03-001757 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Susie Riopelle Status: Closed Recommended Order on Friday, January 16, 2004.

Summary: Department established that workers on home construction job site were "employees," not "independent contractors."

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, ) Case No. 03 - 1757

)

vs. )

)

SUSIE RIOPELLE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice this cause came on for formal proceeding

before Lawrence P. Stevenson, a duly - designated Administrative

Law Judge, in Tampa, Florida, on August 27, 2003.

APPEARANCES

For Petitioner: David C. Hawkins, Esqu ire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Randall O. Reder, Esquire

1319 West Fletcher Avenue

Tampa, Florida 33612 - 3310

ST ATEMENT OF THE ISSUES

At issue in this proceeding is whether the Respondent

failed to abide by the coverage requirements of the Workers'

Compensation Law, Chapter 440, Florida Statutes (2002), by not

obtaining workers' compensation insurance for her employees; and

whether the Petitioner properly assessed a penalty against the

Respondent pursuant to Section 440.107, Florida Statutes (2002).

PRELIMINARY STATEMENT

Pursuant to the Workers' Compensation Law, Chapter 440,

Florida Statutes (2002), the Depar tment of Financial Services,

Division of Workers' Compensation (the "Department"), seeks to

enforce the statutory requirement that employers secure the

payment of workers' compensation for their employees.

On March 27, 2003, the Department issued a "Sto p Work and

Penalty Assessment Order" alleging that Susie Riopelle, d/b/a

Riopelle Construction, failed to abide by the coverage

requirements of the workers' compensation law on that date. The

order directed Riopelle Construction to cease business

operatio ns and pay associated penalties of $1,100. On April 1,

2003, the Department issued a "First Amended Stop Work and

Penalty Assessment Order," changing the named employer to Susie

Riopelle and increasing the assessed penalty to $26,100: $100

pursuant to Se ction 440.107(5), Florida Statutes (2002); $1,000

pursuant to Section 440.107(7), Florida Statutes (2002); and

$25,000 pursuant to Section 440.10(1)(f), Florida Statutes

(2002).

On April 17, 2003, Respondent filed a Petition for Formal

Hearing, which was forwarded to the Division of Administrative

Hearings on May 16, 2003, for assignment of an Administrative

Law Judge and conduct of a formal administrative hearing. The

case was initially scheduled for hearing on July 17, 2003,

continued once on a motion b y the Department, then held on

August 27, 2003.

On August 22, 2003, the Department filed a Motion to Amend

Administrative Charges. The motion requested approval to amend

the charges as set forth in a Second Amended Stop Work and

Penalty Assessment Order (the "stop work order" at issue in this

case). The proposed amendment reduced the assessed penalty to

$21,100 and identified the allegedly misclassified employees as

James C. King, Darren McCarty, Jeffrey Paul Judson, Robert

Stinchcomb, and James Conner. The motion was granted without

objection at the outset of the August 27, 2003, final hearing.

At the hearing, the Department presented the testimony of

Donald Lott, the Department's investigator, and Leo Canton, the

Department’s district supervisor. The Department's Exhibits 1

through 14 were admitted into evidence. Respondent testified on

her own behalf and presented the testimony of Darren McCarty,

Robert Stinchcomb, James King, and Edward Riopelle.

Respondent's Exhibits A through W, CC, OO, XX, YY, D DD, and GGG

were admitted into evidence. Respondent's Exhibits X through Z,

AA, BB, DD through NN, PP through WW, ZZ, AAA through CCC, EEE,

and FFF were proferred. The proffered documents relate to

Respondent's challenge to the facial constitutionality o f

Section 440.107, Florida Statutes (2002). An Administrative Law

Judge does not have jurisdiction over such constitutional

issues. See Communications Workers Local 3170 v. City of

Gainesville , 697 So. 2d 167, 170 (Fla. 1st DCA 1997).

A Transcript of th e final hearing was filed at the Division

of Administrative Hearings on September 15, 2003. On

September 24, 2003, the parties filed a Joint Motion for

Extension of Time to File Proposed Recommended Orders, which was

granted by Order dated September 26, 2 003. Pursuant to the

Order granting extension, both parties timely filed Proposed

Recommended Orders by October 8, 2003.

