10-010012 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Derek Eyre Status: Closed Recommended Order on Friday, May 13, 2011.

Summary: Clear and convincing evidence showed sole proprietor with expired exemption and uninsured employee failed to have required workers' compensation insurance; the evidence supported a part but not all of the assessed penalty.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 10 - 10012

)

DEREK EYRE, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDE R

Administrative Law Judge Eleanor M. Hunter held a final

hearing in this case on March 15, 2011, by video teleconference

between sites in Tallahassee and West Palm Beach, Florida.

APPEARANCES

For Petitioner: Paige Shoemaker, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Derek Eyre, pro se

18330 Jupiter Landings Drive

Jupiter, Florida 33458

STATEMENT OF THE ISSUE S

The issue s are w hether Respondent failed to provide

workers' compensation insurance coverage and/or an exemption as

required by law , as set forth in the s econd Amended Order of

Penalty Assessment dated Marc h 11, 2011 , and, if so, what

penalty, if any, should be assessed against him .

PRELIMINARY STATEMENT

In a Stop - Work Order issued September 16, 2010 , Petitioner

directed Respondent to stop work and cease all business

operations in Florida for allegedly fail ing to obtain workers'

compensation insurance as required in chapter 440, Florida

Statutes (20 10 ) . 1 Respondent was advised, i n the Stop - Work

Order, that a penalty would be assessed against him "[ e ] qual 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 ."

§ 44 0.107(7) (d)1., Fla. Stat.

Respondent timely requested an administrative hearing, and

on November 2, 2010, Petitioner transmitted the file to the

Division of Administrative Hearings for assignment of an

administrative law judge to conduct the hearing . In a n Amended

Order of Penalty Assessment issued by Petitioner on October 29,

2010 , Respondent was notified that the proposed assessed penalty

against him was $16,082.82 . In a secon d Amended Order of

Penalty Assessment , issued on March 11, 2011, Petitioner re duced

the amount of the penalty to $12,247.62 . An O rder granting the

parties ' stipulated motion to ac cept the modified charging

document was entered on the same date, March 11, 2011.

Pursuant to notice, the final hearing in this case was held

on March 15, 2011 . At the hearing, Petitioner presented the

testimony of Mark Marks, Kathleen Patraco , 2 and Lydia Ribacchi .

Petitioner's Exhibits 2 through 6 , and 8 through 13 , were

offered and received in evidence. Respondent testified in his

own behalf and did no t offer any exhibits .

The one - volume T ranscript of the proceedings was filed with

the D OAH on April 4 , 2010. Petitioner filed its P roposed

F indings of F act and C onclusions of L aw on April 13, 2011 .

Respondent did not file any post - hearing pleadings.

FIND INGS OF FACT

1. Petitioner , the Department of Financial Services,

Division of Workers' Compensation ("DFS") , is the state agency

responsible for enforcing section 440.107, Florida Statutes .

That section mandates, in relevant part , that employers in

Flor ida secure workers' compensation insurance coverage f or

their employees . § 440.107(3), Fla. Stat.

2. Respondent , Derek Eyre , is a sole proprietor who works

as a handyman , making home repairs and improvements in the area

of Jupiter , Florida , where he live s . Mr. Eyre always has

maintained valid city and county licenses to operate his

business. The parties agree that the type of work performed by

Mr. Eyre is properly categorized as construction industry work.

3. In 1998, Petitioner's predecessor, the Depa rtment of

Labor and Employment Security, Division of Worker's Compensation

issued a "Construction Industry Certificate of Exemption from

Workers' Compensation Law" to Mr. Eyre , a sole proprietor, as

the "exempt individual" effective May 17, 1998.

4. The p arties agree that at the time it was issued to

Mr. Eyre , the certificate had no expiration date and was a so -

called "lifetime" exemption that "[a]t the time of issuance,

. . . did not expire unless revoked by the exemption holder. "

See Department of Finan cial Services' Proposed Recommended Order

(PRO) in DOAH Case No. 10 - 10012; and § 440.05(3), Fla. Stat.

(1997). 3

5 . Chapter s 98 - 125 and 98 - 174 , Laws of Florida, amending

the provisions of the Workers' Compensation Law, became

effective on May 22, 1998 .

6. Chapter 98 - 125 authorized the predecessor agency to

establish form s and procedures related to exemptions .

7. Chapter 98 - 174 provided an expiration date for

exemptions by amending section 440.05(6), Florida Statutes

(1997) , as follows:

A construction indu stry certificate of

election to be exempt which is issued in

accordance with this section shall be valid

for 2 years after the effective date stated

thereon. Both the effective date and the

expiration date must be listed on the face

of the certificate by the division. The

construction industry certificate must

expire at midnight, 2 years from its issue

date, as noted on the face of the exemption

certificate. Any person who has received

from the division a construction industry

certificate of election to be exempt which

is in effect on December 31, 1998, shall

file a new notice of election to be exempt

by the last day in his or her birth month

following December 1, 1998 . A construction

industry certificate of election to be

exempt may be revoked before it s expiration

by the sole proprietor , partner, or officer

for whom it was issued or by the division

for the reasons stated in this section. At

least 60 days prior to the expiration date

of a construction industry certificate of

exemption issued after Decem ber 1, 1998, the

division shall send notice of the expiration

date and an application for renewal to the

certificateholder at the address on the

certificate.

