02-003097RU Florida Home Builders Association; Florida A.G.C. Council, Inc.; And Parrish Group, Inc.; And Mark Madonia, D/B/A Chop`s Acoustical Ceilings vs. Department Of Insurance, Division Of Workers` Compensation Status: Closed DOAH Final Order on Thursday, October 31, 2002.

Summary: The agency statement concerning workers` compensation insurance did not merely paraphrase statutory amendments, but interpreted the provisions. Therefore, the statement is a rule that should be promulgated.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA HOME BUILDERS )

ASSOCIATION; FLORIDA A.G.C. )

COUNCIL, INC.; and PARRISH )

GROUP, INC., )

)

Petitioners, )

)

vs. ) Case No. 02 - 3097RU

)

DEPARTMENT OF INSURANCE, )

DIVISION OF WORKERS' )

COMPENSATION, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case

on September 13, 2002, in Tallahassee, Florida, before Carolyn

S. Holifield, a duly - designated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioners: William E. Williams, Esquire

Robert D. Fingar, Esquire

Huey, Guilday, Tucker,

Sc hwartz & Williams, P.A.

1983 Centre Point Boulevard, Suite 200

Post Office Box 12500

Tallahassee, Florida 32317 - 2500

For Respondent: Thomas D. Valentine, Esquire

David D. Hershel, Esquire

Department of Insurance

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

STATEMENT OF THE ISSUES

The is sues in this case are: whether Petitioners have

standing to challenge the agency statements in the Division of

Workers' Compensation Bulletin No. 234; whether the agency

statements in Bulletin No. 234 constitute a "rule" as defined by

Subsection 120.52 (1 5), Florida Statutes; and, if yes, whether

the Department violated Subsection 120.54(1), Florida Statutes,

by not adopting the statements in accordance with the rulemaking

procedures.

PRELIMINARY STATEMENT

On August 5, 2002, Petitioners, Florida Home Builders

Association, Florida Associated General Contractors’ Council,

Inc., and the Parrish Group, Inc., filed a Petition seeking an

administrative determination that statements in the Division of

Workers' Compensation Bulletin No. 234, issued on June 20, 2002,

constituted a "rule," as defined by Subsection 120.52(15),

Florida Statutes. When the bulletin was issued, the Division of

Workers' Compensation, was within the Florida Department of

Labor and Employment Security, but it is now within the

Departmen t of Insurance (Department). The Petition alleges that

Bulletin No. 234 violates the rulemaking requirements of

Subsection 120.54(1), Florida Statutes, because the Department

of Insurance has not adopted it as a rule in accordance with

that provision. Fi nally, the Petition seeks attorneys' fees and

costs pursuant to Subsection 120.595(4), Florida Statutes.

On August 27, 2002, Petitioners filed a motion for leave to

amend the Petition in order to add Mark Madonia, d/b/a Chop's

Acoustical Ceilings, as a Petitioner. By Order entered

September 4, 2002, Petitioners’ motion was granted.

Initially, the final hearing was scheduled for September 4,

2002, but upon the parties’ joint motion, the hearing was

rescheduled for September 13, 2002.

Prior to hearing, the parties entered into a pre - hearing

stipulation that limited the necessity to establish certain

facts at the final hearing. At hearing, Petitioners presented

the testimony of five witnesses: Joanne Sturdivant, president

of the Home Builders Insurance Agency; Douglas Buck, director of

government affairs of the Florida Home Builders Association;

Robert Allen Douglas, executive director of Associated General

Contractors’ Council; Robert Parrish, Jr., owner and president

of Parrish Group; and Mar k Madonia, owner of Chop's Acoustical

Ceilings. The Department presented the testimony of Daniel

Sumner, assistant director of the Department’s Division of

Workers' Compensation. Joint Exhibits numbered 1 through 3,

Petitioners Exhibits numbered 2 throug h 5 and 7 through 10, and

Respondent's Exhibits numbered 1 and 3 were offered and received

into evidence.

At the conclusion of the hearing, the parties agreed to

file proposed final orders within ten days of the filing of the

transcript. The Transcript o f the proceeding was filed on

September 25, 2002. The Department and Petitioners filed

Proposed Final Orders, which have been duly considered in

rendering this Final Order.

FINDINGS OF FACT

1. Prior to the 2002 legislative session, pursuant to

Secti ons 440.02 and 440.05, Florida Statutes (2001), certain

persons in the construction industry could elect to be exempt

from the provisions of Chapter 440, Florida Statutes (2001).

