07-001538 Keith Myer, D/B/A Custom Interiors And Design, Inc. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Friday, September 28, 2007.

Summary: The corporate officer and sole employee of the corporation let his exemption lapse, so he was liable for a $18,000 fine over three years.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 07 - 1538

)

KEITH MYER, d/b/a CUSTOM )

INTERIORS & DESIGN, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, a disputed - fact hearing was convened in

this cause on June 21, 2007, in Green Cove Springs, Florida,

before Ella Jane P. Davis, a duly - assigned Administrative Law

Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: K eith Myer, pro se

d/b/a Custom Interiors & Design, Inc.

4621 Burdock Court

Middleburg, Florida 32068

STATEMENT OF THE ISSUE

Whether Respondent failed to secure workers' compensation

coverage as required by law, and, if so, what pe nalty should be

imposed.

PRELIMINARY STATEMENT

The Department of Financial Services, Division of Workers'

Compensation, through one of its investigators, issued to, and

served on, Keith Myer, d/b/a Custom Interiors & Design, Inc., an

Order of Penalty Asse ssment, Number 07 - 019 - D1, alleging that Mr.

Myer had violated Chapter 440, Florida Statutes (the Workers'

Compensation Law), and assessing a penalty of $18,937.37.

Petitioner timely requested a disputed - fact hearing, and

the case was referred to the Divis ion of Administrative Hearings

on or about April 3, 2007.

This case should have been, but was not, styled to reflect

that before the Division of Administrative Hearings, the duty to

go forward was upon the Agency. To correct that oversight, the

style of this cause is hereby amended as set out above.

Therefore, the Agency is hereafter "Petitioner" and the citizen,

Keith Myer d/b/a Custom Interiors & Design, Inc., is hereafter

"Respondent."

At the disputed - fact hearing, Petitioner presented the oral

testi mony of Michael Robinson and had ten exhibits admitted in

evidence. Respondent Myer testified on his own behalf. None of

Respondent's exhibits were admitted in evidence.

On June 27, 2007, Petitioner filed a "Notice of Filing

Florida Statutes and Florida Administrative Code Rule [Chapter]

69L - 6. No timely objection to authentication was filed by

Petitioner. 1/

A Transcript was filed on July 31, 2007.

Each party's timely - filed Proposed Recommended Order has

been considered in preparation of this Recommen ded Order.

FINDINGS OF FACT

1. Petitioner Department is the State Agency responsible

for enforcing those portions of Chapter 440, Florida Statutes,

requiring that employers secure payment of workers' compensation

benefits for their employees.

2. On Nov ember 6, 2006, Petitioner's Investigator Michael

Robinson, conducted a random visit at the construction site of a

new residence at 2631 Bluewave Drive, in Middleburg, Florida.

At that time, he observed Respondent Keith Myer, installing

metal framing for d rywall installation. 2/ This is a construction

industry function.

3. No evidence of current corporate status of Custom

Interiors & Design, Inc., was presented at hearing. No evidence

of the number of employees employed by the corporation was

presented, either. There was no evidence to show which, if any,

corporate officer Mr. Myer might be. The impression given at

hearing by Respondent Myer was that he was the corporation's

sole employee.

4. At the jobsite on November 6, 2006, Mr. Myer told

Mr. Robin son that he had secured the payment of workers'

compensation through Staff Masters, which is a staffing

company. 3/

5. Mr. Myer was unable to provide Mr. Robinson with any

documentation that would support Respondent's claim of having

secured the payment o f workers' compensation through Staff

Masters. Mr. Myer presented no such evidence at hearing,

either.

6. Investigator Robinson utilized the Agency's Coverage

and Compliance Automated System (CCAS) database that contains

all policy information from wor kers' compensation insurance

carriers to insureds, and determined that Respondent did not

have any State of Florida workers' compensation insurance policy

in force and effect on November 6, 2006. Mr. Myer presented no

such policy at hearing, either.

7. At all times material, 2000 through 2004, Section

440.05, Florida Statutes, has allowed a sole proprietor,

partner, or corporate officer actively engaged in construction

to apply for an exemption from workers' compensation benefits.

From 2005 through 2006 , only corporate officers could elect

"out". Only the named individual on the application was exempt

from carrying workers' compensation insurance coverage.

8. Respondent Myer d/b/a Custom Interiors & Design, Inc.,

has no current valid workers' compensa tion exemption, but he had

an exemption that had expired in September 2002.

