09-000641 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Aj's Marble And Tile, Inc. Status: Closed Recommended Order on Monday, November 2, 2009.

Summary: Petitioner proved Respondent did not secure workers' comp insurance coverage for employees for 3-year period and failed to cease business operations under the Stop Work Order. Recommend a penalty assessment per 3d Amended Order of Penalty Assessment.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 09-0641

)

AJ'S TILE AND MARBLE, INC., )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on April 22, 2009, by video teleconference, with the Petitioner

appearing in Tallahassee, Florida, and the Respondent's

Qualified Representative appearing in Miami, Florida, before

Patricia M. Hart, a duly-designated Administrative Law Judge of

the Division of Administrative Hearings, who presided in

Tallahassee, Florida.

APPEARANCES

For Petitioner: Kristian E. Dunn, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: Herbert Grodin, Qualified Representative

Sobel & Cookler, CPAs

950 Jericho Turnpike

Westbury, New York 11590

STATEMENT OF THE ISSUE

Whether the Petitioner failed to secure workers'

compensation insurance coverage for its employees, as set forth

in the Stop-Work Order dated October 15, 2008, and, if so, the

penalty that should be assessed.

PRELIMINARY STATEMENT

On October 15, 2008, the Department of Financial Services,

Division of Workers' Compensation ("Department"), issued a Stop-

Work Order directing AJ's Marble & Tile, Inc. (AJ's Marble &

Tile"), to immediately stop work and cease all business

operations in Florida because it had allegedly failed to obtain

workers' compensation insurance meeting the requirements of

Chapter 440, Florida Statutes (2008), 1 and the Florida Insurance

Code. The Stop-Work Order included an Order of Penalty

Assessment reciting the statutory penalty for failure to obtain

workers' compensation insurance coverage.

The Stop-Work Order was hand-delivered to the owner of AJ's

Marble & Tile, Anibal Garcia, on October 15, 2008, together with

a Request for Production of Business Records for Penalty

Assessment Calculation. On October 24, 2008, the Department

issued an Amended Order of Penalty Assessment based on documents

furnished by AJ's Marble & Tile, in which it included a proposed

penalty in the amount of $109,837.09 attributable to AJ's

Marble & Tile's failure to secure workers' compensation

insurance coverage. No proposed penalty for violating the Stop-

Work Order was included in the October 24, 2008, Amended Order

of Penalty Assessment.

AJ's Marble & Tile timely filed a request for an

administrative hearing through Herbert Grodin of Sobel &

Cookler, CPAs, a business located in Westbury, New York. The

Department transmitted the matter to the Division of

Administrative Hearings for the assignment of an administrative

law judge. A Notice of Hearing by Video Teleconference was

issued on February 16, 2009, scheduling the final hearing for

April 22, 2009. In addition, an order was entered on that date

advising AJ's Marble & Tile of Florida Administrative Code

Rules 28-106.106 and .107, which relate to representation of a

party in an administrative proceeding by a person other than an

attorney licensed to practice law in Florida and of the need for

that person to be authorized to appear in the proceeding as the

party's qualified representative. A copy of the referenced

rules was provided with the order.

After receiving the necessary materials from Mr. Grodin, an

order was entered on April 10, 2009, accepting Mr. Grodin as

AJ's Marble & Tile's qualified representative. An Order

Directing Filing of Exhibits was entered on April 10, 2009,

directing the parties to file the exhibits they intended to

offer into evidence at the final hearing no later than five days

prior to the hearing, which, in this case, was Friday, April 17,

2009.

AJ's Marble & Tile filed a copy of its proposed exhibits on

April 16, 2009. On April 17, 2009, the Department filed some of

the exhibits it intended to offer into evidence at the final

hearing. The exhibits were accompanied by a notice from counsel

for the Department stating that he had been unable to comply

fully with the Order Directing Filing of Exhibits because he had

been in a final hearing with another administrative law judge

that had been extended a day longer than scheduled.

The Department filed with the Division of Administrative

Hearings the remainder of the exhibits it intended to offer into

evidence on April 20, 2009, accompanied by a document entitled

"Addendum to Exhibits for Hearing." Although the Certificate of

Service appended to the addendum indicated that the exhibits had

been served on Mr. Grodin by hand-delivery on April 20, 2009,

counsel for the Department represented in the text of the

addendum that Mr. Grodin had refused to accept the exhibits and

that they would be provided to him on the morning of the final

hearing.

On April 17, 2009, the Department also filed an Unopposed

Motion to Amend Charging Documents, to which it attached a

Second Amended Order of Penalty Assessment. The proposed

penalty stated for AJ's Marble & Tile's alleged failure to

secure workers' compensation insurance coverage for its

employees was increased to $111,840.64, and the Department

included for the first time a proposed penalty in the amount of

$48,000.00 attributable to AJ's Marble & Tile alleged failure to

cease its business operations in Florida in accordance with the

Stop-Work Order issued October 15, 2008, for a total proposed

penalty of $159,840.64.

