07-003625 Jesus Mijares vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Monday, September 15, 2008.

Summary: Petitioner was an "employer" as that term is used in the law and should have provided workers` compensation for his roofing employees.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JESUS MIJARES, )

)

Petitioner, )

)

vs. ) Case No. 07-3625

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS' COMPENSATION, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice a formal hearing was held on June 9,

2008, by video teleconference from West Palm Beach, Florida,

before J. D. Parrish, a designated Administrative Law Judge of

the Division of Administrative Hearings.

APPEARANCES

For Petitioner: R. Patrick Beatty, Esquire

32 East Ocean Boulevard

Post Office Drawer 2333

Stuart, Florida 34995

For Respondent: Colin M. Roopnarine, Esquire

Kristian Dunn, Esquire

Department of Financial Services

Division of Worker's Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

STATEMENT OF THE ISSUES

Whether the Petitioner was required to secure workers'

compensation insurance for employees as delineated by Subsection

440.107(2), Florida Statutes (2008), and, if so, whether he did

so. If Petitioner was required to provide insurance and did not,

this case must also address what penalty for such failure is

appropriate.

PRELIMINARY STATEMENT

The Respondent, Department of Financial Services, Division

of Workers’ Compensation (Respondent or Department), issued and

served a Stop-Work Order and Order of Penalty Assessment Number

06-056-D2 (Order) on the Petitioner, Jesus Mijares (Petitioner),

on February 15, 2006. The Order alleged that Petitioner failed

to abide by the requirements of the Workers' Compensation Law, by

failing to secure workers’ compensation insurance in compliance

with the requirements of Chapter 440, Florida Statutes. The

Order required Petitioner to cease all business operations.

On August 3, 2006, the Department issued to and served on

Petitioner, via certified mail, an Amended Order of Penalty

Assessment (Amended Order) assessing a penalty of $635,727.60.

The Order requiring Petitioner to cease all business operations

remained in effect with the issuance of the subsequent amended

orders of penalty assessment. Petitioner timely requested an

administrative hearing on August 10, 2007. The Department

promptly forwarded the matter to the Division of Administrative

Hearings for formal proceedings.

After that negotiations between the parties continued. To

that end, the Department moved for leave to amend the penalty

assessment. The request was granted and the case went forward

based upon a Second Amended Order of Penalty Assessment (Second

Amended Order). The Second Amended Order assessed a penalty in

the amount of $236,209.79.

At the hearing, the Department presented the live testimony

of the following witnesses: Kathleen Petracco, an investigator

employed by the Respondent; the deposition testimony of Joe

Jameson, owner of All American General Construction (Department

Exhibit 8); and Jesus Mijares, the Petitioner. The Petitioner

also testified in his own behalf. The Department’s Exhibits

numbered 1 through 11 were offered and received into evidence.

A Transcript of the proceedings was filed on June 26, 2008.

Based upon the pronouncement at the hearing, the parties'

proposed recommended orders were due within ten (10) after the

filing of the transcript, but the parties jointly requested an

extension of time. That motion was granted and the parties were

granted an extension of the deadline to August 7, 2008. This

deadline was further extended to August 12, 2008. Both parties

timely filed proposed order that have been fully considered in

the preparation of this order. Statutory references cited herein

relate to the 2006 Statutes unless otherwise noted.

FINDINGS OF FACT

1. The Department is the state agency responsible for

administering and enforcing the statutory requirement that

employers secure workers' compensation insurance for the benefit

of their employees. § 440.107, Fla. Stat. At all times material

to this case, the Department alleged the Petitioner is an

"employer" as that term is used within the law. In contrast, the

Petitioner has denied being an employer and maintains he was not

required to secure workers' compensation insurance for anyone.

2. The Petitioner is from Mexico but is domiciled in

Florida. He has been engaged in the business of roofing for

approximately twenty years.

3. Roofing is a construction activity under the workers'

compensation law.

4. On February 15, 2006, the Department's investigator,

Kathleen Petracco, along with an investigator from the Martin

County Building Department, Contractor Licensing, made a random

stop at 861 SW Bay Pointe Circle, Palm City, Florida.

