04-003789 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Macs Construction And Concrete, Inc. Status: Closed Recommended Order on Friday, August 5, 2005.

Summary: Petitioner correctly calculated the penalty Respondent had to pay for failing to obtain workers` compensation insurance for its employees.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 04 - 3789

)

MACS CONSTRUCTION AND CONCRETE, )

INC., )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, a hearing was conducted in this case

pursuant to Section 120.569, Florida Statutes, and Section

120.57(1), Fl orida Statutes, on June 8, 2005, by video

teleconference at sites in West Palm Beach and Tallahassee,

Florida, before Stuart M. Lerner, a duly - designated

Administrative Law Judge of the Division of Administrative

Hearings (DOAH).

APPEARANCES

For Petitioner : Joe Thompson, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Gary A. Issacs, Esquire

Gary Issacs P.A.

One Clearlake Centre

250 Australian Avenue South, Suite 1401

West Palm Beach, Florida 33401

STATEMENT OF THE ISSUE

Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a

penalty for failing to secure workers' compensation insu rance

for its employees, as required by Florida law.

PRELIMINARY STATEMENT

On or about August 17, 2004, Petitioner issued an Amended

Order of Penalty Assessment advising that it was assessing a

penalty of $2,443,311.23 against Respondent for "[f]ail[ing] to

secure the payment of workers' compensation within the meaning

of § 440.107(2), Fla. Stat. by: failing to obtain coverage that

meets the requirements of CH. 440, Fla. Stat. and the Insurance

Code." Respondent subsequently filed a request for a "formal

Administrative hearing on this matter." On October 15, 2004,

Petitioner referred the matter to DOAH for the assignment of a

DOAH administrative law judge to conduct the hearing Respondent

had requested. After being assigned the case, the undersigned,

on October 26, 2004, set the case for final hearing and issued

an Order of Pre - Hearing Instructions.

In accordance with the undersigned's October 26, 2004,

Order of Pre - Hearing Instructions, the parties, on June 1, 2005,

filed a Joint Stipulation, which read , in pertinent part, as

follows:

Pursuant to the Order of Pre - Hearing

Instructions in the above - styled action, the

Department of Financial Services, Division

of Workers' Compensation (Petitioner) and

Macs Construction and Concrete Inc.

(Respondent), submit their joint stipulation

with regard to the following matters:

(a) NATURE OF THE CONTROVERSY : This is a

proceeding pursuant to chapter 440, Florida

Statutes and related statutes by Petitioner

to enforce the statutory requirement that

employers secure the payment of workers'

compensation for the benefit of their

employees. Petitioner issued an initial

Stop Work Order and Order of Penalty

Assessment (Stop Work Order) and a

subsequent Amended Order of Penalty

Assessment (Amended Order) to Respondent,

allegi ng that Respondent failed to abide by

the statutory requirement in chapter 440.

(b) EACH PARTY'S POSITION : It is perhaps

most pertinent first to identify the areas

of agreement and stipulation between the

parties. Following that will be a

description of each party's position with

regard to issues to be resolved at trial.

FOR THE PURPOSE OF THIS ADMINISTRATIVE

HEARING THE PARTIES AGREE AND STIPULATE TO

THE FOLLOWING FACTS AND/OR ANSWERS TO MIXED

QUESTIONS OF LAW AND FACT :

1. On the date of issue of the Stop Work

Order (on or about August 2, 2004),

Respondent was required to have secured

the payment of workers' compensation for

the benefit of its employees, in

accordance with chapter 440, Florida

Statutes.

2. On the date of issue of the Stop Work

Order (on or about August 2, 2004),

Respondent had not secured the payment of

workers' compensation for the benefit of

its employees because Respondent did not

have in place workers' compensation

insurance that complied with the

requirements of chapter 440, Flo rida

Statutes.

3. The Stop Work Order and Amended Order

were properly served on Respondent.

4. The amount of penalty assessed by

Petitioner in the Amended Order is

$2,443,311.23.

5. Due to Respondent's failure to abide

by the relevant sections of cha pter 440

(including but not necessarily limited to

sections 440.10 and 440.38, Florida

Statutes), Respondent is liable for and

owes at least $1,568,399.00 as a penalty

for violating the relevant section of

chapter 440.

6. The relevant statute for calcula tion

and imposition of the penalty amount is

section 440.107, Florida Statutes.

