12-001622 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. James F. Howard Construction, Inc. Status: Closed Recommended Order on Friday, June 28, 2013.

Summary: The Department did not prove that Respondent 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 3rd Amended Order of Penalty Assessment.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERSÓ

COMPENSATION,

Petitioner,

vs. Case No. 12 - 162 2

JAMES F. HOWARD CONSTRUCTION,

INC.,

Respondent.

/

RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted in this

case on April 4, 2013 , in Pensacola , Florida, before James H.

Peterson III, an Administrative Law Judge assigned by the

Division of Administrative Hearings.

APPEARANCES

For P etitioner: Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Robert O. Beasley, Esquire

Litvak, Beasley and Wilson, LLP

226 East Government Street

P ensacola, Florida 32502

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent violated the

provisions of chapter 440, Florida Statutes, 1 / by failing to

secure the payment of workersÓ compensation, as alleged in the

Stop - Work Order and Thir d Amended Order of Penalty Assessment .

PRELIMINARY STATEMENT

On March 29, 2012 , the Department of Financial Services,

Division of WorkersÓ Compensation (Department or Petitioner),

issued a Stop - Work Order for Specific Worksite Only and Order of

Penalty As sessment (Stop - Work Order) against Respondent James F.

Howard Construction, Inc. , ordering th e corporation to

immediately cease all business operations at 2544 North D

Street, Pensacola, Florida 32501 . The Stop - Work Order advised

Respondent of its right t o have administrative review of the

DepartmentÓs action by filing a petition for hearing within 21

days. Respondent timely requested an administrative hearing by

filing a document entitled Ð Election of Proceeding" (Request for

Hearing) in which Respondent contested one or more of the

Department's allegations in the Stop - Work Order .

When Respondent failed to respond to the Department's

initial request for business records , the Department calculated

an imputed penalty and issued an Amended Order of Penalty

against Respondent. Thereafter, t he Department transmitted the

Request for Hearing to the Division of Administrative Hearings

for the assignment of an administrative law judge to conduct an

administrative hearing.

After it began receiving business record s through discovery

from Respondent, the Department twice amended the Amended Order

of Penalty Assessment, resulting in a Third Amended Order of

Penalty Assessment calculated pursuant to s ection 440.107(7),

Florida Statutes, in the amount of $ 11,335.70 , wh ich was served

upon Respondent by the Department at the final hearing held

April 4, 2013.

At the hearing, the Department presented the testimony of

three witnesses , all of whom were employed by the Department,

including : Government Analyst Mark Mark, Comp liance Investigator

Angelia Brown, and Penalty Auditor Cathe rine Ferguson.

PetitionerÓs E xhibits P - 1 through P - 3, P - 5, P - 6, partial Exhibit

P - 7, Exhibits P - 8, P - 10, P - 11, P - 13, and P - 14 were received into

evidence. Respondent presented the testimony Jame s F. Howard, a

corporate officer of Respondent, and offered no individual

exhibits. The parties offered two joint exhibits which were

received into evidence as Joint Exhibits A and B.

The proceedings were transcribed and a transcript was

ordered. The par ties requested and were given 20 days from the

filing of the t ranscript with the Division of Administrative

Hearings within which to submit proposed recommended orders .

The Transcript , consisting of two volume s , was filed on

April 24, 2013 . By Order gran ting the parties' stipulation for

extension of time, the parties were given until May 21, 2013,

within which to file their proposed recommended orders. The

Department timely filed its Proposed Recommended Order .

Respondent filed it s Proposed Recommended Order on May 23, 2013,

two days after the extended deadline. The Department , however ,

did not seek to strike Respondent's Proposed Recommended Order,

and there does not appear to be any prejudice in considering

Respondent's late - filed Proposed Recommended Order. Therefore,

the Proposed Recommended Orders of both parties have been

considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Department is the state agency responsible for

enforcing the statutory requirement that employer s secure

workersÓ compensation coverage for the benefit of their

employees.

2. Respondent is a corporation with its principal office

3981 North W Street, Unit 36, Pensacola, Florida 32505. At all

relevant time periods, Respondent has been engaged in busi ness

as a contractor in the construction industry.

