05-004109 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Krashco, Inc., D/B/A J. Krash`s Sports Bar Status: Closed Recommended Order on Monday, January 8, 2007.

Summary: Respondent failed to have workers` compensation coverage and continued operating in spite of a Stop Work Order. Recommend a fine of a lesser amount because in a de novo context, Respondent proved compliance by December 15, 2005, not April 28, 2006.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION , )

)

Petitioner, )

)

vs. ) Case No. 0 5 - 4109

)

KRASHCO, INC., d/b/a J. KRASH'S )

SPORTS BAR, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice this cause came on for formal proceeding

and hearing before P. Michael Ruff, duly - designated

Administrative Law Judge of the Division of Administrative

Hearings in Panama City, Fl orida, on August 25, 2006 . The

appearances were as follows:

APPEARANCES

For Petitioner: H.F. Rick Mann, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Janis K. Porter - Kra sh c o, pro se

Krashco, Inc., d/b/a

J. Krash's Sports Bar

521 East 4th Street

Panama City, Florida 32401

STATEMENT OF THE ISSUE S

The issue to be resolved in this proceeding concerns

whether the Respondent was operating its bu siness without

workers' compensation coverage for employees in violation of the

below - referenced provisions of Chapter 440, Florida Statutes,

whether it continued its business operations in violation of a

Stop Work Order issued August 11, 2005, in purporte d violation

of Section 440.107(7)(a), Florida Statutes (2005), and what , if

any, penalty is warranted.

PRELIMINARY STATEMENT

This cause arose when the Department issued a Stop Work

Order against the Respondent on August 11, 2005. The Stop Work

Order was issued pursuant to Section 440.107(7), Florida

Statutes (2005), charging the Respondent with violating Sections

440.10 and 440.38, Florida Statutes, by failing to secure the

payment of workers' compensation for employees , as defined in

Section 440.107 (2), Florida Statutes (2005) . The Respondent

elected to dispute the Stop Work Order and to seek a formal

proceeding pursuant to Sections 120.569 and 120.57, Florida

Statutes, by filing a Petition. Also on August 11, 2005, the

Department served on the Res pondent a request for production of

business records for Penalty Assessment Calculation. On

September 14, and September 19, 2005, Respondent produced

business records to the Department's investigator. On

September 26, 2005, an Amended Order of Penalty As sessment was

issued by the Department (Amended Order) , which imposed on the

Respondent a penalty of $49,979.79. This aggregate penalty

represented a penalty of $11,979.79 pursuant to Section

440.107(7)(d)1 . , Florida Statutes (2005) , for failure to secure

payment of workers' compensation and a penalty of $38,000.00

pursuant to Section 440.107(7)(c), Florida Statutes (2005) , for

conducting business operations in violation of the Stop Work

Order.

The Respondent timely filed a Petition in opposition to th e

entry of the Stop Work Order and the Amended Order. The

Petition was forwarded to the Division of Administrative

Hearings and ultimately to the undersigned Administrative Law

Judge for the conduct of a formal proceeding.

There was substantial diffi culty in the Department 's

obtaining responses to discovery requests throughout the course

of this proceeding. On January 12, 2006, the Department noticed

the Respondent , and subpoena ed the sole officer of the

Respondent , for a deposition duce tecum . On J anuary 17, 2006,

the Department had to move to continue the January 20, 2006,

hearing because discovery had not been responded to , and the

documents requested in conjunction with the deposition had not

been supplied. Two more hearings set in April and May 2006 had

to be continued for the same sort of intransigence by the

Respondent concerning its discovery obligations.

T he Administrative Law Judge issued an Order that deemed

the Department's request for admission s, which had not been

responded to, be admit ted and directed the Respondent to produce

responses to all remaining outstanding discovery requests. Even

so, on June 5, 2006, the Department had to move to enforce the

earlier Orders which ad dressed the original Motion to Compel .

In the meantime, o n May 11, 2006, based upon information

obtained by deposition by the Respondent on April 28, 2006, the

Department moved to amend the Amended Order , with leave being

granted on May 16, 2006, by the Administrative Law Judge.

