10-003029 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Harry Norton, D/B/A Norton Tree Service, Llc A Dissolved Florida Limited Liability Company And Norton Tree Service, Llc Status: Closed Recommended Order on Wednesday, August 25, 2010.

Summary: Petitioner properly issued a Stop-Work Order and Fifth Amended Penalty Assessment against Respondent for failing to obtain workers' compensation insurance that meets the requirements of Chapter 440, Florida Statutes.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS’ )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 10-3029

)

HARRY NORTON, d/b/a NORTON TREE )

SERVICE, LLC A DISSOLVED )

FLORIDA LIMITED LIABILITY )

COMPANY AND NORTON TREE )

SERVICE, LLC, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was conducted in this case on

July 26, 2010, in Tallahassee, Florida, before Administrative

Law Judge W. David Watkins of the Division of Administrative

Hearings, pursuant to the authority set forth in Sections

120.569 and 120.57(1), Florida Statutes.

APPEARANCES

For Petitioner: Jamila G. Gooden, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: Harry Norton, pro se

Norton Tree Service, LLC

12566 Rachel Cooper Lane

Tallahassee, Florida 322317

STATEMENT OF THE ISSUE

The issue is whether Petitioner properly issued a Stop Work

Order (SWO) and Fifth Amended Penalty Assessment against

Respondent for failing to obtain workers' compensation insurance

that meets the requirements of Chapter 440, Florida Statutes.

PRELIMINARY STATEMENT

On March 1, 2010, the Division of Workers' Compensation

("Division" or "Petitioner") issued and served a SWO and Order

of Penalty Assessment ("Order") on Harry Norton, d/b/a Norton

Tree Service ("Norton" or "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.

Also on March 1, 2010, the Division served a request for

production of business records on Norton.

On March 19, April 29, and May 27, 2010, the Division

served: an Amended Order of Penalty Assessment; a Second Amended

Order of Penalty Assessment; and, an Amended Stop Work Order and

(Third) Amended Order of Penalty Assessment, respectively, on

Norton.

On May 20, 2010, the Division received a Petition from

Respondent challenging the Orders of Penalty Assessment and

requesting a hearing on the matter. Attached to the Petition

were an Amended Stop Work Order and Fourth Amended Order of

Penalty Assessment reflecting service on Respondent by certified

mail on May 27, 2010. The Petition was referred to the Division

of Administrative Hearings on June 2, 2010, for assignment of an

Administrative Law Judge to conduct the hearing.

At the outset of the hearing, Petitioner moved ore tenus to

amend its charging documents, and, upon the granting of the

motion, issued and served its Fifth Amended Order of Penalty

Assessment in the amount of $61,003.11. Respondent's Petition

has been applied to the subsequent Fifth Amended Order of

Penalty Assessment so that the final hearing would consider the

most recently filed order of assessment.

At hearing, Respondent testified on his own behalf.

Respondent did not offer any exhibits into evidence. The

Division presented the testimony of Jonas Hall and Monica Moye.

The Division's Exhibits 1 through 14 were received into

evidence.

The proceedings were transcribed and the parties were

advised of the right to submit proposed recommended orders after

the filing of the transcript. The Transcript of the final

hearing was filed with the Division of Administrative Hearings

on August 9, 2010. On August 13, 2010, counsel for Petitioner

filed a Motion for Extension of Time for the submittal of

Proposed Recommended Orders, which was granted. Petitioner

timely filed a Proposed Recommended Order, which has been

considered in the preparation of this Recommended Order. No

Proposed Recommended Order was filed by Respondent.

All citations are to Florida Statutes (2009) unless

otherwise indicated.

FINDINGS OF FACT

1. The Division is an agency within the Department of

Financial Services. It is responsible for enforcing the

workers' compensation coverage requirements pursuant to Section

440.107, Florida Statutes.

2. Norton is a limited liability company operating as a

tree trimming and removal business in Tallahassee, Florida.