7. Petitioner will issue a final order

as part of this proceeding that will

assess a penalty against Respondent of at

least $1,568,399.00 for which amount

Respondent is liabl e and owes as a

penalty for violating relevant sections

of chapter 440.

As to the remaining central issue in the

instant action, the parties disagree as to

the meaning of section 440.107(7)(d)1.;

specifically, the parties disagree as to the

meaning of the phrase ". . . the amount the

employer would have paid in premium applying

approved manual rates to the employer's

payroll . . . ." Even more specifically,

the parties disagree as the meaning of the

term "approved manual rates." Petitioner's

and Responde nt's positions on this issue are

as follows:

Petitioner's position : The application

of "approved manual rates" to

Respondent's payroll necessarily requires

that no discounts or credits referenced

in the National Council on Compensation

Insurance's Basic Manual (Florida state -

specific pages) be applied to the

calculation of the penalty against

Respondent.

Respondent's position : The application

of "approved manual rates" to

Respondent's payroll necessarily requires

that the following credit and discount

r eferenced in the National Council on

Compensation Insurance's Basic Manual

(Florida state - specific pages) be applied

to the calculation of the penalty against

Respondent:

Florida Contracting Classification

Premium Adjustment Program (FCCPAP)

construction credit

Standard Premium Discount

The parties will present direct evidence

at trial as to whether the above credit

and discount are applicable to the to the

calculation of the penalty amount against

Respondent .

With regard to a more ancillary matter, th e

parties also disagree as to the class codes

assigned to certain employees of Respondent.

Respondent asserts that certain employees

were assigned a costlier class code than was

warranted; Petitioner disagrees, but as of

the date of submittal of this Join t

Stipulation the parties are attempting to

resolve their differences before trial. The

presentation of direct evidence on this

issue may or may not be required as of the

date of trial .

* * *

(e) and (f) STATEMENT OF FACTS ADMI TTED AND

STATEMENT OF LAW ON WHICH THERE IS

AGREEMENT :

The parties refer to section (b) of this

document and incorporate it here by

reference.

(g) and (h) STATEMENT OF ISSUES OF FACT AND

LAW REMAINING TO BE LITIGATED

The parties refer to section (b) of this

document for issues that remain to be

litigated, and incorporate that section here

by reference.

* * *

In a footnote, the parties added:

A class code is a number assigned to a

certain type of work or activity that an

empl oyee may perform -- e.g., Concrete (class

code 5221), Executive Supervisor (class code

5606), or Clerical (class code 8810). The

use of class codes published in the National

Council on Compensation Insurance's SCOPES

Manual has been adopted by rule by

Petit ioner.[ 1 ] A rate of insurance (a cost

per $100.00 of payroll) is assigned to each

class based on the level of complexity

and/or risk associated the activity (with a

more complex or riskier activity assigned a

costlier rate), and is published in the

Nation al Council on Compensation Insurance's

Basic Manual . Use of the Basic Manual has

also been adopted by rule by Petitioner.

On June 7, 2005, Petitioner filed an Unopposed Motion to

Amend Administrative Penalty Amount, which read, in pertinent

part, as fol lows:

COMES NOW THE PETITIONER IN THE ABOVE - STYLED

ACTION, the Department of Financial

Services, Division of Workers' Compensation

(Department), to submit its unopposed motion

to amend the amount of the administrative

penalty, and to state:

1. The final hearing in this matter is

scheduled to take place on June 8, 2005

before Administrative Law Judge Stuart

Lerner at video teleconference sites in

Tallahassee and West Palm beach, Florida.

1. Both the Department and Respondent

entered into and filed a join t stipulation

on or about June 1, 2005 that narrowed the

issues in the instant action. The

Department and Respondent agreed and

stipulated that the amount that Respondent

owes in the instant action for having

violated various sections of chapter 440,

Flor ida Statutes is at least $1,568,399.00.

The parties further agreed that as a result

of this action the Department will issue a

final order in an amount that is at least

equal to $1,568,399.00, and for which amount

Respondent will be found owing and liable .

