08-004129 Rex Neil, Inc. vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Friday, November 21, 2008.

Summary: Respondent met burden of proof to establish one day of employment without workers` compensation coverage.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

REX NEIL, INC., )

)

Petitioner, )

)

vs. ) Case No. 08-4129

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COPMPENSATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted in this

case on October 27, 2008, in Sarasota, Florida, before

Administrative Law Judge R. Bruce McKibben of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: William Clay Rexford, pro se

Rex Neil, Inc.

1244 North Brink Avenue

Sarasota, Florida 34237

For Respondent: Thomas H. Duffy, Esquire

Department of Financial Services

200 East Gaines Street, 6th Floor

Tallahassee, Florida 32399-4229

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent had workers'

compensation coverage for his employees pursuant to Chapter 440,

Florida Statutes (2008), specifically whether Tabitha Rexford

was an employee, and, if so, what penalty should be assessed.

PRELIMINARY STATEMENT

On May 14, 2008, Respondent, Department of Financial

Services, Division of Workers' Compensation (hereinafter "DFS"),

did a random compliance check at a residence where William Clay

Rexford (hereinafter "Neil") was engaged in the installation of

wood flooring. A person apparently working with Neil was deemed

by DFS not to have workers' compensation coverage as required by

law.

On the same date as the compliance check, DFS prepared a

Stop-Work Order and Order of Penalty Assessment directing

Petitioner to cease work and imposing a fine. This was followed

by an Amended Order of Penalty Assessment, then, by yet another

Amended Order of Penalty Assessment somewhat reducing the amount

of the fine.

Petitioner filed a Petition for Hearing under Sections

120.569 and 120.57, Florida Statutes (2008), which was

transmitted to the Division of Administrative Hearings on

August 21, 2008, and assigned to the undersigned Administrative

Law Judge.

At the final hearing, Neil testified on his own behalf and

called one additional witness: Tabitha Rexford, his wife. Neil

offered no exhibits into evidence. DFS called two witnesses:

Carol Porter, supervisor of District 7 Workers' Compensation

Bureau of Compliance; and Colleen Wharton, investigator for DFS.

DFS offered Exhibits 1 through 9, which were admitted into

evidence.

At the close of the evidentiary portion of the final

hearing, the parties were given ten days from the filing of the

hearing transcript within which to file their respective

proposed recommended orders. A one-volume hearing Transcript

was filed on November 5, 2008. Each party timely submitted a

Proposed Recommended Order. The parties' proposals have been

carefully considered during the preparation of this Recommended

Order.

Unless otherwise stated, all references to Florida Statutes

herein shall be to the 2008 version.

FINDINGS OF FACT

1. Neil owns and operates a business engaged in the

practice of installing flooring, including carpets, tile,

hardwood, and the like. Neil is a sole proprietor with no one

else on his payroll. The flooring work is performed solely by

Neil, individually, and he picks up and delivers his own

supplies and materials.

2. Neil has been involved in the flooring business for

approximately 30 years and has operated as Rex Neil, Inc., since

2003. There have never been any employees of Rex Neil, Inc.,

other than Neil himself. Neil is the only officer listed for

Rex Neil, Inc., at the Division of Corporations.

3. On May 14, 2008, Neil was involved in the installation

of hardwood floors at a newly constructed single-family

residence in Sarasota County. Neil had recently injured his

back, so his wife (Tabitha) had accompanied him to this

particular job to assist with the unloading of materials. It

was, apparently, the first and only time Tabitha had joined her

husband at a job site.

4. On the date in question, an investigator from DFS

(Colleen Wharton) conducted a compliance investigation at the

house where Petitioner was working. Wharton spoke to other

individuals working in the house; they directed her to another

room in the house where Neil was working. In that room, Wharton

witnessed Tabitha, dressed in work clothes and wearing knee

pads, putting cardboard down on freshly lain wood floors.

Wharton surmised that Tabitha was working for and/or with Neil

based upon Tabitha's dress (work clothes) and her activities

(laying cardboard on the floor).

5. When Wharton approached him, Neil mistakenly believed

she was an officer from the Immigration and Naturalization

Service. (Wharton had, moments before, been speaking with a

group of Hispanic workers outside the house.) Wharton

identified herself as a representative of DFS, but Neil refused

to acknowledge her presence. For some reason, Neil was "ugly"

with Wharton and did not demonstrate any respect for her

position.

6. After Wharton established her credentials, Neil

properly identified himself and stated that he was doing the

flooring work as a subcontractor for Carpet Home. Neil would

not identify the name of his company, but Wharton was able to

ascertain that from the general contractor. Neil told Wharton

he had workers' compensation coverage when, in fact, he had an

exemption from coverage; Tabitha did not have an exemption.

7. Wharton determined from the DFS database that Rex Neil,

Inc., was a valid and current entity and that Neil had an

exemption from coverage. Wharton noted that Neil was the only

officer of the entity and that Tabitha was not listed as an

officer or agent of the entity.

8. Wharton determined that although not listed as such,

Tabitha was operating as an employee of Rex Neil, Inc. This

assumption was bolstered by the fact that Tabitha had been

issued checks from Rex Neil, Inc., on a regular basis. Also,

Wharton believes Tabitha admitted working for her husband since

December 2007. Tabitha maintains that the checks written to her

were representative of the amounts owed to Neil for his work and

were issued to Tabitha only so she would have access to the

money to pay for family expenses. It appears no checks were

written to Neil directly, but that his compensation was

represented by the checks written to Tabitha. Tabitha testified

under oath that she had not helped her husband, except for the

day of the investigation. Her testimony was credible.

