10-007053 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. M And M Coop Construction Co., Inc. Status: Closed Recommended Order on Friday, December 10, 2010.

Summary: Petitioner proved that Respondent failed to provide workers' compensation coverage to its employees and properly assessed a penalty in the amount of $8,621.46.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERSÓ )

COMPENSATION , )

)

Petitioner , )

)

vs. ) Case No. 10 - 7053

)

M AND M COOP CONSTRUCTION CO., )

INC. , )

)

Respondent . )

)

RECOMMENDED ORDER

A formal hearing was conducted in this case on October 13,

2010, by video teleconference with hearing sites located in

Tallahassee, Florida, and Panama City, Florida, before Suzanne

F. Hood, Administrative Law Judge with the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Holly R . Werkema, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Fl orida 32399 - 4229

For Respondent: Jackie Shores

Corporate Representative

M and M Coop Construction Co., Inc.

1401 Minnesota Avenue

Lynn Haven, Florida 32444

S TATEMENT OF THE ISSUES

The issues are as follows: (a) whether Respondent failed

t o secure the payment of workersÓ compensation for its

employees; and if so, (b) whether Petitioner assessed an

appropriate penalty.

PRELIMINARY STATEMENT

On March 16, 2010, Petitioner , Department of Financial

Services, Division of Workers Ó Compensation (Petitioner) , issued

a Stop - Work Order and Order of Penalty Assessment against

Respondent , M and M Coop Construction Co., Inc. (Respondent).

The Stop - Work Order alleged that Respondent had failed to secure

the payment of w orkersÓ compensation for its employees.

On March 16, 2010, Petitioner issued a Request for Business

Records for Penalty Assessment Calculation.

On or about April 8, 2010, Petitioner provided Respondent

with an Amended Order of Penalty Assessment. In a memorandum

dated April 19, 2010, Respondent requested an administrative

hearing to challenge the Stop - Work Order and Amended Order of

Penalty Assessment. Petitioner subsequently amended the penalty

assess ment three additional times before referring the case to

the Division of Administrative Hearings on August 4, 2010.

The parties filed a Joint Response to the Initial Order on

August 11, 2010. On August 12, 2010, the undersigned issued a

Notice of Heari ng by Video Teleconferencing, scheduling the

hearing on October 13, 2010.

On October 5, 2010, Petitioner filed an Emergency Motion to

Amend the Order of Penalty Assessment. The undersigned granted

the motion on the record when the hearing commenced.

During the hearing, Petitioner presented the testimony of

three witnesses. Petitioner offered 17 exhibits that were

accepted as evidence.

Respondent presented the testimony of one witness.

Respondent did not offer any exhibits as evidence.

The T rans cript of the hearing was filed on November 5,

2010. Petitioner filed a Proposed Recommended Order on November

15, 2010. As of the date that this Recommended Order was

issued, Respondent had not filed proposed findings of fact and

conclusions of law.

Exc ept as otherwise noted, references hereinafter shall be

to Florida Statutes (2009).

FINDINGS OF FACT

1. Petitioner is the state agency that is responsible for

enforcing the requirements Chapter 440, Florida Statutes,

requiring employers t o secure the p ayment of workersÓ

compensation for their employees.

2. At all times relevant here, Respondent has been an

active F lorida corporation. RespondentÓ s business involves the

installation of acou stic ceiling tiles. RespondentÓ s work in

this regard constit utes construction.

3. On March 16, 2010, Carl Wo odall, PetitionerÓs workersÓ

compensation compliance investigator, conducted a random

compliance check at a construction site. The site was located

at 707 Jenks Avenue in Panama City, Florida.

4. Upo n his arrival in the construction site, Mr. Woodall

observed two individuals, Robin and Todd Calhoun, installing

acoustic ceiling tiles in a commercial office building. The

individuals informed Mr. Woodall that they were working for

Jackie Shores. The in dividuals provided Mr. Woodall with

contact information for Mr. Shores.