FINDINGS OF FACT

Based on the oral and documentary evidence adduced at the

final hearing, and the entire record in this proceeding, t he

following findings of fact are made:

1. The Department is the state agency responsible for

enforcing the requirement of the workers' compensation law that

employers secure the payment of workers' compensation for their

employees. § 440.107, Fla. Stat (2002). 1

2. On March 27, 2003, the Department's district

supervisor, Leo Canton, assembled a compliance team of three

investigators: Donald Lott, Carol Cobb, and Tracey Gilbert.

They met at the Gibsonton exit of I - 75, south of Tampa at the

Alafia Rive r, and began riding around the area, where a good

deal of new home construction was taking place. The group was

looking for potential violations of the workers' compensation

statute. From the main road, they could see some workers on a

two - story house wi th exposed trusses, and Mr. Canton decided

this would be a good place to investigate.

3. The compliance team arrived at the job site, 9734 White

Barn Road, Riverview, Florida. They observed five men

conducting framing activities, which included cutting two - by -

fours, climbing ladders to adjust trusses and hurricane ties,

and laying plywood sheathing on the trusses. The five men were

later identified as Darren McCarty, Robert Stinchcomb, James

King, Jeffrey Judson, and James Conner.

4. Parked in front o f the partially constructed house was

a utility trailer registered to Susie Riopelle. The trailer

contained an air compressor, hoses, framing equipment, ladders,

nail guns, and other tools. The main hose from the air

compressor was split into six or seve n separate hoses so that

the workers could simultaneously use multiple nail guns.

5. Mr. Canton asked the men to stop working and talk with

him. Mr. Canton testified that each of the five men told the

same basic story: he was employed by Yellow Jacket

Construction, Inc. ("Yellow Jacket"); he was paid by the hour

and in cash; and Yellow Jacket owned the tools in the utility

trailer. The only variable was the length of employment for

each man.

6. Mr. Canton told the men they would need to contact

their employer. They all stated that Edward Riopelle was their

boss. Mr. Canton then asked the men if they would mind giving

statements to members of the compliance team. All five workers

agreed to give statements.

7. Mr. Lott and Mr. Canton interviewed Da rren McCarty, who

told them he worked for Yellow Jacket as a framer and carpenter

and that he was paid weekly in cash by Edward Riopelle at the

rate of $12 to $15 per hour, depending on the job. Mr. McCarty

signed a notarized Affidavit confirming this inf ormation.

8. Mr. Canton interviewed Robert Stinchcomb, who said that

he worked for Yellow Jacket as a framer. Mr. Stinchcomb

identified Edward Riopelle as his boss and stated that he was

paid $10 per hour, in cash. Mr. Stinchcomb signed a notarized

Aff idavit confirming this information.

9. Jeffrey Judson signed an Affidavit stating that he

worked as a framer for Yellow Jacket and that he was paid $12

per hour, in cash, by Edward Riopelle.

10. After the interviews, Mr. Canton determined that the

five workers were employees of either Yellow Jacket or Edward

Riopelle. None of the five workers interviewed at the job site

had workers' compensation insurance on March 27, 2003.

Mr. Canton directed Mr. Lott to issue a stop work order.

11. Mr. Lott issu ed the order to Edward Riopelle, who had

arrived at the job site after being phoned by one of the

workers. Edward Riopelle informed the Department personnel that

Yellow Jacket had been dissolved and that his wife, Susie

Riopelle, was the sole owner of the business.

12. As of March 27, 2003, Respondent Susie Riopelle was a

sole proprietor operating in the construction industry by

framing single - family homes. Ms. Riopelle had been the sole

owner of Yellow Jacket, a corporation which was also in the

busi ness of framing construction. Yellow Jacket had contracted

with a payroll leasing company that was responsible for paying

the salaries of and providing workers' compensation coverage for

Yellow Jacket's employees, who were paid by the hour.

