07-001479F Kenny Nolan, D/B/A Great Southern Tree Service vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed DOAH Final Order on Wednesday, October 3, 2007.

Summary: Petitioner is entitled to attorney`s fees. Respondent was not substantially justified in its actions.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KENNY NOLAN, d/b/a GREAT )

SOUTHERN TREE SERVICE, )

)

Petitioner, )

)

vs. ) Case No. 07 - 1479F

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS' COMPENSATION, )

)

Respondent. )

)

FINAL ORDER

A hearing was held pursuant to notice on July 13, 2007, via

video teleconference with locations in Tallahassee and

Jacksonville, Florida, before Barbara J. Staros, a duly -

appointed Administrative La w Judge .

APPEARANCES

For Petitioner: Kenneth B. Wright, Esq uire

Bledsoe, Jacobson, Schmidt,

Wright, Wilkinson & Long

1301 Riverplace B ou l e v ar d, Suite 1818

Post Office Drawer 1759

Jacksonvill e, Florida 322 07

For Respon dent: Colin Roopnarine, Esquire

Thomas Duffy, Esquire

Department of Financial Services

Division of Workers’ Compensation

2 00 East Gaines Street

Tallahassee, Florida 323 99 - 4229

STATEMENT OF THE ISSUE

Whether Petitioner is entitled to an aw ard of attorney's

fees pursuant to Secti on 57.111, Florida Statutes . 1/

PRELIMINARY STATEMENT

On March 30 , 200 7 , Petitioner, Kenny Nolan , d/b/a Great

Southern Tree Service ( the business will hereinafter be referred

to as Nolan ) , filed a Petition for Attorney's Fees Pursuant to

the Florida Equal Access to Justice Act ( Petition ) , an Affidavit

of Attorney’s Fees , and supporting fee statement . The Petition

requests an award of fees incurred by Petitioner in litigating

the underlying case sty led, Kenny Nolan , d/b/a Great Southern

T ree Service v. Department of Financial Services, Division of

Workers’ Compensation , DOAH Case No. 0 6 - 2785 (Recommended Order

entered November 28 , 200 6 ; Final Order issued February 23,

2007 ) .

On April 2 3 , 200 7 , Res pondent, Department of Financial

Services, Division of Worker’s Compensation ( Department ), filed

a R esponse to Petition for A ttorney's F ees (Response) . In the

Response, the Department acknowledged that Nolan is the

prevailing party in the underlying case and asserted that the

Department did not dispute the reasonableness of the fees. The

Department asserts that its actions were substantially justified

and, therefore, an award of attorney’s fees would be unjust.

Each party requested an evidentiary hearing .

At the commencement of the hearing, the Department

stipulated that Petitioner is a small business party for

purposes of Section 57.111, Florida Statutes.

At hearing, Respondent presented the testimony of Michael

Robinson and Robert Lambert. Responde nt’s Exhibits 1 through 11

were admitted into evidence , which included the transcript of

the final hearing of the underlying proceeding . Petitioner did

not offer any witnesses or exhibits. The parties timely filed

Proposed Final Orders , which have been c onsidered in preparation

of this Final Order.

FINDINGS OF FACT

1. The Department is the state agency charged with the

regulation of workers’ compensation insurance in the State of

Florida.

2. The Department issued a Stop Work O rder to Petitioner

on June 6, 2006. On June 27, 2006, the Department issued an

Amended Order of Penalty Assessment, assessing $272,948.96 in

penalties against Petitioner.

3. Petitioner timely challenged the Stop Work Order and

Amended Order of Penalty Assessment and reque sted an

administrative hearing . A formal hearing was held on October 5,

2006 .

4. The Recommended Order, which was enter ed on

November 28 , 200 6 , recommended that the Department enter a final

order rescinding the Amended Order of Penalty Assessment and t he

Stop Work Order.

5. On February 23 , 200 7 , a Final Order was issued by the

Agency adopting the findings of fact and conclusions of law set

forth in the Recommended Order.

6. On March 30 , 200 7 , Petitioner filed the Petition with a

supporting affid avit and fee statement which initiated the

instant proceeding .

7. In the Petition , Petitioner s eeks relief under the

Florida Equal Access to Justice Act, Section 57.111, Florida

Statutes .

