09-001778 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Majestic Custom Homes And Realty, Inc. Status: Closed Recommended Order on Monday, September 28, 2009.

Summary: Petitioner demonstrated that Respondent failed to secure workers' compensation coverage and that Respondent's employees continued to work during the effective period of the stop-work order; hence, the penalty was warranted and was correct.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS’ )

COMPENSATION, )

)

Petitioner, ) Case No. 09-1778

)

vs. )

)

MAJESTIC CUSTOM HOMES AND )

REALTY, INC., )

)

Respondent. )

________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on July 7, 2009, by video teleconference with connecting sites in

West Palm Beach and Tallahassee, Florida, before Errol H. Powell,

an Administrative Law Judge of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Paige B. Shoemaker, Esquire

Department of Financial Services

Division of Legal Services

Workers’ Compensation Section

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: John P. George, pro se

Majestic Custom Homes and Realty, Inc.

4121 Royal Palm Beach Boulevard

Royal Palm Beach, Florida 33411

STATEMENT OF THE ISSUE

The issue for determination is whether Respondent failed to

secure workers’ compensation coverage in violation of the

requirements of the Workers’ Compensation Law, Chapter 440,

Florida Statutes, as set forth in the Stop-Work Order issued on

February 11, 2009, and, if so, whether Respondent should be

assessed the penalty set forth in the 3rd Amended Order of

Penalty Assessment issued on April 7, 2009.

PRELIMINARY STATEMENT

On February 11, 2009, the Department of Financial Services,

Division of Workers’ Compensation (Department) issued a Stop-Work

Order (SWO) and an Order of Penalty Assessment (OPA) against

Majestic Custom Homes and Realty, Inc. (Majestic). The SWO and

OPA were contained in a one-page document. By the SWO, the

Department charged Majestic with violating Sections 440.10(1),

440.38(1), and 440.107(2), Florida Statutes, by failing to obtain

workers' compensation coverage that meets the requirements of

Chapter 440, Florida Statutes, and the Insurance Code. The SWO

identified Majestic as a construction employer. The posting of

the SWO and OPA was at the worksite, a Port Charlotte address.

By the OPA, the Department assessed a penalty against Majestic,

but no dollar amount was provided, only the calculation method or

process being used by the Department. The SWO and OPA indicated

that they were hand-delivered to Majestic. By an Amended OPA,

issued on March 4, 2009, which indicated that it was hand-

delivered on March 5, 2009, to Majestic’s address, to which was

attached a penalty worksheet, the Department assessed an amended

penalty against Majestic in the amount of $4,298.20. Eventually,

the Department issued a 3rd Amended OPA, issued on March 7, 2009,

to which was attached a penalty worksheet, assessing a penalty

against Majestic in the amount of $29,173.08. By letter dated

March 24, 2009, Majestic requested a hearing and submitted to the

Department a list of all of its employees, gross payroll, class

codes for the employees, and payroll summary reports. This

matter was referred to the Division of Administrative Hearings on

April 7, 2009.

At the hearing, the Department presented the testimony of

two witnesses and entered five exhibits (Petitioner's Exhibits

numbered 2 through 6) into evidence. 1 Majestic presented the

testimony of two witnesses and entered no exhibits into evidence.

A transcript of the hearing was ordered. At the request of

the parties, the time for filing post-hearing submissions was set

for more than ten days following the filing of the transcript.

The Transcript, consisting of one volume, was filed on July 28,

2009. The Department timely filed its post-hearing submission.

Majestic chose not to file a post-hearing submission. The

Department’s post-hearing submission has been considered in the

preparation of this Recommended Order.

FINDINGS OF FACT

1. At all times material hereto, Majestic was an employer

in the State of Florida, engaged in the construction industry.

2. At all times material hereto, John George was the

president of Majestic.

3. On February 11, 2009, the Department’s investigator, Ira

Bender (Investigator Bender), visited Majestic’s model home site

at 16874 Toledo Blade Boulevard, Port Charlotte, Florida.