13. In Janu ary 2003, Ms. Riopelle and her husband Edward

(who had no formal involvement with Yellow Jacket, though he

often assisted his wife with aspects of the business) began

planning to leave the Tampa Bay area and move to Fort White in

Columbia County. They con sulted with their employees, who

expressed a desire to stay together and obtain construction work

on their own. The Riopelles advised their employees that they

would have to establish their own businesses in order to obtain

work as independent contractors . Ms. Riopelle advised the

employees to obtain occupational licenses, commercial liability

insurance, and apply for exemptions from workers' compensation

insurance requirements.

14. At some point in March 2003, Ms. Riopelle began

treating these Yellow Ja cket employees as independent

contractors working on houses that Ms. Riopelle had contracted

to build. Among these purported independent contractors were

the five men interviewed by the compliance team on March 27,

2003: Jeffrey Judson, Darren McCarty, R obert Stinchcomb, James

King, and James Conner. 2

15. Messrs. King, McCarty, Judson, and Conner obtained

their own Hillsborough County occupational licenses in mid -

February 2003. The "business type" listed on each of their

licenses was "perform services f or construction contractor."

Mr. Stinchcomb already had a Hillsborough County occupational

license, dated June 8, 2001, as a "sub - contractor (can't bid;

works under contractor)."

16. Messrs. Judson, King, McCarty, and Conner obtained

individual general l iability insurance through Commercial

Casualty Insurance Company of North Carolina. Mr. Judson's and

Mr. McCarty's policies covered the period February 19 through

May 19, 2003. Mr. King's and Mr. Conner's policies covered the

period March 14 through June 14, 2003.

17. On March 18, 2003, Ms. Riopelle and her sister - in - law,

Tina Shew, appeared at the Department's Tampa office seeking to

file applications for workers' compensation exemptions on behalf

of four of the former Yellow Jacket employees, including some of

those who were at the job site on March 27, 2003. Mr. McCarty

testified that he paid Ms. Shew to handle the paperwork so that

he would not have to miss work. Ms. Riopelle testified that

Ms. Shew had the same arrangement with the other workers.

1 8. Mr. Canton testified that Department rules prohibit

anyone other than the applicant from submitting an application

for exemption and that an investigation is usually commenced

when someone comes in with multiple applications. He met with

Ms. Riopelle and Ms. Shew and attempted to explain that there

was more to attaining non - employee status than having the

exemption and an occupational license. He gave Ms. Riopelle a

"Non - Employee Worksheet," a document used by investigators in

the field, in an effort to explain the nine statutory factors

considered by the Department in determining whether a worker is

an employee or an independent contractor.

19. In speaking with Ms. Riopelle, Mr. Canton learned that

she was a subcontractor for Badger Construction, a company that

was building 300 houses in the Gibsonton area. Ms. Riopelle

told Mr. Canton that her contact at Badger Construction was the

person who told her how to qualify her employees as independent

contractors. Mr. Canton testified that he had never h eard of

Badger Construction and was concerned that it was apparently

giving bad information to its subcontractors. Mr. Canton

instructed the Department's examiner not to process the

applications submitted by Ms. Riopelle and Ms. Shew, pending an

investiga tion of this matter. It is reasonable to infer that

this conversation with Ms. Riopelle led Mr. Canton to choose the

Gibsonton area for the compliance team's March 27, 2003, visit.

20. On March 27, 2003, after the initial stop work order

was issued, Mr. Lott served Ms. Riopelle with a "Request for

Business Owner Affidavit and Production of Business Records,"

seeking copies of business records "to determine whether or not

you or your business is required to provide Workers'

Compensation insurance coverage for employees, or to determine

the civil penalties you may owe for failing to carry Workers'

Compensation insurance."

21. At the time the stop work order was issued, Section

440.107(2), Florida Statutes, required each employer to keep

business records tha t enable the Department to determine the

employer's compliance with the coverage requirements of the

workers' compensation law and empowered the Department to adopt

rules describing the information that those business records

must contain. Florida Adminis trative Code Rule 69L - 6.015

provides, in relevant part:

In order for the Division to determine

that an employer is in compliance with the

provisions of Chapter 440, F.S., every

business entity conducting business within

the state of Florida shall maintai n for the

immediately preceding three year period true

and accurate records. Such business records

shall include original documentation of the

following, or copies, when originals are not

in the possession of or under the control of

the business entity:

* * *

(3) Records indicating for every pay

period a description of work performed and

amount of pay or description of other

remuneration paid or owed to each person by

the business entity, such as time sheets,

time cards, attendance records, earnings

r ecords, payroll summaries, payroll

journals, ledgers or registers, daily logs

or schedules, time and materials listings.

