06-005023 Olender Construction, Co., Inc. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Friday, March 14, 2008.

Summary: Petitioner failed to have workers` compensation insurance for employees. Recommend that the penalty against Petitioner be recalculated.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OLENDER CONSTRUCTION CO., INC., )

)

Petitioner, )

)

vs. ) Case No. 06-5023

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS’ )

COMPENSATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

before Diane Cleavinger, a duly-designated Administrative Law

Judge of the Division of Administrative Hearings, on August 23,

2007, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Jeremy T. Springhart, Esquire

Broad and Cassel

390 North Orange Avenue, Suite 1500

Orlando, Florida 32801

For Respondent: Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Workers’ Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

STATEMENT OF THE ISSUE

Whether Petitioner failed to obtain workers’ compensation

insurance meeting the requirements of Chapter 440, Florida

Statutes, and, if so, the penalty that should be imposed.

PRELIMINARY STATEMENT

On June 22, 2006, the Department of Financial Services,

Division of Workers' Compensation (Department) issued a Stop

Work Order directing Olender Construction Co., Inc. (Olender or

Petitioner) to immediately "stop work and cease all business

operations" in Florida because it had failed to obtain workers'

compensation insurance coverage meeting the requirements of

Chapter 440, Florida Statutes (2006), and the Florida Insurance

Code. On the same date, the Department issued an Order of

Penalty Assessment against Olender imposing a penalty pursuant

to Section 440.107(7)(d), Florida Statutes. On July 18, 2006,

the Department issued an Amended Order of Penalty Assessment in

which it assessed a penalty of $2,236,307.41 for Olender’s

failure to obtain workers' compensation insurance coverage as

required by statute. Petitioner timely requested an

administrative hearing on the Department’s order and penalty.

The Department forwarded the matter to the Division of

Administrative Hearings for assignment of an Administrative Law

Judge.

On June 26, 2007, the Department issued its Second Amended

Order of Penalty Assessment, lowering the penalty for failure to

secure workers' compensation insurance coverage to

$1,324,260.05. Finally, on July 3, 2007, the Department issued

its Third Amended Order of Penalty Assessment, again lowering

the penalty to $1,205,535.40.

At the hearing, the Department presented the testimony of

Margaret Cavazos, and offered Exhibits numbered 1 through 12,

14, 15, 17, 19, 20 and 24 into evidence. The Department also

offered the deposition testimony of Robert Belvieau, Elizabeth

Murray, Primitivo Torres and Daniel Campbell, numbered as

Exhibits 21, 22, 25 and 26, respectively. Olender offered the

testimony of Ruben Rojo, Jonathan Olender and Donna Knoblauch.

Olender also offered Exhibits numbered 6 and 9 into evidence.

After the hearing, Olender filed its Proposed Recommended

Order on September 28, 2007. The Department filed its Proposed

Recommended Order on October 5, 2007. The Department also filed

a Notice of Supplemental authority on December 21, 2007. The

parties’ submissions have been considered in the preparation of

this Recommended Order.

FINDINGS OF FACT

1. Olender is a Delaware corporation that is registered to

do business in Florida and engaged in the business of

construction. Primarily, Olender frames the walls of structures

and installs siding, windows and moisture barriers to such

structures. Such activities are construction activities under

the Florida’s workers’ compensation law. See Ch. 440, Fla.

Stat., and Fla. Admin. Code R. 69L-6.

2. On June 22, 2006, an investigator for the Department

visited the Alta Westgate Apartment complex construction

project, located at 6872 Alta Westgate Drive, Orlando, Florida.

The visit was prompted by a “confidential tip” received by the

Department from Tyler Balsinger, a former employee of

Petitioner. The Alta Westgate complex is owned by Alta

Westgate, LLC. The general contractor responsible for the

construction of the complex was W.P. South Builders. The

overall project manager for the general contractor was Robert

Beliveau. The on-site representative for the general contractor

was Danny Campbell.

3. Mr. Campbell provided the Department’s investigator

with a list of subcontractors on the project worksite. The list

reflected that the subcontractor for framing was Olender and

that John Olender was the person in charge of the company’s work

at the project site. Among other things, the contract also

included the installation of a moisture barrier, generally known

as Tyvek, on the framed structures. Because of the nature of

construction work, it is not unusual to have several

subcontractors on a construction worksite at the same time. It

is unlikely that Olender was the only subcontractor working on

the day the Department’s investigator visited the Alta Westgate

project.

