10-001565 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Mark Dunlap, D/B/A Mark Dunlap Masonry Of Central Fl, Inc., A Dissolved Florida Corporation And Mark Dunlap Masonry Of Central Florida, Inc. Status: Closed Recommended Order on Tuesday, March 22, 2011.

Summary: Department proved by clear and convincing evidence that Respondent failed to obtain workers compensation coverage for his employees, and that its calculation of the penalty to be assessed was correct.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 10 - 1565

)

MARK DUNLAP, d/b/a MARK DUNLAP )

MASONRY OF CENTRAL FL, INC., A )

DISSOLVED FLORIDA CORPORATION )

AND MARK DUNLAP MASONRY OF )

CENTRAL FLORIDA, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice , this cause came on for a formal hearing

before Lawrence P. Stevenson, a duly - d esignated Administrative

Law Judge, via video teleconference from sites in Daytona Beach

and Tallahassee , Florida, on August 25, 2010 .

APPEARANCES

For Petitioner: Justin H. Faulkner , Esquire

Department of Financial Services

Division of Workers' Compensation

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: No appearance

STATEMENT OF THE ISSUES

The issue s in this proceeding are whether Respondent ,

Mark Dunlap , d/b/a Mark Dunlap Masonry of Central Fl orida , Inc.,

a dissolved Florida corporation, and Mark Dunlap Masonry of

Central Florida, Inc. ( "Respondent") failed to abide by the

coverage requirements of the Workers' Compensation Law, c ha pter

440, Florida Statu tes , by not obtaining workers' compensation

insurance for its employees; and whether the Petitioner properly

assessed a penalty against the Respondent pursuant to s ection

440.107, Florida Statutes .

PRELIMINARY STATEMENT

Pursuant to the Workers' Compensatio n Law, c hapter 440, the

Department of Financial Services, Divisio n of Workers'

Compensation ( Department), seeks to enforce the statutory

requirement that employers secure the payment of workers'

compensation for their employees.

On January 8, 2010 , the D epartment issued a Stop - Work Order

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

alleg ed that Respondent failed to abide by the coverage

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

order directed Respondent immediately to cease business

operations and pay a penalty equal to 1.5 times the amount

Respondent 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, whichever is greater,

pu rsuant to s ection 440.107(7)(d), as well as a penalty of up to

$5,000 for each employee whom Respondent misclassified as an

indep endent contractor, pursuant to s ection 440.107(7)(f) .

The Department also requested business records from

Respondent in order to determine the exact amount of the

penalty. Respondent provided records, but these were

insufficient to allow the Department to calculate an appropriate

penalty. Therefore, the Department calculated a penalty based

upon an imputation of Res pondent's p ayroll, pursuant to s ection

440.107(7)(e). The Department issued an "Amended Order of

Penalty Assessment" ("Amended Order") on February 12, 2010, that

assessed a penalty of $121,001.30 against Respondent. The

Amended Order was served on Respondent on Mar ch 5, 2010.

Respondent timely requested a formal administrative hearing

to contest the penalty assessment , and on March 23, 2010 , the

Department forwarded Respondent 's request to the Division of

Administrative Hearings ( " DOAH " ). The case was initially set

for hearing on June 3, 2010. On May 24, 2010, the Department

filed a M otion for C ontinuance and a M otion to C ompel D iscovery.

The Department's discovery requests had been returned in blank

by Respondent, and the Department stated that it could be

pr epared for the scheduled hearing without a continuance and an

order requiring Respondent to substantively reply to the

Depart ment's discovery requests. An Order Granting C ontinuance

a nd Rescheduling H earing by Video Teleconference for Aug ust 25,

2010, was entered on May 2 6, 2010. On June 15, 2010, an O rder

granting the Department's motion to compel was entered directing

Respondent to serve his responses to the Department's discovery

requests no later than June 29, 2010 .

On August 19, 2010, the Department filed a motion to amend

the Amended Order to lower the penalty assessment to $64,315.28.

This motion was granted at the outset of the final hearing, and

the hearing proceeded on the Department's Second Amended Order

of Penalty Assessment ("Second Amended Order").