3. On March 28, 2012, after receiving a public referral

regarding alleged uninsured construction activity at 2544 North

D Street in Pensacola, Florida (the Site) , Department Compliance

Investigator Angeli a Brown visited the Site. Upon Ms. Brown's

arrival, there were plumbers and a siding company at the Site.

According to Ms. Brown, s he also saw an individual attaching u -

shaped metal clips between the inside beams and the roof and

soffits of the house tha t was being constructed at the Site .

4. The plumbers had a workers' compensation policy and the

siding workers had exemptions from workers' compensation

requirements .

5. Ms. Brown s poke to the man who appeared to be attaching

the metal clips . Ba sed upon that conversation, Ms. Brown

concluded that the man was a subcontractor and Respondent's

employee. The evidence, however, does not support that

conclusion.

6. The man, whose name is apparently Robert Madron, was

not called as a witness at the fina l hearing. According to

Ms. Brown, Mr. Madron told h er he had his own company.

Ms. Brown, however, was unable to obtain information verifying

that assertion .

7. Further, while Mr. Howard had paid Mr. Madron prior to

Ms. Brown's visit for unsolicited wor k Mr. Madron had performed

for Mr. Howard, consisting of picking up trash and repairing

some equipment owned by Mr. Howard , Mr. Howard denied that

Respondent ever employed Mr. Madron .

8. Rather than showing that Mr. Madron was a subcontractor

with his ow n business or an employee of Respondent, the evidence

adduced at the final hearing indicated that Mr. Madron, who was

known as "Gomer" by Mr. Howard, was a n unemployed , homeless

person , living in nearby w oods . Mr. Madron would often come to

the Site and s urrounding neighborhood looking for work and food .

9. Mr. Howard was surprised that M s . Brown had taken

Mr. Madron seriously, becau se Mr. Howard believes that

Mr. Madron's facial expressions and unbalanced, awkward gait are

obvious indicators that Mr. M adron is unstable and has mental

problems.

10. Ms. Brown issued a S top - Work O rder to Mr. Madron the

day of her first visit at the Site, March 28, 2012.

11. The evidence presented at the final hearing, however,

failed to show that Mr. Madron was ever empl oyed by Respondent.

12. The next day, March 29, 2012, Ms. Brown returned and

observed four ot her individuals working at the S ite. The

individuals included Robert Jones, Charles Lyons, Martin

Shaughnessy, and Allen Weeden. While Ms. Brown concluded that

these individuals were Respondent's employees on March 29, 2012,

the evidence shows that they were paid for the work that day by

Pa cesetter Personnel, an employee - leasing company.

13. Aside from allegi ng that Respondent employed

Mr. Madron, the Third Amen ded Order of Penalty Assessment is

based upon Respondent's alleged employment and failure to

provide workers' compensation coverage for Mr. Jones, Mr. Lyons,

Mr. Shaughnessy, and Mr. Weeden. In addition, the Third Amended

Order of Penalty Assessment alleg es that Respondent employed its

officer, Mr. Howard, during a lapse in Mr. Howard's exemption

from workers' compensation.

14. There was no testimony from Robert Jones, Charles

Lyons, Martin Shaughnessy, or Allen Weeden offered at the final

hearing and the evidence is otherwise insufficient to show that

those individuals were employed by Respondent on March 29, 2012.

15. The Department's investigator, Ms. Brown, further

concluded that Pacesetter Personnel had not provide d worker's

compensation coverage for those four men on March 29, 2012. Her

conclusion, however, was based on a conversation she said she

had with Pacesetter Personnel. The Department did not offer the

test imony from anyone at Pacesetter, n or did it offer any non -

hearsay evidence to support Ms. Brown's conclusion that

Pacesetter Personnel was not providing workers' compensation to

those four individuals.

16. Further, the only evidence that the Department offered

to prove that Messrs. Jones, Lyons, Shaughnessy, and Weeden were

ever employed by Respondent , or to support the Third Amended

Penalty Assessment, consists of Mr. Howard's cancelled checks to

those individuals.

17. The Third Amended Penalty Assessment seeks an

assessment for Robert Jones from January 1 to March 28, 2012.

At the fi nal hearing, Mr. Howard testified that Mr. Jones is a

relative, and the payment to M r. Jones was a loan to help

Mr. Jones with moving expenses. There is no contrary evidence.

