09-004760 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Sw Cycle Of Lee County, Inc. Status: Closed Recommended Order on Tuesday, June 15, 2010.

Summary: Petitioner proved that Respondent operated a motorcycle sales and service business without securing workers' comppensaton; however, one salesperson without service responsibilities was miscoded.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 09-4760

)

SW CYCLE OF LEE COUNTY, INC., )

)

Respondent. )

________________________________)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division

of Administrative Hearings, conducted the final hearing by

videoconference at sites in Fort Myers and Tallahassee, Florida,

on April 13, 2010. The parties, attorneys for the parties,

witnesses, and court reporter participated by videoconference in

Fort Myers, Florida.

APPEARANCES

For Petitioner: Timothy L. Newhall

Assistant General Counsel

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399-4229

For Respondent: David Leckie

Qualified Representative

SW Cycle of Lee County, Inc.

620 Northeast 15th Avenue, Unit 101

Cape Coral, Florida 33909

STATEMENT OF THE ISSUE

The issue is whether Respondent conducted business

operations without securing the payment of workers' compensation

and, if so, the penalty, pursuant to Section 440.107(7)(d)1.,

Florida Statutes.

PRELIMINARY STATEMENT

By Amended Order of Penalty Assessment filed April 12,

2010, Petitioner proposed the assessment of a total penalty of

$24,033.44 for conducting business without securing the payment

of workers' compensation.

At the hearing, Petitioner called two witnesses and offered

into evidence 12 exhibits: Petitioner's Exhibits 1-12.

Respondent called one witness and offered into evidence no

exhibits. All exhibits were admitted.

The court reporter filed the transcript on April 29, 2010.

Petitioner filed a Proposed Recommended Order on June 8, 2010.

FINDINGS OF FACT

1. Respondent is engaged in the business of selling and

servicing used motorcycles in Cape Coral and is not engaged in

the construction industry. Respondent's president is David

Leckie, and its vice-president is his brother, Stephen Leckie.

(For ease of reference, the brothers shall be referred to as

David and Stephen or the two brothers.)

2. The period at issue in this case is from April 16,

2006, through April 15, 2009. During this entire period,

Respondent conducted business at its former location, whose

address was 1020 Northeast Pine Island Road, Units 304-305, Cape

Coral, Florida.

3. During the entire audit period, Respondent was an

employer and employed at least four persons. At no time during

the audit period did Respondent secure the payment of workers'

compensation for any of its employees.

4. The record includes UCT-6 forms for the entire audit

period. These are quarterly earnings reports filed by employers

pursuant to the requirements of unemployment compensation law.

The Administrative Law Judge has found David to be an

exceptionally candid witness and credits the UCT-6 forms as

reliable.

5. According to the UCT-6 forms, for the last three

quarters of 2006, Respondent employed four persons: the two

brothers, John Gleason, and Barry Loar. Respondent paid gross

wages during this period of $12,600 to David, $8,250 to Stephen,

$13,540 to Mr. Gleason, and $12,416 to Mr. Loar.

6. According to the UCT-6 forms, for 2007, Respondent

employed six persons: the two brothers, Mr. Gleason, Mr. Loar,

Richard Meyer, and Robert Walsh. Respondent paid gross wages

during this period of $30,000 to David, $27,942.20 to Stephen,

$3,500 to Mr. Gleason, $30,737.49 to Mr. Loar, $25,316.19 to

Mr. Meyer, and $9,312 to Mr. Walsh.

7. According to the UCT-6 forms, for 2008, Respondent

employed five persons: the two brothers, Mr. Loar, Mr. Meyer,

and Jason Cabral. Respondent paid gross wages during this

period of $32,000 to David, $29,255.20 to Stephen, $43,812.23 to

Mr. Loar, $29,427.83 to Mr. Meyer, and $6,998.43 to Mr. Cabral.

8. According to the UCT-6 forms, for the first quarter of

2009, Respondent employed five persons: the two brothers,

Mr. Loar, Mr. Meyer, and Mr. Cabral. Respondent paid gross

wages during this period of $8,000 to David, $7,313.80 to

Stephen, $9,744 to Mr. Loar, $7,316.40 to Mr. Meyer, and $1,224

to Mr. Cabral.

9. Because the audit period does not correspond precisely

to calendar quarters, adjustments are required to these reported

earnings. After these adjustments, the gross payroll calculated

for these employees by Petitioner in the Amended Order of

Penalty Assessment is accurately stated to be $353,045.14.

10. During the audit period, Mr. Meyer was a counter

worker and service writer, and David performed exclusively sales

and accounting services. Mr. Gleason and Mr. Loar were

mechanics. Although the record is unclear, Mr. Walsh and

Mr. Cabral were also likely mechanics. Stephen served mostly in

sales and customer relations, but worked as a mechanic about

25 percent of 2007 and 10 percent of the remainder of the audit

period.