Investigator Petracco observed nine workers performing roofing

work at that location.

5. Of the nine workers, only one spoke English well enough

to respond directly to inquiries presented by Investigator

Petracco. That individual, identified in this record as

"Victor," served as the translator for the other workers who

spoke Spanish. According to Victor, the lead worker (later known

to be Victor Briceno), he and the other eight workers all worked

was later determined to be Jesus Mijares, the Petitioner.

6. Through Victor, Investigator Petracco also interviewed

Remigio Lopez, Luis Velasquez, Rubin Hernandez, Antonio Briceno,

Jose Velasca, Sebastian Rodriguez and Marco Duran. All of the

workers represented that they worked for the Petitioner who paid

them $100.00 per day in either cash or by check.

7. Investigator Petracco contacted the Petitioner who

Steve Thaden) from All American General Construction (All

American) to go to the worksite with a crew to tear off a roof.

At that time the Petitioner admitted that the workers on the site

were his employees whom he paid $100 per day in either cash or by

check.

8. Joe Jameson is one of the owners of All American. The

company has been in busy since Hurricane Andrew struck Florida.

Mr. Jameson acknowledged that Steve Thaden (his nephew) had been

employed by the company but claimed that Mr. Thaden was not

authorized to hire the Petitioner or others to perform work on

jobsites. There is no evidence that the Petitioner and the nine

men at the jobsite in question were employees of All American on

the date Inspector Petracco visited the site.

9. An individual may be exempt from workers’ compensation

benefits. To be exempt, an application must be filed and the

procedures of the law must be met. None of the nine men on the

jobsite were exempt under the law.

10. The Department maintains a database (the Coverage and

Compliance Automated System or CCAS) of all workers’ compensation

exemptions in the State of Florida. Inspector Petracco found a

construction exemption for Jesus Mijares through the Paul E. Hahn

Corporation, with an effective period of February 28, 2004,

through February 27, 2006.

11. Sections 440.107(3) and 440.107(7)(a), Florida

Statutes, authorize the Department to issue stop work orders to

employers unable to provide proof of workers’ compensation

coverage. Failure to provide such proof is deemed “an immediate

serious danger to public health, safety, or welfare. . . ,” and

the Department has no discretion in issuing a stop-work order.

See § 440.107(7)(a), Fla. Stat.

12. Prior to issuing a stop-work order, the Department’s

investigator must determine: the identity of the employer;

whether the employer has secured the payment of workers’

compensation for the workers on a job site, either through a

policy or employee leasing; the type of work being performed by

the workers; and the type of remuneration (for example, check or

cash). In this case, Investigator Petracco accepted the

representations of the Petitioner and the nine workers at the

site.

13. Accordingly, Investigator Petracco determined that the

Petitioner had employees operating at a job site for whom he had

failed to secure the payment of workers’ compensation insurance.

14. Based upon this determination, on February 15, 2006,

the Department issued to, and personally served on Petitioner, a

stop-work order and order of penalty assessment for failing to

obtain coverage that meets the requirements of Chapter 440,

Florida Statute, and the Insurance Code, Chapter 726, Florida

Statutes (2006). Also at that time, Investigator Petracco issued

a Request for Production of Business Records for Penalty

Assessment Calculation (Records Request) to Petitioner. The

Records Request required Petitioner to produce business records

for a period of three years, from February 15, 2003, through

February 15, 2006.

15. Employers working on job sites in Florida are required

to keep business records that enable the Department to determine

whether the employer is in compliance with the workers'

compensation law. At the time the Order was issued, and pursuant

to Section 440.107(5), Florida Statutes, the Department had in

effect Florida Administrative Code Rule 69L-6.015. The Rule

provides, in part:

In order for the Department to determine that

an employer is in compliance with the

provisions of Chapter 440, F.S., 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 reinstatement 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,

attendance 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 principals

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 pay period during the

contract period identifying each worker by

name, address, 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

payperiod by each worker, 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, credit 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, Department of Unemployment

Compensation UCT-6 forms and any other forms

or reports prepared by the business or on its

behalf for

filing with the Florida Department of

Unemployment Compensation.

