07-004479 C. R. Higdon Developer, L. L. C. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Wednesday, January 30, 2008.

Summary: Petitioner was not a contractor or employer and was not required to secure workers` compensation for workers on a personal building he contracted to have built.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

C. R. HIGDON DEVELOPER, )

L. L. C., )

)

Petitioner, )

)

vs. ) Case No. 07-4479

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Respondent. )

)

RECOMMENDED ORDER

This cause came on for final hearing before Harry L.

Hooper, Administrative Law Judge with the Division of

Administrative Hearings, on November 20, 2007, in Pensacola,

Florida.

APPEARANCES

For Petitioner: Michael James Rudicell, Esquire

Michael J. Rudicell, P.A.

4303 B Spanish Trail Road

Pensacola, Florida 32504

Douglas F. Miller, Esquire

125 Romana Street, Suite 800

Pensacola, Florida 32591

For Respondent: Douglas D. Dolan, Esquire

Colin Roopnarine, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

STATEMENT OF THE ISSUE

The issue is whether the Stop-Work Order and Amended Order

of Penalty Assessment are lawful.

PRELIMINARY STATEMENT

The Division of Workers' Compensation (Division), acting on

behalf of the Department of Financial Services (Department),

issued a Stop-Work Order (SWO) and Order of Penalty Assessment

to C. R. Higdon Developer, L. L. C. (Higdon, L. L. C.). The SWO

was issued at a construction site located at 6404 Rambler Drive,

Pensacola, Florida, on September 7, 2007. Higdon, L. L. C.,

duly requested an administrative hearing.

The Division forwarded the matter to the Division of

Administrative Hearings in a letter that was filed September 27,

2007. The hearing was set for November 20, 2007. On

October 12, 2007, the Division filed a Motion to Amend the Order

of Penalty Assessment, and on November 1, 2007, the Motion was

granted.

Although Higdon, L. L. C., was the nominal Petitioner, the

Division had the burden of proof and of going forward with the

evidence. At the hearing, Higdon, L. L. C., presented the

testimony of one witness. The Division presented the testimony

of one witness and offered seven exhibits that were accepted

into evidence.

A Transcript was filed on December 24, 2007. The parties

were granted an enlargement of time for filing their proposed

findings of fact and conclusions of law. Subsequently,

Petitioner timely filed its proposed findings of fact and

conclusions of law on January 15, 2008. Respondent filed its

proposed findings of fact and conclusions of law on January 16,

2008.

References to statutes are to Florida Statutes (2007)

unless otherwise noted.

FINDINGS OF FACT

1. The Division is a component of the Department of

Financial Services. The Department is charged with the

administration of portions of the "Workers' Compensation Law."

2. Higdon, L. L. C., is a limited liability corporation.

It is solely owned by Charles R. Higdon (Mr. Higdon).

Mr. Higdon also owns all of the stock of Barefoot Developers,

Inc. He is a licensed general contractor.

3. Michelle Newcomer is an Insurance Analyst II with the

working title of Workers' Compensation Compliance Investigator

and maintains an office in Pensacola, Florida. It is her job to

travel to work sites and to verify compliance with the Workers'

Compensation Law. She is authorized to issue an SWO and to

calculate and assess penalties.

4. On September 5, 2007, Ms. Newcomer went to a work site

located at 6404 Rambler Drive, Pensacola, Florida. This premise

was owned by Barefoot Developers, Inc. She observed several men

erecting a steel frame structure. She made inquiry into the

employment relationships of these workers and attempted to

determine whether the workers on the site were covered by

appropriate workers' compensation insurance.

5. Ms. Newcomer stated at the hearing that she was told by

several of the workers that they were employed by Higdon,

L. L. C.

6. Higdon, L. L. C., and its owner Mr. Higdon, was in the

residential development business and in the conduct of that

business, engaged in excavating and earth moving. On or about

September 5, 2007, Ms. Newcomer conducted a search in the

Coverage and Compliance Automated System (CCAS), a database that

reliably reveals whether or not a person is covered by a

workers' compensation policy of insurance. This search revealed

that Mr. Higdon was exempt from coverage by workers'

compensation insurance.

7. The CCAS search revealed that neither Mr. Higdon, nor

Higdon, L. L. C. held a policy of workers' compensation

insurance. However, according to the sworn testimony of

Mr. Higdon, it was the practice of Higdon, L. L. C., to lease

employees in the conduct of its business. Leased employees are

typically provided workers' compensation coverage by the leasing

company. Higdon, L. L. C., accomplished this through Kite

Insurance Company of Pensacola, Florida. Kite further arranged

for workers through a company named Howard Leasing.

8. Based on the information she had at the time, and after

consulting with her supervisor, Ms. Newcomer issued SWO number

07-386-1A on September 5, 2007. She also calculated a penalty

assessment. She posted the SWO at the job site and personally

served Mr. Higdon. Based on the information she then had, this

action was reasonable.

9. Ms. Newcomer also provided Mr. Higdon with a request

for business records. On advice of counsel, Mr. Higdon refused

to respond to the request for business records. Ms. Newcomer

then calculated a penalty by imputing the statewide average

weekly wage per employee for the period of noncompliance to

determine gross payroll for each employee.

10. Ms. Newcomer had compiled a list that identified the

workers she found at the site. She used a class code of 5040.

This code applies to persons erecting steel structures. She

used this code because the persons she observed at the work site

were engaged in that particular activity. She used this code to

produce the Amended Order of Penalty Assessment issued on

October 2, 2007.

