The Issue The issue is whether the Amended Order of Penalty Assessment issued to Respondent, Dave's Tractor, LLC, on August 27, 2018, is correct.
Findings Of Fact Respondent is a limited liability company engaged in the construction business with offices at 434 Skinner Boulevard, Suite 105, Dunedin, Florida. It uses tractors and a grading process to prepare land prior to building construction for commercial clients. Its managing member is David Richardson. The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. To enforce this requirement, the Department conducts random inspections of job sites and investigates complaints concerning potential violations of workers' compensation rules. On May 25, 2018, Christina Brigantty, a Department investigator, conducted a routine inspection of a job site at 3691 Tampa Road, Oldsmar, Florida. She observed two men working in a ditch, one man mixing cement, the other man driving a tractor. Investigator Brigantty observed four individuals at the job site, including the two working in the ditch: Dylan Richardson; Ismael Demillon; Javier Mastica; and Jorge Duran. She was informed by the individuals that they worked for Richardson Trailers, LLC. Investigator Brigantty called Mr. Ramsey, corporate officer for Respondent, who confirmed that Respondent hired Richardson Trailers, LLC, as a subcontractor. She later confirmed through discussions with Dylan Richardson and the Coverage and Compliance Automated System that Richardson Trailers, LLC, had no workers' compensation insurance on its employees. The parties have stipulated that at the time of the inspection, Respondent had not secured workers' compensation for any of the four individuals observed on the job site. Investigator Brigantty received approval from her supervisor to issue Respondent a Stop-Work Order and Request for Business Records for Penalty Calculation (BRR). These papers were served on Respondent on June 30, 2018. The BRR requested numerous types of business records for the period May 26, 2016, through May 25, 2018, including business tax receipts (occupational licenses), trade licenses or certifications, and competency cards held by Respondent or any of its principals; payroll documents (time sheets, time cards, attendance records, earnings records, check stubs, and payroll summaries for both individual employees and aggregate payrolls, and federal income tax documents reflecting the amount of remuneration paid or payable to each employee, including cash); and account documents including all business check journals and statements, which would include cleared checks for all open and/or closed business accounts established by the employer. Respondent failed to provide any business records in response to the BRR to determine Respondent's payroll for the audit review period. Therefore, the Department proceeded to compute a penalty based on imputed payroll in accordance with section 440.107(7)(e), Florida Statutes. This formula produced a penalty assessment of $165,654.10. On August 27, 2018, the Department served Respondent with an Amended Order of Penalty Assessment totaling $165,654.10. Pursuant to Florida Administrative Code Rule 69L-6.028(4), the Department also gave Respondent 20 business days in which to provide business records that would confirm Respondent's actual payroll during the two-year review period. This meant the records were due by September 25, 2018. A final hearing was scheduled initially for January 24, 2019. By agreement of the parties, on January 4, 2019, the case was rescheduled to March 15, 2019. One ground for granting a continuance was that the parties were "waiting on outstanding discovery that is being located and is necessary for an amicable resolution," presumably referring to items listed in the BRR. The final hearing was conducted on March 15, 2019, or almost seven months after the Amended Order of Penalty Assessment was issued. A week before the final hearing, Respondent began providing business records to the Department, including bank statements and checks on March 8, 2019, and a general ledger on March 13, 2019. Given the time constraints, they were not reviewed by the auditor until the day before the final hearing. The auditor conceded at hearing that these records would result in a "significantly lower" penalty, and they were sufficient to recalculate the penalty. Even so, at this late date, the Department refuses to recalculate the assessment. Respondent's principal, Mr. Richardson, testified that he has "no way to pay" the penalty, it will force him out of business, and he will be required to terminate his employees. Mr. Richardson also testified that he requested the records from the bank on "numerous occasions," but the bank refused to provide them directly to the Department or referred him to other branch offices. However, bank records are not the only way an employer can demonstrate the amount of payroll. This also can be established by business taxes or other records described in the BRR. Mr. Richardson denied knowing that business taxes are an option if bank records are unavailable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order finding that Respondent violated the workers' compensation laws by failing to secure and maintain required workers' compensation insurance for its employees, and imposing a penalty of $165,654.10. DONE AND ENTERED this 3rd day of May, 2019, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of May, 2019. COPIES FURNISHED: Steven R. Hart, Qualified Representative Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Kyle Christopher, Esquire Department of Financial Services Hartman Building 2012 Capital Circle Southeast Tallahassee, Florida 32399 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed) Adrian Shawn Middleton, Esquire Middleton & Middleton, P.A. 1469 Market Street Tallahassee, Florida 32312-1726 (eServed)
Findings Of Fact 10. The factual allegations contained in the Stop-Work Order and Order of Penalty Assessment issued on February 17, 2009, the Amended Order of Penalty Assessment issued on May 19, 2009, and the 2nd Amended Order of Penalty Assessment issued on June 5, 2009, which are fully incorporated herein by reference, are hereby adopted as the Department’s Findings of Fact in this case.
The Issue The issue in this case is whether Elite Restoration and Construction, LLC (Respondent), violated the provisions of chapter 440, Florida Statutes,1/ by failing to secure the payment of workers’ compensation, as alleged in the Stop-Work Order and Second Amended Order of Penalty Assessment; and, if so, what is the appropriate penalty.