* * *

(5) All contracts to which the business

was or is a party for services performed by

an independent contractor, or in the eve nt a

written contract was not executed, written

documentation including the name, business

address, telephone number, and FEIN or

social security number if an FEIN is not

held, of each independent contractor; and

proof of workers' compensation insurance

he ld by each independent contractor during

the life of the contract for his/her

services or records sufficient to prove that

the independent contractor was not required

pursuant to Chapter 440, to have workers'

compensation insurance coverage during that

tim e period;

(6) All check ledgers and bank statements

for checking, savings, credit union, or any

other bank accounts established by the

business entity or on its behalf. . . .

22. On April 1, 2003, the Riopelles arrived at the

Department's Tampa offic e and presented Mr. Lott with their

business records. Mr. Lott testified that these records were

not sufficient to establish that the five workers in question

were independent contractors. None of the records produced by

the Riopelles permitted the Depar tment to determine receipts,

the identity of entities with whom Ms. Riopelle was doing

business, or the amount of money she was paid or owed as a

result of business operations at the job site on March 27, 2003.

23. Mr. Canton confirmed that the documents produced by

the Riopelles did not establish the independent contractor

relationship. He noted that the Riopelles produced some

contracts between Susie Riopelle and the individual workers, but

these contracts called for payment per linear foot, a method

co nsistent with an employer/employee relationship.

24. At the hearing, Ms. Riopelle introduced subcontractor

agreements, general liability insurance applications, county

occupational licenses, and a 28 - page composite exhibit of

financial records to support the claim that the five workers at

the job site on March 27, 2003, were independent contractors.

25. The subcontractor agreements are problematic for

several reasons. The contract between Ms. Riopelle and Jeffrey

Judson, dated March 24, 2003, specifies n o contract price. It

states that Mr. Judson is to perform "framing and sheathing

exterrior [sic] walls," and names "Westfield Homes Plan #2350"

as the specifications for construction. The contract does not

specifically state that the referenced work is t o be performed

at 9734 White Barn Road in Riverview. Ms. Riopelle testified

that the contract with Mr. Judson was for work on the house at

9734 White Barn Road.

26. The contract between Ms. Riopelle and Mr. Stinchcomb,

also dated March 24, 2003, specifie s a price of $250 "to be paid

on following Friday after signing this aggrement [sic]." It

states that Mr. Stinchcomb is to "cut all studs, wrap garage

doors and build arches," and names "Westfield Homes Plan #2350"

as the specifications for construction. The contract does not

specifically state that the referenced work is to be performed

at 9734 White Barn Road in Riverview.

27. Mr. Stinchcomb, a retiree who worked part - time for

Ms. Riopelle, testified that he did not know how the contract

price of $250 was arrived at by Ms. Riopelle. He stated that he

was getting $10 per hour and surmised that $250 represented

payment for a five - hour per day, five - day work week.

28. The contract between Ms. Riopelle and James Conner,

also dated March 24, 2003, specifi es a price of $480 "to be paid

on Friday following date of this signed agreement." It states

that Mr. Conner is to "frame all interior walls to first &

second floor to provide labor only," and names "Westfield Homes

Plan #2350" as the specifications for c onstruction. The

contract does not specifically state that the referenced work is

to be performed at 9734 White Barn Road in Riverview.

29. The contract between Ms. Riopelle and James C. King is

missing a signature page, though both Ms. Riopelle and Mr. King

adopted the contract's terms in their testimony. The contract

specifies a price of $400, "to be paid on the following Friday

after the signing of this agreement." It states that Mr. King

is "to set [trusses] on roof," and names "Westfield Homes Plan

#2350" as the specifications for construction. The contract

does not specifically state that the referenced work is to be

performed at 9734 White Barn Road in Riverview.

