06-002785 Kenny Nolan, D/B/A Great Southern Tree Service vs. Department Of Financial Services, Division Of Workers' Compensation
 Status: Closed
Recommended Order on Tuesday, November 28, 2006.


View Dockets  
Summary: Respondent was not an employer as defined by Section 440.02(17), Florida Statutes. Recommend that the Amended Order of Penalty Assessment be rescinded.

1STATE OF FLORIDA

4DIVISION OF ADMINISTRATIVE HEARINGS

8KENNY NOLAN, d/b/a GREAT )

13SOUTHERN TREE SERVICE, )

17)

18Petitioner, )

20)

21vs. )

23) Case No. 06 - 2785

29DEPARTMENT OF FINANCIAL )

33SERVICES, DIVISION OF )

37WORKERS' COMPENSATION, )

40)

41Respondent. )

43)

44RECOMMENDED ORDER

46A hearing was held pursuant to notice, before Barbara J.

56Staros, Administrative Law Judge with the Division of

64Administrative Hearings, on October 5, 2006, via video -

73teleconference in Jacksonville and Tallahassee, Florida.

79APPEARANCES

80For Petitioner: David C. Hawkins, Esquire

86Department of Financial Services

90200 East Gaines Street

94Tallahassee, Florida 32399

97For Respondent: Kenneth B. Wright, Esquire

103Bledsoe, Jacobsen, Schmidt, Wright,

107Wilkinson, & Lang

1101301 Riverplace Boulevard, Suite 1818

115Jacksonville, Florida 32207

118STATEMENT OF THE ISSUE

122The issue is whether The Department of Financial Services

131properly imposed a Stop W ork Order and Amended Order of Penalty

143Assessment pursuant to the requirements of Chapter 440, Florida

152Statutes.

153PRELIMINARY STATEMENT

155On June 6, 2006, the Department of Financial Services,

164Division of Workers' Compen sation (Division) issued a Stop Work

174Order and Order of Penalty Assessment to Petitioner, Kenny Nolan

184d/b/a Great Southern Tree Service. On June 27, 2006, the

194Division issued an Amended Order of Penalty Assessment in the

204amount of $272,948.96. Respondent contested the Stop Work Order

214and Amended Penalty Assessment, and requested an administrative

222hearing. The matter was forwarded to the Division of

231Administrative Hearings on or about August 3, 2006.

239A Notice of Hearing was issued scheduling the hearing for

249October 5, 2006. On September 29, 2006, the Division filed a

260Motion to Amend Administrative Charges, seeking to further amend

269the Order of Penalty Assessment by increasing the amount by

279$47,000. Petitioner opposed the motion. Argument was heard on

289the motion at the commencement of the hearing. Upon

298consideration of the m otion, the r esponse, and arguments of

309counsel, the m otion was denied.

315At hearing, Petitioner presented the testimony of Kenny

323Nolan, David Soloman, and Eric Kane. Petitioner offer ed

332Exhibits numbered 1 and 2, which were admitted into evidence.

342Respondent presented the testimony of Michael Robinson and

350Andrew Sabolic. Respondent offered Exhibits numbered 1 through

3585 and 8 through 13, which were admitted into evidence.

368A one - vol ume Transcript was filed on October 23 2006. The

381parties timely filed Proposed Recommended Orders which have been

390considered in the preparation of this Recommended Order.

398References to statutes are to Florida Statutes (2006)

406unless otherwise noted.

409FI NDINGS OF FACT

4131. The Division is charged with the regulation of workers'

423compensation insurance in the State of Florida.

4302. Petitioner Kenny Nolan, d/b/a/ Great Southern Tree

438Service, is a sole proprietor located in Jacksonville, Florida,

447and is engage d in the business of cutting trees, which is not a

461construction activity.

4633. Michael Robinson is an investigator employed by the

472Division. His duties include making site visits at locations

481where work is being conducted and determining whether the

490emp loyers in the state are in compliance with the requirements

501of the workers' compensation law and related rules.

5094. On June 6, 2006, Mr. Robinson visited a job site in a

522subdivision in Jacksonville, Florida, and observed five

529individuals at the resident ial work site.