Harry Norton, Jr. is the sole owner and manager of Norton.

3. On March 1, 2010, Petitioner's investigator, Jonas

Hall, visited 1144 Mary's Drive, Tallahassee, Florida ("work

site"), after being referred to the location to investigate

Respondent for compliance with the Florida Workers' Compensation

Law.

4. At the work site, Petitioner's investigator spoke to

Harry Norton, Jr., and asked him whether the other five

individuals observed working at the work site were his

employees. He confirmed they were.

5. While at the work site, Mr. Hall used the Department of

Financial Services' Coverage and Compliance Automated System

(CCAS), and confirmed Respondent lacked insurance for the

payment of workers' compensation coverage. Additionally,

Petitioner's investigator verified through the CCAS that no

exemptions from workers' compensation had been issued for Norton

Tree Service or for any of the five employees identified at the

work site.

6. Upon confirmation that Respondent lacked workers'

compensation coverage and that no exemptions were in effect,

Petitioner's investigator contacted his supervisor and requested

authorization to issue a SWO and business records request.

Approval was given, and Mr. Hall personally served Mr. Norton

with the SWO and Request for Production of Business Records

("Request") at the work site that same day. The SWO ordered

Respondent to immediately cease all business operations.

7. Soon thereafter, Norton responded to the Request and

provided Petitioner's investigator with some of the requested

records. These included UTC-6s, some federal quarterly tax

returns, and handwritten timesheets for 2007. Petitioner's

investigator forwarded the documents to Monica Moye,

Petitioner's penalty calculator, for review.

8. On or about March 16, 2010, Petitioner issued an

Amended Order of Penalty Assessment assessing a penalty of

$214,643.15 against Respondent.

9. Subsequent to the issuance of the Amended Order Norton

provided additional financial documents to Petitioner. These

included additional federal tax returns and Forms 1099, as well

as paycheck stubs and banking records. These documents were

also forwarded to Ms. Moye, resulting in the issuance on

April 28, 2010, of the Second Amended Order of Penalty

Assessment. The new penalty assessment was $76,712.02.

10. Subsequent to the issuance of the Second Amended Order

of Penalty Assessment, Investigator Hall researched the

corporate status of Respondent on the Department of State,

Division of Corporations website. The website showed that

Respondent had become inactive on September 14, 2007.

Accordingly, on May 27, 2010, Investigator Hall issued and

served an Amended SWO and a Third Amended Order of Penalty

Assessment to reflect the inactive status of Respondent.

However, a typographical error in the issuance date necessitated

the issuance of a Fourth Amended Order of Penalty Assessment,

served on June 2, 2010. As with the Second Amended Order, both

the Third and Fourth Amended Orders reflected a penalty of

$76,712.02.

11. On July 23, 2010, a Fifth Amended Order of Penalty

Assessment was issued by Petitioner, this time reducing the

total penalty assessment to $61,003.11. The reduction was the

product of additional financial information being provided by

Mr. Norton and analyzed by Ms. Moye, resulting in the removal of

some individuals from the penalty worksheet.

12. In calculating the penalty owed by Respondent,

Ms. Moye first determined the amount of premium that Respondent

would have paid had workers' compensation insurance been in

place during the period March 2, 2007, through March 1, 2010.

To do so, Ms. Moye identified the Norton employees and their

gross wages using the UCT-6s and check copies provided by

Respondent. Ms. Moye then used this information to ascertain

the time periods for which Respondent had four or more employees

but did not have workers' compensation insurance. Ms. Moye used

weekly pay periods as the interval over which to make this

determination. Only the weeks during which Respondent was found

to have four or more employees were included by Ms. Moye in the

penalty calculation. By assigning the appropriate occupational

class codes to each employee, and then multiplying by the

applicable manual rates as determined by the National Council on

Compensation Insurance, Ms. Moye calculated the premium that

would have been paid by Norton had coverage been provided. This

amount was then multiplied by 1.5, to arrive at the total

penalty of $61,003.11.