Respondent did not appear at the final hearing on

August 23, 2010 , the commencement of which was delayed by 20

minutes to allow Respondent every opportunity to be heard. The

hearing proceeded in order to allow the Department to present

its prima facie case. The hearing adjourned at approximately

10:30 a.m. Respondent had not arrived, nor had he contacted the

Department or DOAH to explain his absence from the scheduled

hearing.

On August 25, 2010 , the undersigned entered an Order to

Show C ause di recting Respondent to provide, within 10 days,

reasons why the record in the case should not be closed and the

recommended order entered based on the current record.

Respondent did n ot respond to the O rder to Show Cause, and an

O rder closing the record wa s entered on September 17, 2010.

At the hearing, the Department presented the testimony of

its investigator, Hector Beauchamp , and of its penalty

calculator, Samantha Nixon . The Department's Exhibits A through

O were admitted into evidence.

A Transcri pt of the final hearing was filed at DOAH on

September 15, 2010 . On September 22, 2010, the Department filed

a motion for an extension of the time within which to submit a

proposed recommend ed order, which was granted by O rder dated

September 23, 2010. I n accordance with the O rder granting

extension, the Department filed a Proposed Recommended O rder on

October 11, 2010 . Respondent did not file a p roposed

recommended order.

On October 6, 2010, Mr. Dunlap filed a document titled

"Declaration," in which he stated that he believed he was in

compliance with the requirements of c hapter 440, Florida

Statutes , and that his failure to appear at the August 25, 2010 ,

hearing was due to a "communication error" that res ulted in his

not receiving the N otice of H earing. Because this declaration

was filed more than one month after the Order to Show Cause was

entered, it was not deemed sufficient cause to reopen the record

in this case and was not considered in the writing of this

Recommended Order.

Unless otherwise sta ted, 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 (3) , Fla.

Stat.

2. R espondent operates a masonry business located in

Paisley, and is therefore engaged in the construction industry.

3 . On J anuary 8, 2010 , Hector Beauchamp , the Department's

investigator , received a referral alleging that Respondent was

working at 1601 Tille ry Drive in Deltona, in violation of the

Workers' Compensation Law. Mr. Beauchamp visited the plans

examiner for the City of Deltona, who confirmed that a building

permit had been issued for the cited address.

4. Mr. Beauchamp drove to 1601 Tillery Drive in Deltona,

where he found four people behind the house building a block

wall as part of an addition to the single - family house at that

address. Mark Dunlap was on the site, and told Mr. Beauchamp

that the four men worked for his business, Mark Dunlap Ma sonry

of Central Florida, Inc. Mr. Dunlap subsequently identified the

four persons working on the site as Wayne Sochocki, Kevin

Copeland, Annie Blackburn, and David Allen Baxley.

5. Mr. Beauchamp researched the database maintained by the

Department of St ate, Division of Corporations (accessible at

www.sunbiz.org) and learned that Mark Dunlap Masonry of Central

Florida, Inc. had been administratively dissolved for failure to

file an annual report on September 25, 2009. Mr. Beauchamp also

learned that Mr. Dunlap had owned another Florida corporation,

Mark Dunlap Masonry, Inc., that had been administratively

dissolved for failure to file an annual report on September 16,

2005. According to the Division of Corporations' information,

both Mark Dunlap Masonry of Central Florida, Inc. , and Mark

Dunlap Masonry, Inc. , had the same Federal Employer

Identification Number ("FEIN") of 030531755.

6. Mr. Dunlap claimed to Mr. Beauchamp that he was himself

exempted from carrying workers' compensation coverage, but

admit ted that he had not secured coverage for the four employees

building the block wall at 1601 Tillery Drive.

7. Mr. Beauchamp consulted the Department's Coverage and

Compliance Automated System ( " CCAS " ) database, which lists the

workers' compensation insura nce policy information for each

business as provided by the insurance companies, as well as any

workers' compensation exemptions for corporate officers. CCAS

indicated that in previous years Respondent had secured workers'

compensation insurance through a leasing arrangement with

Employee Leasing Solutions ("ELS").

