07-004869 Liberty Towing And Recovery, Inc. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Friday, May 16, 2008.

Summary: Petitioner failed to provide workers` compensation insurance; the penalty is appropriate.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LIBERTY TOWING AND )

RECOVERY, INC., )

)

Petitioner, )

)

vs. ) Case No. 07-4869

)

DEPARTMENT OF FINANCIAL SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative

Hearings, by its duly-designated Administrative Law Judge,

Jeff B. Clark, held an administrative hearing in this case on

April 3, 2008, in Sanford, Florida.

APPEARANCES

For Petitioner: John Douglas Daw, Esquire

2250 Lucien Way, Suite 100

Maitland, Florida 32751

For Respondent: Thomas H. Duffy, Esquire

Department of Financial Services

200 East Gaines Street, Sixth Floor

Tallahassee, Florida 32399-4229

STATEMENT OF THE ISSUES

The issues are whether Respondent appropriately issued a "Stop Work" Order; whether certain employees were exempt from workers' compensation coverage; whether Respondent correctly

calculated the assessed penalty; and whether Petitioner was

given three days to produce certain records.

PRELIMINARY STATEMENT

On September 7, 2007, Respondent, Department of Financial

Services, Division of Workers' Compensation, issued a Stop Work

Order to Petitioner, Liberty Towing and Recovery, Inc., alleging

that Petitioner had failed to obtain workers' compensation

insurance coverage for its employees and ordering Petitioner to

immediately stop work and cease all business operations. On

September 10, 2007, based on records obtained during the

investigation, Respondent issued an Amended Order of Penalty

Assessment of $66,762.01. On September 28, 2007, Petitioner

filed a Petition for Administrative Hearing.

On October 24, 2007, Respondent forwarded the case to the

Division of Administrative Hearings. On October 25, 2007, an

Initial Order was sent to both parties requesting mutually

convenient dates for a final hearing. Based on the response of

the parties, on December 3, 2007, the case was scheduled for

final hearing on January 11, 2008, in Sanford, Florida.

Pursuant to an Order of Pre-hearing Instructions, on

January 2, 2008, the parties filed a Pre-hearing Statement that

included stipulated facts. Where appropriate, these stipulated

facts are included in the Findings of Fact herein. On

January 7, 2008, Petitioner filed an unopposed Motion for

Continuance; the motion was granted. The case was rescheduled

for February 12, 2008. On February 11, 2008, Respondent filed

an unopposed Motion for Continuance; that motion was granted.

The case was rescheduled for April 3, 2008, at the request of

the parties.

At the rescheduled final hearing, Respondent presented the

testimony of Hector Beauchamp, an investigator for the Division

of Workers' Compensation, and offered Exhibits numbered 1

through 7, which were admitted into evidence. Petitioner

presented the testimony of Warren Samuels and offered no

exhibits. At Respondent's request, official notice was taken of

Chapter 440, Florida Statutes (2007), and Florida Administrative

Code Rule Chapter 69L-6.

A Transcript was filed on April 28, 2008. Respondent filed

Proposed Findings of Fact and Conclusions of Law on May 7, 2008.

Unless otherwise noted all references are to Florida

Statutes (2007).

FINDINGS OF FACT

Based upon the testimony and evidence received at the

hearing, the following facts were established by clear and

convincing evidence:

1. Respondent is the state agency responsible for

enforcing the statutory requirement that employers secure the

payment of workers' compensation for the benefit of their

employees.

2. Petitioner, Liberty Towing and Recovery, Inc., a

Florida corporation, was engaged in business operations from

September 7, 2004, through September 7, 2007.

3. A Stop Work Order was issued to Petitioner on

September 7, 2007, and an Amended Order of Penalty Assessment

(with a penalty worksheet) was served on Respondent on

September 10, 2007.

4. In September 2007, Hector Beauchamp received

information that Petitioner was possibly in violation of the

coverage requirements of Chapter 440, Florida Statutes.

Mr. Beauchamp researched the matter by reviewing Petitioner's

Unemployment Compensation Tax records on the Florida Department

of Revenue website; its corporate filings on the Florida

Department of State, Division of Corporations', database; and

his own agency's database known as the Coverage and Compliance

Automated System, or the acronym, "CCAS."

5. From the aforementioned records, he determined that

Petitioner had at least four employees from September 2004,

through September 2007, that Farrell Samuels and Warren Samuels

were listed as Petitioner's corporate officers, that Petitioner

did not have workers' compensation insurance coverage, and that

no one in the company had workers' compensation coverage

exemption.

6. On September 7, 2007, Mr. Beauchamp visited

Petitioner's place of business in DeBary, Florida. There he

spoke with Warren Samuels, who identified himself as

Petitioner's vice president. Mr. Beauchamp verified that

neither Warren Samuels nor Farrell Samuels, the corporate

president, had a valid workers' compensation exemption from

September 7, 2004, through September 7, 2007; that no other

employee of Petitioner had a workers' compensation exemption

while employed from September 7, 2004, through September 7,

2007; and that Petitioner did not have workers' compensation

insurance coverage for its employees during that time.

