08-004411
Department Of Financial Services, Division Of Workers&Apos; Compensation vs.
Mike Hill Construction, Inc.
Status: Closed
Recommended Order on Monday, December 15, 2008.
Recommended Order on Monday, December 15, 2008.
1STATE OF FLORIDA
4DIVISION OF ADMINISTRATIVE HEARINGS
8DEPARTMENT OF FINANCIAL )
12SERVICES, DIVISION OF WORKERS' )
17COMPENSATION, )
19)
20Petitioner, )
22)
23vs. ) Case No. 08-4411
28)
29MIKE HILL CONSTRUCTION, INC., )
34)
35Respondent. )
37)
38RECOMMENDED ORDER
40This cause came on for final hearing before Harry L.
50Hooper, Administrative Law Judge with the Division of
58Administrative Hearings, on October 21, 2008, in Bronson,
66Florida.
67APPEARANCES
68For Petitioner: Douglas D. Dolan, Esquire
74Justin H. Faulkner, Esquire
78Department of Financial Services
82Division of Legal Services
86200 East Gaines Street
90Tallahassee, Florida 32399-4229
93For Respondent: Michael C. Hill, pro se
100Mike Hill Construction, Inc.
1049650 Northeast 136th Court
108Williston, Florida 32696
111STATEMENT OF THE ISSUE
115The issue is whether Petitioner's Stop-Work Order and
123Amended Order of Penalty Assessment are lawful.
130PRELIMINARY STATEMENT
132On July 10, 2008, the Department of Financial Services
141(Department) issued a Stop-Work Order (SWO) and Order of Penalty
151Assessment to Mike Hill Construction, Inc. (Hill, Inc.). Hill,
160Inc., asserted its right to a hearing, and the matter was
171forwarded to the Division of Administrative Hearings and filed
180on September 8, 2008. The hearing was scheduled for October 21,
1912008, in Bronson, Florida, and was held at the time and place
203noticed.
204At the hearing, Petitioner presented the testimony of two
213witnesses and offered nine exhibits into evidence. Respondent
221testified and offered two exhibits into evidence. All offered
230exhibits were accepted into evidence.
235A Transcript was filed on November 12, 2008. After the
245hearing, both Petitioner and Respondent timely filed their
253Proposed Recommended Orders.
256References to statutes are to Florida Statutes (2007)
264unless otherwise noted.
267FINDINGS OF FACT
2701. The Division of Workers' Compensation (Division) is a
279component of the Department. The Department is a state agency
289charged with the administration of portions of the "Workers'
298Compensation Law." Among the Division's duties is enforcing the
307statutory requirement that employers secure the payment of
315workers' compensation coverage for the benefit of their
323employees and corporate officers who are required to be covered.
3332. William Pangrass is an investigator for the Division.
342Specifically, Mr. Pangrass works in the Bureau of Compliance in
352the Division's office in Ocala, Florida.
3583. In that capacity, Mr. Pangrass was doing a routine
368compliance check on July 10, 2008, at the premises located at
3792942 Northwest 144th Terrace in Gainesville, Florida. There was
388new construction on the site. Mr. Pangrass saw two men talking
399to one another and going about the site and concluded they were
411involved in the construction. He went inside and saw a third
422man on a ladder located in the interior of the house being
434built. The third man was finishing drywall.
4414. The activities observed by Mr. Pangrass were
449construction industry activities as defined and classified by
457Florida Administrative Code Rule 69L-6.021. This Rule adopts
465the SCOPES Manual of the National Council on Compensation
474Insurance (NCCI).
4765. One of the three men identified himself as Mike Hill,
487the principal of Hill, Inc. Mr. Pangrass inquired into
496Mr. Hill's workers' compensation status. Mr. Hill provided an
505expired exemption card. Inquiry as to the other two men
515revealed that one, Mr. Beauregard, had an expired exemption card
525and the other, Mr. Petrokowski, had no exemption at all.
5356. Mr. Pangrass verified that Mr. Hill was not covered by
546a policy of workers' compensation insurance and did not have an
557exemption from coverage, by using the Coverage and Compliance
566Automated System (CCAS) website. He also reviewed the Florida
575Department of State, Division of Corporations' website to verify
584the status of Hill, Inc. Mr. Pangrass learned that Hill, Inc.,
595had no workers' compensation coverage. Furthermore, it was
603verified that Mr. Hill, who was eligible for an exemption, had
614not obtained an exemption when his previous exemption expired on
624June 29, 2008.