Investigator Bender spoke with two individuals, Linda Meldrum and

Matt Brown, who were working at the worksite. Ms. Meldrum was a

sales representative and Mr. Brown was a superintendent.

Majestic does not dispute that, even though it had employees

working at the model home site, it (Majestic) did not have

workers’ compensation coverage for its employees.

4. On February 11, 2009, a SWO and an OPA were issued by

the Department to Majestic and were posted, by Investigator

Bender, at the model home site, Majestic’s worksite.

Investigator Bender testified that he posted the SWO and OPA at

the worksite. His testimony is found to be credible.

5. The SWO indicates, among other things, that Majestic

failed to obtain workers’ compensation coverage that meets the

requirements of Chapter 440, Florida Statutes, and the Insurance

Code. The SWO further provides that the SWO “SHALL REMAIN IN

EFFECT UNTIL THE [Department] ISSUES AN ORDER RELEASING THE [SWO]

FOR ALL WORKSITES.”

6. The OPA also indicates, among other things, that the

penalty assessed against the employer (Majestic) would be in an

amount equal to 1.5 times the amount the employer would have paid

in premium within the preceding 3-year period, or $1,000.00,

whichever was greater. The OPA further provides that the

“penalty may be amended until a Final Order or an Order of

Conditional Release from [SWO] is issued.”

7. Majestic stipulates and does not dispute that it was

without workers’ compensation coverage for all of its employees.

8. The SWO and OPA indicate that they were hand-delivered

to Majestic at its place of business on February 13, 2009.

Investigator Bender did not hand-deliver the SWO and OPA;

however, he testified at hearing regarding the SWO and OPA and

the usual or standard practice of the Department in hand-

delivering a SWO and OPA. His testimony is found to be credible.

An inference is drawn and a finding of fact is made that the

standard operating procedure of the Department is to hand-deliver

the SWO and OPA to the employer’s address, i.e., at its place of

address for its place of business as 4061 Royal Palm Beach

Boulevard, Royal Palm Beach, Florida. The Department’s

investigator, who is indicated on the SWO and OPA as the one who

hand-delivered the SWO and OPA, did not testify at hearing.

Further, Majestic denies receiving the SWO and OPA at its place

of business and was unaware of the SWO and OPA. The Department

failed to show by clear and convincing evidence 2 that the SWO and

OPA were hand-delivered to Majestic on February 13, 2009, at its

place of business.

9. Also, on February 13, 2009, the Department issued to

Majestic a request for business records (Request) in order to

calculate the penalty to be assessed. The Request indicates,

among other things, that the business records being requested

were to be submitted by Majestic within five business days of the

service of the Request; that the business records were to be

submitted to Investigator Bender, providing his contact

information; and that the failure of Majestic to do so would

result in imputed weekly payroll, which was the statewide average

weekly wage multiplied by 1.5. Further, the Request indicates

that it was personally served on Majestic on February 13, 2009,

at Majestic’s address for its place of business by the same

investigator who was indicated as having hand-delivered the SWO

and OPA. The Department failed to show by clear and convincing

evidence 3 that the Request was personally served on Majestic at

its place of business on February 13, 2009.

10. Majestic did not comply with the Request.

11. An Amended OPA was issued by the Department on March 4,

2009. The Amended OPA provided, among other things, that the

total assessed penalty was $4,298.20; and that the SWO would

remain in effect until either the Department issued a release

from the SWO, indicating the terms or conditions upon which the

SWO would be released, or the Department issued a conditional

release from the SWO, indicating the terms or conditions upon

which the SWO would be conditionally released.

12. A penalty worksheet was attached to the Amended OPA.

The penalty worksheet reflected, among other things, the name of

Majestic’s employees who were covered by the SWO; the imputed

class code for each of the employees—each employee had the same

class code; the period of non-compliance; the imputed gross

payroll for each employee; the insurance premium for each

employee; and the penalty times 1.5 for each employee, totaling

$4,298.20. Because Majestic did not provide the requested

business records, the penalty assessment was based upon imputed

payroll and employee class codes.

