04-003188 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Ronnie W. Marston, Jr., D/B/A Marston Builders Status: Closed Recommended Order on Wednesday, March 23, 2005.

Summary: Respondent failed to secure workers` compensation coverage for his employees.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS' COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 04 - 3188

)

RONNIE W. MARSTON, JR., )

d/b/a MARSTON BUILDERS, )

)

Respondent. )

)

RECOMMENDED ORDER

Notice was provided and on January 31, 2005, at 2:00 p.m.,

a formal hearing was held in this case. Authority for

conducting the hearing is set forth in Sections 120.569 and

120.57(1), Florida Statutes (2004). The hearing location was

the Alachua County Civil Courthouse, 201 East University Avenue,

Gainesville, Florida. Charles C. Adams, Administrative Law

Judge, conducted the hearing.

APPEARANCES

For Petitioner: Colin M. Roopnarine, Esqui re

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Ronnie W. Marston, pro se

d/b/a Marston Builders

25506 North West County Road 241

Alachua, Florida 32615

STATEMENT OF THE ISSUES

Has Respondent failed to secure that payment of workers'

compensation for his employees, Section 440.107(2), Florida

Statutes (2004), justif ying the entry of a stop - work order,

Section 440.107(7)(a), Florida Statutes (2004), and the entry of

a financial penalty against Respondent, Section 440.107(7)(d),

Florida Statutes (2004)?

PRELIMINARY STATEMENT

On June 27, 2004, Petitioner entered a stop - work order

against Respondent for the alleged failure to secure payment of

workers' compensation in violation of Section 440.107(2),

Florida Statutes (2004). This was followed by an Amended Order

of Penalty Assessment in the amount of $106,135.46 in

association with the alleged failure to secure the payment of

workers' compensation. The penalty assessment was entered in

accordance with Section 440.107(7)(d), Florida Statutes (2004).

The Amended Order of Penalty Assessment was dated August 4,

2004.

Respondent, in a Petition for Administrative Hearing

received by Petitioner on August 25, 2004, contested the

allegations that he had failed to secure the payment of workers'

compensation for his employees, to the extent that some

employees were leased e mployees, that some parties named as

employees were not employees and that certain profits from the

venture under consideration were not subject to workers'

compensation. By its terms the Petition for Administrative

Hearing contested the stop - work order a nd Amended Order of

Penalty Assessment.

In turn, Petitioner referred the case to the Division of

Administrative Hearings (DOAH) for conduct of a hearing

consistent with Sections 120.569 and 120.57, Florida Statutes

(2004). On September 8, 2004, DOAH rec eived the case. At that

time Barbara J. Staros, Administrative Law Judge, was assigned

to conduct the proceeding. She noticed the hearing to be heard

on December 1, 2004. The case was reassigned to Ella Jane P.

Davis, Administrative Law Judge, who conti nued the hearing until

January 31, 2005. Another case assignment was made to the

undersigned who conducted the final hearing on the latter

hearing date.

At final hearing, Petitioner presented the testimony of

Investigator William Pangrass. Petitioner's Exhibits numbered 1

through 9 were admitted. Respondent testified in his own

behalf. Respondent did not offer other witnesses or exhibits.

Petitioner requested that official recognition be made of

Chapter 440, Florida Statutes (2004), and Florida Admi nistrative

Code Chapter 69L - 6. Those requests were granted.

On February 14, 2005, the hearing transcript was filed with

DOAH. Petitioner elected to submit proposed findings of facts

and orders through a proposed recommended order filed

February 23, 200 5. That submission was made pursuant to Section

120.57(1)(b), Florida Statutes (2004). It has been considered

in preparing the Recommended Order. Respondent did not avail

himself of the opportunity to submit proposed findings of facts

and orders.

FIN DINGS OF FACT

1. William Pangrass is a workers' compensation

investigator for Petitioner. On July 27, 2004, following a

public complaint, Mr. Pangrass went to a work site location in

Gainesville, Florida. This visit was made to ascertain whether

Respo ndent had secured workers' compensation for persons

employed at the work site. He observed several persons doing

framing and related activities that constituted construction.