5. Mr. Woodall initially contacted Mr. Shores by phone.

Later, Mr. Woodall and Mr. Shores spoke in person at the

construction site. Mr. Shores informed Mr. Woodall that he was

em ployed by Respondent as a job supervisor. Mr. Shores also

identified Robin and Todd Calhoun as RespondentÓ s employees.

6. Mr. Shores informed Mr. Woodall that Respondent used

Southeast Employee Leasing for workers Ó compensation coverage,

but that Robi n and Todd Calhoun had not been signed up for

coverage. Mr. Woodall then contacted George Kaspers from

Southeast Employee Leasing to verify whether Respondent had

secured workersÓ compensation for Robin and Todd Calhoun.

Mr. Kaspers confirmed that the Ca lhouns were not covered and

that they did not have pending employee applications.

7. On March 16, 2010, Mr. Kaspers faxed M r. Woodall a list

of RespondentÓ s employe es that were covered by workersÓ

compensation insurance. The list did not name the Calh ouns.

8. Mr. Woodall next search ed PetitionerÓ s Coverage and

Compliance A utomated Syste m (CCAS) for proof of a workersÓ

compensation policy or officer exemptions. CCAS is a database

that list s workersÓ compensation insurance pol icy information

and all workersÓ compensation exemptions. The database did not

list a current policy for Respondent or any valid exemptions.

9. Mr. Woodall also reviewed the website maintained by the

Florida Department of State, Division of Corporations. The

review showed that Respondent had been an active corporation

since May 7, 2002.

10. Based on his investigation, Mr. Woodall determined

that Res pondent had not secured workersÓ compensation coverage

for all of its employees as required by Chapter 440, Florida

Statute s. On March 16, 2010, Petitioner issued, and served on

Respondent, a Stop - Work Order and Order of Penalty Assessment,

together with a Request for the Production of Business Records

for Penalty Assessment Calculation.

11. The business records request a pplied to the period of

March 17, 2007, through March 16, 2010. The request sought

product ion of payroll records, workersÓ compensation policy

documents, employee leasing documents, temporary labor service

documents, and workersÓ compensation exemption do cuments.

12. Mr. Woodall did not initially request subcontra ctor

payroll and workersÓ compensation documentation from Respondent

because he did not see any subcontractors on site. He did not

want to burden Respondent with a request for more documents that

were necessary to determine a proper penalty. However, after

Respondent failed to produc e the requested records within the

required time - period, the case was assi gned to Monica Moye,

RespondentÓ s penalty calculator, to prepar e a penalty based on

Resp ondentÓ s imputed payroll.

13. On April 8, 2010, Mr. Woodall personally served an

Amended Order of Penalty Assessment on Respondent. The O rder

assessed a total penalty in the amount of $77,492.93 against

Responden t for failure to secure workersÓ compensa tion coverage

for its employees.

14. On April 5, 2010, and April 7, 2010, Respondent

provided bank records with check images to Petitioner for the

period of March 1, 2007, through March 31, 2010. Ms. Moye used

these records to calculate a 2nd Amended Order of Penalty

Assessment. The second order was based on payments to employees

and subcontractors t hat were not covered by workersÓ

compensation insurance or an exemption there from. The second

order assessed a penalty in the amount of $13,018.63.

1 5. After service of the 2nd Amended Order of Penalty

Assessment, Ms. Moye received additional information from

Respondent regarding a subcontractor that was covered by its own

workersÓ compensation policy. After confirming the

subcontractor's coverage, M s. Moye removed all payments to that

subcontractor from Respondent's penalty. Mr. Woodall

subsequently issued a 3rd Amended Order of Penalty Assessment to

Respondent, assessing a penalty in the amount of $7,105.35.