30. The contract between Ms. Riopelle and Darren McCarty,

dated February 28, 2003, does not specify a contract price. It

states the following terms of payment: "To pay sum of

percentage of job completed by Monday each week and paid on

following Friday upon receipt of purchase order at rate of $.60

per sq. ft. purchase order w/below." The items listed below the

quoted statement were: "name; subdivision; lot & block;

complete address; model #; total sq. footage; price; FEIN # or

SSI; liability policy #; occupation license #." The contract

states that Mr. McCarty is "to perform labor o nly framing

residential."

31. Ms. Riopelle testified that Mr. McCarty's contract was

meant to establish that Mr. McCarty would be paid by the job,

not by the hour. She stated that because roofs are different

sizes, a set price cannot be set per roof; r ather, the price

must be set based on the square footage of the roof.

Ms. Riopelle testified that this contract did not specify a

location because it was a general contract meant to cover any

roof that Mr. McCarty worked on.

32. Testifying generally abou t these contractual

agreements, Ms. Riopelle stated that the workers were paid 80

percent of the agreed amount upon completion of the work. The

remaining 20 percent of the contract price would be paid when

the work passed inspection by local authorities. At the

hearing, Mr. McCarty agreed with Ms. Riopelle's explanation of

the method of payment.

33. At the hearing, Ms. Riopelle submitted documents

signed by Mr. Stinchcomb and Mr. McCarty attesting that, as of

February 24, 2003, these men were no longer e mployees of Yellow

Jacket. However, the documents were notarized on April 3, 2003,

after the stop work order was issued. These documents are

unreliable as a basis for findings as to the relationship

between the parties on March 27, 2003, given that they were

apparently created after that relationship was called into

question by the Department. Ms. Riopelle also submitted a

similar document regarding Mr. Conner, but Mr. Conner's

signature does not appear on the document. Mr. Conner did not

appear at the hearing, and thus, there is no means in this

record to ascertain his involvement in the creation of this

document.

34. Three of the former Yellow Jacket employees testified

at the hearing. Mr. McCarty testified that he had been a

carpenter for 15 years a nd that he owned and used his own tools,

including nail gun and nails, on the job. He testified that he

had worked on Yellow Jacket's payroll until two weeks before the

March 27 site visit, which he offered as his explanation for why

he told the complianc e team that he worked for Yellow Jacket.

Mr. McCarty recalled Ms. Riopelle telling him that she and her

husband were planning to move. He testified that he and the

other workers got together to plan how they could go into

business for themselves. Ms. Ri opelle advised them regarding

qualification as independent contractors.

35. Mr. McCarty testified that the group of former Yellow

Jacket employees bid on the job they were working on March 27,

2003. They figured out the overall price of the house, then

figured out which portion of the work each person would perform

and for how much money. On this job, Mr. McCarty contracted to

build the exterior part of the house, including the beam and the

trusses. He would complete the skeleton part of the roof, then

Mr. King would take over and complete the laying of the plywood.

36. Mr. McCarty testified that he told the compliance team

that he was paid "$12 to $15 per hour" because that is the way

he computed his bid on the job. If he completed it quickly, his

pay would equal $15 per hour. If he took more time, his pay

would equal $12 per hour.

37. Mr. Stinchcomb testified he was 73, retired, and

working part - time for Ms. Riopelle. His function at the job

site was to perform all the wood - cutting, including t he

fabrication of window arches. He used his own equipment.

Mr. Stinchcomb recalled conversations with his fellow workers

about dividing up the work "to keep everybody together but on an

independent deal. That's why everybody was supposed to go get

thei r occupation licenses and their workman's comp or whatever

they were doing, but we were all going to stay together as

independents." Mr. Stinchcomb maintained that he was paid $10

per hour at all times he worked for Yellow Jacket or

Ms. Riopelle.

38. Ja mes King testified he was 21 years old and had been

decking roofs for eight years. He remembered being told by Ms.

Riopelle that he was going to need to get a subcontractor's

license but was not sure of the difference between working as an

employee and as an independent contractor. Mr. King testified

that he told the compliance team that he worked for Yellow

Jacket because the paperwork on his workers' compensation

exemption had not come back. He stated that when he worked for

Yellow Jacket, he was paid b y the hour; but when he worked for

Ms. Riopelle, he was paid by the job.

