12-000759 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Hector M. Hickman, D/B/A, Hickman Tile, Inc., A Dissolved Florida Corporation And Hickman Tile, Inc. Status: Closed Recommended Order on Tuesday, July 24, 2012.

Summary: Respondent violated the requirement in chapter 440, F.S. that he secure workers' compensation coverage and Petitioner should access the statutory minimum penalty of $1,000.00.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS’ COMPENSATION, )

Petitioner, ) Case No. 12-0759

)

vs. )

)

HECTOR M. HICKMAN, )

d/b/a HICKMAN TILE, INC., )

A DISSOLVED FLORIDA CORPORATION )

AND HICKMAN TILE, INC., )

Respondents. )

)

)

)

RECOMMENDED ORDER

On June 8, 2012, a duly-noticed hearing was held in

Tallahassee and Jacksonville, Florida, via video teleconference,

before F. Scott Boyd, an Administrative Law Judge assigned by

the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Stefan Robert Grow, Esquire

Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondents: Hector Hickman, pro se Number 3

10110 Arrowhead Drive

Jacksonville, Florida 32257

STATEMENT OF THE ISSUE

The issue in this case is whether Respondents violated the

provisions of chapter 440, Florida Statutes, by failing to

secure the payment of workers’ compensation as alleged in the

Stop-Work Order and Amended Order of Penalty Assessment, and if

so, what penalty is appropriate.

PRELIMINARY STATEMENT

Following a site inspection, Petitioner issued a Stop-Work

Order and Penalty Assessment to Respondents on January 11, 2012,

by posting at the worksite. On January 17, 2012, a copy was

hand–delivered to Mr. Hickman. On February 3, 2012, Petitioner

requested an administrative hearing. An Amended Order of

Penalty Assessment was issued on February 14, 2012. The matter

was referred to the Division of Administrative Hearings for

assignment of an administrative law judge on February 24, 2012.

Pursuant to notice, the final hearing was conducted on

June 8, 2012. Petitioner presented the testimony of three

witnesses: Frank Odom; Victoria Parker; and Thomas R. Hash, Jr.

Petitioner offered 11 exhibits, which were admitted without

objection. Respondent Mr. Hickman testified on his own behalf

and did not offer any exhibits.

The Transcript was filed with the Division on June 25,

2012. Petitioner filed a Proposed Recommended Order on July 5,

2012, which was considered.

FINDINGS OF FACT

1. Petitioner, Department of Financial Services, Division

of Workers' Compensation, is the state agency responsible for

enforcing the requirement that employers in the State of Florida

secure the payment of workers' compensation for their employees.

2. Hickman Tile, Inc., was incorporated as a Florida

domestic for-profit corporation on or about October 22, 2004, to

engage in setting tile in the construction industry. Respondent

Hector M. Hickman was a corporate officer of Hickman Tile, Inc.,

who filed a notice of election to be exempt from the provisions

of chapter 440. The corporation had a checking account.

Mr. Hickman deposited cash and checks into the account and wrote

checks from this account for both business expenses and personal

expenses, including his rent, credit cards, and groceries.

3. On or about September 25, 2009, Hickman Tile, Inc., was

dissolved by the Florida Department of State. After this date,

no further Annual Reports or Requests for Exemption were filed

by the corporation or its officers. Mr. Hickman stopped using

the corporate checking account.

4. All violations of chapter 440 alleged in this case

occurred after the dissolution date of Hickman, Tile, Inc.

5. During 2009, Mr. Hickman started attending college

using student loans. He continued to do some tile work in the

construction industry to meet expenses.

6. Beginning on or about April 18, 2011, Mr. Hickman began

using the corporate checking account again. He deposited cash

as well as checks made out to him personally into the account

and again wrote checks from this account for both business

expenses and personal expenses.

7. Beginning in or around June 2011, Mr. Hickman began

setting tile for Ace Tile and Stone, LLC., a company which

installs tile, stone, and wood flooring. This work was not

carried out on his own home or premises. Mr. Hickman would work

intermittently, as called by Mr. Hash, the owner of Ace Tile.

8. Mr. Hickman and Mr. Hash never discussed the exact

nature of their relationship, but neither followed the

requirements of the workers’ compensation law, as discussed

below. Mr. Hickman asked if Mr. Hash would pay him in cash, and

Mr. Hash usually did so.

9. Mr. Hickman was paid a daily rate of $110.00 per day.

Although usually paid in cash, sometimes he was paid by check

made out to Mr. Hickman, not the corporation. These checks were

deposited into the corporate account: $220.00 on or about

June 15, 2011; $550.00 on or about July 11, 2011; and $440.00 on

or about August 1, 2011.