Respondent was at the work site supervising activities.

Mr. Pangrass asked Res pondent to provide proof of workers'

compensation insurance for persons employed at the work site.

Respondent told Mr. Pangrass that Respondent had a leasing

arrangement with Modern Business Associates, Inc. (MBA) to

provide lease employees for the job, w hich would make the

leasing company responsible for workers' compensation coverage.

The personnel leasing company (MBA) takes employees that would

ordinarily work for an employer, hires them and leases them

back, making the leasing company the employer fo r purposes of

providing workers' compensation insurance.

2. Petitioner's Exhibit numbered 8 is a certificate of

liability insurance for MBA in relation to Respondent. However,

on the date in question, July 27, 2004, there was a dispute

concerning cove rage for the employees Travis Guarino and Thomas

Hunter. On that subject, Respondent first told Mr. Pangrass

that those two employees had just walked on the job that morning

and that Respondent had not had time to inform MBA, so that the

leased employees could be covered for workers' compensation

insurance. Later Respondent told Mr. Pangrass that the employee

names had been called into MBA so that workers' compensation

insurance could be provided.

3. Mr. Pangrass received a written communication from MBA

concerning workers' compensation coverage for the employees at

the work site, to include Messrs. Guarino and Hunter. This

document is dated July 28, 2004. It is Petitioner's Exhibit

numbered 9. It says "the two new employees were covered from

the t ime they began work for Mr. Marston." It refers to them by

name with the date of hire/coverage reflected as 7/27/04. When

Mr. Pangrass received Petitioner's Exhibit numbered 9, he called

MBA and someone, who is not identified in the record, told

Mr. Pang rass that they had received his application, taken to

mean Respondent's application and that the subject employees

were covered as of 5:30 that day. This is taken to mean

5:30 p.m. July 27, 2004.

4. As part of the investigation Mr. Pangrass utili zed the

Coverage and Compliance Automated System (CCAS). The CCAS

printout, Petitioner's Exhibit numbered 1, shows that Respondent

and Marston Builders did not have separate workers' compensation

insurance coverage apart from that provided by MBA.

5. On July 27, 2004, at 3:27 p.m., Mr. Pangrass served

Respondent with a written request for production of business

records for penalty assessment calculation, Petitioner's Exhibit

numbered 4, requesting various categories of records maintained

by Responden t. The next day Mr. Pangrass received from

Respondent copies of cancelled checks drawn on the account of

Ronnie W. Marston, Jr., d/b/a Marston Builders, Petitioner's

Exhibit numbered 5. Some checks were paid to the order of

Respondent. Some were paid to Lisa Marston for child support,

day care, insurance and registration. One check was written to

an auto sales company for the purpose "Nissan Sentra." Some

checks were written to named individuals reflected in the list

of employees on the work site July 27, 2004. Other checks were

written to named individuals not at the work site on that date.

The other persons referred to were in addition to Respondent and

Lisa Marston. Some checks written to the third - party

individuals noted the purposes, such as "su b - work" or

"contracting labor." Other checks written to named individuals

did not identify the purpose.

6. Concerning payments made to Respondent in the checking

account, all checks that were written to Respondent had dates in

2004.

7. Prior to 20 04, Respondent personally had been exempt

from receiving workers' compensation coverage as a sole

proprietor, notwithstanding his status as an employee. He is no

longer entitled to elect exemption from coverage under terms set

forth in Section 440.05, Flo rida Statutes, effective

December 31, 2003. This is further reflected in the employer

exemptions report pertaining to Respondent maintained by

Petitioner, Petitioner's Exhibit numbered 2. When the law

changed, corporate officers could still elect exempti on, sole

proprietors could not. At all times relevant to the inquiry,

Respondent was a sole proprietor.

