09-004303 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Carolina Realty And Development Company, Inc. Status: Closed Recommended Order on Wednesday, December 9, 2009.

Summary: Petitioner properly entered a Stop-Work Order and Second Amended penalty assessment for $10,492.92 against Respondent for employing roofers without workers' compensation coverage.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

) Case No. 09-4303

vs. )

)

CAROLINA REALTY AND DEVELOPMENT )

COMPANY, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

A final hearing was held before Robert S. Cohen,

Administrative Law Judge with the Division of Administrative

Hearings, on December 1, 2009, in Pensacola, Florida.

APPEARANCES

For Petitioner: Timothy L. Newhall, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: John Baehr, pro se

Carolina Realty and

Development Company, Inc.

608 Sheppard Drive

Pensacola, Florida 32507

STATEMENT OF THE ISSUE

The issue is whether the Stop-Work Order and Order of

Penalty Assessment entered by Petitioner on July 15, 2009, and

subsequently amended twice, should be upheld.

PRELIMINARY STATEMENT

On July 15, 2009, Petitioner issued and served a Stop-Work

Order and Order of Penalty Assessment (hereinafter "Order") on

Respondent, alleging that Respondent was not in compliance with

the coverage requirements of Chapter 440, Florida Statutes, and

the Florida Insurance Code. Respondent was ordered to cease all

business operations. Petitioner issued and served an Amended

Order of Penalty Assessment (hereinafter "Amended Order") on

Respondent on August 6, 2009, assessing against Respondent a

penalty in the amount of $48,689.27 pursuant to Subsection

440.107(2), Florida Statutes. Petitioner thereafter filed a

Motion to Amend the Order of Penalty Assessment on November 20,

2009, and, upon the granting of the Motion, issued and served

its Second Amended Order of Penalty Assessment in the amount of

$10,492.94 on that date.

On July 16, 2009, Petitioner received a Petition from

Respondent challenging the Order and requesting a hearing on the

matter. Respondent's Petition has been applied to the

subsequent Amended and Second Amended Orders of Penalty

Assessment so that the final hearing would consider the most

recently filed order of assessment. The Petition was

transferred to the Division of Administrative Hearings on

August 14, 2009. The matter was set for a hearing to be

conducted on October 1, 2009, and after an agreed-upon Motion

for Continuance, the case proceeded to hearing on December 1,

2009, in Pensacola, Florida.

Petitioner presented the testimony of John Wheeler,

Petitioner's investigator, and Larry Scapecchi, and introduced

12 exhibits, all of which were admitted into evidence.

Respondent offered the testimony of its president, John G.

Baehr, and offered no additional exhibits.

Petitioner ordered a transcript, but after a conference

call hearing before the undersigned on December 7, 2009, both

parties agreed that, in the interest of conserving time and

resources, the matter would proceed to recommended order without

a transcript or the filing of proposed recommended orders.

References to statutes are to Florida Statutes (2008)

unless otherwise noted.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for

enforcing the requirement of the Workers' Compensation Law that

employers secure the payment of compensation for their employees

who suffer work-related injuries. Respondent, on July 15, 2009,

was operating in the construction industry as a for-profit

corporation, with an active status.

2. On July 15, 2009, Petitioner's investigator, John

Wheeler, investigated Respondent for compliance with the Florida

Workers' Compensation Law at 36 East Burgess Road, Pensacola,

Florida 32504 (hereinafter "worksite") during a random

inspection.

3. On July 15, 2009, at the worksite, Petitioner's

investigator interviewed and recorded the names of four

individuals performing a roofing job as Benjamin H. Bell,

Christopher T. Bell, Willie Lanier, and Curtis Jenkins.

4. Utilizing the Scopes Manual published by the National

Council on Compensation Insurance and adopted by Florida

Administrative Code Rule 69L-6.021 as guidance, Petitioner's

investigator determined that roofing is within the construction

industry and assigned the appropriate class code (5551) to the

activities being performed at the worksite.

5. Petitioner's investigator determined that both Benjamin

and Christopher Bell were officers of Respondent corporation,

and had hired Mr. Lanier and Mr. Jenkins to work the roofing job

with them.

6. Petitioner's investigator, using the Department of

Financial Services' Coverage and Compliance Automated System

(CCAS), determined that while both Benjamin and Christopher Bell

had valid Certificates of Election to be exempt from Florida

Workers' Compensation Law, neither Mr. Lanier nor Mr. Jenkins

had similar certificates of exemption.