In the motion to amend the Amended Order of Penalty

Assessment, counsel for the Department represented that he had

contacted Mr. Grodin and that Mr. Grodin stated that he did not

oppose the amendment. Counsel for the Department also noted in

the motion that he had advised Mr. Grodin of the possibility of

requesting a continuance due to the short time remaining until

the hearing but that Mr. Grodin stated he was not inclined to

request a continuance. Because the Department had represented

that its motion was unopposed and because the motion was not

filed until late in the afternoon of Friday, April 17, 2009, and

not received by the undersigned until Monday, April 20, 2009,

two business days before the final hearing, no written order was

entered on the motion prior to the final hearing.

The final hearing was convened on April 22, 2009. Shortly

after the final hearing was convened, the undersigned took up

the matter of the Unopposed Motion to Amend Charging Documents.

The undersigned indicated her understanding that Mr. Grodin did

not oppose the amendment, but Mr. Grodin indicated that he did,

in fact, oppose the amendment. Mr. Grodin further stated that

he had not received a copy of the motion or a copy of the

proposed Second Amended Order of Penalty Assessment, even though

counsel for the Department stated that a copy had been sent to

Mr. Grodin by facsimile transmittal to Mr. Grodin's office on

April 17, 2009. Counsel for the Department also represented

that the increased proposed penalties included in the proposed

Second Amended Order of Penalty Assessment were based on

documents provided to the Department by AJ's Marble & Tile or by

Mr. Grodin.

A Department representative present with Mr. Grodin at the

Miami teleconference site provided Mr. Grodin with a copy of the

motion and proposed amendment, and the hearing was recessed to

give Mr. Grodin an opportunity to review the documents. At the

conclusion of the recess, Mr. Grodin renewed his objection to

allowing the proposed amendment, stating that AJ's Marble & Tile

did not violate the Stop-Work Order but, rather, that the

individuals it engaged to work as independent contractors

continued to work. The undersigned explained to Mr. Grodin that

the significant change in the proposed Second Amended Order of

Penalty Assessment was the additional proposed penalty for

violation of the Stop-Work Order; that the Department had to

prove by evidence presented at the final hearing that AJ's

Marble & Tile continued to operate its business after issuance

of the Stop-Work Order, as well as the number of days it had

done so; and that, if the Department proved these facts, the

penalty for each day a business continues to operate after

issuance of a Stop-Work Order is mandated by statute as

$1,000.00 per day. Because the violation of the Stop-Work Order

and the accuracy of the proposed penalty calculation were issues

of fact to be proven by the Department and because of the

representation that the documents on which the proposed

penalties in the Second Amended Order of Penalty Assessment had

been calculated were provided by AJ's Marble & Tile or

Mr. Grodin, the undersigned granted the motion to amend the

penalty assessment, and the Second Amended Order of Penalty

Assessment filed April 17, 2009, was identified as the charging

document in the case.

The matter of the Department's exhibits was then discussed.

Counsel for the Department acknowledged that his exhibits were

not filed with the Division of Administrative Hearings nor

served on Mr. Grodin within the five days specified in the Order

Directing Filing of Exhibits, but he represented that he had

offered to have the exhibits hand-delivered to Mr. Grodin on the

morning of April 20, 2009. Mr. Grodin confirmed at the final

hearing that he had refused to accept hand-delivery of the

documents. Counsel for the Department also represented that the

documents to be offered as exhibits by the Department were

provided by Mr. Grodin or by AJ's Marble & Tile, except for the

Second Amended Order of Penalty Assessment and the accompanying

Penalty Worksheet, several spreadsheets breaking down the

calculations made by the Department, and a packet of certified

documents retrieved from the Department's Coverage and

Compliance Automated System ("CCAS") database.

Because of the potential prejudice to AJ's Marble & Tile

resulting from the Department's failure to file and serve its

proposed exhibits timely, the undersigned explained to

Mr. Grodin that the only way to cure the prejudice was to

continue the hearing until a later date to give him time to

review the documents and prepare his defense. In response,

Mr. Grodin suggested that he review the documents as they came

up during the hearing and state his objections at that time. A

recess was taken to allow time for counsel for the Department,

Mr. Grodin, and the Department investigator present with

Mr. Grodin at the Miami, Florida, location to discuss the

documents at issue. At the conclusion of the recess, the

Mr. Grodin indicated that he was ready to proceed with the

hearing.

At the hearing, the Department presented the testimony of

Ann Johnson, and the following Petitioner's exhibits were

offered and received into evidence: Petitioner's Exhibits 1a,

1b, 1c, 2a, 2b, 2c, 2d, 2e, 2f, 2g, 2h, and 3. Mr. Grodin

testified on behalf of AJ's Marble & Tile, and Respondent's

Exhibits A through F were offered and received into evidence.

