15-003479 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Vlasnik Carpentry And Construction, Inc. Status: Closed Recommended Order on Monday, December 7, 2015.

Summary: The Department failed to prove by clear and convincing evidence that Respondent engaged in carpentry other than on a limited basis during the two-year period reviewed. The $1,000 penalty assessed is sufficient to cover the limited engagement.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS Ó

COMPENSATION,

Petitioner,

vs. Case No. 15 - 3479

VLASNIK CARPENTRY AND

CONSTRUCTION, 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 August 5 , 2015, in Pensacola ,

Florida.

APPEARANCES

For Petitioner: Trevor S. S uter, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Lonnie L. Vlasnik , pro se

6305 Cotton Street

Pensa cola, Florida 32526

STATEMENT OF THE ISSUE S

The issue s are whether Respondent, Vlasnik Carpentry and

Construction, Inc., failed to secure workers Ó compensation

coverage for its employees , and, if so, whether the Department of

Financial Services, Division of Workers Ó Compensation

(Department) , correctly calculated the penalty assessment imposed

against Respondent.

PRELIMINARY STATEMENT

This proceeding arose from the requirement that employers

must secure workers Ó compensation insurance for their employees.

On March 23, 2015, the Department served a Stop - Work Order and

Order of Penalty Assessment (Stop - Work Order) on Respondent for

failing to secure workers Ó compensation for the benefit of its

employees as required by chapter 440, Florida Statutes. On

May 22, 2015, Respondent timely filed its Petition to Request

Hearing for Administrative Review, disputing the Department Ó s

calculation of the penalty. On June 18, 2015, the matter was

re f erred to DOAH and was assigned to the undersigned. On

June 22, 2015, t he Department served an amended order of penalty

assessmen t on Respondent assessing a penalty of $8,240.60.

At the hearing, Petitioner presented the testimony of Kali

King , a c ompliance i nvestigator, and Lawrence Pickle , a p enalty

a uditor , and offered ei ght exhibits, all of which were admitted

into evidence. Respondent presented the testimony of Lonnie

Vlasnik , d irector of Vlasnik Carpentry and Construction, Inc. ,

an d offered three exhibits into evidence , all of which were

admitted into evidence .

A one - volume Transcript of the final hearing was filed on

August 24 , 2015. After the hearing, Petitioner filed its

proposed F indings of F act and C onclusions of L aw on September 3 ,

2015. Respondent did not file a proposed recommended order .

References to statu tes are to Florida Statutes (2014) ,

unless otherwise noted.

FINDING S OF FACT

1. The Department is the state agency responsible for

enforcing the statutory requirement that employers secure the

payment of workers Ó compensation for the benefit of its

empl oyees.

2. Respondent was a business providing services in the

construction industry with its principal office located at

6305 Cotton Street, Pensacola, Florida 32526.

3. Respondent was administratively dissolved for failure to

file its annual report with the Florida Secretary of State,

Division of Corporations, on September 25, 2009. As of the date

of the hearing, Respondent had not been reinstated as an active

corporation.

4. Mr. Lonnie L. Vlasnik, former director of Respondent,

f iled papers to create a limited liability corporation, Vlasnik

Carpentry, L.L.C. , on April 20, 2015. Mr. Vlasnik is the sole

managing member of the L.L.C.

5. On March 23, 2015, the Department Ó s compliance

investigator, Kali King, observed Mr. Vlasnik replacing the

decking on a porch. She interviewed Mr. Vlasnik who stated he

was working for the homeowner and that he possessed a valid

exemption from workers Ó compensation. Mr. Vlasnik told Ms. King

the name of the business under which he had the exemption.

6. After gathering the information from Mr. Vlasnik,

Ms. King consulted the Division of Corporations website to

determine, among other things, the identity of Respondent Ó s

corporate officers. She learned that Mr. Vlasnik and his wife

were the sole directors of the corporati on. She also learned

that the corporation was Ð inactive. Ñ

7. Ms. King consulted the Department Ó s Coverage and

Compliance Automated System (CCAS) for proof of workers Ó

compensation coverage and for any exemptions associated with

Respondent.

