08-002082 Horace Bradley Sheffield Builders, Llc vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Thursday, August 28, 2008.

Summary: Subcontractor without current valid exemption from coverage subjects LLC to stop-work order and penalty.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

) Case No. 08-2082

vs. )

)

HORACE BRADLEY SHEFFIELD ) )

BUILDERS, LLC, )

)

Respondent. )

RECOMMENDED ORDER

Upon due notice, a disputed-fact hearing was held in this

case on July 21, 2008, in Tallahassee, Florida, before Ella Jane

P. Davis, a duly-assigned Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioner: Douglas Dolan, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: No Appearance

STATEMENT OF THE ISSUE

Whether the Department of Financial Services, Division of Workers' Compensation, correctly assessed and collected an assessment of penalty against Respondent.

PRELIMINARY STATEMENT

The style of this cause is hereby amended as set-out above

in order to reflect the burden of proof and the duty to go

forward in this proceeding.

On March 25, 2008, Petitioner Agency issued and served a

Stop-Work Order and Order of Penalty Assessment on Respondent,

alleging that Respondent was not in compliance with the coverage

requirements of the Florida Workers' Compensation Law, which is

Chapter 440, Florida Statutes, and the Florida Insurance Code.

Respondent was ordered to cease all business operations.

Respondent filed a Petition challenging the Stop-Work Order and

Order of Penalty Assessment, alleging that the employee, because

of whom the penalty was assessed, had an election to be exempt

from workers' compensation, and requesting a disputed-fact

hearing.

On April 11, 2008, the Department issued and served an

Amended Order of Penalty Assessment, assessing against

Respondent LLC a penalty in the amount of $1,000.00, pursuant to

Section 440.107(7)(d), Florida Statutes.

Respondent agreed not to employ the individual who

occasioned the penalty and paid the penalty in order to lift the

Stop-Work Order and be able to continue its business endeavors.

However, Respondent never withdrew its request for hearing. The

cause was referred to the Division of Administrative Hearings on

or about April 24, 2008.

Accordingly, it might be said that the true issue herein is

whether or not the Department is entitled to retain Respondent's

$1,000.00.

At final hearing on July 21, 2008, Petitioner presented the

oral testimony of Torry McClellan and Mark Mark and had seven

exhibits admitted in evidence. Respondent did not appear or

present any evidence.

A Transcript was filed with the Division on July 30, 2008.

The Department filed its Proposed Recommended Order on August 5,

2008. Despite the entry on July 31, 2008, of a Post-Hearing

Order explaining how proposed recommended orders were to be

composed and filed, Respondent did not file a proposal on or

before August 11, 2008, as permitted by law.

All statutes and rules referenced herein are the same for

2007 and 2008.

FINDINGS OF FACT

1. On March 25, 2008, the Agency's investigator, Torry

McClellan, conducted a compliance check at acy Lane,

Tallahassee, Florida, to verify compliance with the workers'

compensation statutes.

2. At the worksite, Mr. McClellan observed three men

carrying out carpentry work.

3. Mr. McClellan interviewed John Harrell and Bradley

Sheffield, II, and requested proof of workers' compensation

coverage.

4. John Harrell did not have proof of a current valid

election to be exempt from workers' compensation.

5. The Agency's Coverage and Compliance Automated System

(CCAS) lists active workers' compensation policies and

exemptions throughout Florida. Utilizing CCAS, Mr. McClellan

was unable to locate a current valid election to be exempt from

the requirement of securing the payment of workers' compensation

for John Harrell. John Harrell's previous exemption had expired

in 2003. Mr. McClellan was also unable to locate proof of

either John Harrell or Respondent LLC securing the payment of

workers' compensation through the purchase of an insurance

policy or by any other means.

6. Mr. McClellan testified that John Harrell admitted, and

Horace Bradley Sheffield, Sr., confirmed, to Mr. McClellan that

John Harrell was a subcontractor of Respondent Horace Bradley

Sheffield Builders LLC, on March 25, 2008. Mr. Sheffield Sr.'s

statement is accepted in evidence as an admission by Respondent

LLC via its corporate principal and agent. Mr. Harrell's

alleged statement is not even supplemental hearsay, pursuant to

Section 120.57 (1) (c), Florida Statutes.

7. On March 25, 2008, Mr. McClellan issued and served a

Stop-Work Order and Order of Penalty Assessment on Respondent

through Horace Bradley Sheffield, Jr., for failure of Respondent

to meet the requirements of Chapter 440, Florida Statutes, and

the Florida Insurance Code. Thereby, the LLC was ordered to

cease all business operations, and a $1,000.00 penalty was

assessed against the LLC, pursuant to Section 440.107(7)(d)1.,

Florida Statutes.

8. On March 25, 2008, Mr. McClellan also issued and served

on Respondent a Division of Workers' Compensation Request for

Production of Business Records for Penalty Assessment

Calculation.

9. Respondent complied with the Department's request and

submitted the required records.

10. Utilizing the SCOPES Manual, published by the National

Council of Compensation Insurance and adopted by Florida

Administrative Code Rule 69L-6.021 as guidance, Mr. McClellan

determined that carpentry is within the construction industry

and assigned Occupation Code 5651 to Respondent's activities.

11. Based on Respondent's business records, Mr. McClellan

issued an Amended Order of Penalty Assessment, and served it on

Respondent LLC through Horace Bradley Sheffield, Sr., on

April 11, 2008, in the amount of $1,000.00, which is an amount

greater than the calculated amount due per Respondent LLC's

payroll. One thousand dollars is the statutory minimum.