4. The subcontract required that Olender secure the

payment of workers’ compensation on its employees. The evidence

was not clear regarding whether the general contractor, under

its subcontract with Olender, would provide workers’

compensation insurance on the employees of Olender’s

subcontractors. However, the evidence was clear that J.P.

Builders did not secure such workers’ compensation insurance on

the employees of Olender’s subcontractors.

5. Mr. Campbell also provided the certificate of insurance

for Petitioner. The certificate reflected that Modern Business

Associates, Inc. (MBA), an employee leasing company, provided

workers’ compensation for Olender’s leased employees. See

§ 468.520, Fla. Stat.

6. MBA entered into a client service agreement with

Olender. Under the agreement, Olender would lease employees

from MBA and MBA would provide payroll services and workers’

compensation coverage for the employees it leased to Petitioner.

The agreement terminated on August 30, 2006.

7. MBA’s Client Service Agreement with Petitioner states

on p. 3:

Insurance Coverage. MBA is responsible for

providing Workers’ Compensation coverage to

workers employed by MBA and assigned to

Client, in compliance with applicable law,

and as specified in the Proposal. Workers

performing services for Client not covered

by this Agreement and not on MBA’s payroll

shall not be covered by the workers’

compensation insurance. Client understands,

agrees, and acknowledges that MBA shall not

cover any workers with workers’ compensation

coverage who has not completed and submitted

to MBA an employment application and tri-

fold, and which applicant has not been

reviewed and approved for hire by MBA.

(emphasis supplied)

8. Other than information necessary to supply its

services, MBA was not aware of any specific project or projects

on which Olender was working when it leased employees from MBA.

9. John Olender and Ruben Rojo were two employees that

Olender leased from MBA and for whom MBA provided workers’

compensation insurance. The workers’ compensation policy

complied with Florida’s workers’ compensation requirements.

10. After speaking with Mr. Campbell, the Department’s

investigator, who is fluent in Spanish, walked around the

complex’s worksite. She did not have a hardhat on. She

eventually saw about 10 to 12 workers on the third floor of one

of the buildings under construction (Building 8 or 9). The

Department’s investigator could not say if they were framing.

At some point, John Olender, the company’s project

superintendent, saw the Department’s investigator, noticed she

did not have any safety equipment on, and went to meet her. The

investigator yelled to the workers on the third floor and showed

her Department badge or identification. She was speaking

Spanish to them. The workers ran in an effort to avoid the

Department’s investigator.

11. Mr. Olender, who does not speak or understand Spanish,

sent for Ruben Rojo. Mr. Rojo is the assistant superintendent

for Olender and works under John Olender. He is fluent in

Spanish. He does not hire employees for Olender, but oversees

the work being performed under Olender’s subcontracts.

12. The Department’s investigator continued to attempt to

explain to the workers that she was not interested in their

immigration status, but was there to make sure they were covered

by workers’ compensation insurance.

13. At least some of the workers came down to talk to her.

Mr. Rojo thought the investigator was asking about the workers’

immigration status and told them that they did not have to talk

to her. However, apparently some workers very reluctantly gave

her limited information. The workers who talked to her were

Pedro Antonio Mendez, Jaco Sarmentio, Juan Cardenas, Alvaro Don

Juan Diaz, Jose Varela Orellana, Nesto Suarez Ventura, Miguel

Martinez Diaz, Jose Perez Renaldo and Antonio Hernandez. She

did not obtain any addresses, phone numbers or other identifying

information from the employees. The evidence did not show

whether these individuals gave the Department’s investigator the

correct information. Importantly, they did not tell her who

their employer was or what duties they were performing. None of

these individuals testified at the hearing. John Olender did

not recognize these workers. Mr. Rojo told the investigator

that Olender subcontracted the framing portion of its contract

to “T-Bo”.

