09-002409 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Coconut Cove Resort And Marina, Inc. Status: Closed Recommended Order on Monday, November 30, 2009.

Summary: Respondent failed to have workers' compensation insurance for its employees. Petitioner accurately calculated the penalty to be assessed against Respondent.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 09-2409

)

COCONUT COVE RESORT AND MARINA, )

INC., )

)

Respondent. )

)

RECOMMENDED ORDER

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

before Larry J. Sartin, an Administrative Law Judge of the

Division of Administrative Hearings, on September 22, 2009, in

Marathon, Florida.

APPEARANCES

For Petitioner: Timothy L. Newhall

Assistant General Counsel

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: Paul E. Bates, pro se

8401 Overseas Highway

Islamorada, Florida 33036

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent, Coconut

Cove Resort and Marina, Inc., failed to comply with the

requirements of Sections 440.10, 440.107, and 440.38, Florida

Statutes, and, if so, the appropriate amount of penalty which

should be assessed against Respondent.

PRELIMINARY STATEMENT

Petitioner, the Department of Financial Services, Division

of Workers’ Compensation, as a result of a November 6, 2008, on-

site inspection of Respondent’s worksite and business location

and review of business records produced by Respondent,

determined that Respondent had committed violations of Section

440.107(2), Florida Statutes, by “failing to obtain coverage

that meets the requirements of chapter 440, F.S., and the

Insurance Code. . . .” A Stop-Work Order and Order of Penalty

Assessment, directing that Respondent immediately cease all

business operations in Florida was issued.

On December 3, 2008, Petitioner issued an Amended Order of

Penalty Assessment in Petitioner’s Case No. 08-326-D5. The

Order informed Respondent of Petitioner’s determination that

Respondent had violated Chapter 440, Florida Statutes, and the

amount of the penalty to be assessed due to the alleged

violation. The Amended Order of Penalty Assessment was served

on Respondent by certified mail.

On or about December 23, 2008, Respondent filed a letter

requesting an administrative hearing with Petitioner. That

Request was dismissed by an Order Dismissing Petition for

Section 120.57(1), Florida Statutes, Proceeding Without

Prejudice entered by Petitioner on April 20, 2009.

Respondent filed a Reply, Dispute of Order Dated April 20

09 and Supplement to Appeal Dated December 22 09, dated May 1,

2009, with Petitioner.

A copy of the Amended Order of Penalty Assessment,

Respondent’s original request for hearing, the Order dismissing

Respondent’s first request for hearing, and the April 20, 2009,

request for hearing from Respondent were filed with the Division

of Administrative Hearings by letter on May 6, 2009, requesting

assignment of the matter to an administrative law judge. The

request was designated DOAH Case No. 09-2409, and was assigned

to the undersigned.

By Notice of Hearing entered May 19, 2009, the final

hearing was initially scheduled for July 28, 2009. The hearing

was subsequently continued and rescheduled for September 22,

2009.

On September 18, 2009, Petitioner filed a Motion to Amend

Order of Penalty Assessment, which slightly reduced the amount

of the penalty assessment Petitioner sought to impose on

Respondent. The Motion was opposed by Respondent at the

commencement of the hearing. After hearing evidence concerning

why Petitioner proposed to modify the proposed penalty

assessment, the Motion to amend was granted.

At the final hearing, Petitioner presented the testimony of

Xotchilth Valdivia, an investigator for Petitioner, and Russell

Gray, penalty calculator for Petitioner. Petitioner also had

Exhibits 1 through 3, 4B, 4E, 4F, 4G, 5 through 10, 12, and 13

admitted. Respondent presented the testimony of Paul E. Bates,

President and CEO of Respondent, and Magda Bates. Respondent

offered no exhibits.

The two-volume Transcript of the final hearing was filed on

October 8, 2009. On October 9, 2009, a Notice of Filing

Transcript was entered informing the parties that the Transcript

had been filed and that proposed recommended orders were,

therefore, due on or before November 2, 2009. Petitioner filed

a Proposed Recommenced Order on November 2, 2009. Respondent

has not filed any post-hearing argument. Petitioner’s Proposed

Recommended Order has been fully considered in issuing this

Recommended Order.

All references to Florida Statutes in this Recommended

Order are to the 2008 version, unless otherwise indicated.

FINDINGS OF FACT

1. The Department of Financial Services (hereinafter

referred to as the “Department”), is the state agency charged

with the responsibility of enforcing the requirement of Section

440.107, Florida Statutes, that employers in Florida secure

workers' compensation insurance coverage for their employees.

§ 440.107(3), Fla. Stat.

2. Respondent, Coconut Cove Resort and Marina, Inc.

(hereinafter referred to as “Coconut Cove”), is a Florida

corporation, which at the times relevant operated a small

hotel/resort located in Islamorada, Florida.

3. On November 4, 2008, a complaint was received by the

Bureau of Compliance Office of the Division of Workers’

Compensation located in Miami, Florida, requesting a

determination of whether Coconut Cove was in compliance with

Florida’s workers’ compensation coverage requirements. The

complaint was referred to Xotchilth Valdivia, a Department

investigator, for investigation.