16. The Petitioner failed to provide any of the requested

records, including his federal tax returns. The Petitioner

failed to provide a credible explanation as to why he did not

provide the records requested. Further, the Petitioner's self-

serving assertions at the hearing that the nine men were not his

employees has not been deemed credible. It is undisputed that

nine workers were performing a roofing construction service at

the jobsite. They were dispatched to the site by the Petitioner,

paid a daily wage by the Petitioner, and were accountable to the

Petitioner for the quality of their work performance.

17. When an employer fails to provide requested business

records that the statute requires it to maintain and to make

those records available to the Department, the Respondent may

impute that employer’s payroll using the statewide average weekly

wage as defined in Section 440.12(2), Florida Statutes,

multiplied by a factor of l.5. See § 440.107(7)(e), Fla. Stat.,

and Fla. Admin. Code R. 69L-6.028. Based upon the foregoing, the

Department imputed the gross payroll for the entire period for

which the requested business records were not produced.

18. By imputing the gross payroll of the employees

utilizing the average weekly wage in effect at the time the stop-

work order was issued, the Department calculated a penalty for

the time period of October 1, 2003, through February 15, 2006.

The average weekly wage was $683.00 in 2006.

19. Investigator Petracco assigned a class code to the type

of work performed by Petitioner utilizing the SCOPES Manual,

multiplied the class code’s assigned approved manual rate by the

imputed gross payroll per $100.00, and then multiplied all by

1.5. She then utilized the imputed payroll for the same number

of employees for each of the years assessed pursuant to Florida

Administrative Code Rule 69L-6.028(2). The Amended Order was

issued and assessed a penalty of $635,727.60. That Amended Order

was served on Petitioner by certified mail on August 3, 2006.

20. Investigator Petracco acknowledged that the approved

manual rate for class codes may fluctuate from year to year and

the penalty worksheet reflected any such fluctuations for the

computations she performed. Additionally, Investigator Petracco

did not include the Petitioner on the penalty worksheet, and did

not factor him into the penalty calculation because he possessed

a valid workers’ compensation exemption for the penalty period.

21. Later, after further reflection on the matter,

Investigator Petracco recalculated the penalty assessment. This

decision was based, in part, upon Investigator Petracco giving

the Petitioner the benefit of the doubt in accepting the

assertions that the employees were paid at a rate of $100 per day

and by going back only to January 1, 2005. The Department relied

on these assertions and thus recalculated the penalty to the

reduced amount of $236,209.79.

22. Investigator Petracco issued the Second Amended Order

which was served via a Motion to Amend Order of Penalty

Assessment. The Motion to Amend Order of Penalty Assessment was

granted by order on February 11, 2008.

23. Investigator Petracco also utilized business records

that were subsequently provided by Petitioner’s counsel in

response to the prior records request. In so doing, Jesus

Mijares was included in the penalty for the period of May 15,

2003, through January 23, 2004, for which he was paid

remuneration (in the form of checks written to him), and during

which he did not have a current, valid workers’ compensation

exemption. These checks were made payable directly to Jesus

Mijares from the Paul E. Hahn Company. That company did not have

a workers’ compensation policy or any coverage for its employees.

24. Although the Petitioner claimed that all of the workers

were employees of various companies that he procured them for,

there are no copies of checks or any records that would

corroborate this assertion. The Petitioner further asserts that

he was the victim of the matter.

25. The credible evidence supports the findings that the

Petitioner was contacted to perform roofing construction, that he

procured the workers to do the work requested, that the workers

were paid a daily rate of $100.00 (either in cash or check), and

that the Petitioner was responsible for assuring that the roofing

work was performed correctly. The Petitioner has been doing

roofing for 20 years. Presumably, he performs the work in a

satisfactory manner. The Petitioner does not have workers'

compensation insurance coverage for any of the men who work for

him. Moreover, the men are not covered by any of the general

contractors for whom the Petitioner does the work. Finally, the

men are not part of an employment pool that covers them.