8. There is no dispute that Petitioner is the prevailing

party in the underlying case.

9. Petitioner seeks attorney's fees in the amount of

$2 0 , 1 9 7 . 50 . There is no dispute as to the reasonableness of the

fee s sought.

10. At the time the underlying action was initiated,

Petitioner was a sole proprietor located in Jacksonville,

Florida, which engaged in the business of cutting trees. There

is no dispute that Petitioner is a small business party for

purposes of Subsection 57.111(4)(a), Florida Statutes.

11. On June 6, 2006, the Department’s investigator,

Michael Robinson, conducted a site visit at a job site where he

observed five individuals, four of whom were involved in tree

cutting activities.

12 . During his June 6, 2006, site visit, Robinson

interviewed the four individuals and recorded their responses on

a field interview worksheet. The workers identified Nolan as

their employer, and answered Mr. Robinson’s questions regarding

how long they had been employed by Nolan, and their basis of

pay. One of the workers informed Mr. Robinson that he had been

emplo yed by Nolan for two weeks; a second worker informed him

that he had worked for Nolan for three weeks. Both of these

workers in formed Mr. Robinson that they were paid on a daily

basis. A third worker informed Mr. Robinson that he was paid by

the job. Th e workers were compliant and responsive to

Mr. Robinson’s inquiries.

1 3 . Mr. Nolan was not at the jobsite at the time of

Mr. Robinson’s site visit, but Mr. Robinson obtained hi s phone

number, called, and left a message. Mr. Nolan promptly returned

the c all. Mr. Nolan was also compliant and responsive to

Mr. Robinson’s questions. Mr. Nolan acknowledged to

Mr. Robinson that the four individuals interviewed by

Mr. Robinson were his employees and that he had no workers’

compensation insurance. Mr. Nolan a lso informed Mr. Robinson

that his business was a non - construction business entity and was

not required to carry workers’ compensation insurance.

Mr. Robinson told Mr. Nolan that he was required to have

workers’ compensation insurance.

14 . Mr. Robinson also searched the Coverage and Compliance

Automated System (CCAS) and found no proof of coverage nor an

exemptio n for Nolan.

The Stop Work Order

15 . On the same day as the site visit, Mr. Robinson

conferred with his supervisor, Robert Lambert, to discuss the

issuance of a stop work order. Mr. Robinson conveyed to

Mr. Lambert that Nolan had four employees who were non -

construction workers, and that there was no workers’

compensation coverage. Mr. Robinson did not convey the short

duration of employment o f two employees or that they were paid

daily or by the job.

16. Based upon this information, Mr. Lambert immediately

approved a Stop Work Order , which was issued that day.

Mr. Robinson also issued a request for business records to Nolan

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

17. Paragraphs 1 2 through 24 of the Recommended Order ,

adopted within the Final Order, found that Mr. Nolan started the

business, Great Southern Tree Service, in February or March

2005, as a sole proprieto r; that he did not employ anyone in

2003 or 2004; that the nature of the tree trimming business is

seasonal and sporadic; that Nolan had fewer than four employees

during 2005 ; and that the only time Nolan had four employees was

from May 2006 until June 6, 2006, when two workers worked

occasionally for Nolan due to tree damage in the Jacksonville

area from a storm.

18. Nolan did not produce business records as requested by

the Department because ther e were n o such records to produce .

The Amended Order of Penalty Assessment

19. On June 27, 2006, an Amended Order of Penalty

Assessment (Amended Order) was issued to Nolan in the amount of

$272,948.96, for the time period June 6 , 2003 to June 6, 2006.

Attached to the Amended Order is a worksheet with the name s of

the four workers interviewed by Mr. Robinson on June 6, 2006.

Using a statutory formula, Mr. Robinson imputed a penalty for

the period October 1, 2003 to June 6, 2006, and a penalty of

$100 per day for the time period between June 6, 2003 and

Septemb er 30, 2003.