9. Rex Neil, Inc.'s, business was identified in the Scopes

Manual as Code 5478: Carpet or flooring installation. Wharton

used the assigned rate for this code and it was then compared to

the designated insurance rate. There were no records available

concerning Tabitha's wage, so a wage of $746 per week was

imputed to her (based on the Statewide Average Weekly Wage

scale). Once the amount of unpaid premiums for that wage was

determined, the figure was multiplied by 1.5 to ascertain the

penalty amount. The amount of penalty calculated by DFS was

$38,858.81. A Second Amended Order of Penalty Assessment was

issued reducing the penalty to $21,690.61 due to further review

of relevant records.

10. The Stop-Work Order was left with Neil at the home

where the investigation took place. Neil refused to accept it,

so the Order was laid on the floor next to Neil. An Amended

Order of Penalty Assessment was ultimately served on Neil on

June 20, 2008, by Porter. In fact, the Order was served on Neil

when he arrived at the DFS office to pick up some paperwork

related to this matter. Neil did not believe the penalty was

fair based on the fact that Tabitha had only worked with him for

one single day.

11. Tabitha and Neil testified that the May 14, 2008, date

was the only time Tabitha had been involved with helping her

husband as a worker. Their testimony is credible as to that

fact, and it is accepted. Wharton's one-time observation of

Tabitha laying cardboard on the flooring is not sufficient to

establish that Tabitha was an employee. There was no non-

hearsay evidence that Tabitha claimed to have worked with Neil

since December 2007.

12. However, it is equally clear that on the day in

question, Tabitha was indeed providing some sort of assistance

to her husband in an employee-like capacity. She was, on that

date, essentially an employee.

13. The absence of any Rex Neil, Inc., checks written

directly to Neil is clear and convincing evidence that his

personal remuneration from the company was being paid directly

to his wife, rather than going to him first. The checks written

to Tabitha did not include any reference in the memo line that

the checks were payroll for her or Neil. It is, however,

inconceivable that Neil was working for free.

14. Neil claims retaliation and that DFS (through Wharton)

was punishing him for his disrespectful behavior. There is no

evidence of such retaliation or the existence of a personal

vendetta, although it is clear Neil can be less than diplomatic

in his dealings with authority figures.

15. Petitioner has not been engaged in business since the

date the Stop-Work Order was issued. However, Neil has worked

personally on some jobs since that time.

CONCLUSIONS OF LAW

16. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

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

Florida Statutes.

17. The Department has the burden of proof in this case in

that the administrative fines being proposed are penal in

nature. The standard of proof is clear and convincing evidence.

See Department of Banking and Finance Division of Securities and

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

(Fla. 1996).

18. Pursuant to Sections 440.10 and 440.38, Florida

Statutes, every employer is required to secure the payment of

workers' compensation for the benefit of its employees, unless

the employee is exempted or excluded under Chapter 440, Florida

Statutes. Strict compliance with the workers' compensation law

is required by the employer. See C & L Trucking v. Corbitt , 546

So. 2d 1185, 1187 (Fla. 5th DCA 1989).

19. 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. . . .

The Department's issuance of the Stop-Work Order was properly

done in this case.

20. "Employee" is defined in Subsection 440.02(15),

Florida Statutes, as:

[A]ny person who receives remuneration from

an employer for the performance of any work

or service while engaged in any employment

under any appointment or contract for hire

or apprenticeship, express or implied, oral

or written, whether lawfully or unlawfully

employed, and includes, but is not limited

to, aliens and minors.

21. An employee does not include:

A volunteer, except a volunteer worker for

the state or a county, municipality, or

other governmental entity. A person who

does not receive monetary remuneration for

services is presumed to be a volunteer

unless there is substantial evidence that a

valuable consideration was intended by both

employer and employee. . . .

§ 440.02(15)(d)6., Fla. Stat.

22. The record is unclear as to whether Tabitha received

remuneration for the day she admittedly worked for Neil. Thus,

Tabitha's status as either an employee or a volunteer was not

resolved by the evidence.

23. "Employment . . . means any service performed by an

Fla. Stat. Clearly, Tabitha performed some service to Neil as

evidenced by Wharton's observation and Tabitha's own admission.

24. Persons are considered to be employees of an employer

who pays them remuneration for periods of employment. The

evidence supports a finding that checks written from the account

of Rex Neil, Inc., to Tabitha were actually compensation to Neil

for his work. Thus, the definition of "employee" does not apply

to Tabitha for the time periods prior to the date of the current

investigation. Nonetheless, Tabitha does admit to working for

Neil on the day of the Wharton investigation. And it is clear

Neil did not provide workers' compensation coverage for Tabitha

on that date.

25. As to penalties, 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 the 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

payment of worker's compensation required by

this chapter within the preceding 3-year

period or $1,000, whichever is greater.

26. DFS has met its burden of proof to establish that

Tabitha Rexford was, for one day, the employee of Rex Neil, Inc.

A penalty assessment based upon imputed income is warranted for

that violation. The assessment would be $746 (imputed income)

times 1.5 equals $1,119 for a one-week penalty; $1,119 divided

by five (i.e., one day's work) equals $223.80. Subsection

440.107(7)(d)1., Florida Statutes, allows for a minimum penalty

of $1,000. Neil should be penalized the minimum amount.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered by the Department

of Financial Services, Division of Workers' Compensation,

assessing a penalty of $1,000 against Petitioner for failure to

provide workers' compensation coverage for its employee for one

day.

DONE AND ENTERED this 21st day of November, 2008, in

Tallahassee, Leon County, Florida.

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 21st day of November, 2008.

COPIES FURNISHED :

Thomas H. Duffy, Esquire

Department of Financial Services

200 East Gaines Street, 6th Floor

Tallahassee, Florida 32399-4229

William Clay Rexford

Rex Neil, Inc.

1244 North Brink Avenue

Sarasota, Florida 34237

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.