08-005349 Brevard Management, Llc vs. Department Of Financial Services, Division Of Workers' Compensation Status: Closed Recommended Order on Friday, April 17, 2009.

Summary: The evidence demonstrated that Respondent did not carry the required workers` compensation coverage during the audit period, and that the penalty therefore was correctly calculated by the Division of Workers` Compensation.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BREVARD MANAGEMENT, LLC, )

)

Petitioner, )

)

vs. ) Case No. 08-5349

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS’ )

COMPENSATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for formal

proceeding before Lawrence P. Stevenson, a duly-designated

Administrative Law Judge, via video teleconference from sites in

Orlando and Tallahassee, Florida, on February 27, 2009.

APPEARANCES

For Petitioner: Justin H. Faulkner, Esquire

Douglas D. Dolan, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: Albert Segev, pro se

Brevard Management, LLC, d/b/a

River Palm Hotel

420 South Harbor City Boulevard

Melbourne, Florida 32901

STATEMENT OF THE ISSUES

At issue in this proceeding is whether the Respondent,

Brevard Management, LLC, (Brevard Management) failed to abide by

the coverage requirements of the Workers' Compensation Law,

Chapter 440, Florida Statutes, by not obtaining workers'

compensation insurance for its employees; and whether Petitioner

properly assessed a penalty against Respondent pursuant to

Section 440.107, Florida Statutes.

PRELIMINARY STATEMENT

Pursuant to the Workers' Compensation Law, Chapter 440,

Florida Statutes, the Department of Financial Services, Division

of Workers' Compensation (Department), seeks to enforce the

statutory requirement that employers secure the payment of

workers' compensation for their employees.

On August 25, 2008, the Department issued a "Stop Work and

Penalty Assessment Order" (SWO) alleging that Brevard Management

failed to abide by the coverage requirements of the Workers'

Compensation Law on that date. The order directed Brevard

Management immediately to cease business operations and pay a

penalty equal to 1.5 times the amount Brevard Management would

have paid in premium to secure workers' compensation during

periods within the preceding three years when it failed to do

so, or $1,000, whichever is greater, pursuant to Subsection

440.107(7)(d), Florida Statutes.

The Department then requested business records from Brevard

Management in order to determine the exact amount of the

penalty. Brevard Management promptly provided the records. On

August 26, 2008, the Department issued an "Amended Order

of Penalty Assessment" (Amended Order) that ordered Brevard

Management to pay a penalty of $2,112.03, pursuant to Subsection

440.107(7)(d), Florida Statutes. The SWO requiring Brevard

Management to cease all business operations remained in effect

until Brevard Management secured workers' compensation coverage

for its employees and paid the penalty assessment. Brevard

Management promptly complied with those terms and an Order of

Release from the SWO and the Amended Order was entered on

August 26, 2008.

Brevard Management timely requested a formal administrative

hearing to contest the penalty assessment, and on October 23,

2008, the Department forwarded Brevard Management's request to

the Division of Administrative Hearings (DOAH). The hearing was

originally scheduled for December 10, 2008. The case was

continued twice, and the hearing was held on February 27, 2009.

At the hearing, the Department presented the testimony of

its investigator, Eugene Wyatt. The Department's Exhibits 1

through 13 were admitted into evidence. Department Exhibit 10

was the deposition testimony of Clinton Stanley, a sales manager

for Automatic Data Processing (ADP), a payroll and tax filing

company based in Orlando. Department Exhibit 11 was the

deposition testimony of Elizabeth Hendricks Bowen, an agent for

ADP. Department Exhibit 12 was the deposition testimony of

Michael Cole, general manager of the River Palm Hotel. Brevard

Management presented the testimony of its principal, Albert

Segev. Brevard Management's Exhibits 1 through 4 were admitted

into evidence.

A Transcript of the final hearing was filed at the DOAH on

March 25, 2009. The Department timely filed a Proposed

Recommended Order on April 6, 2009. Brevard Management did not

file a proposed recommended order.

Unless otherwise stated, all statutory references are to the

2008 edition of the Florida Statutes.

FINDINGS OF FACT

Based on the oral and documentary evidence adduced at the

final hearing, and the entire record in this proceeding, the

following findings of fact are made:

1. The Department is the state agency responsible for

enforcing the requirement of the Workers' Compensation Law that

employers secure the payment of workers' compensation coverage

for their employees and corporate officers. § 440.107, Fla.

Stat.

2. On July 31, 2008, Eugene Wyatt, an insurance analyst

working for the Department, visited the River Palm Motel in

Melbourne to investigate the workers' compensation insurance

status of several contractors performing renovations on the

property. The River Palm Motel is owned by Brevard Management,

whose principal owner is Albert Segev.

3. During his visit, Mr. Wyatt spoke to Michael Cole, the

hotel's manager, regarding the workers' compensation coverage of

the hotel itself. Mr. Cole told Mr. Wyatt that the hotel used

Automatic Data Processing, Inc. (ADP), a third-party payroll

services provider, to provide workers' compensation insurance

coverage.