Mr. Grodin did not object to the admission of any of the

Department's exhibits except Petitioner's Exhibit 3, which

consists of the Second Amended Order of Penalty Assessment, the

Penalty Worksheet; a breakdown of the amounts of gross payroll

attributed to each individual listed in the Penalty Worksheet,

and a spreadsheet breaking down the calculations the Department

used to arrive at the proposed $48,000.00 penalty assessment for

AJ's Marble & Tile's alleged violation of the October 15, 2008,

Stop-Work Order. Mr. Grodin objected to the introduction of

this exhibit on the grounds that he disagreed with the

calculations used to determine the proposed penalty for the

alleged violation of the Stop-Work Order.

The undersigned advised Mr. Grodin that he could cross-

examine the Department's witness regarding the correctness of

the information contained in the calculation of the proposed

$48,000.00 penalty and the manner in which the calculations had

been made. The undersigned then asked Mr. Grodin to identify

the evidence and/or witnesses he would present to refute the

violation of the Stop-Work Order and the calculation of the

proposed $48,000.00 penalty. Mr. Grodin responded that he would

present his own testimony and that he was in a position to give

that testimony at the hearing on April 22, 2009. Based on this

representation, the undersigned received Petitioner's Exhibit 3

into evidence.

In correspondence directed to the undersigned dated

April 23, 2009, and filed with the Division of Administrative

Hearings April 27, 2009, Mr. Grodin expressed his displeasure

with the manner in which the undersigned had conducted the final

hearing, especially with regard to allowing the Department's

exhibits into evidence despite the late disclosure and filing of

the exhibits. 2 Mr. Grodin pointed out that the Department had

violated both the Order of Pre-Hearing Instructions entered

February 16, 2009, and the Order Directing Filing of Exhibits

entered April 10, 2009, and he requested that the case be

dismissed because the Department had violated these orders.

Mr. Grodin requested in the alternative that a mistrial be

declared and the matter scheduled for another final hearing,

during which he could present the testimony of witnesses he

would have presented had he received timely disclosure of the

Department's exhibits. A copy of this correspondence was

forwarded to the Department, together with a Notice of Ex Parte

Communication; the Department did not file a response to

Mr. Grodin's request, and no action was taken on the requests

prior to receipt of the parties' proposed recommended orders.

During the hearing, errors were discovered in the

Department's calculations. With Mr. Grodin's agreement, the

Department filed on April 28, 2009, an Unopposed Motion to Amend

Charging Documents, in which the proposed penalty included in

the Second Amended Order of Penalty Assessment was decreased.

Because the proposed amendment was discussed by the parties at

the hearing and because Mr. Grodin stated that he did not object

to the amendment, the Department's motion is granted, and the

Third Amended Order of Penalty Assessment, which includes a

proposed penalty assessment of $158,775.09, shall be considered

the charging document in this case.

The one-volume transcript of the proceeding was filed on

May 11, 2009. On May 18, 2009, AJ's Marble & Tile filed its

Proposed Recommended Order, in which Mr. Grodin again expressed

his displeasure with the manner in which the final hearing was

conducted. The Department filed its Proposed Recommended Order

on May 21, 2009. Upon review of the proposed recommended

orders, the undersigned noticed a discrepancy between

information contained in the Department's proposed findings of

fact and the representation of the Department at the final

hearing that Mr. Grodin or AJ's Marble & Tile had provided all

documents introduced into evidence at the hearing, except those

specifically identified at the hearing.

It appeared from the information in the Department's

proposed findings of fact that certain documents may have been

provided to the Department by a source other than Mr. Grodin or

AJ's Marble & Tile. An Order to Show Cause was, therefore,

entered on June 30, 2009, ordering the Department to show cause

why the final hearing should not be re-opened to allow testimony

on the source of these certain documents and to allow AJ's

Marble & Tile the opportunity to offer evidence regarding the

documents. The Department filed its response to the Order to

Show Cause on July 10, 2009, and a hearing was held on

August 26, 2009, with the parties attending by telephone.

During the telephone hearing, the undersigned stated her intent

to grant Mr. Grodin's request to re-open the final hearing.

Mr. Grodin requested time to consult with his client, and he

agreed to report his client's decision on reopening the hearing

on or before September 14, 2009. In correspondence dated

September 11, 2009, Mr. Grodin stated that his client could not

afford to continue litigation in the case, that the case should

be decided on the evidence presented at the final hearing, and

that the case should be dismissed because of the late disclosure

of the Department's exhibits.

The parties' proposed recommended orders have been

considered in the preparation of this Recommended Order.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the

final hearing and on the entire record of this proceeding, the

following findings of fact are made:

1. The Department is the state agency responsible for

enforcing the requirement of Section 440.107, Florida Statutes,

that employers in Florida secure workers' compensation insurance

coverage for their employees pursuant to Chapter 440, Florida

Statutes. § 440.107(3), Fla. Stat.