2. Pursuant to Section 440.05(3), Florida Statutes (2001),

upon receipt of proper notice and documentation, the Department

issued certificates of exemptions to persons seeking the

Workers' Compensation exemption, unless the Department

determined that the information contained in the notice was

invalid.

3. Between July 1, 2000, and June 30, 2002, approximately

130,000 construction - related exemptions were active.

4. Pursuant to Subsection 440.05(6), Florida Statutes

(2001), a construction industry certificate of election to be

exempt is valid for a period of two yea rs after the effective

date on the certificate, unless the certificate was properly

revoked.

5. Prior to July 1, 2002, the certificates of exemption

were issued pursuant to Subsection 440.05(3), Florida Statutes

(2001). These certificates of exempti ons were applicable

without regard to the value or cost of any particular building

project on which the exemption holder may be working.

6. During the 2002 legislative session, the Florida

Legislature enacted Section 5, Chapter 2002 - 236, Laws of

Flor ida. Portions of this law amended Section 440.02(14),

Florida Statutes. These amendments ("2002 Amendments") state,

in relevant part, the following:

(14) (b) "Employee" includes any person

who is an officer of a corporation and who

performs services fo r remuneration for such

corporation within this state, whether or

not such services are continuous.

1. Any officer of a corporation may elect

to be exempted from this chapter by filing

written notice of the election with the

division as provided in Sec tion 440.05.

2. As to officers of a corporation who

are actively engaged in the construction

industry, no more than three officers may

elect to be exempt from this chapter by

filing written notice of the election with

the division as provided in s. 440 .05.

However, any exemption obtained by a

corporate officer of a corporation actively

engaged in the construction industry is not

applicable with respect to any commercial

building project estimated to be valued at

$250,000 or greater.

3. An officer of a corporation who elects

to be exempt from this chapter by filing a

written notice of the election with the

division as provided in s. 440.05 is not an

employee.

Services are presumed to have been rendered

to the corporation if the officer is

compensated by other than dividends upon

shares of stock of the corporation which the

officer owns.

(c) 1. "Employee" includes a sole

proprietor or a partner who devotes full

time to proprietorship or partnership and,

except as provided in this paragraph, elects

t o be included in the definition of employee

by filing notice thereof as provided in s.

440.05. Partners or sole proprietors

actively engaged in the construction

industry are considered employees unless

they elect to be excluded from the

definition of empl oyee by filing written

notice of the election with the division as

provided in s. 440.05. However, no more

than three partners in a partnership that is

actively engaged in the construction

industry may elect to be excluded. A sole

proprietor or partner w ho is actively

engaged in the construction industry and who

elects to be exempt from this chapter by

filing a written notice of the election with

the division as provided in s. 440.05 is not

an employee. For purposes of this

chapter, an independent contr actor is an

employee unless he or she meets all of the

conditions set forth in subparagraph (d)1.

2. Notwithstanding the provisions of

subparagraph 1., the term "employee"

includes a sole proprietor or partner

actively engaged in the construction

indus try with respect to any commercial

building project estimated to be valued at

$250,000 or greater. Any exemption obtained

is not applicable, with respect to work

performed at such a commercial building

project.

(d) "Employee" does not include:

1. An independent contractor, if:

* * *

Notwithstanding the provisions of this

paragraph or any other provision of this

chapter, with respect to any commercial

building project estimated to be valued at

$ 250,000 or greater, a person who is

actively engaged in the construction

industry is not an independent contractor

and is either an employer or an employee who

may not be exempt from the coverage

require ments of this chapter.

* * *

(Amendments are underlined.)

7. The above - quoted 2002 amendments became effective on

July 1, 2002.

8. After the legislature enacted Chapter 2002 - 236, Laws of

Florida, but prior to its effective date, the Departme nt issued

Bulletin No. 234 ("Bulletin No. 234" or "Bulletin"), which

states in relevant part the following:

TO: All Exemption Holders

FROM: Annemarie Craft, Interim WC

Administrator

DATE: June 20, 2002

SUBJECT: Law Changes Rega rding Exemptions

On July 31, 2002, important changes in the

workers' compensation law regarding

exemptions take effect. This Bulletin is

intended to notify you of some of those

changes. Exemption holders working on a

commercial building project valued at

$250,000 or greater must purchase workers'

compensation coverage, or be covered under a

valid Florida Workers Compensation policy.