20. At the time of the issuance of the Stop Work Order and

the Order of Penalty Assessment, Mr. Robinson and Mr. Lambert

were aware of the statutory requirement that to be considered an

employe r under the workers’ compensation law, f our or mo re

persons must be employed by the same private non - construction

employer. However, neither Mr. Robinson nor Mr. Lambert was

aware of well - established case law holding that the elements of

regularity, continuity, common employment, and duration, should

be considered in determining the applicability of the law , and

that an occasional increase in the number of workers for some

unusual occasion does not automatically result in application of

the workers' compens at ion law . 2/

CONCLUSIONS OF LAW

21 . The Divisi on of Administrative Hearings has

jurisdiction over the subject matter and parties to this

proceeding. §§ 57.111 and 120.57, Fla. Stat.

22 . Attorney's fees have been sought by Petitioner in this

matter pursuant to Section 57.111, Florida Statutes, the E qual

Access to Justice Act.

23 . The legislative intent for enacting the Equal Access

to Justice Act is provided in Subsection 57.111(2), Florida

Statutes, which provides the following:

(2) The Legislature finds that certain

persons may be deterred from s eeking review

of, or defending against, unreasonable

governmental action because of the expense

of civil actions and administrative

proceedings. Because of the greater

resources of the state, the standard for an

award of attorney's fees and costs against

the state should be different from the

standard for an award against a private

litigant. The purpose of this section is to

diminish the deterrent effect of seeking

review of, or defending against,

governmental action by providing in certain

situations an award of attorney's fees and

costs against the state.

2 4 . In pertinent part, Subsection 57.111(4)(a), Florida

Statutes, provides the following:

(4)(a) Unless otherwise provided by law, an

award of attorney's fees and costs shall be

made to a prevailing small business party in

any adjudicatory proceeding or

administrative proceeding pursuant to

chapter 120 initiated by a state agency,

unless the actions of the agency were

substantially justified or special

circumstances exist which would make the

award u njust. (emphasis supplied)

2 5 . Subsection 57.111(3)(c), Florida Statutes, defines a

"prevailing small business party" as follows:

(c) A small business party is a "prevailing

small business party" when:

1. A final judgment or order has been

entere d in favor of the small business party

and such judgment or order has not been

reversed on appeal or the time for seeking

judicial review of the judgment or order has

expired;

2. A settlement has been obtained by the

small business party which is favo rable to

the small business party on the majority of

issues which such party raised during the

course of the proceeding; or

3. The state agency has sought a

voluntary dismissal of its complaint.

2 6 . Petitioner prevailed in the underlying proceedin g.

There is no dispute that Petitioner is a small business party

for purposes of Subsection 57.111(3), Florida Statutes. Thus,

Petitioner is a prevailing small business party for purposes of

Subsection 57.111(3)(c), Florida Statutes.

27 . The term "subs tantially justified" is defined in

Subsection 57.111(3)(e), Florida Statutes, as follows:

(e) A proceeding is "substantially

justified" if it had a reasonable basis

in law and fact at the time it was

initiated by a state agency.

28 . In proceedin gs to establish entitlement to an award of

attorney's fees and costs pursuant to Section 57.111, Florida

Statutes, the initial burden of proof is on the party requesting

the award to establish by a preponderance of the evidence that

it prevailed in the und erlying action and that it was a small

business party at the time the action was initiated. Once the

party requesting the award has met this burden, the burden

shifts to the agency to establish that its action s in

instituting the proceeding w ere substanti ally justified or that

special circumstances exist that would make an award of

attorney's fees and costs to Petitioner unjust. Helmy v.

Department of Business and Professional Regulation , 707 So. 2d

366, 368 (Fla. 1st DCA 1998).

29 . As t here i s no disp ute that Petitioner is a prevailing

small business party, the Department bears the burden of

establishing that its actions in initiating this proceeding w ere

substantially justified. The "substantially justified" standard

falls somewhere between "the no j usticiable issue standard of

Section 57.105 . . . and a n automatic award of fees to a

prevailing party." Id.

30. To be substantially justified, the government agency

must have a solid basis in both fact and law in its actions

initiating the underlying c ase. Casa Febe Retirement Home, Inc.

v. Agency for H ealth Care Administration , 892 So. 2d 1103 (Fla.

2nd DCA 2004). In order to be substantially justified, the

agency must, at the very least, have a working knowledge of the

applicable statutes under whic h it is proceeding. Helmy , supra ,

707 So. 2d 366, 370. It follows that the a gency must have a

working knowledge of the case law construing the statutes under

which it is proceeding.

3 1 . The actions in question are the issuance of the Stop

Work Order and the Amended O rder .