8. An exemp tion is a method whereby a corporate officer can

be relieved of the responsibility of the requirements of

chapter 440 pursuant to section 440.05.

9. CCAS is the Department Ó s internal database that contains

workers Ó compensation insurance policy and exempt ion information.

Insurance providers are required to report insurance coverage

information to the Department which is then inputted into CCAS.

10. Ms. King Ó s CCAS search revealed that Respondent did not

have a workers Ó compensation policy or an employ ee leasing

policy. A dditionally , she discovered that no active exemptions

were associated with Respondent.

11. Based upon the information she gathered, Ms. King

issued and served Mr. Vlasnik with a Stop - Work Order on March 23,

2015. Ms. King simultaneou sly issued and served Ð LONNIE VLASNIK,

DBA, VLASNIK CARPENTRY & CONSTRUCTION, INC. , a Dissolved Florida

Corporation and VLASNIK CARPENTRY & CONSTRUCTION, INC. , Ñ with a

Request for Production of Business Records for Penalty Assessment

Calculation (the Ð Requ est for Production Ñ ). The Request for

Production sought documents to enable the Department to determine

Respondent Ó s payroll for the time period of March 24, 2013,

through March 23, 2015.

12. In response to the Request for Production, Mr. Vlasnik

provi ded the Department with bank statements and other records.

13. Lawrence Pickle, a penalty auditor with the Department,

was assigned in April 2015 to calculate the penalty to be

assessed against Respondent.

14. Mr. Pickle believed the business records produced by

Respondent were sufficient to calculate a penalty for the entire

audit period.

15. Based upon Mr. Pickle Ó s calculations, on June 19, 2015,

the Department issued a second amended order of penalty

assessment to Respondent which was served on Res pondent on

June 22, 2015. The second amended order of penalty assessment

imposed a penalty of $8,240.60.

16. To make the penalty assessment determination,

Mr. Pickle consulted the codes listed in the Scopes® Manual that

has been adopted by the Department through Florida Administrative

Code Rules 69L - 6.021 and 69L - 6.031. Classification codes are

assigned to various occupations to assist in the calculation of

workers Ó compensation insurance premiums.

17. Based upon Ms. King Ó s description of the activities

Mr. Vlasnik was performing and the descriptions listed in the

Scopes® Manual, Mr. Pickle determined that the proper

classification for employees of Respondent was 5645 Ï Carpentry.

Mr. Pickle then utilized the corresponding manual rates for those

classific ation codes and the related periods of the alleged

non - compliance.

18. Assuming the penalty should be imposed in this matter,

Mr. Pickle utilized the appropriate methodology specified in

section 440.107(7)(d)1. and r ules 69L - 6.027 and 69L - 6 .028, to

deter mine the penalty of $8,240.60.

19. Mr. Vlasnik and his wife, both directors of Respondent

when it was an active corporation, are both disabled with

Mrs. Vlasnik being unable to work at all. Mr. Vlasnik Ó s

disability is the result of an automobile accident in which he

suffered a neck injury in 200 4 and for which he rec e ived

significant surgeries and treatment after that time .

20. Mr. Vlasnik Ó s physician, Roy Reyes, M.D., stated in a

letter dated August 4, 2015, that Mr. Vlasnik is Ð unemployable Ñ

as a res ult of Ð medical conditions regarding cervical spine

surgeries x2, Rt ulnar re - location, numbness and tingling upper

extremities, involuntary muscle spasms and feet pain. Therefore

patient is not able to work and keep a job. Ñ This diagnosis was

confirmed by Mr. Vlasnik Ó s MRI report dated June 28, 2011.

21. When the Stop - Work Order was issued on March 25, 2015,

Mr. Vlasnik did not have an exemption as an employee of

Respondent.

