07-001879 Rainbow Roofing Services, Inc. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Tuesday, October 23, 2007.

Summary: Recommend an administrative fine for not securing workers` compensation insurance and working before the Stop Work Order released, although insurance coverage was obtained.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RAINBOW ROOFING SERVICES, INC., ) )

)

Petitioner, )

) Case No. 07-1879

vs. )

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Respondent. )

RECOMMENDED ORDER

Pursuant to notice, this cause was heard by Linda M. Rigot,

the assigned Administrative Law Judge of the Division of

Administrative Hearings, on August 24, 2007, by video

teleconference with sites in Lauderdale Lakes and Tallahassee,

Florida.

APPEARANCES

For Petitioner: Gary L. Brown, Esquire

Kelley, Kronenberg, Gilmartin,

Fichtel and Wander, P.A.

8201 Peters Road, Suite 4000

Fort Lauderdale, Florida 33324

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

The issue presented is whether Petitioner is required to

pay to the Department a penalty assessment, as set forth in the

3rd Amended Order of Penalty Assessment issued June 25, 2007.

PRELIMINARY STATEMENT

On June 20, 2006, the Department of Financial Services,

Division of Workers' Compensation, issued a Stop Work Order and

Order of Penalty Assessment against Petitioner Rainbow Roofing

Services, Inc., alleging that Petitioner had failed to secure

workers' compensation coverage, and Petitioner timely requested

an administrative hearing regarding that allegation. On

August 3, 2006, the Department issued its Amended Order of

Penalty Assessment. This cause was thereafter transferred to

the Division of Administrative Hearings to conduct the

evidentiary proceeding.

The Department's Motion to Amend Order of Penalty

Assessment was filed June 14, 2007, and again on June 25, 2007,

with the Department's 2nd Amended Order of Penalty Assessment

attached to the June 25 Motion. An Order Granting Motion to

Amend Order of Penalty Assessment was entered June 26, 2007, and

the 2nd Amended Order of Penalty Assessment was deemed filed and

served.

On July 16, 2007, the Department filed another Motion to

Amend Penalty Assessment, requesting leave to file a third

amended order of penalty assessment. That proposed amended

order was not attached to the Motion. An Order Granting

Respondent's Motion to Amend Order of Penalty Assessment was

entered July 24, 2007. The Department's 3rd Amended Order of

Penalty Assessment was admitted in evidence at the beginning of

the final hearing in this cause as the Department's Exhibit

numbered 26. The parties agree that the 3rd Amended Order of

Penalty Assessment is the subject of this proceeding.

The Department presented the testimony of Mark Mark, and by

way of deposition, Shawn Snider. Rainbow Roofing presented the

testimony of Paul Albert. Additionally, the Department's

Exhibits numbered 2-4, 7, 10, 12, 18, 20-24, and 26 were

admitted in evidence.

Although both parties requested leave to file proposed

recommended orders after the conclusion of the final hearing in

this cause, only the Department did so. That document has been

considered in the entry of this Recommended Order

FINDINGS OF FACT

1. Petitioner Rainbow Roofing Services, Inc., is a Florida

corporation transacting business in Broward County, Florida.

Paul Albert is the owner and president of Rainbow Roofing.

2. On June 20, 2006, one of the Department's investigators

Mark Mark was driving to work when he noticed men working on the

roof of a house. He stopped and learned that Rainbow Roofing

was the company performing the work.

3. When he arrived at his office, he checked various

records to ascertain who had obtained the building permit for

the work and whether the company had workers' compensation

coverage. He returned to the job site and spoke with the men

present. He then talked with Paul Albert by telephone.

4. Paul Albert had a corporate officer exemption from

workers' compensation. He advised Mark that the men on the job

site worked for Sampson Riley, a subcontractor of Albert's.

5. Although Albert had seen Riley's exemption when they

first started working together, Albert had not requested a copy

of the renewed exemption when that one expired. Riley's last

exemption had expired December 31, 1999.

6. On that same date, Mark issued and served on Albert a

Stop Work Order, together with an Order of Penalty Assessment

for an unspecified amount, and a Request for Production of

Business Records for Penalty Assessment Calculation due to

Rainbow Roofing's failure to have workers' compensation coverage

for its employees. The Request for Production included records

for the three-year period preceding the issuance of the Stop

Work Order.