6277. After consulting with higher authority, Mr. Pangrass
635issued a Stop-Work Order and served it on July 10, 2008. He
647also served Mr. Hill with a Request for Business Records for
658Penalty Assessment Calculation. Mr. Hill responded with records
666as requested. The records consisted of bank statements and
675copies of checks signed by Mike Hill on behalf of Hill, Inc.,
687and a statement by Mr. Hill that he had earned $2,571.91 during
700the period June 30, 2008, through July 10, 2008.
7098. It was Mr. Hill's duty to obtain an exemption from the
721Department, and he failed in that duty. Undoubtedly, the
730failure was due to an oversight on his part. Although one may
742be eligible for an exemption, as Mr. Hill was, the exemption
753does not occur absent an applicant satisfying the Department's
762documentary requirements, and Mr. Hill did not. Because he was
772out of compliance from June 30, 2008, until July 10, 2008, Hill,
784Inc., employed a person without insuring that the person was
794covered or exempt.
7979. The records provided were the sourced documents for an
807Amended Order of Penalty Assessment prepared by Mr. Pangrass and
817served on Mr. Hill on July 21, 2008. This document listed names
829of purported employees or subcontractors, as determined from the
838business records. They were Mike Beauregard; Daryl Miller, LLC;
847Fred Atkins; Ashley's Top Shop; and Mike Hill.
85510. A Penalty Worksheet was used to calculate the
864penalties. On the Penalty Worksheet, the five people or
873entities were assigned NCCI class codes as discussed in
882paragraph 4, above. Thereafter, the periods of noncompliance
890were set forth, followed by the payroll for the period. The
901payroll for each person or entity was divided by 100, and the
913result was multiplied by the manual rate for the class to
924determine the premium that should have been paid. Thereafter,
933the premium was multiplied by 1.5, which is the statutory
943penalty. This resulted in a total penalty for Hill, Inc., of
954$1,447.13
95611. It was determined that Hill, Inc., made payments to
966Mr. Beauregard, who had no exemption, and that Mr. Beauregard
976paid Mr. Petrokowski, who had no workers' compensation coverage.
985They were properly included on the Penalty Worksheet.
99312. With regard to Fred Atkins, none of the records
1003provided to Mr. Pangrass indicate a $250.00 payment to anyone
1013named Fred Atkins. Mr. Pangrass could not explain from where he
1024derived the name Fred Atkins and could not document any payment
1035to him by Hill, Inc. The $41.70 on the Penalty Worksheet
1046attributable to the Fred Atkins entry should be deducted from
1056the total penalty.
105913. Daryl Miller, LLC, appeared twice on the Penalty
1068Worksheet, because it was assumed that the entity was engaged in
1079floor covering and the approved manual rate for floor covering
1089increased. However, there is nothing in the business records
1098introduced into evidence to support any payment to Daryl Miller,
1108LLC, either on June 20, 2007, or between September 26, 2006, and
1120November 16, 2006, as appears on the Penalty Worksheet.
112914. There is a check in evidence with a payee of Daryl
1141Floor Covering in the amount of $2,140.00, and dated June 27,
11532008. Mr. Hill's unrebutted testimony was that Daryl Miller,
1162LLC, an entity without workers' compensation coverage, and Daryl
1171Floor Covering, a company with workers' compensation coverage,
1179are totally different entities. The lack of evidentiary support
1188for payments to Daryl Miller, LLC, requires that the portion of
1199the penalty attributable to that entity, in the amount of
1209$593.10, be deducted from the amount calculated by Mr. Pangrass.
121915. With regard to Ashley's Top Shop, Mr. Hill's
1228unrebutted testimony was that Ashley's Top Shop was a fabricator
1238of counter tops. Mr. Hill stated that he would typically take a
1250pattern to Ashley's Top Shop and that a countertop would be made
1262from it. Thereafter, Mr. Hill testified that he obtained the
1272countertop and installed it. This procedure is a retail sale as
1283opposed to a contractor-subcontractor or employment
1289relationship. The portion of the penalty attributable to
1297Ashley's Top Shop in the amount of $151.61, should be deducted
1308from the amount calculated by Mr. Pangrass.
131516. It is therefore demonstrated by the evidence of record
1325that the correctly calculated penalty is $660.72.
133217. Mr. Hill paid the assessment of $1,447.13, and
1342properly applied for an exemption. The exemption was granted,
1351and on July 21, 2008, Mr. Hill received an Order of Release from
1364Stop-Work Order, and Amended Order of Penalty Assessment. On
1373that date, he also signed a statement that he had terminated all
1385subcontractors and employees who were not in compliance with the
1395workers' compensation law and that he will not hire anyone
1405unless in compliance with the workers' compensation law.