The changes apply to you if you are:

A corporate officer of a corporation that is

actively engaged in the construction

industry;

A sole proprietor or partner who is actively

engaged in the construction industry; or

A person who is actively engaged in the

construction industry as an independent

contractor.

1. Beginning July 1, 2002, if you are a

corporate officer of a corporation that is

actively engaged in the construction

industry, or a sole proprietor or partner

who is actively engaged in the construction

industry, then your exemption will not apply

to any work performed at a commercial

building project valued at $ 250,000 or

greater. If you work at a commercial

building project valued at $250,000 or

greater, then you must secure workers'

compensation coverage in accordance with s.

440.38. The value of the project is the

value of the entire project and not merely

t he value of a part, such as the amount

attributed to a particular subcontract.

This applies to projects in existence on

July 1, 2002, as well as projects to be

started on or after July 1, 2002.

* * *

5. If you are a sole proprietor, partner,

or corpor ate officer, you are permitted to

maintain a certificate of election to be

exempt issued pursuant to s. 440.05, F.S.,

while actively working on a commercial

building project valued at $250,000 or

greater; however, that exemption is not

applicable with resp ect to work performed at

a commercial building project valued at

$250,000 or greater.

9. In summary, Bulletin No. 234 states unequivocally the

Department's practice which limits the use of exemption

certificates for workers' compensation insurance. Ac cording to

the Bulletin, beginning July 2, 2002, "exemption holders working

on a commercial building project valued at $250,000 or greater

must purchase workers' compensation coverage, or be covered

under a valid Florida Workers' Compensation policy." Nex t, the

Bulletin states that, beginning July 1, 2002, "if you are a

corporate officer of a corporation that is actively engaged in

the construction industry, or a sole proprietor or partner

engaged in the construction industry, then your exemption will

not apply to any work performed at a commercial building project

valued at $250,00 or greater." Finally, the Bulletin provides

that, "this applies to projects in existence on July 2002, as

well as projects to be started on or after July 1, 2002."

10. The De partment contends that the Bulletin is only for

informational and notification purposes and that it merely

paraphrases the provisions of Section 5, Chapter 2002 - 236, Laws

of Florida. Furthermore, the Department asserts that the

Bulletin was never intended to create any obligations or

requirements that the Department will enforce in any action that

the Department engages in regarding the applicability of

exemptions.

11. Based on the Department's belief that Bulletin No. 234

was only for the purpose of not ifying all exemption holders of

changes in the law, the Department did not adopt the Bulletin in

accordance with rulemaking procedures in Section 120.54, Florida

Statutes.

12. Notwithstanding the Department's argument in paragraph

11, as reflected within the four corners of the Bulletin,

exemption holders actively engaged in the construction industry

working on commercial building projects valued at $250,000 or

greater after July 1, 2002, must be covered by workers'

compensation insurance, pursuant to the requirements of Chapter

440, Florida Statutes (2002), regardless of when the exemption

certificates were obtained.

13. Contrary to the Department's view, the agency

statements in Bulletin No. 234 adversely affect the rights of

some exemption holders and require compliance with the

provisions contained therein. Implicit in the terms of the

Bulletin is that an exemption holder who fails to comply with

its terms, will be subject to enforcement actions under Chapter

440, Florida Statutes. The extrinsic evi dence presented by the

Department, that it will not take such action in reliance of the

Bulletin, is not controlling.

14. The Florida Home Builders' Association ("FHBA") is a

Florida corporation, comprised of approximately 15,000 members.

Of those member s, approximately 5,000 to 6,000 are builder

members that are actively engaged in the construction of housing

or other developments. Hundreds of the builder members are

involved in commercial construction activities. The remaining

members are associate me mbers comprised of industries, trades,

and services that do business with the builder members.

Associate members who are construction subcontractors are

engaged in commercial building activities.

15. Most commercial construction projects that are new

c onstruction (as opposed to renovations) which FHBA members work

on exceed $250,000 in value. FHBA members who are providing

services at commercial building projects with a value over

$250,000 have a reasonable expectation that they will continue

to provid e such services in the future.

16. Over 2500 member companies of FHBA have active

workers' compensation exemption certificates for at least one

employee each, issued, prior to July 1, 2002, pursuant to

Section 440.05, Florida Statutes (2001). These memb ers are

involved in commercial building projects estimated to be valued

at $250,000 or greater and which started prior to July 1, 2002.