5365. Mr. Robinson interviewed the individuals and, based

544upon these interviews, determined that four of the individuals

553worked for Mr. Nolan: Chad Pasanen, David Soloman, Michael

562Walton, and Eric Kane. None of these workers had a worker s'

574compensation exemption.

5766. Mr. Robinson also completed a Field Interview

584Worksheet on June 6, 2006, when interviewing the four workers.

594Mr. Robinson wrote on the interview worksheet that Mr. Pasanen

604worked for Mr. Nolan for three weeks with a daily b asis of pay

618and that Mr. Walton worked for Mr. Nolan for two weeks with a

631daily basis of pay. The interview worksheet has no entry for

642the length of time Mr. Solomon worked for Mr. Nolan but does

654indicate he was paid by the job. The portion of the interv iew

667worksheet regarding Mr. Kane is not in evidence.

6757. Mr. Robinson checked the database in the Coverage and

685Compliance Automated System and found no proof of coverage nor

695an exemption for Mr. Nolan.

7008. After conferring with his supervisor, Mr. Robin son

709issued a Stop - Work Order and Order of Penalty Assessment to

721Petitioner on June 6, 2006, along with a request for business

732records for the purpose of calculating a penalty for lack of

743coverage for the period June 6, 2003 through June 6, 2006. The

755reque st for business records instructed Mr. Nolan to produce

765business records within five days.

7709. Mr. Nolan did not produce business records as

779requested.

78010. On June 27, 2006, Mr. Robinson issued an Amended Order

791of Penalty Assessment to Petitioner for $ 272,948.96. Attached

801to the Amended Order of Penalty Assessment is a penalty

811worksheet with a list of names under the heading, "Employee

821Name," listing the names of Chad Pasanen, David Solomon , Michael

831Walton and Eric Kane.

83511. The amount of the penalt y was imputed using the

846statewide weekly average wage that was in effect at the time of

858the issuance of the stop - work order. Through imputation of

869payroll for the four employees, the Department calculated a

878penalty for the time period of October 1, 2003 t hrough June 6,

8912006. Using rates from an approved manual, Mr. Robinson

900assigned a class code to the type of work performed by

911Petitioner and multiplied the approved manual rate with the

920imputed payroll per one hundred dollars, then multiplied all by

9301.5. Penalties are calculated by determining the premium amount

939the employer would have paid based on his or her Florida payroll

951and multiplying by a factor of 1.5. The payroll was imputed

962back to October 1, 2003. For the period prior to October 1,

9742003, Mr. Robinson assessed a penalty of $100 per day for each

986calendar day of noncompliance. The portion of the penalty

995attributable to the period June 6, 2003 through September 30,

10052003, is $11,600.00 .

1010Respondent's Business

101212. Mr. Nolan started the busines s, Great Southern Tree

1022Service, in February or March 2005, as a sole proprietor.

1032Mr. Nolan was not in business prior to early 2005 and did not

1045employ anyone in 2003 or 2004.

105113. At the inception of his tree trimming business,

1060Mr. Nolan's brother worked f or Mr. Nolan for two to three months

1073until his brother's health rendered him unable to continue

1082working for Mr. Nolan.

108614. Mr. Nolan subsequently worked with Christopher Wilcox

1094until December 2005, when Mr. Wilcox was in an automobile

1104accident and becam e unable to work.

111115. After Wilcox was injured in December 2005, Mr. Nolan

1121did not have any employees for the remainder of the winter.

1132Only Mr. Nolan's brother and Christopher Wilcox worked with

1141Mr. Nolan in 2005.

114516. The nature of the tree trimming bus iness is seasonal.

1156Mr. Nolan obtained work sporadically. Typically, he had jobs

1165two or three times a week. It is busiest in the spring and

1178summer and slowest during the fall and winter months.

118717. In March 2006, Mr. Nolan was approached by David

1197S olomon who was looking for work. Mr. Solomon worked for

1208Mr. Nolan "maybe twice a week" and possibly three times a week

1220when he was "lucky."

122418. Mr. Nolan worked exclusively for residential

1231customers. He obtained business by knocking on doors and

1240handing out business cards. When he was paid by his customers,

1251he immediately paid the men who were helping him. He was

1262usually paid in cash. In the instances when he was paid by a

1275check, he would take his employees to the bank, where he would

1287cash the check a nd pay off his workers.