2. At the times material to this proceeding, AJ's Marble &

Tile was a Florida corporation located in Pembroke Pines,

Florida. Anibal Garcia was the owner of AJ's Marble & Tile,

which, at the times material to this proceeding, engaged in the

business of designing and arranging decorative marble and tile.

3. AJ's Marble & Tile created the design of the marble and

tile, and arranged for the installation of the marble and tile

in accordance with the design. The workers hired by AJ's

Marble & Tile to perform the installations signed a document

entitled "Contract for Performance, Independent Contractors" and

a document entitled "Independent Contractors Agreement." AJ's

Marble & Tile issued annually an Internal Revenue Form 1099,

which reports "Miscellaneous Income," to each worker installing

marble and tile pursuant to the contract and agreement they

signed with AJ's Marble & Tile.

4. On or about October 15, 2008, Ann Johnson, a compliance

investigator employed by the Department, conducted a random site

visit to a fast-food-restaurant construction site located in the

area which she was assigned to patrol. Ms. Johnson was

approached by a person who identified himself as the general

contractor, and he provided Ms. Johnson with the names of the

seven companies that were working on the site at the time of the

site visit.

5. Ms. Johnson went to her car and conducted research on

the seven companies identified by the general contractor using

the Department's CCAS database, which provides information on

workers' compensation insurance coverage and exemptions.

Ms. Johnson's research on the CCAS database revealed that six of

the companies working on the construction site had workers'

compensation insurance coverage for their employees.

Ms. Johnson also found in the CCAS database an exemption from

Chapter 440, Florida Statutes, issued to Anibal Garcia, the

owner and an officer of AJ's Marble & Tile. Ms. Johnson did

not, however, find any record in the CCAS database to show that

AJ's Marble & Tile had workers' compensation insurance coverage

for any employee.

6. Ms. Johnson approached the men whom the general

contractor identified as working for AJ's Marble & Tile. She

observed one man installing decorative tile on the outside of

the building and three men installing tile in two bathrooms

inside the building; one of the three men inside the building

was working with a tile saw.

7. Ms. Johnson, who is fluent in Spanish, interviewed the

men in Spanish since that was their native language. The four

men told Ms. Johnson that they were employed and paid by AJ's

Marble & Tile.

8. Ms. Johnson obtained AJ's Marble & Tile's telephone

number and called the company's office. She spoke with

Mr. Garcia, who told her that he did not have workers'

compensation insurance coverage for the men on the construction

site but that he did have an exemption for himself

9. Ms. Johnson told Mr. Garcia to meet her at the

construction site, and he arrived there about an hour later.

While she was waiting for Mr. Garcia, Ms. Johnson spoke with her

supervisor; with his authorization, she prepared a Stop-Work

Order and a Request for Production of Business Records for

Penalty Assessment Calculation for AJ's Marble & Tile.

Ms. Johnson personally delivered these documents to Mr. Garcia

when he arrived at the construction site.

10 The Stop-Work Order prepared by Ms. Johnson on

October 15, 2008, directed AJ's Marble & Tile to cease all

business operations in Florida until the Department issued an

order releasing the Stop-Work Order, citing as authority

Section 440.107, Florida Statutes. The Stop-Work Order also

included an Order of Penalty Assessment that stated in general

terms the statutory penalty for failure to secure workers'

compensation coverage.

11. The Request for Production of Business Records for

Penalty Assessment Calculation directed that AJ's Marble & Tile

to provide business records from October 16, 2005, through

October 15, 2008, for examination and copying within five days

of the date on which the request was received. AJ's Marble &

Tile and its Certified Public Accountant, Herbert Grodin,

provided documents to the Department for the three-year period

consisting of check stubs, the payroll ledger, Internal Revenue

Service Form 1099s, and independent contractor agreements.

12. Ms. Johnson identified each person who had been paid

by AJ's Marble & Tile for tile installation from October 16,

2005, through October 15, 2008, from the payroll records

provided by AJ's Marble & Tile, and she ran their Social

Security numbers through the Department's CCAS database. She

found that, during the relevant time period, none of the

individuals listed had an exemption from Chapter 440, Florida

Statutes, and that none had workers' compensation insurance

coverage. Ms. Johnson further determined that AJ's Marble &

Tile had not provided workers' compensation insurance coverage

to the persons identified in its payroll documents during the

period from October 16, 2005, through October 15, 2008, when the

Stop-Work Order was issued.

Calculation of proposed penalty assessment for failure to

provide workers' compensation insurance coverage .

13. Ms. Johnson verified the amounts paid by AJ's Marble &

Tile to each worker it paid to install marble and tile during

the relevant time period by correlating the information in the

payroll ledger, the information on the check stubs, and the

information in the Internal Revenue Service Form 1099s. With

few exceptions, the payroll information contained in these

documents was consistent.

14. Ms. Johnson referred to the National Council of

Compensation Insurance ("NCCI") SCOPES Basic Manual of

Classifications ("SCOPES Manual") to determine the

classification code attributable to the businesses and workers

engaged in decorative tile work. The classification code

assigned by Ms. Johnson to AJ's Marble & Tile and the workers it

paid to install tile and marble was Code 5348.