13. During the hearing, Respondent admitted not having

workers' compensation coverage for his employees. Mr. Norton

testified he was told many years earlier by his CPA that his

company was exempted from the coverage requirements because the

company had only two employees. Mr. Norton was apparently under

the mistaken belief that the exemption continued in effect, even

after the addition of several more employees over the years.

CONCLUSIONS OF LAW

14. 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 (2010).

15. Chapter 440, Florida Statutes, is known as the

"Workers' Compensation Law." See § 440.01, Fla. Stat.

16. Employers are required to secure payment of

compensation for their employees. §§ 440.10(1)(a) and

440.38(1), Fla. Stat.

17. "Employer" is defined, in part, as "every person

carrying on any employment." § 440.02(16), Fla. Stat.

"Employment . . . means any service performed by an employee for

the person employing him or her" and includes "[a]ll private

employments in which four or more employees are employed by the

18. "Employee" is defined, in part, as "any person who

receives remuneration from an employer for the performance of

any work or service while engaged in any employment under any

appointment or contract for hire or apprenticeship, express or

implied, oral or written. . . ." § 440.02(15)(a), Fla. Stat.

19. Because an administrative fine deprives the person

fined of substantial rights in property, such fines are punitive

in nature. Petitioner has the burden of proof and must

establish through clear and convincing evidence that Respondent

violated the workers' compensation law. Department of Banking

and Finance, Division of Securities and Investor Protection v.

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

20. Under Section 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."

21. Petitioner established by clear and convincing

evidence that Norton was an "employer" for workers' compensation

purposes because it was engaged in a tree trimming and removal

business and frequently had four or more employees working for

the corporation during the period March 2, 2007, through

March 1, 2010. Norton was therefore required to secure the

payment of workers' compensation.

22. Section 440.107(7)(a), Florida Statutes, provides in

relevant part:

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 . . . 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.

Thus, the Division's SWO was mandated by statute.

23. Section 440.107(7)(d), Florida Statutes, states as

follows:

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 $1,000.00,

whichever is greater.

24. Florida law does not provide for consideration of

mitigating circumstances in cases where an employer fails to

secure workers' compensation insurance because the employer is

not aware that it is required, or mistakenly believes his

company is exempted. 1 /

25. Based on Respondent's business records, Respondent's

total payroll from March 2, 2007, through March 1, 2010, was

$238,767.31. The total workers' compensation premium that

Respondent should have paid for its employees during the

relevant time period was $40,668.64. Multiplying that amount by

the statutory factor of 1.5 results in a penalty assessment in

the amount of $61,003.11.

26. Petitioner correctly issued the SWO and Fifth Amended

Penalty Assessment prescribed in Section 440.107(7)(d), Florida

Statutes. The evidence here clearly indicates that Respondent

owes $61,003.11 as a penalty for not "securing the payment of

workers' compensation."

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, issue a final order affirming

the Stop Work Order and Fifth Amended Order of Penalty

Assessment in the amount of $61,003.11.

DONE AND ENTERED this 25th day of August, 2010, in

Tallahassee, Leon County, Florida.

S

W. DAVID WATKINS

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 25th day of August, 2010.

ENDNOTE

1 / Certain corporate officers can become exempt from the coverage

requirements of Chapter 440, Florida Statutes, but must

affirmatively make that election. §§ 440.02(15)(b), 440.05,

Fla. Stat.; Fla. Admin. Code R. 69L-6.012(2). An exemption for

an officer of a corporation is not automatic, but rather

requires the filing of a written notice of the election to be

Stat.; Fla. Admin. Code R. 69L-6.012(1)(a)(2),(6).

COPIES FURNISHED :

Jamila Georgette Gooden, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Harry Norton

Norton Tree Service, LLC

12566 Rachel Cooper Lane

Tallahassee, Florida 32317

Julie Jones, 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

Honorable Alex Sink

Chief Financial Officer

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.