03-004014 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Retrospec Painting &Amp; Reconstruction, Inc. Status: Closed Recommended Order on Wednesday, February 4, 2004.

Summary: Respondent failed to provide workers` compensation benefits to its employees. Recommend fine.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 03 - 4014

)

RETROSPEC PAINTING & )

RECONSTRUCTION, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

On December 17, 2003, an administrative hearing in this

case was held in Tampa, Florida, before William F. Quattlebaum,

Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

Fo r Petitioner: John M. Iriye, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Jose ph E. Launikitis, Esquire

Fuller, Holsonback, Bivins & Malloy

400 North Ashley Drive, Suite 1500

Tampa, Florida 33602

STATEMENT OF THE ISSUES

The issues in the case are whether the Respondent was

requ ired to carry workers' compensation coverage for certain

individuals, and, if so, whether the Petitioner correctly

assessed a penalty against the Respondent.

PRELIMINARY STATEMENT

By Stop Work and Penalty Assessment Order dated

September 22, 2003, the De partment of Financial Services,

Division of Workers' Compensation (Petitioner), assessed a

penalty against Retrospec Painting & Reconstruction, Inc.

(Respondent). Based on information provided by the Respondent,

the Petitioner entered an Amended Stop Work and Penalty

Assessment Order on September 30, 2003.

The amended order proposed a penalty based on work

performed by two entities, one identified as "Mauro Makawachi

d/b/a MM & JP Painting" and the other identified as "Julio

Macahutchy d/b/a Rainbow Pain ting."

The Respondent filed a Petition for Formal Hearing. The

Respondent's petition was forwarded to the Division of

Administrative Hearings, which scheduled and conducted the

proceeding.

The Respondent's Petition for Formal Hearing identified

objectio ns only to the allegations related to "Mauro Makawachi

d/b/a MM & JP Painting." Additionally, in its response to

Petitioner's request for admissions related to "Julio Macahutchy

d/b/a Rainbow Painting," the Respondent asserted that such

issues were outsid e the Respondent's petition for hearing.

At the commencement of the hearing, the Respondent moved to

amend its Petition for Formal Hearing to include issues related

to "Julio Macahutchy d/b/a Rainbow Painting." The Petitioner

objected to the motion. Th e motion was denied. Accordingly,

this Recommended Order addresses only the allegations involving

"Mauro Makawachi d/b/a MM & JP Painting" and the related

penalties.

At the hearing, the Petitioner presented the testimony of

two witnesses, and had Exhibit s numbered 1 through 12 admitted

into evidence. The Respondent presented the testimony of one

witness, and had Exhibits numbered 1 through 3 admitted into

evidence.

The one - volume Transcript of the hearing was filed on

January 8, 2004. The Petitioner f iled a Proposed Recommended

Order on January 20, 2004. The Respondent filed a Proposed

Recommended Order on January 21, 2004.

FINDINGS OF FACT

1. On September 18, 2003, Tracy Gilbert, an inspector

employed by the Petitioner, visited a residential const ruction

worksite located at 3109 West Sunset Drive, Tampa, Florida.

2. At the time of her visit, Ms. Gilbert saw three

unidentified men painting the interior of a two - story residence.

The men were wearing t - shirts bearing the Respondent's name and

a te lephone number. She attempted to speak to the men, but none

spoke English, and Ms. Gilbert was unable to communicate with

them. Ms. Gilbert attempted to obtain information from a fourth

unidentified man who arrived at the construction site while she

was present, but the evidence fails to establish that any

relevant information was obtained.

3. Ms. Gilbert then located the construction site permit

board, and as she examined the board, a fifth unidentified man

wearing a t - shirt bearing the Respondent's n ame and a telephone

number, walked up to her and gave her a business card with the

Respondent's information on it.

4. Ms. Gilbert called the telephone number printed on the

t - shirts and business card and left a message. Within a few

minutes, Richard T. Killam returned her call.

5. Mr. Killam is the owner and operator of the Respondent.

Ms. Gilbert advised Mr. Killam of what she had seen. Mr. Killam

advised Ms. Gilbert that the individuals she had seen were not

his employees, and stated that they we re employed by an

individual identified as Mauro Makawachi (Mauro) to whom the job

was "subcontracted." Mr. Killam provided a telephone number to

Ms. Gilbert, which he identified as that of Mauro.

6. The Respondent contracts with general contractors fo r

painting jobs at various construction sites. In situations

where additional labor is required, including the one at issue

in this proceeding, the Respondent has on occasion hired Mauro

to work on those jobs. The evidence fails to establish the

existenc e of any written contract between Mr. Killam and Mauro

related to the worksite at issue in this proceeding.

7. Ms. Gilbert called the telephone number provided by Mr.

Killam and had a brief conversation with the individual

identified as Mauro, but appare ntly obtained no information

regarding the situation during the conversation and has since

been unable to establish further contact with Mauro.