11. Mr. Meyer's duties required him to establish initial

contact with the customer visiting the sales and repair facility

for service on her motorcycle. Mr. Meyer listened to the

customer's complaints and assessed the bike. Mr. Meyer

transferred the motorcycle to a mechanic who diagnosed the

specific problem. If the mechanic needed parts, Mr. Meyer

assembled them and entered them on the customer's invoice.

Mr. Meyer's job included collecting the required parts from

their inventory bins and delivering them to the mechanic in the

service bay where work on the bike took place. Except for this,

Mr. Meyer did not enter the service bay because the vending

machine and employee rest room were located outside of the

service bay in which mechanical work was performed.

12. David and Stephen (except when he worked on bikes, as

noted above) did not enter the service bay. They performed

their services in an area in which no mechanical work was

performed.

13. As discussed in the Conclusions of Law, Petitioner

classifies the risk factor for specific jobs by using the Scopes ®

Manual of the National Council on Compensation Insurance, Inc.

In this case, Petitioner properly classified all employees,

except David, as Code 8380, which applies to automotive service

workers, as well as parts department employees and counter

workers, even if physically separated from the service areas,

and service writers.

14. The only questionable classifications in this case are

for David and Stephen. The narrative accompanying Code 8380

explains their proper classification: "Automobile salespersons

who exclusively sell or lease vehicles are classified to Code

8748, a Standard Exception classification." As noted above,

during the audit period, Stephen worked part of the time in the

service bay doing mechanical work, so Petitioner properly

classified him under code 8380. However, David never worked as

a mechanic and never entered the service bay where mechanical

work was performed, so Petitioner should have classified him

under the presumably lower-risk Code 8748.

15. Calculating the workers' compensation premium requires

the use of the manual rate assigned, for each period of time, to

a Coded activity. The manual rates for the audit period for

Code 8748 are not in the record, so Petitioner needs to

recalculate the unpaid premium and, then, the penalty based on

the correct manual rates applied to David's earnings under

Code 8748. Otherwise, Petitioner's penalty calculations are

entirely correct.

CONCLUSIONS OF LAW

16. The Division of Administrative Hearings has

Fla. Stat. (2009).

17. Section 440.02(16)(a), Florida Statutes, defines an

employer to be "every person carrying on any employment."

Section 440.02(15), Florida Statutes, defines an employee as

"any person who receives remuneration from an employer for the

performance of any work or service while engaged in any

employment. . . ." Section 440.02(17)(b)2., Florida Statutes,

defines employment subject to workers' compensation coverage as

"[a]ll private employments in which four or more employees are

employed by the same employer. . . ." Sections 440.31(1) and

440.09(1), Florida Statutes, require employers to secure the

payment of workers' compensation for covered accidents. Section

440.107(2), Florida Statutes, provides that "securing the

payment of workers' compensation" means obtaining coverage that

meets the requirements of Chapter 440, Florida Statutes.

18. Because Petitioner seeks to impose a penalty against

Respondent, Petitioner must prove the material allegations by

clear and convincing evidence. Department of Banking and

Finance v. Osborne Stern and Company, Inc. , 670 So. 2d 932 (Fla.

1996).

19. Petitioner has proved that Respondent was required to

secure the payment of workers' compensation and failed to do so.

20. Section 440.107(7)(d)1., Florida Statutes, provides:

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.

21. In its Proposed Recommended Order, Petitioner states

that Florida Administrative Code Rule 69L-6.021(2) adopts the

Scopes ® Manual and the codes at issue in this case. This rule

does not adopt the codes at issue in this case. However, the

widespread use of the Scopes ® Manual justifies its use based on

the language, "approved manual rates," in Section

440.107(7)(d).1, Florida Statutes, as cited immediately above.

Cf . Fla. Admin. Code R. 69L-5.201(21).

22. Petitioner has proved the correctness of the amended

penalty in all respects but one: the classification of David

under Code 8380. David should be classified under Code 8748.

Petitioner needs to recalculate the penalty based on the manual

rates applicable to David's earnings during the audit period for

this code and recalculate the penalty.

RECOMMENDATION

It is

RECOMMENDED that the Department of Financial Services enter

a final order determining that Respondent has not secured

required workers' compensation insurance and imposing against

Respondent the penalty set forth in the Amended Order of Penalty

Assessment, adjusted only to reflect a code of 8748, not 8380,

for David Leckie's earnings throughout the audit period.

DONE AND ENTERED this 15th day of June, 2010, in

Tallahassee, Leon County, Florida.

___________________________________

ROBERT E. MEALE

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 15th day of June, 2010.

COPIES FURNISHED:

Timothy L. Newhall, Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

David Leckie

620 Northeast 15th Avenue

Coral Gables, Florida 33909

David Leckie

SW Cycle of Lee County, Inc.

1020 Northeast Pine Island Road

Unit 304-305

Cape Coral, Florida 33909

Julie Jones, CP, FRP, Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

Honorable Alex Sink

Chief Financial Officer

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

Benjamin Diamond, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399-0300

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.