16. Later, Ms. Moye received informa tion from Respondent,

indicating that two additional subcontractors had workers Ó

compensation coverage for their employees. This information

resulted in the issuance of a 4th Amended Order of Penalty

Assessment, assessing a penalty in the amount of $6,675 .91.

17. Classification codes are four digit codes assigned to

occupation by the National Council on Compensation Insurance,

Inc. (NCCI) to assis t in the calculation of workersÓ

compensation insurance premiums. The codes are listed in the

Scopes® Manu al, which Petitioner has adopted by rule.

18. After discovery was completed in this case, Petitioner

det ermined that some of RespondentÓ s employees had been assigned

an improper construction classification code of 5348 on the 4th

Amended Order of Penal ty Assessment. Code 5348 encompasses

ceramic tile, indoor stone, and marble installation. The proper

code for RespondentÓ s employees was 5020, which encompasses the

installation of suspended acoustical ceilings.

19. Based on information provided by R espondent during

discovery, Petitioner also determined that one of RespondentÓ s

clerical employees should be assigned classification code 8810

rather than construction code 5348. Additionally, Petitioner

discovered that payments to two entities were payme nts for

material rather than labor. Based on information learned during

discovery, Petitioner prepared a 5th Amended Order of Penalty

Assessment, assessing a total penalty in the amount of

$8,621.46.

20. To calculate the penalty of the 5th Amended Ord er of

Penalty Assessment, Petitioner totaled the gross payroll paid to

RespondentÓ s employees and subcontractors t hat were not covered

by workersÓ compensation for each period of non - compliance.

Respondent conceded that all of the individuals and entities

listed on the penalty worksheet performed services for

Respondent during the time periods listed. Respondent also

conceded that the gross payroll amounts were correctly

calculated, that none of the individuals listed had secured an

exemption, and that no ne of the payments to employees or

subcontractors included in the penalty calcul ation were covered

by a workersÓ compensation policy.

21. Approved manual rates are established by NCCI and

adopted by Petitioner. The approved manual rates are calculated

upon the ris k assigned to the type of employment reflected by

each classification code.

22. Using the penalty calculation worksheet, Petitioner

divided the gross payroll amount for each employee and

subcontractor in each period of non - compliance by 10 0 and

multiplied that figure by the approved manual rate for the

classification code assigned to that employee or subcontractor.

The pr oduct was the amount of workersÓ compensation premium

Respondent should have paid for each employee and subcontractor

if Respondent had been compliant.

23. The premium amounts were then multiplied by 1.5 to

arrive at the penalty for each employee and subcontractor. The

penalties for each employee and subcontractor for each period of

non - compliance were then added toget her to come up with a total

penalty of $8,621.48.

CONCLUSIONS OF LAW

24. The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter of this

proceeding pursuant to Sections 120.569 and 120.57(1), Florida

Statutes (2 010).

25. Chapter 440, Florida Statutes, is known as the

"WorkersÓ Compensation Law." See § 440.01, Fla. Stat.

26. Because administrative fines are penal in nature,

Petitioner has the burden of proving its case by clear and

convincing evidence. See DepÓt. of Banking and Fin. v. Osborne

Stern and Co. , 670 So. 2d 932, 935 (Fla. 1996). To meet this

burden, Petitioner must prove that Respondent was required to

comply with the WorkersÓ Compensation Law, that Respondent

failed to comply with that law, an d that the penalty assessed by

Petitioner is appropriate. Petitioner has met its burden.

27. Section 440.03, Florida Statutes, states that Ðevery

employer and employee as defined in s. 440.02 shall be bound by

the provisions of this chapter.Ñ

28. An e mployer is defined, in pertinent part, as Ðevery

person carrying on any employment.Ñ See § 440.02(16)(a), Fla.

Stat.

