03-001332 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. H. H. Hudson &Amp; Sons, Inc. Status: Closed Recommended Order on Monday, November 10, 2003.

Summary: Respondent conceded that it did not provide its employees with workers` compensation insurance and did not dispute the amount of the assessed penalty.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Cas e No. 03 - 1332

)

H. H. HUDSON & SONS, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this case on

September 23, 2003, in Ocala, Florida, before Suzanne F. Hood,

Administrative Law Judge with the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Eric Lloyd, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Larry Collins, Esquire

202 South Magnolia, Su ite 3

Ocala, Florida 34474

STATEMENT OF THE ISSUE

The issue is whether Respondent is subject to assessed

penalties as set forth in the Amended Stop Work and Penalty

Assessment Order dated March 11, 2003.

PRELIMINARY STATEMENT

O n March 11, 2003, Petitioner Department of Financial

Services, Division of Workers' Compensation (Petitioner), issued

an Amended Stop Work and Penalty Assessment Order. The Order

directed Respondent H. H. Hudson & Sons, Inc. (Respondent), to

cease and des ist from all business operations until it complied

with the workers' compensation law, including the payment of the

total assessed penalty in the amount of $434,545.57.

On March 25, 2003, Respondent filed a Petition for Formal

Administrative Hearings. Pe titioner referred the Petition to

the Division of Administrative Hearings on April 15, 2003.

A Notice of Hearing dated April 22, 2003, scheduled the

hearing for June 18, 2003.

On June 5, 2003, Respondent filed a Motion and Memorandum

for Protective Ord er. On June 11, 2003, Petitioner filed

Division's Combined Motion to Compel Discovery, to Extend Time

for Responding to the Order of Pre - Hearing Instructions, and for

Expedited Ruling.

The undersigned heard oral argument on the pending motions

in a tele phone conference on June 11, 2003. At the conclusion

of the conference, the undersigned reserved ruling on the

motions based on representations by the parties that they could

resolve the discovery dispute.

On June 12, 2003, Petitioner filed a Motion fo r

Continuance. After a telephone conference on June 16, 2003, the

undersigned issued an Order Granting Continuance and

Re - Scheduling Hearing to be heard on July 18, 2003.

On July 17, 2003, Petitioner filed an unopposed Motion for

Continuance due to a medical emergency affecting Petitioner's

counsel. The undersigned issued an Order Granting Continuance

dated July 21, 2003.

A Notice of Hearing dated August 7, 2003, scheduled the

hearing for September 23, 2003.

During the hearing, Petitioner pr esented the testimony of

one witness and offered one composite exhibit that was accepted

into the record as evidence. Respondent did not present any

witnesses or offer any exhibits. The parties agreed that all

pending discovery motions were moot.

The Tr anscript of the proceeding was filed on October 7,

2003. Petitioner filed a Proposed Recommended Order on

November 5, 2003. As of the date of the issuance of this

Recommended Order, Respondent had not filed a proposed findings

of facts and conclusions of law.

All references are to Florida Statutes (2002) except as

otherwise noted.

FINDINGS OF FACT

1. Petitioner is the agency charged with enforcing

statutory requirements that employers secure the payment of

workers' compensation for their employees.

2. Respondent is a Florida corporation, Federal Employer

Identification No. 592489849, located in Ocala, Florida, that

provides livestock transportation services.

3. Henry Hayes Hudson, III, is Respondent's president.

Martha Hudson is Respondent's vi ce president. Henry and Martha

Hudson are Respondent's only officers and shareholders.

4. On or about March 3, 2003, Petitioner received a

complaint alleging that Respondent did not carry workers'

compensation coverage. That same day, Petitioner's

inve stigator, William Pangrass, conducted a compliance

inspection at Respondent's principal place of business, 5879

West County Road 326, Ocala, Florida.

5. During the investigation, Mr. Pangrass interviewed

Martha Hudson and Respondent's bookkeeper, Kelly Hadsock. The

investigation revealed that Respondent had no proof of workers'

compensation for the prior three years.

6. Petitioner personally served Respondent with a Stop

Work and Penalty Assessment Order, No. 03 - 191 - D1, on March 3,

2003. The Order r equired Respondent to cease all business

activities. The Order also assessed the minimum statutory

penalty in the amount of $100.00 under Section 440.107(5) and

$1,000.00 under Section 440.107(7)(b). Martha Hudson refused to

sign the Order.

7. Next, Pe titioner personally served a Request for

Business Owner Affidavit and Production of Business Records on

March 3, 2003. Martha Hudson also refused to sign this

document.

8. Respondent subsequently provided Petitioner with copies

of its payroll records. The records included Respondent's

payroll from March 3, 2000, through March 3, 2003. For all or

part of that period, Respondent employed 52 individuals.

Petitioner used the payroll records to calculate the penalty

assessment for the three - year period o f time that Respondent did

not provide its employees with workers' compensation.

9. On March 11, 2003, Petitioner issued the Amended Stop

Work and Penalty Assessment Order, No. 03 - 191 - D1 - 2. The Amended

Order required Respondent to cease all business o perations and

to pay a penalty in the amount of $109,500.00, pursuant to

Section 440.107(5), and a penalty in the amount of $325,045.57,

pursuant to Section 440.107(7)(a). The total assessed penalty

was $434,545.57.

10. In a telephone conference on July 11, 2003, the

parties stipulated that Respondent had no workers' compensation

coverage for the period of time at issue here. They also

stipulated that the only remaining issue involved the accuracy

of the assessed penalty.

11. During the hearing, Petit ioner presented competent

evidence to support the accuracy of the assessed penalty. More

importantly, Respondent stipulated to the accuracy of the

assessed penalty.

