09-003484 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Dts, Llc Status: Closed Recommended Order on Friday, January 29, 2010.

Summary: Petitioner failed to prove that drivers were employees; they were independant contractors. Therefore, Respondent was compliant with coverage statute and no penalty.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 09-3484

)

DTS, LLC, )

)

Respondent. )

)

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 09-3486

)

P.A.T. AUTO TRANSPORT, INC., )

)

Respondent. )

_______________________________ )

RECOMMENDED ORDER

Pursuant to appropriate notice, this matter came on for

final hearing before P. Michael Ruff, duly-designated

Administrative Law Judge of the Division of Administrative

Hearings on November 3, 2009, in Pensacola, Florida. The

appearances were as follows:

APPEARANCES

For Petitioner: Kristian E. Dunn, Esqire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Douglas D. Dolan, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Douglas F. Miller, Esquire

Clark, Partington, Hart, Larry

Bond & Stackhouse

125 West Romana Street, Suite 800

Pensacola, Florida 32591

STATEMENT OF THE ISSUES

The issues to be resolved in this proceeding concern

whether the Respondent, P.A.T. Auto Transport, Inc., committed

the violations alleged in the relevant Stop-Work Order and the

Fourth Amended Order of Penalty Assessment, and, if so, what, if

any, penalty is warranted.

PRELIMINARY STATEMENT

This cause arose upon the issuance of a Stop-Work Order

(SWO) on or about May 5, 2009, directing the Respondent, P.A.T.

Auto Transport, Inc. (P.A.T., Respondent) to stop work and cease

all business operations in Florida because of allegedly failing

to obtain workers' compensation insurance coverage meeting the

standards of Chapter 440, Florida Statutes, and the Florida

Insurance Code. The Department calculated an initial Amended

Order of Penalty Assessment (AOPA), which was amended a number

of times so that the 4th AOPA was issued and served on November

3, 2009, the initial day of hearing.

On receiving the initial AOPA, the Respondent filed a

Petition for Hearing and the matter was referred to the Division

of Administrative Hearings and the undersigned Administrative

Law Judge, on or about June 24, 2009. The case was consolidated

with Case Number 09-3484, by an order entered, pursuant to

motion, on August 7, 2009. In the meantime, the matter had been

set for hearing for October 7 and 8. Thereafter, a stipulated

Motion for Continuance was filed and the matter was continued

and rescheduled for a hearing for November 3 and 4, 2009.

Case 09-3484, by the Department of Financial Services,

Division of Workers' Compensation against DTS, LLC, had

originally been assigned to Judge Cleavinger, before

consolidation with Case Number 09-3486.

Upon the convening of the hearing, the Department presented

the 4th AOPA and Penalty Worksheet. The admissibility of this

document, and proceeding on the 4th Amended Order of Penalty

Assessment was not challenged by the Respondent, but the

Respondent did challenge the amount of penalty and the entries

on the Penalty Worksheet, as addressed herein.

The Petitioner presented the testimony of Michelle

Newcomer, the Department's Investigator, and also presented the

testimony of one of Investigator Newcomer's staff employees,

Janice Evers. The Respondent presented the testimony of Tracie

Hedges as its corporate representative and admitted into

evidence, without objection, were depositions of the following

persons: Candy Baker, Greg Hedges, Mike Short, Mike Staines,

Lloyd Young, and Tracie Hedges. Also admitted into evidence

without objection were Composite Exhibits 1A through 1F,

Composite Exhibits 2A through 2E, Composite Exhibits 5A through

5D, Petitioner's Exhibit 6, as well as the Petitioner's answers

to the Respondent's Interrogatories, Respondent's Request for

Admissions and the Petitioner's responses.

The parties stipulated to the admission of the depositions

listed herein, although the Respondent had objections to

specific questions asked by the Petitioner, as well as specific

responses from deponents Michael Short and Lloyd Young. Those

objections were sustained or overruled as set forth in the

transcript of the proceeding on pages 17 through 35.

P.A.T. moved that its Request for Admissions be deemed

admitted because the Department failed to file responses to the

request within the 30 days required by Fla. R. Civ. Pro. 1.370.

If a party admits a matter in response to a Request for

Admission, that matter is generally conclusively established,

unless a court, on motion, permits withdrawal or amendment of

the admission. It is not disputed that P.A.T. filed its

admissions request on July 5, 2009, and the Department did not

answer those requests until August 26, 2009, obviously more than

30 days after the request was served. The Motion to Deem

Matters Admitted was not raised until the outset of the hearing.

Therefore, since response time had not been afforded the

Petitioner to respond to the Respondent's motion, ruling thereon

on was reserved until the entry of the Recommended Order and the

parties were given the opportunity to file briefs or memoranda

concerning the matter, and to incorporate such into their

proposed recommended orders. The Motion to Deem Matters

Admitted is addressed in the Conclusions of Law below.

Upon conclusion of the proceeding, the parties elected to

obtain a transcript thereof. The transcript was filed

November 23, 2009. The parties had requested an extension of

the customary period for filing proposed recommended orders.

