The Issue Whether Respondent violated the provisions of chapter 440, Florida Statutes (2016),1/ by failing to secure the payment of workers’ compensation coverage, as alleged in the Third Amended Order of Penalty Assessment; and, if so, what penalty is appropriate.
Findings Of Fact Parties. The Department is responsible for enforcing the requirements of chapter 440, which mandate employers in Florida secure the payment of workers’ compensation insurance to cover their employees in case of workplace injuries. § 440.107, Fla. Stat. ASAP Flooring is owned and operated by Mr. Reinartsen; it has been an active corporation since 2006. ASAP Flooring provides flooring, painting and drywall services for construction projects. Ms. Brigantty is a Department compliance investigator. Her job is to ensure compliance by employers in her district with the workers’ compensation insurance regulations. Her job duties include conducting investigations triggered either through a report to the Department of non-compliance or through random inspections of workplaces and jobsites. As part of her investigative duties she conducts employer and employee interviews, collects financial documentation, and researches various data banks for corporate and workers’ compensation status. Department’s Investigation and Assessment. On October 24, 2016, Ms. Brigantty was driving around Pinellas County as part of her work duties. She stopped to conduct a random check at a residential construction site located at 3583 Douglas Place, Palm Harbor, Florida 34683 (“Jobsite”). At the Jobsite, Ms. Brigantty observed two men -- later identified as Eric Reinartsen and Wallace Humbert -- preparing and installing floors. After identifying herself as a compliance officer and interviewing them, she discovered Mr. Reinartsen was the owner of ASAP Flooring, and Mr. Humbert was an ASAP Flooring employee. Mr. Reinartsen admitted ASAP Flooring did not have workers’ compensation. At the time, he believed ASAP Flooring was exempt from the workers’ compensation insurance requirements due to his role as a corporate officer and because it only had one employee. During the initial interview, Ms. Brigantty learned Mr. Humbert had worked for ASAP Flooring for four or five months and was paid a flat fee per job. After meeting with Mr. Reinartsen, Ms. Brigantty checked the Florida Department of State, Division of Corporations website to confirm Respondent’s status as an active corporation, and that Mr. Reinartsen was its only officer. Mr. Brigantty then used the Department’s database, Coverage and Compliance Automated System (“CCAS”), which contained information on employers and their workers’ compensation status and any exemptions. According to CCAS, at the time of Ms. Brigantty’s inspection, ASAP Flooring had no workers’ compensation insurance. CCAS also reflected Respondent had an exemption from the workers’ compensation insurance requirements for Mr. Reinartsen because he was its sole corporate officer, but there was no exemption for Mr. Humbert or for any other employees. On October 24, 2016, after confirming ASAP Flooring had at least one employee, but had not secured workers’ compensation insurance, the Department issued a SWO and had it personally served on Mr. Reinartsen at the Jobsite.3/ At this time, the Department also served Mr. Reinartsen with a Request for Production of Business Records for Penalty Assessment Calculations. In response, Respondent provided bank statements, check images, check stubs, tax information and e-mails to the Department. These documents showed that during the previous two-year period (“look-back period”), October 24, 2014, to October 24, 2016, Respondent had a number of employees, but did not have workers’ compensation coverage for them. At the hearing, Respondent did not dispute ASAP Flooring was required to have workers’ compensation insurance, the status of the people identified as employees, or the fact that it did not have adequate workers’ compensation coverage.4/ Penalty Calculation. To calculate the penalty assessed against Respondent, the Department’s Auditor utilized the information she gleaned from documents submitted by Respondent and through Mr. Reinartsen’s deposition testimony taken in these proceedings. She then applied the formulas and rules set forth in the Florida Administrative Code to the information and utilized a Penalty Calculation Worksheet (the “worksheet”) to compute the final penalty assessment amount. The worksheet for the Third OPA is attached as Appendix “A” to this Recommended Order (“Appx. A”). Through her review of ASAP Flooring’s business records and Mr. Reinartsen’s deposition testimony, the Auditor confirmed (1) the individuals who were direct employees or construction subcontractors during those periods of non-compliance (Appx. A, column “Employer’s Payroll”); (2) the periods of non-compliance (Appx. A, column “b”); (3) the gross payroll for those individuals during these periods of non-compliance (Appx. A, column “c”); and (4) the services provided by those individuals. The Auditor used the services to determine the classification codes created by the National Council on Compensation Insurance (“NCCI”), and listed in the NCCI’s Scopes Manual, which has been adopted by the Department through Florida Administrative Code Rule 69L-6.021(1). These classification codes are four-digit codes assigned to various occupations by the NCCI to assist in the calculation of workers’ compensation insurance premiums. To derive the gross pay figures in the worksheet (Appx. A, column “c”) the Auditor explained she utilized payment information in the ASAP Flooring’s business records. Although Respondent initially asserted some of these payments were actually for both labor and materials, these distinctions were not detailed in the business records created at the time of service or payment. Regardless, pursuant to rule 69L-6.035(i) and (j), the Auditor excluded the cost of materials from the payroll calculations. Specifically, she applied an “80:20” ration rule for those payments Respondent claimed were partly labor and partly materials: considering 80 percent of the total payment as “labor” for penalty calculation purposes; and excluding 20 percent for penalty calculation purposes as “materials.” Using the gross payroll (Appx. A, column “c”) and the appropriate NCCI manual rate (Appx. A, column “e”), the Auditor calculated the premium rate (Appx. A, column “f”) for each individual or entity (Appx. A, column “Employer’s Payroll”). She then multiplied the premium rate by two to reach a penalty amount (Appx. A, column “g”). This calculation method to determine a final penalty is authorized by section 440.107(7)(d)1., and rule 69L-6.027. Ultimately, based on the amounts indicated in the worksheet, the Department issued a Third Amended OPA calculating the penalty as $15,577.84. The Department applied a 25 percent reduction, yielding a remaining penalty of $11,683.38. According to the evidence, in November 2016, Respondent paid $1,000 to the Department as a “down payment” toward any ultimate assessment. Applying this $1,000 as a credit to the penalty in the Third OPA results in Respondent owing $10,683.38. Respondent’s Defenses. At the final hearing, Mr. Reinartsen did not dispute any of the figures in the worksheet or the penalty amount. Rather, he raised three arguments unrelated to ASAP Flooring’s failure to secure workers’ compensation insurance for its employees. First, Respondent asserted Ms. Brigantty was not properly outfitted to enter a construction site and therefore, he argued, she was violating rules set forth by the Occupational Safety and Health Agency (“OSHA”). Ms. Brigantty admitted she was not wearing a hard hat, and did not think she was wearing steel-toed boots with hard soles when she entered the Jobsite. Second, Respondent argued Ms. Brigantty did not issue a SWO to another contractor at a neighboring construction site who was putting in pavers, identified only as “Luis.” Mr. Reinartsen could not provide the name of the other contractor’s company, a last name, or any other identifying information; nor did Respondent provide evidence that “Luis” was in a similar situation: non-compliant with and non-exempt from chapter 440. Ms. Brigantty did not remember going to the neighboring site or speaking to anyone else during her stop at the Jobsite. Finally, Respondent argued the penalty is substantial and payment in full (as opposed to a payment plan spread out over a number of years) would put him and his small family-owned company out of business. Ultimate Findings. The Department demonstrated, by clear and convincing evidence, Respondent violated chapter 440 as charged in the SWO by failing to secure workers’ compensation coverage for its employees. The Department demonstrated, by clear and convincing evidence, the penalty for this violation is $11,683.38.
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, ASAP Flooring, violated the requirement in chapter 440 to secure workers’ compensation coverage and imposing a total penalty of $11,683.38, less the $1,000 down payment, the balance to be paid in $100 a month increments. DONE AND ENTERED this 12th day of February, 2018, in Tallahassee, Leon County, Florida. S HETAL DESAI 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 12th day of February, 2018.
The Issue The issue to be determined is whether Respondent, Wilby’s Home Repairs, LLC, failed to secure the payment of workers’ compensation coverage for its employees, and if so, what penalty is owed.