Findings Of Fact The Department is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees and corporate officers. Respondent is an active Florida corporation that was formed on August 28, 2009, with a principal address of 7185 West Village Drive, Homosassa, Florida 34446. Respondent was engaged in business operations in the state of Florida during the entire period of November 2, 2014, to November 1, 2016. Brian Johnson (Respondent’s owner or Mr. Johnson) is Respondent's sole shareholder, owning 100 percent of the stock. The Department's investigator, Michael Robinson, commenced a random worksite compliance investigation on November 1, 2016, at a gas station at 970 Atlantic Boulevard, Jacksonville, Florida 32225. He observed Respondent's owner, Mr. Johnson, and three others, Tim Neeld, Derrick Windier, and James Ingash, painting a metal canopy covering the gas pumps. Mr. Johnson told the investigator that his company, Elite Restoration & Construction, LLC, was a subcontractor for Aluminum Plus of DeLand, Florida. By searching the Division's Coverage and Compliance Automated System, the investigator determined that Brian Johnson obtained a workers' compensation exemption on October 12, 2016, or 20 days prior to the investigation, and further determined that an employee leasing contract previously held by Respondent terminated on January 15, 2015, which is more than nine months prior to the investigation. Mr. Johnson confirmed that Respondent had an exemption for himself, effective October 12, 2016, but did not have any workers' compensation insurance for its employees. On November 1, 2016, after consulting with a supervisor, the Department's investigator issued the Stop-Work Order, which was posted at Respondent's worksite and personally served upon Respondent’s owner. On the same day, the investigator also personally served the Request for Production, which requested business records to determine Respondent's payroll during the two-year penalty period proscribed by section 440.107(7)(d)1., which in this case is from November 2, 2014, to November 1, 2016. The Request for Production explicitly states that the requested records must be provided within 10 business days from receipt of the request. Respondent obtained an Agreed Order of Conditional Release from the Stop-Work Order on November 8, 2016, by terminating the three workers observed during the compliance investigation who did not have workers’ compensation coverage and paying the Department a $1,000 down payment toward the penalty that would be calculated in this case. Respondent produced business records for penalty calculation on November 17, 2016, and February 28, 2017, which is beyond the 10-day time period required by the Request for Production.2/ The Department's penalty auditor, Lynne Murcia, used those records to calculate a $21,475.30 penalty for failing to comply with the workers' compensation insurance requirements of chapter 440. On April 20, 2017, when Respondent’s owner came to the Department’s Jacksonville office, he was personally served with the Amended Penalty and advised of his right to seek administrative review of the Stop-Work Order and Amended Penalty. Mr. Johnson filed a petition for hearing on behalf of Respondent on May 5, 2017, stating that the penalty calculated was wrong because it included income earned in states other than Florida. Respondent produced additional business records on May 17, August 21, and August 31, 2017, for the purpose of demonstrating that a portion of his company’s payroll was derived from work completed at worksites outside of Florida, and arguing that the out-of-state payroll should not be included in the penalty calculation. The invoices showed $182,056.78 in total income, consisting of $77,268 from 14 jobs in Florida, and $104,788.60 for 14 jobs outside of the State of Florida. Upon initial review, the Department’s auditor declined to make any adjustments because the invoices did not provide information showing earnings of specific employees for jobs outside of Florida. Thereafter, Mr. Johnson produced additional records that allowed the Department’s auditor to trace out-of-state employment to transactions in Respondent’s general ledger. The Department's auditor reviewed Respondent's additional records and removed out-of-state payroll and per diem payments. In accordance with that review, the Department issued the 2nd Amended Penalty which reduced the penalty to $16,671.14. The 2nd Amended Penalty also reduced the 2016 payroll attributed to Respondent's owner. Respondent was an "employer" in the state of Florida, as that term is defined in section 440.02(16), from November 2, 2014, to November 1, 2016. Respondent did not secure the payment of workers' compensation insurance coverage, nor have others secured the payment of workers' compensation insurance coverage for the employees listed on the penalty worksheet of the 2nd Amended Penalty during the periods of noncompliance listed on the penalty worksheet. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty had a valid Florida workers' compensation coverage exemption during the periods of noncompliance listed on the penalty worksheet. In the past, Respondent had an employee leasing contract with Southeast Personnel Leasing, Inc. That contract was terminated on January 15, 2015, due to the leasing company’s concerns about out-of-state employment that would not be covered by the leasing company's workers' compensation insurance. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were "independent contractors" as that term is defined in section 440.02(15)(d)1. None of the employees listed on the penalty worksheet of the 2nd Amended Penalty were employees of a temporary labor company. Employees on the penalty worksheet of the 2nd Amended Penalty are correctly classified under Class Code 5474, painting, as defined in the "Scopes Manual" published by the National Council on Compensation Insurance, Inc. (NCCI), and adopted in Florida Administrative Code Rule 69L-6.021(2)(jj). The approved manual rates used in the penalty worksheet of the 2nd Amended Penalty, as defined by the NCCI Scopes Manual and adopted by the Office of Insurance Regulation, are the correct manual rates for the corresponding periods of noncompliance listed on the penalty worksheet. In calculating the 2nd Amended Penalty, the Department’s auditor used the worksheet required by rule 69L-6.027, along with Respondent’s bank statements, check images, general ledger, and tax returns filed with the Internal Revenue Service. The auditor capped Respondent’s owner’s pay for that portion of 2014 falling within the penalty period because his salary and dividend totaling $73,484 in 2014 exceeded the statewide average of $862.51 per week or $44,850.52 per year. She also adjusted the period of noncompliance for Mr. Johnson, pursuant to rule 69L-6.028(2), because he obtained an exemption from Florida’s Workers’ Compensation Law on October 12, 2016. The auditor explained that she used Respondent’s tax returns for 2014 and 2015 because she believed they were the most reliable indication of salaries and wages, officer compensation, and payroll for outside services and subcontractors. She further explained that she used Respondent’s tax returns and general ledger as the most accurate sources for determining payroll for 2016. The auditor’s explanation is reasonable and credited. Mr. Johnson questioned the auditor’s method of determining payroll and offered alternative methods using spreadsheets he created to identify what he called “member draws” and other summaries. The invoices provided by Respondent to the Department, however, do not match the summaries; and Respondent’s method of determining payroll, when compared to the method utilized by the Department, is not accurate or reliable. The auditor’s method reflected in the 2nd Amended Penalty appropriately applied approved manual rates corresponding to Class Code 5474, painting, to determine the evaded workers’ compensation insurance premium. Then, the evaded premium was properly multiplied by two in accordance with section 440.107(7)(d)1.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order, consistent with this Recommended Order, upholding the Stop-Work Order and imposing the penalty set forth in the 2nd Amended Order of Penalty Assessment against Elite Restoration and Construction, LLC. DONE AND ENTERED this 20th day of February, 2018, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of February, 2018.
The Issue The issue in this case is whether the Respondent should be assessed a penalty for an alleged failure to obtain workers’ compensation, as charged in a Stop-Work Order and Amended Order of Penalty Assessment.
Findings Of Fact On March 3, 2015, Kirk Glover, an investigator employed by the Petitioner, observed two men who appeared to him to be installing soffits on a home at 8905 Dove Valley Way in the Champions Gate residential development near Davenport, Florida (the worksite). The two men were the Respondent, Lee Roy Lamond Sizemore, and his son, Chris Sizemore. The investigator asked the Respondent for the name of his company. The Respondent answered that he had not established his company, which was to be named “Lee’s Screen and Repairs.” The investigator then asked the Respondent if he had workers’ compensation coverage or an exemption or exclusion from the requirement to have coverage. The Respondent answered, no. The investigator verified this information and concluded that the Respondent was in violation. The investigator asked the Respondent to provide business records to facilitate the computation of the appropriate penalty. In response, the Respondent provided all the records he had for 2015, which consisted of bank statements on a personal account he shared with his wife, and their joint income tax returns for 2013 and 2014. The bank statements did not reflect any business activity. The 2014 tax return indicated that the Respondent was self-employed in construction but had no income for that year. The 2013 tax return indicated that the Respondent was self-employed selling and installing pool enclosures and had gross income of $6,264 that year. Based on the information provided by the Respondent, the Petitioner calculated a penalty of $11,121.16. The calculated penalty included $1,633.84 for the Respondent for the period from July 1 to December 31, 2013, based on the tax return for 2013. It also included $4,743.66 each for the Respondent and his son for the period from January 1 to March 3, 2015; those amounts were based on income imputed to them because the records provided for that period were deemed insufficient. The Respondent did not dispute the penalty calculation, assuming that workers’ compensation coverage was required and that penalties were owed. However, the evidence was not clear and convincing that coverage was required for either the Respondent or his son in 2015. The Respondent testified that he was in the process of establishing his business under the name of Lee’s Screen and Repairs on March 3, 2015. Up to and including that day, he was self-employed, but there was no clear and convincing evidence that he or his son had worked or had any income in 2015. The Respondent testified that his son had been released from prison in 2014, was not employed, and needed money. The Respondent brought his son to the worksite on March 3, 2015, hoping that the contractor on the job would hire him and his son to do soffit and fascia work. He had not yet seen the contractor when the Petitioner’s investigator arrived, and neither he nor his son had any agreement with the contractor to begin work or be paid. There was no clear and convincing evidence that there was any agreement by anyone to pay either the Respondent or his son for any work on March 3, 2015, or at any other time in 2015. The Petitioner did not contradict the Respondent’s testimony. In this case, the absence of business records for 2015 is evidence that no business was conducted that year, consistent with the Respondent’s testimony, and does not support the imputation of income and assessment of a penalty for 2015.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, enter a final order imposing a penalty against the Respondent in the amount of $1,633.84 for 2013, but no penalty for 2014 or 2015. DONE AND ENTERED this 20th day of November, 2015, in Tallahassee, Leon County, Florida. S J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of November, 2015. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Lee Roy Sizemore 9728 Piney Port Circle Orlando, Florida 32825 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
