07-005020 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Plumb Structures, Inc. Status: Closed Recommended Order on Wednesday, April 9, 2008.

Summary: Petitioner proved by clear and convincing evidence that Respondent failed to secure workers` compensation insurance coverage in 2006 and 2007 for an officer of the corporation whose certificate of exemption had expired.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 07-5020

)

PLUMB STRUCTURES, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

The final hearing in this case was held on January 15,

2008, by video-teleconference at sites in Tallahassee and Tampa,

Florida, before Bram D.E. Canter, an Administrative Law Judge of

the Division of Administrative Hearings (DOAH).

APPEARANCES

For Petitioner: Anthony B. Miller, Esquire

Colin M. Roopnarine, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: Nadine Knowles, Esquire

Plumb Structures, Inc.

10197 Frierson Lake Drive

Hudson, Florida 34669

STATEMENT OF THE ISSUES

The issues to be determined in this case are whether

Respondent Plumb Structures, Inc., violated state laws

applicable to workers’ compensation insurance coverage by

failing to secure coverage for an employee and, if so, whether

the penalty assessed against Respondent by Petitioner Department

of Financial Services, Division of Workers’ Compensation

(Department) was lawful.

PRELIMINARY STATEMENT

On September 25, 2007, the Department issued a stop-work

order to Respondent regarding work at its job site located in

Land O’ Lakes, Florida, for Respondent’s failure to secure

workers’ compensation insurance coverage for Timothy Frees, its

vice president. The Department also issued an Amended Order of

Penalty Assessment against Respondent for $8,774.75.

Respondent timely requested an administrative hearing, and

the Department referred the matter to DOAH on October 30, 2007,

to conduct an evidentiary hearing.

The Department presented the testimony of two of its

employees, Lloyd Hillis and Gregory Mills. The Department’s

Exhibits 1 through 20 were admitted into the record. Respondent

presented no witness testimony and no exhibits.

Following the hearing, the Department filed a Notice of

Filing Complete Exhibit 17, in which it was represented that the

exhibit offered into evidence at the hearing was incomplete

Counsel for Respondent did not object to the filing and it was

admitted into evidence.

The one-volume Transcript of the final hearing was filed

with DOAH. Proposed Recommended Orders were submitted by both

parties and carefully considered in the preparation of this

Recommended Order.

FINDINGS OF FACT

1. Petitioner is the state agency responsible for the

enforcement of the workers’ compensation insurance coverage

requirements established in Chapter 440, Florida Statutes

(2007). 1

2. Respondent is a Florida corporation with its office in

Hudson. Timothy Frees is Respondent’s vice president and

registered agent.

3. On September 25, 2007, Lloyd Hillis, an investigator

for the Department, was performing “spot checks” of contractors

and subcontractors at job sites in certain subdivisions in

Land ‘O Lakes to determine compliance with the worker’s

compensation laws. Mr. Hillis stopped at a house where he

observed a worker installing sliding glass doors. The worker

identified himself to Mr. Hillis as Timothy Frees and stated

that he worked for Plumb Structures, Inc.

4. Upon checking relevant records maintained by the

Department on his laptop computer, Mr. Hillis determined

Mr. Frees was not covered by workers’ compensation insurance.

The computerized records showed Mr. Frees had obtained an

exemption from coverage for a period of time, but the exemption

had expired on August 4, 2005. Subsection 440.05(3), Florida

Statutes, provides that each corporate officer of a corporation

engaged in the construction industry may elect to be exempt from

the requirements of Chapter 440, Florida Statutes, and

Subsection 440.05(5), Florida Statutes, provides that, upon

written notice of such election, the Department will issue a

certificate of exemption which is valid for two years.

5. The Department’s records indicated that the Department

mailed Mr. Frees a “Notice of Expiration of Certificate of

Election to be Exempt” on June 16, 2005. It was undisputed that

no application to renew the certificate of exemption for

Mr. Frees beyond August 4, 2005, was sent to the Department

until after September 25, 2007.