9. At all times material, 2000 through 2006, Sections

440.05(3) and 440.05(6), Florida Statutes, have limited the

duration of construction workers' compensation exemptions to a

p eriod of two years. At the end of two years, the exemption

automatically expires or terminates.

10. Respondent Myer testified that he was not aware that

his exemption had lapsed, even though the law states that a

construction exemption has a duration of two years.

11. Although Respondent denied receiving an expiration

notification letter from the Agency, Investigator Robinson

testified, and documents were admitted in evidence which show,

that on or about June 19, 2002, the Agency sent a letter to

Respo ndent Myer at his last known business address as shown on

his exemption card, notifying him that his exemption was due to

expire. The documents in evidence also suggest that Respondent

or a similar name filed an incomplete exemption application in

October 2002, but no witness's testimony addressed this issue.

12. While the Agency's investigator was exploring all

possible coverage of Respondent, Respondent was added to the

payroll of the general contractor, Maronda Homes, which was on -

site at the Bluewave Drive address, so that Respondent became

covered by Maronda Homes' workers' compensation insurance

policy. As a result, the Agency did not issue a stop - work order

against Respondent.

13. There is no evidence that Respondent Myer or Custom

Interiors & D esign, Inc., were sub - contractors for, or employees

of, any general contractor at any date prior to November 9,

2006, so as to be covered by that general contractor's workers'

compensation policy pursuant to Section 440.10, Florida

Statutes.

14. On Novem ber 20, 2006, Investigator Robinson served

Respondent with a "Request for Production of Business Records

for Penalty Assessment Calculation," seeking copies of business

records for a period of three years, pursuant to Section

440.107(7)(d)1., Florida Statu tes. This was for the purpose of

determining whether Respondent had secured workers' compensation

coverage, whether he or his employees had current valid workers'

compensation exemptions, and to determine any civil penalties

that might be owed for failing to secure the payment of workers'

compensation.

15. At the time the records request was issued, Florida

Administrative Code Rule 69L - 6.015, stated, in relevant part:

In order for the Division to determine that

an employer is in compliance with the

prov isions of Chapter 440, F.W., every

business entity conducting business within

the state of Florida shall maintain for the

immediately preceding three year period true

and accurate records. Such business records

shall include original documentation of the

following, or copies, when originals are not

in the possession of or under the control of

the business entity:

(1) All workers' compensation insurance

policies of the business entity, and all

endorsements, notices of cancellation,

nonrenewal, or reinstat ement of such

policies.

* * *

(3) Records indicating for every pay period

a description of work performed and amount

of pay or description of other remuneration

paid or owed to each person by the business

entity, such as time sheets, time cards,

atten dance records, earnings records,

payroll summaries, payroll journals, ledgers

or registers, daily logs or schedules, time

and materials listings.

(4) All contracts entered into with a

professional employer organization (PEO) or

employee leasing company, temporary labor

company, payroll or business record keeping

company. If such services are not pursuant

to a written contract, written documentation

including the name, business address,

telephone number, and FEIN or social

security number of all principal s if an FEIN

is not held, of each such PEO, temporary

labor company, payroll or business record

keeping company; and

(a) For every contract with a PEO: a

payroll ledger for each day period during

the contract period identifying each worker

by name, addre ss, home telephone number, and

social security number or documentation

showing that the worker was eligible for

employment in the United States during the

contract for his/her services, and a

description of work performed during each

pay period by each wor ker, and the amount

paid each pay period to each worker. A

business entity may maintain such records or

contract for their maintenance by the PEO to

which the records pertain.

* * *

(6) All check ledgers and bank statements

for checking, savings, cre dit union, or any

other bank accounts established by the

business entity or on its behalf; and

(7) All federal income tax forms prepared

by or on behalf of the business and all

State of Florida, Division of Unemployment

Compensation UCT - 6 forms and any o ther forms

or reports prepared by the business or on

its behalf for filing with the Florida

Division of Unemployment Compensation.

16. In response to the records request, Respondent

provided only W - 2 forms for 2003 through 2005, and duplicate

checks for 2006. The W - 2 forms show the "employer" as Customer

Interiors & Design, Inc., and Keith Myer as an "employee." Each

of the checks shows the payor as "Custom Interiors & Design,

Inc., Keith Myer, Angela Myer," and shows the payee as "Keith

Myer."