1413CONCLUSIONS OF LAW
141618. The Division of Administrative Hearings has
1423jurisdiction over the subject matter of and the parties to this
1434proceeding. § 120.57(1), Fla. Stat. (2008).
144019. Because administrative fines are penal in nature, the
1449Department has the burden to prove by clear and convincing
1459evidence that Hill, Inc., failed to be in compliance with the
1470coverage requirements set forth, by not securing a certificate
1479of exemption for Mr. Hill, who was entitled to a certificate of
1491exemption for the period June 30, 2008, through the time he was
1503designated exempt on July 10. The Department must further prove
1513by clear and convincing evidence that Hill, Inc., failed to
1523ensure that Mr. Beauregard and Mr. Petrokowski were covered by
1533workers' compensation insurance when Mr. Hill employed them.
1541Department of Banking and Finance, Division of Securities and
1550Investor Protection v. Osborne Stern, Inc. , 670 So. 2d 932 (Fla.
15611996) and L and W Plastering and Drywall Services, Inc. v.
1572Department of Financial Services, Division of Workers'
1579Compensation , Case No. 06-3261 (DOAH, March 16, 2007).
158720. The Florida Legislature has determined that the
1595failure of an employer to comply with the requirement to provide
1606workers' compensation coverage to employees ". . . poses an
1616immediate danger to public health, safety, and welfare."
1624§ 440.107(1), Fla. Stat.
162821. Pursuant to Sections 440.10 and 440.338, Florida
1636Statutes, employers must secure the payment of workers'
1644compensation for their employees. Specifically, Subsection
1650440.10(1)(a), Florida Statutes, provides, "Every employer coming
1657within the provisions of this chapter shall be liable for, and
1668shall secure, the payment to his or her employees, or any
1679physician, surgeon, or pharmacist providing services under the
1687provisions of s. 440.13 , of the compensation payable under ss.
1697440.13 , 440.15 , and 440.16. Any contractor or subcontractor who
1706engages in any public or private construction in the state shall
1717secure and maintain compensation for his or her employees under
1727this chapter as provided in s.440.38."
173322. Subsections 440.107(2), (3), and (7), Florida
1740Statutes, authorize the Department to issue stop-work orders and
1749penalty assessment orders in its enforcement of workers'
1757compensation coverage requirements, and read in pertinent part:
1765440.107 --Department powers to enforce
1770employer compliance with coverage
1774requirements
1775* * *
1778(2) For purposes of this section,
1784'securing the payment of workers'
1789compensation' means obtaining coverage that
1794meets the requirements of this chapter and
1801the Florida Insurance Code. . . .
1808* * *
1811(3) The department shall enforce workers'
1817compensation coverage requirements,
1820including the requirement that the employer
1826secure the payment of workers' compensation,
1832and the requirement that the employer
1838provide the carrier with information to
1844accurately determine payroll and correctly
1849assign classification codes. In addition to
1855any other powers under this chapter, the
1862department shall have the power to:
1868* * *
1871(g) Issue stop-work orders, penalty
1876assessment orders, and any other orders
1882necessary for the administration of this
1888section.
1889* * *
1892(7)(d)1. In addition to any penalty,
1898stop-work order, or injunction, the
1903department shall assess against any employer
1909who has failed to secure the payment of
1917compensation as required by this chapter a
1924penalty equal to 1.5 times the amount the
1932employer would have paid in premium when
1939applying approved manual rates to the
1945employer's payroll during periods for which
1951it failed to secure the payment of workers'
1959compensation required by this chapter within
1965the preceding 3-year period or $ 1,000,
1973whichever is greater.
197623. The definition of employee and the status of corporate
1986officers as employees for purposes of workers' compensation are
1995outlined in Subsections 440.02(15)(a) and (b), Florida Statutes,
2003which provide in part:
2007440.02. Definitions --When used in this
2013chapter, unless the context clearly requires
2019otherwise, the following terms shall have
2025the following meanings:
2028* * *
2031(15)(a) "Employee" means any person who
2037receives remuneration from an employer for
2043the performance of any work or service while
2051engaged in any employment under any
2057appointment or contract for hire or
2063apprenticeship, express or implied, oral or
2069written, whether lawfully or unlawfully
2074employed, and includes, but is not limited
2081to, aliens and minors.
2085(b) "Employee" includes any person who
2091is an officer of a corporation and who
2099performs services for remuneration for such
2105corporation within this state, whether or
2111not such services are continuous.