8. Based upon his belief that Messers. Guarino and Hunter

were employed at the work site without workers' compensation

coverage, Mr. Pangrass issu ed a stop - work order on July 27,

2004, at 3:27 p.m., Petitioner's Exhibit numbered 6. This

decision was supported by the field interview worksheet

completed by Mr. Pangrass, Petitioner's Exhibit numbered 3.

9. Based upon information discovered in the cancelled

checks showing the payments that have been referred to,

Mr. Pangrass entered an Amended Order of Penalty Assessment on

August 4, 2004, calling for $106,135.46 in penalties under

authority set forth in Section 440.107(7)(d), Florida Statutes

(2004 ). The Amended of Order of Penalty Assessment is

Petitioner's Exhibit numbered 7. It has attached a worksheet

setting forth calculations pertaining to the persons who

received the checks described. These calculations include class

codes, the period of n on - compliance, the gross payroll, the

payroll column divided by 100, approved manual rate, premium

calculations and penalty calculations the product of the proper

premium multiplied by 1.5. The class codes were derived from

the Scopes Manual, a listing pu blished by NCCI that includes all

occupations with job descriptions and classification numbers

assigned to them. The Scopes Manual is used in the insurance

industry and has been adopted by Petitioner in Florida

Administrative Code Rule 69L - 6.021. The cla ssification code

selected to perform penalty calculations was that of "Carpentry -

Detached One or Two Family Dwellings." This classification is

Number 5645.

10. The calculation of an assessed penalty included

workers found at the work site on July 2 7, 2004, who were paid

by MBA. As reflected in the cancelled checks, Petitioner's

Exhibit numbered 5, those workers were also paid by Respondent.

For this reason, they were considered to be dually employed and

payments not received from the lease company entitled the

employees to workers' compensation coverage from Respondent.

11. Calculations in the penalty worksheet supporting the

assessment included payments to Respondent and Lisa Marston.

The portion of the check payments received in the name of

Respondent were outside the December 21, 2003 date, when the

right to select to exemption from workers' compensation coverage

as an employee who was a sole proprietor had expired. The

calculations and the worksheet include checks written to Lisa

Marston u pon the theory that the payments benefit Respondent no

less so had they been paid to Respondent directly, who in turn

paid Lisa Marston.

12. Calculations in the worksheet leading to the assessed

penalty included checks written to individuals regardle ss of the

stated purpose for the check, as well as those for whom the

purpose of the payments was not made known.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction over the subject matter and parties to this action

consist ent with Sections 120.569 and 120.57(1), Florida Statutes

(2004).

14. Petitioner's purpose here is two - fold. Petitioner

wishes to maintain in effect the stop - work order issued July 27,

2004, and to assess a monetary penalty under the Amended Order

of Pe nalty Assessment entered August 4, 2004. Petitioner has

exercised its authority pursuant to Section 440.107(7)(a) and

(d), Florida Statutes (2004). It is understood that Petitioner

wishes to maintain the stop - work order dependant upon a decision

sustaini ng any penalty assessed under terms of the Amended Order

of Penalty Assessment and subject to the payment of the penalty

if sustained.

15. Proof that Respondent failed to secure the payment of

workers' compensation as required, leading to a penalty

asse ssment as contemplated by the Amended Order of Penalty

Assessment must be by clear and convincing evidence. See

Department of Banking and Finance, Division of Investor

Protection v. Osborne Stern and Company , 670 So. 2d 932 (Fla.

1996); and Section 120.57 (1)(j), Florida Statutes (2004).

16. Pertaining to this case certain categories of

employees are subject to the protection of the workers'

compensation law. Those employees are defined in at Section

440.02(15), Florida Statutes (2004), as:

(a) 'Empl oyee' means any person who

receives remuneration from an employer for

the performance of any work or service while

engaged in any employment under any

appointment or contract for 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) 'Employee' includes:

* * *

2. All persons who are being paid by a

construction contractor as a subcontractor,

unless the subcontractor has validly elected

an exemption as permitted by this chapter,

or has otherwise secured the payment of

compensation coverage as a subcontractor,

consistent with s. 440.10, for work

performed by or as a subcontractor.