Thereafter, on July 6, 2006, the Department ultimately filed a

Second Amended Order of Penalty Assessment (Second Amended

Order) seeking an additional penalty of $222,000.00 for

violation of the Stop Work Order issued August 11, 2005. This

resulted in an aggregate penalty assessment aga inst Krasco,

Inc., d/b/a J. Krash's Sports Bar in the amount of $271,979.79.

Th e cause came on for final hearing on August 25, 2006. At

the hearing the Respondent Krashco, Inc., stipulated to the

original Amended Order, that is, it indicated that it did not

dispute that it had employed at least four employees without

securing payment of workers' compensation and had violated the

Stop Work Order as of the date of September 26, 2005, when the

Amended Order of Penalty Assessment was issued.

Upon con vening of the final hearing on August 25, 2006, in

Panama City, it developed that the Department's investigator,

Patricia Krossman, was unable to attend due to illness. The

Department presented the testimony of Investigator Supervisor

William Dorney. The Department's Exhibits 1 through 13 and its

cross - examination E xhibits 14A, 14B, 14C, and 14D through 20D

were admitted into evidence.

On August 30, 2006, the Department filed a n un - opposed

Motion to admit a s a Department cross - examination exhibit, the

t rans cript of the deposition of the Respondent's designated

representative, its accountant, Mr. McDo nough , which had been

taken before the final hearing. This transcript was admitted.

On August 31, 2006, the Department filed a suppl ement to E xhibit

9 to b e admitted to the hearing record , which was without

objection and was admitted. On September 1, 2006, with prior

leave from the Administrative Law Judge, the Department deposed

its Investigator Patricia Krossman and on September 7, 2006,

pursuant to the j udge's earlier ruling , submitted the transcript

of her deposition to be admitted into the evidential record,

which it was. Thereafter, on September 8, 2006, with leave of

the Administrative Law Judge by ruling at hearing, the

Department submitted a late - f iled exhibit consisting of

discovery responses belated ly received from the Respondent after

the final hearing . These comprised Krashco, Inc.'s checking

account statements, check register, and "expenses by vendor

summary," and which was identified as "A," "B," and "C." This

exhibit was a lso admitted.

The president of Krashco, Inc., did not testify. Rather

the Respondent offered the testimony of one witness, Krashco,

Inc.'s Accountant, Mr. Matthew McDonough. The Respondent

offered no exhibits into evide nce either on direct or cross -

examination.

A Transcript was obtained and filed with the Administrative

Law Judge . The Petitioner Department submitted a Proposed

Recommended Order which has been considered in the rendition of

this Recommended Order.

FIND INGS OF FACT

1. The Department of Financial Services, Division of

Workers' Compensation (Department) is an agency of the State of

Florida charged with enforcing the statutory requirements

requiring employers to secure the payment of workers'

compensation benefits by obtaining insurance coverage therefor

for employees , as mandated by Section 440.107, Florida Statutes

(2005) . The Respondent, Krashco, Inc., d/b/a J. Krash ' s Sports

Bar (Krashco, Inc.) is a Florida corporation domiciled in Panama

City , Florid a . On August 11, 2005, it was engaged in the

business of operating J. Krash ' s Sports Bar at 1508 Calhoun

Avenue in Panama City , Florida .

2. Patricia Krossman is a Workers' Compensation

Investigator for the Department. She conducts investigations

into all types of business to verify that they have required

workers' compensation insurance coverage or are statutorily

exempt. She visited J. Krash's Sports , Bar accompanied by her

supervisor, William Dorney, and another investigator on

August 11, 2005. J. Krash's Sports Bar is a business owned by

the Respondent Krashco, Inc. Upon entering the bar, Ms.

Krossman, observed several customers and a bartender. She

inquired of the bartender whether the owner was present. She

was then introduced to Mr. Matthew M cDonough who identified

himself as the accountant for Krashco, Inc. Mr. Dorney was

present and witnessed this encounter with Mr. McDonough.