10. Mr. Hash would call Mr. Hickman to work by the job

when Mr. Hash needed him. Mr. Hickman did not do work for

Mr. Hash unless Mr. Hickman had accepted work on a particular

job. Mr. Hickman was free to accept a job from Mr. Hash or not,

and to accept jobs from other contractors.

11. Mr. Hash did not supervise Mr. Hickman in the daily

performance of the job. Hickman supplied his own tools and was

responsible for them.

12. Mr. Hickman’s employment relationship with respect to

Mr. Hash was that of an independent contractor.

13. On January, 11, 2012, Mr. Frank Odom, an investigator

for Petitioner, visited a residential construction site in

Jacksonville. He observed two individuals engaged in tile

setting activities. Mr. Hickman was mixing thinset mortar, the

other person, Mr. Mike Harrell, was cutting tile. These were

construction activities. Mr. Odom identified himself as a

workers’ compensation investigator.

14. Mr. Hickman told Mr. Odom that both men were exempt

employees through their own separate entities. Mr. Hickman

indicated that he had an exemption under Hickman Tile, Inc.

Mr. Harrell also indicated that he was exempt and provided

Mr. Odom a copy of an exemption card under Mark Harrell, LLC.

Both men indicated that they were working for Ace Tile.

15. Shortly thereafter, Mr. Hash arrived at the site.

Mr. Hash stated that he was exempt through his entity, Ace Tile.

He explained that Ace Tile was the contractor and had obtained

the contract with the homeowner through a retail store where the

homeowner had purchased the tile. He stated that the

individuals working at the site, Mr. Hickman and Mr. Harrell,

each had exemptions under their respective entities.

16. Mr. Odom checked the workers’ compensation information

through the computer in his car by accessing the Coverage and

Compliance Automated System (CCAS). It revealed that

Mr. Hickman’s exemption through Hickman Tile, Inc., had expired

in 2009. He checked the Department of State’s website for the

Division of Corporations and determined that Hickman Tile, Inc.

had been dissolved in 2009. Mr. Odom determined that both

Mr. Hash and Mr. Harrell had active exemptions.

17. Mr. Odom prepared a stop-work order and posted it

at the work site. He was unable to serve a copy on

Mr. Hickman at that time, because Mr. Hickman and

Mr. Harrell had left the job site. Mr. Odom left a copy of

the stop-work order and a request to produce business

records for a penalty assessment with Mr. Hash, asking him

to tell Mr. Hickman to contact Mr. Odom at his office.

18. Mr. Hickman came to Mr. Odom’s office on January 17,

2012. At that time, Mr. Odom was able to serve Mr. Hickman with

copies of the stop-work order and request for business records.

Mr. Hickman stated at this time that he was an employee of Ace

Tile and that he had a Form 1099 showing he had been paid

$8,000.00 in 2011. Mr. Odom advised him that a Form 1099 was

commonly used to pay people who were self-employed and that an

employee would have received a W-2 form.

19. Also on January 17, 2012, Mr. Hickman provided

Petitioner with copies of check stubs from the Hickman Tile,

Inc. checking account beginning on September 28, 2008, and going

regularly through September 8, 2009, and then after a gap in

dates, beginning again with a check stub dated April 18, 2011,

and going regularly through January 13, 2012.

20. Mr. Hickman provided an affidavit on January 27, 2012,

stating that he had received $8,000.00 working as Tom Hash’s

helper in 2011 and that he had received $330.00 from Mr. Hash in

2012 up until January 11, when the work was stopped by

Petitioner.

21. Mr. Hickman was paid approximately $8,000.00 for tile-

setting work he performed for seven months in 2011 for Ace Tile

and Stone. In 2012, he was paid $330.00 for three days of tile-

setting work performed until January 11. This was work within

the construction industry.

22. Mr. Hickman was a sole proprietor working as an

independent contractor for Mr. Hash. While Petitioner failed to

prove that Mr. Hickman was paid by the job, and in fact there

was credible evidence that he was paid by the day, failure to

prove that payment was by the job is not alone determinative.

The balance of the evidence clearly showed that Mr. Hickman’s

relationship to Mr. Hash was one of independent contractor,

rather than employee. Mr. Hickman was not supervised in the

performance of his duties. He was an experienced tile setter

with more years of experience than Mr. Hash. The other tile

setter, Mr. Harrell, was hired by Mr. Hash as an independent

contractor. Mr. Hickman provided his own tools, was responsible

only for the end result of his work, and he was employed for one

job only, until he was called again. He was free to decline any

particular job and could work for other entities in addition to

Mr. Hash, as he desired. Finally, no wage records or payroll

deductions were kept by Mr. Hash; to the contrary, a Form 1099

was prepared for Mr. Hickman, though he later refused to accept

it.

23. Mr. Hickman had no workers’ compensation insurance for

himself, and he had no valid exemption.