129619. Eric Kane also began working for Nolan in March 2006.

1307Like Mr. Soloman, he also worked two to three days a week for

1320Mr. Nolan.

132220. Kane was at the jobsite on the day Mr. Robinson made

1334the site visit, but was not working that day. He was sitting

1346off to the side and was "just hanging out" with the other men.

1359According to Mr. Kane, Mr. Robinson did not ask him any

1370questions.

137121. In May 2006, a storm or small tornado hit an area of

1384Jacksonville called Ortega. The resulting tre e damage

1392temporarily enabled Mr. Nolan to get more work.

140022. At that point, Mr. Nolan hired Chad Pasanen.

1409Mr. Nolan estimates that Mr. Pasanen worked for him for about

1420three weeks before the site visit by Mr. Robinson.

142923. Mr. Pasanen previously worke d for Asplundh Tree Expert

1439Company. One of his paycheck stubs establishes that he worked

1449for Asplundh as late as April 8, 2006.

145724. Mr. Nolan also hired Michael Walton in May 2006.

1467Mr. Walton previously worked for Seaborn Construction Company.

1475A payche ck stub establishes that he worked for Seaborn as late

1487as April 26, 2006. Mr. Walton sporadically worked for Mr. Nolan

1498for about two weeks prior to the site visit.

150725. The Division did not count Mr. Nolan as an employee

1518for purposes of calculating the penalty assessment.

1525CONCLUSIONS OF LAW

152826. The Division of Administrative Hearings has

1535jurisdiction over the parties and subject matter of this

1544proceeding pursuant to Sections 120.569 and 120.57(1), Florida

1552Statutes (2006).

155427. Administrative fines are penal in nature. Department

1562of Banking and Finance, Division of Securities and Investor

1571Protection v. Osborne Stern, Inc. , 670 So. 2d 932 (Fla. 1996).

1582Therefore, the Division bears the burden of proof herein by

1592clear and convincing evidence.

159628. S ection 440.10(1), Florida Statutes, requires every

1604employer coming within the provisions of Chapter 440 to secure

1614coverage under that chapter.

161829. Subsection 440.02(17), Florida Statutes, reads in

1625pertinent part as follows:

1629440.02. Definitions. --

1632(17) (a) "Employment," subject to the other

1639provisions of this chapter, means any

1645service performed by an employee for the

1652person employing him or her.

1657(b) "Employment" includes:

1660* * *

16632. All private employments in which four or

1671mor e employees are employed by the same

1679employer or, with respect to the

1685construction industry, all private

1689employment in which one or more employees

1696are employed by the same employer.

1702(emphasis supplied)

170430. Section 440.107, Florida Statutes, authorizes th e

1712Division to issue stop - work orders and penalty assessment orders

1723in its enforcement of workers' compensation coverage

1730requirements, and reads in pertinent part:

1736(7 )(d)1 . In addition to any penalty, stop -

1746work order, or injunction, the department

1752shall as sess against any employer who has

1760failed to secure the payment of compensation

1767as required by this chapter a penalty equal

1775to 1.5 times the amount the employer would

1783have paid in premium when applying approved

1790manual rates to the employer's payroll

1796during periods for which it failed to secure

1804the payment of workers' compensation

1809required by this chapter within the

1815preceding 3 - year period or $1,000, whichever

1824is greater.

1826* * *

1829(e) When an employer fails to provide

1836business recor ds sufficient to enable the

1843department to determine the employer's

1848payroll for the period requested for the

1855calculation of the penalty provided in

1861paragraph (d), for penalty calculation

1866purposes, the imputed weekly payroll for

1872each employee, corporate offi cer, sole

1878proprietor, or partner shall be the

1884statewide average weekly wage as defined in

1891s. 440.12(2) multiplied by 1.5.

189631. Florida Administrative Code Rule 69L - 6.028 reads in

1906pertinent part:

1908(1) In the event an employer fails to

1916provide business reco rds sufficient for the

1923department to determine the employer's

1928payroll for the period requested for the

1935calculation of the penalty pursuant to

1941Section 440.107(7)(e), F.S., the department

1946shall impute payroll at any time after the

1954expiration of fifteen busin ess days after

1961receipt by the employer of a written request

1969to produce such business records.