Therefore, Proposed Recommended Orders were timely filed on or

before December 17, 2009. Those Proposed Recommended Orders

have been considered in the rendition of this Recommended Order.

FINDINGS OF FACT

1. The Petitioner is an agency of the State of Florida,

charged with the responsibility of enforcing the Workers'

Compensation coverage requirements embodied in Section 440.107,

Florida Statutes (2008), whereby Florida employers must secure

the payment of workers' compensation insurance coverage and

benefits for their employees. See § 440.107(3), Fla. Stat.

2. The Respondent, P.A.T., is a corporation conducting a

trucking business, headquartered in Pensacola, Florida. The

Respondent's services include transporting motor vehicles using

a fleet of some 61 highway tractors and associated auto

transport trailers.

3. Michelle Newcomer is an investigator employed by the

Petitioner. Her duties include conducting inspections and

investigations of businesses who may be workers' compensation

employers, to determine if they are required to have workers'

compensation coverage under Florida law, and the extent and

compliance of that coverage. Ms. Newcomer conducted an

inspection of the Respondent at 6732 Rambler Drive in Pensacola,

Florida, on March 18, 2009. She determined that two companies,

or businesses, operated at that address, the Respondent and MNT

Enterprises (MNT). MNT had a workers' compensation policy

covering its employees and was statutorily compliant.

Ms. Newcomer also investigated the Respondent and learned that

the principal stockholder, George Hedges, was exempt from

coverage. She inquired about the status of the truck drivers

working for the company and was told by Tracie Hedges that they

were independent contractors. She was unable to witness any

violations occurring at that time and concluded the

investigation.

4. Later, in April 2009, she received information that led

her to believe that the Respondent's truck drivers were

employees and not independent contractors.

5. She had an opportunity to see a pay stub for a truck

driver who had worked for the company who had been injured and

had a workers' compensation issue. She noticed that the pay

stub reflected that Federal Income Tax withholding had been

deducted, along with various other deductions, such as Social

Security and Medicare. She felt this might be indicative of an

employee relationship, rather than the drivers being independent

contractors.

6. She returned to the Respondent's address later that

month and issued a written Request for Production of Business

Records to the Respondent and to an associated company called

TK131. She issued a Stop-Work Order for the Respondent due to

its purported failure to comply with workers' compensation

coverage requirements for employees. The Respondent did provide

the required business records.

7. She reviewed the records provided to her and was able

to ascertain that the Respondent employed more than four

employees. Additionally, she learned that, although the

Respondent, through a leasing arrangement for its office

employees, had workers' compensation coverage for them, the 59

drivers and corporate officers did not appear to be covered by

workers' compensation insurance. Thereafter, the Stop-Work

Order was amended to include the purported failure to secure

payment of workers' compensation coverage as required by Chapter

440, Florida Statutes. That resulted in a Stop-Work Order and

Penalty Assessment. The Department also issued a Stop-Work

Order and Penalty Assessment to DTS, LLC, which included the

predecessor company, Darts Transport. The Stop-Work Order and

Penalty Assessment issued to DTS was later revoked, however.

8. The Department takes the position that the Respondent,

P.A.T., paid its drivers through the entity known as "DTS", or

directly with P.A.T. checks during the audit period, and that

the number of drivers paid for their services was more than four

employees and closer to 59 drivers for the 61 tractor-trailers

owned by the Respondent. The Department does concede that a

small number of the drivers were clearly owner-operators and no

longer contends that they were employees. The Department thus

contends that at no time pertinent hereto did the Respondent

have a workers' compensation policy or an employee leasing

arrangement in place by which workers' compensation coverage was

provided for the drivers. The original Order of Penalty

Assessment covered the period April 22, 2006, through April 22,

2009. The 4th Amended Order of Penalty Assessments for those

dates, which is at issue in this case, also included a $108,000

fine for the Respondent's working in violation of a Stop-Work

Order. The total fine assessed and sought by the Petitioner is

$1,564,707.91.

9. The Department maintains that the drivers working for

the company are employees and therefore should have been covered

with workers' compensation insurance, but the Respondent

disputes that claim, asserting that the drivers are independent

contractors and therefore do not need to be covered by workers'

compensation insurance. The Petitioner maintains that office

workers employed by the Respondent were required to be covered

by workers' compensation insurance as well. The Respondent

maintains that these were covered through coverage obtained from

an employee leasing company, through an employee leasing

program. The Department also maintains that three employees, as

corporate officers, were not properly qualified to be exempt.

The Respondent maintains that the required Exemption Request

forms were properly delivered to the Department and therefore it

complied with the law in obtaining exemptions from workers'

compensation coverage. Finally, the Department maintains that

certain named individuals were employees of the Respondent and

should have been covered by workers' compensation coverage or

insurance, but the Respondent maintains that these employees,

who essentially performed incidental, non-recurring tasks for

the Respondent, were not employees and did not have to be

covered by such insurance. Moreover, the Respondent claims that

it has a contingent liability insurance policy in place which

served as a policy of workers' compensation insurance and for

this reason it is compliant also.

