07-003948 S.A.C., Llc vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Tuesday, March 25, 2008.

Summary: Petitioner failed to maintain workers` compensation coverage for one of its employees and did not provide payroll records for employee. Therefore, Petitioner is liable for penalty assessment for a three-year period.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

S.A.C., LLC, )

)

Petitioner, )

)

vs. ) Case No. 07-3948

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Respondent. )

)

RECOMMENDED ORDER

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

on January 25, 2008, in Sarasota, Florida, before Administrative

Law Judge Carolyn S. Holifield of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Thomas H. Duffy, Esquire

Department of Financial Services

200 East Gaines Street, 6th Floor

Tallahassee, Florida 32399

For Respondent: No appearance

STATEMENT OF THE ISSUE

The issue is whether Respondent, Department of Financial

Services, Division of Workers' Compensation, properly assessed a

penalty of $90,590.42 against Petitioner, S.A.C., LLC.

PRELIMINARY STATEMENT

On June 20, 2007, Respondent, Department of Financial

Services, Division of Workers' Compensation ("Department"),

issued a Stop Work Order and Order of Penalty Assessment

No. 07-125-D3 ("the Order") directing Petitioner, S.A.C., LLC,

("S.A.C." or "S.A.C., LLC.") to cease business operations and

assessed a penalty pursuant to Subsection 440.107(7)(d), Florida

Statutes. 1/ The Order did not give a specific penalty assessment

amount, but gave the statutory formula for calculating the

penalty. 2/ On July 17, 2007, the Department issued Amended Order

of Penalty Assessment No. 07-125-D3 ("Amended Order" or "Amended

Order of Penalty Assessment"). The Amended Order assessed

S.A.C. a penalty of $90,590.42. S.A.C., through its attorney,

challenged the penalty assessment and requested an

administrative hearing.

As indicated above, the case was noticed for hearing on

January 25, 2008, in an Order Rescheduling Hearing issued

December 26, 2007, which was mailed to S.A.C. at its address of

record. However, despite a 20-minute delay in convening the

hearing, at the time and place designated in the notice, no one

appeared on behalf of S.A.C.

At hearing, the Department presented the testimony of

Colleen Wharton, an Insurance Analyst II for the Department.

The Department's Exhibits 1 through 6 were admitted into

evidence. No testimony or evidence was presented on behalf of

S.A.C.

The Transcript of the hearing was filed on February 7,

2008. The Department filed a Proposed Recommended Order which

has been considered in preparation of this Recommended Order.

FINDINGS OF FACT

1. The Department is the state agency responsible for

enforcing the statutory requirement that employers secure

payment of workers' compensation for the benefit of their

employees pursuant to Section 440.107, Florida Statutes.

2. At all times relevant to this proceeding, Petitioner,

S.A.C., LLC, was a corporation domiciled in Florida. S.A.C.'s

2007 Limited Liability Company Annual Report lists its principal

place of business as 626 Lafayette Court, Sarasota, Florida,

34236, and its mailing address as Post Office Box 49075,

Sarasota, Florida 34230.

3. At all times relevant to this proceeding, William R.

Suzor was the president and managing member of S.A.C.

4. Collen Wharton is an Insurance Analyst II with the

Department. In this position, Ms. Wharton conducts inspections

to ensure that employers are in compliance with the law.

5. On June 20, 2007, Ms. Wharton conducted a compliance

check at 2111 South Osprey Avenue in Sarasota, Florida. During

the compliance check, Ms. Wharton observed three males working

at that location. The three men were framing a single-family

house that was under construction. This type of work is

carpentry, which is considered construction.

6. During the compliance check, Ms. Wharton asked David

Crawford, one of the men working at the site, who was their

employer. Mr. Crawford told Ms. Wharton that he and the other

two men worked for S.A.C., but were paid by a leasing company.

Mr. Crawford told Ms. Wharton that the company was owned by

Mr. Suzor and, in response to Ms. Wharton's inquiry, he gave her

Mr. Suzor's telephone number.

7. In addition to Mr. Crawford, the other workers at the

site were identified as Terry Jenkins and Frank Orduno.

