department of Financial Services 3700 Lifford Circle Tallahassee, Florida 32309 Phone: (850)668-9820 Fax: (850)668-9825 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the above and foregoing Recommended Order has been provided by US Mail to: Mr. Christopher Marsh, Econotax, on behalf of Mubarak Trading Corporation, Inc., 139 Deal Parkway, SE, Suite 102, Fort Walton Beach, Florida 32548 and via hand delivery in the interests of judicial economy to Alexander Brick, Esq. Department of Financial Services, Division of Legal Services, 200 East Gaines Street, Tallahassee, FL 32399-4429 this 19" day of December, 2011. Alan J. ~ 2h -13-
