09-004057 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. The Gardner Group, Inc. Status: Closed Recommended Order on Thursday, December 24, 2009.

Summary: Petitioner demonstrated that Respondent, a non-construction business, had four or more employees and failed to provide workers' compensation coverage, justifying imposition of a penalty.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, ) Case No. 09-4057

)

vs. )

)

THE GARDNER GROUP, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for formal

proceeding before Lawrence P. Stevenson, a duly-designated

Administrative Law Judge, in Jacksonville, Florida, on

October 27, 2009.

APPEARANCES

For Petitioner: Paige Billings Shoemaker, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: Beverly Carter, Qualified Representative

The Gardner Group, Inc.

810 Third Street

Neptune Beach, Florida 32266

STATEMENT OF THE ISSUE

At issue in this proceeding is whether the Respondent, The Gardner Group, Inc. (Gardner Group) failed to abide by the

coverage requirements of the Workers' Compensation Law,

Chapter 440, Florida Statutes, by not obtaining workers'

compensation insurance for its employees; and whether the

Petitioner properly assessed a penalty against the Respondent

pursuant to Section 440.107, Florida Statutes.

PRELIMINARY STATEMENT

Pursuant to the Workers' Compensation Law, Chapter 440,

Florida Statutes, the Department of Financial Services, Division

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

statutory requirement that employers secure the payment of

workers' compensation for their employees.

On June 26, 2009, the Department issued a Stop Work Order

(SWO) that included an Order of Penalty Assessment. The SWO

alleged that Gardner Group failed to abide by the coverage

requirements of the workers' compensation law on that date. The

order directed Gardner Group immediately to cease business

operations and pay a penalty equal to 1.5 times the amount

Gardner Group would have paid in premium to secure workers'

compensation during periods within the preceding three years

when it failed to do so, or $1,000.00, whichever is greater,

pursuant to Subsection 440.107(7)(d), Florida Statutes.

Also on June 26, 2009, the Department requested business

records from Gardner Group in order to determine the exact

amount of the penalty. Gardner Group promptly provided the

records. On July 13, 2009, the Department issued an "Amended

Order of Penalty Assessment" (Amended Order) that ordered

Gardner Group to pay a penalty of $15,595.93, pursuant to

Subsection 440.107(7)(d), Florida Statutes. A "Second Amended

Order of Penalty Assessment" (Second Amended Order) was issued

on July 17, 2009, ordering Gardner Group to pay a penalty in the

amount of $15,264.24.

Gardner Group timely requested a formal administrative

hearing to contest the penalty assessment, and on July 30, 2009,

the Department forwarded Gardner Group's request to the Division

of Administrative Hearings (DOAH). The hearing was held as

originally scheduled on October 27, 2009.

At the hearing, the Department presented the testimony of

its investigator, Lucio Luis Cabrera, Jr., and of its penalty

calculator, Gloria Ieanez Catalan. The Department's Exhibits 1

through 8 were admitted into evidence. Gardner Group presented

the testimony of its Vice President of Administration, Beverly

Carter. Gardner Group's composite Exhibit 1 was admitted into

evidence.

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

November 12, 2009. The Department timely filed a Proposed

Recommended Order on November 23, 2009. Gardner Group did not

file a proposed recommended order.

Unless otherwise stated, all statutory references are to

the 2009 edition of the Florida Statutes.

FINDINGS OF FACT

Based on the oral and documentary evidence adduced at the

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

following findings of fact are made:

1. The Department is the state agency responsible for

enforcing the requirement of the workers' compensation law that

employers secure the payment of workers' compensation coverage

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

Stat.

2. Gardner Group is an insurance broker located in Neptune

Beach, Florida. The company has a total of six employees.

Gardner Group stipulated that all persons listed in the Second

Amended Order were its employees, and to the correctness of the

calculation of payroll for which the penalty was assessed.

3. On June 25, 2009, Lou Cabrera, the Department's

investigator, visited Gardner Group's place of business at 810

Third Street in Neptune Beach, where he spoke with Gardner Group

employee Corinne Carter.