10. The parties agree that Florida Administrative Code

Rule 69L-6.035 defines "payroll" as the basis for calculating a

penalty. Payroll can include any of ten variations of payments

from or through an employer to or on behalf of an employee.

These include the payment of traditional wages and also bonuses,

un-repaid loans to employees, expense reimbursements that are

not documented on the employer's business records, payments

binding an employer to a third party on behalf of an employee

for services rendered by the employee, among others.

11. Investigator Newcomer relied on Florida Administrative

Code Rule 69L-6.035(1)(a) to define payroll for the office

workers and truck drivers paid directly from the Respondent's

account. The drivers were paid from the P.A.T. account from

July 16, 2008, through April 22, 2009. Investigator Newcomer

opined that the drivers' payroll prior to July 16, 2008, could

not be included on the Penalty Worksheet based upon Rule 69L-

or (j) to define P.A.T.'s payroll.

12. The Department included payments to various child

support enforcement agencies, made on behalf of drivers, on the

Penalty Worksheet, by authority of Florida Administrative Code

Rule 69L-6.035(1)(c), defined as payments made to a third party

on behalf of the employer for services rendered to the employer

by the employee.

13. The Department also included as payroll on the Penalty

Worksheet loans made to drivers, maintaining that these have not

been repaid and should be deemed as part of payroll under Rule

69L-6.035(1)(g). There is no proof that this is the case,

however, because neither Ms. Newcomer nor Ms. Hedges offered any

evidence to establish that there is proof that some or all of

the loans remained unpaid.

14. The Petitioner, through the testimony of Investigator

Newcomer, takes the position that payments made by P.A.T. to

Darts Transports or DTS,LLC are properly included on the Penalty

Worksheet by authority of Florida Administrative Code Rule 69L.-

6.035(1)(i). Those payments were made prior to July 16, 2008,

before P.A.T. began making payments directly to drivers. The

Rule provision in question, concerns payments made to an alleged

non-compliant employer who has contracted with the customer, if

the contract includes payment for labor and materials. If it is

impossible to segregate the cost of materials from the employee

payroll in such a contract, then under this Rule provision, 80

percent of the total contract price shall be presumed to be the

employer's payroll, with regard to that customer and contract.

The unrefuted evidence, however, establishes that the drivers in

this situation were paid a flat 25 percent commission of the

hauling fee charged by P.A.T., after deduction of the cost of

fuel for the trucks. P.A.T.'s customers paid the fuel surcharge

to P.A.T. There is no evidence that P.A.T. provided customers

with any materials. Its business operation involves solely and

simply the transportation of customer-owned vehicles.

15. The Department also maintains that corporate officers

Bradley Hedges and Gregory A. Hedges, as well as Teri Kimberly

Forret, corporate officers of P.A.T., are non-exempt employees.

It contends that under Rule 69L-6.035(2) their compensation

constitutes "payroll," under the default formula in that Rule

provision, for defining payroll to a corporate officer, if the

ten factors under sub-section(1) of that Rule do not address the

means of compensation received by those corporate officers.

16. The quintessential question in this case, however,

concerns whether the drivers are independent contractors or

employees. If they are independent contractors, then there is

no obligation on the part of the Respondent to ensure payment of

workers' compensation benefits for them. This would mean that

the Respondent cannot be adjudicated non-compliant by the

Petitioner Department and payments to the drivers would not

constitute payroll and would be stricken from the Penalty

Worksheet calculation.

17. Independent contractor status is defined in

Section 440.02(15)(d)1.a.(I)-(VI) and b.(I)-(VII), Florida

Statutes (2008). Under the former statutory provision, four of

the six criteria must be met for independent contractor status

to be established. Under the latter provision, any of the seven

conditions named in that provision may be satisfied and

independent contractor status thus established. With regard to

the criteria in Section 440.02(15)(d)1.a.(I)-(VI), the

preponderant weight of the evidence shows that some of the truck

drivers are independent contractors with federal employer

identification numbers and some are sole proprietors who are

therefore not required to obtain a federal employer

identification number under pertinent state or federal

regulations. § 440.02(15)(d)1.a.(II), Fla. Stat.

18. The evidence also shows, for purposes of

Subsection(15)(d)1a.(V) of this statutory provision, that the

drivers are permitted to work or perform work for other entities

or companies needing their services, in addition to the

Respondent, at the election of the driver. There is no showing

that an employment application must be completed to perform such

tasks for other unrelated entities. The drivers must use the

unrelated company's truck for work assigned to them by such

other companies or entities. They are not permitted to use

P.A.T. trucks for non-P.A.T. transportation work (driving) they

have agreed to perform. Moreover, all the drivers are

compensated for completion of a task or set of tasks according

to a flat 25 percent commission of the hauling charge imposed by

P.A.T. There is no evidence that clearly shows a contractual

agreement which expressly states that an employment relationship

exists between the drivers and P.A.T.