Findings Of Fact The Department of Financial Services, Division of Workers’ Compensation, is the state agency charged with the enforcement of the requirement in chapter 440, Florida Statutes, that employers in Florida secure workers’ compensation coverage for their employees as required by section 440.107(3). At all times relevant to this case, Respondent was a company engaged in the construction industry. Its principal office was located at 2641 University Boulevard North, H115, Jacksonville, Florida 32211. On or about October 2, 2014, Ann Johnson, a compliance investigator for the Division, observed two people doing patch/repair work using a ladder on the outside of a home at 2322 Myra Street in Jacksonville, Florida. She approached and spoke to both men, who identified themselves as Michael Wilbur and Robert Nelson and stated that they worked for Wilby’s Home Repairs. When Ms. Johnson asked for proof of workers’ compensation coverage, Mr. Wilbur could not provide it but thought both gentlemen had exemptions. Mr. Wilbur thought that his accountant who had prepared the paperwork for filing with the Division of Corporations for his company had also completed the applications for exemptions for workers’ compensation coverage. However, no applications for exemptions had been filed. Investigator Johnson consulted the Division of Corporations website to determine the identity of Respondent’s corporate officers and found that Mr. Wilbur and Mr. Nelson were the listed officers. She then consulted the Division’s Coverage and Compliance Automated System (“CCAS”) for proof of workers’ compensation coverage and for any exemptions associated with Respondent. Investigator Johnson’s research revealed that Respondent did not have a workers’ compensation policy or an employee-leasing policy, and further, there were no exemptions for its corporate officers on file. Based on this information, Investigator Johnson consulted with her supervisor, who provided authorization for the issuance of a Stop-Work Order. She then issued a Stop-Work Order and personally served it on Mr. Wilbur on October 2, 2014. At the same time, she issued and served a Request for Production of Business Records for Penalty Assessment Calculation (BRR). The requested documents were for the purpose of determining Respondent’s payroll from May 16, 2014 (the date the company was formed according to the Division of Corporations website) to October 2, 2014 (the date of the random inspection). They consisted of payroll documents, such as time sheets or cards, attendance records, check stubs, and payroll summaries; account documents, such as check journals and statements; disbursements records; workers’ compensation coverage documents, such as copies of policies, declaration pages, and certificates of workers’ compensation; documents related to any exemptions held; documents reflecting the identity of each subcontractor and the relationship thereto, including any and all payments to subcontractors; and documentation of subcontractors’ workers’ compensation coverage. On October 3, 2014, Mr. Wilbur came into the Division office in Jacksonville and filled out the applications for exemptions, and those were processed. Mr. Wilbur submitted a cashier’s check for $1,000 and Respondent was released from the Stop-Work Order. He also brought in some records in response to the BRR. Those records consisted of letters, notations, and copies of checks made out to Robert Nelson or Mike Wilbur from Grant-Dooley Rental. The records were scanned and provided to the penalty auditing team to calculate an appropriate penalty according to the statutory formula. Penalty audit supervisor Anita Proano reviewed the business records provided by Respondent, but could not, from those records, properly identify the amount of gross payroll paid to Respondent’s employees on which workers’ compensation premiums had not been paid. Ms. Proano determined that Respondent had not been in compliance with coverage requirements from May 16, 2014, to October 2, 2014. The business records provided by Respondent were not sufficient for the Department to calculate a penalty for Respondent’s period of noncompliance with the coverage requirements of chapter 440. The auditor assigned to the case then calculated a penalty based upon imputed payroll pursuant to the procedures required by section 440.107(7)(e) and Florida Administrative Code Rule 69L-6.208. Had the documents submitted by Respondent been adequate, then the Division would have used those documents to calculate Respondent’s payroll. The checks provided by Respondent to the Division consisted of checks made out to Robert Nelson and Michael Wilbur, individually, spanning from approximately May 9, 2014, through October 2014, from Grant- Dooley Rental. Mr. Wilbur testified that the only job Respondent handled during this period was the family home on Myra Street, and he and Mr. Nelson were paid directly by the homeowner rather than having payments made to Wilby’s Home Repair as an entity. Unfortunately, these direct payments are not the type of records contemplated by the Division’s rules regarding appropriate documentation of payroll. On October 17, 2014, the Division issued an Amended Order of Penalty Assessment to Respondent, which was served on Respondent on October 20, 2014. The penalty assessed for noncompliance was $21,583.48. The penalty assessment calculation is based upon the classification codes listed in the Scopes® Manual, which have been adopted through the rulemaking process through rules 68L- 6.021 and 69L-6.031. Classification codes are codes assigned to different occupations by the National Council on Compensation Insurance, Inc. (NCCI), to assist in the calculation of workers’ compensation insurance premiums. Auditor Proano used classification code 5645 (carpentry) for both employees. Code 5645 is the correct code for the type of work observed by Ms. Johnson during her inspection. Using this classification code, Ms. Proano used the corresponding approved manual rates for that classification and the period of non-compliance. The average weekly wage as established by the Department of Economic Opportunity for the relevant period is $827.08. Ms. Proano used that amount and multiplied it by 2 for the number of days of noncompliance. Based on that calculation, she came up with a gross payroll amount of $66,166.40, which she divided by 100. Ms. Proano then multiplied that amount by the manual approved rate ($16.31), times two to reach the amount of penalty to be imposed. All of the penalty calculations are in accordance with the Division’s Penalty Calculation Worksheet. The Department has demonstrated by clear and convincing evidence that Respondent employed Robert Nelson and Michael Wilbur on October 2, 2014, and that Respondent was engaged in the construction business for the period of May 16, 2014, through October 2, 2014, without proper workers’ compensation coverage for that period. The Department also demonstrated by clear and convincing evidence that the documents submitted by Respondent, which may indeed be all of the documentation Respondent possessed, were not sufficient to establish Respondent’s payroll, thus necessitating imputation of payroll. Finally, the Department proved by clear and convincing evidence that the required penalty for the period of noncompliance is $21,583.48.
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 Wilby’s Home Repairs, LLC, failed to secure the payment of workers’ compensation insurance coverage for its employees with respect to Robert Nelson and Michael Wilbur, in violation of section 440.107, Florida Statutes, and imposing a penalty of $21,583.48. DONE AND ENTERED this 10th day of June, 2015, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 10th day of June, 2015. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Mike Wilbur 5376 Shirley Avenue Jacksonville, Florida 32210 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue The issues in this enforcement proceeding are whether Respondent failed to comply with Sections 440.10, 440.05, and , Florida Statutes (2003),1 and, if so, whether Petitioner correctly assessed the penalty for said failure.
Findings Of Fact Based upon observation of the demeanor and candor of each witness while testifying; documentary materials received in evidence; evidentiary rulings made pursuant to Section 120.57, Florida Statutes (2004); and stipulations of the parties, the following relevant and material facts, arrived at impartially based solely upon testimony and information presented at the final hearing, are objectively determined: At all times material, Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), is the state agency responsible for enforcement of the statutory requirements that employers secure the payment of workers' compensation coverage requirements for the benefit of their employees in compliance with the dictates of Chapter 440, Florida Statutes. Employers who failed to comply with Chapter 440, Florida Statutes, are subject to enforcement provisions, including penalty assessment, of Chapter 440, Florida Statutes. At all times material, Respondent, St. James Automotive, Inc. (St. James), is a corporation domiciled in the State of Florida and engaged in automobile repair, with known business locations in Pine Island and St. James City, Florida. Both locations are owned by Richard Conrad (Mr. Conrad). On or about August 5, 2004, a Department investigator conducted an "on-site visit" at the St. James location on Pine Island Road, Pine Island, Florida. The purpose of the on-site visit was to determine whether or not St. James was in compliance with Chapter 440, Florida Statutes, regarding workers' compensation coverage for the workers found on-site. The investigator observed four individuals working on-site in automotive repair functions. One employee, when asked whether "the workers had workers' compensation coverage in place," referred the investigator to the "owner," who, at that time, was at the second business location at 2867 Oleander Street, St. James City, Florida. The investigator verified the owner's presence at the St. James City location by telephone and met him there. Upon his arrival at the St. James City location, the investigator initiated a workers' compensation coverage check on two databases. He first checked the Coverage and Compliance Automated System (CCAS) to ascertain whether St. James had in place workers' compensation coverage. The CCAS system contained current status and proof of workers' compensation coverage, if any, and record of any exemptions from workers' compensation coverage requirements filed by St. James' corporate officers. The CCAS check revealed no workers' compensation coverage filed by any corporate officers of St. James. The second system, the National Council on Compensation Insurance (NCCI), contained data on workers' compensation coverage in effect for workers (employees) in the State of Florida. NCCI similarly revealed no workers' compensation coverage in effect for St. James' Florida employees. The investigator discussed the situation and findings from both the CCAS and NCCI with Mr. Conrad who acknowledged and admitted: (1) St. James had no workers' compensation coverage in place; (2) St. James had made inquiry and arranged for an unnamed attorney to file exemptions from workers' compensation coverage on behalf of several St. James employees, but the attorney never filed exemptions; and (3) Mr. Conrad subsequently attempted to file the exemptions himself but was unsuccessful-- "because names of exemption applicants [employees] did not match the corporate information on file for St. James, Inc., at the Division of Corporations." When offered the opportunity by the Department's investigator to produce any proof of workers' compensation coverage or exemption from coverage, Mr. Conrad was unable to do so. At the conclusion of the August 5, 2004, on-site visit, and based upon a review of the CCAS and NCCI status reports and Mr. Conrad's inability to produce proof of workers' compensation coverage or exemptions, the investigator determined that St. James was not in compliance with requirements of Chapter 440, Florida Statutes. The investigator then issued a Stop Work Order on St. James' two business locations. The Stop Work Order contained an initial assessed penalty of $1,000, subject to increase to an amount equal to 1.5 times the amount of the premium the employer would have paid during the period for which coverage was not secured or whichever is greater. Mr. Conrad acknowledged his failure to conform to the requirements of Chapter 440, Florida Statutes, stating5: I guess you could say--I first of all, I am guilty, plain and simple. In other words, I did not conform. Subsequent to issuing the August 5, 2004, Stop Work Order, the Department made a written records' request to Mr. Conrad that he should provide payroll records listing all employees by name, social security number, and gross wages paid to each listed employee.6 Mr. Conrad provided the requested employee payroll records, listing himself and his wife, Cheryl L. Conrad, not as owners, stockholders or managers, but as employees. Pursuant to Section 440.107, Florida Statutes, the Department is required to link the amount of its enforcement penalty to the amount of payroll (total) paid to each employee. The persons listed on St. James' payroll records received remuneration for the performance of their work on behalf of St. James and are "employees" as defined in Subsection 440.02(15), Florida Statutes. Review of the payroll records by the Department's investigator revealed the listed employees for services performed on its behalf. The employee payroll records provided by St. James were used by the Department's investigator to reassess applicable penalty and subsequent issuance of the Amended Order of Penalty Assessment in the amount of $97,260.75.7 St. James' payroll records did not list the type of work (class code or type) each employee performed during the period in question. Accordingly, the Department's investigator properly based the penalty assessment on the highest-rated class code or type of work in which St. James was engaged, automotive repair. The highest-rated class code has the most expensive insurance premium rate associated with it, indicating the most complex activity or type of work associated with St. James' business of automotive repair. The Department's methodology and reliance on the NCCI Basic Manual for purpose of penalty calculation is standardized and customarily applied in circumstances and situations as presented herein.8 Mr. Conrad, in his petition for a Chapter 120, Florida Statutes, hearing alleged the 8380 (highest premium rate) class code applied to only three of his employees: himself, Brain Green, and William Yagmin. On the basis of this alleged penalty assessment error by the Department, Mr. Conrad seeks a reduction of the Amended Order of Penalty Assessment amount of $97,260.75. Mr. Conrad presented no evidence to substantiate his allegation that the Department's investigator assigned incorrect class codes to employees based upon the employee information Mr. Conrad provided in response to the Department's record request. To the contrary, had he enrolled in workers' compensation coverage or had he applied for exemption from coverage, Mr. Conrad would have known that his premium payment rates for coverage would have been based upon the employees' class codes he would have assigned each employee in his workers' compensation coverage application. In an attempt to defend his failure to comply with the workers' compensation coverage requirement of Chapter 440, Florida Statutes, Mr. Conrad asserted that the Department's investigator took his verbal verification that certain employees were clerical, but neglected to recognize his statement that he was also clerical, having been absent from the job-site for over three years. Mr. Conrad's excuses and avoidance testimony was not internally consistent with his earlier stated position of not conforming to the statutory requirements of Chapter 440, Florida Statutes. The above testimony was not supported by other credible evidence of record. This is critical to the credibility determination since Mr. Conrad seeks to avoid paying a significant penalty. For those reasons, his testimony lacks credibility. Mr. Conrad also attempted to shift blame testifying that--"My attorney did not file exemption forms with the Department," and my "personal attempts to file St. James' exemption form failed--[B]ecause the mailing instructions contained in the Department's form were not clear." In his final defensive effort of avoidance, Mr. Conrad testified that he offered to his employees, and they agreed to accept, unspecified "increases" in their respective salaries in lieu of St. James' providing workers' compensation coverage for them. This defense suffered from a lack of corroboration from those employees who allegedly agreed (and those who did not agree) and lack of documented evidence of such agreement. The intended inference that all his employees' reported salaries included some unspecified "salary increase" is not supported by employee identification or salary specificity and is thus unacceptable to support a finding of fact. St. James failed to produce credible evidence that the Department's Stop Work Order, the Penalty Assessment, and/or the Amended Penalty Assessment were improper. St. James failed to produce any credible evidence that the Department's use of the NCCI Basic Manual, as the basis for penalty assessment calculation based upon employee information provided by St. James, was improper and/or not based upon actual employee salary information provided by St. James. Prior to this proceeding, the Department and Mr. Conrad entered into a penalty payment agreement as authorized by Subsection 440.107(7)(a), Florida Statutes.9 The penalty payment agreement required fixed monthly payments be made by Mr. Conrad and afforded Mr. Conrad the ability to continue operation of his automotive repair business that was, by order, stopped on August 5, 2004.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order that affirms the Stop Work Order and the Amended Order of Penalty Assessment in the amount of $97,260.75, minus any and all periodic payments of the penalty remitted by St. James, pursuant to agreed upon conditional release from the Stop Work Order dated August 5, 2004. DONE AND ENTERED this 4th day of March, 2005, in Tallahassee, Leon County, Florida. S FRED L. BUCKINE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of March, 2005.