17. According to the W - 2 forms, Respondent Myer's personal

gross income from Custom Interiors & Design, Inc., in calendar

year 2003 was $13,250.00; in calendar year 2004 was $16,500.00,

and in calendar year 2005 was $34,625.00.

18. Using these W - 2 forms an d checks, the Agency

investigator calculated a gross payroll from the period

November 9, 2003 to December 31, 2004, as $17,604.17; for

January 1, 2005 to December 31, 2005, as $34,625.00; and for

January 1, 2006 to November 9, 2006, as $14,600.00.

19. Ba sed on Respondent's materials, Investigator Robinson

calculated a penalty for the three - year time period of

November 6, 2003, through November 6, 2006. In calculating the

penalty, he assigned Class Code 5445, to the framing work

performed by Respondent ut ilizing the SCOPES Manual; multiplied

the class code's assigned approved manual rate with the payroll

per one hundred dollars, and then multiplied all by 1.5.

20. The approved manual rate for Class Code 5445

fluctuated from year to year, and Mr. Robinson 's penalty

worksheet reflected such fluctuations.

21. After several tries, the Order of Penalty Assessment,

which assessed a penalty of $18,937.37, was served on Respondent

by certified mail on March 1, 2007.

22. Respondent Myer did not dispute any of the formulas or

mathematics employed. He did not challenge his "employee"

status. He only asserted that the penalty is excessively high

for an honest mistake.

CONCLUSIONS OF LAW

23. The Division of Administrative Hearings has

jurisdiction over the pa rties and subject matter of this

proceeding, pursuant to Section 120.569 and Subsection

120.57(1), Florida Statutes.

24. Petitioner Department has the duty to go forward and

bears the burden of proof, by clear and convincing evidence, to

prove that Petit ioner violated the Workers' Compensation Act

during the relevant period and that the penalty assessments are

correct. Department of Banking and Finance Division of

Securities and Investor Protection v. Osborne Stern and Co. , 670

So. 2d 932 (Fla. 1996).

2 5. The charging document herein is very vague as to

statutory authority, but does set forth the proposed final

agency action of invoking a fine. Petitioner cites, within its

Proposed Recommended Order, Sections 440.05(3), 440.05(6),

440.10, 440.107(2)(d) 1., and 440.38, Florida Statutes.

26. At all times material, i.e. the three - year span of

2003 - 2006, Section 440.10(1)(a), Florida Statutes, has provided:

(1)(a) Every employer coming within the

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 the provisions of s. 440.13, of the

compensation payable under ss. 440.13,

440.15, and 440.16. Any contractor 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. (Emphasis added).

27. Pursuant to Section 440.10 and 440.38, Florida

Statutes, at all times material, every "employer" has been

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 is required.

See C&L Trucking v. Corbitt , 546 So. 2d 1185, 1187 (Fla. 5th DCA

1989).

28. At all times material, "employer" has been defined at

Section 440.02(16), Florida Statutes, as:

. . . the state and all political

subdivisions thereof, all public and quasi -

public corporations therein, every pe rson

carrying on any employment, and the legal

representative of a deceased person. . . .

If the employer is a corporation, parties in

actual control of the corporation,

including, but not limited to, the

president, officers who exercise brood

corporate po wers, directors and all

shareholders who directly own a controlling

interest in the corporation, are considered

the employer for the purpose of ss. 440.105,

440.106, and 440.107.

29. At all times material, at least 2003 - 2006 "employee"

was defined in Sec tion 440.02(15), Florida Statutes, in

pertinent part:

(a) "Employee" means 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 for hire or

appre nticeship, express or implied, oral or

written, whether lawfully or unlawfully

employed, and includes, but is not limited

to, aliens and minors.

(b) "Employee" means 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.

30. As strange as it sounds, Petitioner was both an

"employee" and an "employer" for purposes of Chapter 440,

Florida Statutes. Also, Section 440.107(17)(b)2. Florida

Statutes, has, from 2002 to date, defined "employment" with

respect to the construction industry as "all private employment

in which one or more employees are employed by the same

employer." (Emphasis supplied.)

31. The Workers' Compensation Law is fre quently amended.

Some of its new provisions take effect July 1, of a year; others

take effect October 1, of a different year. Because a statute

and rule limit the Agency to assessing a penalty over only three

years, the period involved in the instant pen alty assessment

runs from November 9, 2003 to December 31, 2004; January 1, 2005

to December 31, 2005, and January 1, 2006 to November 9, 2006.