3. Mr. Krossman interviewed Mr. McDonough who stated that

he handled all the business for Krashco, Inc., and that Krashco,

Inc., had one full - time employee and six hourly employees.

Mr. McDonough provided the names of those employees to

Ms. Krossman and told her that Krashco, Inc., had no workers'

compensation insurance policy to cover those employees. This

revelati on was corroborated by Mr. Dorney who was also present.

4 . Mr. McDonough identified Ms. Janis Kay Porter - Krasno as

the sole officer of the corporation, Krashco, Inc. He provided

the telephone number for Ms. Krasno and Investigator Krossman

telephoned Ms. Krasno . She confirmed the number and the names

of the employees of Krashco, Inc., and J. Krash's Sports Bar.

She also confirmed that Krashco, Inc. , had no workers'

compensation coverage.

5 . In accordance with Chapter 440, Florida Statutes,

insurance ca rriers report to the Department the issuance to

businesses of workers' compensation insurance policies. The

Department issues workers' compensation insurance exemptions

also. The Department maintains an electronic database of

employer coverage and exempt ions in its Coverage and Compliance

Autom ated System (CCAS) , which allows investigators to determine

whether an employer has secured workers' compensation insurance

coverage or whether that employer has an exemption from

coverage. This database is used in the normal course of the

Department's investigations. Ms. Krossman utilized the CCAS

data base in the subject investigation. This database confirmed

that the Respondent ha d no workers' compensation coverage and no

exemption from coverage from any office r of the Respondent

corporation at the time of the investigation. ( See Department

exhibits three and four in evidence).

6. The Department has a policy or statutory interpretation

which it carries out , concerning its duties under Section

440.107(7)(a), Fl orida Statutes (2005), requiring that if an

employer who is required to secure payment of workers'

compensation benefits has failed to do so , that failure is

deemed an immediate serious danger to public health safety or

welfare and results in the issuance of a "Stop Work Order" by

the Department.

7 . In view of her investigation as described, Investigator

Krossman determined that the Respondent was in violation of the

workers' compensation law. This was because it employed more

than four individuals, for whom the Respondent was required to

secure the payment of workers' compensation and yet had no

workers' compensation for any of its employees. Investigator

Krossman's supervisor, Mr. Dorney, reviewed the results of

Ms. Korssman's investigation and agreed with her and authorized

her to issue a Stop Work Order to the Respondent due to its

failure to comply with the relevant requirements of Chapter 440,

Florida Statutes. Indeed, the Respondent ultimately stipulated

its liability for the charge that it viola ted Section

440.107(7), Florida Statutes (2005) , by not securing the payment

of workers' compensation for the employees in question.

8 . The Stop Work Order was served on Krashco, Inc., on

August 11, 2005, alerting that employer in accordance with

Section 440.107(7)(d), Florida Statutes (2005), that a penalty

would be assessed and that the penalty might be amended based on

further information obtained, including the production of

business records by the employer. The Stop Work Order also

advised that if th e employer conduct ed any business operations

in violation of the Stop Work Order that a penalty of $1,000.00

per day of violation would be assessed.

9 . Under the mandate of Section 440.107(5), Florida

Statutes (2005) , and Florida Administrative Code Rule 69L - 6.015,

Florida employers are required to maintain business records that

enable the Department to determine whether an employer is

complying with the workers' compensation law. On August 11,

2005, Ms. Krossman issued and hand served on Krashco, Inc. , a

written request for production of business records for purposes

of a penalty assessment calculation.

10 . On September 14 and 19, 2005, the Respondent's

accountant provided business records to the Department. After

reviewing those business records , Investigator Krossman again

consulted with her supervisor Mr. Dorney, who authorized her to

issue an Amended Order of Penalty Assessment. The Amended Order

of Penalty Assessment is the Department's E xhibit 9 in evidence.