39. While the workers testified that they used their own

tools on the job, it was undisputed that Ms. Riopelle owned the

trailer containing an air compressor and that all of the work ers

except Mr. Stinchcomb, the wood cutter, used the air compressor

at the job site. Ms. Riopelle testified that she leased the

trailer and equipment to Mr. Conner at a rate of $20 per day.

At the hearing, she produced a document purporting to be a

contr act between her and Mr. Conner, dated February 28, 2003,

stating that Ms. Riopelle was leasing framing equipment and the

trailer to Mr. Conner for $20 per day, payable weekly. However,

the contract was notarized on April 3, 2003, raising the

question whet her it was created after the fact of the stop work

order. Ms. Riopelle submitted no other documentation to

substantiate the existence of a lease agreement for the trailer

and equipment.

40. Mr. McCarty agreed that the workers were leasing the

air compres sor from Ms. Riopelle, and stated that the cost came

to about $20 - per - week per person, which would roughly gibe with

the $20 - per - day figure given by Ms. Riopelle. However, Mr. King

testified that he was paying Edward Riopelle $50 per week to

lease the air tools.

41. Edward Riopelle testified that once Yellow Jacket

became defunct and Ms. Riopelle began to operate under her own

name, the workers were paid in cash on receipt of their invoices

for labor. At the hearing, no invoices were provided to

indicate whether the workers were being paid by the hour or on a

"commission," "per job," or "competitive bid" basis.

42. Ms. Riopelle maintained that Messrs. McCarty,

Stinchcomb, King, Judson, and Conner were independent

contractors, rather than employees on March 27, 2003, and that

she, therefore, was not required to secure the payment of

workers' compensation for the five workers. As of March 27,

2003, Section 440.02(15)(d)1, Florida Statutes, provided, in

relevant part, that the term "employee" does not in clude an

"independent contractor" if:

a. The independent contractor maintains a

separate business with his or her own work

facility, truck, equipment, materials, or

similar accommodations;

b. The independent contractor holds or

has applied for a fed eral employer

identification number, unless the

independent contractor is a sole proprietor

who is not required to obtain a federal

employer identification number under state

or federal requirements;

c. The independent contractor performs or

agrees to perform specific services or work

for specific amounts of money and controls

the means of performing the services or

work;

d. The independent contractor incurs the

principal expenses related to the service or

work that he or she performs or agrees to

perform;

e. The independent contractor is

responsible for the satisfactory completion

of work or services that he or she performs

or agrees to perform and is or could be held

liable for a failure to complete the work or

services;

f. The independent contractor receives

compensation for work or services performed

for a commission or on a per - job or

competitive - bid basis and not on any other

basis;

g. The independent contractor may realize

a profit or suffer a loss in connection with

performing wor k or services;

h. The independent contractor has

continuing or recurring business liabilities

or obligations; and

i. The success or failure of the

independent contractor's business depends on

the relationship of business receipts to

expenditures. . . .

43. Section 440.02(15)(d)1, Florida Statutes, listed the

nine elements of the independent contractor exemption in the

conjunctive, meaning that all nine elements must be established

for the exemption to apply. This interpretation is confirmed by

S ection 440.02(15)(c), Florida Statutes, which at the time

provided: " For purposes of this chapter, an independent

contractor is an employee unless he or she meets all of the

conditions set forth in subparagraph (d)1."

44. Based upon the testimony and all the documentation

submitted at the hearing, it is found that Ms. Riopelle and the

five workers had an understanding that the men would no longer

be employees of Yellow Jacket because the Riopelles were leaving

the area. As of March 27, 2003, the men had obtained

occupational licenses, obtained individual general liability

insurance, and applied for workers' compensation exemptions.