1974(2) When an employer fails to provide

1981business records sufficient to enable the

1987department to determine the employer's

1992payroll for the period requested for th e

2000calculation of the penalty pursuant to

2006Section 440.107(7)(d), F.S., the imputed

2011weekly payroll for each employee, corporate

2017officer, sole proprietor or partner for the

2024portion of the period of the employer's non -

2033compliance occurring on or after October 1 ,

20402003, shall be calculated as follows:

2046(a) . . . [ F ] or . . . each employee

2059identified by the department as an employee

2066of such employer at any time during the

2074period of the employer's non - compliance , the

2082imputed weekly payroll for each week of the

2090empl oyer's non - compliance for each such

2098employee shall be the statewide average

2104weekly wage . . . that is in effect at the

2115time the stop work order was issued to the

2124employer, multiplied by 1.5. Employees

2129include sole proprietors and partners in a

2136partnership .

2138* * *

2141(c) If a portion of the period of non -

2151compliance includes a partial week of non -

2159compliance, the imputed weekly payroll for

2165such partial week of non - compliance shall be

2174prorated from the imputed weekly payroll for

2181a full we ek.

2185* * *

2188(4) Where periods of the employer's non -

2196compliance occurred prior to October 1,

22022003, and the employer fails to provide

2209business records sufficient to enable the

2215department to determine the employer's

2220payroll for periods of non - compliance prior

2228to October 1, 2003, for purposes of

2235calculating the penalty to be assessed

2241against the employer for periods of non -

2249compliance prior to October 1, 2003, the

2256department shall assess against the employer

2262a penalty of $100 per day for each and every

2272calendar day in the period of non - compliance

2281occurring prior to October 1, 2003, the

2288employer was not in compliance, pursuant to

2295Section 440.107(5), F.S. (2002).

2299(emphasis supplied)

230132. In Meyer v. Kimberly , 765 So. 2d 951 (Fla. 1st DCA

231320 00), the Court addresses the definition of "employer" as it

2324relates to persons not in the construction industry:

2332By its terms, the statute imposes no

2339obligation upon one who is not an

"2346employer," and a private employer with less

2353than four employees, who engages in business

2360outside the construction industry is, by

2366legislative definition, not an "employer"

2371for purposes of chapter 440. . . . Chapter

2380440 automatically relieves such employers of

2386any obligation to secure compensation, and

2392no separate election i s required.

2398765 So. 2d 951 at 952 and 953 .

240733. To be subject to the workers' compensation

2415requirements of Chapter 440, including the requirement to

2423maintain records sufficient for the Division to determine an

2432employer's payroll for periods of non - compli ance, an individual

2443who is not in the construction business must employ four

2453persons. Meyer v. Kimberly, supra ; § 440.02(17)(b)2., Fla.

2461Stat.

246234. Clearly, Mr. Nolan was not an employer before he

2472started his business in early 2005. Thus, all of the pro posed

2484penalty attributed to the time period June 6, 2003 until when he

2496started his business in February or March 2005, has no basis in

2508law or fact.

251135. During 2005, Mr. Nolan worked only with his brother

2521and Christopher Wilcox. Therefore, he was not an employer for

2531purposes of Chapter 440 in 2005, as he had fewer than four

2543employees during that year. Consequently, the proposed penalty

2551attributed to all of 2005 is not supported by the evidence.

256236. In March 2006, both Mr. Soloman and Mr. Kane began

2573work ing for Mr. Nolan two to three days a week. He only had two

2588employees during January and February 2006, and, therefore, was

2597not an employer during that time for purposes of Chapter 440.

2608Thus, the proposed penalty for January and February, 2006, is

2618not su pported by the evidence.

262437. From March until May 2006, when Mr. Pasanen and

2634Mr. Walton began working for Mr. Nolan on a part - time basis,

2647Mr. Nolan only had two employees, Mr. Soloman and Mr. Kane.

2658Therefore, Mr. Nolan was not an employer from March unti l May,

26702006, for purposes of Chapter 440. Thus, the amount of the

2681proposed assessment for March and April 2006 is not supported by

2692the evidence.