The Amended Order was issued an d served on Respondent on

September 26, 2005, and assessed a total penalty of $49,979.79

under the authority of Section 440.107(7)(d)1 . and (c), Florida

Statutes (2005) . The penalty calculations pertaining to each of

the employees listed appeared in a thr ee page worksheet attached

and incorporated as part of Department's exhibit nine in

evidence. Investigator Krossman selected the appropriate NCCI

class code for Krashco Inc.'s business , and its corresponding

premium rate , in order to apply that to each em ployee ' s wages.

The Department relies on these premium rates and the

classification codes for these purposes in the normal course of

its regulation of such matters. 1/ Ultimately, at hearing, the

Respondent stipulated that it did not dispute the charge in the

Amended Order and does not dispute the accuracy of the penalty

calculation. 2/

11 . In light of the requirements of Section

440.107(7)(d)1 . , Florida Statutes (2005) , Investigator Krossman

calculated the penalty for the period of non - compliance back t o

September 1, 2002, pursuant to the three year "reach back

standard" in the statute. The premium which had thus been

evaded which the Respondent would have paid had it secured

workers' compensation insurance was thus shown to be $7,986.43.

The statutori ly provided penalty on that amount of evaded

premium multiplied by the statutory standard of 1.5 times

resulted in a penalty amount of $11,979.79.

12 . Respondent also stipulated at the hearing that it had

violated the Stop Work Order issued on August 11, 2005, by

continuing to conduct its business operations of J. Krash's

Sports Bar through September 19, 2005. This engendered an

additional penalty as provided in Section 440.107(7)(a) and (c),

Florida Statutes (2005) . Investigator Krossman calculated the

additional penalty at $1,000.00 per day of violation time from

August 12, 2005 through September 19, 2005, at $38,000.00. This

results in a total aggregate assessed penalty , pursuant to the

Amended Order , of $49,979.79.

13 . The business of Respondent Kra shco, Inc. , is J.

Krash's Sports Bar. Its principal place of business is 1508

Calhoun Avenue, Panama City, Florida 32405. Section

440.107(7)(a), Florida Statutes (2005), requires a cessation of

all business operations by an employer when a Stop Work Orde r is

issued by that employer by the Department. The Stop Work Order

"shall remain in effect until the Department issues an o rder

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 a ny penalty assessed under this s ection. " 3/

14 . Krashco, Inc. , has never paid any part of the assessed

penalty pursuant to the Amended Order or the Second Amended

Order filed later. The Department has never issued a n Order of

Relea se from the Stop Work Order .

15 . Nevertheless, the Respondent Krashco, Inc., after

September 19, 2005, continued the business operation s of J.

Krash's Sports Bar.

16 . Officers of corporations may elect an exemption from

coverage under the workers' comp ensation law as an employee ( see

Section 440. 05). This exemption is effective, however, only for

the corporation listed in the eligible officer ' s Notice of

Election to be Exempt and which is paying that officer's salary

or wages.

17 . Three new corporatio ns were formed whereby the

previous employees of Krashco, Inc., d/b/a J. Krash's Sports Bar

became officers of Krashco, Inc., and those three new

corporations. This is because Krashco, Inc., needed people to

operate the bar on its behalf to buy goods and services to sell

and dispense at its business , J. Krash's Sports Bar. Krashco,

Inc.'s former employees became officers of these three newly

created corporations and two of the former employees became

officers of the Respondent Krashco, Inc.

18 . Krashco, Inc. , d/b/a J. Krash's Sports Bar verbally

contracted with these new officers of the new corporation s to

perform the same services for its business , J. Krash's Sports

Bar, that those same individuals had been performing before

becoming officers of these co rporations, performing security,

catering, and bartending services. Krashco, Inc. 's , principals

were of the belief that it was necessary to secure the services

in this manner in order to continue the operation of its

business, without employees , so that i t would no longer be

required to have workers' compensation coverage for them .