45. However, despite these actions, the evidence does not

demonstrate that the employer - employee relationship had been

seve red as of March 27, 2003. Because several of the documents

submitted by Ms. Riopelle appear to have been back - dated, the

reliability of all the documents is called into question. Even

assuming that the subcontractor agreements were entered into

prior to March 27, 2003, they do not establish that the men were

independent contractors under the criteria set forth in Section

440.02(15)(d)1, Florida Statutes. Mr. Judson's contract does

not state a price. Mr. McCarty's contract calls for him to be

paid per sq uare foot of work performed, not on a per - job basis.

None of the contracts states a time or place of performance,

making it unclear whether the contracts pertain to the work

being performed on March 27, 2003.

46. It is significant that when the men were first

questioned at the job site on March 27, 2003, they told the

Department's compliance team that they were employed by Yellow

Jacket and were paid by the hour. Even at the hearing,

Mr. Stinchcomb continued to maintain that he was paid on an

hourly basi s. Mr. McCarty tried to explain his answer to the

compliance team by reference to how he arrived at his bid, but

this testimony was unconvincing. The men were paid in cash, and

Ms. Riopelle submitted no ledgers or other documentation to

support her claim that she was paying the men on a per - job

basis, despite a Department rule requiring her to maintain such

records.

47. The nature of the work being performed by the five men

makes it highly unlikely that any one of them could be held

responsible for the s atisfactory completion of the work or could

be held liable for a failure to complete the work or services.

While the men made some effort to separate the tasks at the job

site, Mr. McCarty conceded that they helped each other out when

necessary.

48. The men were using equipment belonging to

Ms. Riopelle. It was claimed at the hearing that the men were

leasing the equipment from Ms. Riopelle, but the testimony did

not agree on the terms of the lease. Ms. Riopelle's statement

that she rented the equipment to Mr. Conner for $20 per day

roughly comported with Mr. McCarty's testimony that each man

paid $20 per week for the equipment. However, Mr. King

testified that he paid $50 per week to Edward Riopelle for use

of the air tools.

49. There was no evidence that any of the men incurred the

principal expenses related to their work, could realize a profit

or suffer a loss in connection with performing their work, had

continuing or recurring business liabilities or obligations, or

that the success or failure of their business depended on the

relationship of business receipts to expenditures. The weight

of the evidence leads to the finding that Messrs. McCarty, King,

Stinchcomb, Judson, and Conner were performing salaried labor as

employees of Ms. Riopelle on Mar ch 27, 2003.

CONCLUSIONS OF LAW

50. The Division of Administrative Hearings has

jurisdiction of the subject matter of and the parties to this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2003).

51. Employers are required to secure payment of

compe nsation for their employees. §§ 440.10(1)(a) and

440.38(1), Fla. Stat.

52. "Employer" is defined, in part, as "every person

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

"Employment . . . means any service performed by an employee for

the perso n employing him or her" and "with respect to the

construction industry, [includes] all private employment in

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

§ 440.02(17)(a) and (b)(2), Fla. Stat.

53. "Employee" means "any person engaged i n any employment

under any appointment or contract for hire or apprenticeship,

express or implied, oral or written, whether lawfully or

unlawfully employed. . . ." § 440.02(15)(a), Fla. Stat.

54. The Department has the burden of proving by a

preponderanc e of the evidence that an employer violated the

Workers' Compensation Law and that the penalty assessments were

correct under the law. Department of Labor and Employment

Security, Division of Workers' Compensation v. Genesis

Plastering, Inc. , Case No. 00 - 3749 (DOAH April 27, 2001,

Para. 32) (Adopted by Final Order May 25, 2001); Department of

Labor and Employment Security, Division of Workers' Compensation

v. Bobby Cox, Sr., d/b/a CH Well Drilling , Case No. 99 - 3854

(DOAH March 20, 2000, Para. 34) (adopted, in part, by a Final

Order June 8, 2000).

55. The Department established by a preponderance of the

evidence that the workers were not "independent contractors."

The burden then shifted to Ms. Riopelle to establish that they

were independent contractors. Ms. Riopelle was in a unique

position to bring forth evidence regarding the workers; but the

documentation she presented was insufficient, and the testimony

she presented was unconvincing. In the absence of documentation

to establish that the workers me t the criteria to be considered

"independent contractors," the workers must be considered

"employees."

