05-003190 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Clark Green, D/B/A Clark W. Green Painting Status: Closed Recommended Order on Thursday, November 2, 2006.

Summary: Respondent`s exemption as a sole proprietor expired by operation of law in 1999.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS' COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 05 - 3190

)

CLARK GREEN, d/b/a )

CLARK W. GREEN PAINTING, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held pursuant to notice, before Barbara J.

Staros, Administrative Law Judge with the Division of

Administrative Hearings, on August 22, 2006, via video -

tele conference in Jacksonville and Tallahassee, Florida.

APPEARANCES

For Petitioner: Colin M. Roopnarine, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: R. Joseph Dill, Esquire

Era clides, Johns, Hall, Gelman,

Eikner, Johannessen, L.L.P.

4811 Atlantic Boulevard

Jacksonville, Florida 32207

STATEMENT OF THE ISSUE

The issue is whether The Department of Financial Services

properly imposed a Stop Work Order an d Amended Order of Penalty

Assessment pursuant to the requirements of Chapter 440, Florida

Statutes.

PRELIMINARY STATEMENT

On February 25, 2005, the Department of Financial Services,

Division of Workers' Compensation (Division) issued a Stop Work

Order and Order of Penalty Assessment to Respondent, Clark

Green, d/b/a Clark W. Green Painting. On March 22, 2005, the

Division issued an Amended Order of Penalty Assessment for

$126,393.87. Respondent contested the Stop Wo rk Order and

Amended Penalty Assessment, and requested an administrative

hearing. 1/ The matter was forwarded to the Division of

Administrative Hearings on or about September 5, 2005.

The case was originally scheduled to be heard on

November 18, 2005. C ontinuances were granted for good cause

shown. On April 21, 2006, the Division filed a Motion to Amend

Order of Penalty Assessment, which was granted. The amended

amount of the penalty assessment was reduced to $80,931.29.

At hearing, Petitioner present ed the testimony of Katina

Johnson, Donald Bowman, and Greg Mills. Petitioner offered

Exhibits numbered 1 through 16, which were admitted into

evidence. Respondent presented the testimony of Clark Green.

Respondent offered Exhibits numbered 1 through 3 , which were

admitted into evidence.

A Transcript was filed on September 6, 2006. Petitioner

filed an unopposed Motion for Extension of Time in which to file

proposed recommended orders, which was granted. The parties

timely filed Proposed Recommended Orders which have been

considered in the preparation of this Recommended Order.

References to statutes are to Florida Statutes (2005)

unless otherwise noted.

FINDINGS OF FACT

1. The Division is charged with the regulation of workers'

compensation ins urance in the State of Florida.

2. Respondent Clark Green, d/b/a/ Clark W. Green Painting,

is a sole proprietor located in Jacksonville, Florida, and is

engaged in the business of painting, which is a construction

activity.

3. Katina Johnson is an in vestigator employed by the

Division. Her duties include investigating businesses to ensure

that the employers in the state are in compliance with the

requirements of the workers' compensation law and related rules.

4. On February 22, 2005, Ms. Johnson visited a job site in

the Northside subdivision in Jacksonville, Florida, and observed

two workers coming out of a new construction home. The two

workers appeared to have been painting , as they had paint on

their clothes, arms, and hands. This visit was a random site

check.

5. Ms. Johnson interviewed the two workers, Tikos Johnson

and Ricky Reed. As a result of that interview, Ms. Johnson

contacted Mr. Clark Green.

6. Shortly thereafter, the file was transferred to another

investigator, Donald Bowma n. Mr. Bowman checked the database in

the Coverage and Compliance Automated System and found no proof

of coverage for Mr. Green. Mr. Bowman did find in the records

of the Division that Mr. Green had an exemption as a sole

proprietor, but that it had expi red December 31, 1999.

7. After conferring with his supervisor, Mr. Bowman issued

a Stop - Work Order and Order of Penalty Assessment to Respondent

on February 25, 2005, along with a request for business records

for the purpose of calculating a penalty f or lack of coverage.

8. Respondent did not produce business records as

requested.

9. On March 22, 2005, Mr. Bowman issued an Amended Order

of Penalty Assessment to Respondent for $126,393.87. Attached

to the Amended Order of Penalty Assessment is a p enalty

worksheet with a list of names under the heading, "Employee

Name," listing the names of Tikos Johnson, Rickey Reed, and

Mr. Green.