19 . After August 11, 2005, and through most of the

remainder of 2005, Ms. Janis Krasno, the President of Krashco,

Inc. , continued to pay these new officers, the former employee s,

directly with checks d rawn on Krashco Inc.'s account and made

payable to the individual officers as payees (not to their

corporation) for the same services they had performed for the

benefit of J. Krash's Sports Bar. 4/

20 . Keith Larson, an employee of Krashco, Inc., became an

officer of the original Krashco, Inc. , as well as Crashco, Inc. ,

one of the three newly created corporations. Keith Larson

elected an exemption from Chapter 440 as an officer of Krashco,

Inc. Larson's election of exemption with K rashco, Inc.,

however, did no t become effective until November 2, 2005.

Consequently, Keith Larson continued to be paid by Krashco,

Inc. , as an employee through at least November 1, 2005.

21 . Six other Krashco, Inc., employees were granted

exemptions (as officers of the other corporations) by the

Petitioner from the requirement of workers' compensation

coverage, which were all effective on August 22, 2005. This

reduced the number of employees of record to less than the

compliment of four (or more) for wh ich coverage is required.

This would seem, under only these circumstances, to represent

the expiration of liability by the Respondent for failure to

secure payment of workers' compensation and to also be the date

the Stop Work Order should be rescinded an d further penalties

to l led.

22. The fact is, however, that Ms. Krasno and the

Respondent, Krashco, Inc., as found below , continued to pay

these "former employees" with Krashco, Inc., checks made to them

individually (not to their corporations), for the sa me job

duties, until December 15, 2005. Thus they continued to

function as employees of the Respondent, Krashco, Inc., until

that date. After that date they were paid by a new corporation,

Crashco, Inc.

2 3 . Ms. Janis Krasno, President of Krashco, Inc.,

continued to operate and run J. Krash's Sports Bar as an officer

of and on behalf of Krashco, Inc., through April 28, 2006. This

included payment of Krashco's expenses occasioned in the

operation of the business.

2 4 . Ms. Krasno, President of Krashco, I nc. , wrote checks

through December 15, 2005, drawn on Krashco, Inc. 's bank account

to pay for Krashco, Inc.'s business operation expenses , all of

which were for the benefit of operating J. Krash's Sports Bar.

2 5 . Ms. Krasno as President of Krashco, Inc. , issued

checks through December 15, 2005, drawn on that corporation's

account to pay the individual officers of the three new

corporations which had been formed, and of Krashco , Inc., for

those officers ' bartending, security, and catering services, all

of w hich were performed to continue and perpetuate the operation

of J. Krash's Sports Bar.

2 6 . Ms. Krasno issued checks through December 15, 2005, on

Krashco, Inc.'s account, to promote sales , by the promotion of

upcoming activities to be held at the bar , or to purchase goods

for sale at J. Krash's Sports Bar , from various vendors , for

non - alcoholic drinks, restaurant supplies, food and other goods

for parties . Such payments were also used to pay vendors such

as Goldring Gulf Distributing Company and other di stributors for

alcoholic beverages to be sold in the operation of J. Krash's

Sports Bar , and for incidental expenses.

27 . From August 12, 2005 through December 15, 2005 , and

through April 28, 2006, J. Krash's Sports Bar was generally open

for business s even days a week from 2:00 p.m. to 4:00 a.m.

28 . Since September 19, 2005 through April 28, 2006,

Ms. Krasno still controlled the management and operations of

Krashco, Inc., d/b/a J. Krash's Sports Bar. On December 21,

2005, however, Krashco, Inc.'s, p resident, Ms. Krasno , who also

became president of Crashco, Inc., beg a n issuing checks drawn on

the bank account of Crashco, Inc., to pay for expenses

occasioned in the operation of the Respondent's business J.

Krash's Sports Bar. These were payments to t he same officers

she had been paying since September 19, 2005, for their

bartending, security, and catering services , as well as to

essentially the same vendors for purchases of alcoholic

beverages , etc. for sale at J. Krash's Sports Bar. Through the

dat e of the final hearing Ms. Krasno, with checks drawn on the

account of Crashco, Inc., purchased alcoholic beverages on

behalf of Krashco, Inc., the holder of liquor license

BEV1301819 , in order to continue the business operations of

Krashco, Inc., d/b/a J. Krash's Sports Bar.