4. After performing an in-office audit of the Department’s

databases and finding no evidence that Coconut Cove had secured

workers’ compensation coverage or had obtained exemptions from

Florida workers’ compensation laws, Ms. Valdivia traveled to

Coconut Cove’s location on November 6, 2008.

5. Upon arriving at Coconut Cove’s location, Ms. Valdivia

spoke with a woman by the named Comeau, who was manning the

front desk of the resort. Ms. Valdivia asked to speak with

Mr. Bates, but was informed that Mr. Bates, a commercial airline

pilot, was away. Ms. Comeau, however, told Ms. Valdivia that

Mr. Bates’ wife, Magda was available.

6. While waiting for Ms. Bates to arrive, Ms. Valdivia

observed four individuals who appeared to be performing work for

the resort, in addition to Ms. Comeau, who was manning the front

desk: a male who was working around the swimming pool, and two

women who appeared to be maids with cleaning mops.

7. When Ms. Bates arrived, Ms. Valdivia identified herself

and the purpose of her visit. During the course of her

discussion with Ms. Bates, Ms. Bates identified 18 individuals

as employees of Coconut Cove by name and occupation. The 18

individuals included Mr. and Ms. Bates, both officers of Coconut

Cove.

8. While indicating that she knew nothing about Florida

workers’ compensation requirements, Ms. Bates also stated that

Coconut Cove did not have workers’ compensation coverage.

9. Finding that Coconut Cove had four employees as of

November 6, 2008, and no workers’ compensation coverage,

conclusions not disputed by Ms. Bates, Ms. Valdivia issued Stop-

Work Order No. 08-326-D5 and served it on Ms. Bates. A Request

for Production of Business Records for Penalty Assessment

Calculation (hereinafter referred to as the “Request for

Records”), was also served on Ms. Bates. The Request for

Records sought payroll records for the three-year period

preceding the date of the issuance of the Stop-Work Order.

10. Ms. Valdivia explained the reason why the Stop-Work

Order was being issued and the purpose of the Request for

Records. She also explained that the business records would be

utilized in calculating any penalty owed by Coconut Cove for

failing to carry workers’ compensation coverage.

11. Although Coconut Cove attempted to prove that Ms.

Valdivia acted arbitrary in her actions to this point, the

evidence proved the contrary. Ms. Valdivia acted reasonably,

appropriately, and had good cause for the actions taken.

12. In response to the Request for Records, Ms. Bates

telephoned the accountant for Coconut Cove and requested that he

provide the payroll information being sought by the Department.

Almost all that information was immediately faxed to Ms. Bates,

who then provided a copy to Ms. Valdivia. The documentation

consisted of a payroll report for Coconut Cove for the period

January 1, 2008, to November 6, 2008, UCT-6 reports filed by

Coconut Cove with the Florida Department of Revenue for the

fourth quarter of 2005 through the third quarter of 2008.

(Petitioner’s Exhibits 4B, 4E, 4F, and 4G.)

13. Based upon the information contained in the UCT-6

reports provided by Coconut Cove to the Department, the names of

employees and the gross income paid to them by Coconut Cove was

reported by Coconut Cove to the Department of Revenue. Those

reports indicate that Coconut Cove employed four or more

individuals each month from October 2005 through September 2008.

14. Subsequently, Coconut Cove provided additional payroll

information to the Department concerning payroll for the periods

of November 7, 2005, through December 31, 2005, and November 1,

2008, through November 6, 2008. Again, the documents, which

were provided by Coconut Cove, indicate that it had employed

four or more individuals during the periods of time covered by

these documents.

15. The Request for Records included a request for time

sheets, check stubs, and check ledgers for the period of time at

issue, November 7, 2005, to November 6, 2008 (hereinafter

referred to as the “Audit Period”). None of these documents

were provided to the Department or at hearing. While Coconut

Cove had a stack of documents at hearing which Mr. Bates

referred to generally as time cards, those documents were not

offered into evidence and no specific testimony concerning the

vast majority of the documents was provided.

16. Based upon the documentation provided by Coconut Cove

to the Department, documentation which was offered and admitted

at hearing, the Department proved clearly and convincingly that

Coconut Cove employed four or more individuals during each month

of the Audit Period. This finding excludes Mr. and Ms. Bates,

who, although employees of Coconut Cove who had not obtained

exemptions from coverage during the audit period, received no

remuneration from Coconut Cove during the Audit Period.

17. The documentation provided by Coconut Cove was

provided to Russell Gray, an employee of the Department since

1986. Mr. Gray reviewed all the payroll information provided by

Coconut Cove to Ms. Valdivia, transferred the payroll

information to spread sheets, and proceeded to calculate the

penalty imposed pursuant to statutes and rules for Coconut

Cove’s failure to comply with the insurance coverage

requirements of Chapter 440, Florida Statutes. The manner in

which Mr. Gray calculated the penalty is more specifically and

accurately described in the Department’s proposed findings of

fact numbered 21 through 25 and 27, which are hereby

incorporated into this Recommended Order by reference.