19. Even if the status and operations of the drivers

referenced above does not meet four of the criteria listed in

sub-subparagraph a. Subsection 440.02(d)1., they may still be

presumed to be independent contractors and not employees, based

upon a full consideration of the nature of their individual

situation with regard to satisfying any of the conditions or

criteria referenced in Section 440.02(15)(d)1.b.(I)-(VII).

20. With regard to the first criteria under that

provision, the drivers perform the services of driving for a

specific amount of money in the form of a 25 percent commission.

They control a substantial amount of the means of performing the

services or work. The driver is asked to deliver vehicles from

point A to point B for that commission. He gets paid that

commission whether it takes one day or six days to accomplish

the task. The driver determines the route to be driven. The

driver, within the limits of the Department of Transportation

rules, determines when to begin driving and when to pull over to

sleep. The driver is free to decline to accept a hauling job.

There is no detrimental action taken against a driver for

declining to accept a given hauling job, unless it happens too

frequently for satisfactory conduct of P.A.T.'s operations. The

driver must provide the incidental tools and equipment, such as

binding chains and maintenance tools to operate the truck and

securely transport the load of vehicles he is required to

transport. The driver is responsible for maintaining current

driver's license qualifications and DOT physical examination

requirements. The driver is responsible for paying for any

necessary badges authorizing entry at maritime ports, a frequent

occurrence in the transportation of foreign-manufactured

vehicles.

21. The Respondent, P.A.T., either owns or leases the

trucks used by the drivers and pays for the insurance policies

for the trucks. P.A.T. also pays for routine maintenance of the

truck. If the driver causes damage of any sort to the truck,

the driver must bear the financial responsibility for repair of

the damage. The driver must also bear responsibility for any

damage to the vehicles being transported on the trucks. It can

thus be seen that both the Respondent and the drivers control a

substantial portion, respectively, of the means of performing

the services or work.

22. Clearly, the unrefuted evidence shows that the drivers

receive compensation for the work or services performed (driving

services, incidental loading and unloading and protection

responsibilities, with regard to the vehicular cargo), for a

commission or per job basis and not on any other basis.

Therefore criterion number IV, cited last above, is clearly met.

23. Concerning criterion (II) under the last-referenced

provision cited above, the drivers incur expenses for costs of

their commercial driver's license, repair costs for any vehicle

damage to the truck or to the vehicles which are being

transported by the truck; any DOT fines incurred by the drivers;

any badge expenses, as port entry and exit fees, must be borne

by the drivers; lodging and meal expenses on the road during a

haul must be borne by the drivers, without reimbursement.

24. Concerning criterion (III), the driver is responsible

for the satisfactory completion of the work or services that he

or she agrees to perform, in the operational sense, in that the

driver will not be paid if the delivery of the vehicles ordered

to be transported is not satisfactorily accomplished. The

privity of contract, however, for a given hauling job runs

between the customer and P.A.T., the Respondent, who the

customer actually contracts with to have the vehicles

transported.

25. The drivers, for purposes of criteria (V), (VI),

(VII), of the last-referenced statutory provision, as

established by the unrefuted testimony of Ms. Hedges, stand to

realize a profit, or suffer a loss, in connection with

performing the transportation driving services. They have

continuing or recurring business liabilities or obligations

aside from the expense of owning or leasing the truck, insuring

the truck, or the fuel expense which they do not bear. They do,

however, have recurring or continuing business liabilities or

obligations which have a direct effect on whether they realize

any net gain from a commission on a given hauling job. The

success or failure of their business, even as sole proprietors,

depends on the relationship of their receipts, under their 25

percent commission arrangement, and their expenditures for each

hauling job for which they earn that commission. Drivers often

complain of losing money due to vehicle repair bills, fines,

towing charges, etc.

26. Additionally, as referenced above, although when

transporting loads for P.A.T., the drivers must use P.A.T. owned

or leased trucks, the drivers are free, under their arrangement,

to engage in hauling for other companies or customers, if they

are not currently engaged in the middle of a hauling job for

P.A.T. They may do so for other companies using other trucks,

so long as they do not engage in such transportation services

for other entities with P.A.T.'s truck. This factual

arrangement tends to also militate in favor of the drivers not

being employees.

27. Many of the drivers have the standard federal tax

withholdings deducted from their commission payments, as well

as, in some cases, court-ordered child support payments. While

this might be deemed to militate in favor of an

employer/employee relationship, the unrefuted testimony of Ms.

Hedges establishes that this is a service that drivers have come

to P.A.T.'s management and requested, because in view of their

many hours and days spent on the road, and for other reasons,

involving their business management abilities, it is an

assistance to them to have the tax liabilities simply withheld

from their commission payments. This helps to avoid personal

difficulties involving arrearages to the Internal Revenue

Service.