(Emphasis added)

8 . Although not required to do so for exemptions issued

before December 1, 1998 , DFS' s predecessor sent form letters

dated October 9, 1998, to all holders of exemptions notifying

them that their exemptions would expire , and that the exemption

filing fee had been increased from $25 to $50.

9. The letter was sent to the address for Mr . Eyre

maintained in the Workers ' Compensation exemption database, but

it was not sent by registered mail . Mr. Eyre did not receive

the letter.

10 . On September 16, 2010, Kathleen Patraco , an

investigator for DFS was conducting a routine compliance

"cons truction sweep" in Martin County, Florida, when she saw a

worker carrying paint and a paintbrush from a van. She found

the worker on a ladder painting the fascia on the home.

11 . Ms. Patraco took pictures of a worker, the work being

done , and of the van . The van, as pictured, had the following

words painted on its exterior , "The Repair Genie," "Licensed,"

and "Bonded."

12 . Ms. Patraco interviewed t he worker, Frank Weinsheimer ,

who told her that he worked for Mr. Eyre and gave her Mr. Eyre' s

telephone nu mber . Ms. Patraco also spoke to the homeowner who

produced the contract with Mr. Eyre for the work being performed

at the home . Ms. Patraco photographed the contract .

13 . When she telephoned Mr. Eyre, he told Ms. Patraco that

he did not have workers' co mpensation insurance coverage for

Mr. Weinsheimer , but claimed to have had an exemption for

himself .

14. Mr. Eyre told Ms. Patraco that Mr. Weinsheimer worked

for him "on and off" at a "part - time hourly rate." When she

checked the state database, Ms. Pat racho found that Mr. Eyre did

not have workers' compensation coverage for a worker. During

the final hearing, however, Mr. Eyre conceded that he now knows

that he should have had workers' compensation insurance coverage

for Mr. Weinsheimer , and is not con testing that portion of the

assessed penalty .

15 . Ms. Patraco also determined that Mr. Eyre's worker's

compensation exemption for himself had expired on December 31,

1999. As a result, Ms. Patracho requested and received a Stop -

Work Order that was issued on September 16, 2011 . She posted it

at the job site that day and hand delivered to Mr. Eyre at her

office on the following day .

16 . On September 17, 2010, in addition to delivering the

Stop - Work Order, Ms. Patraco also issued a business records

request to Mr. Eyre . Based on a review of those records, the

initial assessed penalty was $16,082.82.

17 . DFS received additional business records from Mr. Eyre

with his apparent explanation of records and expenditures,

intended, in part, to determine his salar y, but Mr. Eyre did not

pay himself a salary.

18. DFS attempted to calculate the penalty by multiplying

payroll by the manual rate of pay for the National Counsel for

Insurance Compensation's classification code , in this case code

number 5474 for construc tion work, including painting, for the

three - year period without coverage to determine the premium that

would have been paid. A s authorized by section 440.107(7)(d)1.,

the penalty is determined by multiplying the premium that should

have been paid for the three - year period of non - compliance by

the 1.5 percent .

19. Using the statutory formula and Mr. Eyre's records,

DFS reduced the penalty to $ 12,247.62 .

20 . The portion of the premium and 1.5 percent penalty f or

failing to provide worker's compensation co verage for

Mr. Weinsheimer for each day he worked is as follows : $23.36 ,

$ 20.49 , $ 6.30 , $ 24.45 , $ 10.80 , and $ 17.84 , or a total of $103.24

for the period of non - compliance, or the greater penalty of

$1,000, pursuant to section 440.107(7)(d)1.

21 . Although Mr . Eyre thought his Certificate of Exemption

was valid at the time the Stop - Work Order was issued , it was

not . It had, as noted , expired by operation of law on

December 31, 1999 , as a result of the 1998 amendment to section

440.05(6), Florida Statutes .

2 2 . Mr. Eyre is also no longer eligible to receive an

exemption as a sole proprietor. Currently, section

440.02 (15)(c)4. defines "[a] sole proprietor who engages in the

construction industry" as an employee.

2 3 . Of the intended assessed penalty of $12,24 7.62, after

subtracting $103.24 for the failure to cover Mr. Weinsheimer , a

balance of $12,144.38 is attributable to the unpaid premium and

penalty for Mr. Eyre . Regarding how the penalty was calculated,

the only explanation offered by the wit n ess for DFS was "[y}ou

review the records looking for remuneration to the employees"

and " there were payments found in Mr. Eyre's records. " DFS' s

exhibits indicate that Mr. Eyre provided the sole explanation of

payments, including the appropriate deductions for per sonal,

supply , and material expenses that should not have been included

in his payroll to himself.