32 . As for the Stop Work Order, Section 440.107(7)(a),

Florida Statutes, requires the Department to issue a stop work

order within 72 hours of determining that an employer who is

required to secure workers’ compensation coverage has not done

so. The Stop Work Order was issued immediately, d espite Nolan’s

assertion that he was not required to carry workers’

compensation coverage and despite recei ving the information from

the employees interviewed regarding the short duration of th eir

employment, and that three of the four inter viewed were paid on

a daily or "by the job" basis . Other than requesting business

records which Nolan was not required to keep, no further inquiry

was undertaken during the 72 - hour period to determine if Nol an

was subject to the law. 3 /

33. As for the Amended Order , the Department argues that

because of Nolan’s lack of business records, Mr. Robinson was

unable to determine the length of time Nolan had been in

business, and could not determine whether the emp loyees were

sporadic, intermittent, or constant.

34 . However, since No lan was not subject to the

requirements of the workers’ compensation law, he was not

required to maintain the records requested by the Department.

35 . In analyzing whether the Dep artment had a solid basis

in fact and law, the analysis becomes intertwined. That is,

Mr. Robinson had the information that two of the necessary four

employees had worked for Nolan for a brief period of time and

were paid in a manner to indicate occasiona l or intermittent

employment. However, the lack of knowledge of the significance

of the case law interpreting the applicable statutes upon which

the Department proceeded was critical and resulted in the

Department’s actions not having a solid basis in law at the time

its actions were initiated. That is, knowledge of this case law

would have alerted the Department that the workers’ factual

answers to Mr. Robinson’s questions had a legal significance

that needed to be explored before the Stop Work Order was issued

and certainly before the Amended Order was issued three weeks

later .

3 6 . Subsection 57.111(4)(a), Florida Statutes, also

affords the Agency an opportunity to avoid attorney’s fees if

special circumstances exist which would make such an award

un just. The Department bears the burden of showing that special

circumstances exist. The Department ’s response did not

specifically address the "special circumstances" prong of

Subsection 57.111(4), Florida Statutes , except to assert that

the award of fees would be unjust because the Department

believes that its actions were substantially justified. The

Department did not meet its burden in this regard.

37 . Based upon the foregoing, Petitioner is entitled to an

award of attorney’s fees for the underlyin g action. The amount

of fees requested, $2 0 , 197 . 50 , is reasonable. Petitioner did

not request that any taxable costs be reimbursed.

ORDER

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

ORDERED that Petitioner’s Petition and Ap plication for

Attorney’s Fees Pursuant to the Florida Equal Access to Justice

Act is granted. Respondent shall pay to Petitioner within

30 d ays of the date of this Final Order the sum of $ 20 , 197.50

for attorney’s fees incurred by Petitioner in DOAH Case

No. 0 6 - 2785 .

DONE AND ORDERED this 3rd day of Octo ber , 200 7 , in

Tallahassee, Leon County, Florida.

BARBARA J. STAROS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 3rd day of Octo ber , 200 7 .

ENDNOTES

1/ Unless otherwise indicated, all statutory references in this

Final Order are to the 200 6 version of the Florida Statutes.

2/ Mathers v. Sellers , 113 So. 2d 443 (Fla. 1st DCA 1959);

Subterranean Circus v. Lewis , 319 So. 2d 600 (Fla. 1st DCA

1975).

3/ The Department is authorized to administer oaths, issue

subpoenas, and use other methods of investigation. § 440.107(3),

Fla. Stat.

COPIES FURNISHED :

Kenneth B. Wright, Esquire

Bledsoe Jacobson Schmidt & Wright

1301 Riverplace Boulevard, Suite 1818

Jacksonville, Florida 32207

Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Daniel Sumner , General Counsel

Department of Financial Services

The Capitol, Level 11

Tallahassee, Florida 32399 - 0300

Alex Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Level 11

Tallahassee, Florida 32399 - 0300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

fil ing the original Notice of Appeal with the agency Clerk of

the Division of Administrative Hearings and a copy, accompanied

by filing fees prescribed by law, with the District Court of

Appeal, First District, or with the District Court of Appeal in

the Appe llate District where the party resides. The notice of

appeal must be filed within 30 days of rendition of the order to

be reviewed.