17. Emplo yers who are subject to the requirements for

providing workers' compensation coverage are set out in Section

440.02(16)(a), Florida Statutes (2004), where it states:

(a) 'Employer' means the state and all

political subdivisions thereof, all public

and q uasi - public corporations therein, every

person carrying on any employment, and the

legal representative of a deceased person or

the receiver or trustees of any person.

'Employer' also includes employment

agencies, employee leasing companies, and

similar a gents who provide employees to

other persons. . . .

18. The nature of employment which is under consideration

here is defined at Section 440.02(17)(a) and (b), Florida

Statutes (2004), where it states:

(a) 'Employment,' subject to the other

provision s of this chapter, means any

service performed by an employee for the

person employing him or her.

(b) 'Employment' includes:

* * *

2. All private employments in which four

or more em ployees are employed by the same

employer or, with respect to the

construction industry, all private

employment in which one or more employees

are employed by the same employer.

19. The liability for employers to provide workers'

compensation is set fort h in Section 440.10(1)(a), Florida

Statutes (2004), which states:

440.10 Liability for compensation. --

(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 physician, 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. Any contractor or subcontractor who

engages in any public or private

construction in the state shall secure and

maintain compensa tion for his or her

employees under this chapter as provided in

s. 440.38 .

20. Employers are obligated to secure the payment for

compensation in the manner described in Section 440.38, Florida

Statutes (2004).

21. To the extent that Respondent used MBA as an employee

leasing company to provide employees for his work sit e, it is

under terms that explain the relationship between the employee

leasing company and the client company. In this example MBA was

the employee leasing company and Respondent was the client

company. Provisions within Section 468.520, Florida Statute s

(2004), placed the relationship in context where it is stated:

(4) 'Employee leasing' means an arrangement

whereby a leasing company assigns its

employees to a client and allocates the

direction of and control over the leased

employees between the l easing company and

the client. . . .

(5) 'Employee leasing company' means a sole

proprietorship, partnership, corporation, or

other form of business entity engaged in

employee leasing.

(6) 'Client company' means a person or

entity which contracts wi th an employee

leasing company and is provided employees

pursuant to that contract.

22. The obligation of MBA as the leasing company to

provide workers' compensation insurance for leased employees is

set forth Section 468.529(1), Florida Statutes ( 2004), which

states:

A licensed employee leasing company is the

employer of the leased employees, . . . and

shall be responsible for providing workers'

compensation coverage pursuant to chapter

440. . . .

23. Section 440.05, Florida Statutes (2004), co ntrolling

this case did not allow Respondent to elect an exemption from

protection under the statute in his capacity as sole proprietor

beyond December 31, 2003. This voiding of the certificate of

election to be exempt for periods beyond December 31, 2003 , is

further explained in Florida Administrative Code Rule 69L - 6.012.

These changes were brought about under Chapters 2003 - 412 and

2003 - 422, Law of Florida, which left only certain corporate

officers engaged in the construction industry with the right to

file a notice of election to be exempt from the requirements

within the Workers' Compensation Law.

24. Section 440.107(3), Florida Statutes (2004), explains

Petitioner's authority to enforce workers' compensation coverage

requirements where it states:

The department shall enforce workers'

compensation coverage requirements,

including the requirement that the employer

secure the payment of workers' compensation,

and the requirement that the employer

provide the carrier with information to

accurately det ermine payroll and correctly

assign classification codes. In addition to

any other powers under this chapter, the

department shall have the power to:

(a) Conduct investigations for the purpose

of ensuring employer compliance.

* * *

(c) Examine and copy business records.

* * *

(g) Issue stop - work orders, penalty

assessment orders, and any other orders

necessary for the administration of this

section.

(h) Enforce the terms of a stop - work order.