7. The Stop Work Order recited that it would remain in

effect until the Department's Division of Workers' Compensation

issued an order releasing the Stop Work Order. Mark told Albert

that he needed to either obtain workers' compensation coverage

or enter into an employee leasing agreement in order to have the

Stop Work Order released.

8. Albert provided to the Department tax records, business

checking account records, business check ledgers, copies of

cancelled checks, and checking account statements for the years

2003, 2004, 2005, and 2006. The Department utilized these

records to compute the penalty it was assessing against Rainbow

Roofing. The Department issued an Amended Order of Penalty

Assessment on August 3, 2006, which contained a specific penalty

assessment amount. Two subsequent amendments resulted in the

3rd Amended Order of Penalty Assessment, issued June 25, 2007,

which is the subject of this proceeding.

9. On June 23, 2006, three days after the Stop Work Order

was entered, Albert obtained a quote from an employee leasing

company in Texas. He signed the written quote on June 26. On

June 28, Rainbow Roofing entered into a Staff Leasing Agreement

with AMS Staff Leasing, and on June 30, Rainbow Roofing's

employees completed applications for employment by AMS Staff

Leasing. On July 6, 2006, the former employees of Rainbow

Roofing became covered by workers' compensation insurance, and

Albert provided a copy of the certificate of coverage to the

Department's investigator the next day, as he had said that he

would.

10. Since Rainbow Roofing had come into compliance with

the requirement for workers' compensation coverage, Rainbow

Roofing re-commenced business operations on July 7, 2006, using

the employees who formerly worked for Rainbow Roofing but now

worked for AMS Staff Leasing. At the time that Rainbow Roofing

commenced working again, there was no penalty assessment which

needed to be paid, or even which could be paid. The Department

did not determine the amount of penalty it was assessing against

Rainbow Roofing until August 3, 2006.

11. On September 19, 2006, investigator Mark was driving

down the street. When he saw two Rainbow Roofing trucks, he

followed them to a job site. Albert and one of his leased

employees were doing clean-up work at a job site. Mark told

Albert that he was in violation of the Stop Work Order, and

Albert shut down the job.

12. Albert admits that Rainbow Roofing worked

approximately ten jobs between June 20, 2006, when the Stop Work

Order was issued, and September 19, 2006. Since the penalty for

working while a Stop Work Order is in effect is $1,000 a day,

investigator Mark contacted AMS Staff Leasing to obtain that

company's records regarding its employees leased to Rainbow

Roofing.

13. The Department obtained records from the Valleon

Group, a company that does marketing for AMS Staff Leasing under

some type of partnership agreement, according to Shawn Snider's

deposition testimony. As such, both companies have access to at

least some of each other's business records, and they share

control over those records. The records produced by Valleon

appear incomplete, and Snider testified that the dates on some

of them are not correct dates, but represent some internal

record-keeping system.

14. However, the Verification of Wages forms signed by

AMS' employees leased to Rainbow Roofing reflect wages paid for

five days a week commencing July 7, 2006, and continuing through

August 3, 2006. After that date, the records of whichever

company they belong to, AMS Staff Leasing or Valleon Group, are

not clear as to whether those employees were paid, let alone

whether they worked.

15. The Verification of Wages forms demonstrate that those

leased employees received wages for working 20 days. In

addition, since one employee was observed working by

investigator Mark on September 19, 2006, the Department has

proven that Rainbow Roofing worked 21 days while the Stop Work

Order was in effect.

16. Using the records of Rainbow Roofing which Albert gave

to him, investigator Mark calculated a penalty assessment to

cover the time period of June 21, 2003, through June 20, 2006,

the three years prior to the issuance of the Stop Work Order.

He obtained class codes from the SCOPES Manual, performed the

multiplication formula, and added the daily penalty for working

while the Stop Work Order was in effect. His calculations were

subsequently modified twice, resulting in the 3rd Amended Order

of Penalty Assessment, which is the subject matter of this

proceeding. His calculations must be again adjusted since the

Department only proved that Rainbow Roofing engaged in business

operations for 21 days while the Stop Work Order was in effect,

not the 41 days assumed by investigator Mark.

