13-003217 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Mad Dog Marketing Group, Inc. Status: Closed Recommended Order on Friday, December 20, 2013.

Summary: Respondent did not have workers' compensation coverage on its 11 employees at the time the Department conducted a site visit. The Stop-Work Order and Third Amended Penalty Assessment are confirmed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS '

COMPENSATION ,

Petitioner ,

vs. Case No. 13 - 3217

MAD DOG MARKETING GROUP, INC. ,

Respondent .

/

RECOMMENDED ORDER

A final hearing was held in this matter before Robert S.

Cohen, Administrative Law Judge with the Division of

Administrative Hearings (DOAH) , on November 5, 2013, by video

teleconferencing at sites located in Tampa and Tallahassee,

Flo rida.

APPEARANCES

For Petitioner: Trevor S. Suter, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Kristian Eiler Dunn, Esquire

Dickens and Dunn, P.L.

517 East College Avenue

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

The issue is whether the Stop - Work Order and the Thi rd

A mended Order of Penalty Assessmen t entered by Petitioner on

July 25, 2013, and August 13, 2013, respectively, should be

upheld.

PRELIMINARY STATEMENT

This matter arose from the requirement that employers of a

certain number of employees must secure workers ' compensation

insurance for them . On July 25, 2013, Petitioner, the Department

of Financial Services, Division of Workers ' Compensation

(Department) , served a Stop - Work Order and Order of Penalty

Assessment (Stop - Work Order) on Respondent for failure to secure

the required workers ' comp ensation insurance required by

c hapter 440, Florida Statutes. An Amended Order of Penalty

Assessment was filed on August 2, 2013, assessing a penalty of

$53,213.47. Respondent requested a review of that assessment ,

and, on August 21, 2013, the assessment was further amended to

$44,062.81. After further review, on October 28, 2013, the

Department issued its Thi rd Amended Order of Penalty Assessment

for $42,251.43. Thereafter, upon the request of Respondent, the

matter was referred to DOAH for a hearing i nvolving disputed

issues of material fact.

At the hearing, Petitioner presented the testimony of Sharon

Belcher, p resident of Respondent ; Investigator Tracey Gilbert ;

and Penalty Auditor Chad Mason from the Department, and offered

11 exhibits, all of which were admitted into evidence.

Respondent presented the testimony of Sharon Belcher and Mark

Cristillo, an employee of ADP Insurance and offered four

exhibits, all of which were admitted into evidence.

A one - volume T ranscript of the final hearing was fil ed on

November 21, 2013 . After the hearing, Respondent and Petitioner

filed their proposed findings of fact and conclusions of law on

December 1 0 and 11 , 2013 , respectively .

References to statutes are to Florida Statutes (201 3 ) unless

otherwise noted.

FINDING S OF FACT

1. The Department is the state agency tasked with the

responsibility of enforcing the requirement of

s ection 440.107(3), Florida Statutes, that employers in Florida

secure the payment of workers ' compensation for their employees.

2. R espondent, Mad Dog Marketing Group, Inc., is a

corporation organized under c hapter 607, Florida Statutes, and

was registered with the Florida Department of State, Division of

Corporations, throughout the period of July 26, 2010, to July 25,

2013.

3. At al l times relevant to this proceeding, Respondent was

engaged in the operation of a hardware store business with three

locations in Florida.

4. On July 25, 2013, based upon an anonymous referral,

Tracey Gilbert, the Department ' s c ompliance i nvestigator,

com menced a workers ' compensation compliance investigation of

Respondent by visiting the job site , an appliance parts store at

730 West Brandon Boulevard, Brandon, Florida, and interviewing

Sharon Belcher.

5. According to Ms. Gilbert, Ms. Belcher informed he r that

she had 11 employees at the time of the site visit and that she

did not have workers ' compensation coverage for them.

Ms. Belcher showed Ms. Gilbert an application for workers '

c ompensation insurance and said she had not taken action with it

since the company wanted a $10,000 premium. She also showed

Ms. Gilbert some OSHA and workplace posters, but not the typical

" broken arm poster " that describes workers ' compensation coverage

for a place of business.