25. The records that were requested from Respondent in

this case were in keeping with Section 440.107(3)(c), Florida

Statutes (2004), and Florida Administrative Code Rule 69L - 6.015.

Pursuant to that request Respondent made available the cancelled

checks .

26. In relation to the service of the stop - work order and

the Amended Order of Penalty Assessment, Section 440.107(7)(a)

and (d) states in pertinent part:

(a) Whenever the department determines that

an employer who is required to secure the

payment to his or her employees of the

compensation provided for by this chapter

has failed to secure the payment of workers'

compensation required by this chapter or to

produce the required business records under

subsection (5) within 5 business days after

recei pt of the written request of the

department, such failure shall be deemed an

immediate serious danger to public health,

safety, or welfare sufficient to justify

service by the department of a stop - work

order on the employer, requiring the

cessation of all business operations. If

the department makes such a determination,

the department shall issue a stop - work order

within 72 hours. The order shall take

effect when served upon the employer or, for

a particular employer worksite, when served

at that worksit e. In addition to serving a

stop - work order at a particular worksite

which shall be effective immediately, the

department shall immediately proceed with

service upon the employer which shall be

effective upon all employer worksites in the

state for which the employer is not in

compliance. A stop - work order may be served

with regard to an employer's worksite by

posting a copy of the stop - work order in

a conspicuous location at the worksite. The

order shall remain in effect until the

department issues a n order releasing the

stop - work order upon a finding that the

employer has come into compliance with the

coverage requirements of this chapter and

has paid any penalty assessed under this

section. . . .

* * *

(d)1. 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 equal to

1.5 times the amount the employer would have

paid in premi um when applying approved

manual rates to the employer's payroll

during periods for which it failed to secure

the payment of workers' compensation

required by this chapter within the

preceding 3 - year period or $1,000, whichever

is greater.

27. Mr. Pangrass went to the work site on July 27, 2004,

and entered the stop - work order effective 3:27 p.m. that date.

He was justified in issuing the stop - work order given

Respondent's explanations concerning the status of the employees

Guarino and Hunter. Their status was only clarified the

following day concerning workers' compensation coverage. The

status was made known in the communication dated July 28, 2004,

from MBA the leasing company. It makes no difference whether

one reads the communic ation to say that the coverage began

July 27, 2004, when they began work or at 5:30 p.m. that date as

referred to by an unknown person in conversation with

Mr. Pangrass. What is significant is that the beginning point

of their employment was only made kno wn July 28, 2004, beyond

the place and time where the stop - work order was issued, given

Respondent's vague explanation of the status of coverage for the

subject employees.

28. Mr. Pangrass was entitled to seek the production of

the business records from Respondent. They were timely

provided, but they revealed Respondent's failure to secure

payment of compensation for workers, aside and apart from the

obligation by MBA to provide payment of compensation for the

lease employees on the work site July 27, 2 004.

29. To the extent that the cancelled checks evidence

receipt of renumeration by those persons named, to include

Respondent, it is concluded that it was for the performance of

work. Those persons were Respondent's employees entitled to

payment of w orkers' compensation and that payment had not been

secured. The exception to this conclusion would be payments to

Lisa Marston. These were not payments to an employee.

30. The evidence presented to sustain these conclusions

was clear and convincing.

RECOMMENDATION

Upon the consideration of the facts found and the

conclusions of law reached, it is

RECOMMENDED:

That a Final Order be entered keeping the stop - work order

in effect pending payment of the modified penalty assessed for

failure to sec ure payment of workers' compensation.

DONE AND ENTERED this 23rd day of March, 2005, in

Tallahassee, Leon County, Florida.

S

___________________________________

CHARLES C. ADAMS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Bu ilding

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 23rd day of March, 2005.

COPIES FURNISHED :

Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Ronnie W. Marston

d/b/a Marston Builders

25506 North West County Road 241

Alachua, Florida 3261 5

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, Flori da 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.