13. The Amended OPA indicates that it was hand-delivered to

Majestic at the address of its place of business on March 6,

2009, by the same investigator who was indicated as having hand-

delivered the SWO and OPA and the Request. Majestic maintains

that the Amended OPA was not hand-delivered to it (Majestic) at

its place of business. The Department failed to show by clear

and convincing evidence 4 that the Amended OPA was hand-delivered

to Majestic on March 6, 2009, at its place of business.

14. On March 23, 2009, Investigator Bender returned to the

model home site, i.e., the worksite. At that time, he found

Ms. Meldrum and Mr. Brown working. Ms. Meldrum, the sales

representative, had continued working her normal work schedule of

Monday, Tuesday, Wednesday, Saturday, and Sunday, since the

posting of the SWO; she had never ceased working as usual.

Mr. Brown, the superintendent, had continued working part-time

and being paid his normal salary, since the posting of the SWO;

he too had never ceased working as usual. Terry Hearn, assistant

to Mr. George, also worked for Majestic and was paid a salary

from February 12 through March 23, 2009.

15. The SWO had not been lifted. The SWO was still in

effect on March 23, 2009.

16. Mr. George testified that Majestic had no knowledge of

a SWO until sometime in March 2009. He did not testify that

Majestic was ever served with the SWO at its place of business.

His testimony is found to be credible.

17. The evidence is not clear and convincing 5 that Majestic

was served with the SWO.

18. A 2nd Amended OPA was issued by the Department on

March 25, 2009. The 2nd Amended OPA amended the total penalty to

an amount of $32,298.20, based upon “additional penalty of

$28,000.00 added to original penalty for working thru the SWO.”

The additional penalty represented 28 days that the employees

were working during the time that the SWO was in effect, at

$1,000.00 per day. The 2nd Amended OPA indicates that it was

personally served on Majestic at the address of its place of

business on March 27, 2009, by the same Department’s investigator

who was indicated as having hand-delivered the SWO and OPA. The

Department failed to show by clear and convincing evidence 6 that

the Amended OPA was hand-delivered to Majestic on March 6, 2009,

at its place of business. However, Majestic admits that it

received notification regarding an assessed penalty in mid-March

2009. Hence, an inference is drawn and a finding of fact is made

that Majestic received notification of the 2nd Amended OPA.

19. Mr. George testified that Majestic’s person who handled

its workers’ compensation coverage was no longer with Majestic at

the pertinent time and did not inform Majestic about its workers’

compensation coverage; and that Majestic was, therefore, not

aware that it did not have workers’ compensation coverage until

it received notification in mid-March of the SWO. However,

Mr. George further testified that Majestic was responsible for

maintaining workers’ compensation coverage; and that he was not

making any excuses for Majestic’s failure to maintain such

coverage. His testimony is found to be credible.

20. Furthermore, Mr. George testified that, if Majestic had

been notified of the SWO at its place of business, it would have

immediately ceased all work and obtained the workers’

compensation coverage. His testimony is found to be credible.

However, Mr. George’s testimony fails to demonstrate that the SWO

and OPA were not posted at the worksite: Investigator Bender

testified that he posted the SWO and the OPA at the worksite on

February 11, 2009, and Investigator Bender’s testimony was found

credible. Therefore, the evidence is insufficient to disturb the

finding of fact that the SWO and OPA were posted at the worksite

on February 11, 2009.

21. Subsequently, on May 20, 2009, Majestic provided the

Department with the business records requested in the Request.

Majestic provided the Department its (Majestic’s) Quickbook

records, which contained, among other things, Majestic’s actual

payroll and proper class codes.

22. Majestic requests compensation for the time expended by

its employees, who were very limited in number, in obtaining the

information needed by the Department in order to obtain the

correct codes. Majestic did not present any evidence

demonstrating a cost associated with providing the information to

the Department.

23. Having received Majestic’s Quickbook records, the

Department issued a 3rd Amended OPA on April 7, 2009. The 3rd

Amended OPA amended the total penalty to an amount of $29,173.08,

based upon “Employees added to the penalty, class codes changed

and business records used (no imputing).”