The Issue Whether David Cooper’s Construction, Inc. (“Respondent”), failed to secure the payment of workers’ compensation insurance 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 statutory requirement that employers in Florida secure workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Respondent is a Florida corporation engaged in the business of residential construction in Port St. Joe, Florida. At all times relevant hereto, Carl Woodall was a workers’ compensation compliance investigator employed by the Department. Employers may comply with the workers’ compensation coverage requirement by obtaining a workers’ compensation insurance policy or an employee leasing agreement. Corporate officers and members of limited liability companies can elect an exemption from workers’ compensation coverage. See § 440.05, Fla. Stat. On August 12, 2016, Mr. Woodall made an unannounced, random inspection of a worksite at 2912 Garrison Avenue in Port St. Joe, Florida. Mr. Woodall observed two men on the roof of an existing structure at that address who appeared to be framing an addition to the structure. At Mr. Woodall’s request, the two men identified themselves as David Cooper and Macon Stewart. Mr. Cooper identified himself as Respondent’s owner and stated that Mr. Stewart was working for him. Mr. Cooper informed Mr. Woodall that he paid Mr. Stewart by check at the rate of $10 per hour. While at the worksite, Mr. Woodall checked the Coverage and Compliance Automated System (“CCAS”) database, which tracks workers’ compensation insurance coverage and exemption data for employers in Florida. Mr. Woodall’s search of CCAS revealed that Respondent did not have a workers’ compensation insurance policy to cover its employees nor an employee leasing agreement. The search also revealed that Mr. Stewart did not have an active workers’ compensation exemption. Mr. Woodall personally served Mr. Cooper with a Stop-Work Order (“SWO”) and Order of Penalty Assessment on August 12, 2016. Respondent complied with the SWO by making a $1,000 down payment toward the penalty assessment (which had yet to be calculated) and agreeing not to allow Mr. Stewart to work for Respondent until such time as Mr. Stewart obtained an exemption. The Order of Penalty Assessment includes a Request for Production of Business Records (“Request”) which could be used to calculate the amount of the penalty. In response to the Request, Mr. Cooper provided the Department with billing statements, handwritten time sheets, and certificates of exemption for certain employees. Lynne Murcia is a Department penalty auditor. She is tasked with reviewing business records provided by employers and calculating penalties for employers who have been notified they are in violation of workers’ compensation coverage requirements. Ms. Murcia was assigned to calculate the penalty to be assessed against Respondent. Ms. Murcia began by reviewing Respondent’s business records for the audit period, which is the two-year period immediately preceding the date of the SWO. See § 440.107(7)(d), Fla. Stat. The audit period in this case is from February 1, 2015, through January 31, 2017. The Department’s penalty is based on the employer’s payroll to employees during any periods during the audit period in which the employer did not provide workers’ compensation insurance coverage for its employees (“the period of non-compliance”). In this case, the period of non-compliance is the same as the audit period. An employer’s payroll is the amount of wages or other compensation made to employees during the period of non-compliance. See Fla. Admin. Code R. 69L-6.035. Transactions that are considered payroll include direct payment for services rendered, as well as outstanding loans, reimbursements, bonuses, and profit-sharing. Id. Based upon the records received from Respondent, Ms. Murcia identified Respondent’s employees during the period of non-compliance as Joseph Turner, Linda Cooper, and Macon Stewart.2 Compensation paid to those employees during the period of non- compliance was as follows: Joseph Turner, $11,740; Linda Cooper, $2,178; and Macon Stewart, $60. Thus, Respondent’s gross payroll for the period of non-compliance was $13,978. Next, Ms. Murcia consulted the Scopes Manual published by the National Council on Compensation Insurance (“NCCI”) to assign a class code to each employee. The class codes correspond with the type of work performed by an employee and establish the manual rate for workers’ compensation insurance for that type of work. Based upon Mr. Woodall’s observations of the work being performed at the worksite, Ms. Murcia assigned NCCI class code 5645, Carpentry, to Mr. Stewart. 2 Ms. Murcia initially identified additional employees whose wages were included in the Second and Third Amended Orders of Penalty Assessment. For purposes of this Recommended Order, the relevant payroll is that identified in the Fourth Amended Order of Penalty Assessment. Based on Ms. Cooper’s description of her job duties, Ms. Murcia assigned NCCI class code 8810, Clerical, to Ms. Cooper. Respondent’s records did not identify the type of work performed by Mr. Turner. When the business records do not identify the type of work performed by an employee, the Department must apply to the employee the highest manual rate associated with any employee’s activities based on the investigator’s personal observation of work activities. See Fla. Admin. Code R. 69L-6.035(4). Ms. Murcia assigned class code 5645, Carpentry, to Mr. Turner because that class code corresponds with a higher manual rate than 8810, Clerical. Using the gross payroll to each employee, multiplied by the applicable manual rate, Respondent would have paid $1,897.51 in workers’ compensation insurance premiums to cover its employees during the period of non-compliance (“the avoided premium”). The statutory penalty to be assessed is twice the avoided premium. See § 440.107(7)(d)1., Fla. Stat. Ms. Murcia calculated the penalty to be assessed as $3,795. Ms. Murcia applied the correct approved manual rates and correctly utilized the methodology specified in section 440.107(7) and Florida Administrative Code Rules 69L-6.027 and 69L-6.035 to determine the penalty to be imposed.
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 David Cooper’s Construction, Inc., violated the workers’ compensation insurance statute and assessing a penalty of $3,795. DONE AND ENTERED this 26th day of January, 2021, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 2021. COPIES FURNISHED: David Cooper David Cooper’s Construction, Inc. 2449 Hayes Avenue Port St. Joe, Florida 32456 Diane Wint, Agency Clerk Division of Legal Services Department of Financial Service Room 612.14, Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0390 Rean Knopke, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399
The Issue The issues are whether Respondent, Deck King Corp., failed to secure workers’ compensation coverage for its employees, and, if so, whether the Department of Financial Services, Division of Workers’ Compensation (“Department”) correctly calculated the penalty assessment imposed against Respondent.
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 its employees. Respondent was a business providing services in the construction industry with its principal office located at 2200 Northwest 22nd Court, Miami, Florida 33142. On June 29, 2015, Marilyn Victores, the Department’s compliance investigator, observed Ivan Lopez Avila and Robert Jordan performing construction work on a job site at 150 South Hibiscus Drive, Miami Beach, Florida 33139. She learned from the individuals working that they were performing the job on behalf of Respondent, Deck King Corp. After gathering the information at the job site, Ms. Victores spoke with her supervisor, Ms. Scarlett Aldana, and an investigation was performed. The Division of Corporations’ website was consulted to determine, among other things, the identity of Respondent’s corporate officers. Mses. Victores and Aldana learned that Respondent had three corporate officers and directors listed, Derek Barnick, Thomas Barnick, and Fausto Lopez. They also learned that the corporation was “active.” Ms. Victores consulted the Department’s Coverage and Compliance Automated System (“CCAS”) for proof of workers’ compensation coverage and for any exemptions associated with Respondent. An exemption is a method whereby a corporate officer can be relieved of the responsibility of the requirements of chapter 440, Florida Statutes, pursuant to section 440.05. CCAS is the Department’s internal database that contains workers’ compensation insurance policy and exemption information. Insurance providers are required to report insurance coverage information to the Department which is then inputted into CCAS. Ms. Victores’ CCAS search revealed that Respondent did not have a workers’ compensation policy or an employee leasing policy. Additionally, she discovered that no active exemptions were associated with Respondent. Based upon the information she gathered, Ms. Victores issued and served Respondent with a Stop-Work Order on June 29, 2015. Ms. King simultaneously issued and served Respondent a Request for Production of Business Records for Penalty Assessment Calculation (the “Request for Production”). The Request for Production sought documents to enable the Department to determine Respondent’s payroll for the time period of June 30, 2013, through June 29, 2015. In response to the Request for Production, Respondent provided the Department only bank statements. Ms. Eunika Jackson, a penalty auditor with the Department, was assigned to calculate the penalty to be assessed against Respondent. Ms. Jackson believed the business records produced by Respondent were insufficient to calculate a penalty for the entire audit period as they did not specify payroll or payments made to employees other than two specific checks, which were credited against the penalty ultimately assessed against Respondent. Based upon Ms. Jackson’s calculations, on October 9, 2015, the Department issued an Amended Order of Penalty Assessment to Respondent which was served on Respondent on that date. The Amended Order of Penalty Assessment imposed a penalty of $148,923.16. To make the penalty assessment determination, Ms. Jackson consulted the codes listed in the National Council on Compensation Insurance’s (NCCI) Scopes® Manual, which has been adopted by the Department 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. Based upon Ms. Victores’ description of the activities Respondent’s workers were performing and the descriptions listed in the NCCI Scopes® Manual, Ms. Jackson determined that the proper classification for employees of Respondent was 5403. Ms. Jackson then utilized the corresponding manual rates for that classification code and the related periods of the alleged non- compliance. Based upon the information provided to her by Mses. Victores and Aldana, Ms. Jackson utilized the appropriate methodology specified in section 440.107(7)(d)1. and rules 69L-6.027 and 69L-6.028, to determine the penalty of $148,923.16. The business records supplied by Respondent in response to the Department’s Request for Production consisted of two years’ worth of bank statements. No tax records, such as W-2s, W-4s, 1099s, or tax returns of Respondent, were provided to the Department to allow it to determine whether any of the workers were independent contractors, what salaries, if any, they were paid, or in any way to mitigate the penalty assessed by the Department. By not appearing at hearing or attempting to file any documents in explanation or mitigation of the penalty assessed against it, Respondent gave the Department nothing upon which to reach any conclusion of payroll other than through imputation. Using the Penalty Calculation Worksheet, Ms. Jackson determined the penalty to be assessed against Respondent. She imputed the income for Derek Barnick, Thomas Barnick, Ivan Lopez Avila, Robert Lopez, and Fausto Lopez, and used actual records provided by Respondent to determine the income of an individual identified only as “Mili” who received $105 in April 2014. Working through the calculations called for by the worksheet included the class code, period(s) of non-compliance, gross payroll, a divisor of 100 which was then multiplied by the approved manual rate, and then multiplied by two to calculate the penalty. The result was a penalty assessment of $148,923.16. By not appearing at hearing or offering any evidence to contradict the penalty assessed by the Department, Respondent waived its opportunity to prove the Department’s data used and calculations made were performed improperly. The Department properly determined the penalty using the worksheet prescribed by its statutes and rules.