CONCLUSIONS OF LAW

12. The Division of Administrative Hearings has

jurisdiction over th e parties and the subject matter of this

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

Statutes (2003).

13. Petitioner must prove by a preponderance of the

evidence that Respondent failed to provide its Florida employees

with workers' c ompensation insurance and that the penalties

assessed are correct. See Department of Employment and Labor

Security, Division Of Workers' Compensation v. Eastern Personnel

Services, Inc. , DLES Case No. 99 - 275, (Final Order, October 12,

1999), adopting in t oto Case No. 99 - 2048 (DOAH October 12, 1999)

(Although violations of Chapter 440 can result in a substantial

fine, which may even render an employer insolvent, the employer

nonetheless does not have a license or property interest at

stake so as to raise th e standard of proof to clear and

convincing evidence.)

14. Section 440.015 states as follows in relevant part:

440.015 Legislative intent. -- It is the

intent of the Legislature that the Workers'

Compensation Law be interpreted so as to

assure the q uick and efficient delivery of

disability and medical benefits to an

injured worker and to facilitate the

worker's return to gainful reemployment at a

reasonable cost to the employer.

15. Section 440.03 states as follows:

440.03 Application. -- Every empl oyer and

employee as defined in s. 440.02 shall be

bound by the provisions of this chapter.

16. Section 440.02 states as follows in pertinent part:

(15)(a) "Employee" means any person

engaged in any employment under any

appointment or contract of hire or

apprenticeship, express or implied, oral or

written, whether lawfully or unlawfully

employed, and includes, but is not limited

to, aliens and minors.

* * *

(16) "Employer" means . . . every person

carrying on any employment. . . .

* * *

(17)(a ) "Employment," subject to the

other provisions of this chapter, means any

service performed by an employee for the

person employing him or her.

(b) "Employment" includes:

* * *

2. All private employment in which four

or more employees are empl oyed by the same

employer. . . .

17. Section 440.10(1)(a) states as follows in relevant

part:

(1)(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 physi cian, surgeon, or

pharmacist providing services under the

provisions of s. 440.13, of the compensation

payable under ss. 440.13, 440.15, and

440.16.

18. Section 440.38 requires employers to secure payment of

compensation for their employees. The statu te allows employers

to insure the payment of such compensation through an insurance

carrier or by acting as a self - insurer. See Section 440.38(1).

19. The Legislature has determined that "the failure of an

employer to comply with the workers' compensati on coverage

requirements . . . poses an immediate danger to public health,

safety, and welfare." Section 440.107(1). Petitioner has the

duty of enforcing the employer's compliance with the

requirements of the workers' compensation law.

Section 440.107(1 ).

20. Section 440.107(5) states as follows:

(5) 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 do so, 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 operation at the

place of employment or job site. . . . The

order shall take effect upon the date of

service upon the employer, unless the

employer provides evidence satisfactory to

the division of having secured any necessary

insurance or self - insurance and pays a civil

penalty to the division, to be deposit ed by

the department into the Workers'

Compensation Administration Trust Fund, in

the amount of $100 per day for each day the

employer was not in compliance

with this chapter.

21. Section 440.107(7) states as follows in pertinent

part:

(7) In additio n to any penalty, stop - work

order, or injunction, the department shall

assess against any employer, who has failed

to secure the payment of compensation as

required by this chapter, a penalty in the

following amount:

(a) An amount equal to at least the

amount that the employer would have paid or

up to twice the amount the employer would

have paid during periods it illegally failed

to secure payment of compensation in the

preceding 3 - year period based on the

employer's payroll during the preceding

3 - y ear period; or

(b) One thousand dollars, whichever is

greater.

Any penalty assessed under this subsection

is due within 30 days after the date on

which the employer is notified, except that,

if the department has posted a stop - work

order or obtained i njunctive relief against

the employer, payment is due, in addition to

those conditions set forth in this section,

as a condition to relief from a stop - work

order or an injunction. Interest shall

accrue on amount not paid when due at the

rate of 1 percent per month. The division

shall adopt rules to administer this

section.

22. In this case, the preponderance of the evidence

indicates that Respondent was an employer for each day of the

period between March 3, 2000, and March 3, 2003. The evidence

also i ndicates that Respondent did not have workers'

compensation insurance in place during this period of time.

Therefore, Respondent failed to abide by the coverage

requirement of the workers' compensation law.

23. Respondent owes $109,500.00 under Section 440.107(5)

and $325,045.57 under Section 440.107(7). The total assessed

penalty in the amount of $434,545.57 is the minimum statutory

penalty based upon Respondent's payroll.

24. During the hearing, Respondent did not dispute the

facts showing that it had not complied with Sections 440.10(1)

and 440.38 or the penalty assessed pursuant to Sections

440.107(5) and 440.107(7). Instead, Respondent took the

opportunity to preserve constitutional arguments on the record

because an Administrative Law Judge do es not have jurisdiction

over constitutional issues. See Communications Workers Local

3170 v. City of Gainesville , 697 So. 2d 167, 170 (Fla. 1st

DCA 1997).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED:

That Petitioner enter a final order affirming the Amended

Stop Work Penalty Assessment Order and directing Respondent to

pay a penalty in the amount of $434,545.57.

DONE AND ENTERED this 10th day of November, 2003, in

Tallahassee, Leon County, Florida.

S

SUZANNE F. HOOD

Administrative Law Judge

Division 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

this 10th day of November, 2003.

COPIES FURNISHED :

Larry Collins, Esquire

202 South Magnolia, Suite 3

Ocala, Florida 34474

Eric Lloyd, Esquire

Department of Financial Service s

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Mark Casteel, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

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 Recommende d Order should be filed with the agency that

will issue the final order in this case.