22. Mr. Vlasnik went to the Department Ó s office on

April 10, 2015 , to pay $1,0 00 towards the penalty assessment , but

the Department would not lift the Stop - Work Order since he

refused to enter into a payment agreement for the entire

assessment. He also was told by Ms. King or, perhaps, by

Ms. Sharon Kelson that he could not receive an exemption from the

workers Ó compensation requirement until he set up an L.L.C. ,

since he was required to be an employee of a Florida corporation

before he could receive an exemption.

23. The business records supplied by Mr. Vlasnik in

response to the Department Ó s Request for Production consisted of

three years Ó worth of bank statements. Most of the banking

transactions were through the ATM and were cash transactions

without an explanation on the statements of the use of the cash

withdrawn. A total of $783.45 were payments made to Lowe Ó s

(14 transactions totaling $385.05), Home Depot (10 transactions

totaling $336.81), Pensacola Hardware (three transactions

totaling $49.04), and Paint Mart (one transaction for $12.55).

24. Mr. Vlasnik testified that, other than small payments

made to Home Depot or Lowe Ó s, along with account fees, all of his

withdrawals from the account were for paying his and his wife Ó s

medical and household bills. The account was maintained in the

name of Respondent even though the c orporation had been dissolved

years before the records produced in response to the Request for

Production.

25. Mr. Vlasnik did not use the ATM withdrawals to pay

Respondent Ó s employees for work performed since the dissolved

corporation had no employees.

26. Since the time of his accident in 200 4 and the

subsequent surgeries , Mr. Vlasnik testified that he was Ð working

for scraps Ñ by performing any odd jobs he could pick up to make

ends meet. He performed tasks like taking alarm calls for

companies, vacu uming houses, meeting real estate agents to help

do an appraisal , or meeting termite inspectors to let them into a

home to perform their work .

CONCLUSIONS OF LAW

27 . The Division of Administrative Hearings has

jurisdiction over the subject matter of an d the parties to this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2015).

28 . Because administrative fines are penal in nature, the

Department has the burden of proving by clear and convincing

evidence that Respondent violated the Workers Ó Compensa tion Law

during the relevant time period and that the penalty assessments

are correct. Dep Ó t of Banking & Fin. v. Osborne Stern & Co. , 670

So. 2d 932, 933 - 34 (Fla. 1996).

29 . The Department is the agency responsible for

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

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

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

every Ð employer Ñ is required to secure the payment of workers Ó

compensation for the benefit of its employees unless exempted or

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

Compensation Law is required. See C&L Trucking v. Corbitt , 546

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

31 . Section 440.107(2) states that ÐÒ securing the payment

of worker s Ó compensation Ó means obtaining coverage that meets the

requirements of this chapter and the Florida Insurance Code. Ñ

32 . Pursuant to section 440.107(3)(g), Ð The department shall

enforce workers Ó compensation coverage requirements Ñ and Ð t he

department sh all have the power to . . . [i] ssue stop - work orders,

penalty assessment orders, and any other orders necessary for the

administration of this section. Ñ

33 . Section 440.02(16)(a) defines Ð employer, Ñ in part, as

Ð every person carrying on any employment. Ñ Further, Ð [i] f the

employer is a corporation, parties in actual control of the

corporation, including, but not limited to, the president,

officers who exercise broad corporate powers, directors, and all

shareholders who directly or indirectly own a control ling

interest in the corporation, are considered the employer for the

purposes of ss. 440.105 , 440.106 , and 440.107 . Ñ

34 . The W orkers Ó C ompensation L aw requires employers to

secure the payment of compensation for their employees.

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

35. Section 440.107(7)(a) states, 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 Ó

compensation required by this chapter . . .

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. If the department makes

suc h a determination, the department shall

issue a stop - work order within 72 hours.

36. Pursuant to section 440.05(6), Ð [a] certificate of

election to be exempt which is issued on or before January 1, 2013,

in accordance with this section shall be valid fo r 2 years after

the effective date stated thereon. Ñ Respondent, a dissolved

corporation, did not have a certificate of exemption to cover

Mr. Vlasnik, its director.