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order imposing a penalty of $148,923.16 against Respondent. DONE AND ENTERED this 15th day of March, 2016, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2016. COPIES FURNISHED: Tabitha G. Harnage, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 (eServed) Deck King Corp. 2200 Northwest 22nd Court Miami, Florida 33142 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue The issues in this case are whether Respondent, Customs Logistics Services, Inc., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency charged with enforcing the requirement in chapter 440 that employers in Florida secure workers' compensation coverage for their employees. At all times relevant to this proceeding, Respondent was a corporation registered to do business in Florida. Respondent is a family-owned-and-operated customs brokerage service with its principal office located at 6940 Northwest 12th Street, Miami, Florida 33126. At the time of the inspection giving rise to this proceeding, Respondent employed seven or eight employees.2/ The Compliance Inspection On September 29, 2014, Petitioner's compliance inspector, Hector Fluriach, conducted an onsite inspection at Respondent's principal office to determine whether Respondent was in compliance with the workers' compensation coverage requirements established in chapter 440. At that time, Respondent's co-owners, Astrid Escalona and Carlos Henoa, told Fluriach that Respondent employed six employees and two corporate officers, and also paid two family members who did not work at the principal office. Upon inquiry, Escalona and Henoa informed Fluriach that Respondent did not have workers' compensation insurance coverage for its employees. Using Petitioner's Coverage and Compliance Automated System ("CCAS") and the National Council for Compensation Insurance ("NCCI") insurance coverage verification system, Fluriach confirmed that Respondent had not obtained workers' compensation insurance coverage for its employees, and that it was not in compliance with chapter 440 during certain periods within the two years preceding the inspection. Under the NCCI basic occupational classification system and Scopes Manual, six of Respondent's employees are classified as clerical (Code 8810), and one is classified as a driver (Code 7380). None of Respondent's employees is classified as employed within the construction industry. As a private entity employing four or more employees in a non-construction industry occupation, Respondent was required under chapter 440 to provide workers' compensation coverage for its employees. Respondent's corporate officers were eligible under section 440.05 to elect to be exempt from the workers' compensation coverage requirements of chapter 440; however, none had elected to be exempt. Fluriach issued Stop-Work Order No. 14-329-D5 ("Stop- Work Order"), personally served it on Respondent, and explained it to Escalona. The Stop-Work Order included an Order of Penalty Assessment, ordering assessment of a penalty against Respondent in an amount equal to two times the amount Respondent would have paid in workers' compensation coverage premiums when applying the approved manual rates to Respondent's payroll during the periods for which it had failed to secure workers' compensation coverage during the preceding two years (for convenience, hereafter referred to as the "look-back period"). Fluriach also served a business records request, requesting Respondent to provide specified business records3/ for Petitioner's use in determining the penalty. In a series of submittals, Respondent provided the requested business records to Petitioner. The evidence showed that during the two-year look- back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, and none of its corporate officers were exempt from the workers' compensation coverage requirement. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Petitioner's Computation of Penalty Amount To calculate the applicable penalty, Petitioner must determine, from a review of the employer's business records, the employer's gross payroll for the two-year look-back period. For days during the look-back period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the look-back period for purposes of calculating the applicable penalty commenced on September 30, 2012, and ended on September 29, 2014, the day on which the compliance inspection was conducted. Respondent's business records revealed that Respondent had fewer than four employees between January 1 and March 31, 2013, so Respondent was not required to have workers' compensation coverage for that period. Thus, Petitioner did not assess a penalty against Respondent for that period. For the rest of the look-back period, Respondent employed four or more employees, so was required to obtain workers' compensation coverage for those employees for that portion of the period. Respondent provided business records sufficient for Petitioner to determine Respondent's gross payroll for all but September 30, 2012. For that day, Petitioner imputed Respondent's gross payroll using Florida's statewide average weekly wage. On the basis of Respondent's business records submittals, Petitioner's auditor, Eric Ruzzo, recalculated the penalty to be assessed against Respondent. Petitioner issued an Amended Order of Penalty Assessment on October 17, 2014, imposing a total penalty of $5,617.04. On November 7, 2014, following receipt of additional records, Petitioner issued a Second Amended Order of Penalty Assessment, reducing the penalty to $3,982.52. Finally, after receiving more records, Petitioner issued a Third Amended Order of Penalty Assessment on January 12, 2015, further reducing the penalty to $3,205.70. Each of these penalty assessments was served on Respondent. Petitioner seeks to impose a $3,205.70 penalty against Respondent in this proceeding. In calculating the penalty, Ruzzo examined three-month (i.e., quarterly) periods within the two-year look-back period. Ruzzo identified the occupational class code applicable to each of Respondent's employees. As stated above, all but one of Respondent's employees were classified as clerical, and one of Respondent's employees was classified as a driver. For each employee, Ruzzo determined the gross payroll paid to that employee for the specific quarter in which Respondent was non-compliant during the look-back period, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupational class code. This calculation yielded the workers' compensation coverage premium for that specific employee for the specific quarter for which Respondent was non- compliant during the look-back period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. As previously noted, Respondent did not provide gross payroll records covering September 30, 2012; thus, for that day, Ruzzo imputed the gross payroll for each of Respondent's employees using the statewide average weekly wage as defined in section 440.12(2)4/ multiplied by two. Ruzzo then performed the same computations to yield the penalty amount to be imposed for Respondent's failure to provide workers' compensation on September 30, 2012. Ruzzo then added each penalty amount determined for each employee using actual gross payroll and imputed payroll, to yield the total penalty amount of $5,286.70. Because Respondent had not previously been issued a stop-work order, pursuant to section 440.107(7)(d)1., Petitioner applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $2,081.00. This was subtracted from the calculated penalty of $5,286.70, yielding a total penalty of $3,205.70. Respondent's Defense At the final hearing, Escalona testified that she and the other co-owners of Respondent always have attempted to fully comply with every law applicable to Respondent's business, and have never had compliance problems. She testified that neither she nor the other co-owners of Respondent realized that Respondent was required to have workers' compensation coverage for its employees, and they did not intentionally violate the law. Petitioner apparently mailed a memorandum regarding verifying workers' compensation coverage requirements to businesses in the area before it conducted compliance inspections. The memorandum was dated October 8, 2014, and Escalona testified Respondent received it on October 13, 2014, approximately two weeks after the compliance inspection that Fluriach conducted. Escalona asserted that had Respondent received the memorandum before the compliance inspection was conducted, she would have called Petitioner to determine if Respondent needed to obtain workers' compensation coverage, would have asked how to obtain it, and would have obtained coverage for its employees and exemptions for its corporate officers. Escalona testified that the $3,205.70 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact Petitioner has shown, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the Stop-Work Order, by failing to secure workers' compensation coverage for its employees. Petitioner has shown, by clear and convincing evidence, that the $3,205.70 penalty proposed to be assessed against Respondent pursuant to the Third Amended Penalty Assessment is the correct amount of the penalty to be assessed in this proceeding.
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, Customs Logistics Services, Inc., violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $3,205.70. DONE AND ENTERED this 11th day of August, 2015, in Tallahassee, Leon County, Florida S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2015.
The Issue Whether Leonard Smith, d/b/a Site Development & Pipeline Construction, Inc., violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers’ compensation coverage for its employees; and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing workers’ compensation coverage requirements in Florida, including the requirement that employers secure the payment of workers’ compensation coverage for their employees. See § 440.107(3), Fla. Stat. Leonard Smith is an 85-year-old retired contractor. Respondent’s corporate records with the Florida Division of Corporations record that Leonard Smith is Respondent’s owner, president, and registered agent. Respondent was incorporated in February 2014. The company was administratively dissolved in September 2015. However, Leonard Smith still does business using Respondent’s name. On June 13, 2017, Cristina Brigantty, a compliance investigator with the Department, conducted a random workers’ compensation check at a worksite located at 499 Lorraine Leland Street in Dunedin, Florida. At the site, Investigator Brigantty observed an individual operating a compact excavator/tractor commonly called a “Bobcat” (the manufacturer’s name). The Bobcat operator was moving soil and appeared to be grading the site in preparation for the pouring of concrete. Investigator Brigantty approached the individual operating the Bobcat and requested his name. The driver identified himself as Joe Smith. Joe Smith also relayed to Investigator Brigantty that he was just hired by Leonard Smith (no relation) to work on the site. Joe Smith added that he expected to work approximately ten hours and be paid around $2,000 from Leonard Smith for the job. Joe Smith then provided Investigator Brigantty with Leonard Smith’s business card and phone number. At the final hearing, Investigator Brigantty testified that her duties for the Department include inspecting businesses to determine whether the business has obtained the required workers’ compensation insurance coverage. Investigator Brigantty explained that a business that performs construction-related work must have workers’ compensation coverage. Therefore, Investigator Brigantty believed that Respondent should have secured sufficient workers’ compensation coverage for its employee (Joe Smith). After learning Leonard Smith’s name, Investigator Brigantty searched the Department’s Coverage and Compliance Automated System (“CCAS”) database. CCAS is a Department database that tracks workers’ compensation insurance coverage. CCAS contains coverage data from insurance carriers, as well as any workers’ compensation exemptions on file with the Department. Insurance providers are required to report coverage and cancellation information, which the Department uses to update CCAS. While reviewing CCAS, Inspector Brigantty initially noted that the Department did not have on file any request from Leonard Smith, Respondent’s owner-of-record, for an exemption from workers’ compensation coverage. An exemption is a method by which a business’s corporate officer may exempt him or herself from the requirements of chapter 440. See § 440.05, Fla. Stat. Thereafter, based on her research of the information in CCAS, Inspector Brigantty concluded that Respondent did not have a valid exemption for a corporate officer (Leonard Smith) on June 13, 2017. Neither did Respondent carry any workers’ compensation coverage for Joe Smith. After determining that Respondent had not obtained workers’ compensation coverage for Joe Smith on the date of her visit, Investigator Brigantty called Leonard Smith. In the ensuing conversation, Leonard Smith told her that Joe Smith was working for him at the jobsite. On June 22, 2017, Investigator Brigantty issued a Stop- Work Order to Respondent. With the Stop-Work Order, Investigator Brigantty also served Respondent with a Request for Production of Business Records for Penalty Assessment Calculation. Through this document, the Department requested several categories of business records from Respondent for the period of June 14, 2015, through June 13, 2017. The requested documents