29 . After December 21, 2005 and through April 28, 2006,

income of sales at J. Krash's Sports Bar was deposited in

Crashco, Inc. 's account .

30. After entry of the Amended Order on September 26,

2005, the Respondent timely filed its re quest for a formal

proceeding on October 14, 2005. This rendered the initial

agency action to be non - final , to await the outcome of this de

novo , proceeding.

CONCLUSIONS OF LAW

30 . The Division of Administrative Hearings has

jurisdiction of the sub ject matter of and the parties to this

proceeding. § § 120.569 and 120.57(1), Fla. Stat. (2006).

31 . The Department has the burden of proof in this case.

It must demonstrate by clear and convincing evidence that the

Respondent violated the workers' compensation law during the

relevant periods of time and that the penalty assessments are

correctly calculated and imposed. Department of Banking and

Finance Division of Secur i ties and Investor Pro tection v.

Osborne Stern and Co. , 670 So. 2d 932 (Fla. 199 6).

32 . Every employer is required to secure workers'

compensation insurance for its employees.

§§ 440.10(1)(a) and 440.38(1), Fl a. Stat. (2005).

33 . Employers are subject to the requirement of providing

workers' compensation coverage a s set forth in Section

440.02(16), Florida Statutes (2005), which states in pertinent

part:

(a) "Employer" means the state and all

political subdivision s thereof, all public

and quasi - public corporations therein, every

person carrying on any employment, and the

legal r epresentative of a deceased person or

the receiver or trustees of any person.

"Employer" also includes employment

agencies, employee leasing companies, and

similar agents who provide employees to

other persons. If the employer is a

corporation, parties i n actual control of

the corporation, including, but not limited

to, the president, officers who exercise

broad corporate powers, directors, and all

shareholders who directly or indirectly own

a controlling interest in the corporation,

are considered the em ployer for the purposes

of §§ 440.105, 440.106, and 440.107

34 . The nature of employment that is being considered here

is defined at Sections 440.02(17)(a) and (b) (2005) , where it

states:

(a) 'Employment,' subject to the other

provisions of this chapt er, 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 employees are employed by the same

employer or, with respect to the

construction indu stry, all private

employment in which one or more employees

are employed by the same employer.

(Emphasis supplied).

35 . Certain categories of employees are subject to the

protection of the workers' compensation law. Relevant to this

case, "Employee" is defined at Section 440.02(15) , as:

(a) 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

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.

(b) "Employee" includes any person who is

an officer of a corporation and who performs

services for remuneration for such

corporation within this state, whether or

not such services are continuous.

* * *

36 . The liability for employers to provide workers'

compensation is set forth in Section 440.10(1)(a), which states:

440.10 Liability for compensation. --

(1)(a) Every employer coming within th e

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 s.

440.13, of the compensation payable under

ss. 440.13, 440.15, and 440.16. Any

con tractor or subcontractor who engages in

any public or private construction in the

state shall secure and maintain compensation

for his or her employees under this chapter

as provided in s. 440.38.

37 . Respondent Krashco, Inc., d/b/a J. Krash's Sports Bar

was engaged in "employment" as defined in Sections 440.02(17)(a)

and (b)2 , Florida Statutes (2005) .

38 . Respondent Krashco, Inc., d/b/a J. Krash's Sports Bar

was obligated to secure the payment of workers' compensation for

its "employees," as that term i s defined in Sections

440.02(15)(a) and (b), Florida Statutes (2005) . See §§

440.10(1)(a), Fla. Stat. (2005).

39 . Respondent Krashco, Inc., was obligated to secure the

payment of compensation in the manner described in Section

440.38, Florida Statutes (2 005). The Respondent, Krashco, Inc.,

failed to do so.

40 . Section 440.107(3) explains the Department's authority

to enforce workers' compensation coverage requirements where it

states:

The department shall enforce workers'

compensation coverage requirem ents,

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 determine payroll and correctly

assign classification codes. In additio n 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

as sessment orders, and any other orders

necessary for the administration of this

section.