3. The parties have reached agreement on

another issue (identified as an "ancillary

issue" on page 3 of the joint stipulation

filed on or about June 1, 2005) as to how

some employees should be identified under

class codes (i.e., the type of work they

p erformed). Due to adjustment of the class

codes that had been at issue, the parties

now agree that the maximum amount of the

penalty at issue is $2,323,765.60 . The

Department desires to issue a new (second)

Amended Order of Penalty Assessment to

Responde nt that reflects the amended amount

of penalty at issue.

4. Counsel for both parties have discussed

this Motion to Amend and are in agreement as

to its substance.

WHEREFORE, the Department moves that the

Administrative Law Judge issue an order that

allo ws the Department to issue an Amended

Order of Penalty Assessment that reflects an

administrative penalty amount of

$2,323,765.60.

In a footnote, Petitioner added:

In the first Amended Order of Penalty

Assessment that was issued in this case and

is on fi le with the Administrative Law Judge

and the Division of Administrative Hearings,

the penalty amount at issue was

$2,443,311.23. Though the parties disagree

as to exactly how much Respondent owes as a

penalty amount, as indicated above

Respondent has stip ulated that it owes an

amount of at least $1,568,399.00. The

Department contends that the new penalty

amount owed by Respondent is $2,323,765.60

(subject to the Administrative Law Judge's

granting of this Motion to Amend). The

remaining issue to be tried on June 8, 2005

would be whether Respondent owes

$1,568,399.00 or $2,323,765.60 as a penalty

amount.

As noted above, the final hearing in this case was held on

June 8, 2005. 2 At the outset of the hearing, the undersigned

granted Petitioner's Unopposed Motion to Amend Administrative

Penalty Amount. Three witnesses testified at the hearing:

Robert Barnes, Andrew Sabolic, and George (Don) Craig. In

addition, a total of 11 exhibits (Petitioner's Exhibits 1

through 6, and Respondent's Exhibits 1 through 5 ) were offered

and received into evidence.

At the close of the evidentiary portion of the hearing on

June 8, 2005, the undersigned, on the record, advised that

proposed recommended orders had to be filed with DOAH within 30

days of the date of the filing with DOAH of the hearing

transcript.

The transcript of the final hearing (consisting of one

volume) was filed with DOAH on June 27, 2005.

Petitioner and Respondent filed their Proposed Recommended

Orders on July 27, 2005.

FINDINGS OF FACT

Based on the evi dence adduced at hearing, and the record as

a whole, the following findings of fact are made to supplement

and clarify the sweeping factual stipulations set forth in the

parties' June 1, 2005, Joint Stipulation 3 :

Legislative History of the "Penalty Calcula tion" Provisions of

Section 440.107(7), Florida Statutes

1. Since October 1, 2003, the effective date of Chapter

2003 - 412, Laws of Florida, Section 440.107(7)(d)1., Florida

Statutes, has provided as follows:

In addition to any penalty, stop - work order,

o r 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 premium when applying approved

manual ra tes 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.

2. Prior to its being amended by Chapter 2003 - 412 , Laws of

Florida, Section 440.107(7), Florida Statutes, read, in

pertinent part, as follows:

(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 compens ation 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 paymen t 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.

3. The Senate Staff Analysis and Economic Analysis for the

senate bill that ultima tely became Chapter 2003 - 412, Laws of

Florida, contained the following explanation of the "change" the

bill would make to the foregoing "penalty calculation"

provisions of Section 440.107(7), Florida Statutes 4 :

The department is required to assess an

emplo yer that fails to secure the payment of

compensation an amount equal to 1.5 times,

rather than 2 times, the amount the employer

would have paid in the preceding three years

or $1,000, which is greater.

There was no mention in the staff analysis of any oth er "change"

to these provisions.

The NCCI Basic Manual

4. The National Council on Compensation Insurance, Inc.

(NCCI) is a licensed rating organization that makes rate filings

in Florida on behalf of workers' compensation insurers (who are

bound by these filings if the filings are approved by Florida's

Office of Insurance Regulation, unless a "deviation" is

permitted pursuant to Section 627.11, Florida Statutes).

5. The NCCI publishes and submits to the Office of

Insurance Regulation for approval a Bas ic Manual that contains

standard workers' compensation premium rates for specified

payroll code classifications, as well as a methodology for

calculating the amount of workers' compensation insurance

premiums employers may be charged.

6. This methodology is referred to in the Basic Manual as

the "Florida Workers Compensation Premium Algorithm"

(Algorithm).