6. Ms. Belcher then gave Ms. Gilbert a list of Respondent ' s

11 current employees.

7. On her laptop computer, Ms. Gilbert consulted the

Department ' s Coverage and Compliance Automated System (CCAS)

database to determine whether Respondent had secured workers '

compensation coverage or an exemption fro m the requirements for

coverage for its employees. CCAS is the database Ms. Gilbert

routinely consults during the course of her investigations. She

determined from CCAS that Respondent neither had workers '

compensation coverage for her employees nor had received an

exemption from such coverage from the Department.

8. Ms. Belcher ' s recollection of her meeting with

Ms. Gilbert differs from Ms. Gilbert ' s. Ms. Belcher recalled

that she had applied for insurance with ADP on July 11, 2013,

received the " broke n arm poster , " and believed she was covered at

the time Ms. Belcher conducted her investigation. She offered an

exhibit showing photographs of posters (but not the " broken arm

poster " ) on the office bulletin board. She also offered an

exhibit she testifi ed was the UPS label from the tube containing

the " broken arm poster. " No photograph of the " broken arm

poster " was produced as an exhibit.

9. Ms. Gilbert did not contact ADP to verify whether

Respondent had coverage on the date of her site visit to the

Brandon store.

10. Ms. Gilbert issued a Stop - Work Order to R espondent and

a concurrent Request for Production of Business Records for

Penalty Assessment Calculation at 11:20 a.m. on July 25, 2013.

11. Ms. Belcher first submitted an application for worker s '

compensation coverage on July 11, 2013, but coverage was not

bound on that date.

1 2 . Ms. Belcher submitted the paperwork to bind her

insurance coverage on the afternoon of July 25, 2013, according

to Mark Cristillo, an employee of ADP Insurance. Mr. C ristillo

testified that he had made several attempts during the month of

July 2013 to obtain the signed documents from Ms. Belcher,

including an attempt as late as July 23, 2013, at 11:45 a.m.

Ms . Belcher told Mr. Cristillo at that time that she had not

r eviewed the quote package.

1 3 . At 11:20 a.m., the time Ms. Gilbert ' s issued the

Stop - Work Order on July 25, 2013, Ms. Belcher had not bound her

insurance coverage. When she submitted the payment with the

signed documents to ADP later that afternoon, the coverage was

bound effective 12:01 a.m. on July 25, 2013.

14. The records produced by Ms. Belcher were given to Chad

Mason, one of the Department ' s p enalty a uditors, to calculate the

penalty. He reviewed the records and determined the amount of

gross pa yroll paid to Respondent ' s employees during the three -

year penalty period preceding the investigation during which

Respondent was not in compliance with the workers ' compensation

coverage requirements.

15. Using Respondent ' s bi - weekly payroll chart,

Res pondent ' s Florida Department of Revenue UCT - 6 reports, and the

classification codes for each employee, Mr. Mason calculated a

Thi rd Amended Order of Penalty Assessment of $42,251.43, based

upon what Respondent would have paid in workers ' compensation

premi ums had it been in compliance with Florida ' s Workers '

Compensation Law. The order was issued on October 24, 2013.

16. Mr. Mason determined that the appropriate codes for

Respondent ' s employees were 8010 and 8810, which are hardware

store employees and ge neral clerical employees, respectively.

These codes were derived from the S copes Manual, which lists all

of the various jobs that may be performed in the context of

workers ' compensation. The manual is produced by NCCI, the

National Council on Compensati on Insurance, Inc., the nation ' s

most authoritative data collecting and disseminating organization

for workers ' compensation.

17. The parties stipulated prior to hearing that all of the

individuals listed on the p enalty w orksheet of the Amended Order

of Penalty Assessment were " employees " in the state of Florida of

Respondent during the periods of non - compliance listed on the

penalty worksheets. However, R espondent claimed that some of the

employees were out - of - state and not subject to Florida law.