8. By checking the records the Department maintains in a

computerized database, Ms. Wharton determined that S.A.C. did

not carry workers' compensation insurance, but had coverage on

its employees through Employee Leasing Solutions, an employee

leasing company. She also determined, by consulting the

Department's database, that none of the men had a workers'

compensation exemption.

9. Ms. Wharton telephoned Employee Leasing Solutions,

which advised her that two of the workers at the site,

Mr. Crawford and Mr. Jenkins, were on the roster of employees

that the company maintained. The company advised her that the

other worker, Mr. Orduno, was not on its roster of employees.

This information was verified by an employee list that the

leasing company provided to Ms. Wharton.

10. On June 20, 2007, after determining that one worker at

the work site had no workers' compensation coverage, Mr. Wharton

prepared a Stop-Work Order. She then telephoned Mr. Suzor, told

him that he had one worker at the site who did not have workers'

compensation coverage and requested that he come to the work

site. During the conversation, Mr. Suzor advised Ms. Wharton

that Mr. Crawford was in charge at the work site, that she could

give the Stop-Work Order to Mr. Crawford, and that he

(Mr. Suzor) would meet her the following day.

11. Ms. Wharton, after she telephoned Mr. Suzor, she

conferred with her supervisor and then issued Stop-Work Order

No. 07-125-D3, posting it at the work site and serving it on

Mr. Crawford.

12. On June 21, 2007, Mr. Suzor met with Ms. Wharton at

her office. During that meeting, Ms. Wharton served a copy of

Stop-Work Order No. 07-125-D3 on Mr. Suzor. She also served him

with a Request for Production of Business Records for Penalty

Assessment Calculation ("Request for Business Records").

13. The Request for Business Records listed specific

records that Mr. Suzor/S.A.C. should provide to the Department

so that the Department could determine the workers who S.A.C.

paid during the period of June 19, 2004, through June 20, 2007.

14. The Request for Business Records notes that the

requested records must be produced within five business days of

receipt. According to the Request for Business Records, if no

records are provided or the records provided are insufficient to

enable the Department to determine the payroll for the time

period requested for the calculation of the penalty in

Subsection 440.107(7)(d), Florida Statutes, "the imputed weekly

payroll for each employee, . . . shall be the statewide average

weekly wage as defined in section 440.12(2), F.S. multiplied

by 1.5."

15. S.A.C. did not respond to the Department's Request for

Business Records.

16. On July 17, 2007, the Department had received no

records from S.A.C. Without any records, Ms. Wharton had no

information from which she could determine an accurate

assessment of S.A.C.'s payroll for the previous three years.

Therefore, Ms. Wharton calculated the penalty based on an

imputed payroll.

17. In her calculations, Ms. Wharton assumed that

Mr. Orduno worked from June 21, 2004, through June 20, 2007, and

that he was paid 1.5 times the state-wide average weekly wage

for the class code assigned to the work he performed for each

year or portion of the year. The Department then applied the

statutory formula set out in Subsection 440.107(7)(d), Florida

Statutes. Based on that calculation, the Department correctly

calculated S.A.C.'s penalty assessment as $90,590.42, as

specified in the Amended Order of Penalty Assessment dated

July 17, 2007.

18. The Amended Order of Penalty Assessment reflecting the

correct penalty amount was served on S.A.C.'s attorney, John

Myers, Esquire, by hand-delivery, on July 17, 2007. 3/

19. On July 21, 2007, S.A.C., through its former counsel,

filed a Petition for Hearing.

CONCLUSIONS OF LAW

20. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this

proceeding pursuant to Section 120.569 and Subsection 120.57(1),

Florida Statutes.

21. Administrative fines are penal in nature. Department

of Banking and Finance, Division of Securities and Investor

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

Therefore, the Department bears the burden of proof herein by

clear and convincing evidence.

22. Subsection 440.10(1), Florida Statutes, requires every

employer coming within the provisions of Chapter 440, Florida

Statutes, to secure coverage under that chapter.

23. An "employer" is defined as "every person carrying on

employment. . . ." An "employee" is defined as "any person who

receives remuneration from an employer for the performance of

any work or service while engaged in any employment."

§§ 440.02(15) and (16), Fla. Stat.