15. According to the SCOPES Manual and to Florida

Administrative Code Rule 69L-6.021(1)(z), Code 5348 is

applicable to the construction industry. The SCOPES Manual

identifies the type of work covered by Code 5348 as "Tile and

Terrazzo Contractors"; Florida Administrative Code Rule 69L-

6.021(1)(z) identifies the type of work covered by Code 5348 as

"Stone, Mosaic or Terrazzo or Ceramic Tile Work Inside." The

SCOPES Manual states that Code 5348 is

applied to contractors engaged in tile,

stone, mosaic, or marble work. It includes

the installation of glazed porcelain or

ceramic wall, ceiling, or floor tiles as

found in . . . various rooms in residences.

. . . Inside and outside work, of a

primarily decorative, artistic, or

ornamental nature, such as setting surface

or wall tile of polished stone or marble,

fine mosaic wall and ceiling work, inside

and outside, is included within the scope of

Code 5348.

16. The manual rates approved in Florida for use in

determining the amount of workers' compensation insurance

premiums are contained in the pages of the NCCI Basic Manual

applicable to Florida. Ms. Johnson consulted the applicable

pages of the NCCI Basic Manual to determine the approved manual

rate in Florida for workers classified under Code 5348. The

approved manual rate effective January 1, 2005, for Code 5348

was $10.28 per $100.00 of payroll; the approved manual rate in

Florida effective January 1, 2006, for Code 5348 was $10.03 per

$100.00 of payroll; the approved manual rate in Florida

effective January 1, 2007, for Code 5348 was $8.34 per $100.00

of payroll; the approved manual rate in Florida effective

January 1, 2008, for Code 5348 was $6.55 per $100.00 of payroll.

17. Ms. Johnson calculated the total proposed penalty

attributable to AJ's Marble & Tile's failure to provide workers'

compensation insurance coverage for the workers it paid to

install marble and tile during the relevant time period as

follows: She listed each of the workers paid by AJ's Marble &

Tile's on the Penalty Worksheet; she assigned each worker

Code 5348, which defined their workplace operations in

accordance with the SCOPES Manual; she set out the dates during

which AJ's Marble & Tile did not provide workers' compensation

insurance coverage for these workers; she entered the annual or

pro-rated gross payroll for each worker during the period of

non-compliance; she divided the gross payroll for each worker by

100; she set out the Florida-approved manual rate for each

worker during the period of non-compliance in accordance with

the classification code assigned the worker; she determined the

premium that AJ's Marble & Tile would have paid for workers'

compensation insurance coverage for each worker during the

period of non-compliance by multiplying the approved manual rate

by one one-hundredth of the gross payroll for each worker; she

calculated the proposed penalty attributable to each worker

during the period of non-compliance by multiplying the premium

for each worker by 1.5; and, finally, she calculated the total

proposed penalty attributable to AJ's Marble & Tile's failure to

secure workers' compensation insurance coverage for its workers

during the time periods at issue.

18. On October 24, 2008, Ms. Johnson issued an Amended

Order of Penalty Assessment setting forth a total proposed

penalty of $109,837.09, all of which was attributable to AJ's

Marble & Tile's "[f]ailure to secure the payment of workers'

compensation within the meaning of section 440.107(2), F.S. by

failing to obtain coverage that meets the requirements of

Chapter 440, F.S., and the Insurance Code." The Amended Order

of Penalty Assessment included the following language, in bold

print:

The Stop-Work Order issued in this case

shall remain in effect until either (a) The

Division issues an order releasing the Stop-

Work Order upon finding that the employer

has come into compliance with the coverage

requirement of the workers' compensation law

and pays the total penalty in full, or (b)

The Division issues an Order of Conditional

Release From Stop-Work Order pursuant to the

employer coming into compliance with the

coverage requirements of the workers'

compensation law and entering into a Payment

Agreement Schedule For Periodic Payment of

Penalty.

19. In the Second Amended Order of Penalty Assessment

filed April 17, 2009, Ms. Johnson calculated a proposed penalty

of $111,840.64 attributable to AJ's Marble & Tile's failure to

secure workers' compensation insurance coverage and added a

proposed penalty for violation of the Stop-Work Order; in the

Third Amended Order of Penalty Assessment filed April 28, 2009,

Ms. Johnson calculated a proposed penalty of $110,775.09

attributable to AJ's Marble & Tile failure to secure workers'

compensation insurance coverage and again included a proposed

penalty for violation of the Stop-Work Order.

Calculation of proposed penalty for failure to cease business

operations as required in the October 15, 2008, Stop-Work Order .