41 . On August 11, 2005, Investigator Krossman properly

conducted an investigation of Respondent pursuant to Section

440.107(7)(3), Florida Statutes (2005) .

42 . Recor ds requested by Investigator Krossman from

Respondent were in keeping with Sections 440.107(3)(c) and

440.107(5) , Florida Statutes (2005) , and Florida Administrative

Code Rule 69L - 6.015.

43 . Section 440.107(5), Florida Statutes (2005) , provides

that every employer is required to maintain and produce business

records to comply with Section 440.107. Florida Administrative

Code Rule 69L - 6.015, promulgated pursuant to the authority of

Section 440.107(5), Florida Statutes, identifies records that

are included in such business records.

44 . In relation to the Stop Work Order and the Amended

Order, Section 440.107(7)(a) and (d) , Florida Statutes (2005),

state s in pertinent part:

(a) Whenever the department determines that

an employer who is required to secure th e

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 af ter

receipt of the written request of the

department, such failure shall be deemed an

immediate serious danger to the public

health, safety, or welfare sufficient to

justify service by the department of a stop -

work order on the employer, requiring the

cess ation 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 at that worksite. In

addition to serving a stop - work order at a

particu lar 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 an order

releasing the stop - work order upon a finding

that th e employer has come into compliance

with the coverage requirement of this

chapter and has paid any penalty assessed

under this section. . . .

* * *

(d)1. 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 rates to the employer's payroll

during periods for whic h 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.

45 . Investigator Krossman was authorized to seek the

production of the Respondent's business records. The Respondent

had four or more employees who were entitled to payment of

workers' compensation and that payment was not secured by the

Respondent.

46 . Investigator Krossman and the Department were

justified in issuing the Stop Work Order on August 11, 2 005, in

accordance with Section 440.107(7)(a), Florida Statutes (2005).

Under that statutory authority the Stop Work Order remain ed in

effect until the Respondent, Krashco, Inc., might demonstrate

compliance with the coverage requirement for workers'

comp ensation.

47 . The penalty assessment proposed for Respondent

Krashco, Inc.'s failure to comply with the coverage requirements

f or workers' compensation properly covers the period of

September 1, 2002 through September 19 , 2005 , as to the Amended

Order . This is in recognition that the Respondent had not

provided workers' compensation coverage at anytime during that

period for its business known as J. Krash's Sports Bar. Thus

the Respondent is subject to the penalty assessment calculations

under the form ula contemplated in Section 440.107(7)(d)1 .,

Florida Statutes (2005).

48 . The Department appropriately issued the Amended Order

of Penalty Assessment on September 26, 2005, and appropriately

used the payroll figures provided by the Respondent for

calculat ion of the penalty assessment.

49 . The Department satisfied its burden of proving by

clear and convincing evidence that Respondent failed to secure

the payment of workers' compensation as defined in Section

440.107(2), Florida Statutes (2005), and that it correctly

assessed the penalty described in Section 440.107(7)(d)1 . ,

Florida Statutes (2005), as to the Amended Order, for that

failure. Additionally, the Respondent stipulated that it did

not dispute the charge and penalty assessed in the original

Amend ed Order issued September 26, 2005.

50 . The Department also proved that the Respondent

continued its business operations after the Stop Work Order was

issued on August 11, 2005, and did so continuously through

September 19, 2005, and beyond.

51 . The pr eponderant evidence shows that the exemptions

accorded the six employees, effective August 22, 2005, reduced

the compliment of employees for the Respondent corporation below

the threshold, above which workers' compensation coverage is

required, by the abov e - referenced statute.

52 . The Respondent corporation, however, with check s drawn

on its account by its president, continued to pay these people

individually for the same duties, in the same manner, as before

August 22, 2005, the date of these exemptions. Thus for factual

and legal purposes, in light of the above authority, they still

functioned, and were paid as employees of the Respondent,

Krashco, Inc . This means that the Respondent was still liable

under the above - referenced authority, for securing wo rkers'

compensation coverage through December 15, 2005. After that

date the personnel were paid by the separate corporation,

Crashco, Inc., so that the Respondent corporation no longer had

an employment relationship with sufficient employees so that

worke rs' compensation coverage would be required.