7. Using the CCAS, Petitioner's investigator was unable to

locate proof of insurance securing the payment of workers'

compensation coverage by Respondent that would cover Mr. Lanier

or Mr. Jenkins for the job at issue.

8. On July 15, 2009, Petitioner's investigator issued a

Stop-Work Order and Order of Penalty Assessment to Petitioner

for failure to meet the requirements of Chapter 440, Florida

Statutes, and the Florida Insurance Code. The Order required

Respondent to cease all business operations and assessed a

penalty equal to 1.5 times the amount the employer would have

paid in premium when applying the approved manual rates to the

employer's payroll during periods for which it failed to secure

the payment of workers' compensation against Respondent for the

preceding three-year period, pursuant to Subsection

440.107(7)(d), Florida Statutes.

9. On July 15, 2009, Petitioner's investigator issued to

Respondent a Division of Workers' Compensation Request for

Production of Business Records for Penalty Assessment

Calculation (hereinafter "Request").

10. Respondent responded to the Request and provided

Petitioner's investigator with the requested records on July 21,

2009.

11. On August 6, 2009, Petitioner issued an Amended Order

of Penalty Assessment assessing a new penalty of $48,689.27

against Respondent, based on Respondent's business records.

12. On November 20, 2009, Petitioner issued a Second

Amended Order of Penalty Assessment reducing Respondent's

penalty to $10,492.94.

13. Petitioner's investigator issued the Second Amended

Order of Penalty Assessment after having learned from Respondent

that many of the amounts considered for the penalty in the

Amended Penalty Assessment should not be deemed payroll for

uncovered or non-exempt workers.

14. The roofing job at issue at 36 Burgess Road, resulted

from a verbal contract entered into between Benjamin and

Christopher Bell, on behalf of Respondent, and Larry Scapecchi,

a Florida-certified roofing and general contractor.

15. Respondent's president, Mr. Baehr, was not aware of

the verbal contract entered into by Respondent's vice

presidents, Benjamin and Christopher Bell, to perform the

roofing job that gave rise to this proceeding.

16. Mr. Baehr did not authorize the contract into which

Benjamin and Christopher Bell entered.

17. In his 30 years in the construction business,

Mr. Baehr had never entered into a verbal contract to perform

construction work. All of contracts for construction jobs were

written.

18. Benjamin and Christopher Bell, as officers of

Respondent corporation, had real or apparent authority to enter

into the contract for the roofing job, and Mr. Larry Scapecchi

entered into the contract with them based upon his good-faith

belief in their authority to contract on behalf of the

corporation.

19. Benjamin and Christopher Bell, on behalf of

Respondent, allowed two workers, Willie Lanier and Curtis

Jenkins, to be employed on the Burgess Road roofing job who were

neither exempt from the requirements of Florida's Workers'

Compensation Law nor covered by a policy of workers'

compensation insurance for the work they were performing in

Pensacola, Florida.

20. In response to Petitioner's Request for Production of

Documents, since no payroll information was supplied by

Respondent to Petitioner for the two workers, Willie Lanier and

Curtis Jenkins, their salary had to be imputed based upon the

two days they were found to be performing roofing work at the

worksite. The remainder of the salary used in calculating the

penalty to be assessed was based upon the payroll records for

non-exempt and non-covered employees from January 2007 until the

date of the inspection, July 15, 2009.

21. The premium due was calculated by multiplying one

percent of the gross payroll times the approved manual rate

which resulted in the amount of $6,995.28. The penalty was then

determined by multiplying the amount of premium due by 1.5,

resulting in the final penalty due of $10,492.92.

22. Based upon the payroll records produced by Respondent

in response to Petitioner's request, a penalty in the amount of

$10,492.92 is due to Petitioner. This amount is $0.02 less than

the amount calculated by Petitioner and may be the result of

rounding errors.

CONCLUSIONS OF LAW

23. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat.

24. Petitioner is the state agency responsible for

enforcing Respondent's violation of workers' compensation

coverage requirements. Petitioner has the burden of proof in

this case and must show by clear and convincing evidence that

Respondent violated the Workers' Compensation Law during the

relevant period and that the penalty assessments are correct.

Department of Banking and Finance v. Osborne Stern and Co. , 670

So. 2d 932, 933 (Fla. 1996).