8. In an employee leasing arrangement, the leasing company

hires an employer's workers and leases them back to the

employer. The leasing company provides payroll services and

workers' compensa tion insurance coverage to the leased employees

in exchange for a fee paid by the employer. However, only those

employees specifically placed in the leasing arrangement by the

employer and accepted as employees by the leasing company are

covered by the le asing company's workers' compensation

insurance.

9. Mr. Beauchamp's investigation confirmed that

Respondent's workers' compensation coverage obtained through the

leasing agreement with ELS had been terminated as of July 8,

2008.

10 . The CCAS database con firmed that Mr. Dunlap had an

active exemption from the requirement to obtain workers'

compensation coverage. It also confirmed that none of the four

employees whom Mr. Beauchamp found building the block wall at

1601 Tillery Drive were exempt .

11. Mr. Be auchamp concluded that Respondent had failed to

secure workers' compensation insurance coverage that met the

requirements of c hapter 440. Mr. Beauchamp therefore issued an

SWO to Respondent on January 8, 2010, and personally served the

SWO on Mr. Dunlap o n the same date.

12. Also on January 8, 2010, Mr. Beauchamp served

Respondent with the Request for Production of Business Records

for Penalty Assessment Calculation. The purpose of this request

was to obtain the business records necessary to determine th e

appropriate penalty to be assessed against Respondent for

violating the coverage requirements of c hapter 440. Because

s ection 440.107(7)(d)1. provides that the Department's

assessment of a penalty covers the preceding three - year period,

the request for production asked for Respondent's business

records from January 9, 2007 , through January 8, 2010.

13. If an employer fails to produce business records

sufficient to allow for the calculation of the appropriate

penalty, the Department must calculate the ap plicable penalty by

imputing the employer's payroll using the statewide average

weekly wage for the type of work performed by the employee and

multiplying that payroll by 1.5.

14. The statewide average wage is derived by use of the

occupation classifica tion codes established by the proprietary

Scopes Manual developed by the National Council on Compensation

Insurance, Inc. ( " NCCI " ) . The Scopes Manual has been adopted by

reference in Florida Administrative Code Rule 69L - 6.031(6). For

Respondent's employe es, Mr. Beauchamp applied the occupation

classification code 5022, for masonry. Fla. Admin. Code R. 69L -

6.031(6)(b)9.

15 . The Department's Amended Order, assessing an imputed

penalty in the amount of $121 , 001.30 against Respondent, was

issued on February 12, 2010 , and served on Mr. Dunlap by process

server on March 5, 2010.

16. Following service of the Amended Order, Respondent

supplied the Department wit h additional business records,

including Respondent's payroll runs from ELS and W - 2's for the

year 20 07. However, even these records were not sufficient to

permit the Department to calculate a penalty based on

Respondent's actual payroll.

17. The additional business records produced by Respondent

did show that Mark Dunlap Masonry, Inc. , had a policy of

workers' compensation insurance in place with Business First

Insurance Company from September 9, 2004 , through February 22,

2008. Mr. Beauchamp had not previously found this coverage

because the FEIN number listed by the Division of Corporations

for Mark Dunlap Masonry, Inc. , was incorrect.

18. The Department issued the Second Amended Order on

August 18, 2010, lowering the penalty assessment to $64,315.28.

Although the Business First Insurance Company policy had been

issued to Mark Dunlap Masonry, Inc., and not to Respondent, the

Department nonetheless concluded that the policy brought

Respondent into compliance with c hapter 440 until February 22,

2008, and adjusted the penalty assessment accordingly.

19. Respondent's workers' compensation coverage throu gh

the leasing agreement with ELS became effective on March 20,

2008, and was terminated on July 7, 2008.

20. Of the f our workers whom Mr. Beauchamp found at the

work site on January 8, 2010, only Wayne Sochocki was listed on

the ELS employee roster. Thu s, Respondent was in compliance

with respect to Mr. Sochocki for the period from March 20, 2008 ,

through July 7, 2008. However, the records indicate that

Respondent was not in compliance through the ELS leasing

agreement with respect to its employees Kevi n Copeland, Annie

Blackburn, or David Allen Baxley because they had never been

tendered to ELS as leased employees.