18. The Third Amended Penalty Assessment provides an

assessment for Charles Lyo ns for the periods from July 1, 2010

to December 31, 2010, and from January 1, 2011 to December 31,

2011. The assessment is based upon one check to Mr. Lyons in

the amount to $480. Mr. Howard testified that Mr. Lyons had an

exemption from workers' compen sation. The Department presented

no contradictory evidence.

19. The Third Amended Penalty Assessment se eks an

assessment for Martin Shaughnessy for several time periods based

upon several checks from Mr. Howard. Mr. Howard testified that

Mr. Shaughnessy had an exemption and the Department presented no

contrary evidence.

20. The Third Amended Penalty assessment also seeks an

assessment for James Howard, individually, from July 17 to

August 11, 2011, during which time there was a lapse in his

certificate of exemption from workers' compensation. The

evidence showed that, other than that 26 - day lapse, Mr. Howard

has maintained his exemption since 2003.

21. The Department presented no evidence that Mr. Howard

provided services to, or was paid by , Respondent during the time

that his exemption had lapsed. The only evidence presented was

a check from Respondent's checking account showing a payment to

Mr. Howard's mother during the lapse period. Mr. Howard

testified that the check was to reimburse his mother f or the use

of her American Express card to purchase materials and supplies.

The Department presented no countervailing evidence.

22. In sum, the evidence presented at the final hearing

was insufficient to support the Stop Work Order or Third Amended

Pena lty Assessment.

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 . (2012) .

24. The Department is responsible for enforcing t he

requirement that employers coming within the provisions of

chapter 440, Florida Statutes, obtain workers' compensation

coverage for their employees " that meets the requirements of

[chapter 440] and the Florida Insurance Code . . . ."

§ 440.107(2), Fla. Stat.

25. As the party asserting the affirmative in this

proceeding, t he Department has the burden of proof. See , e.g. ,

Balino v. DepÓt of H RS , 348 So. 2d 349 (Fla. 1st DCA 1977).

26. Because the Department is seeking to prove violations

of a statute a nd impose administrative fines or other penalties,

it has the burden to prove the allegations in the complaint by

clear and convincing evidence. Ferris v. Turlington , 510 So. 2d

292 (Fla. 1987).

27. Chapter 440 broadly defines "employer" as "every

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

28. "Employment" subject to Florida's workers'

compensation law " means any service performed by an employee for

the person employing him or her . . . [and] with respect to the

construction industr y, [includes] all private employment in

which one or more employees are employed by the same employer."

§ 440.02(17)(a)&(b)(2), Fla. Stat.

29. The definitional section of chapter 440 defines

Ðe mployeeÑ as " any person who receives remuneration from an

emp loyer 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,

whether lawfully or unlawfully employed, and includes, but is

not limited to , aliens and minors. " § 440.02(15)(a), Fla. Stat.

30. The term "employee" as used in chapter 440 also

includes "[a]n independent contractor working or performing

services in the construction industry . . . [as well as a] sole

proprietor who engages in th e construction industry and a

partner or partnership that is engaged in the construction

industry." § 440.02(15)(c), Fla. Stat.

31. In addition, the chapter 440 definition of "employee"

includes "[a] ll persons who are being paid by a construction

contrac tor 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 , [ 2 /] for work performed

by or as a subcontractor. " § 440.02(15)(c)(2), Fla. Sta t.

32. O fficers of corporations, however, including up to

three list ed officers of a corporation involved in the

construction industry who each own at least a 10 percent share

of the corporation, may elect to be exempt from the requirement

that they be covered by workers' compensation insurance. An

officer of a corporatio n who validly elects to be exempt by

filing a notice of the election with the Department is not an

employee . § 440.02(15)(b), Fla. Stat. ( emphasis added ) .

33. The Department argues that it properly issued and

served the Stop - Work Order and business recor ds request upon

Respondent because Robert Madron was working for Respondent as a

subcontractor on March 28 and 29, 2012. See Petitioner's

Proposed Recommended Order (PRO), ¶ 41. However, as noted in the

Findings of Fact, above, the Department failed to pr ove that

Robert Madron was ever employed by Respondent.