7. Before leaving Petitioner's office on that day,

Mr. Beauchamp served upon Mr. Samuels a Stop Work Order, which

directed Petitioner to cease all business operations.

Mr. Beauchamp also served a Request for Production of Business

Records on Mr. Samuels, requiring the production within five

business days. The request for business records asked for,

among other things, payroll documents and certificates of

exemption from workers' compensation coverage.

8. In response to the request, Petitioner provided certain

business records consisting of, among other things, Federal

Income Tax Returns for 2004, 2005, and 2006; employee W-2 forms

for 2005; a list of wages paid for seven employees for the final

quarter of 2005; a spreadsheet purporting to show wages paid to

nine employees in 2006; and a payroll report showing wages paid

to four employees in 2007. After reviewing these records on

September 10, 2007, Mr. Beauchamp determined them to be less

complete than the quarterly wage reports he had retrieved from

the Unemployment Compensation Tax database. He used the

Unemployment Compensation Tax figures to calculate a penalty,

using Respondent's Penalty Calculation Worksheet (Penalty

Worksheet) and arrived at a total penalty of $66,762.01. He

served an Amended Order of Penalty Assessment for that amount

personally upon Mr. Warren Samuels at 2:53 p.m., on

September 10, 2007. (The initial penalty assessment was served

with the Stop Work Order and references a penalty "in an amount

equal to 1.5 times," the cost of appropriate insurance.)

9. In accordance with standard procedure, as dictated by

appropriate Florida Statutes, Mr. Beauchamp first calculated the

payroll for each employee for the last three months of 2004, all

of 2005, all of 2006, and the first nine months of 2007. The

payroll for each employee for each year was then divided by 100

and multiplied by an "approved manual rate." The product of

1/100th of the payroll and the approved manual rate provided the

amount that would have been paid in premiums for that employee

for that year, i.e. , the evaded (unpaid) premium. The evaded

premium is then multiplied by the statutorily-mandated penalty

multiplier of 1.5 to determine the penalty for each employee for

each period of non-compliance. All these calculations were

reflected in Respondent's Penalty Worksheet that was delivered

to Petitioner.

10. Remuneration was paid to Farrell Samuels in 2007, and

remuneration was paid to Warren Samuels in 2004, 2005, 2006 and

2007. Payment to these corporate officers was included in the

penalty calculation.

11. The Unemployment Compensation Tax records revealed

that for each quarter between September 7, 2004, and

September 7, 2007, Petitioner had at least four employees.

12. Petitioner provided no workers' compensation coverage

at any time during September 7, 2004, through September 7, 2007.

13. Respondent correctly identified the classification

code for each of Petitioner's employees it listed in its Penalty

Worksheet.

14. The approved manual rates listed on the Penalty

Worksheet of the Amended Order of Penalty Assessment were

correct for the years in question.

15. The payroll amounts listed on the Penalty Worksheet of

the Amended Order of Penalty Assessment were correct for the

relevant periods.

16. There was no computation error on the Penalty

Worksheet attached to the Amended Order of Penalty Assessment.

17. The records Petitioner provided were incomplete, but

those records confirmed that Petitioner had at least four

employees during the relevant time.

CONCLUSIONS OF LAW

18. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

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

19. Because administrative fines are penal in nature,

Respondent is required to prove by clear and convincing evidence

that Petitioner failed to provide its employees with workers'

compensation coverage from September 7, 2004, through

September 7, 2007 . Department of Banking and Finance Division

of Securities and Investor Protection v. Osborne Stern Inc. ,

670 So. 2d 932, 935 (Fla. 1996).

20. Petitioner's case focused on the suggestion that

Respondent should not have counted the two corporate officers,

Warren Samuels and Ferrell Samuels, as employees since they

could have been exempt, and also alleged that the Department did

not give Petitioner three days to produce records.

21. Subsection 440.10(1)(a), Florida Statutes, states, in

part:

(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, . . . the compensation

payable under ss. 440.13, 440.15, and

440.16.

22. Compliance with the coverage requirements of the

workers' compensation law is enforced pursuant to Subsection

440.107(2), Florida Statutes, which reads, in relevant part:

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.

23. Employers in non-construction industries that employ

at least four persons are required to secure the payment of

workers' compensation for their employees. Petitioner was an

"employer" for workers' compensation purposes, because it

employed four or more persons during the relevant time period.

§§ 440.02(16)(a) and 440.02(17)(b)2., Fla. Stat.

24. All persons receiving remuneration are considered

employees. Subsection 440.02(15)(b), Florida Statutes, states,

in part:

"Employee" includes 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.