53 . Section 440.107(7)(a), Florida Statutes (2005), quoted

above, provides that a Stop Work Order will remain in effect

until the employer is in compliance with coverage requirements

" . . . and has paid any p enalty assessed under this section. .

. ." The Respondent filed its request for formal proceeding and

hearing on October 14, 2005. When that was done the coverage

issue, the Stop Work Order and the question of penalty became

non - final agency action until this de novo proceeding could be

con ducted , evidence taken and legal authority considered in

arriving at a determination of the coverage question, the

validity of the Stop Work Order and whether any penalty is

warranted, its manner of assessment, and its scope and amount.

54 . That determination can now be made. The preponderant,

persuasive evidence supporting the above findings of fact

establishes that the Respondent, Krashco, Inc., was in violation

of the above - referenced workers' compensation coverage

requirements, the Stop Work Order and is liable for the related

penalty assessment for the period charged to, and including,

December 15, 2005.

55 . The preponderant evidence shows that after that date,

during the pendency of this de novo proceeding, that the

Respondent sufficiently altered its operation and its manner of

securing and paying for services and goods necessary to

operation of the business so as to comply with the referenced

legal authority.

56 . It has therefore been established that, as to th e

Amended Order, the proposed aggregate penalty of $49,979.79 is

appropriate. In addition to this, a portion of the penalty for

violation of the Stop Work Order, represented by the Second

Amended Order, for the period from September 19, 2005 through

Decem ber 15, 2005, should be imposed for an additional amount of

$87,000.00 in penalty , a total of $136,979.80. Additionally, an

assessment for the lack of coverage for the period of

September 19, 2005 through December 15, 2005, at 1.5 times the

amount the Res pondent would have paid in premium , based on the

formula depicted in Subsection 440.107(7)(d)1 , Florida Statutes

(2005), should be imposed.

RECOMMENDATION

Having considered the foregoing findings of fact , the

conclusions of law, the evidence of record , the candor and

demeanor of the witnesses, and the pleadings and arguments of

the part ies , it is, therefore ,

RECOMMENDED that a final ord er be entered by the Department

of Financial Services, Division of Workers' Compensation

assessing , under the Amended Order of Penalty Assessment, the

Second Amended Order of Penalty Assessment and the Stop - Work

Order , a penalty in the total amount of $ 136,979.80, together

with an additional assessment for failure to secure coverage for

the period of September 19, 2005 th rough December 15, 2005, in

the manner provided in Subsection 440.107(7)(d)1 . , Florida

Statutes (2005).

DONE AND ENTERED this 8th day of January , 200 7 , in

Tallahassee, Leon County, Florida.

S

P. MICHAEL RUFF

Admini strative 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 Admi nistrative Hearings

this 8th day of January , 200 7 .

ENDNOTE S

1/ See , e.g. , Department of Labor and Employment Security,

Division of Workers' Compensation v. Bobby Cox, Sr., d/b/a C.H.

Well Drilling , DOAH Case No. 99 - 3854 (Recommended Order

March 20, 200 0 ) , Final Order June 8, 2000, adopting in part:

Department of Labor and Employment Security, Division of

Workers' Compensation v. Eastern Personnel Services, Inc. , DOAH

Case No. 99 - 2048 (Final Order entered November 30, 1999).

2/ See also Order entered May 15 , 2006, deeming these matters

admitted as to the charge and the accuracy of the penalty

calculation concerning the amended order.

3/ See § 440.107(7)(a), Fla . Stat . (2005).

4/ See § 440.107(02)(15)(a), Fla . Stat . (2005).

COPIES FURNISHED :

H.F. Rick Mann, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Honorable Alex Sink

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Carlos G. Mu ñ iz, General C ounsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Janis K. Porter - Krash c o, President

Krashco, Inc., d/b/a

J. Krash's Sports Bar

521 East 4th Street

Panama City, Florida 32401

NOTICE OF RIGHT TO SU BMIT 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.