269438. The only remaining question is whether or not Mr.

2704Nolan was an employer for purposes of Chapter 440 from May 2006

2716until June 6, 2006, the day of Mr. Robinson's site visit.

272739. Both Mr. Soloman and Mr. Kane worked occasionally for

2737Mr. Nolan. All of the employees interviewed were paid on a

2748daily or job basis, which is consistent with occasional or

2758sporadic employment. At the time of the site visit, Mr. Pasanen

2769had worked for Mr. Nolan for three weeks and Mr. Walton had

2781worked for Mr. Nolan for two weeks. Both Pasanen and Walton

2792worked two or three days a week. Both Pasanen and Walton began

2804working for Mr. Nolan as a result of an event, i.e. a storm that

2818caused tree damage.

282140. Courts have interpreted "employment" as used in

2829Section 440.02(17)(b)2., Florida Statutes, as follows:

2835. . . an occasional increase in the number

2844of workmen for some unusual oc casion does

2852not automatically res ult in application of

2859the Act. [citations omitted] The prevailing

2865theory is that liability of an employer

2872should not vary from day to day according to

2881the number of persons in his employ each

2889day, but should be governed by the

2896established mode or plan of his business or

2904operation, and from that determine if he

2911regularly and customarily employs the

2916requisite number. . . . In order,

2923therefore, to bring employment within the

2929purview of our Act, it was necessary to show

2938the ex istence of an established more or plan

2947of hiring [four] [1 / ] or more persons pursuant

2957to some constant or periodic custom

2963resulting in a numerical pattern of

2969employment that becomes the rule and not the

2977exception.

2978Mathers v. Sellers , 113 So. 2d 443, 44 4 - 445 (Fla. 1st DCA 1959) ;

2993Accord Subterranean Circus v. Lewis , 319 S o . 2d 600 (Fla. 1st

3006DCA 1975).

300841. Applying the reasoning of the Mathers and Subterranean

3017Circus opinions, to the facts in evidence, the undersigned is

3027not persuaded that Mr. Nolan w as an employer for pur poses of

3040Chapter 440 from May until June 6, 2006. Thus, under the

3051rationale of this case law, the proposed penalty for that period

3062of time is not supported by the evidence.

3070RECOMMENDATION

3071Based upon the Findings of Fact and Conclusi ons of Law, it

3083is,

3084RECOMMENDED:

3085That the Division of Workers' Compensation enter a Final

3094Order rescinding the Amended Order of Penalty Assessment issued

3103June 27, 2006, and the Stop Work Order issued to Petitioner on

3115June 6, 2006.

3118DONE AND ENTERED this 2 8 th day of November, 2006, in

3130Tallahassee, Leon County, Florida.

3134S

3135BARBARA J. STAROS

3138Administrative Law Judge

3141Division of Administrative Hearings

3145The DeSoto Building

31481230 Apalachee Parkway

3151Tallahassee, Florida 32399 - 3060

3156(850) 488 - 9675 SUNCOM 278 - 9675

3164Fax Filing (850) 921 - 6847

3170www.doah.state.fl.us

3171Filed with the Clerk of the

3177Division of Administrative Hearings

3181this 2 8 th day of November, 2006.

3189ENDNOTE

31901/ Section 4 40. 02 , Florida Statutes, was amended in 1990,

3201increasing the number of employees from three to four in the

3212definition of "employment". At that time, the definition was

3222found in Section 440.02(15), Florida Statutes (1989). s. 9,

3231Ch. 90 - 201, Laws of Flori da.

3239COPIES FURNISHED :

3242David C. Hawkins, Esquire

3246Department of Financial Services

3250Division of Workers' Compensation

3254200 East Gaines Street

3258Tallahassee, Florida 32399

3261Kenneth B. Wright, Esquire

3265Bledsoe, Jacobson, Schmidt, Wright

3269Wilkinson & Lang

327213 01 Riverplace Boulevard, Suite 1818

3278Jacksonville, Florida 32207

3281Honorable Tom Gallagher

3284Chief Financial Officer

3287Department of Financial Services

3291The Capitol, Plaza Level 11

3296Tallahassee, Florida 32399 - 0300

3301Carlos G. Mu ? niz, General Counsel

3307Department of Financial Services

3311The Capitol, Plaza Level 11

3316Tallahassee, Florida 32399 - 0300

3321NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

3327All parties have the right to submit written exceptions within

333715 days from th e date of this Recommended Order. Any exceptions

3349to this Recommended Order should be filed with the agency that

3360will issue the Final Order in this case.