34. The Department further argues that Charles Lyons,

Robert Jones, Allen Weeden, and Martin Shaughnessy were

Respondent's employees on March 29, 2012, even if leased through

Pacesetter Personnel bec ause "leased employees are employees of

the employer who utilizes the leasing company's services." See

Department's PRO, ¶ 37 ( citing Hazealeferiou v. Labor Ready ,

947 So. 2d 599 (Fla . 1st DCA 2007) ) .

35. The Department's use of the decision in Hazealefe riou ,

supra , for the proposition that Respondent should be subject to

the Third Amended Penalty Assessment because the leased

employees were Respondent's employees is contrary to

Department's investigator's admission that "[i]f they're being

paid by Pacese tter, they are employed by Pacesetter."

Transcript of Final Hearing (Transcript), p. 168; see also

Transcript , p. 170 ("They worked for Pacesetter.").

36. Moreover, a review of the opinion in Hazealeferiou

makes it clear that a company obtaining employee s through an

employee leasing company is not subject to workers' compensation

liability unless the employee leasing company fails to provide

coverage. See Hazealeferiou , 947 So. 2d 604.

37. As explained by the Department's Government Analyst,

Mr. Mark, w hen a leasing company is involved , "[t] he employer

enrolls and signs a client agreement with the leasing company to

pay all payroll through the leasing company and the leasing

company will provide workers' compensation coverage under their

policy. " See Tr anscript, p. 36 .

38. A conclusion that the employee - leasing company was the

employer and provided workers' compensation for the leased

employees is consistent with the requirements of section

468.529(1), Florida Statutes, which provides in pertinent part:

A licensed employee leasing company is the

employer of the leased employees . . . . An

employee leasing company shall be

responsible for timely payment of

reemployment assistance taxes pursuant to

chapter 443, and shall be responsible for

providing worke rsÓ compensation coverage

pursuant to chapter 440.

39. Therefore, it is concluded that t he Department did not

prove by clear and convin cing evidence that the leased employees

were employed by Respondent on March 29, 2012 , for purposes of

imposing liabili ty upon Respondent for failure to provide

workers' compensation coverage . Rather , the evidence and law

indicate that, for purposes of workers' compensation liability,

the y were employees of an employee - leasing company.

40. Further, c onsidering the Findin gs of Fact in view of

applicable law, it is concluded that the Department failed to

provide sufficient evidence to justify the Stop - Work Order or

its business records request, and the evidence submitted at the

final hearing was otherwise inadequate to supp ort the Third

Amen ded Order of Penalty Assessment.

41. In sum, Petitioner failed to establish by clear and

convincing evidence that Respondent violated the provisions of

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

of workersÓ compensat ion, as alleged in the Stop - Work Order and

Third Amended Order of Penalty Assessment.

RECOMMENDATION

Based on the for e going Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Division of WorkersÓ Compensation

enter a final order dismissi ng the Stop - Work Order and Third

Amended Order of Penalty Assessment issued against Respondent .

DONE AND ENTERED this 28th day of June, 2013 , in

Tallahassee, Leon County, Florida.

S

JAMES H. PETERSON, III

Administrative L aw Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28t h day of June, 2013 .

ENDNOTES

1 / Unless otherwise indicated, all citations to Florida Statutes

are to the 2011 version in effect at the time of the

allegations.

2 / Section 440.10(1)(a), (b), and (c), Florida Statutes,

provides:

( a) 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 pay able

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 .

(b) In case a contractor sublets any part or parts of

his or her contract work to a subcontractor or

subcontractors, all of the employees of such

contractor and subcontractor or subcontractors engaged

on such contract work shall be deemed to be employed

in one an d the same business or establishment, and the

contractor shall be liable for, and shall secure, the

payment of compensation to all such employees, except

to employees of a subcontractor who has secured such

payment.

(c) A contractor shall require a subcontractor to

provide evidence of workersÓ compensation insurance.

A subcontractor who is a corporation and has an

officer who elects to be exempt as permitted under

this chapter shall provide a copy of his or her

certifi cate of exemption to the contractor.

COPIES FURNISHED :

Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Robert O. Beasley, Esquire

Litvak, Beasley and Wilson, LLP

226 East Government Street

Pe nsacola, Florida 32502

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

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.