pertained to: employer identification, payroll documents, account documents, disbursements, workers’ compensation coverage, professional employer organization, temporary labor service, exemptions, subcontractors, and subcontractor’s workers’ compensation coverage. Based on its investigation, the Department determined that Respondent failed to secure adequate workers’ compensation coverage for its employees. Therefore, the Department proceeded to calculate a penalty based on Respondent’s lack of compliance with chapter 440. The Penalty Calculation: Lynne Murcia, the penalty auditor who determined the penalty the Department seeks to impose on Respondent, testified regarding her computation. Ms. Murcia explained that the penalty essentially consists of the “evaded” premium amount, or the actual amount the employer would have paid in workers’ compensation insurance for the uncovered employees, multiplied by two. To calculate the appropriate penalty for Respondent’s failure to secure workers’ compensation coverage, the Department first ascertained Respondent’s period of non-compliance. In determining this time frame, the Department referred to Florida Administrative Code Rule 69L-6.028(2), which directs that: The employer’s time period or periods of non- compliance means the time period(s) within the two years preceding the date the stop- work order was issued to the employer within which the employer failed to secure the payment of compensation pursuant to chapter 440, F.S., and must be either the same time period as set forth in the business records request for the calculation of penalty or an alternative time period or period(s) as determined by the Department, whichever is less. The employer may provide the Department with records from other sources, including, but not limited to, the Department of State, Division of Corporations, the Department of Business and Professional Regulation, licensing offices, and building permitting offices to show an alternative time period or period(s) of non-compliance. Based on these instructions, the Department deduced that Respondent’s period of non-compliance was from June 14, 2015, through June 13, 2017, which was the two-year period preceding the date of the Stop-Work Order.2/ (This two-year period was also the time for which the Department requested business records from Respondent.) After determining Respondent’s period of non- compliance, the Department then calculated the monetary penalty it should impose upon Respondent. In accordance with section 440.107(7)(d)1., the Department must assess against an employer: a penalty equal 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 failed to secure the payment of workers’ compensation required by this chapter within the preceding 2-year period or $1,000, whichever is greater. Therefore, the Department reviewed the business records Respondent provided to ascertain the amount of Respondent’s payroll during the two-year period of non-compliance. In response to the Department’s request for documents, Respondent produced a number of financial records. These records consisted primarily of bank statements and cancelled checks. The documentation Respondent submitted, however, was not comprehensive enough for the Department to determine all the wages Respondent paid to its employees, or the work they performed for the period of June 13, 2015, through June 14, 2017. Specifically, Respondent failed to provide complete bank statements or the corresponding check images for the periods of January 1 through April 30, 2016; June 1 through July 31, 2016; and June 1 through June 13, 2017. Consequently, the Department determined that Respondent did not provide business records sufficient for it to calculate Respondent’s complete payroll or the actual employee wages it paid over the two-year period of non-compliance. Therefore, the Department exercised its option to “impute” Respondent’s weekly payroll from June 13, 2015, through June 14, 2017. In addition to Joe Smith, the Department imputed wages for several other individuals and entities it identified in Respondent’s business records. Based on Respondent’s financial records, between June 14, 2015, and June 13, 2017, Respondent made payments to Earl Cockeranoham, “J.M.L.,” Martin Moore, “Peterson,” and Robert Tamburan. The Department also identified a subcontractor Respondent paid in 2015 named Roger’s Dirt Works, Inc. The Department further determined that at the time of the transaction, Roger’s Dirt Works, Inc., had neither workers’ compensation coverage, nor an exemption for a corporate officer. (Roger’s Dirt Works, Inc., subsequently obtained a valid exemption.) Therefore, the Department included Roger’s Dirt Works, Inc., in the penalty for the period of June 14 through December 31, 2015. The Department also added to Respondent’s payroll “uninsured labor” for the full period of non-compliance. Ms. Murcia relayed that “uninsured labor” reflects undesignated cash transactions for which the recipient was not identified or “validated” by Respondent’s business records and receipts. See Fla. Admin. Code R. 69L-6.035(1)(k). Respondent’s financial records revealed four separate cash payments totaling $6,892. Finally, the Department included Leonard Smith in all periods of non-compliance. The Department explained that Leonard Smith was registered as a corporate officer of Respondent. However, he did not have an active workers’ compensation exemption on file. Therefore, Respondent was also required to carry workers’ compensation for himself. See Fla. Admin. Code R. 69L-6.028(3)(b). To calculate Respondent’s imputed weekly payroll, section 440.107(7)(e) directs that the gross payroll for an employer who provides insufficient business records is imputed at the statewide average weekly wage multiplied by 1.5 for each employee for the period requested for the calculation of the penalty. Therefore, the Department obtained the statewide average weekly wage effective at the time of the Stop-Work Order ($886.46)3/ for each identified employee, corporate officer, and subcontractor, then multiplied that number by 1.5. See § 440.107(7)(e), Fla. Stat.; and Fla. Admin. Code R. 69L- 6.028(3)(a). To calculate a penalty based on an imputed payroll, the Department assigns an employer’s employees the highest rated workers’ compensation classification code. The classification code is based on either the business records submitted or the investigator’s observation of the employees’ activities. In this case, the business records Respondent provided to the Department were not sufficient to categorize the exact type of work that Joe Smith, or any of the other identified employees, performed for Respondent over the two-year period of non-compliance. However, during her investigation of the jobsite on June 13, 2017, Investigator Brigantty observed Joe Smith engaging in activities consistent with excavating, such as filling, backfilling, and moving earth. According to the Scopes Manual issued by the National Council on Compensation Insurance, Inc. (“NCCI”), class code 6217 is the “Excavation and Drivers” classification.4/ Consequently, the Department applied class code 6217 to all Respondent’s employees and officer for the entire penalty period. See Fla. Admin. Code R. 69L-6.028(3)(b) and 69L-6.021(2)(mmm)(excavation is classified as “construction activity”). Therefore, to calculate the premium amount for the workers’ compensation insurance Respondent should have paid for its employees, the Department applied the manual rates corresponding to class code 6217. Thereafter, based on: 1) the total periods of non- compliance, 2) Respondent’s calculated payroll for the periods of non-compliance, and 3) the estimated premium for workers’ compensation insurance, the Department issued the Amended Order of Penalty Assessment (“Penalty Assessment”) on October 13, 2017. The Penalty Assessment imposed a penalty of $42,407.08 against Respondent. Ms. Murcia explained that the initial penalty amount was calculated without the benefit of Respondent’s business records. However, after Respondent began providing its financial records in October 2017, the Department reduced its penalty assessment three times. On November 30, 2018, the Department served a 2nd Amended Order of Penalty Assessment, which adjusted the penalty down to $11,958.46. On May 29, 2019 (following leave by the undersigned), the Department produced a 3rd Amended Order of Penalty Assessment, which further reduced the penalty to $8,443.96. Finally, at the final hearing (in light of Leonard Smith’s deposition), the Department introduced a 4th Amended Order of Penalty Assessment with a revised (and final) penalty amount of $8,366.44. At the final hearing, Leonard Smith was adamant that Joe Smith was not his employee on June 13, 2017, or at any point. Instead, Leonard Smith explained that he is just a “broker” to help place workers with construction projects. Leonard Smith claimed that for the last nine years, he simply does estimating and consulting for other small contractors. Consequently, because he no longer engages in construction work or employs any workers, Leonard Smith asserted that he does not need to carry workers’ compensation insurance. Regarding the work that Investigator Brigantty witnessed on June 13, 2017, Leonard Smith testified that a church contacted him about supplying, filling, and spreading dirt on its property. Leonard Smith explained that the church was to pay him $12,840.00 for the job. Leonard Smith referred to Joe Smith as a “private contractor.” Leonard Smith relayed that he met Joe Smith in June 2017. Joe Smith expressed that he was looking for work. Leonard Smith told him about the job in Dunedin, Florida. On June 13, 2017, Leonard Smith met Joe Smith, who had brought his Bobcat, at the church and discussed the job. Leonard Smith then left him to complete the work. Leonard Smith insisted that he never “paid” Joe Smith. Instead, he simply agreed to share the money the church was giving him for the job. Leonard Smith called his own portion a “consulting fee.” On June 23, 2017, after he had received the $12,840.00 from the church, Leonard Smith wrote a check to Joe Smith for $3,440.00. Joe Smith never worked for Respondent or Leonard Smith before or since June 13, 2017. Regarding the payment to Earl Cockeranoham recorded in Respondent’s business records, Leonard Smith testified that Mr. Cockeranoham never worked for him. Instead, the money he paid to Mr. Cockeranoham in 2015 ($460.00) was for work Mr. Cockeranoham performed for the same church. Regarding evidence of a payment to Martin Moore, Leonard Smith testified that he paid Mr. Moore $500.00 in 2016 for Mr. Moore’s rent. Leonard Smith denied that he paid Mr. Moore for construction work. Respondent further testified that Respondent had known Mr. Moore a long time. Joe Smith testified at the final hearing regarding his understanding of his employment relationship with Respondent on June 13, 2017. Initially, Joe Smith explained that he had been out of work for several months and was looking for a job when he met Leonard Smith in June 2017. Leonard Smith offered him the work at the church spreading soil. Joe Smith relayed that he owned the Bobcat and brought it with him to the jobsite. Joe Smith stated that, on June 13, 2017, he met Leonard Smith at the church. There, Leonard Smith informed him that he was to bring an area of land up to proper elevation. They also discussed how they would split payment for the job. Joe Smith understood that the church was going to pay Leonard Smith. Then, Leonard Smith was going to give him his share. Joe Smith confirmed that Leonard Smith sent him approximately $3,000.00 several weeks after the job. Joe Smith also conceded that he was not covered by workers’ compensation on June 13, 2017. Joe Smith further testified that Investigator Brigantty showed up at the worksite the day he started working. Finally, at the final hearing, Joe Smith was dismayed that he had created this issue regarding workers’ compensation coverage. He expressed that he was simply looking for work, and Leonard Smith was kind enough to help him out. Joe Smith did not want to get anyone in trouble. Based on the competent substantial evidence in the record, the Department demonstrated, by clear and convincing evidence, that Respondent failed to secure workers’ compensation insurance coverage or workers’ compensation exemptions for its “employees” for the periods of June 14, 2015, through June 13, 2017. Accordingly, the Department met its burden of proving that Respondent violated chapter 440 and should be penalized. (As more fully addressed below, the evidence in the record does not sufficiently establish that either Earl Cockeranoham or Martin Moore were “employees” of Respondent under chapter 440. Therefore, they should not be included in the penalty calculation.)
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, Leonard Smith, d/b/a Site Development & Pipeline Construction, Inc., violated the requirement in chapter 440 to secure workers’ compensation coverage, and imposing a total penalty of $8,219.06. DONE AND ENTERED this 13th day of September, 2019, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of September, 2019.