CONCLUSIONS OF LAW

17. The Division of Administrative Hearings has

jurisdiction over the subject matter hereof and the parties

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

18. The Department seeks to impose an administrative

penalty in this proceeding. The burden of proof, therefore, is

on the Department, and the Department must prove by clear and

convincing evidence that Rainbow Roofing failed to have workers'

compensation coverage and the appropriate amount of penalty

Rainbow Roofing should pay. Dept. of Banking & Finance,

Division of Securities & Investor Protection v. Osborne Stern &

Co. , 670 So. 2d 932 (Fla. 1996).

19. Section 440.10, Florida Statutes, requires every

employer to secure the payment of workers' compensation for the

benefit of its employees unless exempted or excluded under

Chapter 440, Florida Statutes. In furtherance thereof, Section

440.107(7), Florida Statutes, provides that failure to secure

the payment of workers' compensation is deemed an immediate

serious danger to the public health, safety, or welfare. That

Subsection further authorizes the Department to issue a Stop

Work Order, thus requiring that business to cease operations.

20. That Subsection further provides that a Stop Work

Order will remain in effect until released by the Department

upon the occurrence of two conditions: the employer has come

into compliance and the employer has paid any penalty assessed

by the Department. That Subsection further provides that the

Department may issue a conditional release if the employer has

come into compliance by obtaining workers' compensation coverage

and has entered into a payment schedule agreement with the

Department. There is no evidence that Rainbow Roofing has paid

the penalty assessment or entered into a payment schedule

agreement.

21. Subsection 440.107(7)(c), Florida Statutes, requires

the Department to assess a penalty of $1,000 per day against an

employer conducting business operations in violation of a stop-

work order. Subsection (7)(d) sets forth the formula for

calculating the penalty assessment as follows: a penalty equal

to 1.5 times the amount the employer would have paid in premiums

within the preceding 3-year period, or $1,000, whichever is

greater. The initial assessment was for $492,637.92, an amount

substantially greater than the statutory $1,000 minimum fine.

22. Both Subsections (7)(c) and (7)(d) are mandatory. The

intent of the employer is, therefore, irrelevant as is the

employer's ability to pay. Similarly, there is no deadline by

which the Department is required to calculate its penalty

assessment so an employer can re-commence business operations.

In this case, Rainbow Roofing commenced business operations as

soon as it came into compliance with workers' compensation

requirements, and there is no evidence that Rainbow Roofing

engaged in business operations, except for one day, after

August 3, 2006, the day the Department finally determined the

amount of penalty it was imposing.

23. Rainbow Roofing's failure to have workers'

compensation coverage for its employees on June 20, 2006,

required the Department to issue its Stop Work Order. Rainbow

Roofing did not contest the issuance of the Stop Work Order at

the final hearing in this cause; rather, it contested the amount

of penalty assessment sought by the Department.

24. As to the amount of penalty assessment for the lack of

coverage, investigator Mark testified that he followed the

statutory formula in making his calculations and used the SCOPES

Manual to obtain the appropriate codes for determining the

premiums that would have been paid. His testimony regarding

that computation being correct was not disputed at the final

hearing.

25. The Department's determination of the number of days

Rainbow Roofing operated while the Stop Work Order was in effect

was disputed, however. Although Albert admitted during the

final hearing that Rainbow Roofing had performed roofing work

before the Stop Work Order was released, he did not admit to the

number of days between June 20 and September 19, 2006, on which

such work took place. It was, therefore, the Department's

obligation to prove the number of days.

26. The documentation relied on by the Department was

inconclusive except for 20 days, and investigator Mark observed

Rainbow Roofing working on one additional day. The Department,

therefore, has only proven 21 days, rather than the 41 days on

which its 3rd Amended Order of Penalty Assessment was based, and

the amount assessed in that 3rd Amended Order, $525,760.08,

should be reduced by $20,000.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered assessing against

Rainbow Roofing a penalty in the amount of $505,760.08.

DONE AND ENTERED this 23rd day of October, 2007, in

Tallahassee, Leon County, Florida.

S

LINDA M. RIGOT

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 23rd day of October, 2007.

COPIES FURNISHED :

Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

Gary L. Brown, Esquire

Kelley, Kronenberg, Gilmartin,

Fichtel and Wander, P.A.

8201 Peters Road, Suite 4000

Fort Lauderdale, Florida 33324

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 32399-0307

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.