18 . Ms. Belcher testified that, as of July 25, 2013, three

of its employees, Fred Hasselman, Douglas Strickland, and Josh

Hyers , were employees of the Tennessee store and not subject to a

Florida penalty. Mr. Hyers was a Florida employee prior to

July 1 , a ccording to Ms. Belcher. However, all three of the

employees were listed on the Florida Department of Revenue ' s

UCT - 6 form for the time period of the non - compliance. The UCT - 6

form lists those employees who are subject to Florida ' s

Unemployment Compensa tion Law. Mr. Mason reasonably relied upon

the UCT - 6 filings for the relevant time period to calculate

Respondent ' s gross payroll in Florida. No evidence was produced

to show them listed as Tennessee employees on that state ' s

comparable tax form or any o fficial document from outside

Florida. The logical assumption is that they are Florida

employees under the law.

19. Accepting all the employees disclosed by R espondent as

Florida employees led Mr. Mason to make his calculations of the

penalty assessment using the appropriate codes from the Scopes

Manual for hardware store and general clerical workers, 8010 and

8810. All the named employees on the Thi rd Amended Order of

Penalty Assessment were paid by Respondent in the amounts

indicated on the penalty wor ksheet that accompanies that

assessment during the penalty period of July 26, 2010, through

July 25, 2013. Even though small discrepancies came up at the

hearing regarding the classifications of some of Respondent ' s

employees, the parties had stipulated t o the accuracy of the

classifications of those employees so those numbers will be

accepted for purposes of this decision.

20. Based upon the testimony at the hearing and the

pre - hearing stipulations of the parties, the penalty assessment

in the amount of $42,251.43 is accurate. Mr. Mason correctly

applied the methodology for determining the amount of coverage

required, determining that the appropriate premium for the three -

year period would have been $28,167.50. When multiplied by the

factor used to cal culate the penalty, 1.5 times the premium, the

total amount due is $42,251.43.

21. The Department has proven by clear and convincing

evidence that at the time the Stop - Work Order was issued and

served on Respondent on the morning of July 25, 2013 , Respond ent

had not secured workers ' compensation coverage for its employees

as required by c hapter 440.

22. On two occasions , August 2 and August 21, 2013,

Ms. Gilbert returned to Respondent ' s Brandon location after the

Stop - Work Order had been issued. The firs t was to serve the

Amended Order of Penalty Assessment and the second was to serve

the Second Amended Order of Penalty Assessment. On both

occasions, the business was open in violation of the Stop - Work

Order. A business under a Stop - Work Order may elect to enter

into a payment plan after a ten percent down payment to keep the

business open while a challenge to DOAH is under way. Respondent

had not entered into such a plan. Therefore, the Department

seeks $1,000 penalty for each of the days Ms. Gilbert v isited the

Brandon store and saw it open for business. This total

additional penalty of $2,000 could have been greater had the

Department further investigated whether the business remained

open on other days after the Stop - Work Order had been imposed.

CO NCLUSIONS OF LAW

2 3. 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. Because administrative fines are penal in nature, t he

D epartment has the burden of proving by clear and convincing

evidence that Respondent violated the Workers ' Compensation Law

during the relevant time period and that the penalty assessments

are correct. Dep ' t of Banking & Fin. v. Osborne Stern & Co. , 670

So. 2d 932 , 93 3 - 34 (Fla. 1996).

25. The Department is the agency responsible for

enforcement of c hapter 440. As the responsible agency, the

Department must abide by the statutes and rules that govern it.

26. Pursuant to sections 440.10, 440.107(2), and 440.38,

every " employer " is required to secure the payment of workers '

compensation for the benefit of its employees unless exempted or

excluded under c hapter 440. Strict compliance with the Workers '

Compensation Law is required. See C&L Trucking v. Corb i tt , 546

So. 2d 1185, 118 6 (Fla. 5 th DCA 1989).

27. Section 440.107(2) states that "' securing the payment

of workers ' compensation ' means obtaining coverage that meets the

requirements of this chapter and the Florida Insurance Code. "

28. Pursuant to section 440.107(3) (g), " 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. "

29. Se ction 440.02(16)(a) defines " employ er , " in part,

as " every person carrying on any employment. " " Employment "

is defined as " any service performed by an employee for the

person employing him or her " and the definition includes

" [a]ll private employments in which four or more employees

are employed by the same employer. " § 440.02(17)(a) and

(b)2 . , Fla. Stat .