Status of Non-Driver P.A.T. Workers and Corporate Officers

28. Persuasive testimony offered by Tracie Hedges,

established that Regina Davis, Robin Hand, Stanley Warren,

William Bertelsen, Cecil Hannah, Chipley Atkinson, Kristene

Viverios, Katherine Flores, Laura Dunn, Amber Taylor, Amy

Murphy, and Ms. Hedges herself, are office workers of P.A.T.

They are covered by a policy of workers' compensation insurance

through AES Leasing, a worker leasing company. Apparently the

Petitioner no longer disputes this.

29. Ms. Hedges reviewed, in her testimony, the final

Penalty Worksheet concerning the status of various named persons

who the Petitioner contends were employees, not covered by

workers' compensation coverage. Ms. Hedges established with

persuasive testimony that Arthur Nicolas was not a P.A.T.

employee, but did some improvements on the office building (i.e.

in the nature of carpentry). Alex Sibbach and Witt Davis did

not ever work as employees for P.A.T. They may have performed

some yard work or sold some equipment to P.A.T., but were never

employees. She also established that Richard Burrson and Robert

Marra were dump truck drivers for a company by the name of MNT

Enterprises and had never been P.A.T. employees.

30. Bradley and Gregory A. Hedges and Kimberly Forret are

officers of P.A.T., or were at times pertinent to this case.

The Petitioner contends that they had not established an

exemption from the requirement of being covered under a policy

of workers' compensation insurance. This is because of the

Petitioner's contention that no corporate officer exemption had

been filed or made effective. Bradley Hedges and Gregory A.

Hedges are children of owners Greg and Tracie Hedges. Kimberly

Forret is Tracie Hedges' sister. Ms. Forret is an office worker

at P.A.T. and both Bradley and Gregory A. Hedges work at P.A.T.

on a part-time basis while attending school.

31. Ms. Hedges completed exemption forms for all three of

them and delivered them to Investigator Newcomer's office on

Burgess Road in Pensacola, Florida. Investigator Newcomer took

the position that the exemptions for these people had not been

established or filed based on her examination of agency computer

records. The computer program or site failed to establish to

her that the three individuals in question had established

exemptions. Exemption status is triggered by compliance with

Section 440.05, Florida Statutes (2008). 1/

acie Hedges established with persuasive testimony

that the exemption applications for the named three officers had

been hand-delivered to the Burgess Road office of the Department

of Financial Services. Janice Evers is a staff worker at that

office. She testified that her research could neither confirm

nor deny that the exemption applications were delivered to her

office, but acknowledges their receipt by the Department. It

must be concluded that the applications were delivered to the

office on Burgess Road but were never forwarded to the

Tallahassee office by Ms. Newcomer's or Ms.' Evers staff.

Investigator Newcomer's business address is 610 East Burgess

Road in Pensacola, the location where Ms. Hedges testified that

the exemption applications were delivered. When the Department

made a Discovery Request for Production of the Business Records

of the Respondent, it required that those records be produced at

that same business address in Pensacola, Florida. It is thus

"an office of the Department" for purposes of Section 440.05(c),

Florida Statutes (2008).

33. Ms. Hedges established that the exemption applications

were delivered during the 2005 calendar year although she was

unable to provide an exact date of delivery. Ms. Evers

acknowledges that fact in her testimony. The Stop-Work Order at

issue in this case by statute can only date back as early as

April 22, 2006. Even if the applications were delivered on

December 31, 2005, the three officers in question would be

exempt from workers' compensation coverage requirements prior to

April 22, 2006, when the time period, or audit period, related

to the Stop-Work Order began. It is determined that at least by

January 30, 2006, exemptions had been established, by delivery

at least 30 days prior thereto, for Bradley Hedges, Gregory

Hedges, and Terri Kimberly Forret. It is found that the

exemptions were shown by persuasive evidence to have been

delivered during the 2005 calendar year. Inasmuch as they were

"received" by the Department in 2005, then they would have

become effective, by operation of law, on or before January 30,

2006, well before the effective date of the Penalty Assessment

of April 22, 2006.

CONCLUSIONS OF LAW

34. 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. (2009).

35. It has been determined that administrative fines are

penal in nature. Thus the Department has the burden to prove

its position in this case by clear and convincing evidence, in

establishing that the Respondent failed to comply with the

workers' compensation requirements at issue. Department of

Banking and Finance, Division of Securities and Investor

Protection v. Osbourne Stern, Inc. , 670 So. 2d 932 (Fla. 1996)

and L and W Plastering and Drywall Services, Inc. v. Department

of Financial Services, Division of Workers' Compensation , Case

No. 06-3261 (DOAH, March 16, 2007).

36. Section 440.10, Florida Statutes (2009), requires

every employer as defined in Section 440.02(16)(a), Florida

Statutes (2009), to secure the payment of workers' compensation

coverage. In order to establish that a person or entity is an

"employer" within the statutory provision, an employer and

employee relationship must exist between that entity and the

worker or workers at issue.