29. ÐEmployment . . . means any service performed by an

employee for the person employing him or herÑ and includes Ðwith

respect to the construction industry, all private employment in

which one or more employees are employed by the same employer.Ñ

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

30. Employee is defined, in pertinent part, as Ðany person

who receives remuneration from an employer for the performance

of any work or service while engaged in any employment . . . Ñ

See § 440.02(15)(a), Fla. Stat. This definition includes "[a]ll

persons who are being paid by a construction contractor as a

subcontractor, unless the sub contractor has validly elected an

exemption as permitted by this chapter, or has otherwise secured

the payment of workers' compensation coverage." See

§ 440.02(15)(c)2., Fla. Stat.

31. "Construction industry" is defined as "for - profit

activities invol ving any building, clearing, filling,

excavation, or substantial improvement in the size or use of any

structure or the appearance of any land." See § 440.02(8), Fla.

Stat. Section 440.02(8), Florida Statutes, further provides

that "[t]he division may, b y rule, establish standard industrial

classification codes and definitions thereof which meet the

criteria of the term 'construction industry' as set forth in

this section." Pursuant to this statutory authority, Petitioner

has adopted Florida Administrati ve Code Rule 69L - 6.021, which

adopts the definitions found in the Scopes® Manual.

32. Florida Administrative Code Rule 69L - 6.021(1) lists

workplace operations that fall within the statutory definition

of "construction industry" and includes the Scopes® Manual's

classification code 5020, acoustic ceiling installation. In

this case, Respondent's business involved acoustic ceiling

installation.

33. Respondent did not contest the following:

(a) Respondent was an ÐemployerÑ; (b) Respondent conducted

co nstruction - industry business operations in Florida; and

(c) Respondent paid remuneration to individuals to perform work

in Florida. Because Respondent is an Ðemployer,Ñ it is required

to comply with the WorkersÓ Compensation Law.

34. Clear and convinc ing evidence indicates that

Respondent was required to secure the payment of workersÓ

compensation coverage for its employees and subcontractors that

met the requirements of Chapter 440, Florida Statutes, and the

Florida Insurance Code. Section 440.10(1)( a), Florida Statutes,

requires that every employer coming within the provisions of

Chapter 440, Florida Statutes, is liable for and shall secure

workersÓ compensation insurance for its employees. See also

§ 440.38(1), Fla. Stat. Section 440.107(2), Flori da Statutes,

states that "' securing the payment of workersÓ compensa tionÓ

means obtaining coverage that meets the requirements of this

chapter and the Florida Insurance Code."

35. Clear and convincing evidence shows that Respondent

failed to secure the p ayment of workers' compensation for all of

its employees and subcontractors as required by Chapter 440,

Florida Statutes, and that Petitioner assessed an appropriate

penalty for this violation. Petitioner is required by Section

440.107(7)(d)1., Florida St atutes , to

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 p ayroll

during period 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.

There is no authority for Petitioner to reduce the amount

of the penalty.

36. Here, Petitioner proved by clear and convincing

evidence that Respondent was assessed a penalty only for payment

to employees and statutory employees that were not covered by

workers' compensation insurance. Respondent owes $8,621.46 as a

penalty for not Ðsecuring the payment of workersÓ compensation.Ñ

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED:

That the Department of Financia l Services, Division of

WorkersÓ Compensation, enter a final order , affirming,

approving, and adopting the 5th Amended Order of Penalty

Assessment.

DONE AND ENTERED this 1 0 th day of December , 2010 , in

Tallahassee, Leon County, Florida.

S

SUZANNE F. HOOD

Administrative Law Judge

Di vision of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 1 0 th day of De cember , 2010 .

COPIES FURNISHED :

Jackie Shores

M & M Coop Construction Co., Inc.

1401 Minnesota Avenue

Lynn Haven, Florida 32444

Holly R. Werkema, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

Julie Jones, CP, FRP

Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

Benjamin Diamond, General Counsel

Department of Financial ServicesÓ

The Capitol, Plaza Level 11

Tallahassee, Florida 32399

Honorable Alex Sink

Chief Financial Officer

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 day s 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.