Several dozen FHBA members affected by the limitations on the

exemptions stated in Bulletin No. 234 have contacted the FHBA

for advice.

17. FBHA members who are contractors, whose exemptions are

limited based on Bulletin No. 234, must attempt to secure

workers' compensation insurance. Subcontractors to these

members whose exemptions are limited must obtain insurance. T o

the extent the subcontractor has workers' compensation insurance

obligations under existing contracts, either the subcontractor,

the prime contractor or the owner of the project must absorb the

cost of workers' compensation insurance premiums. The

possi bility also exists that the subcontractor may be forced off

the job if he does not obtain the insurance and/or the cost of

premiums cannot be accounted for.

18. The FHBA lobbies the Florida Legislature and executive

agencies on issues that effect the con struction industry,

including workers' compensation insurance.

19. The Florida Associated General Contractors' Council

("A.G.C. Council") is a Florida corporation which has

approximately 2,000 members. Of these members, approximately

800 are contractors and subcontractors actively engaged in the

construction industry in Florida. The remaining members are

involved in construction - related businesses.

20. The approximately 800 A.G.C. Council members engaged

in construction activities are all commercial b uilders. Most of

the projects on which they work on are valued at over $250,000.

21. Of the approximately 800 A.G.C. Council members

engaged in construction, 48 have active exemption certificates

for from one to three employees each.

22. Approximately twenty to thirty A.G.C. Council members

who worked on commercial projects valued at over $250,000 and

who were under prime contracts before July 1, 2002, have

contacted the A.G.C. Council's office in response to Bulletin

No. 234. These subcontractors wer e concerned that they would

have to obtain workers' compensation insurance at costs that

were not anticipated when they signed their contracts. The

general contractors who called the A.G.C. Council Office were

concerned because they had subcontractors who were going to have

to obtain insurance and the general contractors were being asked

to cover the costs. In some cases, subcontractors were unable

to obtain insurance and the general contractor had to remove

them from the job, which created an increased c ost to the

contractor by having to find a replacement subcontractor.

23. The A.G.C. Council represents its members before the

Florida Legislature on a number of issues of interest to the

construction industry, including codes, licensing, and workers'

com pensation insurance. Moreover, the A.G.C. Council represents

its members in administrative and judicial proceedings.

24. The Parrish Group is a Florida corporation which

provides construction, design/build, development, and realty

services to its cl ients. It has a number of subsidiary

companies which also provide construction, development, and real

estate services. The companies are all commonly owned and the

finances are combined and reported on a single financial

statement.

25. The Parrish Grou p is involved commercial construction

projects, most of which have a value of over $250,000, and it

intends to continue developing such commercial projects.

26. The Parrish Group uses subcontractors for all of its

construction activities, including site construction,

foundation, structure, build - out, and internal build - outs. The

Parrish Group has relationships with 40 to 50 subcontractors and

generally uses approximately 30 of these subcontractors on any

given project.

27. The Parrish Group does not ha ve a valid exemption, but

six of the Parrish Group's regular subcontractors, including

Mark Madonia, d/b/a Chop's Acoustical Ceilings, hold active

exemption certificates issued prior to July 1, 2002, pursuant to

Subsection 440.05(3), Florida Statutes (2001 ).

28. The Parrish Group's subcontractors who held active

exemption certificates issued prior to July 1, 2002, if required

to obtain workers' compensation insurance, would try to pass the

cost of premiums to the primary contractor, a Parrish Group

subsid iary, Parrish Builders. If the subcontractor is

successful in passing the cost to the primary contractor, the

primary contractor would try to pass the costs on to the owner,

i.e. , the Parrish Group. If the subcontractor were unable to

obtain the workers' compensation insurance, the primary

contractor would have the subcontractor removed from the job.

Alternatively, the prime contractor could retain the

subcontractor as an employee, in which case the primary

contractor would have to bear the cost of the a dditional

insurance under its policy. These increased costs would not

have been accounted for in the prime contract, if that contract

was in effect prior to July 1, 2002.

29. Mark Madonia is one of Parrish Group's regular

subcontractors. When faced wit h the prospect of having to

obtain workers' compensation insurance, Mr. Madonia sought a

change order from Parrish Builders. The Parrish Group, as

owner, agreed to the change order and bore the additional costs.