11. In order to complete the worksheet resulting in the

Amended Order of Penalty Assessment, Ms. Newcomer figured the

gross payroll for the period she found to be the period of

noncompliance, in the case of each assumed employee, and divided

that by 100. She multiplied that figure by the approved manual

rate for each claimed employee. The approved manual rate is the

premium that is assigned for class code 5040, and it can vary

over time. The approved manual rate is set by the National

Council on Compensation Insurance.

12. The product obtained resulted in the theoretical

amount of premium that should have been paid for the assumed

employees. This figure was multiplied by 1.5 in order to obtain

the penalty for failure to obtain workers' compensation coverage

for each employee. The figures for each employee used in the

calculation were added and resulted in a total penalty

assessment of $853,036.80, which was the ultimate sum reported

in the Amended Order of Penalty Assessment.

13. Ms. Newcomer's calculations were accomplished in

accordance with the requirements of Subsection 440.107(7),

Florida Statutes, and Florida Administrative Code

Rules 69L-6.027 and 69L-6.028.

14. Mr. Higdon testified under oath that the steel

building that was being constructed at the Rambler Drive

premises was being built by J and T Home Improvements (J and T)

pursuant to a contract entered into between Mr. Higdon and

J and T. Mr. Higdon stated that he wanted a big building in

which he could store his recreational vehicles, boats, and

antique cars. He also wanted extra storage space for his son's

possessions. This testimony was unrebutted.

15. Mr. Higdon signed a contract with J and T in his own

name, not as president of Higdon L. L. C. He paid for the

construction work from his personal funds. The construction of

the steel building was not related to Mr. Higdon's usual

business of residential subdivision development. The building

was not to be used in any commercial endeavor. It was completed

in September 2007.

16. Ms. Newcomer did not learn of Mr. Higdon's contract

with J and T until the time of the hearing.

CONCLUSIONS OF LAW

17. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

proceeding. § 120.57(1), Fla. Stat.

18. Because administrative fines are penal in nature, the

Division has the burden to prove by clear and convincing

evidence that Higdon L. L. C., failed to be in compliance with

Chapter 440, Florida Statutes, by not securing the payment of

workers' compensation. Department of Banking and Finance,

Division of Securities and Investor Protection v. Osborne Stern,

Inc. , 670 So. 2d 932 (Fla. 1996) and L and W Plastering and

Drywall services, Inc. v. Department of Financial Services,

Division of Workers' Compensation , Case No. 06-3261 (DOAH,

March 16, 2007).

19. Section 440.107, Florida Statutes, announces a

Legislative finding that "the failure of an employer to comply

with the workers' compensation coverage requirements under this

chapter poses an immediate danger to public health, safety, and

welfare." It further provides a scheme for enforcing that

policy, including the imposition of penalties.

20. Subsections 440.10(1)(a) and 440.38(1), Florida

Statutes, require every employer coming within the provisions of

Chapter 440 to secure coverage under that Chapter.

21. Subsection 440.02(16)(a), Florida Statutes, provides

as follows:

440.02. Definitions--When used in this

chapter, unless the context clearly requires

otherwise, the following terms shall have

the following meanings:

* * *

(16)(a) "Employer" means the state and

all political subdivisions thereof, all

public and quasi-public corporations

therein, every person carrying on any

employment, and the legal representative of

a deceased person or the receiver or

trustees of any person. "Employer" also

includes employment agencies, employee

leasing companies, and similar agents who

provide employees to other persons. If the

employer is a corporation, parties in actual

control of the corporation, including, but

not limited to, the president, officers who

exercise broad corporate powers, directors,

and all shareholders who directly or

indirectly own a controlling interest in the

corporation, are considered the employer for

the purposes of ss. 440.105, 440.106, and

440.107.

22. Mr. Higdon was not a "person carrying on any

employment" with regard to the steel building. He was not an

employer "coming within the provisions of Chapter 440." In this

case, he simply contracted for the construction of a steel

building for his own personal use and, therefore, was not an

employer.

23. Mr. Higdon was an employer when engaged in his

business of development as a licensed general contractor but

that fact does not make him an employer with regard to every

construction activity in which he engages.

24. Mr. Higdon was not the contractor, as that term is

used in Subsection 440.10(1)(b), Florida Statutes. J and T was

not his subcontractor. To the contrary, Mr. Higdon was an

"owner," and J and T was the contractor. See Cuero v. Ryland

Group , 849 So. 2d 326 (Fla. 2d DCA 2003). As was the case with

Ryland Group , Mr. Higdon, through his solely owned corporation

Barefoot, Inc., was the owner of the Rambler Drive property, and

he entered into a contract with another for the purpose of

having a building constructed.

RECOMMENDATION

Based upon 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

dismissing the Stop Work Order and Amended Order of Penalty

Assessment.

DONE AND ENTERED this 30th day of January, 2008, in

Tallahassee, Leon County, Florida.

S

HARRY L. HOOPER

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 30th day of January, 2008.

COPIES FURNISHED :

Douglas D. Dolan, Esquire

Colin Roopnarine, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

Michael James Rudicell, Esquire

Michael J. Rudicell, P.A.

4303 B Spanish Trail Road

Pensacola, Florida 32504

Douglas F. Miller, Esquire

125 Romana Street, Suite 800

Pensacola, Florida 32591

Daniel Sumner, General Counsel

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-0307

Honorable Alex Sink

Chief Financial Officer

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 exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.