6. Before leaving the job-site, Mr. Hillis issued a stop-

work order against Plumb Structures and hand-delivered it to

Mr. Frees. Mr. Frees was also given a Request for Production of

Business Records for Penalty Assessment Calculation. Business

records were requested for the period from August 4, 2005, the

expiration date of Mr. Frees’ exemption, to September 25, 2007,

the date of the stop-work order.

7. Mr. Frees produced some business records for the

Department, including a pay stub from Bill the Window Man, Inc.,

for which Mr. Frees said he worked as a subcontractor in 2005,

showing year-to-date earnings through December 8, 2005, of

$13,526; a W-2 Wage and Tax Statement issued by Plumb Structures

showing 2006 income to Mr. Frees of $27,675; and a single pay

stub from 2007 showing a year-to-date income from Plumb

Structures of $17,460.

8. These business records were not sufficient to determine

Mr. Frees’ wage for these years because they did not indicate

his hourly rate of pay. Therefore, the Department imputed his

wage by using the statewide approved manual rate for the class

code applicable to installation of doors.

9. On September 27, 2007, the Department issued an Amended

Order of Penalty Assessment against Plumb Structures for

$8,774.75.

10. Respondent does not dispute the Department’s imputed

wage for Mr. Frees, but Respondent does dispute that Mr. Frees

was an employee of Plumb Structures following the expiration of

the certificate of exemption.

11. With regard to work done by Mr. Frees in 2005,

Respondent also argues that the evidence only shows Mr. Frees

was an employee of Bill the Window Man, Inc. Mr. Frees told the

the Window Man in 2005, but Mr. Hillis assumed, and the

Department contends, that Mr. Frees meant that Plumb Structures

was the subcontractor to Bill the Window Man. The pay stubs of

Bill the Window Man were made out to Timothy Frees, not Plumb

Structures. The Department’s evidence on this point does not

meet the standard of proof applicable in this case, which is

“clear and convincing evidence.”

12. Respondent’s argument that Mr. Frees was not an

employee of Plumb Structures in 2006 and 2007 is based solely on

Respondent’s interpretation of the applicable law and is

addressed below.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction over this matter pursuant to Sections 120.569,

120.57(1), and 440.107(13), Florida Statutes.

14. Because an administrative fine deprives the person

fined of substantial rights in property, such fines are punitive

in nature. The Department has the burden of proof and must

establish through clear and convincing evidence that Respondent

violated the law. Department of Banking and Finance Division of

Securities and Investor Protection v. Osborne Stern and Co. , 670

So. 2d 932, 935 (Fla. 1996) (the imposition of administrative

fines which are penal in nature and implicate significant

property rights must be justified by a finding of clear and

convincing evidence of a related violation).

15. Proceedings under Section 120.57, Florida Statutes,

are intended to formulate final agency action, not to review

action taken earlier and preliminarily. Dept. of Transportation

v. J.W.C. Co., Inc. , 396 So. 2d 778 (Fla. 1st DCA 1981).

16. Section 440.10(1)(a), Florida Statutes, provides:

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 payable

under ss. 440.13, 440.15, and 440.16. Any

contractor or subcontractor who engages in

any public or private construction in the

state shall secure and maintain compensation

for his or her employees under this chapter

as provided in s. 440.38.

17. The term “employer” is defined in Subsection

440.02(16), Florida Statues, as “every person carrying on any

employment.” The term “employment” is defined in Subsection

employee.” The term “employee” is defined in Subsection

440.02(15)(b), Florida Statutes, to include each officer of a

corporation who performs services for remuneration. Based on

these definitions, Mr. Frees was an employee of Plumb

Structures.