26. The Petitioner provided copies of checks to the

Department from the Paul E. Hahn Company that were provided to

other individuals who were employees of that company. The checks

were remuneration to the employees only. In contrast, the

Petitioner was unable to explain why some employees received

checks and he received checks from which he was to pay other

workers. Based upon the most credible assessment of the facts,

it must be found that the Petitioner operated as a subcontractor.

He paid his employees from the check written to him.

27. Based upon the checks written to him by the Paul E.

Hahn Company, based on the lack of records provided by the

Petitioner, and the past trend of his work history as a roofing

subcontractor, together with the statements from the men on the

jobsite, it is found that the Petitioner was an employer within

the meaning of the workers' compensation law.

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings. § 120.57(1), Fla. Stat. (2008).

29. The Department has the burden of proof in this case and

must show by clear and convincing evidence that the Petitioner

violated the Workers' Compensation Law during the relevant period

and that the penalty assessment is correct. Department of

Banking and Finance Department of Securities and Investor

Protection v. Osborne Stern and Co. , 670 So. 2d 932 (Fla. 1996).

30. 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). In this case it is concluded

the Petitioner acted as a subcontractor and was therefore an

"employer" as provided by law.

31. Section 440.10(1), Florida Statutes, 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. . . .

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

employment..." § 440.02(16), Fla. Stat. "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 same employer." § 440.02(17)(a) and (b)2.

Fla. Stat.

33. "Employee" is defined in Section 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

apprenticeship, express or implied, oral or

written, whether lawfully or unlawfully

employed . . . .

34. Pursuant to Section 440.107(3)(g), Florida Statutes,

(1) The department shall enforce workers'

compensation coverage requirements, including

the requirement that the employer secure the

payment of workers' compensation. . . . [and]

the department shall have the power to:

* * *

(g) Issue stop-work orders, penalty

assessment orders, and any other orders

necessary for the administration of this

section.

35. Section 440.107(7)(d)1., Florida Statutes, provides

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.

36. Employers are obligated to maintain records for the

prior three years to prove compliance with the coverage

requirements of Chapter 440, Florida Statutes. See also Fla.

Admin. Code R. 69L-6.015. The Petitioner cannot permissibly

ignore the statutes and rule without defeating the purposes of

the Workers’ Compensation Law.

37. Under the “Required Records Doctrine” of the

Administrative Procedure Act, an agency may request the

production of any records that it must keep and maintain by law.

See Saviak v. Gunter , 379 So. 2d 450 (Fla. 3d DCA 1980); Sheppard

v. Florida State Board of Dentistry , 369 So. 2d 629 (Fla. 1st DCA

1979). An agency may also use investigatory devices permissible

by statute, that are enforceable even in the absence of

preexisting proof of statutory non-compliance. See Florida Dept.

of Insurance & Treasurer v. Bankers Insurance Co. , 694 So. 2d 70

(Fla. 1st DCA 1997). In this case, the Department, under the

authority of Section 440.107(5), Florida Statutes, and Florida

Administrative Code Rule 69L-6.015, properly issued a records

request for penalty calculation. The Petitioner did not comply

with that request.

38 Under these circumstances, the Department is charged

with assessing a penalty through imputation of the gross payroll.

Pursuant to Section 440.107(7)(e), Florida Statutes:

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 s. 440.12(2) multiplied by 1.5.

39. 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.

40. Based on the foregoing, since the Petitioner did not

provide records sufficient to compute payroll and a penalty, the

Department was mandated by law to impute the gross payroll based

upon the findings of its investigation, and assess a penalty for

the period for which the records were requested for the same

number of employees.

41. Big Bend Hospice, Inc., v. Agency for Health Care

Administration , DOAH Case No. 01-4415 (Final Order filed April 8,

2003), provides support for the imputation of gross payroll:

When an employer fails to provide requested

Business records that the statutes requires

it to maintain, and to make such records

available to the Department within 45 days of

the request, the Department, effective

October 1, 2003, is authorized to impute that

employer's payroll using "the statewide

average weekly wage as defined in Section

440.12(2), multiplied by l.5." §

440.107(7)(e), Fla. Stat., and Fla. Admin.