37. "Employee" is defined in Section 440.02(15), Florida

Statutes (2009). An independent contractor is not an employee,

as provided in Section 440.02(15)(d), Florida Statutes (2009).

38. "Employee means any person who received 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 implie

39. Independent contractor is defined in Section

provides six criteria. Four of these statutory criteria must be

met to attain the status of independent contractor under this

provision of Section 440.02(15)(d)1., Florida Statutes:

(I) The independent contractor maintains a

separate business with his or her own work

facility, truck, equipment, materials, or

similar accommodations;

(II) The independent contractor holds or

has applied for a federal employer

identification number, unless the

independent contractor is a sole proprietor

who is not required to obtain a federal

employer identification number under state

or federal regulations;

(III) The independent contractor receives

compensation for services rendered or work

performed and such compensation is paid to a

business rather than to an individual;

(IV) The independent contractor holds one

or more bank accounts in the name of the

business entity for purposes of paying

business expenses or other expenses related

to services rendered or work performed for

compensation;

(V) The independent contractor performs

work or is able to perform work for any

entity in addition to or besides the

employer at his or her own election without

the necessity of completing an employment

application or process; or

(VI) The independent contractor receives

compensation for work or services rendered

on a competitive-bid basis or completion of

a task or a set of tasks as defined by a

contractual agreement, unless such

contractual agreement expressly states that

an employment relationship exists.

40. Concerning criteria (I) through (VI), quoted above,

the evidence is not clear which of the drivers hold federal

employer identification numbers, although some do, nor which

ones are sole proprietors, although a substantial number of them

are. The proof does not show that compensation for services was

only paid to a business, rather than to individuals, nor was

there definitive proof as to which drivers held one or more bank

accounts in the name of a business entity for purposes of paying

business expenses, etc. The proof does show that the drivers in

question can perform work or are able to perform work for any

entity, in addition to the Respondent P.A.T., without any proof

that there was a necessity of completing an employment

application process. This is true so long as they use a

different truck and trailer than one owned by P.A.T. that is in

the possession of the drivers for only P.A.T.-contracted

transportation purposes. The proof also shows that the drivers

in question received compensation for work or services upon

completion of a task or a set of tasks, as defined by their

agreement, written or oral, with P.A.T. There is no persuasive

proof that any contractual agreement expressly states that an

employment relationship exists. Therefore, the drivers in

question comply with criterion (VI). Accordingly, at most, it

can be determined that the drivers in question meet the

standards or criteria (V) and (VI) of the above-referenced

statutory provision. Because they must meet four of the above

six criteria of the statute in order to be qualified as

independent contractors, they cannot so qualify under these

provisions.

41. Be that as it may, pursuant to Section

440.02(15)(d)1.b., Florida Statutes (2009): "If four of the

criteria listed in sub-subparagraph a. do not exist, an

individual may still be presumed to be an independent contractor

and not an employee based on full consideration of the nature of

the individual situation with regard to satisfying any of the

following conditions (emphasis added):

(I) The independent contractor performs or

agrees to perform specific services or work

for a specific amount of money and controls

the means of performing the services or

work.

(II) The independent contractor incurs the

principal expenses related to the service or

work that he or she performs or agrees to

perform.

(III) The independent contractor is

responsible for the satisfactory completion

of the work or services that he or she

performs or agrees to perform.

(IV) The independent contractor receives

compensation for work or services performed

for a commission or on a per-job basis and

not on any other basis.

(V) The independent contractor may realize

a profit or suffer a loss in connection with

performing work or services.

(VI) The independent contractor has

continuing or recurring business liabilities

or obligations.

(VII) The success or failure of the

independent contractor's business depends on

the relationship of business receipts to

expenditures.

42. Concerning (I), quoted above, the drivers did control

a substantial portion of the means of performing the driving

services or transportation work involved. It is true that the

Respondent, P.A.T., owned the trucks and was responsible for

insuring them, paid routine maintenance costs, and fuel, until

the customer reimbursed for the fuel. The drivers had

possession of the trucks, at their own residences or places of

business, or while traveling on the road. They did not return

the trucks to the Respondent's yard or storage facility in

between trips. The drivers had the option of selecting the

route for the transportation service on a given load or hauling

arrangement and controlled the time of departure and time of

arrival. The driver determined, within reasonable limits, when

to pick up the load of vehicles and when to deliver them at the

destination. The drivers were also free to refuse to accept a

hauling order from P.A.T. There was no penalty imposed on a

driver for doing this, so long as it did not occur too

frequently. Thus, in view of the above findings of fact, the

drivers did not control all the means of performing the services

or work, but did control a substantial portion thereof.

43. The drivers also incurred substantial expenses related

to performing the transportation work, but did not bear the

"principal expenses" because they were not responsible for the

routine maintenance on the truck, the payments on the truck loan

or lease, nor the insurance payments. Moreover, P.A.T. paid any

tolls incurred by the drivers on trips, so long as the driver

submitted receipts for reimbursement. The drivers were

responsible to pay for any government-mandated items such as

physicals and decals, as well as lodging, food, and Department

of Transportation fines, if any. They paid fees required to

enter and exit port facilities. On balance, it is determined

that the drivers do not really qualify as independent

contractors under the provision at (II) of the above-cited

statute.