CONCLUSIONS OF LAW

24. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter in this

proceeding pursuant to sections 120.569 and 120.57(1), Florida

Statutes (2011). 1/

25. Petitioner has the responsibility to enforce workers’

compensation requirements, including the requirement that

employers secure the payment of workers’ compensation, pursuant

to section 440.107(3).

26. In this proceeding, Petitioner seeks to penalize

Respondents for failure to secure the payment of workers'

compensation for the benefit of employees, as required by

chapter 440, Florida Statutes.

27. Petitioner failed to prove that Hickman Tile, Inc.,

violated any provision of chapter 440. All violations of

chapter 440 alleged in this case occurred after the dissolution

date of Hickman, Tile, Inc., and the violations, if any, were

committed by Mr. Hickman d/b/a Hickman Tile, Inc., hereafter

referred to as Respondent.

28. Petitioner has the burden of proof to show, by clear

and convincing evidence, that Respondent committed the violation

alleged in the Administrative Complaint. Ferris v. Turlington ,

510 So. 2d 292 (Fla. 1987).

29. The clear and convincing standard of proof has been

described by the Florida Supreme Court:

Clear and convincing evidence requires that

the evidence must be found to be credible;

the facts to which the witnesses testify

must be distinctly remembered; the testimony

must be precise and explicit and the

witnesses must be lacking in confusion as to

the facts in issue. The evidence must be of

such weight that it produces in the mind of

the trier of fact a firm belief or

conviction, without hesitancy, as to the

truth of the allegations sought to be

established.

In re Davey , 645 So. 2d 398, 404 (Fla. 1994) (quoting Slomowitz

v. Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983)).

30. Section 440.10(1)(a) provides in relevant part:

Every employer coming within the provisions

of this chapter shall be liable for, and

shall secure, the payment to his or her

employees, or any physician, surgeon, or

pharmacist providing services under the

provisions of s. 440.13 , of the compensation

payable under ss. 440.13 , 440.15 , and

440.16 . Any contractor or subcontractor

who engages in any public or private

construction in the state shall secure

and maintain compensation for his or her

employees under this chapter as provided in

s. 440.38 .

31. Section 440.02(8) defines “construction industry” in

pertinent part as “for-profit activities involving any building,

clearing, filling, excavation, or substantial improvement in the

size or use of any structure or the appearance of any land.”

Allied Trucking of Fla. v. Lanza , 826 So. 2d 1052, 1052-1053

(Fla. 1st DCA 2002). Respondent’s activities in setting tile at

the residential worksite for payment constituted construction.

32. The next question to be considered is whether or not

Respondent meets the definition of an employer. Section

440.02(16)(a) defines "employer" to include "every person

carrying on any employment."

33. Section 440.02(17) defines "employment" as “any

service performed by an employee for the person employing him or

her.” The definition excludes certain types of labor and

services not applicable here, and includes, "with respect to the

construction industry, all private employment in which one or

more employees are employed by the same employer."

34. Historically, it has been held that a sole proprietor

could not be his own employee because there was no legal entity

apart from the individual which could be considered to be the

individual’s employer. Stevens v. Int'l Builders of Fla. , 207

So. 2d 287, 290 (Fla. 3d DCA 1968)(sole proprietor could not be

a “statutory employee” of himself under the workers’

compensation law because it is a logical anomaly to conceive of

an individual as an entity apart from itself).

35. Particularly in the relatively dangerous construction

industry, statutory changes were subsequently enacted to expand

workers’ compensation coverage. First, a sole proprietor was

permitted to “opt in” by becoming an employee of his own

business. § 440.02(2)(c), Fla. Stat. (1981); Boyd-Scarp Enters.

v. Saunders , 453 So. 2d 161, 163 (Fla. 1st DCA 1984)(sole

proprietor who failed to affirmatively elect to be an employee

of his own business could not be considered a “statutory

employee” of the general contractor either).

36. The statute was next changed to create an “opt out”

structure. That is, a sole proprietor in the construction

industry was considered to be an employee for purposes of

workers’ compensation unless the sole proprietor affirmatively

elected to be excluded from the definition of employee by filing

written notice of such election with the Division of Workers'

Compensation. § 440.02(13)(c), Fla. Stat. (1995); Armstrong v.

Ormond in the Pines , 734 So. 2d 596, 597-598 (Fla. 1st DCA

1999)(without evidence of election to be exempt, sole proprietor

was an employee of the general contractor).

37. In 2004, the statute was amended again. Section

440.02(15)(c) now defines "employee" to include:

1. A sole proprietor or a partner who is

not engaged in the construction industry,

devotes full time to the proprietorship or

partnership, and elects to be included in

the definition of employee by filing notice

thereof as provided in s. 440.05 .