The Issue Whether Millenium Homes, Inc. (Petitioner) conducted operations in the State of Florida without obtaining workers’ compensation coverage which meets the requirements of Chapter 440, Florida Statutes (2008), in violation of Subsection 440.107(2), Florida Statutes (2008)1, as alleged in the Stop-Work Order and Order and Penalty Assessment and the Fifth Amended Order of Penalty Assessment. If so, what penalty should be assessed by the Department of Financial Services, Division of Workers’ Compensation (Respondent), pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Respondent is the state agency charged with the responsibility of enforcing the requirements of Chapter 440, Florida Statutes, that employers in Florida secure the payment of workers’ compensation coverage for their employees. § 440.107(3), Fla. Stat. Workers’ compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. The payment of workers’ compensation coverage may be secured via three non-mutually exclusive methods: 1) the purchase of a workers’ compensation insurance policy; 2) arranging for the payment of wages and workers’ compensation coverage through an employee leasing company; and 3) applying for and receiving a certificate of exemption from workers’ compensation coverage if certain statutorily mandated criteria are met. On September 4, 2008, Maria Seidler, a compliance investigator employed by Respondent, was making random site visits at the Bella Vida development in North Fort Myers. Seidler observed eight workers unloading a truck, taking measurements, and performing various tasks on new homes under construction. All eight of the men were engaged in some type of activity on the job site. None were merely standing around, sitting in a truck, or otherwise idle. Seidler had all eight men stand in front of her, spoke to them in Spanish, and recorded their names on her field interview worksheet. All eight men advised Seidler, in Spanish, that they worked for Millenium Homes. None of the men advised Seidler that they did not work for Petitioner, nor that they were present in hopes of applying for a job. The individual apparently in charge at the job site, did not advise Seidler that not all of the men present were working for Petitioner. The evidence demonstrated that D.R. Horton was the general contractor for the project, and that D.R. Horton had contracted with Petitioner to frame out the housing units at the project. The eight men, who were present on the job site and who identified themselves as employees of Petitioner, confirmed that they were present on September 4, 2008, to perform framing. Framing is a construction activity as contemplated by Subsection 440.02(8), Florida Statutes, and Florida Administrative Code Rule 69L-6.021. James Loubert, president and sole shareholder of Petitioner, was not on the job site at the time of Seidler’s arrival, and she initially spoke with him by telephone. Loubert arrived at the job site a short time later. Loubert advised Seidler that Petitioner had secured workers’ compensation coverage for its employees through an employee leasing arrangement with Employee Leasing Solutions (ELS). This coverage was later confirmed by Seidler. However, of the eight workers found on the job site, three workers, Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar, were not named on the ELS list of Petitioner’s active, covered employees. Seidler was very definite and precise in her testimony that she observed Alejandro Osorio, Josue Sanchez Bautista, and Luis Aguilar wearing hard hats and engaging in work activities upon her arrival at the job site. Her testimony is found to be credible. When Loubert arrived at the job site, he informed Seidler that two of the workers, not listed on Petitioner’s active employee roster, were to have been sent home to pick up their Social Security cards, and that he had called in the third worker, Josue Sanchez Bautista, to ELS. Loubert did not inform Seidler that Osorio, Bautista, and Aguilar were not employees of Petitioner and were merely present at the job site in hopes of applying for a job. The Pre-hearing Stipulation signed by counsel for the parties and filed with the DOAH clerk on December 8, 2009, contained the following statements of admitted facts in section E: Respondent’s [sic] employees Josue Sanchez Bautista, Luis Aguilar, and Juan Perez had not been called into and accepted as employees by ELS as of September 4, 2008. Respondent [sic] was not in compliance with the coverage requirements of Chapter 440, Florida Statutes, as of September 4, 2008.2 At the hearing, both Javier Perez and Loubert testified that Osorio, Bautista, and Aguilar were not employees of Petitioner, but rather were waiting on site for Loubert to arrive, so that they could ask for jobs. However, they were all wearing hard hats. The testimony of Perez and Loubert is inconsistent with the observations of Seidler, as well as the statements made to Seidler by Loubert at the job site on September 8, 2008, and is, therefore, not credible. Petitioner had no workers’ compensation coverage other than that provided though ELS, and no active exemptions. James Loubert is the only officer of Petitioner, and did not have an exemption from coverage as of September 4, 2008. At the work-site, a Stop-Work Order 08-234-D7 was issued and personally served upon James Loubert based upon Petitioner’s failure to secure the payment of workers’ compensation for its employees Josue Sanchez Bautista, Luis Aguilar, and Alejandro Osorio. A business records request was also served on Loubert in order to obtain the records necessary to calculate and assess a penalty on Petitioner based upon its failure to comply with the coverage requirements of Chapter 440, Florida Statutes. Pursuant to Section 440.107(5), Florida Statutes, Petitioner’s business records were requested back to September 5, 2005, or three years prior to the issuance of the Stop-Work Order. Petitioner produced the register for its primary checking account to Respondent on September 4, 2008, in response to Respondent’s request for business records. Lynne Murcia is a compliance specialist for Respondent. She reviews business records produced by employers to determine the amount of payroll on which workers’ compensation premium was not paid, in order to calculate an appropriate penalty for violations of the coverage requirements of Chapter 440, Florida Statutes. Upon review of the business records initially produced by Petitioner, it was determined that the register from one of Petitioner’s two business checking accounts was missing. The records initially produced by Petitioner were, therefore, insufficient for the calculation of an appropriate penalty. It was requested that Petitioner produce the register for the second checking account, and those records were quickly produced. Thereafter, a 45-page summary of all transactions potentially meeting the definitions of payroll set forth in Florida Administrative Code Rule 69L-6.035 (the Rule), was prepared and an Order of Penalty Assessment issued. In determining which payments should potentially be considered payroll, pursuant to the Rule, all payments made by Petitioner directly to its employees that did not pass through ELS were included. To the extent that those direct payments meet the definition of payroll, they were subject to workers’ compensation premium and would be properly included in an assessed penalty. Petitioner also made direct “per diem” payments to reimburse its employees for the cost of meals and lodging which they incurred during the times that they were required to travel away from home to perform their jobs. The per diem rates were calculated pursuant to Internal Revenue Service guidelines, and were deducted as a business expense on Petitioner’s income tax returns for the years 2005-2007. The Rule requires that expense reimbursements by an employer to employees be included as payroll subject to workers’ compensation premium to the extent that the business records of the employer do not confirm that the expenses were incurred as valid business expenses. All per diem payments made by Petitioner to its employees were included in the calculations, because Petitioner did not produce the receipts reflecting that its employees had actually incurred meal and lodging expenses in those amounts. However, following the December 15, 2009, hearing, Respondent examined the issue further and concluded that Petitioner’s per diem payments to its employees were properly documented as business expenses on Petitioner’s income tax returns. Respondent thereafter sought leave to file its Fifth Amended Order of Penalty Assessment deleting all per diem payments from the assessed penalty. Petitioner made numerous payments to third parties who provided construction, maintenance, or janitorial services at the homes of James Loubert, his father, Adrian Loubert, and his wife, April White, or who provided child care services for the Loubert family. For example, Petitioner paid $1,500.00 for tile work performed at James Loubert’s residence; $478.00 to Alex Ortiz, Antonio Elias, and Candy Ortiz for pressure-washing the homes of James Loubert and April White; $2,548.14 to Pedro Delgano for building cabinets for the homes of James Loubert and his father; $11,326.40 to Rick Wilson for painting the houses of James and Adrian Loubert; and beginning August 23, 2007, through December 20, 2007, $1,433.66 to Diane Berger for cleaning James Loubert’s home. Petitioner also paid $3,402.00 to Cinta Smollis for babysitting services provided to Loubert. These individuals do not appear on the penalty work sheet of the Fifth Amended Order of Penalty Assessment, since they do not meet the statutory definition of employees. Petitioner also paid large sums of money to Adrian Loubert for the purchase of a farm in Canada. In addition, James Loubert testified that some of the payments to his father represented expense reimbursements, suggesting that, at some point, Adrian Loubert had been an employee of Petitioner. Petitioner did not introduce any exhibits into evidence reflecting the nature or amount of the reimbursements allegedly being made to Adrian Loubert. James Loubert was actively involved in the carpentry work performed by Petitioner, on the project on which the stop- work order was issued as well as on prior projects. Nevertheless, he received only a minimal salary through Petitioner’s employee leasing company, ELS. In 2007, Loubert received a total salary of $11,000.00 through ELS. In 2008, he received a total salary through ELS of only $7,200.00. Any payments that James Loubert received directly from Petitioner, that meet the definition of payroll set forth in the Rule, were subject to workers’ compensation premium, and are therefore subject to penalty. During the three-year penalty period specified by the statute, Petitioner made many cash payments to, or for the benefit of, James Loubert. The business records produced by Petitioner indicate that these cash payments were made to payees such as Blockbuster Video, Toys-R-Us, and PetsMart, as well as for vacation expenses. In addition, James Loubert took large amounts of cash from Petitioner to facilitate his hobby of racing cars. Throughout the penalty period, Petitioner also made numerous payments to Loubert’s wife, April White, and to his daughter, Alexa Seagate. Petitioner also made numerous payments to Gary White, his father-in-law and one of Petitioner’s employees. James Loubert testified that the payments made to, or on behalf of, family members, the payments made to third- party payees, and the cash payments which he took from Petitioner reflected shareholder distributions. However, the memo lines on those payment entries do not indicate that those payments were intended to be shareholder distributions. Petitioner’s business records reflect that the memo line on a check would indicate that it was a shareholder distribution, if that was what it was intended to be. This was the practice on other transactions. In addition, James Loubert testified that the memos for his Quick Books entries reflect “exactly what” each payment was for. Presumably those memo entries are the same as the memo entries on the corresponding checks. The payments made by Petitioner to third parties from which it appears that Petitioner did not receive services or a benefit, including but not limited to the payments made to family members of James Loubert, and the cash payments made by Petitioner to finance James Loubert’s auto racing hobby, do not constitute legitimate business expenses. Petitioner frequently made loans or wage advances to its employees. Although Loubert testified that those loans were repaid to him, he later acknowledged that a $2,000.00 loan to employee Rachel Broulet was never paid back, and that a $975.00 loan to Nicholas Susa was never repaid. Petitioner did not produce business records or documentary evidence at the hearing that indicates that any of the loans which it made to employees were repaid. The State of Florida has adopted a classification code developed by the National Council of Compensation Insurance (NCCI), which assigns individual four digit codes to various classes of labor. This classification code is utilized to segregate different categories of labor by risk and to determine appropriate workers’ compensation premiums for those classes of labor in Florida. Fla. Admin. Code R. 69L-6.021. As noted above, Petitioner was performing framing work at the time of the September 4, 2008, inspection. Because Petitioner’s employees were observed at work constructing residential homes, classification code 5645, detached one or two family dwellings, was correctly applied to Petitioner’s employees directly engaged in construction activities. This includes Javier Perez, as he was working along with and directly supervising the other seven carpenters who were working on site when the inspection took place. Classification code 8742, outside sales, has been applied to James Loubert, as he was not observed working on September 4, 2008. However, Loubert did testify at his deposition that he usually performed construction work along side Petitioner’s other employees, but Respondent did not apply the construction code to him in the Fifth Amended Order of Penalty Assessment. Classification code 8810 was correctly applied to those employees of Petitioner who performed clerical work in the office. The appropriate manual rates for each year of the penalty period of September 5, 2005, through September 4, 2008, was applied for each classification code assigned to Petitioner’s employees. In preparing the Fifth Amended Order of Penalty Assessment, the amount of unsecured payroll attributable to each employee of Petitioner listed on the penalty worksheet was correctly calculated. From the evidence, Luis Aguilar and Alejandro Osorio were to be paid $10.00 per hour. There was no evidence that Aguilar and Osorio had worked prior to the issuance of the Stop-Work Order, and therefore, earnings of $80.00 assigned, reflecting eight hours at $10.00 per hour for September 4, 2008, was correct. Petitioner failed to provide any business records or other information concerning the rate of pay for Josue Sanchez Bautista, the third non-compliant worker. Bautista’s wages for September 4, 2008, can be imputed utilizing the statewide average wage pursuant to Subsection 440.107(7)(e), Florida Statutes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order finding that Millenium Homes, Inc., failed to secure the payment of workers’ compensation insurance coverage for its employees, in violation of Section 440.38(1), Florida Statutes, and that a penalty in the amount of $66,099.37 should be imposed for the failure to provide the required workers’ compensation insurance coverage. DONE AND ORDERED this 28th day of May, 2010, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 2010.