44. The drivers were clearly responsible for the

satisfactory completion of the work and, in fact, were

responsible for payment for any damages to the trucks, trailers,

or to the cargo they were transporting. However, the ultimate

contractual responsibility for satisfactory completion of the

transportation work was the responsibility of the Respondent,

P.A.T. itself. It was in privity of contract with the

customers, who ordered the vehicles transported. It is also

true that the drivers were responsible for the satisfactory

completion of the work in the sense that they would not be paid

if it was not satisfactorily accomplished, in terms of

timeliness, proper delivery of undamaged vehicles, etc. On

balance, however, with regard to Criterion (III), the

satisfactory completion of the work was the primary obligation

of the Respondent and not the driver.

45. There is no question that the drivers received

compensation for their work or services performed by payment of

a commission or on a per job basis and not on any other basis

for purposes of paragraph (IV), above. The drivers clearly meet

this criterion and thus are independent contractors pursuant to

this standard.

46. It is also true, as established by unrefuted testimony

of Ms. Hedges, that the contractors stand to obtain a profit or

suffer a loss in connection with performing the transportation

services involved. It was shown that they do have recurring

business liabilities or obligations, in spite of the fact that

they do not own the trucks or pay the routine maintenance on the

trucks. This is shown in the above findings of fact and it is

noteworthy that any damage to the truck must be the

responsibility of the driver, not the Respondent.

47. Ms. Hedges also established that the success or

failure of the drivers' businesses depended on the relationship

of their receipts or revenues, generated from their commissions,

to the expenditures they had to pay in accomplishing their

hauling duties. These included government compliances, fines,

towing expenses, lodging on the road, if necessary, and food

purchased on the road on hauling trips.

48. Thus, it must be concluded that, on balance, the

drivers are presumed to be independent contractors and not

employees, based on a full consideration of the nature of the

individual situation with regard to P.A.T. and its drivers, in

light of the fact that they have satisfied Criteria (IV) through

(VII), quoted above. It is certainly noteworthy that, under

Section 440.02(15)(d)1.b., the consideration of the nature of

the individual situation is with regard to satisfaction of any

of the conditions enumerated at (I) through (VII). A plain

meaning reading of this statutory provision clearly shows that

if even one criterion under this provision at sub-subparagraph

b.(I-VII) is satisfied, then the drivers can be deemed

independent contractors. There is no question that they satisfy

criterion IV in terms of the method of payment for compensation

for their work and Ms. Hedges' testimony concerning their income

and expenses, especially the fact that she frequently

experiences drivers complaining of insufficient receipts to

cover their expenses, shows that they comply, with Paragraphs

(V), (VI) and (VII), quoted above. Therefore the drivers, for

these reasons, are concluded to be independent contractors and

not employees.

49. Section 440.02(15)(b)1.and 3. Florida Statutes,

authorize corporate officers, not engaged in the construction

industry, to elect exempt status from the provisions of the

Workers' Compensation Act. A Notice of Officer Exemption shall

become effective when issued by the Department or within 30 days

after an application for an exemption is received by the

Department, whichever occurs first. § 440.05, Fla. Stat.

(2009). "Department" is defined in Section 440.02(12) as the

Department of Financial Services.

50. The testimony of Tracie Hedges, as well as Janice

Evers, establishes that the exemption applications for Bradley

Hedges, Gregory A. Hedges and Terry Kimberly Forret were hand-

delivered to the Burgess Road office of the Department in

Pensacola. Janice Evers is a staff worker at that office. She

testified that she did not have knowledge of the actual delivery

of the exemption applications to her office, but she did

acknowledge, in her testimony, that the applications had been

received by the Department in 2005. It is concluded that the

applications were delivered to Investigator Newcomer's office on

Burgess Road, in Pensacola, but for unknown reasons were never

forwarded to Tallahassee by her staff. The question becomes

whether delivery to that office in Pensacola is receipt by the

Department, pursuant to Section 440.05(5), Florida Statutes.

Investigator Newcomer is clearly employed by the Department of

Financial Services. Her business address is 610 East Burgess

Road in Pensacola. The Department's request for production of

the Respondent's business records in this case directed that the

records must be produced at 610 East Burgess Road, Pensacola,

Florida, 32504-6320. Clearly, it is concluded that that office

is an office of the Department for purposes of the above-cited

statute.

acie Hedges established that the exemption

applications in question were delivered during the 2005 calendar

year and Ms. Evers' testimony confirms that. Although the exact

date of delivery could not ascertained, the Stop-Work Order can

only date back to April 22, 2006. It is established that the

exemption request or applications were received by the

Department in 2005. Therefore, at the latest, the exemption

would have taken effect, by operation of law, 30 days beyond the

last day of the year 2005 or on or before January 31, 2006.