2. All persons who are being paid by a

construction contractor as a subcontractor,

unless the subcontractor has validly elected

an exemption as permitted by this chapter,

or has otherwise secured the payment of

compensation coverage as a subcontractor,

consistent with s. 440.10 , for work

performed by or as a subcontractor.

3. An independent contractor working or

performing services in the construction

industry.

4. A sole proprietor who engages in the

construction industry and a partner or

partnership that is engaged in the

construction industry.

This definition does away with all elections for sole

proprietors engaged in construction, and simply declares as a

matter of law that they are employees. Although not obvious

from the text alone, which does not refer to employers at all

and confusingly blends forms of legal organization with types of

business relationships, the court cases and legislative history

summarized above make it clear that this language also makes a

sole proprietor who engages in the construction industry his own

employer.

38. The issue then, is whether Respondent was a sole

proprietor working as an independent contractor for Mr. Hash, in

which case he is his own employer and obligated to provide his

own workers’ compensation coverage, or if he instead is simply

an employee of Mr. Hash’s, in which case the employer’s burden

falls solely upon Mr. Hash.

39. While section 440.02(15)(d)1. delineates several

factors relevant to the determination of whether a person is an

independent contractor, the statute restricts their application

to an “independent contractor who is not engaged in the

construction industry.” They reiterate the factors considered

at common law, however.

40. Petitioner proved by clear and convincing evidence

that Respondent was a sole proprietor working as an independent

contractor for Mr. Hash. The question of whether a person is

properly classified an employee or an independent contractor

must be addressed on a case-by-case basis. La Grande v. B & L

Srvs., Inc. , 432 So. 2d 1364, 1366 (Fla. 1st DCA 1983). While

Petitioner failed to prove that Respondent was paid by the job,

and in fact there was credible evidence that he was paid by the

day, this failure alone is not determinative. The balance of

the evidence clearly showed that Respondent’s relationship to

Mr. Hash was one of independent contractor, rather than

employee. The lack of control exercised by Mr. Hash over

Respondent’s work is a primary factor. Strickland v.

Progressive American Ins. Co. , 468 So. 2d 525 (Fla. 1st DCA,

1985).

41. Section 440.38(1) provides several methods by which an

employer may satisfy the requirement to secure the payment of

compensation, including through insuring payment with any stock

company or mutual company or association or exchange. It is

undisputed that Respondent had not satisfied this requirement.

Petitioner proved by clear and convincing evidence that

Petitioner failed to secure the payment of compensation to

himself as employee.

42. Section 440.107(7)(d)1. provides:

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.

43. Section 440.02(8) authorizes the Division to establish

standard industrial classification codes and definitions for the

construction industry by rule.

44. Florida Administrative Code Rule 69L-6.021

incorporates by reference classification codes and descriptions

of the National Council on Compensation Insurance, Inc. (NCCI)

Basic Manual, 2001 edition, with updates through January 1,

2011. Classification code number 5348 covers ceramic tile,

indoor stone, marble, or mosaic work, and is applicable here.

The Department applied the rule’s approved manual rate of 4.43

for 2011 and 5.25 for 2012 in calculating the premiums that

would have been paid for coverage during the period of

noncompliance.

45. Petitioner demonstrated, by clear and convincing

evidence, that under the applicable statutory and rule

provisions, the premium for the 2011 payroll of $8,000.00 was

$354.40, while the premium for the 2012 payroll of $330.00 was

$17.33.

46. Under section 440.107(7)(d)1., Petitioner shall assess

a penalty equal to 1.5 times the workers’ compensation premium,

or $1,000, whichever is greater. The computed penalty was

correctly computed under this statute to be $557.60., so the

statutory minimum penalty is instead applicable.

RECOMMENDATION

Upon consideration of the above 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 Hector Hickman, d/b/a Hickman Tile, Inc., violated

the requirement in chapter 440, Florida Statutes, to secure

workers' compensation coverage and imposing upon him a total

penalty assessment of $1000.00.

DONE AND ENTERED this 24th day of July, 2012, in

Tallahassee, Leon County, Florida.

S

F. SCOTT BOYD

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 24th day of July, 2012.

ENDNOTE

1/ All references to statutes and rules are to the versions in

effect in 2011 and 2012, except as otherwise indicated. With

the exception of the approved Manual Rates Tables incorporated

by reference, no changes in statutes or administrative rules

were identified during the time of the alleged violations.

COPIES FURNISHED:

Hector M. Hickman

Hickman Tile, Inc.

Number 3

10110 Arrowhead Drive

Jacksonville, Florida 32257

Stefan Robert Grow, Esquire

Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

[e-mail]

Julie Jones, Agency Clerk

Department of Financial Services

Room 612G, Larson Building

200 East Gaines Street

Tallahassee, Florida 32399-0390

[e-mail]

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.