25. Pursuant to Sections 440.10 and 440.38, Florida

Statutes, every "employer" is required to secure the payment of

workers' compensation for the benefit of its employees unless

exempted or excluded under Chapter 440, Florida Statutes.

Strict compliance with the Workers' Compensation Law is,

therefore, required by the employer. See , e.g. , C&L Trucking v.

Corbitt , 546 So. 2d 1185, 1186 (Fla. 5th DCA 1989).

26. Pursuant to Subsection 440.107(3)(g), Florida

Statutes, "The department shall enforce workers' compensation

coverage requirements . . . the department shall have the power

to: Issue stop-work orders, penalty assessment orders, and any

other orders necessary for the administration of this section."

27. Pursuant to Subsection 440.02(16)(a), Florida

Statutes, the law defines "employer" as ". . . every person

carrying on any employment . . . ." If the employer is a

corporation, such as in this case, the parties in actual control

of the corporation, including the president, officers, directors

and shareholders, are considered the employer. Id.

28. The workers' compensation law requires employers to

secure the payment of compensation for their employees.

§§ 440.10(1)(a) and 440.38(1), Fla. Stat. (2006).

29. Pursuant to Section 440.05, Florida Statutes, the

Department may grant applications for certificates of election

of exemption from the Workers' Compensation Law.

30. Pursuant to Subsection 440.05(6), Florida Statutes, "a

construction industry certificate of election to be exempt which

is issued in accordance with this section shall be valid for 2

years after the effective date stated thereon."

31. Benjamin and Christopher Bell possessed valid

exemption certificates at the time of the inspection at the

worksite on July 15, 2009. Willie Lanier and Curtis Jenkins did

not.

32. Pursuant to Subsection 440.02(17)(b)2., Florida

Statutes, "employment" is defined as ". . . with respect to the

construction industry, all private employment in which one or

more employees are employed by the same employer."

33. Pursuant to Subsection 440.02(8), Florida Statutes,

Petitioner "may, by rule, establish standard industrial

classification codes and definitions thereof which meet the

criteria of the term 'construction industry'. . . ."

34. Petitioner has adopted construction industry

classification codes contained in the Basic Manual (Scopes

Manual) published by the National Council on Compensation

Insurance by Florida Administrative Code Rule 69L-6.021 (2007),

which references Subsection 440.02(8), Florida Statutes, as

specific authority for implementation. Florida Administrative

Code Rule 69L-6.021 includes roofing as an activity within the

construction industry. Fla. Admin. Code R. 69L-6.021(1)(tt).

35. Pursuant to Subsection 440.107(2), Florida Statutes,

"'securing the payment of workers' compensation' means obtaining

coverage that meets the requirements of this chapter and the

Florida Insurance Code."

36. Respondent was an employer, engaged in employment in

the construction industry as a corporation, that received

remuneration and, in this case, was not in compliance with

Chapter 440, Florida Statutes, and was correctly assessed a

penalty.

37. Petitioner "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 $1000, whichever

is greater." Petitioner's investigator used this method of

penalty calculation to arrive at Respondent's final penalty

amount. § 440.107(7)(d)1., Fla. Stat.

38. The method of penalty calculation described in

Subsection 440.107(7)(d), Florida Statutes, is mandatory.

39. Neither Chapter 440, Florida Statutes, nor the Florida

Insurance Code contemplates any knowledge requirement as a

factor which would excuse an employer's failure to secure the

payment of workers' compensation.

40. Respondent did not provide any proof that it is not

subject to the applicable laws and rules of Petitioner

concerning the requirement that it secure workers' compensation

insurance for its employees. Moreover, Petitioner proved by

clear and convincing evidence that the employees subject to the

penalty were not covered by a valid workers' compensation

insurance policy or holders of exemption certificates during the

assessment period. Finally, the method of assessing the penalty

imposed by Petitioner was performed correctly, and in accordance

with the Florida Statutes and Petitioner's rules.

RECOMMENDATION

Based on the findings of fact and conclusions of law, it is

RECOMMENDED that Petitioner enter a final order that adopts

the Stop-Work Order and Second Amended Order of Penalty

Assessment assessing a penalty of $10,492.92.

DONE AND ENTERED this 9th day of December, 2009, 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

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of December, 2009.

COPIES FURNISHED :

Timothy L. Newhall, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

John Baehr

Carolina Realty and Development Company, Inc.

608 Sheppard Drive

Pensacola, Florida 32507

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Julie Jones, CP, FRP, Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0307

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.