8. Although it is reasonable to presume that the

unidentified persons observed at the worksite by Ms. Gilbert

w ere being paid for their work, there is no evidence that the

Respondent employed or paid the unidentified persons.

9. Mr. Killam testified that he had arranged for the work

at the jobsite to be performed by Mauro. It is reasonable to

infer that the uni dentified persons observed painting at the

worksite by Ms. Gilbert were there at the direction of Mauro and

would have been paid by Mauro.

10. The Respondent asserts that Mauro is an independent

contractor for whom the Respondent is under no obligation to

obtain workers' compensation insurance coverage. Mr. Killam

provided to Ms. Gilbert an affidavit of "independent contractor"

status and a certificate of insurance both allegedly provided to

him by Mauro.

11. The evidence fails to establish that Mau ro's affidavit

reflected the actual terms of his work on behalf of the

Respondent.

12. Mauro's affidavit of independent contractor status

indicates that Mauro incurred the "principle [sic] expenses

related to the services or work" that Mauro performed f or the

Respondent. Mr. Killam testified that the primary expenses of a

painting business are paint and labor. There is no credible

evidence that Mauro maintained a separate business with his own

materials. The Respondent paid for the paint used at the

w orksite.

13. The affidavit indicates that Mauro held or had applied

for a federal employer identification number. There is no

credible evidence that Mauro held or has applied for a federal

employer identification number.

14. The affidavit indicates th at Mauro performed specific

amounts of work for specific amounts of money. There is no

credible evidence that Mauro was paid on a commission or per - job

competitive bid basis by the Respondent. The Respondent paid

Mauro on a regular basis for labor perfor med during the pay

period.

15. Mauro's certificate of insurance identified the

insurer as "Aries Insurance Company." Ms. Gilbert determined

that Aries Insurance Company had stopped writing business prior

to the date of issuance on the certificate of insu rance provided

by the Respondent to the Petitioner, and, therefore, the

Certificate of Insurance was invalid.

16. The Respondent leased some employees from Progressive

Employer Services, which provided workers' compensation

insurance for leased employee s. Mauro was not a leased

employee.

17. There is no evidence that Mauro or the unidentified

workers observed by Ms. Gilbert were exempt from workers'

compensation requirements.

18. The evidence establishes that the Respondent failed to

provide worker s' compensation coverage for Mauro. There is no

evidence that the unidentified workers observed by Ms. Gilbert

were provided with workers' compensation coverage by anyone.

19. Based on the payroll records provided to Ms. Gilbert

by the Respondent, Ms. Gilbert calculated the total amount of

penalty directly attributable to payments by the Respondent to

Mauro as $13,049.45.

CONCLUSIONS OF LAW

20. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

pro ceeding. § 120.57(1), Fla. Stat. (2003).

21. The Petitioner has the burden of establishing by a

preponderance of the evidence that an employer has violated

requirements to provide workers' compensation coverage and that

the proposed penalty assessment is correct. In this case, the

burden has been met.

22. Every employer is required to secure workers'

compensation coverage for employees. §§ 440.10(1)(a) and

440.38, Fla. Stat. (2002).

23. The Respondent is an "employer" as defined by

Section 440.02(1 6), Florida Statutes (2002).

24. The Respondent asserts that Mauro was an "independent

contractor" for whom the Respondent was not required to provide

coverage because the Respondent obtained an affidavit and a

certificate of insurance from Mauro. The evidence fails to

establish that Mauro was an independent contractor. Section

440.10(1)(g), Florida Statutes (2002), provides as follows:

(g) For purposes of this section, a person

is conclusively presumed to be an

independent contractor if:

1. The ind ependent contractor provides the

general contractor with an affidavit stating

that he or she meets all the requirements of

s. 440.02 ; and

2. The independent contractor provides the

general contractor with a valid certificate

of workers' compensation insu rance or a

valid certificate of exemption issued by the

department.

25. The evidence fails to establish that the certificate

of insurance received by the Respondent was valid at the time he

received it. The Respondent's assertion that he was unaware

th at Aries Insurance Company did not write workers' compensation

coverage is immaterial.

26. The evidence further fails to establish that Mauro was

an independent contractor pursuant to Section 440.02(15),

Florida Statutes (2002), which provides in relevant part as

follows:

(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.

* * *

(c)1. "Employee" includes a sole proprietor

or a partner who devotes full time to the

proprietorship or partnership and, except as

provided in this paragraph, elects to be

included in the definition of employee by

filing n otice 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 employee by filing written

notice of the election with the department

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 who is actively

engaged in the construction industry a nd who

elects to be exempt from this chapter by

filing a written notice of the election with

the department as provided in s. 440.05 is

not an employee. For purposes of this

chapter, an independent contractor is an

employee unless he or she meets all of t he

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

industry with respect to any commercial

building project e stimated 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:

a. The independent co ntractor 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 federal employer

identification number, unless the

independent con tractor 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 s atisfactory 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 work or services;

h. The independent contractor has

continuing or rec urring 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.