2 4 . Mr. Eyre disputed the accu racy of DFS's calculations

because he used funds from his account for both business and

personal expenses for his family and h imself , sometimes making

cash payments. The evidence is insufficient to establish that

DFS' calculations , which depended solely on Mr. Eyere's

explanations to DFS , are clearly correct.

2 5 . DFS has clearly demonstrated that Mr. Eyre is

ineligible to reapp ly for an exemption under chapter 440,

Florida Statutes, unless or until he has establish ed a

corporation and become an employee of that corporation , or has

paid workers' compensation coverage for himself .

2 6 . DFS has, as conceded by Mr. Eyre, clearly est ablished

that the Stop - Work Order issued against Mr. Eyre should not be

lifted until he has paid a penalty of $1,000, for failing to

provide coverage for his worker.

CONCLUSIONS OF LAW

2 7 . The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties thereto pursuant to sections 120.569 and 120.57(1),

Florida Statutes.

2 8 . Because an administrative fine deprives the person or

corporation fined of substantial rights in property, such fines

are penal in nature. Respondent has the burden to prove in this

case, by clear and convincing evidence, that Petitioner violated

the Workers' Compensation Law during the relevant period, by

failing to be in compliance with the coverage requirements of

the law, and that the penalty assessments are correct. See Dep't

of Banking & Fin., Div. of Sec. & Investor Prot. v. Osborne

Stern & Co. , 670 So. 2d 932 (Fla. 1996).

2 9 . In Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla.

4th DCA 1983), the Court of Appeal, Fourth Distr ict, provided a

"workable definition of clear and convincing evidence" and held

that

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 testimon y

must be precise and explicit and the

witnesses must be lacking 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 a firm belief or

conviction, without hesitancy, as to the

truth of t he allegations sought to be

established.

30 . According to section 440.02(14)(a), Mr. Weinsheimer

clearly met the definition of an employee of Mr. Eyre, as

follows:

"Employee" means 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, whether lawfully or unlawfully

employed, and includes, but is not limited

to, aliens and minors.

31 . Pursuant to section 440. 029(14)(c), a sole proprietor

actively engaged in the construction industry is also defined as

an employee unless he elects to be excluded from the definition

of employee by filing a notice with the Division of Workers'

Compensation. Allied Trucking of Fla., Inc. v. Lanza , 826 So.

2d 1052, (Fla. 1st DCA 2002 ), rev . denied, (Fla. 2003). I t is,

therefore, also clear that i n the absence of a valid election to

be exempt , the statute treats a sole proprietor , like Mr. Eyre,

as an employee for workers' compensation purposes . Smith v.

Larry Rice Constr. , 730 So. 2d 336, (Fla. 1st DCA 1999).

32 . There is no dispute in this case , that Mr. Weinsheimer

and Mr. Eyre were employees for whom workers ' compensation

insurance co verage should have been provided. § 440.107, Fla.

Stat.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial

Services, Division of Workers' Compensation, enter a final order

aff irming and adopting the Stop - Work Order , and affirming and

assessing a penalty against Derek Eyre i n the amount of one

thousand dollars ( $1 , 000 .00) , pursuant to section

440.107(7)(d)1. , to be paid into the Workers' Compensation

Administration Trust Fund .

D ONE AND ENTERED this 1 3t h day of May , 2011 , in

Tallahassee, Leon County, Florida.

S

ELEANOR M. HUNTER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, F lorida 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 3 th day of May , 2011 .

ENDNOTES

1 / All references in this Ord er to Florida Statutes are to the

2010 edition unless indicated otherwise.

2 / "Patraco" is spelled as it is in the Official Transcript,

filed April 4, 2011, not "Patrecco" as spelled in Petitioner

DFS' PRO.

3 / In 1997, subsection 440.05(3) provided tha t:

(3) Each sole proprietor , partner, or

officer of a corporation who is actively

engaged in the construction industry and who

elects an exemption from this chapter or

who, after electing such exemption, revokes

that exemption, must mail a written notice

to such effect to the division on a form

prescribed by the division. The notice of

election to be exempt from the provisions of

this chapter must be notarized and under

oath ... Upon receipt of the notice of the

election to be exempt and a determination

th at the notice meets the requirements of

this subsection, the division shall issue a

certification of the election to the sole

proprietor, partner, or officer ... The

certification of the election is valid until

the sole proprietor , partner, or officer

revo kes her or his election. Upon filing a

notice of revocation of election, a sole

proprietor, partner, or officer who is a

subcontractor must notify her or his

contractor.

COPIES FURNISHED :

Julie Jones, CP, FRP, Agency Clerk

Department of Financial Servic es

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

Paige Billings Shoemaker, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Derek Eyre

18330 Jupiter Landings Drive

Jupit er, Florida 33458

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.