30. When the Parrish Group's subcontracto rs, who had

certificates of exemption, made bids used in prime contracts

that were effective before July 1, 2002, the cost of workers'

compensation insurance was not included in the bid.

31. Mark Madonia, d/b/a Chop's Acoustical Ceilings, is a

sole propr ietor who installs ceiling grade systems. Mr. Madonia

provides these services as a subcontractor to the Parrish Group

and other developers.

32. Mr. Madonia works primarily on commercial building

projects, most of which are valued at over $250,000.

Mr. Madonia expects to continue to work on commercial building

projects valued at over $250,000 in the future.

33. Mr. Madonia is a member of FHBA and has a valid

workers' compensation exemption certificate that was issued

prior to July 1, 2002. Mr. Madonia has had an exemption since

1994 and his current certificate is in effect until May 25,

2003.

34. Prior to July 1, 2002, Mr. Madonia had not obtained

workers' compensation insurance because of his exemption.

35. When Mr. Madonia received Bulletin No. 2 34 on or about

July 12 through 14, 2002, he attempted to obtain workers'

compensation insurance. Three companies denied him coverage

because he did not have a sufficient number of employees.

36. Mr. Madonia risked being removed from jobs had he not

obta ined the workers' compensation coverage required by the

Bulletin.

37. Mr. Madonia eventually contracted with an employee

leasing company. In order to do so, he had to make his

subcontractors his employees. The cost of the employee leasing

service, incl uding workers' compensation coverage is $27.00 per

$100.00 of payroll. Mr. Madonia could have been responsible for

these costs, although in this case, the Parrish Group agreed to

absorb the extra costs.

38. If a valid workers' compensation insurance exe mption

is limited and no longer applies to commercial construction

projects with a value of $250,000 or more, the general

contractor for such projects will require that the affected

persons provide proof of coverage or they cannot lawfully be

allowed on th e job site.

39. In the event a subcontractor with an exemption needs

to obtain insurance, the subcontractor would have to obtain

workers' compensation insurance. If the primary contract has

already been signed by the owner and the general contractor,

th en the costs of the job have already been set. The

subcontractor may absorb the costs or, alternatively, the

subcontractor could attempt to pass the additional costs of

insurance premiums to the general contractor. The general

contractor could then try t o pass the additional costs on to the

owner. In any event, either the subcontractor, the general

contractor, or the owner will have to absorb the unanticipated

costs of workers' compensation insurance.

CONCLUSIONS OF LAW

40. The Division of Administrati ve Hearings has

jurisdiction over the subject matter and the parties to this

proceeding. Sections 120.54, 120.56 and 120.57(1), Florida

Statutes.

41. Section 120.56(4), Florida Statutes, states that

"[a]ny person substantially affected by an agency stat ement may

seek an administrative determination that the statement violates

s. 120.54(1)(a)."

42. The term "substantially affected person" includes

trade or professional associations which meet the test for

associational standing. Florida Homebuilders Ass ociation v.

Department of Labor and Employment Security , 412 So. 2d 351, 352

(Fla. 1982). To meet the test for associational standing, an

association must demonstrate that a substantial number of its

members, although not necessarily a majority, are "subs tantially

affected" by an agency statement or rule. Further, the subject

matter of a rule must be within the association's general scope

of interest and activity, and the relief requested must be a

type appropriate for a trade association to receive on be half of

its members, e.g. , no money damages are claimed on behalf of the

association or its members. Id. at 353 - 354; Florida Board of

Medicine v. Florida Academy of Cosmetic Surgery, Inc. , 808 So.

2d 243, 250 (Fla. 1st DCA 2002).

43. With regard to the criteria required to establish

"associational" standing, the evidence established that a

substantial number of FHBA members and A.G.C. Council members

have active workers' compensation exemptions that were issued

prior to July 1, 2002, and that a substanti al number of these

members work on commercial building projects, most of which are

valued in excess of $250,000. Because of the limitation on

workers' compensation exemption certificates stated in Bulletin

No. 234, holders of exemption certificates issued prior to

July 1, 2002, but not yet expired, will have to obtain workers'

compensation insurance, beginning July 1, 2002.

44. As a result of the Department's statement in Bulletin

No. 234, FHBA members and A.G.C. Council members will incur the

cost of pre miums for such coverage or will otherwise have to

bear the expense of compliance with the statement in Bulletin

No. 234. Furthermore, the subject matter of the agency

statement, workers' compensation insurance, is within the

general scope of interest of b oth FHBA and A.G.C. Council.