14. T-Bo was also known as Primitivo Torres. In his

deposition testimony, Mr. Torres did not recognize these

workers’ names. He also thought that most of the workers he

employed for his framing subcontract with Olender were illegal

immigrants. Mr. Torres was unclear in his testimony regarding

his status with Olender. He did indicate that he worked in both

Orlando and Tampa. Apparently, at times, he was an employee and

at other times he was a subcontractor. He was listed as a

leased employee under MBA’s contract with Olender. The evidence

suggests, but does not prove, that Mr. Torres was a person who

supplied immigrant workers to construction sites.

15. In Orlando, Mr. Torres lived in an apartment complex

in the Rosemond area with his employees. The rent was sometimes

paid by Olender and then deducted from the remuneration paid to

Mr. Torres. Mr. Torres paid his employees from the money he

received under his subcontract with Olender.

16. Mr. Torres also testified that when the Department’s

investigator contacted him in June 2006, to discuss workers’

compensation insurance, he told her that he neither secured the

payment of workers’ compensation for himself nor for the other

workers in both Tampa and Orlando.

17. Donna Knoblauch, who oversaw Olender’s main office,

received a faxed copy of a certificate of workers’ compensation

insurance from Mr. Torres. However, the faxed certificate was

an illegible copy of what appeared to be a certificate of

liability insurance issued by a company in Texas. The

certificate does not have a legible “sent date,” a legible

workers’ compensation policy number, legible dates of coverage,

a legible producer name, or any information indicating that

coverage includes the State of Florida. The document is

insufficient to demonstrate that Mr. Torres provided workers’

compensation coverage for his employees that worked under his

subcontract with Olender.

18. John Olender testified that Mr. Torres utilized, at

most, 20 framers for the construction at Alta Westgate. Mr.

Torres corroborates that number and indicates that various

people worked in crews of around five. On the other hand, Danny

Campbell testified that Olender had approximately 20 workers

when the project started, increased to approximately 75 people

performing framing duties on the worksite and decreased to about

20 workers by the time the Department’s investigator visited the

worksite. Mr. Campbell testified that on January 22, 2006, he

believed that Olender had approximately five individuals for the

punch-out group, three–to-five cleaners, a forklift operator,

approximately two individuals installing the Tyvek moisture-

barrier paper, two individuals performing window installation

and approximately 15–to-20 individuals installing siding at the

worksite. No other testimony supports the number of workers Mr.

Campbell believed to be at the jobsite on June 22. On balance,

the best evidence of the approximate number of workers was that

of Mr. Olender and Mr. Torres. However, these figures were only

estimates of the actual number which may have been less than 20

workers. In any event, the employment of these 12 workers on

the third floor was not demonstrated by the evidence. Their

names did not appear on the list of employees leased by Olender

from MBA and were otherwise, unknown to the Mr. Olender, Rojo

and Torres.

19. While at the jobsite, the Department’s investigator

also spoke with Victor Ibarra. Mr. Ibarra drove a forklift and

indicated that he worked for Olender. Again, no address or

other identifying information was supplied to the investigator.

Later, the investigator spoke with a woman who purported to be

Mr. Ibarra’s wife. There was no information on the forklift

indicating that it belonged to Olender and Olender denies

employing a person named Victor Ibarra. Mr. Campbell testified

in his deposition that Olender had forklifts on the jobsite.

However, he did not testify that the forklift Victor Ibarra

drove on June 22, 2006, was owned by Olender. Likewise,

Mr. Campbell did not testify that Mr. Ibarra was an employee of

Olender. Mr. Ibarra’s name did not appear on the list of leased

employees provided by MBA. The Department's investigator

included Mr. Ibarra as an employee of Olender based on

Mr. Ibarra’s statements. However, the evidence presented by the

Department is not sufficient to establish that Mr. Ibarra was an

employee of Olender, since Mr. Ibarra did not testify at the

hearing. Mr. Campbell’s testimony does not corroborate the

hearsay statements of Mr. Ibarra since the testimony does not

indicate the forklift Mr. Ibarra drove belonged to Olender or to

another subcontractor on the project.

20. After talking to Mr. Ibarra, the Department’s

investigator met Rosa Barden, Martha Alvarado and Ismael Ortiz,

who were applying a moisture barrier paper known as “Tyvek” to a

building at the construction site. The three individuals told

the investigator that that they had been hired by Mr. Rojo on

behalf of Olender and had only worked for about a day. The

investigator included these three individuals as employees of

Olender. No addresses or other contact information was obtained

by the investigator. None of these individuals testified at the

hearing. Mr. Rojo testified that he did not know the three

individuals on the “paper crew” and did not hire them. None of

the three individuals were listed as leased employees with MBA.