10. The amount of the penalty was imputed using the

Florida average weekly wage that was in effect at the time of

t he issuance of the stop - work order. Through imputation of

payroll for the purported employees, the Department calculated a

penalty for the time period of February 25, 2002 through

February 25, 2005. Mr. Bowman assigned a class code to the type

of work pe rformed by Respondent utilizing the SCOPES manual,

multiplied the approved manual rate with the imputed payroll per

one hundred dollars, then multiplied all by 1.5. Penalties are

calculated by determining the premium amount the employer would

have paid ba sed on his or her Florida payroll and multiplying by

a factor of 1.5. The payroll was imputed back to October 1,

2003. For the period prior to October 1, 2003, Mr. Bowman

assessed a penalty of $100 per day for each calendar day of

noncompliance.

11. Mr. Bowman also requested business records from Engle

Homes, which had subcontracted with Respondent to provide

services at the work site investigated by the Division, in an

effort to determine whether Respondent was actually performing

services for Engle Homes. While he eventually received records

from Engle Homes, Mr. Bowman did not use them in his calculation

of the penalty , as they were not received directly from

Respondent and were received more than 45 days after his

request.

12. On April 21, 2 006, a second Amended Order of Penalty

Assessment was issued reducing the amount of the penalty to

$80,931.29. This reduction in penalty was the result of the

Department 's removing Tikos Johnson and Rickey Reed from the

penalty calculation , as they had be en served stop - work orders

and had separate penalty assessments assessed to them.

Respondent's Exemption

13. On or about November 28, 1996, Respondent was issued a

"Construction Industry Certificate of Exemption from Florida

Workers' Compensation Law" c ard. The exemption card bears no

expiration date.

14. At the time Respondent received his exemption card,

such exemptions were valid "until the sole proprietor . . .

revokes his exemption." Section 440.05(3), Florida Statutes

(1995). Consequently, the exemptions issued at that time were

considered "lifetime" exemptions.

15. Gregory Mills is a Senior Management Analyst I

Supervisor. His duties are to supervise and manage the

exemption process for the Division. He has been in this

position for over t wo years and prior to this position was

employed by the Division as a workers' compensation

investigator. He was an investigator, and therefore not in

charge of the exemption process, at the time the law changed in

1999.

16. There is a memorandum in evid ence entitled "Notice of

Change to Exemption Process" dated October 9, 1998. The

memorandum is addressed to "Holders of BCM - 204s (Construction

Industry Exemptions). The stated purpose of this memorandum is

to advise holders of construction industry exemp tions of recent

changes in the laws which affected the exemption holder's rights

and responsibilities. The Notice contained the following

language in bold print:

EFFECTIVE JANUARY 1, 1999: construction

industry exemptions issued after 1/1/99 will

expire two years after the effective date of

the exemption. A construction industry

exemption issued prior to 1/1/99 (BCM - 204)

will expire on the last day of the birth

month of the exemption holder in the year

1999.

17. The Notice also compared the then cur rent process with

the process after January 1, 1999, advising exemption holders

that their exemptions would expire in 1999 on the last day of

the birth month of the exemption holder, and that exemptions

issued after January 1, 1999, w ou l d expire every two years.

18. Mr. Mills believes that this letter was mailed to all

exemption holders, including Respondent, in October 1998 to

their address es of record. However, because the Division's

record retention policy is to retain documents for five years ,

and bec ause Mr. Mills was not in charge of exemptions at the

time of the law change, he cannot say with complete certainty

that a copy of this notice was mailed to Mr. Green.

19. Mr. Green insists that he did not receive a copy of

this notice and that had he received it, he would have complied.

Mr. Green's testimony in this regard is accepted as credible.

Whether the Division mailed a copy of the notice to Respondent

or not, Mr. Green did not receive it.

20. Further, since the date of this notice and the change

in the law, Mr. Green presented his exemption card to general

contractors for whom he performed painting work. The general

contractors all accepted his card.

CONCLUSIONS OF LAW

21. The Division of Administrative Hearings has

jurisdiction over t he parties and subject matter of this

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

Statutes (2006).

22. Administrative fines are penal in nature. Department

of Banking and Finance, Division of Securities and Investor

Protection v. Osbo rne Stern, Inc. , 670 So. 2d 932 (Fla. 1996).

Therefore, Petitioner bears the burden of proof herein by clear

and convincing evidence.

23. Section 440.02(16), Florida Statutes, defines

"employer" as "every person carrying on any employment . . ."