24. A penalty worksheet was attached to the 3rd Amended

OPA. The penalty worksheet reflected, among other things, the

name of Majestic’s employees who were covered by the SWO; the

class code for each of the employees; the period of non-

compliance; gross payroll for each employee; the insurance

premium for each employee; and the penalty times 1.5 for each

employee, totaling $1,173.08. Further, the penalty worksheet

reflected, among other things, the time period of the violation

of the SWO, i.e., February 12 through March 23, 2009; the number

of days of the violation, i.e., 28 days; the statutory penalty,

i.e., $1,000.00, times the number of days in violation; the total

penalty for violating the SWO in the amount of $28,000.00; and a

total penalty in the amount of $29,173.08.

25. Majestic entered into a payment agreement with the

Department, and the SWO was conditionally released.

26. Majestic does not dispute that the persons listed on

the 3rd Amended OPA were employed by it during the time period

that the SWO was in effect and that the class codes for the

employees are correct.

27. However, Majestic does dispute the assessed penalty in

the amount of $28,000.00.

28. At the time of hearing, the number of persons employed

by Majestic’s had been considerably reduced to only three

employees.

CONCLUSIONS OF LAW

29. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and the

parties thereto pursuant to Sections 120.569 and 120.57(1),

Florida Statutes (2009).

30. The Department is charged with implementing and

enforcing the Workers' Compensation Law, Chapter 440, Florida

Statutes.

31. The ultimate burden of proof is on the Department to

establish by clear and convincing evidence that Majestic violated

Chapter 440, Florida Statutes, as alleged in the SWO and that the

penalty assessed is correct as alleged in the 3rd Amended OPA.

Department of Banking and Finance, Division of Securities and

Investor Protection v. Osborne Stern and Company , 670 So. 2d 932

(Fla. 1996); § 120.57(1)(j), Fla. Stat. See Department of

Financial Services, Division of Workers' Compensation vs. U and M

Contractors, Inc. , DOAH Case No. 04-3041 (Recommended Order,

April 7, 2005; Final Order, adopting Recommended Order in toto ,

April 27, 2005).

32. Strict compliance with the Workers' Compensation Law is

required and is, therefore, required of the employer. See C & L

Trucking v. Corbitt , 546 So. 2d 1185, 1187 (Fla. 5th DCA 1989).

33. Section 440.107, Florida Statutes (2008) and (2009),

provide in pertinent part:

(1) The Legislature finds that the failure

of an employer to comply with the workers'

compensation coverage requirements under this

chapter poses an immediate danger to public

health, safety, and welfare.

(2) For the purposes of this section,

‘securing the payment of workers'

compensation’ means obtaining coverage that

meets the requirements of this chapter and

the Florida Insurance Code. . . .

(3) The department shall enforce workers'

compensation coverage requirements, including

the requirement that the employer secure the

payment of workers' compensation, and the

requirement that the employer provide the

carrier with information to accurately

determine payroll and correctly assign

classification codes. In addition to any

other powers under this chapter, the

department shall have the power to:

(a) Conduct investigations for the purpose

of ensuring employer compliance.

(b) Enter and inspect any place of business

at any reasonable time for the purpose of

investigating employer compliance.

(c) Examine and copy business records.

* * *

(f) Issue and serve subpoenas for attendance

of witnesses or production of business

records, books, papers, correspondence,

memoranda, and other records.

(g) Issue stop-work orders, penalty

assessment orders, and any other orders

necessary for the administration of this

section.

(h) Enforce the terms of a stop-work order.

(i) Levy and pursue actions to recover

penalties.

* * *

(4) The department shall designate

representatives who may serve subpoenas and

other process of the department issued under

this section.

(5) The department shall specify by rule the

business records that employers must maintain

and produce to comply with this section.