12. At some point, Respondent paid the $1,000.00, in order

to get the Stop-Work Order lifted but did not withdraw the

request for hearing.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this cause,

pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

14. Petitioner is the state agency responsible for

enforcing the requirement of the Workers' Compensation Law that

employers secure the payment of compensation for their

employees.

15. Petitioner herein bears the duty to go forward and

burden of proof by "clear and convincing" evidence, pursuant to

Department of Banking and Finance Division of Securities and

Investor Protection v. Osborne Stern and Co. , 670 So. 2d 932

(Fla. 1996); Triple M Enterprises, Inc. v. Dept. of Financial

Services, Division of Workers' Compensation , DOAH Case No. 04-

2524 (RO: January 13, 2005; FO: not available); Dept. of

Financial Services, Division of Workers' Compensation v. U & M

Contractors, Inc. , DOAH Case No. 04-3041 (RO: April 7, 2005; FO:

April 27, 2005).

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

The department shall enforce workers'

compensation coverage requirements including

the requirement that the employer secure the

payment of workers' compensation. . . . In

addition to any other powers under this

chapter, 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.

17. Pursuant to Florida Administrative Code Rules 69L-

6.029(3)(g) and (4) and 69L-6.030(6), if a contractor does not

obtain evidence of a valid Certificate of Election to be Exempt

and the subcontractor has failed to secure the payment of

workers' compensation, the contractor will be issued a Stop-Work

Order, and a penalty will be assessed against the contractor,

pursuant to Section 440.107(7)(d)1., Florida Statutes, based

upon the payroll of all uninsured subcontractors or limited to

$1,000.00, whichever is greater.

18. Section 440.02(16)(a), Florida Statutes, defines

"employer" in part as ". . . every person carrying on any

employment . . .". Respondent was an "employer," as statutorily

defined, because it employed various parties.

19 Section 440.02(15)(c), Florida Statutes, defines

"employee" in part as:

2. All persons who are being paid by a

construction contractor as a subcontractor,

unless the subcontractor has validly elected

an exemption as permitted by this chapter,

or has otherwise secured the payment of

compensation coverage as a subcontractor,

consistent with s. 440.10, for work

performed by or as a subcontractor.. . . .

20. Therefore, herein, John Harrell was an "employee"

because he had not validly elected to be exempt from securing

the payment of workers' compensation.

21. Section 440.02(17)(b) defines "employment" in part as:

2. All private employments . . . with

respect to the construction industry, all

private employment in which one or more

employees are employed by the same employer.

22. Therefore, it is concluded that Respondent herein

engaged in "employment" because he was in the construction

industry and employed John Harrell.

23. The Department has adopted construction industry

classification codes contained in the Basic Manual (SCOPES

Manual), published by the National Council on Compensation

Insurance. See Florida Administrative Code Rule 69L-6.021,

referencing Section 440.02(8), Florida Statutes, as specific

authority and statutes to be implemented.

24. Pursuant to Section 440.02(8), Florida Statutes, the

Department may, by rule, establish standard industrial

classification codes, and definitions thereof, which meet the

criteria of the statutory term "construction industry,"

contained in that subsection. Therefore, it is concluded that

Petitioner worked in the construction industry because the

SCOPES Manual considers the class code assigned to "carpentry"

to be in the construction industry and because building a

structure meets the lengthy statutory definition at Section

440.02(8), Florida Statutes.

25. On March 25, 2008, Respondent was a corporation

engaged in the construction industry.

26. Florida's Workers' Compensation Law requires employers

to secure the payment of workers' compensation for their

employees. See §§ 440.10(1)(a) and 440.38(1), Fla. Stat.

27. Pursuant to Section 440.107(2), Florida Statutes,

"securing the payment of workers' compensation" means obtaining

the coverage that meets the requirements of Chapter 440 and the

Florida Insurance Code. Respondent did not secure the payment

of workers' compensation.

28. Pursuant to Section 440.05(5), Florida Statutes, a

Notice of Election to be exempt shall be effective when issued

by the Department. In this case, Petitioner's employee

(Harrell) did not have a Notice of Election to be Exempt issued

by the Department.

29. Pursuant to Section 440.05(6), Florida Statutes, a

construction industry Certificate of Election to be Exempt shall

be valid for two years after the effective date stated thereon.

In this case, John Harrell's previous exemption had expired five

years previous to any time material.

30. Respondent was an employer, engaged in employment,

with an employee, working in the construction industry, and not

in compliance with Chapter 440, Florida Statutes. Respondent

was correctly assessed a penalty.

31. Pursuant to Section 440.107(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 $1,000.00,

whichever is greater.

32. Petitioner's penalty was correctly assessed by the

Department at $1,000.00.

RECOMMENDATION

Based on the foregoing Findings of Facts and Conclusions of

Law, it is

RECOMMENDED that a final order be entered by the Department

of Financial Services that affirms, approves, and adopts the

Stop-Work Order and Second Amended Order of Penalty Assessment

at $1,000.00, and which permits the Agency's retention of the

$1,000.00 penalty.

DONE AND ENTERED this 28th day of August, 2008, in

Tallahassee, Leon County, Florida.

S

___________________________________

ELLA JANE P. DAVIS

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 28th day of August, 2008.

COPIES FURNISHED:

Douglas Dolan, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Horace Sheffield

Horace B. Sheffield Builders, LLC

4564 Ambervalley Drive

Tallahassee, Florida 32312

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.