21161. Any officer of a corporation may
2123elect to be exempt from this chapter by
2131filing written notice of the election with
2138the department as provided in s.440.05.
21442. As to officers of a corporation who
2152are engaged in the construction industry, no
2159more than three officers of a corporation or
2167of any group of affiliated corporations may
2174elect to be exempt from this chapter by
2182filing written notice of the election with
2189the department as provided in s. 440.05.
2196Officers must be shareholders, each owning
2202at least 10 percent of the stock of such
2211corporation and listed as an officer of such
2219corporation with the Division of
2224Corporations of the Department of State, in
2231order to elect exemptions under this
2237chapter. For purposes of this subparagraph,
2243the term "affiliated" means and includes one
2250or more corporations or entities, any one of
2258which is a corporation engaged in the
2265construction industry, under the same or
2271substantially the same control of a group of
2279business entities which are connected or
2285associated so that one entity controls or
2292has the power to control each of the other
2301business entities. The term "affiliated"
2306includes, but is not limited to, the
2313officers, directors, executives,
2316shareholders active in management,
2320employees, and agents of the affiliated
2326corporation. The ownership by one business
2332entity of a controlling interest in another
2339business entity or a pooling of equipment or
2347income among business entities shall be
2353prima facie evidence that one business is
2360affiliated with the other.
23643. An officer of a corporation who
2371elects to be exempt from this chapter by
2379filing a written notice of the election with
2387the department as provided in s. 440.05 is
2395not an employee.
2398Services are presumed to have been
2404rendered to the corporation if the officer
2411is compensated by other than dividends upon
2418shares of stock of the corporation which the
2426officer owns.
242824. Section 440.05, Florida Statutes, provides the
2435procedure for corporate officers to exempt themselves from
2443workers' compensation coverage. It provides in relevant part,
2451as follows:
2453440.05. Election of exemption; revocation of
2459election; notice; certification
2462(1) Each corporate officer who elects not
2469to accept the provisions of this chapter or
2477who, after electing such exemption, revokes
2483that exemption shall mail to the department
2490in Tallahassee notice to such effect in
2497accordance with a form to be prescribed by
2505the department.
2507* * *
2510(3) Each officer of a corporation who is
2518engaged in the construction industry and who
2525elects an exemption from this chapter or
2532who, after electing such exemption, revokes
2538that exemption, must mail a written notice
2545to such effect to the department on a form
2554prescribed by the department. The notice of
2561election to be exempt from the provisions of
2569this chapter must be notarized and under
2576oath. The notice of election to be exempt
2584which is submitted to the department by the
2592officer of a corporation who is allowed to
2600claim an exemption as provided by this
2607chapter must list the name, federal tax
2614identification number, social security
2618number, all certified or registered licenses
2624issued pursuant to chapter 489 held by the
2632person seeking the exemption, a copy of
2639relevant documentation as to employment
2644status filed with the Internal Revenue
2650Service as specified by the department, a
2657copy of the relevant occupational license in
2664the primary jurisdiction of the business,
2670and the registration number of the
2676corporation filed with the Division of
2682Corporations of the Department of State
2688along with a copy of the stock certificate
2696evidencing the required ownership under this
2702chapter. The notice of election to be
2709exempt must identify each corporation that
2715employs the person electing the exemption
2721and must list the social security number or
2729federal tax identification number of each
2735such employer and the additional
2740documentation required by this section. In
2746addition, the notice of election to be
2753exempt must provide that the officer
2759electing an exemption is not entitled to
2766benefits under this chapter, must provide
2772that the election does not exceed exemption
2779limits for officers provided in s. 440.02,
2786and must certify that any employees of the
2794corporation whose officer elects an
2799exemption are covered by workers'
2804compensation insurance. Upon receipt of the
2810notice of the election to be exempt, receipt
2818of all application fees, and a determination
2825by the department that the notice meets the
2833requirements of this subsection, the
2838department shall issue a certification of
2844the election to the officer, unless the
2851department determines that the information
2856contained in the notice is invalid. The
2863department shall revoke a certificate of
2869election to be exempt from coverage upon a
2877determination by the department that the
2883person does not meet the requirements for
2890exemption or that the information contained
2896in the notice of election to be exempt is
2905invalid. The certificate of election must
2911list the name of the corporation listed in
2919the request for exemption. A new
2925certificate of election must be obtained
2931each time the person is employed by a new or
2941different corporation that is not listed on
2948the certificate of election. A copy of the
2956certificate of election must be sent to each
2964workers' compensation carrier identified in
2969the request for exemption. Upon filing a
2976notice of revocation of election, an officer
2983who is a subcontractor or an officer of a
2992corporate subcontractor must notify her or
2998his contractor. Upon revocation of a
3004certificate of election of exemption by the
3011department, the department shall notify the
3017workers' compensation carriers identified in
3022the request for exemption.