* * *

(7) (a) Whenever the department determines

that an employer who is required to secure

the payment to his or her employees of the

compensation provided for by this chapter has

failed to secure the payment of workers'

compensation required by this chapter or to

produce the required business records under

subsection (5) within 5 business days after

receipt of the written request of the

department, such failure shall be deemed an

immediate serious danger to public health,

safety, or welfare sufficient to justify

service by the department of a stop-work

order on the employer, requiring the

cessation of all business operations. If the

department makes such a determination, the

department shall issue a stop-work order

within 72 hours. The order shall take effect

when served upon the employer or, for a

particular employer worksite, when served at

that worksite. In addition to serving a

stop-work order at a particular worksite

which shall be effective immediately, the

department shall immediately proceed with

service upon the employer which shall be

effective upon all employer worksites in the

state for which the employer is not in

compliance. A stop-work order may be served

with regard to an employer's worksite by

posting a copy of the stop-work order in a

conspicuous location at the worksite. The

order shall remain in effect until the

department issues an order releasing the

stop-work order upon a finding that the

employer has come into compliance with the

coverage requirements of this chapter and has

paid any penalty assessed under this section.

The department may issue an order of

conditional release from a stop-work order to

an employer upon a finding that the employer

has complied with coverage requirements of

this chapter and has agreed to remit periodic

payments of the penalty pursuant to a payment

agreement schedule with the department. If

an order of conditional release is issued,

failure by the employer to meet any term or

condition of such penalty payment agreement

shall result in the immediate reinstatement

of the stop-work order and the entire unpaid

balance of the penalty shall become

immediately due. . . .

* * *

(c) The department shall assess a penalty of

$1,000 per day against an employer for each

day that the employer conducts business

operations that are in violation of a stop-

work order.

(d) 1. In addition to any penalty, stop-work

order, or injunction, the department shall

assess against any employer who has failed to

secure the payment of compensation as

required by this chapter a penalty equal to

1.5 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 3-year

period or $ 1,000, whichever is greater.

* * *

(e) When an employer fails to provide

business records sufficient to enable the

department to determine the employer's

payroll for the period requested for the

calculation of the penalty provided in

paragraph (d), for penalty calculation

purposes, the imputed weekly payroll for each

employee, corporate officer, sole proprietor,

or partner shall be the statewide average

weekly wage as defined in s. 440.12(2)

multiplied by 1.5. . . .

34. No dispute exists that Majestic was an employer as

defined by Chapter 440, Florida Statutes, during the pertinent

time periods of the instant case.

35. No dispute exists that the persons listed on the

Penalty Worksheet attached to the 3rd Amended OPA were employees

of Majestic as defined by Chapter 440, Florida Statutes, during

the pertinent time periods of the instant case.

36. Florida Administrative Code Rule 69L-6.021,

Construction Industry Classification Codes, Descriptions, and

Operations Scope of Exemption, provides in pertinent part:

(1) The Division adopts the classification

codes and descriptions that are specified in

the Florida Contracting Classification

Premium Adjustment Program, and published in

the Florida exception pages of the National

Council on Compensation Insurance, Inc.

(NCCI), Basic Manual (October 2005 ed.). For

convenience, the Division lists here the

classification codes and descriptions that

are published in the Florida exception pages

of the Basic Manual and adopted in this rule.

* * *

(2) The Division adopts the definitions

published by NCCI, SCOPES[R] of Basic Manual

Classifications (October 2005) that

correspond to the classification codes and

descriptions adopted in subsection (1) above.

The definitions identify the workplace

operations that satisfy the criteria of the

term "construction industry" as used in the

workers' compensation law. The definitions

are hereby incorporated by reference . . . .

37. No dispute exists that the class codes for Majestic’s

employees reflected on the Penalty Worksheet attached to the 3rd

Amended OPA are correct.

38. However, Majestic contends that it should be reimbursed

for the time expended by its employees, who were very limited in

number, in obtaining the information needed by the Department in

order to obtain the correct class codes. Majestic failed to

present evidence demonstrating a cost associated with producing

the information. Moreover, the Department demonstrated that an

employer was required to provide the information when requested;

that, without information provided by an employer, the Department

imputes information, which includes class codes and salaries; and

that, when information is provided by an employer, the Department

uses that information provided to properly and correctly reflect

the information regarding employees and to calculate any penalty.