24. Section 440.107, Florida Statutes, authorizes the

Department to issue Stop-Work Orders and Penalty Assessment

Orders in its enforcement of workers' compensation coverage

requirements and reads, in pertinent part:

(2) For purposes of this section,

"securing the payment of workers'

compensation" means obtaining coverage that

meets the requirements of this chapter and

the Florida Insurance Code. . . .

* * *

(7)(d)1. In addition to any penalty,

stop-work order, or injunction, the

department shall assess against any employer

who has failed to secure the payment of

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.

* * *

(e) 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.

25. Florida Administrative Code Rule 69L-6.028 reads, in

pertinent part:

(1) In the event an employer fails to

provide 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 impute payroll at any time after the

expiration of fifteen business days after

receipt by the employer of a written request

to produce such business records.

(2) When an employer fails to provide

business records sufficient to enable the

department to determine the employer's

payroll for the period requested for

purposes of calculating the penalty provided

for in Section 440.107(7)(d), F.S., the

imputed weekly payroll for each employee,

corporate officer, sole proprietor or

partner for the portion of the period of the

employer's non-compliance occurring on or

after October 1, 2003, shall be calculated

as follows:

(a) 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 . . . 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.

* * *

(c) If a portion of the period of non-

compliance includes a partial week of non-

compliance, the imputed weekly payroll for

such partial week of non-compliance shall be

prorated from the imputed weekly payroll for

a full week.

26. Section 468.520, Florida Statutes, reads, in pertinent

part, as follows:

(4) "Employee leasing" means an

arrangement whereby a leasing company

assigns its employees to a client and

allocates the direction of and control over

the leased employees between the leasing

company and the client. . . .

(5) "Employee leasing company" means a

sole proprietorship, partnership,

corporation, or other form of business

entity engaged in employee leasing.

(6) "Client company" means a person or

entity which contracts with an employee

leasing company and is provided employees

pursuant to that contract.

27. At all times relevant hereto, Petitioner was an

employer engaged in the construction industry which was not in

compliance with the requirements of Chapter 440, Florida

Statutes, of securing workers' compensation insurance for all of

its employees.

28. S.A.C. was a client company of an employee leasing

company, Employee Leasing Solutions. Only the employees leased

from Employee Leasing Solutions were covered under Employee

Leasing Solutions' workers' compensation coverage. One of

S.A.C.'s three workers performing construction work at a job

site on June 20, 2007, was not covered under Employee Leasing

Solutions' workers' compensation coverage.

29. The Department properly applied the statutorily

prescribed guidelines and arrived at the correct penalty

assessment of $90,590.42.

RECOMMENDATION

Based upon the Findings of Fact and Conclusions of Law,

it is

RECOMMENDED that Respondent, Department of Financial

Services, Division of Workers' Compensation, enter a final order

which affirms the Amended Order of Penalty Assessment issued

July 17, 2007, assessing a penalty of $90,590.42, and the

Stop-Work Order issued to Petitioner, S.A.C., LLC, on June 20,

2007.

DONE AND ENTERED this 25th day of March, 2008, in

Tallahassee, Leon County, Florida.

S

CAROLYN S. HOLIFIELD

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 25th day of March, 2008.

ENDNOTES

1/ All references are to 2007 Florida Statutes, unless

otherwise indicated.

2/ The Order stated, "[a] penalty against the Employer is

hereby Ordered in an Amount: 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 payment of workers' compensation, required

by this chapter within the preceding 3-year period, or $1,000,

whichever is greater. Section 440.107(7(d). . . . The penalty

may be amended until a Final Order . . . is issued."

3/ The Department's initial contact was with Mr. Suzor.

However, it was Mr. Myers who submitted a Petition for Hearing.

Pursuant to an Order issued November 14, 2007, Mr. Myers was

allowed to withdraw from the case.

COPIES FURNISHED :

William Suzor

S.A.C., LLC

Post Office Box 49075

Sarasota, Florida 34230

Thomas H. Duffy, Esquire

Department of Financial Services

200 East Gaines Street, 6th Floor

Tallahassee, Florida 32399

William Suzor

S.A.C., LLC

626 Lafayette Court

Sarasota, Florida 34236

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.