7. According to the Algorithm, the first step in the

premium calculating process is to determine the employer's

"manual premium," which is accomplishe d by applying the rates

set forth in the manual (or manual rates) to the employer's

payroll as follows (for each payroll code classification):

"(PAYROLL/100) x RATE)."

8. Adjustments to the "manual premium" are then made, as

appropriate, before a final p remium is calculated.

9. Among the factors taken into consideration in

determining the extent of any such adjustments to the "manual

premium" in a particular case are the employer's loss

experience, deductible amounts, premium size (with employers who

pay " larger premium[s]" entitled to a "Premium Discount") , and,

in the case of a "policy that contains one or more contracting

classifications," the wages the employer pays its employees in

these classifications (with employers " paying their employees a

bette r wage" entitled to a "Contracting Classification Premium

Adjustment Program" credit) .

Petitioner's Construction of the "Penalty Calculation"

Provisions of Section 440.107(7), Florida Statutes

10. In discharging its responsibility under Section

440.107 (7), Florida Statutes, to assess a penalty " against any

employer who has failed to secure the payment of compensation as

required," Petitioner has consistently construed the language in

the statute, " the amount the employer would have paid," as

meaning the aggregate of the "manual premiums" for each

applicable payroll code classification , calculated as described

in the NCCI Basic Manual. It has done so under both the pre -

and post - Chapter 2003 - 412, Laws of Florida, versions of Section

440.107(7).

11. This construction is incorporated in Petitioner's

"Penalty Calculation Worksheet," which Florida Administrative

Code Rule 69L - 6.027 provides Petitioner " shall use" when

" calculating penalties to be assessed against employers pursuant

to Section 440.107, F.S." ( Florida Administrative Code Rule

69L - 6.027 first took effect on December 29, 2004.)

Penalty Calculation in the Instant Case

12. In the instant case, "1.5 times the amount the

[Respondent] would have paid in premium when applying approved

manual rates to [Respondent's] payroll during periods for which

it failed to secure the payment of workers' compensation" equals

$2,323,765.60.

CONCLUSIONS OF LAW

13. DOAH has jurisdiction over the subject matter of this

proceeding and of the parties hereto pursuant to Chapter 120,

Florida Statutes.

14. Both parties agree that the instant case turns on how

Section 440.107(7)(d)1., Florida Statutes, should be

interpreted.

15. As they indicated in their Joint Stipulation, their

dispute centers on whether "[t]he applicat ion of 'approved

manual rates' to Respondent's payroll [as directed by Section

440.107(7)(d)1., Florida Statutes] necessarily requires that no

discounts or credits referenced in the National Council on

Compensation Insurance's Basic Manual (Florida state - s pecific

pages) be applied to the calculation of the penalty against

Respondent." Petitioner contends that it does, whereas

Respondent takes the contrary position, arguing that "the

following credit and discount referenced in the National Council

on Compen sation Insurance's Basic Manual (Florida state - specific

pages) [must] be applied . . . : Florida Contracting

Classification Premium Adjustment Program (FCCPAP) construction

credit [and] Standard Premium Discount."

16. To resolve this dispute concerning the proper

interpretation of Section 440.107(7)(d)1., Florida Statutes, it

is necessary to ascertain what the Legislature intended. See

Daniels v. Florida Department of Health , 898 So. 2d 61, 64 (Fla.

2005) (" In construing a statute we are to give effect t o the

Legislature's intent. "); Department of Revenue v. Lockheed

Martin Corporation , -- So.2d -- , 2005 WL 1544773 *2 (Fla. 1st

DCA July 5, 2005)("Legislative intent is the polestar that

guides a court's statutory construction analysis."); and Health

Optio ns, Inc. v. Agency For Health Care Administration , 889 So.

2d 849, 851 (Fla. 1st DCA 2004) (" We begin our analysis with

adherence to the rule that in construing a statute's terms, the

polestar that guides a court's inquiry is the legislative

intent.").

17. "The fundamental rule of construction in determining

legislative intent is to first give effect to the plain and

ordinary meaning of the language used by the Legislature."

State v. Sousa , 903 So. 2d 923, 928 (Fla. 2005).

18. "If statutory intent is uncl ear from the plain

language of the statute, only then may '[the tribunal] apply

rules of statutory construction and explore legislative history

to determine legislative intent.'" Crescent Miami Center, LLC

v. Florida Department of Revenue , 903 So. 2d 913, 918 (Fla.