4. Mr. Cabrera later spoke with Beverly Carter, Gardner

Group's Vice President for Administration. Ms. Gardner told

Mr. Cabrera that Gardner Group had four employees in addition to

her and Corrine Carter. The company's business records later

verified that these persons, Kayla Hauk, Sandra Moore, Brian

Cook, and Howard Dunlap, were employees of Gardner Group.

5. Because Gardner Group had four or more employees, it

appeared to meet the threshold for "employment" requiring

workers' compensation coverage. § 440.02(17)(b)2., Fla. Stat.

6. A corporate officer may elect to be exempt from the

requirements and benefits of Chapter 440, Florida Statutes, by

filing a notice and receiving a certificate of election to be

exempt from the Department. See Florida Administrative Code

Rule 69L-6.012 for details of the process employed to obtain an

exemption.

7 . As of June 25, 2009, Howard Dunlap and Trace Milam were

the only corporate officers of Gardner Group holding valid

workers' compensation exemptionsace Milam was no longer

working for Gardner Group on June 25, 2009.

8. As of June 25, 2009, Gardner Group did not have

workers' compensation insurance. Mr. Cabrera issued and

personally served the SWO on Gardner Group. Mr. Cabrera also

issued and personally served a request for production of

business records for the purpose of accurately calculating a

penalty assessment for Gardner Group.

9. Gardner Group promptly complied with the Department's

request for business records. Based on those records, the

Department issued the Amended Order on July 13, 2009, ordering

Gardner Group to pay a penalty of $15,595.93, pursuant to

Subsection 440.107(7)(d), Florida Statutes. On July 17, 2009,

the Department issued the Second Amended Order, ordering Gardner

Group to pay a penalty in the amount of $15,264.24. The Second

Amended Order is the basis of this proceeding.

10. The SWO was conditionally released when Gardner Group

entered into a periodic payment agreement and came into

compliance with Section 440, Florida Statutes, by obtaining

exemptions for three corporate officers (Mr. Dunlap, Mr. Cook,

and Beverly Carter) and maintaining three employees.

11. Sole proprietors and partners not engaged in the

construction industry are not considered employees for purposes

of workers' compensation coverage unless they affirmatively

elect to be covered. § 440.02(15)(c)1., Fla. Stat.

12. At the hearing, Beverly Carter testified that she is a

partner in Gardner Group. She produced documents demonstrating

that she owns 5 percent of the outstanding shares in Gardner

Group. Mr. Dunlap owns 85 percent of the outstanding shares,

and Mr. Milam owns 10 percent of the outstanding shares. The

shares are not publicly traded, and a cross purchase agreement

places restrictions on the manner in which the shareholders may

dispose of their holdings.

13. Section 440.02(21), Florida Statutes, defines

"partner" to mean:

any person who is a member of a partnership

that is formed by two or more persons to

carry on as co-owners of a business with the

understanding that there will be a

proportional sharing of the profits and

losses between them. For the purposes of

this chapter, a partner is a person who

participates fully in the management of the

partnership and who is personally liable for

its debts.

14. As Vice President for Administration, Ms. Carter does

participate in the management of the business. However, Gardner

Group is a C corporation, formed pursuant to Chapter 607,

Florida Statutes, meaning that the shareholders are not

personally liable for the debts of the business. Ms. Carter

testified that she is paid a salary that constitutes her main

compensation from Gardner Group. She testified that she may

receive a dividend if the corporation shows a profit.

15. Gardner Group is a corporation, not a partnership, and

Ms. Carter therefore cannot meet the definition of "partner" set

forth in Section 440.02(21), Florida Statutes.

16. Ms. Carter credibly testified that Gardner Group was

unaware that its corporate officers were required to file a

notice of election in order to be exempt from workers'

compensation coverage. She noted that it was a simple matter

for the company to obtain those exemptions, and stated that it

was unfair to penalize Gardner Group more than $15,000.00 for

the "minor technicality" of failing to file exemption notices

for its three corporate officers.