21. The Department correctly imputed the penalty against

Respondent for the four employees found at the work site on

January 8, 2010 , for a ll periods of noncompliance. The

Department correctly determined the period of noncompliance for

Mr. Sochocki to run from July 8, 2008 to January 8, 2010, and

for Mr. Copeland, Ms. Blackburn and Mr. Baxley to run from

February 22, 2008 , to January 8, 2010 .

22. The Department utilized the correct occupation

classification code for the four employees.

23. The Department correctly utilized the procedure set

forth by s ection 440.107(7)(d) and (e), and the penalty

calculation worksheet incorporated by referen ce into Florida

Administrative Code Rule 69L - 6.027(1), to calculate the penalty

assessed against Respondent by the Second Amended Order.

CONCLUSIONS OF LAW

24 . The Division of Administrative Hearings has

jurisdiction of the subject matter of and th e parti es to this

proceeding. § § 120.569 and 120.57(1), Fla. Stat.

25 . Employers are required to secure payment of

comp ensation for their employees. § § 440.10(1)(a) and

440.38(1), Fla. Stat.

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

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

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

the person employing him or her" and includes , " with respect to

the construction industry, a ll private employment in which one

or more employees are employed by the same employer."

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

27 . "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

appo intment 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

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

Stat. Certain corporate officers may elect to exempt themselves

fro m the coverage requirements of c hapter 440. §§ 440.02(15)(b)

and 440.05, Fla. Stat. In this case, Mr. Dunlap had a workers'

compensatio n exemption , but none of Respondent's four employees

had an exemption .

28 . 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

ass essments were correct under the law. See DepÓt of Banking &

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

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

29 . In Evans Packing Co. v. DepÓt of Agric. and Consumer

Serv s. , 550 So. 2d 112, 1 16, n. 5 (Fla. 1st DCA 1989), the Court

defined clear and convincing evidence as follows:

Clear 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 evi dence

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

t ruth of the allegations sought to be

established. Slomowitz v. Walker , 429 So.

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

30 . Judge Sharp, in her dissenting opinion in Walker v. FL

DepÓt of Bus. and ProfÓ l Regulation , 705 So. 2d 652, 655 (Fla.

5th DCA 1998)(Sharp , J., dissenting), reviewed recent

pronouncements on clear and convincing evidence:

[ C ] lear 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 67 2 (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

fact finder a firm belief or conviction as to

the truth of the allegations sought to be

established. Inqui ry Concerning Davey , 645

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

31 . The Department established by clear and convincing

evidence that Respondent was an "employer" for workers'

compensation purposes because it was engaged in the construction

industry and had one o r more employees working for the company

from February 22, 2008 , through January 8, 2010 .

§ 440.02(16)(a) and (17)(b)2., Fla. Stat. Respondent was

therefore required to secure the payment of workers'

compensation. §§ 440.10(1)(a) and 440.38(1), Fla. Sta t.

32 . Section 440.107(7)(a) provides in relevant part:

Whenever the D epartment 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 o f 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

D epartment of a stop - work order on the

employer, requiring the cessatio n of all

business operations. If the D epartment

makes such a determination, the D epartment

shall issue a stop - work order within 72

hours.

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

As to both the Amended Order and the Second Amended Order, t he

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,

Co nclusions 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' Co mpensation,

assessing a penalty of $ 64,315.28 against Respondent .

DONE AND ENTERED this 2 2nd day of March, 2011 , in

Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Buil ding

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 2 2nd day of March, 2011 .

COPIES FURNISHED :

Mark Dunlap

Mark Dunlap Masonry, Inc.

45806 Lake Street

Paisley, Florida 32767

Justin H. Faulkner , Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Julie Jones, Agency Clerk

Department of Financial Ser vices

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399

P. K. Jameson, General Counsel

Department of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399

Honorable Jeff Atwater

Chief Financial Officer

D epartment of Financial Services

The Capitol, Plaza Level 11

Tallahassee, Florida 32399

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

wi ll issue the final order in this case.