302625. Even though a person meets all of the requirements for
3037an exemption, that person does not become exempt until the
3047process outlined by Sub section 440.05(3), Florida Statutes , has
3056been accomplished. Accordingly, Mr. Hill was an employee during
3065all times pertinent, and Hill, Inc., was required to obtain
3075coverage and failed to do so.
308126. Mr. Hill and his employees, Mr. Beauregard and
3090Mr. Petrokowski, were not covered by workers' compensation
3098insurance during the times indicated on the Penalty Worksheet,
3107and the penalties calculated by the Department in the case of
3118these three men are correct.
3123RECOMMENDATION
3124Based upon the foregoing Findings of Fact and Conclusions
3133of Law, it is
3137RECOMMENDED that the Department of Financial Services enter
3145a final order requiring Hill, Inc., to pay a penalty of $660.72,
3157and to refund any amounts paid by Hill, Inc., in excess of that
3170amount.
3171DONE AND ENTERED this 15th day of December, 2008, in
3181Tallahassee, Leon County, Florida.
3185S
3186HARRY L. HOOPER
3189Administrative Law Judge
3192Division of Administrative Hearings
3196The DeSoto Building
31991230 Apalachee Parkway
3202Tallahassee, Florida 32399-3060
3205(850) 488-9675 SUNCOM 278-9675
3209Fax Filing (850) 921-6847
3213www.doah.state.fl.us
3214Filed with the Clerk of the
3220Division of Administrative Hearings
3224this 15th day of December, 2008.
3230COPIES FURNISHED :
3233Douglas D. Dolan, Esquire
3237Department of Financial Services
3241Division of Legal Services
3245200 East Gaines Street
3249Tallahassee, Florida 32399-4229
3252Michael C. Hill
3255Mike Hill Construction, Inc.
32599650 Northeast 136th Court
3263Williston, Florida 32696
3266Justin H. Faulkner, Esquire
3270Department of Financial Services
3274Division of Legal Services
3278200 East Gaines Street
3282Tallahassee, Florida 32399-4229
3285Honorable Alex Sink
3288Chief Financial Officer
3291Department of Financial Services
3295The Capitol, Plaza Level 11
3300Tallahassee, Florida 32399-0300
3303NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
3309All parties have the right to submit written exceptions within
331915 days from the date of this Recommended Order. Any exceptions
3330to this Recommended Order should be filed with the agency that
3341will issue the Final Order in this case.
- Date
- Proceedings
- PDF:
- Date: 03/04/2009
- Proceedings: Letter to DOAH from M. Hill regarding corrections to final order filed.
- PDF:
- Date: 12/30/2008
- Proceedings: Department of Financial Services, Division of Workers` Compensation`s Exceptions to Recommended Order filed.
- PDF:
- Date: 12/15/2008
- Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
- PDF:
- Date: 11/24/2008
- Proceedings: Department of Financial Services, Division of Workers` Compensations` Proposed Recommended Order filed.
- Date: 11/12/2008
- Proceedings: Transcript filed.
- Date: 10/22/2008
- Proceedings: Respondent`s Exhibit 2 (exhibit not available for viewing) filed.
- Date: 10/21/2008
- Proceedings: CASE STATUS: Hearing Held.
- PDF:
- Date: 10/15/2008
- Proceedings: Notice of Appearance as Co-counsel (filed by Justin Faulkner) filed.
- Date: 10/15/2008
- Proceedings: Respondent`s Supporting Exhibits (exhibits not available for viewing) filed.
- PDF:
- Date: 10/07/2008
- Proceedings: Letter to M. Hill from D. Dolan enclosing exhibits and witness list (no exhibits attached) filed.
Case Information
- Judge:
- HARRY L. HOOPER
- Date Filed:
- 09/08/2008
- Date Assignment:
- 09/08/2008
- Last Docket Entry:
- 03/04/2009
- Location:
- Bronson, Florida
- District:
- Northern
- Agency:
- ADOPTED IN PART OR MODIFIED
Counsels
-
Douglas Dell Dolan, Esquire
Address of Record -
Justin H. Faulkner, Esquire
Address of Record -
Mike Hill
Address of Record