2005).

19. It is evident from an examination of the language used

in Section 440.107(7)(d)1., Florida Statutes, that the

construction advanced by Petitioner is the one the Legislature

intended.

20. In the statute, the Legislature has directed

Petitioner to calculate the penalty to be assessed against a

non - compliant employer by determining " the amount the employer

would have paid in premium when applying approved manual rates

to the employer's payroll " (or, in other words, determining, for

each payroll code classification, what the employer's "manual

premium" would have been during the period of non - compliance).

No reference is made in Section 440.107(7)(d)1., Florida

Statutes, to Petitioner's "applying" anything other than

"approved manual rat es" in determining, for purposes of

calculating the penalty to be assessed against the employer,

" the amount the employer would have paid in premium."

Accordingly, to read the statute as contemplating that

Petitioner would, in addition to " applying approv ed manual rates

to the employer's payroll," also "apply" credits and discounts

(as well as surcharges) in making this determination would add

words to the statute not placed there by the Legislature. This

neither the undersigned nor Petitioner may do. Se e Hayes v.

State , 750 So. 2d 1, 4 ( Fla. 1999)(" We are not at liberty to add

words to statutes that were not placed there by the

Legislature."); Chaffee v. Miami Transfer Company , Inc. , 288 So.

2d 209, 215 (Fla. 1974)("To say, as the employer would have us

do, that in merger cases the true meaning of s 440.15(3)(u) is

that disability for purposes of that section is the greater of

physical impairment or loss of earning capacity only if there is

a loss of earning capacity is to invoke a limitation or to add

wo rds to the statute not placed there by the Legislature. This

we may not do."); In re Order on Prosecution of Criminal Appeals

by the Tenth Judicial Circuit Public Defender , 561 So. 2d 1130,

1137 (Fla. 1990)("Courts should not add additional words to a

sta tute not placed there by the legislature, especially where

uncertainty exists as to the intent of the legislature."); PW

Ventures, Inc. v. Nichols , 533 So. 2d 281, 283 (Fla. 1988)("The

express mention of one thing implies the exclusion of

another."); Alsop v. Pierce , 19 So. 2d 799, 805 - 06 (Fla.

1944) (" When the controlling law directs how a thing shall be

done that is, in effect, a prohibition against its being done in

any other way."); Childers v. Cape Canaveral Hosp., Inc. , 898

So. 2d 973, 975 ( Fla. 5th DC A 2005) (" Courts must give statutory

language its plain and ordinary meaning, and is not at liberty

to add words that were not placed there by the legislature.");

Sun Coast International Inc. v. Department of Business

Regulation, Division of Florida Land Sa les, Condominiums and

Mobile Homes , 596 So. 2d 1118, 1121 (Fla. 1st DCA 1992)(" [A]

legislative direction as to how a thing shall be done is, in

effect, a prohibition against its being done in any other way.);

and Hialeah , Inc., v. B & G Horse Transportatio n, Inc ., 368 So.

2d 930, 933 (Fla. 3d DCA 1979)("[A] court may not invoke a

limitation or add words to a statute not placed there by the

legislature. . . . Construing Section 323.24 to provide

jurisdiction for the enjoining of persons who intend to or are

preparing to operate a vehicle in violation of Chapter 323,

requires the court to extend the meaning of the section beyond

that intended by the legislature, and requires the addition of

words to the section.").

21. Because it is clear from the language u sed by the

Legislature in Section 440.107(7)(d)1., Florida Statutes, that

Petitioner's construction of the statute carries out legislative

intent, it is unnecessary to look beyond this language and

examine the statute's legislative history to determine whe ther a

contrary construction is warranted. See Sousa , 903 So. 2d at

928 ("Courts are not to change the plain meaning of a statute by

turning to legislative history if the meaning of the statute can

be discerned from the language in the statute."); Crescen t Miami

Center, LLC , 903 So. 2d at 918; Knowles v. Beverly Enterprises -

Florida, Inc . ,898 So. 2d 1, 10 ( Fla. 2004)(" Because we agree

that the language used by the Legislature is unambiguous, it is

not necessary to examine the legislative history."); Goldenb erg

v. Sawczak , 791 So. 2d 1078, 1083 (Fla. 2001)("No reliance on

legislative history is needed to determine intent where the

statutory language is clear."); and Bryan v. State , 865 So. 2d

677, 679 (Fla. 4th DCA 2004)("Only if it is unclear should the

cour t resort to traditional rules of statutory construction and

examine legislative history.").