However, Olender’s subcontract clearly lists the application of

Tyvek as a part of its contract. Additionally, the payment

information supplied by the general contractor shows that

Olender was paid for Tyvek application on all the buildings in

the complex. Unlike Mr. Ibarro’s testimony, the contract and

payment evidence independently corroborates the otherwise

hearsay statements of these three individuals and Olender should

have provided workers compensation insurance on them. There was

no evidence that Olender provided such workers’ compensation

insurance; such failure violates Chapter 440, Florida Statutes.

See

Code R. 69L-6.019.

21. In total, the Department’s inspector met with John

Olender for approximately one hour discussing the work performed

by Olender and the employees retained by Olender. During this

meeting, Mr. Olender, identified members of a “punch-out” crew

who had worked on the project. The punch-out crew repaired any

defects in framing prior to inspection. The names supplied by

Mr. Olender were Juan Gonzalez, Miguel, Sal, William, WI Gerardo

(noted as El Guardo in the third Amended Order of Penalty

assessment), Pedro, Jacobo and Boso. Mr. Olender did not know

their last names. The evidence did not show the period of time

that the punch-out crew would have been working at the project

site. Presumably, they would have begun some time after the

initial building was framed. The Department’s investigator did

not personally see the punch-out crew at the project.

Mr. Olender also informed the Department’s investigator that he

did not handle matters concerning workers’ compensation

insurance and that she would have to contact the Company’s main

office in Missouri. He provided the number for the office. He

also gave the investigator the number for Michael Olender, the

president of the company and the number for Mr. Torres. The

investigator issued a Workers’ Compensation Request for

Production of Business Records to Olender. She left the Request

with John Olender.

22. The request for records asked for certain categories

of Olender’s business records for the period of January 22, 2004

to June 22, 2004. Of importance here, the Department requested

records in categories 1, 4, 5 and 6. In general, category 1

covers all payroll records, including checks and check stubs,

time sheets, attendance records and cash payment records.

Categories 4, 5 and 6 cover all records that relate to

subcontractors, including their identity, contract, payment

thereof, workers compensation coverage for all the

subcontractor’s employees, and/ or the employees’ exemption

status. These records are required to be maintained by a

company doing business in Florida.

23. Mr. Campbell testified that some members of the punch-

out crew often approached him about whether he had paid Olender

so that they in turn could be paid. Again, none of these

individuals testified at the hearing. However, given the

admissions of Olender’s employee and Mr. Campbell’s testimony,

the evidence supports the conclusion that the eight individuals

on the punch-out crew were employed by Olender. None of these

employees were leased employees and therefore, were not covered

by the workers’ compensation policy provided by MBA. There was

no evidence that Olender secured any workers' compensation

insurance on these eight employees. Such failure violates

Chapter 440, Florida Statutes. See §§ 440.10(1)(g) and

440.38(7), Fla. Stat., and Fla. Admin. Code R. 69L-6.019.

24. The Department’s investigator contacted Ms. Knoblauch

while she was on her way to a medical appointment. The

investigator requested Olender’s proof of workers’ compensation

insurance. Ms. Knoblauch told the investigator that she was not

at the office where the records were kept, but on the way to a

medical appointment. She said she would be returning to the

office after the appointment. The investigator said she needed

the records immediately. Ms. Knoblauch offered to skip her

appointment and requested time to turn around and return to the

office. The investigator refused to permit her the time to

return to the office.

25. At some point, MBA supplied the Department’s

investigator with a list of Olender’s leased employees. The

list did not contain any of the names she had gathered during

her visit to the worksite.