Here, members of both organizations are engaged in the

construction industry and are subject to workers' compensation

insurance requirements. Finally, the relief sought by the FHBA

and A.G.C. Council, the Department's discont inuance of reliance

on the Bulletin or similar agency statement, is appropriate for

a trade association to obtain on behalf of its members.

45. Based on the foregoing, FHBA and the A.G.C. Council

are substantially affected by the agency statement and, th us,

have standing in this proceeding.

46. In order to demonstrate standing, the Parrish Group

and Mark Madonia must also meet the criteria established in

Subsection 120.56(4), Florida Statutes. In order to be deemed a

"substantially affected" person, t he person or entity

challenging a statement or rule must show that the statement or

rule will cause a real and sufficiently immediate injury and

that the alleged injury is within the zone of interest to be

protected or regulated. Florida Board of Medicine , 808 So. 2d,

243 at 250; Lonoue v. Florida Department of Law Enforcement ,

751 So. 2d 94, 96 (Fla. 1st DCA 1999).

47. Mr. Madonia holds an active workers' compensation

exemption certificate which, on its face, is valid until May 5,

2002. As applied to M r. Madonia, Bulletin No. 234 requires him

to secure workers' compensation insurance in order to lawfully

work on commercial construction valued at $250,000 or greater,

even if such projects began prior to July 1, 2002.

48. The Parrish Group owns and deve lops commercial

construction projects which are valued at $250,000 or more and,

through a construction subsidiary, regularly uses subcontractors

who hold active workers' compensation exemption certificates,

issued prior to July 1, 2002. Bulletin No. 234 r equires that

subcontractors on these projects obtain workers' compensation

insurance. On such projects for which the primary contract was

executed prior to July 1, 2002, the cost of this insurance is

borne by the Parrish Group's construction subsidiary or by the

Parrish Group itself. On future commercial projects, valued at

$250,000 or greater, constructed while existing exemption

certificates are in effect, the cost of workers' compensation

insurance will be borne by the subcontractor, whose price to

Par rish Builders will be increased to reflect the cost of

workers' compensation premiums, and Parrish Builders will pay

the increased cost to the subcontractor and charge a higher

price to the owner. Parrish Group, the owner, will ultimately

pay a higher cos t for the construction. These increased costs

represent a real and immediate injury to the Parrish Group and

to Mr. Madonia and are within the zone of interest to be

regulated.

49. Based on the foregoing, the Parrish Group and Mark

Madonia are substantia lly affected persons and, thus, have

standing to challenge the agency statement in Bulletin No. 234.

50. The burden of proof, absent a statutory directive to

the contrary, is on the party asserting the affirmative of an

issue under Chapter 120, Florida S tatutes. See Florida

Department of Transportation v. J.w.C., Inc. , 396 So. 2d 778,

788 (Fla. 1st DCA 1981). Petitioners have asserted that

Bulletin No. 234 is an agency statement which constitutes a rule

that has not been adopted by rulemaking procedures as provided

in Section 120.54, Florida Statutes. Therefore, Petitioners

bear the burden of proof.

51. To prevail, Petitioners must establish that the agency

statement in Bulletin No. 234 is a rule within the meaning of

Subsection 120.52(15), Florida St atutes. If the agency

statement is determined to be a rule, the burden shifts to the

Department to show that one of the defenses permissible under

Subsection 120.54 (1) or (2), Florida Statutes, are applicable.

Pursuant to those provisions, the Departmen t may show that

rulemaking was not feasible or practicable. In this case, the

Department has not raised either of these defenses, but has

maintained that the statements in Bulletin No 234 do not

constitute a rule.

52. Subsection 120.52(15), Florida Statu tes, defines the

term "rule" to mean "each agency statement of general

applicability that implements, interprets, or prescribes law or

policy or describes the procedure or practice requirements of an

agency and includes any form which imposes any requireme nt or

solicits any information not specifically required by statute or

by an existing rule."

53. An agency statement is a rule if it has the effect of

a rule regardless of whether the agency calls it a rule. If the

alleged agency statements are deemed r ules, they must be adopted

through rulemaking procedure in accordance with Section 120.54,

Florida Statutes.

54. Courts have provided guidance in determining whether

an agency statement is a rule. Balsam v. Department of Health

and Rehabilitative Servic es , 452 So. 2d 976 at 977 - 978 (1st DCA,

1984) the court, quoting State Department of Administration v.