37. The Department is empowered to examine and copy the

business records of any employer conducting business in Florida

to determine whether it is in compliance with the Workers Ó

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 d eemed 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.

38. Section 440.107(7)(d)1 . provides that the Department :

[S] hall assess against any employer who has

failed to secure the payment of compensation

as required by this chapter a penalty equal

to 2 times the amount the employer would have

paid in premium when applying approved manual

rates to the employer Ó s payroll during

periods for which it failed to secure the

payment of workers Ó compensation required by

this chapter within the preceding 2 - year

period or $1,000, whichever is greater.

The method of penalty calculation described in

section 440.107(7)(d) is mandatory.

39. Pursuant to Florida law, Ð [a] corporation

administratively dissolved continues its corporate existence but

may not carry on any business except that necessary to wind up

and liquidate its bu siness affairs . . . and notify claimants. Ñ

§ 607.1421, Fla. Stat.

40. Respondent, although administratively dissolved by the

Division of Corporations for failure to file its 2009 annual

report, exists for purposes of the proposed assessment in this

matt er. The issue that remains is whether the Department has

proven by clear and convincing evidence the amount of payments

made to Respondent Ó s employees to justify the imposition of a

penalty assessment of $8,240.60.

41. The clear and convincing standard o f evidence has been

described by the Florida Supreme Court as follows:

[C]lear 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 p recise 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

alleg ations sought to be established.

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

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

42. The link between the cash withdrawals shown in the bank

records submitted by Respondent and relied upon by the Department

as being payments made to Mr. Vlasnik as Respondent Ó s employee is

lacking. While the checking account is in Respondent Ó s name, it

appears to have been used by Mr. Vlasnik as his personal account,

from which he regularly withdrew cash funds to pay for household

and medical expenses for his wife and himself. The only

transactions that can be shown as potentially related to the

field of carpentry are those made to Lowe Ó s and Home Depot. The

total amount of these carpentry or home improvement - related

transactions is $783.45, hardly an amount that would support an

active carpentry or handyman business.

43. The only carpentry activity observed by any of the

Department Ó s investigators was on March 23, 2015, when Ms. King

saw Mr. Vlasnik replacin g the decking material on the porch at a

private home. None of the business records produced by

Respondent support significant carpentry or even handyman work

being performed by Mr. Vlasnik as Respondent Ó s employee.

44. The extent of the evidence relied upon by the

Department in assessing a penalty of $8,240.60 against Respondent

does not rise to the level of clear and convincing. It is

evident that Mr. Vlasnik performed some work during the period of

March 24, 2013, through March 23, 2015, and that some of it may

have been carpentry - related. His testimony concerning his

disability and his inability to work at other than occasional and

menial jobs given to him by others is credible and weakens the

Department Ó s case that he was engaged in carpentry work

t hroughout the two - year period examined. Moreover, the fact that

Mr. Vlasnik paid $1,000, incorporated an L.L.C., and attempted to

receive an exemption after the Stop - Work Order was imposed showed

both his good faith and his desire to follow the law. The $1,000

already received from Mr. Vlasnik by the Department is more than

the total amount of material purchases he made at the various

home improvement stores during the two - year period of the

assessment and represents a fair assessment in this matter where

the Department Ó s entitlement to the full amount of the assessment

($8,240.60) was not proven by clear and convincing evidence.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department issue a f i nal o rder

accepting the $1,000 penalty already received from Respondent as

payment in full for any assessment sought . Further, it is

RECOMMENDED that the Department inform Mr. Vlasnik that he would

be better served by closing the business account on the d issolved

corporation and opening a new one in the name of the active

L.L.C. should he desire to continue in some form of business.

DONE AND ENTERED this 7th day of December , 2015 , 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

Division of Administrative Hearings

this 7th day of December , 2015 .

COPIES FURNISHED:

Trevor S. Suter, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

(eServed)

Lonnie L. Vlasnik

6305 Cotton Street

Pensacola, Florid a 32526

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit writte n 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.