26. Within a few hours from the beginning of the

investigation, the Department's investigator issued a Stop Work

Order and an Order of Penalty Assessment on June 22, 2006. The

Order was served via certified mail on Michael Olender and

Olender’s legal counsel. The Stop Work Order required that

Olender "cease all business operations in this state" and

advised that a penalty of $1,000.00 per day would be imposed if

Olender were to conduct any business in violation of the Stop

Work Order. Additionally, along with the Order, the Department

issued and served on Petitioner via certified mail a Division of

Workers’ Compensation Request for Production of Business Records

for Penalty Calculation, requesting records for a period of

three years. The request, made pursuant to Section 440.107(7),

Florida Statutes, asked the employer to produce, for the

preceding three years, documents that reflected payroll, proof

of insurance, workers’ compensation audit reports, identity,

duration, contracts, invoices and check stubs reflecting payment

to subcontractors, proof of workers’ compensation coverage for

those subcontractors, employee leasing company information,

temporary labor service information, and any certificate of

workers’ compensation exemption. The request asked for the same

type of records that had been requested earlier. Neither

request for records was specific to a particular construction

job that Olender may have performed work on.

27. The investigator informed Mr. Campbell that Petitioner

was being issued a Stop-Work Order and gave him a copy of the

Order. Mr. Campbell faxed the Order to Olender’s office in

Missouri.

28. The Department’s investigator also checked the

database. The system tracks workers' compensation insurance

policy information provided by workers’ compensation carriers on

an insured employer. The database did not contain an entry that

reflected a current State of Florida workers' compensation

insurance policy for Olender. The database did reference that

Olender had a stop-work order served on it on July 12, 2002,

which had been lifted on July 31, 2002, with payment of the

penalty.

29. Florida law requires that employers maintain a variety

of business records involving their business. See § 440.107(5),

Fla. Stat., and Fla. Admin. Code R. 69L-6.015. The Rule is

limited to records regarding a business’ employees and any

payout by the employer to any person. In this case, under the

Rule, the only records Olender was required to maintain related

to its employees and its subcontractor, Mr. Torres. There

was no evidence regarding any other subcontractors Olender may

have contracted with. The only records supplied by Olender to

the Department were the records from MBA that included workers’

compensation information and W-2 forms for Olender’s leased

employees, the illegible proof of insurance for Mr. Torres and

copies of checks from Olender to Mr. Torres for the subcontract.

Those records reflected that John Olender, Ruben Rojo and

Primitivo Torres were leased employees and covered by workers’

compensation insurance under Olender’s contract with MBA.

Olender supplied no records regarding workers’ compensation

coverage for the eight employees who were members of the punch-

out crew, the three workers who were members of the paper crew

or the 12 workers who were on the third floor.

30. When an employer fails to provide requested business

records that the statute requires it to maintain, the Department

is required to impute the employer's payroll using "the

statewide average weekly wage as defined in Section 440.12(2)."

The penalty for failure to secure the workers' compensation

insurance coverage required by Florida law is 1.5 times the

premium that would have been charged for such coverage for each

employee identified by the Department. The premium is

calculated by applying the approved manual rate for workers'

compensation insurance coverage for each employee to each

$100.00 of the gross payroll for each employee.

31. In this case, the Department, after several amended

assessments, imputed the payroll for Olender for the period

beginning January 22, 2004, Petitioner’s date of incorporation,

and ending June 26, 2006. Included in the calculation were the

eight individuals on the punch-out crew identified by John

Olender, the 12 employees who were working on the third floor,

the forklift driver Victor Ibarra, and the three individuals on

the paper crew.

32. In calculating the premium for workers' compensation

insurance coverage, the Department's investigator used the risk

classifications and definitions of the National Council of

Compensation Insurance, Inc. ("NCCI") SCOPES Manual. The

appropriate code for Olender’s employees was classification code

5561 which covers framing of multiple family dwellings. The

gross payroll imputed to each of the 27 employees was $683.00

per week. The Department then utilized the imputed payroll for

same employees for the years 2004 and 2005. The Department’s

calculation resulted in an assessed penalty of $1,205,535.40.

33. However, the evidence establishes that Olender had 11

direct employees rather than 27 employees during the period of

the Alta Westgate contract. Olender’s performance under that

contract began on April 3, 2006. Other than the period of time

involved with the Alta Westgate project, there was no evidence

regarding the period of time Olender conducted business in

Florida that would require it to comply with Florida law. The

date of incorporation of Olender is insufficient to demonstrate

that Olender engaged in any business in Florida that would

require it to comply with Florida’s workers’ compensation law.

Therefore, the penalty calculation must be modified to reflect

only those eleven employees for the time period Olender

performed under its contract on the Alta Westgate project.