18. Respondent contends, however, that the key statute

applicable to the status of Mr. Frees in this case is Subsection

does not include an officer of a corporation who elects to be

exempt. Subsection 440.05(15)(d)(8), Florida Statutes, states

that such officer is not an employee “for any reason” until a

notice of revocation of election is filed pursuant to Section

440.05. Respondent argues that these two statutes, taken

together, mean that an officer who was issued a certificate of

exemption remains in a non-employee status until his certificate

is revoked, even if the certificate has expired. Respondent

argues further that, because the Department never revoked the

certificate of Mr. Frees, he remained a non-employee and

Respondent cannot be guilty of failing to secure worker’s

compensation insurance coverage for him.

19. The only references to the revocation of a certificate

are found in Subsection 440.05(3), Florida Statutes, which

states that the Department shall revoke a certificate “upon a

determination by the department that the person does not meet

the requirements for exemption or that the information contained

in the notice of election to be exempt is invalid,” and “[u]pon

revocation of a certificate of election of exemption by the

department, the department shall notify the workers'

compensation carriers identified in the request for exemption.”

It is clear that the purpose of this law is to provide the

Department with authority to terminate a certificate prior to

its expiration date.

20. Reading the various provisions of the law in pari

materia , and in a manner that does not render meaningless the

two-year limit on certificates of exemption, it is plain that

the expiration of a certificate and the revocation of a

certificate are two different ways that an exemption terminates.

A certificate holder does not need a notice of revocation before

a two-year certificate can actually expire.

21. Subsection 440.05(6), Florida Statutes, states:

At least 60 days prior to the expiration

date of a construction industry certificate

of exemption issued after December 1, 1998,

the department shall send notice of the

expiration date and an application for

renewal to the certificate holder at the

address on the certificate.

Respondent argues that the Department is barred from imposing a

penalty against Respondent for failing to renew the certificate

of exemption because the Department did not notify Respondent

within 60 days that the certificate was expiring. The

Department mailed the notice to Respondent 49 days before the

expiration of Mr. Frees’ certificate.

22. Nothing in Chapter 440, Florida Statutes, suggests

that its requirements become unenforceable if the Department

sends a notice less than 60 days before a certificate of

exemption expires. There were no cases cited by the Respondent

where this particular statutory directive or similar statutory

language has been interpreted by the courts to absolve a person

from statutorily-imposed duties. Satisfaction of the 60-day

notice directive is not a prerequisite to imposing a penalty.

23. The Respondent also contends that it never received

the Department’s notice that Mr. Frees’ certificate of exemption

was about to expire. Because the statute states that a

certificate is only good for two years and the certificate

states on its face that it expires on August 4, 2005, it is

probably irrelevant whether Respondent received the notice that

the certificate was about to expire. If it is relevant, the

Department presented sufficient proof that it mailed the notice

of expiration to Respondent and Respondent’s claim that it never

received the notice was not credible.

24. Section 440.107(7)(d)1., Florida Statutes, states 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 within the preceding 3-year period or $1,000,

whichever is greater.

25. Section 440.107(7)(e), Florida Statutes, provides:

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.

Because the business records produced by Respondent were

insufficient to determine Mr. Frees’ hourly rate of pay in 2006

and 2007, the Department was authorized to impute his wage.

26. The Department proved by clear and convincing evidence

that Mr. Frees worked for Respondent in 2006 and 2007. The

Department did not prove by clear and convincing evidence that

Mr. Frees worked for Respondent in 2005. Based upon the penalty

calculation shown in Department Exhibit 7, if the 2005 component

of the penalty were eliminated, the resulting penalty would be

$7,649.72.

RECOMMENDATION

Based on the Findings of Fact and Conclusions of Law, it is

recommended that the Department enter a final order that

assesses a penalty against Respondent of $7,649.72.

DONE AND ENTERED this 9th day of April, 2008, in

Tallahassee, Leon County, Florida.

BRAM D. E. CANTER

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 9th day of April, 2008.

ENDNOTE

1 / All references to the Florida Statutes are to the 2007

codification.

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 32399-0300

Anthony B. Miller, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

Nadine L. Knowles, Esquire

Plumb Structures, Inc.

10197 Frierson Lake Drive

Hudson, Florida 34669

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.