24. Subsection 440.10(1)(a), Florida Statutes, reads in

pertinent part as follows:

440.10. Liability for Compensation.

(1)(a) . . . Any contractor or subcontractor

who engages in any public or private

construction in the state shall secure and

maintain comp ensation for his or her

employees under this chapter as provided in

s. 440.38.

25. Section 440.107, Florida Statutes, authorizes the

Division to issue stop - work orders and penalty assessment orders

in its enforcement of workers' compensation coverage

requirements , and reads in pertinent part:

(7)(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 eq ual

to 1.5 times the amount the employer would

have paid in premium 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

precedin g 3 - year period or $1,000, whichever

is greater.

* * *

(e) When an employer fails to provide

business records sufficient to enable the

department to determine the employer's

payroll for the period requested for the

calculation of the penalty provided in

paragraph (d), for penalty calculation

purposes, the imputed weekly payroll for

each employee, corporate officer, sole

proprietor, or partner shall be the

statewide average weekly wage as defined in

s. 440.12(2) multiplied by 1. 5.

26. Florida Administrative Code Rule 69L - 6.028(4) provides

that for periods in which the employer's non - compliance occurred

prior to October 1, 2003, and the employer fails to provide

business records, the Department shall assess a penalty of $100

per day for each calendar day in the period of non - compliance

occurring before October 1, 2003.

Respondent's Exemption

27. At the time that Respondent received his exemption,

Section 440.05(3), Florida Statutes (1995), provided that as to

a sole proprietor w ho elects and receives an exemption, "[t]he

certification of the election is valid until the sole proprietor

. . . revokes his election."

28. Section 440.05, Florida Statutes, was amended by s. 2,

Ch. 98 - 174, Laws of Florida, effective January 1, 1999. T he

amendment added the following language:

(6) A construction industry certificate of

election to be exempt which is issued in

accordance with this section shall be valid

for 2 years after the effective date stated

thereon. Both the effective date and th e

expiration date must be listed on the face

of the certificate by the division. The

construction industry certificate must

expire at midnight, 2 years from its issue

date, as noted on the face of the exemption

certificate. Any person who has received

fr om the division a construction industry

certificate of election to be exempt which

is in effect on December 31, 1998, shall

file a new notice of election to be exempt

by the last day in his or her birth month

following December 1, 1998. A construction

ind ustry certificate of election to be

exempt may be revoked before its expiration

by the sole proprietor, partner, or officer

for whom it was issued or by the division

for the reasons stated in this section. At

least 60 days prior to the expiration date

of a construction industry certificate of

exemption issued after December 1, 1998, the

division shall send notice of the expiration

date and an application for renewal to the

certificateholder at the address on the

certificate.

29. Thus, Mr. Green's exempt ion , which was issued to him

in 1996, expired by operation of law in December 1999.

30. While the 1998 amendment to Section 440.05, Florida

Statutes, affirmatively required the Division to send notice of

the expiration date and an application for renewal to the

certificateholder at the address on the certificate on

exemptions issued after December 1, 1998, it did not require

notification to those whose certificates of exemption were

issued prior to that date. Therefore, any notification sent by

the Divisi on to Respondent and other holders of certificates of

exemption issued prior to that date was done as a matter of

courtesy.

31. While Mr. Green did not receive the notice that the

Division believes was sent to him, he was not in compliance with

the worker s' compensation law. Respondent's other arguments,

which raise constitutional issues, are beyond the scope of this

tribunal to decide.

RECOMMENDATION

Based upon the Findings of Fact and Conclusions of Law, it

is,

RECOMMENDED:

That the Division o f Workers' Compensation enter a Final

Order affirming the Amended Order of Penalty Assessment issued

April 17, 2006, and the Stop Work Order issued to Respondent on

February 25, 2005.

DONE AND ENTERED this 2nd day of November, 2006, in

Tallahassee, Leon C ounty, Florida.

S

BARBARA J. STAROS

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 (8 50) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 2nd day of November, 2006.

ENDNOTE

1/ Respondent has raised constitutional issues that will not be

ad dressed in this Recommended Order, as the undersigned does not

have jurisdiction to decide on constitutional challenges to

statutes or existing rules. Department of Administration,

Division of Personnel v. Department of Administration, Division

of Adminis trative Hearings , 326 So. 2d 187 (Fla. 1st DCA 1976).

COPIES FURNISHED :

Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

R. Joseph Dill, Esquire

Eraclides , Johns, Hall, Gelman

Eikner & Johannessen, L.L.P.

4811 Atlantic Boulevard

Jacksonville, Florida 32207

Honorable Tom Gallagher

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Carl os G. Mu ? niz, 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.