CONCLUSIONS OF LAW

34. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

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

35. Pursuant to Sections 440.10 and 440.38, Florida

Statutes, every “employer” is required to secure the payment of

workers’ compensation for the benefit of its employees unless

exempted or excluded under Chapter 440, Florida Statutes.

Strict compliance with the Workers' Compensation Law is,

therefore, required by the employer. See C&L Trucking v.

Corbitt , 546 So. 2d 1185, 1187 (Fla. 5th DCA 1989). The

Department has the duty of enforcing the employer's compliance

with the requirements of the workers' compensation law.

§ 440.107(3), Fla. Stat.

36. Section 440.10(1), Florida Statutes (2006), provides

in pertinent part:

(a) Every employer coming within the

provisions of this chapter shall be liable

for, and shall secure, the payment to his or

her employees . . . of the compensation....

37. "Employer" is defined as "every person carrying on any

Employment . . .". § 440.02(16), Fla. Stat. (2006).

38. "Employment . . . means any service performed by an

employee for the purpose of employing 'him or her' and 'with

respect to the construction industry, [includes] all private

employment in which one or more employees are employed by the

39. The Department must prove by a preponderance of the

evidence that Olender failed to provide its employees with

workers' compensation insurance coverage and that the civil and

administrative penalties assessed are correct. See Department

of Labor and Employment Security, Division of Workers'

Compensation v. Patrick Jackey, d/b/a Bert's World of Color ,

DOAH Case No. 98-2496, page 5 (Recommended Order, December 4,

1998)("Although violations of Chapter 440, Florida Statutes, can

result in a substantial fine, which may even render an employer

insolvent, the employer nonetheless does not have a license or

property interest at stake so as to raise the standard of proof

to clear and convincing evidence"); Florida Department of

Transportation v. J.W.C. Co., Inc. , 396 So. 2d 778, 788 (Fla.

1st DCA 1981)("In accordance with the general rule, applicable

in court proceedings, 'the burden of proof, apart from statute,

is on the party asserting the affirmative of an issue before an

administrative tribunal.' Balino v. Department of Health and

Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977) .").

See also § 120.57(1)(j), Fla. Stat.

40. It is undisputed that Petitioner was an “employer”

carrying on “employment” in the State of Florida for the period

Olender performed its contract on the Alta Westgate contract.

41. The question to be resolved in this case is who of the

many people the Department’s investigator interviewed on

June 22, 2006, were employed by Olender and the period of time

Olender engaged in business in the State of Florida for which it

was required to provide workers’ compensation insurance.

42. The penalty assessed by the Department was based on

the date of incorporation of Olender. However, that date does

not indicate the period of time that Olender employed any

employees who performed work in Florida which required Olender

to provide workers’ compensation insurance under Florida law.

The record is devoid of any evidence that Olender conducted any

business in Florida except during the period it was the

subcontractor on the Alta Westgate project. There was some

indication in the record that Olender was the subcontractor on a

project in Tampa, but there was no credible evidence of the time

during which Olender performed work on the Tampa project.

Therefore, the only time period for assessment purposes

demonstrated by the evidence was the time period Olender

performed work under its subcontract with the general contractor

on the Alta Westgate project.

43. Olender maintained that it never employed anyone named

Victor Ibarra. Based on the findings of fact herein, the

Department has failed to prove by a preponderance of the

evidence that Victor Ibarra was employed by Olender. The

Department relied exclusively on statements by Mr. Ibarra made

to the Department's investigator in reaching its conclusion that

he was an employee of Olender. The Department presented no

other persuasive, non-hearsay evidence relating to the status of

Mr. Ibarra. Moreover, the evidence did not establish

Mr. Ibarra’s statements were "admissions" that could be used

against Olender pursuant to the exception to the hearsay rule

found in Section 90.803(18), Florida Statutes. Because of the

limitation on the use of hearsay evidence in administrative

proceedings, the hearsay statements of Mr. Ibarra cannot be used

to establish that he was, in fact, an employee of Olender. See

§ 120.57(1)(c), Fla. Stat. ("Hearsay evidence may be used for

the purpose of supplementing or explaining other evidence, but

it shall not be sufficient in itself to support a finding unless

it would be admissible over objection in civil actions.").