22. Nonetheless, it is worthy of note that the statute's

legislative history, if anything, supports Petitioner's

construction. Cf. U.S. v. Searcy , -- F.3d -- , 20 05 WL 1767649

(11th Cir. 2005) ("Although it is unnecessary to look at the

legislative history to reach this conclusion, we note that it

also supports the categorization of § 2422(b) as a crime of

violence for career offender purposes.").

23. The pre - Chapt er 2003 - 412, Laws of Florida, version of

Section 440.107(7), Florida Statutes, simply provided that the

determination of the "amount the employer would have paid"

during the period of non - compliance be "based on the employer's

payroll" during that period, and it gave no further specific

guidance as to how this "amount" should be calculated.

Petitioner's consistent practice under this version of the

statute was to apply "approved manual rates," and not to

consider the possible applicability of any credit, d iscount, or

surcharge, in arriving at "the amount the employer would have

paid." The changes made to the statute through the enactment of

Chapter 2003 - 412, Laws of Florida, reflect the Legislature's

approval of this methodology. Had the Legislature wante d

Petitioner to include credits, discounts, and surcharges in its

calculation and not rely only on the application of "approved

manual rates " (as Petitioner had been doing), the Legislature

would have so specified in the amended statute. Its failure to

ha ve done so is compelling evidence that this was not its

intent. 5 See State ex rel. Szabo Food Services, Inc. of North

Carolina v. Dickinson , 286 So. 2d 529, 531 (Fla. 1973)("When the

Legislature reenacts a statute, it is presumed to know and adopt

the con struction placed thereon by the State tax administrators.

The mere change of language does not necessarily indicate an

intent to change the law for the intent may be to clarify what

was doubtful and to safeguard against misapprehension as to

existing law. The language of the amendment in 1971 was

intended to make the statute correspond to what had previously

been supposed or assumed to be the law. The circumstances here

are such that the Legislature merely intended to clarify its

original intention rathe r than change the law.")(citations

omitted.); Cole Vision Corp. v. Department of Business and

Professional Regulation, Board of Optometry , 688 So. 2d 404, 408

(Fla. 1st DCA 1997)("[T]he Board for many years before 1991, in

rules, declaratory statements and disciplinary proceedings,

interpreted sections 463.014(10(a) and (b) as prohibiting

professional associations and affiliations between optometrists

and optical corporations. The legislature therefore must be

presumed to have adopted the Board's interpret ation that

professional associations and affiliations between optometrists

and lay corporations for the provision of optometric services

are unlawful when it reenacted the statute in 1991."); Davies v.

Bossert , 449 So. 2d 418, 420 (Fla. 3d DCA 1984)("[B]ec ause the

legislature enacted only minor amendments to the statute,

consistent with technological developments in mass communication

media, it is presumed that it approved the interpretation given

the earlier statute by the Florida Supreme Court."); and

Pen insular Supply Co. v. C.B. Day Realty of Florida , 423 So. 2d

500, 502 ( Fla. 3d DCA 1982)(" If the legislature had intended

that a materialman who failed to give a timely notice to the

owner should be without any remedy, specifically an equitable

lien, it wo uld have said so explicitly, in light of the number

of cases which had previously construed the statute. When the

legislature reenacts a statute, it is presumed to know and adopt

the construction placed thereon by courts or administrators,

except to the e xtent to which the new enactment differs from

prior constructions.").

24. Without encountering any legislative disapproval,

Petitioner has continued to consistently calculate " the amount

the employer would have paid," for purposes of determining the

appro priate penalty to impose on a non - compliant employer under

Section 440.107(7), Florida Statutes, the same way it had prior

to the effective date of Chapter 2003 - 412, Laws of Florida.

Moreover, it has incorporated this methodology in a rule,

Florida Admini strative Code Rule 69L - 6.027. This rule has the

effect of law, and it is not subject to invalidation in this

Section 120.57 substantial interest proceeding. See State v.