25. Certain corporate officers can become exempt from the

coverage requirements of Chapter 440, Florida Statutes, but must

affirmatively make that election. Subsection 440.02(15)(b)1.,

Florida Statutes, states:

Any officer of a corporation may elect to be

exempt from this chapter by filing written

notice of the election with the department

as provided in s. 440.05.

No evidence was presented that Petitioner's corporate officers

had secured the required exemption.

26. Section 440.107, Florida Statutes, outlines

Respondent's duties and powers to enforce compliance with the

requirement to provide for the payment of workers' compensation

and authorizes Respondent to issue stop work orders and penalty

assessment orders in its enforcement of workers' compensation

coverage requirements. Subsection 440.107(7)(a), Florida

Statutes, states, in relevant part:

Whenever the department determines that an

employer who is required to secure the

payment to his or her employees of the

compensation provided for by this chapter

has failed to secure the payment of workers'

compensation required by this chapter . . .

such failure shall be deemed an immediate

serious danger to public health, safety, or

welfare sufficient to justify service by the

department of a stop-work order on the

employer, requiring the cessation of all

business operations. If the department

makes such a determination, the department

shall issue a stop-work order within 72

hours.

On the date the Stop Work Order was issued, September 7, 2007,

Petitioner had four employees; the Stop Work Order was not only

justified, it was mandated.

27. Regarding the penalty that has been assessed,

Subsection 440.107(7)(d)1., Florida Statutes, states:

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.

28. Respondent adopted a Penalty Calculation Worksheet to

use in calculating penalties to assess against employers who do

not secure the payment of workers' compensation. That worksheet

was properly completed in this case.

29. Respondent applied the proper methodology in

calculating the penalty. Subsection 440.107(d)(1), Florida

Statutes, requires Respondent to penalize non-compliant

employers by requiring them to pay 1.5 times the evaded premium,

i.e. , the premiums the employer should have been paying for the

previous three years.

30. Petitioner did not dispute the accuracy of

Respondent's calculation of the penalty, only that the two

corporate officers' payroll totals should not have been

included, inasmuch as they were entitled to be exempt from

having to be covered. That argument is unpersuasive, inasmuch

as it is undisputed that the two officers were not exempt at any

time during the three-year period.

31. Petitioner raised an issue concerning a purported

three-day deadline to provide records. The meaning of this

argument is unclear, inasmuch as the evidence shows that

Respondent's Request for Production of Business Records for

Penalty Assessment gave Petitioner five days to produce records

and those records were voluntarily produced within three days.

32. Subsection 440.05(11), Florida Statutes, states:

Any corporate officer permitted by this

chapter to claim an exemption must be listed

on the records of this state's Secretary of

State, Division of Corporations, as a

corporate officer. The department shall

issue a stop-work order under s. 440.107(7)

to any corporation who employs a person who

claims to be exempt as a corporate officer

but who fails or refuses to produce the

documents required under this subsection to

the department within 3 business days after

the request is made.

This statute applies to a situation where a corporation employs

someone who claims to be a corporate officer, but who does not

provide records showing that he or she has that status. In this

case, there was never an issue that Warren or Ferrell Samuels

were, in fact, corporate officers or that neither had

exemptions.

33. Petitioner did not produce, nor did it argue, that it

had less than four employees at all times during the three-year

period. Respondent produced Unemployment Compensation Tax

records that showed at least four employees for each quarter,

and that in each quarter, at least four people had received pay

substantial enough to demonstrate that the person was a

full-time employee. In the absence of contrary evidence, the

records produced by Respondent demonstrate that Petitioner had

four employees continuously from September 7, 2004, through

September 7, 2007.

34. The evidence has clearly and convincingly proved that

Petitioner violated Sections 440.10 and 440.38, Florida

Statutes, from the period from September 7, 2004, through

September 7, 2007, by failing to provide workers' compensation

insurance and that its penalty was accurately calculated.

RECOMMENDATIONS

Based on the foregoing Findings of Fact and Conclusions of

Law it is

RECOMMENDED that Respondent, Department of Financial

Services, Division of Workers' Compensation, enter a final

order:

1. Finding that Petitioner, Liberty Towing and Recovery

Services, Inc., failed to secure the payment of workers'

compensation for its employees, in violation of Subsections

440.10(1)(a) and 440.38(1), Florida Statutes; and

2. Assessing a penalty against Petitioner in the amount of

$66,762.01, which is equal to 1.5 times the evaded premium based

on the Unemployment Compensation Tax records and the applicable

approved manual rate and classification code.

DONE AND ENTERED this 16th day of May, 2008, in

Tallahassee, Leon County, Florida.

S

JEFF B. CLARK

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 16th day of May, 2008.

COPIES FURNISHED :

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

Thomas H. Duffy, Esquire

Department of Financial Services

200 East Gaines Street, Sixth Floor

Tallahassee, Florida 32399-4229

John Douglas Daw, Esquire

2250 Lucien Way, Suite 100

Maitland, Florida 32751

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.