44. On the other hand, there was sufficient non-hearsay

evidence to establish that Rosa Barden, Martha Alvarado and

Ismael Ortiz were employees of Olender. These three individuals

were applying Tyvek to the framed buildings at Alta Westgate

when the Department’s investigator talked to them. They told

her that they had been hired by Mr. Rojo who was Olender’s

employee. The subcontract and payment information from the

general contractor corroborated the fact that Olender was

responsible for the application of Tyvek and was also paid for

that work. This evidence corroborated the hearsay statements of

these three individuals. Since the evidence demonstrated that

these three individuals were employees of Olender, Olender

should have provided workers’ compensation insurance on them.

There was no evidence that Olender provided such insurance.

45. The evidence demonstrated that Mr. Torres was a

subcontractor who variously employed people to work under his

subcontract with Olender. The evidence did not demonstrate that

Mr. Torres secured the payment of workers’ compensation on his

employees. Olender did have an illegible certificate of

insurance that purported to show that Mr. Torres may have had

workers’ compensation insurance. However, that document is both

unreliable and unpersuasive, since there are no discernable

dates, policy number, named insured or legible insurance company

on the document. The certificate does not appear to possess a

State of Florida endorsement as required by Section 440.38,

Florida Statutes, and Florida Administrative Code R. 69L-6.019.

46. In pertinent part, Section 440.10(1)(g), Florida

Statutes, (2006) states:

Subject to § 440.38, any employer who has

employees engaged in work in this state

shall obtain a Florida policy or endorsement

for such employees which utilizes Florida

class codes, rates, rules, and manuals that

are in compliance with and approved under

the provisions of this chapter and the

Florida Insurance Code.

47. Subsection 440.38(7), Florida Statutes (2006),

provides in relevant part:

Any employer who meets the requirements of

subsection (1) through a policy of insurance

issued outside of this state must at all

times, with respect to all employees working

in this state, maintain the required

coverage under a Florida endorsement using

Florida rates and rules pursuant to payroll

reporting that accurately reflects the work

performed in this state by such employees.

See also Fla. Admin. Code R. 69L-6.019(3) and (4).

48. Section 440.10, Florida Statutes (2006), states:

(b) In case a contractor sublets any part

or parts of his or her contract work to a

subcontractor or subcontractors, all of the

employees of such contractor and

subcontractor or subcontractors engaged on

such contract work shall be deemed to be

employed in one and the same business or

establishment, and the contractor shall be

liable for, and shall secure, the payment of

compensation to all such employees, except

to employees of a subcontractor who has

secured such payment.

(c) A contractor shall require a

subcontractor to provide evidence of

workers' compensation insurance. . . . .

49. Read together, these statutes, at a minimum, require a

contractor, like Olender here, to maintain records that reflect

who their subcontractors are and that such subcontractors have

supplied the contractor with reasonable documentation that the

subcontractor has secured workers’ compensation insurance on its

employees. The statute does not require that the contractor

maintain records regarding the subcontractor’s employees.

However, the documentation of such insurance must at least be

legible and demonstrate that it provides coverage according to

Florida law. The illegible certificate of insurance supplied by

Olender to the Department did not meet these requirements.

Thus, even though Mr. Torres was a subcontractor of Olender,

Petitioner is liable for failing to secure the payment of

workers’ compensation for Mr. Torres’ employees. The difficulty

arises in the fact that there is no credible, non-hearsay

evidence that demonstrates the 12 workers on the third floor

were employees of Mr. Torres. Indeed, other than an estimate of

the number of individuals employed by Mr. Torres, there is no

evidence that any Torres employees worked at the Alta Westgate

project. A vague estimate of the number of employees of a

subcontractor is insufficient to impute an amount of gross

payroll for penalty assessment purposes.

50. The Department is required by Section 440.107(7)(d)1.,

Florida Statutes, to:

assess against any employer who has failed

to secure the payment of workers’

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 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.

51. The Department is authorized by Section 440.107(9),

Florida Statutes, to enact rules to implement Section 440.107,

and it has done so in Florida Administrative Rule Chapter 69L-6,

which requires employers in Florida to "maintain employment

records pertaining to every person to whom the employer paid or

owes remuneration for the performance of any work or service in

connection with any employment" for "the current calendar year

to date and for the preceding three calendar years" and to

"produce the records when requested by the division pursuant to

Section 440.107." Fla. Admin. Code R. 69L-6.015(1), (3), and

(11).