20. On or about October 22, 2008, Ms. Johnson was provided

documents indicating that AJ's Marble & Tile entered into an

employee-leasing contract with South East Personnel Leasing on

October 17, 2008. She also was provided a Certificate of

Liability Insurance issued to South East Personnel Leasing

showing that it had a workers' compensation insurance policy,

effective January 1, 2008, through January 1, 2009, applying

specifically to active employees leased to AJ's Marble & Tile. 3

21. At some point subsequent to issuance of the Amended

Order of Penalty Assessment on October 24, 2008, Ms. Johnson

came into possession of weekly payroll registers generated by

South East Personnel Leasing for the employees leased to AJ's

Marble & Tile. The earliest payroll register was for the pay

period ending October 26, 2008, and the most recent register was

for the pay period ending March 20, 2009. 4 The payroll registers

contained the names of the employees leased to AJ's Marble &

Tile; the regular and overtime hours they worked during the

weekly pay period; and each employee's gross pay, deductions,

and the net pay.

22. The personnel registers establish that AJ's Marble &

Tile continued engaging in business in Florida after the

issuance of the Stop-Work Order on October 15, 2008, without

having obtained an order from the Division of Workers'

Compensation releasing the Stop-Work Order or an Order of

Conditional Release From Stop-Work Order. Ms. Johnson,

therefore, calculated a proposed penalty attributable to AJ's

Marble & Tile violation of the Stop-Work Order based on the

information contained in the payroll registers she received from

South East Personnel Leasing.

23. In determining the number of work days AJ's Marble &

Tile was in violation of the Stop-Work Order, Ms. Johnson took

the number of hours worked each week by each leased employee as

listed on the weekly pay registers; she then identified the

greatest number of hours worked by an employee during each

weekly pay period; she estimated that the typical work day for

one of AJ's Marble & Tile's leased employees would be 10 hours;

she divided the greatest number of hours worked each pay period

by 10 and rounded up or down as seemed appropriate to arrive at

the number of work days on which at least one employee leased by

AJ's Marble & Tile worked during each weekly pay period; and she

totaled the number of work days she had calculated for each week

to arrive at the total number of work days that AJ's Marble &

Tile had engaged in business during the relevant period.

24. Ms. Johnson determined from her calculations that AJ's

Marble & Tile had engaged in business for a total of 48 work

days during the period extending from October 16, 2008, through

March 20, 2009.

25. The manner in which the Department calculated the

number of days to attribute to AJ's Marble & Tile for the

purpose of assessing a penalty for violation of the Stop-Work

Order appears reasonable under the circumstances and the

attribution of 48 days on which AJ's Marble & Tile is charged

with conducting business operations in violation of the Stop-

Work Order results in AJ's Marble & Tile being charged a penalty

for fewer days than it would be had the Department calculated

the number of days strictly on the basis of five days for each

week between October 15, 2008, and March 30, 2009.

26. In the Third Amended Order of Penalty Assessment,

Ms. Johnson included a proposed penalty of $48,000.00 for AJ's

Marble & Tile's violation of the October 15, 2008, Stop-Work

Order, for a total proposed penalty in the amount of

$158,775.09.

CONCLUSIONS OF LAW

27. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties thereto pursuant to Sections 120.569, 120.57(1), and

440.107(13), Florida Statutes (2009).

28. The Department seeks to impose an administrative

penalty on AJ's Marble & Tile attributable to its failure to

secure workers' compensation insurance coverage for its

employees and its failure to cease business operations as

required by the Stop-Work Order issued October 15, 2008.

Accordingly, the Department must prove the charges and the

proposed penalty amounts set forth in the Stop-Work Order and

Third Amended Order of Penalty Assessment by clear and

convincing evidence. See Department of Banking & Finance,

Division of Securities & Investor Protection v. Osborne Stern &

Co. , 670 So. 2d 932 (Fla. 1996).

29. Section 440.38(1), Florida Statutes, provides in

pertinent part that "[e]very employer shall secure the payment

of compensation under this chapter: (a) By insuring and keeping

insured the payment of such compensation with any stock company

or mutual company or association or exchange authorized to do

business in the state." The compensation and benefits required

by Chapter 440, Florida Statutes, must be paid as follows: "The

employer must pay compensation or furnish benefits required by

this chapter if the employee suffers an accidental compensable

injury or death arising out of work performed in the course and

the scope of employment. § 440.09(1), Fla. Stat.

30. The definitions pertinent to this matter are found in

Section 440.02, Florida Statutes, as follows:

(15)(a) "Employee" means 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, whether lawfully or unlawfully

employed, and includes, but is not limited

to, aliens and minors.

* * *

c) "Employee" includes:

* * *

3. An independent contractor working or

performing services in the construction

industry.

* * *

(16)(a) "Employer" means the state and all

political subdivisions thereof, all public

and quasi-public corporations therein, every

person carrying on any employment, and the

legal representative of a deceased person or

the receiver or trustees of any person.

"Employer" also includes employment

agencies, employee leasing companies, and

similar agents who provide employees to

other persons. If the employer is a

corporation, parties in actual control of

the corporation, including, but not limited

to, the president, officers who exercise

broad corporate powers, directors, and all

shareholders who directly or indirectly own

a controlling interest in the corporation,

are considered the employer for the purposes

of ss. 440.105, 440.106, and 440.107.