56. Section 440.107(5), Florida Statutes, provided:

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 operations at the

place of employment or job site. If the

department makes such a determination, the

department shall issue a stop - work order

within 72 hours. The order shall take

effect upon the date of service upon the

employer, unless the employer provides

evidence satisfactory to the department of

having secured any necessary insurance or

self - insurance and pays a civil penalty to

the department, to be deposited by the

department into the Workers' Com pensation

Administration Trust Fund, in the amount of

$100 per day for each day the employer was

not in compliance with this chapter.

The evidence presented at the hearing established that the

Department correctly assessed a penalty of $100, pursuant to

S ection 440.107(5), Florida Statutes.

57. Section 440.107(7), Florida Statutes, provided in

relevant part:

In addition 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 s ecure payment of compensation in the

preceding 3 - year period based on the

employer's payroll during the preceding

3 - year period; or

(b) One thousand dollars, whichever is

greater. . . .

The evidence presented at the hearing established that the

Dep artment correctly assessed a penalty of $1,000, pursuant to

Section 440.107(7), Florida Statutes.

58. Section 440.10(1)(f), Florida Statutes, provided:

(f) If an employer fails to secure

compensation as required by this chapter,

the department may ass ess against the

employer a penalty not to exceed $5,000 for

each employee of that employer who is

classified by the employer as an independent

contractor but who is found by the

department to not meet the criteria for an

independent contractor that are set forth in

s. 440.02. The department shall adopt rules

to administer the provisions of this

paragraph.

59. The Department has adopted Florida Administrative Code

Rule 69L - 6.018 to implement Section 440.10(1)(f), Florida

Statutes, providing:

(1) An em ployer who fails to secure

compensation as required by Sections

440.10(1) and 440.38(1), F.S., for each

employee classified by the employer as an

independent contractor but who does not meet

the criteria of an independent contractor

specified in Section 44 0.02, F.S., shall be

assessed a penalty in the following amount:

(a) $2500 per misclassified employee for

the first two misclassified employees per

site; and

(b) $5,000 per misclassified employee

after the first two misclassified employees

per site .

(2) The Division shall determine that an

employer has misclassified an employee as an

independent contractor if:

(a) The employer in any way reports that

a worker who is an employee pursuant to

Section 440.02(15), F.S., is an independent

contract or;

(b) The employer maintains records

identifying the worker as an independent

contractor; or

(c) The employer holds out the employee

as an independent contractor for federal tax

purposes.

The evidence presented at the hearing established that th e

Department correctly assessed a penalty of $20,000, pursuant to

Section 440.10(1)(f), Florida Statutes and Florida

Administrative Code Rule 69L - 6.018, for the five misclassified

employees.

RECOMMENDATION

Having considered the foregoing Findings of Fact,

Conclusions of Law, the evidence of record, the candor and

demeanor of the witnesses, and the pleadings and arguments of

the parties, it is, therefore,

RECOMMENDED that a final order be entered by the

Department of Financial Services, Division of Workers '

Compensation, directing that the Respondent stop work and cease

her operations until such time as she secures workers'

compensation coverage for her employees and directing that the

Respondent pay a penalty in the amount of $21,100.

DONE AND ENTERED this 16th day of January, 2004, in

Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

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 16th day of January, 2004.

ENDNOTES

1/ All citations will be to Florida Statutes (2002) unless

o therwise indicated. Chapter 2003 - 412, Laws of Florida, enacted

significant changes to the statutory provisions relevant to this

case. However, the events at issue in this matter occurred

prior to the effective date of Chapter 2003 - 412.

2 / All of the na med employees except James Conner had been

employees of Yellow Jacket. Messrs. Judson, McCarty, and King

had been paid through the contracted payroll leasing service.

Mr. Stinchcomb was paid directly by Ms. Riopelle because he was

collecting retirement f rom another job, and the payroll leasing

service therefore would not cover him.

COPIES FURNISHED :

David C. Hawkins, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Randa ll O. Reder, Esquire

1319 West Fletcher Avenue

Tampa, Florida 33612 - 3310

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Mark Casteel, General Counsel

Departme nt 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 Recommended Order should be filed with the agency that

will issue the final order in this case.