Further, the evidence demonstrates that, in the instant case,

Majestic benefited from providing the information on its

employees—the penalty decreased from an assessed penalty of

$4,298.20 to $1,173.08. Hence, the undersigned is not persuaded

that Majestic should be reimbursed for the time expended by its

employees in providing the information that it (Majestic) was

required to provide and that was needed by the Department in

order to obtain the correct salaries and class codes of

Majestic’s employees.

39. No dispute exists that Majestic failed to have workers’

compensation coverage for its employees during the pertinent time

period in the instant case. Hence, Majestic violated Chapter

440, Florida Statutes, by failing to secure the payment of

workers' compensation coverage for its employees.

40. As to the 3rd Amended OPA in the amount of $29,173.08,

Majestic does no dispute the penalty in the amount of $1,173.08,

but does dispute the penalty for violating the SWO in the amount

of $28,000.00. The evidence demonstrates that the SWO was posted

and, therefore, served at the worksite by the Department.

evidence fails to demonstrate that the SWO was personally served

on Majestic at its place of business. Further, the evidence

demonstrates that Majestic failed to cease all business

operations and its employees continued to work during the period

of time that the SWO was in effect, i.e., February 12, 2009

through March 23, 2009, for a total of 28 days. The SWO served

at the worksite took effect immediately upon being served.

fails to demonstrate that Majestic was served with the SWO at its

place of business, and, therefore, the SWO failed to take effect

Fla. Stat. (2008) and (2009).

41. The evidence demonstrates that Majestic’s employees

continued to work at the worksite where the SWO was served.

Consequently, only the worksite should be considered in the

penalty for working during the effect of the SWO.

42. Majestic argued at hearing that the amount of the

penalty for violating the SWO, i.e., $28,000.00, was unfair in

that the penalty was disproportionate to the violation committed.

The undersigned is not persuaded by Majestic’s argument. See

Riopelle v. Department of Financial Services, Division of

Workers’ Compensation , 907 So. 2d 1220 (Fla. 1st DCA 2005). The

Department is mandated to impose a penalty of $1,000.00 per day

for violation of a properly served SWO. § 440.107(7)(c), Fla.

Stat. (2008) and (2009). The evidence demonstrates that the SWO

was violated at the worksite for 28 days and that the penalty for

such a violation is $28,000.00.

43. The evidence demonstrates that the issuance of a SWO

and OPA by the Department were warranted and that the Department

correctly assessed the penalty in the 3rd Amended OPA.

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:

1. Finding that Majestic Custom Homes and Realty, Inc.

violated Sections 440.10 and 440.107, Florida Statutes, by

failing to secure the payment of workers' compensation coverage

for its employees and by failing to cease all business operations

at the worksite after service of the Stop-Work Order at the

worksite.

2. Affirming and upholding the Stop-Work Order and 3rd

Amended Order of Penalty Assessment in the total amount of

$29,173.08.

DONE AND ENTERED this 28th day of September, 2009, in

Tallahassee, Leon County, Florida.

___________________________________

ERROL H. POWELL

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of September, 2009.

ENDNOTES

1/ Petitioner’s Exhibit numbered 1 was withdrawn.

2/ See Conclusion of Law numbered 31.

3/ Id.

4/ Id.

5/ Id.

6/ Id.

COPIES FURNISHED:

Paige B. Shoemaker, Esquire

Department of Financial Services

Division of Legal Services

Workers’ Compensation Section

200 East Gaines Street

Tallahassee, Florida 32399-4229

John P. George

Majestic Custom Homes and Realty, Inc.

4121 Royal Palm Beach Boulevard

Royal Palm Beach, Florida 33411

Alex Sink, Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Tracey Beal, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this recommended order. Any exceptions to

this recommended order should be filed with the agency that will

issue the final order in this case.