* * *

(17)(a) "Employment," subject to the other

provisions of this chapter, means any

service performed by an employee for the

person employing him or her.

(b) "Employment" includes:

* * *

2. All private employments in which four or

more employees are employed by the same

employer or, with respect to the

construction industry, all private

employment in which one or more employees

are employed by the same employer.

31. Florida Administrative Code Rule 69L-6.021 provides in

pertinent part as follows:

The Department adopts the classification

codes and descriptions that are specified in

the Florida Contracting Classification

Premium Adjustment Program, and published in

the Florida exception pages of the National

Council on Compensation Insurance, Inc.

(NCCI), Basic Manual (October 2005 ed.).

For convenience, the Division lists here the

classification codes and descriptions that

are published in the Florida exception pages

of the Basic Manual and adopted in this

rule.

* * *

(z) 5348 Stone, Mosaic or Terrazzo or

Ceramic Tile Work Inside

* * *

(2) The Division adopts the definitions

published by NCCI, SCOPES® of Basic Manual

Classifications (October 2005) that

correspond to the classification codes and

descriptions adopted in subsection (1)

above. The definitions identify the

workplace operations that satisfy the

criteria of the term "construction industry"

as used in the workers' compensation law.

The definitions are hereby incorporated by

reference . . . .

32. Based on the findings of fact herein and the

definitions set out above, AJ's Marble & Tile was, at the times

material to this proceeding, an employer pursuant to the

definition of employer set forth in Section 440.02(17)(a) and

(b)2., Florida Statutes. AJ's Marble & Tile is engaged in the

construction industry because decorative marble and tile

installation is considered part of the construction industry

pursuant to Florida Administrative Code Rule 69L-6.021(1)(z) and

in accordance with the definition contained in the SCOPES

Manual. The workers receiving payment for services performed

for AJ's Marble & Tile, even though they were treated by AJ's

Marble & Tile as independent contractors, are considered

employees of AJ's Marble & Tile for purposes of Chapter 440,

Florida Statutes, by virtue of the inclusion in the definition

of "employee" "[a]n independent contractor working or performing

services in the construction industry." § 440.02(15)(c)3.,

Florida Statutes. 5 AJ's Marble & Tile is, therefore, required to

provide workers' compensation insurance coverage for the workers

it paid to install marble and tile.

33. Section 440.107, Florida Statutes, provides in

pertinent part:

(1) The Legislature finds that the failure

of an employer to comply with the workers'

compensation coverage requirements under

this chapter poses an immediate danger to

public health, safety, and welfare.

(2) For the purposes of this section,

"securing the payment of workers'

compensation" means obtaining coverage that

meets the requirements of this chapter and

the Florida Insurance Code. . . .

(3) The department shall enforce workers'

compensation coverage requirements,

including the requirement that the employer

secure the payment of workers' compensation,

and the requirement that the employer

provide the carrier with information to

accurately determine payroll and correctly

assign classification codes. In addition to

any other powers under this chapter, the

department shall have the power to:

(a) Conduct investigations for the purpose

of ensuring employer compliance.

(b) Enter and inspect any place of business

at any reasonable time for the purpose of

investigating employer compliance.

(c) Examine and copy business records.

(d) Administer oaths and affirmations.

(e) Certify to official acts.

(f) Issue and serve subpoenas for

attendance of witnesses or production of

business records, books, papers,

correspondence, memoranda, and other

records.

(g) Issue stop-work orders, penalty

assessment orders, and any other orders

necessary for the administration of this

section.

(h) Enforce the terms of a stop-work order.

(i) Levy and pursue actions to recover

penalties.

(j) Seek injunctions and other appropriate

relief.

* * *

(7)(a) 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 or to

produce the required business records under

subsection (5) within 5 business days after

receipt of the written request of the

department, 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 order shall take

effect when served upon the employer or, for

a particular employer worksite, when served

at that worksite. In addition to serving a

stop-work order at a particular worksite

which shall be effective immediately, the

department shall immediately proceed with

service upon the employer which shall be

effective upon all employer worksites in the

state for which the employer is not in

compliance. A stop-work order . . . shall

remain in effect until the department issues

an order releasing the stop-work order upon

a finding that the employer has come into

compliance with the coverage requirements of

this chapter and has paid any penalty

assessed under this section. The department

may issue an order of conditional release

from a stop-work order to an employer upon a

finding that the employer has complied with

coverage requirements of this chapter and

has agreed to remit periodic payments of the

penalty pursuant to a payment agreement

schedule with the department. . . .

(b) Stop-work orders and penalty assessment

orders issued under this section against a

corporation, partnership, or sole

proprietorship shall be in effect against

any successor corporation or business entity

that has one or more of the same principals

or officers as the corporation or

partnership against which the stop-work

order was issued and are engaged in the same

or equivalent trade or activity.