( See Finding of Fact 18.) During these periods, Section

440.107(7)(d) has provided for 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 the employer failed to secure the payment of workers'

compensation required by Chapter 440.

32. Mr. Myer's cla im that he had an exemption or was

eligible for an exemption supports the proposition that he was,

in fact, a corporate officer. In Hagner v. United States , 285

U.S. 427, 430 (1932), the Court stated that, "[t]he rule is well

settled that proof that a let ter properly directed . . . creates

a presumption that it reached its destination in usual time and

was actually received by the person to whom it was addressed.”

See also In re East Coast Brokers & Packers, Inc. , 961 F.2d 1543

(1992) (adopting in Florida the standard stated by the United

States Supreme Court in Hagner ), and Brown v. Griffin

Industries, Inc., et al. , 281 So. 2d 897 (Fla. 1973). Under

such circumstances, Mr. Myer's protestation that he did not

receive the Agency's notice of the expiration of his exemption

is not persuasive. Received or not, the Agency's notice that an

exemption is about to expire does not eliminate the individual's

legal duty to re - file for an exemption every two years.

33. In this case, the system sadly penalizes Respon dent

Myer for incorporating and for not working for someone else,

which is a proposition contrary to "The American Dream," but

just as incorporation is designed to insulate an individual from

certain types of liability, the complicated structure of Chapter

440, is designed to protect those whom that individual might

hire as employees and those general contractors who might "sub -

out" work to him, in the event he, or one of his employee's,

suffers a construction industry accident. Because no one has

been inj ured and due to the hardship upon Respondent, this case

might be a situation in which the Agency would want to

compromise the fine or work out a payment schedule with

Respondent, but the law is clear that the fine is owed.

34. Petitioner Department has s atisfied its burden of

proving clearly and convincingly, that Petitioner failed to

secure the payment of "workers' compensation" as that term is

defined in Section 440.107(2), Florida Statutes, and that the

Agency correctly assessed the penalty prescribed in Section

440.107(7)(d), Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Facts and Conclusions of

Law, it is

RECOMMENDED that the Department of Financial Services,

Division of Workers' Compensation enter a final order approving

the penalty of $18,937.37 against Respondent.

DONE AND ENTERED this 28th day of September, 2007, in

Tallahassee, Leon County, Florida.

S

ELLA JANE P. DAVIS

Administrative Law Judge

Division of Administrative Hearings

T he 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 28th day of September, 2007.

ENDNOTES

1/ This cause spans September 2002, when Respondent's exemption

ended, to January 24, 2007, when the Agency first mailed its

charges to Respondent. The materials filed by Petitioner Agency

for official recognition do not adequately cover this e ntire

period. Therefore, the undersigned has done additional research

on the content of Chapter 440, Florida Statutes, in each

intervening year. Also, due to the indicated amendments to Rule

Chapter 69L - 6, the undersigned has also researched that

chapter 's evolution. For instance, the following Sections cited

by the Agency were frequently amended: Section 440.02 was

amended in 2002; Section 440.05 was amended in 2002, 2003, 2005,

and 2006; Section 440.10 was amended in 2002 and 2003; Section

440.107 was amended in 2002 and 2004; and Section 440.38 was

amended in 2002, 2003, and 2004. Florida Administrative Code

Chapter 69L - 6 was amended in 2002, 2003 and 2005. Rule 69L -

6.012 was frequently amended in its various parts. Rule 69L -

6.015 was amended in 20 03 and 2005.

2/ Mr. Robinson also observed a Mr. Freeman installing metal

framing. There is no evidence Mr. Freeman was an employee of

Mr. Myer d/b/a Custom Interiors & Design, Inc., so any evidence

concerning Mr. Freeman is irrelevant.

3/ Mr. Robins on's oral recitation of his conversation with a

Staff Masters' employee is uncorroborated hearsay and may not

form the basis of a finding of fact, regardless of

Mr. Robinson's subsequently memorializing the conversation in

his investigative report.

4/ Th e Order of Penalty Assessment constitutes the charging

document herein.

COPIES FURNISHED :

Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Keith Myer

d/b/a Custom Interiors & Design, Inc.

4621 Burdock Court

Middleburg, Florida 32068

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399 - 0300

Daniel 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 excep tions

to this Recommended Order should be filed with the agency that

will issue the final order in this case.