Code R. 69L-6.028. Petitioner thus imputed

the payroll for the entire period for which

the requested business records were not

produced.* * * Accordingly, under these

circumstances, Petitioner is charged with

assessing a penalty through imputation of the

payroll.

42. The Legislature did not intend mere refusal to be a

defense to the Department’s records request. It recognized that

some employers would refuse such requests in an attempt to avoid

the Department’s penalty. The Department’s mandate to impute

gross payroll when an employer fails to provide records

sufficient to calculate a penalty has been upheld in Twin City

Roofing Construction Specialists, Inc. v. State of Florida,

Department of Financial Services , 969 So. 2d 563, 566 (Fla. 1st

DCA 2007), wherein the court stated:

The legislature has recognized that in order

to enforce compliance with the requirement to

secure the payment of workers' compensation,

companies would have to maintain business

records and produce them to the Department

upon request. § 440.107(3), Fla. Stat.

(2005). The Department, pursuant to section

440.107, Florida Statutes, has implemented

its own rules requiring employers to keep

detailed employment records and to hand them

over when requested. See Fla. Admin. Code R.

69L-6.015. When, as here, an employer

refuses to provide business records, the

Division is required to impute the missing

payroll for the period requested in order to

assess the penalty. § 440.107(7)(e), Fla.

Stat. (2005).

43. Florida Administrative Code Rule 69L-6.028(3) states:

If subsequent to imputation of weekly payroll

pursuant to subsection (2) herein, but before

the expiration of forty-five calendar days

from the receipt by the employer of written

request to produce business records, the

employer provides business records sufficient

for the department to determine the

employer’s payroll for the period requested

for the calculation of the penalty pursuant

to Section 440.107(7)(e), F.S., the

department shall recalculate the employer’s

penalty to reflect the payroll information

provided in such business records.

44. The Petitioner failed to provide the requested tax

records which may have provided some proof of his status as an

employee and not an employer. In fact, the Petitioner could have

shown that he was the employee of more than one company for the

subject time. Without records it is impossible to know the

actual earnings.

45. Florida Administrative Code Rule 69L-6.028(3) does not

require the Department to impute Petitioner’s gross payroll if

records are received after 45 days. The Department could have

refused to accept the records provided by Petitioner’s attorney

and proceeded with the Amended Order, which would have resulted

in a penalty of $635,727.60. Instead, the Department exercised

discretion and accepted the records, relied on the statements

made by the Petitioner's employees on the job site that they were

paid at the rate of $100/day, and recalculated the penalty.

46. The weight of the creditable evidence supports the

conclusion that the Petitioner acted as a roofing subcontractor,

procured labor for roofing purposes, paid his employees at the

rate of $100/day, and was required to obtain workers'

compensation coverage for such employees.

47. There is competent and substantial evidence to support

the Department’s issuance of a stop work order to Petitioner

because it was shown that Petitioner failed to secure the payment

of workers’ compensation for the workers on the job site. The

Department met its burden of proof and established by clear and

convincing evidence that Petitioner failed to secure the payment

of workers’ compensation as that term is defined in Section

440.107(7)(2), Florida Statutes correctly imputed Petitioner’s

payroll, then correctly recalculated the penalty.

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 sustaining

the Second Amended Order of Penalty Assessment and imposing a

penalty in the amount of $236,209.79 against this Petitioner.

DONE AND ENTERED this 15th day of September, 2008, in

Tallahassee, Leon County, Florida.

___________________________________

J. D. Parrish

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 15th day of September 2008.

COPIES FURNISHED :

Colin M. Roopnarine, Esquire

Kristian Dunn, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

R. Patrick Beatty, Esquire

32 East Ocean Boulevard

Post Office Drawer 2333

Stuart, Florida 34995

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 32399-0307

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.