18. Mr. Gray determined that the penalty to be assessed

against Coconut Cove was $27,897.58. An Amended Order of

Penalty Assessment for the penalty was issued December 3, 2008,

and served on Coconut Cove by certified mail on December 4,

2008.

19. Subsequently, Mr. Gray concluded that his penalty

calculation was incorrect to the extent that he had included

gross income in the amount of $1,316.65 to an employee named

Gerald Elmore. This figure was the income of another employee

and not income attributable to Mr. Elmore. In order to correct

his error, the Department filed a Motion to Amend Order of

Penalty Assessment on September 18, 2009, seeking to file a 2nd

Amended Order of Penalty Assessment, lowering the penalty

assessment to $27,821.74. Despite objections to this amendment

raised at hearing by Coconut Cove, the Motion to Amend was

granted after hearing the impact of the change and the reason it

was required.

20. On December 15, 2008, Coconut Cove entered into a

Payment Agreement Schedule for Periodic Payment of Penalty. The

Department, therefore, issued a Conditional Release from Stop-

Work Order, also dated December 15, 2008.

21. Coconut Cove’s relevant defense to the foregoing

consisted of the assertion by Mr. and Ms. Bates that they simply

did not have more than three employees at anytime. It was

asserted that employees listed on the documentation provided by

Coconut Cove’s accountant to Ms. Bates and given by Ms. Bates to

Ms. Valdivia, were actually employees of another entity owned by

the Bates, Paul’s Beach Bar and Grill, Inc., which runs an on-

site restaurant and catering service. The testimony of Mr. and

Ms. Bates on this issue was not convincing and is rejected as

unworthy. The testimony was uncertain as to time, short on

specifics, and was contrary to the information reported on the

payroll records and UCT-6s provided by Coconut Cove’s

accountant. That testimony is also rejected because no

explanation as to why the individuals had been listed as

employees of Coconut Cove on the payroll records and UCT-6s if

they were indeed employees of Paul’s Beach Bar and Grill, Inc.

22. The Department proved clearly and convincingly, based

upon documentation produced to it by Coconut Cove, that the

individuals named on the penalty worksheet attached to the

Amended Order of Penalty Assessment were employees of Coconut

Cove during the Audit Period, that Coconut Cove paid those

individuals the gross income included in the penalty worksheet,

and that the calculation of the penalty assessment, as amended

at hearing, was accurate.

CONCLUSIONS OF LAW

23. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

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

Florida Statutes (2009).

24. Because the administrative fines sought by the

Department are penal in nature, it must prove by clear and

convincing evidence that GTC failed to comply with the

requirements of Chapter 440, Florida Statutes, and that the

Department’s proposed civil and administrative penalties

assessed are correct. See Department of Banking and Finance,

Division of Securities and Investor Protection v. Osborne Stern,

Inc. , 670 So. 2d 932, 935 (Fla. 1996).

25. Every “employer” is required to secure the payment of

compensation for the benefit of its “employees.”

the duty of enforcing the employer's compliance with the

requirements of the workers' compensation law. § 440.107(3),

Fla. Stat.

26. An "employer" is defined as "every person carrying on

means “any person who received remuneration from an employer for

the performance of any work or service while engaged in any

defined in Section 440.02(17)(b)2., Florida Statutes, as “[a]ll

private employments in which four or more employees are employed

by the same employer. . . .”

27. Based on the findings of fact herein, the Department

carried its burden of proving by clear and convincing evidence

that, based upon documentation produced to it by Coconut Cove,

the individuals named on the penalty worksheet attached to the

Amended Order of Penalty Assessment were “employees” who were

Period, that Coconut Cove paid those individuals the gross

income included in the penalty worksheet, and that Coconut Cove

did not have insurance coverage for those employees during the

Audit Period.

28. The Department is required by Section 440.107(7)(d)1.,

Florida Statutes, where it is determined that an employer has

failed to have required insurance coverage as required by

Section 440.38(1), Florida Statutes, to:

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.

29. The Department is authorized by Section 440.107(9),

Florida Statutes, to enact rules to implement Section 440.107,

and it has done so in Florida Administrative Code Chapter 69L-6.

Florida Administrative Code Rule 69L-6.027 establishes the

procedures for calculating the penalty authorized by Section

440.107(7)(d)1., Florida Statutes. The Department has proven by

clear and convincing evidence that it correctly followed its

rules in calculating the imputed payroll in this matter.

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 Respondent, Coconut Cove Resort and

Marina, Inc., failed to secure the payment of workers’

compensation for its employees during the Audit Period, in

violation of Section 440.107, Florida Statutes; and

2. Assessing a penalty against Coconut Cove Resort and

Marina, Inc., in the amount of $27,821.74.

DONE AND ENTERED this 30th day of November, 2009, in

Tallahassee, Leon County, Florida.

LARRY J. SARTIN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 30th day of November, 2009.

COPIES FURNISHED :

Timothy L. Newhall, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Paul Bates

Magda Bates

8401 Overseas Highway

Islamorada, Florida 33036

Tracey Beal, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Honorable 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

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.