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PDF
Date
Proceedings
PDF:
Date: 03/30/2007
Proceedings: Petition and Application for Attorneys Fees Pursuant to the Florida Equal Access to Justice Act filed. (DOAH CASE NO. 07-1479F ESTABLISHED)
PDF:
Date: 02/27/2007
Proceedings: Final Order filed.
PDF:
Date: 02/23/2007
Proceedings: Agency Final Order
PDF:
Date: 11/28/2006
Proceedings: Recommended Order
PDF:
Date: 11/28/2006
Proceedings: Recommended Order (hearing held October 5, 2006). CASE CLOSED.
PDF:
Date: 11/28/2006
Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
PDF:
Date: 11/03/2006
Proceedings: Petitioner's Notice of Filing Proposed Recommended Order of Petitioner Kenneth Nolan d/b/a Great Southern Tree Service filed.
PDF:
Date: 11/02/2006
Proceedings: Respondent`s Proposed Recommended Order filed.
PDF:
Date: 11/02/2006
Proceedings: Proposed Recommended Order of Petitioner Kenneth Nolan d/b/a Great Southern Tree Service filed.
PDF:
Date: 10/24/2006
Proceedings: Notice of Filing Transcript.
Date: 10/23/2006
Proceedings: Transcript of Proceedings filed.
Date: 10/05/2006
Proceedings: CASE STATUS: Hearing Held.
PDF:
Date: 10/04/2006
Proceedings: Nolan`s Opposition to Division`s Motion to Amend Administrative Charges and for Expedited Ruling filed.
PDF:
Date: 10/03/2006
Proceedings: Division`s Notice of Filing Exhibit filed (Proposed Hearing Exhibits not available for viewing).
PDF:
Date: 10/02/2006
Proceedings: Prehearing Stipulation of Petitioner Kenny Nolan d/b/a Great Southern Tree Service filed.
PDF:
Date: 09/29/2006
Proceedings: Appendix to the Division`s Unilateral Pre-hearing Statement filed (Proposed hearing exhibits not available for viewing).
PDF:
Date: 09/29/2006
Proceedings: Division`s Motion to Amend Administrative Charges and for Expedited Ruling filed.
PDF:
Date: 09/29/2006
Proceedings: Division`s Unilateral Pre-hearing Statement filed.
PDF:
Date: 09/21/2006
Proceedings: Notice of Taking Deposition filed.
PDF:
Date: 09/12/2006
Proceedings: Amended Notice of Hearing by Video Teleconference (hearing set for October 5, 2006; 10:30 a.m.; Jacksonville and Tallahassee, FL; amended as to Starting time).
PDF:
Date: 08/15/2006
Proceedings: Order of Pre-hearing Instructions.
PDF:
Date: 08/15/2006
Proceedings: Notice of Hearing by Video Teleconference (hearing set for October 5, 2006; 9:30 a.m.; Jacksonville and Tallahassee, FL).
PDF:
Date: 08/11/2006
Proceedings: Joint Response to Initial Order filed.
PDF:
Date: 08/04/2006
Proceedings: Initial Order.
PDF:
Date: 08/03/2006
Proceedings: Notice and Certificate of Service of Division`s First Set of Interrogatories filed.
PDF:
Date: 08/03/2006
Proceedings: Stop Work Order filed.
PDF:
Date: 08/03/2006
Proceedings: Petition for Formal Administrative Hearing filed.
PDF:
Date: 08/03/2006
Proceedings: Notice of Referral filed.
PDF:
Date: 08/03/2006
Proceedings: Amended Order of Penalty Assessment filed.

Case Information

Judge:
BARBARA J. STAROS
Date Filed:
08/03/2006
Date Assignment:
08/04/2006
Last Docket Entry:
03/30/2007
Location:
Jacksonville, Florida
District:
Northern
Agency:
ADOPTED IN TOTO
 

Counsels

Related Florida Statute(s) (6):