Thus the three corporate officers in question would have been

exempt from workers' compensation coverage requirements prior to

April 22, 2006. It is concluded that they were indeed exempt

from such workers' compensation coverage requirements.

Therefore the Respondent would be in compliance as to them, if

they were not covered by a policy of workers' compensation

insurance between April 2006 and April 2009. Thus three

corporate officers cannot be the basis of a Stop-Work Order and

Penalty Assessment

52. The above findings of fact, based upon the

preponderant, persuasive evidence offered by the Respondent

through, primarily, Ms. Hedges' testimony, shows that Robert

Marra, Alex Sibbach, Greg Hall, Richard Burson, Tanner Hanna,

Tony Burson, Kenneth Sibbach, Bobby Laballe, Arthur Nicholas and

Witt Davis had received payments from the Respondent for various

incidental jobs or tasks, not involving transportation, as for

instance, office renovations, landscaping, etc. While there is

evidence of payments to these individuals, there is no

convincing evidence that they were on a payroll or that these

were payroll payments. There is no clear and convincing

evidence that these persons were employees of the Respondent.

There was no evidence presented to contradict Ms. Hedges'

testimony and it has been deemed credible and accepted.

Consequently, these persons named must be stricken from the

Penalty Worksheet and cannot be the basis of a Stop-Work Order

or Penalty Assessment because there is no evidence of non-

compliance with regard to them by the Respondent. Hoar

Construction v. Varney , 586 So. 2d 463 (Fla. 1st DCA 1991).

53. The remaining persons named in the above Findings of

Fact were office workers at P.A.T. When the investigation was

commenced, these office workers were covered by a policy of

workers' compensation insurance issued through AES Employee

Leasing. Because of this, the office workers named in the above

Findings of Fact were compliant as to the workers' compensation

coverage requirements of Chapter 440, Florida Statutes, at the

time of issuance of the Stop-Work Order and Penalty Assessment

which initiated this proceeding. They were compliant at the

time of the business records request as well.

54. In summary, the Petitioner has not presented clear and

convincing evidence to establish that the drivers in question

were employees. Rather it is determined, based upon the factors

and considerations referenced above, that they were independent

contractors and therefore compliant as to workers' compensation

coverage. Likewise, the office workers and the other-named

workers have not been proven, by clear and convincing evidence,

to be employees such that the Respondent would be required to

provide for workers' compensation benefits for them.

55. The Respondent has filed a Motion to Deem Matters

Admitted, referencing its Request for Admissions that was filed

and served upon the Petitioner. The Request for Admissions was

not timely responded to, but was answered to some twenty-one

days late. The Petitioner filed no motions seeking relief from

the time constraints for responding to the Request for

Admissions, nor relief from any of the admission requests. The

Respondent seeks to enforce the provision of Florida Rule of

Civil Procedure 1.370(a), because the Petitioner failed to

respond to the Request for Admissions within the required 30

days.

56. The undersigned has considered argument at the outset

of the hearing by the parties on the motion, in their Proposed

Recommended Orders, as well as the decisional authority cited by

the parties. It is undisputed that the Request for Admissions

were answered 21 days late and that no motion seeking an

extension of time, or otherwise seeking relief from the Request

for Admissions was advanced by the Petitioner. It is also true

that, after the Request for Admissions was answered, there still

remained approximately two month's time available for consequent

hearing preparation. Therefore, in consideration of this factor

and the arguments and the legal authority relied upon by the

parties, it is determined that no undue prejudice has been

occasioned the Respondent by the late service of the answers to

the Request for Admissions. Therefore, in view of the lack of

substantial prejudice, the motion is denied.

57. In view of the lack of clear and convincing evidence

establishing that the Respondent committed the violations of the

relevant provisions of Chapter 440, Florida Statutes, addressed

herein, is determined that there is no proven basis for the

Stop-Work Order or for the Assessment of Penalty. In view of

the above findings, conclusions, and considerations, it is moot

and unnecessary to determine if the disputed contingent

liability insurance policy actually constituted a policy of

workers' compensation insurance.

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,

dismissing the Stop-Work Order and Fourth Amended Order of

Penalty Assessment, in its entirety.

DONE AND ENTERED this 29th day of January, 2010, in

Tallahassee, Leon County, Florida.

S

P. MICHAEL RUFF

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 29th day of January, 2010.

ENDNOTE

1/ A notice given under Subsection(1), Subsection (2) or

Subsection (3) [Concerning claiming corporate officer exempt

status] shall become effective when issued by the Department or

thirty (30) days after an application for an exemption is

received by the Department , whichever occurs first.

(Emphasis applied).

COPIES FURNISHED :

Douglas D. Dolan, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399

Douglas F. Miller, Esquire

Clark, Partington, Hart, Larry

Bond & Stackhouse

125 West Romana Street, Suite 800

Pensacola, Florida 32591

Tracey Beal, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0307

Honorable Alex Sink

Chief Financial Officer

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.