Harvey , 356 So. 2d 323 (Fla. 1st DCA 1978), states that:

[a]ny agency statement is a rule if it

purports in and of itself to create certain

rights and ad versely affect others' [cite

omitted], or serves by [its] own effect to

create rights, or to require compliance, or

otherwise to have the direct and consistent

effect of law.[cite omitted]

55. The agency statements in Bulletin No. 234 limit the

use of ex emptions issued prior to July 1, 2002, by requiring the

holders of such exemptions to purchase workers' compensation

insurance for commercial building projects valued at $250,000 or

greater. Additionally, the Bulletin requires the designated

persons to pu rchase workers' compensation insurance for

commercial building projects valued at $250,000, without regard

to the starting date of the projects or the date of the

construction contract for the project. Finally, the Bulletin is

applicable to designated cla sses of people, i.e. , corporate

officers of corporations actively engaged in the construction

industry, sole proprietors or partners actively engaged in the

construction industry, and persons actively engaged in the

construction industry as independent con tractors.

56. The agency statements in Bulletin No. 234 have general

applicability and implement, interpret, or prescribe "law or

policy" concerning workers' compensation insurance. Moreover,

the statements adversely affect rights and/or require complian ce

or otherwise have the direct and consistent effect of law.

Accordingly, the statements are rules within the meaning of

Subsection 120.52 (15), Florida Statutes, and must be

promulgated pursuant to the rulemaking procedures in Section

120.54, Florida St atutes.

57. Section 120.595 (4)(a), Florida Statutes, provides

that "[u]pon entry of a final order that all or part of an

agency statement violates s. 120.54 (1)(a), the administrative

law judge shall award reasonable costs and reasonable attorneys'

fees to the petitioner" unless the agency demonstrates one of

the exceptions listed in that provision.

58. The Department has not asserted or proved the

applicability of any of the exceptions to the mandate that

attorneys' fees and costs be awarded to the suc cessful

petitioner in a proceeding under Subsection 120.56(4), Florida

Statutes. Accordingly, Petitioners are entitled to recover a

reasonable sum for attorneys' fees and costs it has incurred in

this case.

59. Jurisdiction is retained to conduct a separ ate

proceeding on the amount of attorneys' fees and costs to be

awarded to Petitioner.

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

ORDERED that:

1. The statements in Bulletin No. 234 constitute a rule

that was not adopted under, and, therefore, violate, Section

120.54, Florida Statutes.

2. Jurisdiction is retained to conduct further proceedings

as necessary to award attorneys' fees and costs to Petitioners,

pursuant to Section 120.595(4)(a), Florida Statutes.

3. The part ies have thirty (30) days from the date of this

Final Order to resolve the amount of such award, subject to

approval of the undersigned. If the parties have not resolved

the amount of such award within the time prescribed herein, the

parties shall advise the undersigned, in writing, and a hearing

will be scheduled to resolve the issue.

DONE AND ORDERED this 31st day of October, 2002, in

Tallahassee, Leon County, Florida.

___________________________________

CAROLYN S. HOLIFIELD

Administrative Law Judge

Div ision of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

th is 31st day of October, 2002.

COPIES FURNISHED :

Thomas D. Valentine, Esquire

David D. Hershel, Esquire

Department of Insurance

612 Larson Building

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

William E. Williams, Esquire

Robert D. Fingar, Es quire

Huey, Guilday, Tucker,

Schwartz & Williams, P.A.

1983 Centre Point Boulevard, Suite 200

Post Office Box 12500

Tallahassee, Florida 32317 - 2500

Carroll Webb, Executive Director

Joint Administrative Procedures Committee

120 Holland Building

Tallahas see, Florida 32399 - 1300

Honorable Tom Gallagher

State Treasurer/Insurance Commissioner

The Capitol, Plaza Level 02

Tallahassee, Florida 32399 - 0300

Mark Casteel, General Counsel

Department of Insurance

The Capitol, Lower Level 26

Tallahassee, Florida 32399 - 0307

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure . Such proceedings are commenced by

filing the original notice of appeal with the Clerk of the

Division of Administrative Hearings and a copy, accompanied by

filing fees prescribed by law, with the District Court of

Appeal, First District, or with the Dis trict Court of Appeal in

the Appellate District where the party resides. The notice of

appeal must be filed within 30 days of rendition of the order to

be reviewed.