(c) The department shall assess a penalty

of $1,000 per day against an employer for

each day that the employer conducts business

operations that are in violation of a stop-

work order.

(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, whichever

is greater.

(Emphasis added.)

34. Based on the findings of fact herein, the penalty

attributable to AJ's Marble & Tile's failure to secure workers'

compensation insurance coverage for its employees, as set out on

the Penalty Worksheet attached to the Third Amended Order of

Penalty Assessment, was calculated in conformance with the

requirements of Section 440.107(7)(d)1., Florida Statutes, on

the form required by Florida Administrative Code Rule 69L-6.027.

The Department has, therefore, proven by clear and convincing

evidence that AJ's Marble & Tile was properly assessed

$110,775.09 as the penalty for its failure to secure workers'

compensation insurance coverage for its employees during the

time periods at issue.

35. Based on the findings of fact herein, immediately

after being served with the Stop-Work Order, AJ's Marble & Tile

entered into an employee-leasing agreement with South East

Personnel Leasing, which agreement included workers'

compensation insurance coverage for the employees leased by AJ's

Marble & Tile. AJ's Marble & Tile, therefore, satisfied one of

the requirements necessary for the issuance of an Order of

Conditional Release from Stop-Work Order pursuant to

Section 440.107(7)(a), Florida Statutes. It did not, however,

satisfy the second requirement of Section 440.107(7)(a), Florida

Statutes, that it either pay the assessed penalty in full or

"remit periodic payments of the penalty pursuant to a payment

agreement schedule with the department." The Department has,

therefore, met its burden of proving by clear and convincing

evidence that AJ's Marble & Tile violated the Stop-Work Order

from October 15, 2008, through March 20, 2009.

36. Based on the findings of fact herein, the appropriate

penalty to impose on AJ's Marble & Tile for violation of the

Stop-Work Order is $48,000.00 pursuant to the requirement in

Section 440.107(7)(c), Florida Statutes, that "[t]he department

shall assess a penalty of $1,000 per day against an employer for

each day that the employer conducts business operations that are

in violation of a stop-work order."

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial Services

enter a final order:

(1) Finding that AJ's Marble & Tile, Inc., failed to

secure workers' compensation insurance coverage for its

employees in violation of Section 440.38(1), Florida Statutes,

from October 16, 2005, through 0ct 15, 2008, and imposing a

penalty in the amount of $110,775.09 for the failure to provide

the required workers' compensation insurance coverage; and

(2) Finding that AJ's Marble & Tile violated

Section 440.107(7)(a), Florida Statutes, by conducting business

operations in violation of the Stop-Work Order issued

October 15, 2008, that AJ's Marble & Tile conducted business for

48 days during the period extending from October 15, 2008,

through March 20, 2009, and imposing a penalty in the amount of

$48,000.00, as required by Section 440.107(7)(c), Florida

Statutes.

DONE AND ENTERED this 2nd day of November, 2009, in

Tallahassee, Leon County, Florida.

___________________________________

PATRICIA M. HART

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 2nd day of November, 2009.

ENDNOTES

1 / All references herein to the Florida Statutes are to the 2008

edition unless indicated otherwise.

2 / Mr. Grodin also faulted the undersigned for not allowing him

to present testimony regarding what he characterized as the

unprofessional attitude of Ann Johnson, the Department's

compliance investigator who conducted the investigation of AJ's

Marble & Tile. During the final hearing, however, the

undersigned explained to Mr. Grodin that any alleged misconduct

committed during the investigation by Ms. Johnson could be

presented to the Department in a complaint but that his

complaints were not relevant to a determination of the issues of

whether AJ's Marble & Tile should be assessed a penalty and, if

so, the amount of the penalty.

3 / Petitioner's Exhibit 2h. A review of the documents included

in this exhibit indicate that the certificate and other details

of South East Personnel Leasing's relationship with AJ's

Marble & Tile were provided by South East Personnel Leasing.

4 / It is apparent from a review of the record that these

documents were not provided by AJ's Marble & Tile or Mr. Grodin

but were provided by the leasing company. It is noted, however,

that AJ's Marble & Tile included in Respondent's Exhibit C two

payroll registers from "South East Employee Leasing, Inc.," the

most recent for the pay period ending April 1, 2009.

5 / It is not necessary to reach the issue of whether the workers

met the definition of independent contractors in

Section 440.02(15)(d), Florida Statutes, because that applies

only to "[a]n independent contractor who is not engaged in the

construction industry."

COPIES FURNISHED:

Kristian E. Dunn, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

Herbert Grodin

Sobel & Cookler, CPAs

950 Jericho Turnpike

Westbury, New York 11590

Alex Sink, Chief Financial Officer

Department of Financial Services

The Capitol, Plaza level 11

Tallahassee, Florida 32399-0300

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza level 11

Tallahassee, Florida 32399-0300

Tracey Beal, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

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.