4. Brevard Management began operating the River Palm Motel

on June 18, 2008. On June 19, 2008, Brevard Management entered

into an agreement with ADP for the provision of payroll

services, including the filing of payroll taxes, using Easy Pay,

ADP's proprietary payroll management service.

5. On August 25, 2008, Mr. Wyatt received an anonymous

referral alleging that the River Palm Motel was not carrying

workers' compensation insurance for its employees. Later that

day, Mr. Wyatt returned to the River Palm Motel, this time to

investigate the workers' compensation status of the motel

itself.

6. Upon his arrival at the motel, Mr. Wyatt spoke with

Mr. Cole, who disclosed that Brevard Management owned the motel.

Mr. Wyatt conducted a search of the Division of Corporation's

website and learned that Mr. Segev was the principal owner of

Brevard Management.

7. Mr. Cole provided Mr. Wyatt with invoices for the last

payroll period for the River Palm Motel. The invoices indicated

that the company had more than ten employees, which led

Mr. Wyatt to conclude that the company was required to secure

workers' compensation insurance. At his deposition, Mr. Cole

confirmed that River Palm Motel had between ten and twelve

employees on August 25, 2008.

8. Mr. Cole believed that Brevard Management had secured

workers' compensation insurance coverage through ADP. However,

the payroll invoices that Mr. Cole provided to Mr. Wyatt showed

no deductions for any insurance.

9. Mr. Wyatt consulted the Department's Coverage and

Compliance Automated System (CCAS) database, which lists the

workers' compensation insurance policy information for each

business as provided by the insurance companies, as well as any

workers' compensation exemptions for corporate officers. CCAS

indicated that Brevard Management had no workers' compensation

insurance policy in place and no current, valid exemptions.

10. Mr. Cole provided Mr. Wyatt with a copy of the

June 19, 2008, payroll agreement between Brevard Management and

ADP, which gave no indication that workers' compensation

insurance was included. The evidence at the hearing established

that ADP does not automatically provide workers' compensation

insurance coverage to entities that enroll for its payroll

services. ADP provides such insurance coverage, but only as

part of a separate transaction.

11. After receiving authorization from the acting

supervisor in the Department's Orlando office, Mr. Wyatt issued

the SWO to Brevard Management on August 25, 2008, and personally

served it on Mr. Segev on August 26, 2008.

12. On August 25, 2008, Mr. Wyatt gave Mr. Cole a request

to produce business records, for the purpose of making a penalty

assessment calculation. In response, Mr. Cole provided an

employee roster from ADP showing the payroll entries for every

Brevard Management employee from the opening of the motel in

June 2008 through August 25, 2008.

13. After Mr. Wyatt's visit, Mr. Cole contacted ADP and

spoke to Elizabeth Bowen, a workers' compensation sales agent

with ADP Insurance Services. Ms. Bowen faxed forms to Mr. Cole

to complete in order to obtain a workers' compensation insurance

policy.

14. Mr. Cole completed the paperwork and obtained a

workers' compensation insurance policy through NorGUARD

Insurance Company, effective August 25, 2008.

15. Mr. Cole testified that he believed in good faith that

he had obtained workers' compensation insurance at the time he

signed up for payroll services with ADP sales representative

Clinton Stanley in June 2008. It was only Mr. Wyatt's

investigation that alerted Mr. Cole to the fact that Brevard

Management did not have the required coverage.

16. Mr. Stanley recalled that Mr. Cole had requested

workers' compensation insurance, recalled telling Mr. Cole that

his request had to be routed to ADP's separate insurance

division, and recalled having forwarded the request to the

insurance division. Mr. Stanley had no explanation for why the

insurance division did not follow up with Mr. Cole in June 2008.

Because he never heard from Mr. Cole again, he assumed that

Brevard Management had obtained the requested workers'

compensation coverage.

17. It is accepted that Mr. Cole believed that he had

purchased the workers' compensation coverage as part of the ADP

payroll services; however, the evidence established that

Mr. Cole should reasonably have known that this was not the

case. Nothing in the June 2008 contractual documentation with

ADP indicated that Brevard Management had obtained workers'

compensation insurance coverage, and the subsequent ADP payroll

registers showed no deductions for workers' compensation

insurance.

18. Using the proprietary Scopes Manual developed by the

National Council on Compensation Insurance, Inc. (NCCI),

Mr. Wyatt assigned Brevard Management's employees the occupation

classification code 9052, "Hotel: All Other Employees & Sales

Persons, Drivers." This was the same code assigned by Ms. Bowen

when she completed the policy paperwork for Brevard Management.

Ms. Bowen described this classification as "all inclusive" with

respect to hotel employees.

19. Mr. Wyatt calculated an amended penalty based on the

payroll records provided by Mr. Cole, from the date Brevard

Management became an active limited liability company, June 3,

2008, to the date the SWO was issued, August 25, 2008.