Jenkins , 469 So. 2d 733, 734 (Fla. 1985) (" We note that agency

rules and regulations , duly promulgated under the authority of

law, have the effect of law."); City of Palm Bay v. Department

of Transportation , 588 So. 2d 624, 628 (Fla. 1st DCA 1991)("The

same principle applies to duly promulgated agency rules, which

will be treated as presu mptively valid until invalidated in a

section 120.56 rule challenge."); Graham v. Swift , 480 So. 2d

124, 125 (Fla. 3d DCA 1985)("[A] valid rule or regulation of an

administrative agency has the force and effect of law."); and

Department of Law Enforcement, Criminal Justice Standards and

Training Commission v. Retureta , No. 03 - 3659PL, 2004 WL 1588971

*6 (Fla. DOAH July 14, 2004)(Recommended Order)("[S]tatutory law

does not authorize an Administrative Law Judge to invalidate

agency rules, unless as a result o f a rule challenge, pursuant

to Section 120.56, Florida Statutes. Thus, absent a successful

rule challenge or judicial order, the Administrative

Law Judge must apply Florida Administrative Code Rule 11B -

27.0011(4)(b) . . . .").

25. Employing this longs tanding methodology which is now

incorporated in Florida Administrative Code Rule 69L - 6.027 to

the facts of the instant case results in the determination that,

in accordance with Section 440.107(7)(d)1., Florida Statutes,

Respondent should pay a $2,323,765 .60 penalty for failing to

secure workers' compensation insurance for its employees.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that Petitioner order Respondent to pay a

$2,323,765.60 penalty for fail ing to secure workers'

compensation insurance for its employees.

DONE AND ENTERED this 5 th day of August, 2005, in

Tallahassee, Leon County, Florida.

S

___________________________________

STUART M. LERNER

A dministrative 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 5 th day of August, 2005.

ENDNOTES

1./ "Class code" is defined in Petitioner's Florida

Administrative Code Rule 69L - 3.002(4), F lorida Administrative

Code, as follows:

"Class Code" means the 4 - digit code assigned

by the National Council on Compensation

Insurance (NCCI) for the particular

occupation of the injured employee, as it

exists in the NCCI Scopes(TM) Manual 2004

Edition, w hich is hereby incorporated by

reference."

2 ./ The final hearing was originally scheduled to commence on

December 15, 2004, but was continued three times.

3 ./ These factual stipulations have been accepted. See

Columbia Bank for Cooperatives v. Okeel anta Sugar Cooperative ,

52 So. 2d 670, 673 (Fla. 1951) (" When a case is tried upon

stipulated facts the stipulation is conclusive upon both the

trial and appellate courts in respect to matters which may

validly be made the subject of stipulation. Indeed, o n appeal

neither party will be heard to suggest that the facts were other

than as stipulated or that any material facts w[ere] omitted ");

Schrimsher v. School Board of Palm Beach County , 694 So. 2d 856,

863 (Fla. 4th DCA 1997) (" The hearing officer is bound by the

parties' stipulations."); and Palm Beach Community College v.

Department of Administration, Division of Retirement , 579 So. 2d

300, 302 (Fla. 4th DCA 1991)("When the parties agree that a case

is to be tried upon stipulated facts, the stipulation is binding

not only upon the parties but also upon the trial and reviewing

courts. In addition, no other or different facts will be

presumed to exist.").

4 ./ " [S]ince 1982 th[e] [Florida Supreme] Court has on numerous

occasions looked to legislative histo ry and staff analysis to

discern legislative intent." American Home Assurance Co. v.

Plaza Materials Corporation , -- So. 2d -- , 2005 WL 1575877 *7

(Fla. July 7, 2005).

5 ./ Further evidence of this lack of legislative intent is the

absence of any mentio n of such a change in the Senate Staff

Analysis and Economic Analysis for the senate bill that

ultimately became Chapter 2003 - 412, Laws of Florida. See

American Home Assurance Co. , 2005 WL 1575877 *7.

COPIES FURNISHED:

Joe Thompson, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

Gary A. Issacs, Esquire

Gary Issacs P.A .

One Clearlake Centre

250 Australian Avenue South, Suite 1401

West Palm Beach, Florida 33401

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Carlos G. Muniz, G eneral 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 orde r. Any exceptions

to this recommended order should be filed with the agency that

will issue the final order in this case.