17. The Department lacks discretion to overlook the

requirements of Section 440.05, Florida Statutes, regarding the

method by which a corporate officer must elect exemption from

workers' compensation coverage, or the requirements of Section

440.107, Florida Statutes, regarding enforcement of workers'

compensation coverage requirements. Therefore, Gardner Group's

unawareness of the filing requirement does not excuse the

payment of the amount set forth in the Second Amended Order.

CONCLUSIONS OF LAW

18. 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.

19. Employers are required to secure payment of

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

440.38(1), Fla. Stat.

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

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

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

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

employments in which four or more employees are employed by the

same employer. . . ."§ 440.02(17)(a) and (b)(2), Fla. Stat.

21. "Employee" is defined, in part, as "any person who

receives remuneration from an employer for the performance of

any work or service while engaged in any employment under any

appointment or contract for hire or apprenticeship, express or

implied, oral or written. . . ." § 440.02(15)(a), Fla. Stat.

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

corporation and who performs services for remuneration for such

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

Stat. Certain corporate officers may elect to exempt themselves

from the coverage requirements of Chapter 440, Florida Statutes.

Gardner Group's employees had a workers' compensation exemption,

but five employees were subject to the coverage requirement.

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

and must show by clear and convincing evidence that the employer

violated the Workers' Compensation Law and that the penalty

assessments were correct under the law. See Department of

Banking and Finance, Division of Securities and Investor

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

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

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

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

1989), the court defined clear and convincing evidence as

follows:

[C]lear and convincing evidence requires

that the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

evidence must be precise and explicit and

the witnesses must be lacking in confusion

as to the facts in issue. The evidence must

be of such weight that it produces in the

mind of the trier of fact the firm belief of

conviction, without hesitancy, as to the

truth of the allegations sought to be

established. Slomowitz v. Walker , 429 So.

2d 797, 800 (Fla. 4th DCA 1983).

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

Florida Department of Business and Professional Regulation , 705

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

reviewed recent pronouncements on clear and convincing evidence:

. . . Clear and convincing evidence requires

more proof than preponderance of evidence,

but less than beyond a reasonable doubt. In

re Inquiry Concerning a Judge re Graziano ,

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

intermediate level of proof that entails

both qualitative and quantative [sic]

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

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

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

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

evidence must be sufficient to convince the

trier of fact without any hesitancy. Id.

It must produce in the mind of the trier of

fact a firm belief or conviction as to the

truth of the allegations sought to be

established. Inquiry Concerning Davey , 645

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

25. The Department established by clear and convincing

evidence that Gardner Group was an "employer" for workers'

compensation purposes because it was engaged in a non-

construction industry and had four or more employees working for

the company from July 2006 through June 2009. § 440.02(16)(a)

and (17)(b)2., Fla. Stat. Gardner Group was therefore required

and 440.38(1), Fla. Stat.

26. Section 440.107(7)(a), Florida Statutes, provides in

relevant part:

Whenever the department determines that an

employer who is required to secure the

payment to his or her employees of the

compensation provided for by this chapter

has failed to secure the payment of workers'

compensation required by this chapter. . .

such failure shall be deemed an immediate

serious danger to public health, safety, or

welfare sufficient to justify service by the

department of a stop-work order on the

employer, requiring the cessation of all

business operations. If the department

makes such a determination, the department

shall issue a stop-work order within 72

hours.

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

The Department applied the proper methodology in computing the

penalty, pursuant to the Penalty Calculation Worksheet adopted

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

RECOMMENDATION

Having considered the foregoing Findings of Fact,

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

demeanor of the witnesses, and the pleadings and arguments of

the parties, it is, therefore,

RECOMMENDED that a final order be entered by the Department

of Financial Services, Division of Workers' Compensation,

assessing a penalty of $15,264.24 against The Gardner Group,

Inc.

DONE AND ENTERED this 24th day of December, 2009, in

Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 24th day of December, 2009.

COPIES FURNISHED :

Paige Billings Shoemaker, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-4229

Howard Dunlap

The Gardner Group, Inc.

810 Third Street

Neptune Beach, Florida 32266

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.