30. The W orkers ' C ompensation L aw requires employers to

secure the payment of compensation for their employees.

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

31 . Pursuant to s ection 440.05, the Department may grant

applications for certificates of election of exemption from the

Workers ' Compensation Law.

32 . Pursuant to section 440.05(6), " a certificate of

election to be exempt which is issued . . . in accordance with

this section is valid for 2 years after the effective date stated

thereon. "

33. " Corporate officer " or " officer of a corporation " is

defined as " any person who fills an office provided for in the

corporate charter or articles of inc orporation filed with the

Division of Corporations of the Department of State or as

permitted or required by chapter 607. " § 440.02(9), Fla. Stat.

34. Corporate officers can become exempt from the coverage

requirements of c hapter 440, but must affirmativ ely make that

election. See §§ 440.02(15)(b) and 440.05, Fla. Stat; and Fla.

Admin. Code Rule 69L - 6.012(2). Ms. Belcher had not sought an

exemption from coverage.

35. I n determining the number of employees of a particular

employer, " [t]he prevailing the ory is that liability of an

employer should not vary from day to day according to the number

of persons in his employ on each day, but should be governed by

the established mode or plan of his business or operation, and

from that determine he regularly and customarily employs the

requisite number. " Mathers v. Sellers , 113 So. 2d 443, 445

(Fla. 1 st DCA 1959).

36. Respondent is a corporation in a non - construction

industry, and at all times relevant for the calculation of the

monetary penalty in this matter, had four or more employees

conducting business in Florida. For the purpose of determining

Respondent ' s employees, the employees at each distinct business

location who were paid by Respondent are considered its

employees.

37. The Department shall issu e a penalty of $1,000 per day

against an employer for each day the employer conducts business

operations in violation of a stop - work order. § 440.107(3),

Fla. Stat.

38. The Department is empowered to examine and copy the

business records of any employe r conducting business in Florida

to determine whether it is in compliance with the Workers '

Compensation Law. See § 440.107(3), Fla. Stat. Whenever the

Department finds an employer who is required to have such

coverage but fails to do so, such failure is deemed an immediate

serious danger to the 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. See § 440.107(1) and (7)(a), Fla. Stat.

3 9. Section 440.107(7)(d)1 . provides that :

. . . 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 premi um 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.

The method of p enalty calculation described in

s ection 440.107(7)(d) is mandatory.

40. By not providing for the payment of workers '

compensation insurance, Respondent violated chapter 440 on

July 25, 2013, and for the three years preceding that date. No

evidence was pr oduced to demonstrate any coverage existed for the

three - year period immediately preceding the date of the site

visit by the Department. The Department was therefore justified

in issuing the Stop - Work O rder and Order of Penalty Assessment,

the Amended Ord er of Penalty Assessment, the Seco nd Amended Order

of Penalty Assessment, and the Thi rd Amended Order of Penalty

Assessment.

41. Respondent was open for business on both August 2 and

August 21, 2013, when Ms. Gilbert returned to serve amended

orders of pe nalty assessment. The Department was therefore

justified in assessing an additional penalty of $1,000 per day to

Respondent for each day the business operated in violation of the

Stop - Work Order. Had the Department presented further evidence

on the perio d of time the business remained open in violation of

the Stop - Work O rder, it would have been entitled to assess even

greater penalties against Respondent , since it is unlikely from

the testimony of the witnesses that the business was open only on

those two days .

42. The Department utilized the appropriate worksheet,

occupation codes, and salary information for calculating the

appropriate penalty to be assessed against Respondent for

conducting business without the required workers ' compensation

coverage. Its calculation of the penalty in the amount of

$42,251.43 is accurate. Further, the Department is justified in

assessing an additional penalty of $2,000 against Respondent

representing $1,000 for each of the two days Ms. Gilbert

witnessed Respondent ' s Br andon business open in violation of the

Stop - Work Order. The total amount of the penalty to be imposed

is therefore $44,251.43.