52. Section 440.107(7)(d)1., Florida Statutes, states that

an employer who fails to secure the payment of workers’

compensation is subject to

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 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.

53. It was undisputed that the work being performed by

Petitioner was framing and other duties on the Alta Westgate

project. Thus, the penalty calculated utilizing the approved

manual rate assigned to class code 5651 was properly assessed.

54. It is also undisputed that Petitioner failed, in part,

to provide the records regarding all of its direct employees and

reasonable documentation that its subcontractor, Mr. Torres,

secured workers’ compensation insurance on his employees. Under

these circumstances, the Department is charged with assessing a

penalty through imputation of the gross payroll of Olender.

Section 440.107(7)(e), Florida Statutes, states, in relevant

part:

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 § 440.12 (2) multiplied by 1.5.

55. Florida Administrative Code Rule 69L-6.028(2)(a)

states,

For employees other than corporate officers,

for each employee identified by the

department as an employee of such employer

at any time during the period of the

employer’s non-compliance, the imputed

weekly payroll for each week of the

employer’s non-compliance for each such

employee shall be the statewide average

weekly wage as defined in Section 440.12(2),

F.S., that is in effect at the time the stop

work order was issued to the employer,

multiplied by 1.5. Employees include sole

proprietors and partners in a partnership.

56. In this case, the evidence did not identify any

employees of Mr. Torres. Therefore, no penalty can be assessed

for those employees.

57. Section 440.12(2), Florida Statutes, provides in

pertinent part:

For the purpose of this subsection, the

"statewide average weekly wage" means the

average weekly wage paid by employers

subject to the Florida Unemployment

Compensation Law as reported to the Agency

for Workforce Innovation for the four

calendar quarters ending each June 30, which

average weekly wage shall be determined by

the Agency for Workforce Innovation on or

before November 30 of each year and shall be

used in determining the maximum weekly

compensation rate with respect to injuries

occurring in the calendar year immediately

following. The statewide average weekly

wage determined by the Agency for Workforce

Innovation shall be reported annually to the

Legislature.

58. In Florida Administrative Code Rule 69L-6.021(1), the

Department has adopted "the classification codes and

descriptions that are specified in the Florida Contracting

Classification Premium Adjustment Program, and published in the

Florida exception pages of the National Council on Compensation

Insurance, Inc. (NCCI), Basic Manual (1996 ed., issued

January 21, 2003)" to determine the approved manual rates for

different types of construction activities.

59. As noted in the findings of fact, the Department

assigned classification code 5651 to the employees of Olender.

That code encompasses framing activities involved in the

construction of multi-family dwellings. The evidence showed

that the classification code used by the Department was

appropriate for ascertaining the approved manual rate to be used

in calculating the workers' compensation premium that would have

been paid by Olender had it secured workers' compensation

insurance coverage pursuant to Florida law.

60. Based on the findings of fact in this Recommended

Order, the Department has proven by a preponderance of the

evidence that it correctly calculated the imputed payroll for

the eight employees of Olender that were members of the punch-

out crew and the three employees that were members of the punch-

out crew. The evidence did not support the Department’s

calculation with regards to any other individuals listed in the

third Amended Penalty Assessment or to the time period that

Olender conducted business in Florida. Therefore, the

Department's total penalty calculation is incorrect, and should

be adjusted to reflect the findings in this Recommended Order.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial

Services, Division of Workers' Compensation, enter a final

order:

1. Finding that Olender Construction Co., Inc., failed to

have Florida workers' compensation insurance coverage for 11 of

its employees, in violation of Sections 440.10(1)(a) and

440.38(1), Florida Statutes; and

2. Recalculating the penalty against Olender.

DONE AND ENTERED this 14th day of March, 2008, in

Tallahassee, Leon County, Florida.

S

DIANE CLEAVINGER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 14th day of March, 2008.

COPIES FURNISHED:

Colin M. Roopnarine, Esquire

Department of Financial Services,

Division of Workers Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

Jeremy T. Springhart, Esquire

Broad and Cassel

390 North Orange Avenue, Suite 1500

Orlando, Florida 32801

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Daniel Y. Sumner, 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.