However, the determination as to whether an

individual included in the Standard

Industrial Classification Manual of 1987,

Industry Numbers 0711, 0721, 0722, 0751,

0761, 0762, 0781, 0782, 0783, 0811, 0831,

0851, 2411, 2421, 2435, 2436, 2448, or 2449,

or a newspaper delivery person, is an

independent contractor is governed not by

the criteria in this paragraph but by

common - law principles, giving due

consideration to the business activity of

the individual. Notwithstanding the

provisions of this paragraph or any other

provision of this chapter, with respect to

any commercial b uilding 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

requirements of t his chapter. (emphasis

supplied)

27. The facts fail to establish that Mauro meets the

requirements set forth at Section 440.02(15)(d), Florida

Statutes (2002), which could establish Mauro's status as an

independent contractor.

28. Based on the prep onderance of the evidence including

the Respondent's records and testimony, Mauro meets the

definition of "employee" set forth at Section 440.02(15)(a),

Florida Statutes (2002).

29. The Petitioner assessed a penalty against the

Respondent based on the p rovisions of Section 440.107, Florida

Statutes (2002), which in relevant part provides 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 th is 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 oper ations at the

place of employment or job site. If the

division makes such a determination, the

division 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

ev idence 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' Compensation

Administration Trust Fund, in the amount of

$100 per day for each day the employer was

not in compliance with this chapter.

* * *

(7) 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

secure payment of c ompensation 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.

30. The Respondent asserts that any penalty imposed must

be limited by operation of Sect ion 440.10(1)(f), Florida

Statutes (2002), which in relevant part provides as follows:

If an employer fails to secure compensation

as required by this chapter, the department

may assess 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.

31. The Petitioner has adopted Florida Administrative Code

Rule 69L - 6.018 which provides as follows:

69L - 6.018 Misclassification of Employees as

Independent Contractors.

(1) An employer 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 440.02, F.S., shall be

assessed a penalty in the following amount:

(a) $2,500 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

empl oyer 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

contractor;

(b) The employer maintains records

identifying th e worker as an independent

contractor; or

(c) The employer holds out the employee as

an independent contractor for federal tax

purposes.

32. In this case, the Respondent reported Mauro as an

independent contractor, although Mauro was in fact an employee

pursuant to Section 440.02(15), Florida Statutes (2002). The

Petitioner could have assessed an additional penalty of $2,500

as set forth in the Rule, but for reasons unclear, the

Petitioner is not seeking to impose the penalty authorized by

Section 440.1 0(1)(f), Florida Statutes (2002). The penalty

authorized by Section 440.107(7), Florida Statutes (2002), is

not limited by Section 440.10(1)(f), Florida Statutes, but may

be imposed "[i]n addition to any penalty, stop - work order, or

injunction."

33. Ms . Gilbert testified that her calculation of the

penalty included a $100 non - compliance fine and $13,049.45 based

on actual payments to Mauro. An additional penalty amount of

$2,551.13 was based on payments made to "Julio Macahutchy d/b/a

Rainbow Painting" which are not at issue in this proceeding.

There is no evidence that Ms. Gilbert's calculation of the

penalty was not in accordance with the statute.

34. The Petitioner asserts that the provision of t - shirts

to the unidentified men gives rise to the inference of control

and cites Department of Labor and Employment Security v. A. J.

Interiors, Inc. , DOAH Case No. 00 - 4177 (Final Order issued

June 8, 2001) in support of the assertion. The Respondent

testified that he provided shirts to persons performin g work for

him to provide a professional appearance at the job site.

Review of the facts of the cited case indicates that in the

A. J. Interiors case, the workers wearing the t - shirts were

identified by name, spoke with the investigator, acknowledged

tha t they subcontracted work from the Respondent in that case,

and had no workers' compensation insurance. In this case, there

was no communication with the workers. The mere wearing of a

t - shirt does not give rise to an inference of control by the

Respond ent.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Department of Financial Services,

Division of Workers' Compensation, enter a Final Order affirming

the Stop Work and Penalty Assessment Order i ssued on

September 22, 2003, as amended by the Amended Stop Work and

Penalty Assessment Order issued on September 30, 2003.

DONE AND ENTERED this 4th day of February, 2004, in

Tallahassee, Leon County, Florida.

S

WILLIA M F. QUATTLEBAUM

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 4th day of February, 2004.

COPIES FURNISHED :

John M. Iriye, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Joseph E. La unikitis, Esquire

Fuller, Holsonback, Bivins & Malloy

400 North Ashley Drive, Suite 1500

Tampa, Florida 33602

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 Recommended Order should be filed with the agency that

will issue the Final Order in this case.