Mr. Wyatt divided the total payroll by 100, then multiplied that

figure by NCCI's approved manual rate for insurance coverage in

2008 for classification code 9052. That product was then

multiplied by 1.5 to arrive at the penalty for the stated

period. The total penalty for all employees was $2,112.03.

20. The Amended Order was served on Brevard Management on

August 26, 2008, along with the SWO.

21. On August 26, 2008, Mr. Wyatt met with Mr. Cole and

Mr. Segev, who produced a copy of the application for workers'

compensation insurance placed through NorGUARD Insurance Company

and tendered a cashier's check for the full amount of the

penalty. The SWO was released on the same day.

CONCLUSIONS OF LAW

22. The Division of Administrative Hearings has

jurisdiction of the subject matter of and the parties to this

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

23. Employers are required to secure payment of

compensation for their employees. §§ 440.10(1)(a) and

440.38(1), Fla. Stat.

24. "Employer" is defined, in part, as "every person

carrying on any employment." § 440.02(16), Fla. Stat.

"Employment . . . means any service performed by an employee for

the person employing him or her" and includes "[a]ll private

employments in which four or more employees are employed by the

25. "Employee" is defined, in part, as "any 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. . . ." § 440.02(15)(a), Fla. Stat.

"Employee" also includes "any person who is an officer of a

corporation and who performs services for remuneration for such

corporation within this state. . . ." § 440.02(15)(b), Fla.

Stat. Certain corporate officers may elect to exempt themselves

from the coverage requirements of Chapter 440, Florida Statutes.

Brevard Management's employees had a workers' compensation

exemption.

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

and must show by clear and convincing evidence that the employer

violated the Workers' Compensation Law and that the penalty

assessments were correct under the law. See Department of

Banking and Finance, Division of Securities and Investor

Protection v. Osborne Stern and Co. , 670 So. 2d 932 (Fla. 1996);

and Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

27. In Evans Packing Co. v. Department of Agriculture and

Consumer Services , 550 So. 2d 112, 116, n. 5 (Fla. 1st DCA 1989),

the court defined clear and convincing evidence as follows:

[C]lear and convincing evidence requires

that the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

evidence must be precise and explicit and the

witnesses must be lacking in confusion as to

the facts in issue. The evidence must be of

such weight that it produces in the mind of

the trier of fact the firm belief of

conviction, without hesitancy, as to the

truth of the allegations sought to be

established. Slomowitz v. Walker , 429 So. 2d

797, 800 (Fla. 4th DCA 1983).

28. Judge Sharp, in her dissenting opinion in Walker v.

Florida Department of Business and Professional Regulation , 705

So. 2d 652, 655 (Fla. 5th DCA 1998)(Sharp, J., dissenting),

reviewed recent pronouncements on clear and convincing evidence:

Clear and convincing evidence requires

more proof than preponderance of evidence,

but less than beyond a reasonable doubt. In

re Inquiry Concerning a Judge re Graziano ,

696 So. 2d 744 (Fla. 1997). It is an

intermediate level of proof that entails

both qualitative and quantative [sic]

elements. In re Adoption of Baby E.A.W. ,

658 So. 2d 961, 967 (Fla. 1995), cert.

denied , 516 U.S. 1051, 116 S. Ct. 719, 133

L.Ed.2d 672 (1996). The sum total of

evidence must be sufficient to convince the

trier of fact without any hesitancy. Id.

It must produce in the mind of the trier of

fact a firm belief or conviction as to the

truth of the allegations sought to be

established. Inquiry Concerning Davey , 645

So. 2d 398, 404 (Fla. 1994).

29. The Department established by clear and convincing

evidence that Brevard Management was an "employer" for workers'

compensation purposes because it was engaged in a non-

construction industry and had four or more employees working for

and (17)(b)2., Fla. Stat. Brevard Management was therefore

required to secure the payment of workers' compensation. §§

440.10(1)(a) and 440.38(1), Fla. Stat.

30. Subsection 440.107(7)(a), Florida Statutes, provides

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.

31. Thus, the Department's SWO was mandated by statute.

The Department applied the proper methodology in computing the

penalty, pursuant to the Penalty Calculation Worksheet adopted

by reference in Florida Administrative Code Rule 69L-6.027.

RECOMMENDATION

Having considered the foregoing Findings of Fact,

Conclusions of Law, the evidence of record, the candor and

demeanor of the witnesses, and the pleadings and arguments of

the parties, it is, therefore,

RECOMMENDED that a final order be entered by the Department

of Financial Services, Division of Workers' Compensation,

assessing a penalty of $2,112.03 against Brevard Management,

LLC.

DONE AND ENTERED this 17th day of April, 2009, in

Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

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 17th day of April, 2009.

COPIES FURNISHED :

Tracy Beal, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Ben Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0307

Justin H. Faulkner, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399

Albert Segev

Brevard Management, LLC, d/b/a

River Palm Hotel

420 South Harbor City Boulevard

Melbourne, Florida 32901

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.