43. Respondent ' s argument that it had workers ' compensation

insurance coverage in place as of 12:01 a.m. on July 25, 2013,

fai ls to pass the smell test. The evidence was conflicting on

the point of when Ms. Belcher, on behalf of Respondent, applied

for and had insurance coverage bound. She testified she applied

for coverage on July 11, yet Mr. Cristillo, the representative of

t he insurer ADP, testified that as late as the morning of

July 23, 2013, Ms. Belcher still was questioning the premium and

the coverage had not been bound. When Ms. Gilbert appeared on

the morning of July 25, 2013, she was shown an application and a

bullet in board with posters pertaining to workplace safety, but

not the traditional " broken arm poster " supplied by workers '

compensation insurers listing the policy number and contact

telephone number to call in case of a claim.

44. The trail of evidence leads to the fact that

Ms. Belcher contacted ADP on the afternoon of July 25, 2013,

after Ms. Gilbert had made her site visit and issued the

Stop - Work Order and Order of Penalty Assessment that morning.

The company issued the policy on that date, making it ef fective

retroactively to 12:01 a.m. that day , which happens to be prior

to the time of Ms. Gilbert ' s morning visit. At best, this is an

attempt by a skilled lawyer to find a loophole in the statute

requiring workers ' compensation coverage by all employers with

four or more employees. At worst, this is an attempt to back

date insurance coverage to thwart the Workers ' Compensation Law.

The undersigned accepts the testimony of ADP ' s employee,

Mr. Cristillo, as true and finds that Ms. Belcher, as president

o f Respondent realized the " wolves were at the door " and

finalized her purchase of insurance after the Stop - Work Order was

issued. The coverage was not in place at the time of the

Stop - Work Order and Order of Penalty A ssessment, making the

Department ' s ac tions in penalizing Respondent and ceasing work at

the Brandon jobsite justified. This ruling is consistent with

other f inal o rders of the Department . See , e.g. , Dep ' t of Fin.

Servs. v. Po ' Boys, Inc. , Case No. 13 - 0605 at 15, 16 (Fla. DOAH

May 23, 2013; F la. DFS July 30, 2013)(citing U.S. Builders, L.P.

v. Dep ' t of Fin. Servs. , Case No. 07 - 4428 (Fla. DOAH Jan. 14,

2009; Fla. DFS Feb. 23, 2009)( " back dated " coverage not material

because Florida law does not recognize retroactive compliance

with workers ' com pensation requirements); Dep ' t of Fin. Servs. v .

H.R. Elec. , Case No. 04 - 2965 (Fla. DOAH Jun. 8, 2006; Fla. DFS

Aug. 22, 2006)(retroactive coverage obtained after issuance of

stop - work order does not satisfy employer ' s obligation); and

Dep ' t of Labor & Emp . Sec. v. E. Pers. Servs., Inc. , Case

No. 99 - 2048 (Fla. DOAH Oct. 12, 1999; Fla. DLES Nov. 30,

1999)(obtaining coverage after compliance investigator visits

site and determines no coverage in effect is no defense to

stop - work order or penalty assessment) .

45. W hile these actions are nothing to applaud, however,

the evidence does not support finding Ms. Belcher and her

attorney attempted to defend an action they knew or should have

known was not in compliance with chapter 440 at the time of the

initial in vestigation. Therefore, based upon the record before

the undersigned, the evidence is insufficient to find a violation

of section 57.105, Florida Statutes, resulting in the award of

attorney ' s fees and costs to the Department. If the Department

has furth er evidence to produce or that may be discovered through

post - hearing discovery solely on the issue of attorney ' s fees and

costs pursuant to section 57.105, it may seek these through

separate motion.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department issue a f inal order

upholding the Stop - Work Order and Thi rd Amended Order of Penalty

Assessment, and assess a penalty in the amount of $42,251.43. It

is further RECOMMENDED that the D epartment fine Respondent an

additional $1,000 per day for the two days Respondent did not

comply with the Stop - Work Order, resulting in a total penalty of

$44,251.43.

DONE AND ENTERED this 20 th day of December , 2013 , 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

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Divisi on of Administrative Hearings

this 20 th day of December , 2013 .

COPIES FURNISHED:

Trevor S. Suter, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Kristian Eiler Dunn, Esquire

Dickens and Dunn, P.L.

517 East C ollege Avenue

Tallahassee, Florida 32301

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.