The Issue At issue in this proceeding is whether the Respondent, George Washington Beatty, III, failed to abide by the coverage requirements of the Workers' Compensation Law, chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for himself and/or his employees, and, if so, whether the Petitioner properly assessed a penalty against the Respondent pursuant to section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following Findings of Fact are made: The Department is the state agency responsible for enforcing the requirement of the Workers' Compensation Law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. George Washington Beatty, III, is a sole proprietor who works as a painter and general construction handyman in the vicinity of Panama City. The types of work performed by Mr. Beatty are properly considered construction industry work. Mr. Beatty’s business is not incorporated. He has no regular employees other than himself. His Form 1099-MISC tax forms indicate that he was actively engaged in performing construction work during the two-year audit period from September 9, 2012, through September 8, 2014. Carl Woodall is a Department compliance investigator based in Panama City. On September 8, 2014, Mr. Woodall drove up to 1803 New Hampshire Avenue in Lynn Haven, a vacant house where he saw a “for sale” sign and indications of work being performed on the house: the garage door was open and contained a great deal of painting materials such as drop cloths and paint buckets. A work van and a pickup truck were parked in the driveway. Mr. Woodall testified that as he walked up to the front door, he could see someone inside on a ladder, painting the ceiling. As Mr. Woodall started to go in the front door, he was met by Mr. Beatty on his way out the door. Mr. Woodall introduced himself and gave Mr. Beatty his business card. Mr. Woodall asked him the name of his business and Mr. Beatty stated that he did not know what Mr. Woodall was talking about. Mr. Beatty then told Mr. Woodall that he worked for Brush Stroke Painting but that he was not working this job for Brush Stroke. Mr. Beatty told Mr. Woodall that he was helping out a friend. Mr. Woodall asked whether Mr. Beatty had workers’ compensation insurance coverage, and Mr. Beatty again stated that he did not know what Mr. Woodall was talking about. He was just there helping out his friend, the owner of the house. Mr. Woodall asked Mr. Beatty to give him the owner’s name and phone number. Mr. Beatty went out to his van to retrieve the information. While Mr. Beatty was out of the house, Mr. Woodall took the opportunity to speak with the three other men working in the house. The first man, whom Mr. Woodall approached, was immediately hostile. He said that he was not working for anyone, that he was just helping someone out. He walked out of the house and never returned while Mr. Woodall was there. Mr. Woodall walked into the kitchen and spoke to a man who was on a ladder, painting. The man identified himself as Dennis Deal and stated that he was working for Mr. Beatty for eight dollars an hour in cash. He told Mr. Woodall that he helped out sometimes when Mr. Beatty needed help. Before Mr. Woodall could speak to the third person, Mr. Beatty came back into the house with the owner’s contact information. Mr. Beatty continued to deny that he was paying anyone to work in the house. With Mr. Beatty present, Mr. Woodall spoke with the third man, Michael Leneave, who stated that Mr. Beatty was paying him ten dollars an hour in cash. Mr. Woodall then took Mr. Beatty over to Mr. Deal, who reiterated that Mr. Beatty was paying him eight dollars an hour. Mr. Beatty responded that he could not believe the men were saying that because he had never told them a price. Mr. Woodall asked Mr. Beatty to identify the man who left the house, and Mr. Beatty told him it was Tommy Mahone. Mr. Beatty stated that Mr. Mahone had a bad temper and probably left to get a beer. After speaking with Mr. Beatty and the other men, Mr. Woodall phoned Brian Daffin (Mr. Daffin), the owner of the house. Mr. Woodall knew Mr. Daffin as the owner of an insurance company in Panama City. Mr. Daffin told Mr. Woodall that Mr. Beatty was painting his house, but was evasive as to other matters. Mr. Woodall stated that as the owner of an insurance company, Mr. Daffin was surely familiar with workers’ compensation insurance requirements and that he needed a straight answer as to whether Mr. Daffin had hired Mr. Beatty to paint the house. Mr. Daffin stated that he did not want to get Mr. Beatty in trouble, but finally conceded that he had hired Mr. Beatty to paint the house. Of the other three men, Mr. Daffin was familiar only with Mr. Mahone. He told Mr. Woodall that he had hired Mr. Beatty alone and did not know the details of Mr. Beatty’s arrangements with the other three men. At the hearing, Mr. Beatty testified that he was asked by Mr. Daffin to help him paint his house as a favor. Mr. Beatty had met Mr. Daffin through James Daffin, Mr. Daffin’s father and Mr. Beatty’s friend. No one was ever paid for anything. Mr. Beatty stated that he took the lead in speaking to Mr. Woodall because he was the only one of the four men in the house who was sober. He told Mr. Woodall that he was in charge because Mr. Daffin had asked him to oversee the work. None of the three men alleged to have been working for Mr. Beatty testified at the hearing. Mr. Daffin did not testify. Mr. Beatty’s testimony is thus the only direct evidence of the working arrangement, if any, which obtained between Mr. Beatty and the three other men present at the house on September 8, 2014. The only evidence to the contrary was Mr. Woodall’s hearsay testimony regarding his conversations with the three men and with Mr. Daffin. Mr. Woodall checked the Department's Coverage and Compliance Automated System ("CCAS") database to determine whether Mr. Beatty had secured the payment of workers' compensation insurance coverage or had obtained an exemption from the requirements of chapter 440. CCAS is a database that Department investigators routinely consult during their investigations to check for compliance, exemptions, and other workers' compensation related items. CCAS revealed that Mr. Beatty had no exemption or workers' compensation insurance coverage for himself or any employees. There was no evidence that Mr. Beatty used an employee leasing service. Based on his jobsite interviews with the alleged employees and Mr. Beatty, his telephone conversation with Mr. Daffin, and his CCAS computer search, Mr. Woodall concluded that as of September 8, 2014, Mr. Beatty had three employees working in the construction industry and that he had failed to procure workers’ compensation coverage for himself and these employees in violation of chapter 440. Mr. Woodall consequently issued a Stop-Work Order that he personally served on Mr. Beatty on September 8, 2014. Also on September 8, 2014, Mr. Woodall served Mr. Beatty with a Request for Production of Business Records for Penalty Assessment Calculation, asking for payroll and accounting records to enable the Department to determine Mr. Beatty’s payroll and an appropriate penalty for the period from September 9, 2012, through September 8, 2014. Mr. Beatty provided the Department with no documents in response to the Request for Production. On September 24, 2014, the Department issued an Amended Order of Penalty Assessment that assessed a total penalty of $141,790.96. The Amended Order of Penalty Assessment was served on Mr. Beatty via hand-delivery on October 16, 2014. Anita Proano, penalty audit supervisor for the Department, later performed her own calculation of the penalty as a check on the work of the penalty calculator. Ms. Proano testified as to the process of penalty calculation. Penalties for workers' compensation insurance violations are based on doubling the amount of evaded insurance premiums over the two- year period preceding the Stop-Work Order, which in this case was the period from September 9, 2012, through September 8, 2014. § 440.107(7)(d), Fla. Stat. Because Mr. Beatty initially provided no payroll records for himself or the three men alleged to have worked for him on September 8, 2014, the penalty calculator lacked sufficient business records to determine an actual gross payroll on that date. Section 440.107(7)(e) provides that where an employer fails to provide business records sufficient to enable the Department to determine the employer’s actual payroll for the penalty period, the Department will impute the weekly payroll at the statewide average weekly wage as defined in section 440.12(2), multiplied by two.1/ In the penalty assessment calculation, the Department consulted the classification codes and definitions set forth in the SCOPES of Basic Manual Classifications (“Scopes Manual”) published by the National Council on Compensation Insurance (“NCCI”). The Scopes Manual has been adopted by reference in Florida Administrative Code Rule 69L-6.021. Classification codes are four-digit codes assigned to occupations by the NCCI to assist in the calculation of workers' compensation insurance premiums. Rule 69L-6.028(3)(d) provides that "[t]he imputed weekly payroll for each employee . . . shall be assigned to the highest rated workers' compensation classification code for an employee based upon records or the investigator's physical observation of that employee's activities." Ms. Proano testified that the penalty calculator correctly applied NCCI Class Code 5474, titled “Painting NOC & Shop Operations, Drivers,” which is defined in part as “the general painting classification. It contemplates exterior and interior painting of residential or commercial structures that are constructed of wood, concrete, stone or a combination thereof regardless of height.” The corresponding rule provision is rule 69L-6.021(2)(jj). The penalty calculator used the approved manual rates corresponding to Class Code 5474 for the periods of non-compliance to calculate the penalty. Subsequent to issuance of the Amended Order of Penalty Assessment, Mr. Beatty submitted to the Department, IRS Wage and Income Transcripts for the tax years of 2011, 2012, and 2013, but not for tax year 2014. These Transcripts consisted of Form 1099-MISC forms completed by the business entities for which Mr. Beatty had performed work during the referenced tax years. The Department used the Transcripts to calculate the penalty for the 2012 and 2013 portions of the penalty period and imputed Mr. Beatty’s gross payroll for the 2014 portion pursuant to the procedures required by section 440.107(7)(e) and rule 69L-6.028. On August 25, 2015, the Department issued a Second Amended Order of Penalty Assessment in the amount of $58,363.88, based on the mixture of actual payroll information and imputation referenced above. At the final hearing convened on November 3, 2015, Mr. Beatty stated that he now had the Wage and Income Transcript for tax year 2014 and would provide it to the Department. At the close of hearing, the undersigned suggested, and the Department agreed, that the proceeding should be stayed to give the Department an opportunity to review the new records and recalculate the proposed penalty assessment. On December 21, 2015, the Department issued a Third Amended Order of Penalty Assessment in the amount of $9,356.52. Ms. Proano herself calculated this penalty. The Third Amended Order assessed a total penalty of $9,199.98 for work performed by Mr. Beatty during the penalty period, based on the Wage and Income Transcripts that Mr. Beatty submitted. The Third Amended Order assessed a total penalty of $156.54 for work performed by Messrs. Mahone, Deal, and Leneave on September 8, 2014. This penalty was imputed and limited to the single day on which Mr. Woodall observed the men working at the house in Lynn Haven. Mr. Beatty’s records indicated no payments to any employee, during the penalty period or otherwise. The evidence produced at the hearing established that Ms. Proano utilized the correct class codes, average weekly wages, and manual rates in her calculation of the Third Amended Order of Penalty Assessment. The Department has demonstrated by clear and convincing evidence that Mr. Beatty was in violation of the workers' compensation coverage requirements of chapter 440. The Department has also demonstrated by clear and convincing evidence that the penalty was correctly calculated through the use of the approved manual rates, business records provided by Mr. Beatty, and the penalty calculation worksheet adopted by the Department in rule 69L-6.027. However, the Department did not demonstrate by clear and convincing evidence that Tommy Mahone, Dennis Deal, and Michael Leneave were employees of Mr. Beatty on September 8, 2014. There is direct evidence that Mr. Woodall saw the men working in the house, but the only evidence as to whether or how they were being paid are the hearsay statements of the three men as relayed by Mr. Woodall. The men were not available for cross-examination; their purported statements to Mr. Woodall could not be tested in an adversarial fashion. Mr. Beatty’s testimony that the men were not working for him and that he was merely supervising their work as a favor to Mr. Daffin is the only sworn, admissible evidence before this tribunal on that point. Mr. Beatty was adamant in maintaining that he did not hire the men, and his testimony raises sufficient ambiguity in the mind of the factfinder to preclude a finding that Messrs. Mahone, Deal, and Leneave were his employees. Mr. Beatty could point to no exemption or insurance policy that would operate to lessen or extinguish the assessed penalty as to his own work. The Department has demonstrated by clear and convincing evidence that Respondent was engaged in the construction industry in Florida during the period of September 9, 2012, through September 8, 2014, and that Respondent failed to carry workers’ compensation insurance for himself as required by Florida’s Workers’ Compensation Law from September 9, 2012, through September 8, 2014. The penalty proposed by the Third Amended Order of Penalty Assessment should be reduced to $9,199.98, the amount sought to be imposed on Mr. Beatty himself.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $9,199.98 against George Washington Beatty, III. DONE AND ENTERED this 6th day of July, 2016, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of July, 2016.
The Issue The issue is whether the Stop-Work Order and the Third Amended Order of Penalty Assessment entered by Petitioner on July 25, 2013, and August 13, 2013, respectively, should be upheld.
Findings Of Fact The Department is the state agency tasked with the responsibility of enforcing the requirement of section 440.107(3), Florida Statutes, that employers in Florida secure the payment of workers' compensation for their employees. Respondent, Mad Dog Marketing Group, Inc., is a corporation organized under chapter 607, Florida Statutes, and was registered with the Florida Department of State, Division of Corporations, throughout the period of July 26, 2010, to July 25, 2013. At all times relevant to this proceeding, Respondent was engaged in the operation of a hardware store business with three locations in Florida. On July 25, 2013, based upon an anonymous referral, Tracey Gilbert, the Department's compliance investigator, commenced a workers' compensation compliance investigation of Respondent by visiting the job site, an appliance parts store at 730 West Brandon Boulevard, Brandon, Florida, and interviewing Sharon Belcher. According to Ms. Gilbert, Ms. Belcher informed her that she had 11 employees at the time of the site visit and that she did not have workers' compensation coverage for them. Ms. Belcher showed Ms. Gilbert an application for workers' compensation insurance and said she had not taken action with it since the company wanted a $10,000 premium. She also showed Ms. Gilbert some OSHA and workplace posters, but not the typical "broken arm poster" that describes workers' compensation coverage for a place of business. Ms. Belcher then gave Ms. Gilbert a list of Respondent's 11 current employees. On her laptop computer, Ms. Gilbert consulted the Department's Coverage and Compliance Automated System (CCAS) database to determine whether Respondent had secured workers' compensation coverage or an exemption from the requirements for coverage for its employees. CCAS is the database Ms. Gilbert routinely consults during the course of her investigations. She determined from CCAS that Respondent neither had workers' compensation coverage for her employees nor had received an exemption from such coverage from the Department. Ms. Belcher's recollection of her meeting with Ms. Gilbert differs from Ms. Gilbert's. Ms. Belcher recalled that she had applied for insurance with ADP on July 11, 2013, received the "broken arm poster," and believed she was covered at the time Ms. Belcher conducted her investigation. She offered an exhibit showing photographs of posters (but not the "broken arm poster") on the office bulletin board. She also offered an exhibit she testified was the UPS label from the tube containing the "broken arm poster." No photograph of the "broken arm poster" was produced as an exhibit. Ms. Gilbert did not contact ADP to verify whether Respondent had coverage on the date of her site visit to the Brandon store. Ms. Gilbert issued a Stop-Work Order to Respondent and a concurrent Request for Production of Business Records for Penalty Assessment Calculation at 11:20 a.m. on July 25, 2013. Ms. Belcher first submitted an application for workers' compensation coverage on July 11, 2013, but coverage was not bound on that date. Ms. Belcher submitted the paperwork to bind her insurance coverage on the afternoon of July 25, 2013, according to Mark Cristillo, an employee of ADP Insurance. Mr. Cristillo testified that he had made several attempts during the month of July 2013 to obtain the signed documents from Ms. Belcher, including an attempt as late as July 23, 2013, at 11:45 a.m. Ms. Belcher told Mr. Cristillo at that time that she had not reviewed the quote package. At 11:20 a.m., the time Ms. Gilbert's issued the Stop-Work Order on July 25, 2013, Ms. Belcher had not bound her insurance coverage. When she submitted the payment with the signed documents to ADP later that afternoon, the coverage was bound effective 12:01 a.m. on July 25, 2013. The records produced by Ms. Belcher were given to Chad Mason, one of the Department's penalty auditors, to calculate the penalty. He reviewed the records and determined the amount of gross payroll paid to Respondent's employees during the three- year penalty period preceding the investigation during which Respondent was not in compliance with the workers' compensation coverage requirements. Using Respondent's bi-weekly payroll chart, Respondent's Florida Department of Revenue UCT-6 reports, and the classification codes for each employee, Mr. Mason calculated a Third Amended Order of Penalty Assessment of $42,251.43, based upon what Respondent would have paid in workers' compensation premiums had it been in compliance with Florida's Workers' Compensation Law. The order was issued on October 24, 2013. Mr. Mason determined that the appropriate codes for Respondent's employees were 8010 and 8810, which are hardware store employees and general clerical employees, respectively. These codes were derived from the Scopes Manual, which lists all of the various jobs that may be performed in the context of workers' compensation. The manual is produced by NCCI, the National Council on Compensation Insurance, Inc., the nation's most authoritative data collecting and disseminating organization for workers' compensation. The parties stipulated prior to hearing that all of the individuals listed on the penalty worksheet of the Amended Order of Penalty Assessment were "employees" in the state of Florida of Respondent during the periods of non-compliance listed on the penalty worksheets. However, Respondent claimed that some of the employees were out-of-state and not subject to Florida law. Ms. Belcher testified that, as of July 25, 2013, three of its employees, Fred Hasselman, Douglas Strickland, and Josh Hyers, were employees of the Tennessee store and not subject to a Florida penalty. Mr. Hyers was a Florida employee prior to July 1, according to Ms. Belcher. However, all three of the employees were listed on the Florida Department of Revenue's UCT-6 form for the time period of the non-compliance. The UCT-6 form lists those employees who are subject to Florida's Unemployment Compensation Law. Mr. Mason reasonably relied upon the UCT-6 filings for the relevant time period to calculate Respondent's gross payroll in Florida. No evidence was produced to show them listed as Tennessee employees on that state's comparable tax form or any official document from outside Florida. The logical assumption is that they are Florida employees under the law. Accepting all the employees disclosed by Respondent as Florida employees led Mr. Mason to make his calculations of the penalty assessment using the appropriate codes from the Scopes Manual for hardware store and general clerical workers, 8010 and 8810. All the named employees on the Third Amended Order of Penalty Assessment were paid by Respondent in the amounts indicated on the penalty worksheet that accompanies that assessment during the penalty period of July 26, 2010, through July 25, 2013. Even though small discrepancies came up at the hearing regarding the classifications of some of Respondent's employees, the parties had stipulated to the accuracy of the classifications of those employees so those numbers will be accepted for purposes of this decision. Based upon the testimony at the hearing and the pre-hearing stipulations of the parties, the penalty assessment in the amount of $42,251.43 is accurate. Mr. Mason correctly applied the methodology for determining the amount of coverage required, determining that the appropriate premium for the three- year period would have been $28,167.50. When multiplied by the factor used to calculate the penalty, 1.5 times the premium, the total amount due is $42,251.43. The Department has proven by clear and convincing evidence that at the time the Stop-Work Order was issued and served on Respondent on the morning of July 25, 2013, Respondent had not secured workers' compensation coverage for its employees as required by chapter 440. On two occasions, August 2 and August 21, 2013, Ms. Gilbert returned to Respondent's Brandon location after the Stop-Work Order had been issued. The first was to serve the Amended Order of Penalty Assessment and the second was to serve the Second Amended Order of Penalty Assessment. On both occasions, the business was open in violation of the Stop-Work Order. A business under a Stop-Work Order may elect to enter into a payment plan after a ten percent down payment to keep the business open while a challenge to DOAH is under way. Respondent had not entered into such a plan. Therefore, the Department seeks $1,000 penalty for each of the days Ms. Gilbert visited the Brandon store and saw it open for business. This total additional penalty of $2,000 could have been greater had the Department further investigated whether the business remained open on other days after the Stop-Work Order had been imposed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a final order upholding the Stop-Work Order and Third Amended Order of Penalty Assessment, and assess a penalty in the amount of $42,251.43. It is further RECOMMENDED that the Department fine Respondent an additional $1,000 per day for the two days Respondent did not comply with the Stop-Work Order, resulting in a total penalty of $44,251.43. DONE AND ENTERED this 20th day of December, 2013, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN 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 December, 2013. COPIES FURNISHED: Trevor S. Suter, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 Kristian Eiler Dunn, Esquire Dickens and Dunn, P.L. 517 East College Avenue Tallahassee, Florida 32301 Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390
