10-001100 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Pat O'Connell Plastering, Inc. Status: Closed Recommended Order on Tuesday, June 15, 2010.

Summary: The Department failed to prove that wages were paid by the Respondent corporation for construction activity to officer/sole employee during the time period after officer's exemption had expired and had not yet been renewed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF WORKERS' )

COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 10-1100

)

PAT O'CONNELL PLASTERING, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause was heard by Linda M. Rigot,

the assigned Administrative Law Judge of the Division of

Administrative Hearings, on May 4, 2010, by video teleconference

with sites in Daytona Beach and in Tallahassee, Florida.

APPEARANCES

For Petitioner: Justin H. Faulkner, Esquire

Holly R. Werkema, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-4299

For Respondent: Patrick E. O'Connell, President Pat O'Connell Plastering, Inc.

1319 Woodbine Street

Daytona Beach, Florida 32114

STATEMENT OF THE ISSUE

The issue presented is whether Respondent is obligated to

pay the Department the amount of $1,000 as set forth in the

Department's Amended Order of Penalty Assessment.

PRELIMINARY STATEMENT

On January 14, 2010, the Department of Financial Services,

Division of Workers' Compensation, issued a Stop-Work Order and

Order of Penalty Assessment against Respondent Pat O'Connell

Plastering, Inc., ordering that corporation to immediately cease

all business operations for all worksites in the State of

Florida. On January 19, 2010, the Department issued its Amended

Order of Penalty Assessment, advising Respondent, among other

things, of its right to request an administrative hearing

regarding that Amended Order. Upon receipt of Respondent's

request for a hearing, this matter was transferred to the

Division of Administrative Hearings to conduct the evidentiary

proceeding.

The Department presented the testimony of Mark F. Mark,

Carolyn V. Martin, and Essie Samantha Nixon. Respondent

presented the testimony of Patrick E. O'Connell. Additionally,

the Department's Exhibits numbered 1-7 and Respondent's Exhibit

numbered 1 were admitted in evidence.

The Transcript of the final hearing was filed on May 25,

2010. The Department's proposed recommended order was filed on

June 4, 2010. Those documents have been considered in the entry

of this Recommended Order.

FINDINGS OF FACT

1. Patrick E. O'Connell is the president of Respondent Pat

O'Connell Plastering, Inc. As its name suggests, Respondent has

been in the plastering business, and O'Connell has been its

employee. Plastering is a construction activity, which has an

approved manual rate for class code 5480.

2. As a corporate officer, O'Connell is entitled, upon

application and approval, to an exemption from the requirement

that his employer obtain workers' compensation coverage for him

as an employee of the corporation.

3. For many years, Respondent has obtained an exemption

from workers' compensation coverage for its president/employee

O'Connell. The last exemption expired on December 6, 2009.

4. On January 14, 2010, a Department investigator was

performing random compliance checks and discovered O'Connell at

a home in Ormond Beach plastering a pool in back of that home.

The investigator understood that type of activity was classified

as construction. When she questioned O'Connell, he explained

that he was the owner of the company and that the company had no

other employees. He told her that he had an exemption from

workers' compensation insurance coverage.

5. Upon verifying on the Department's database the

information O'Connell had given her, the investigator discovered

that his exemption had expired and that Respondent did not have

workers' compensation insurance coverage. The investigator

immediately issued a Stop-Work Order and handed it to O'Connell

along with a request for the corporation's business records for

the prior three years so that a penalty could be calculated.

6. The next day O'Connell gave the investigator the

business records she had requested. He gave her Respondent's

2008 income tax return, O'Connell's 2008 income tax return,

Respondent's check stubs from January 2007 through January 2010,

and Respondent's bank statement for December 2009. Using

Respondent's check stubs, the Department calculated a penalty

amount and issued an Amended Order of Penalty Assessment.

7. The Department's employee who calculated the penalty

assessment testified as to how she made the calculations. She

used the class code 5480, which represents the construction

industry trade of plastering. She ascertained that between the

date when O'Connell's exemption expired and the date when the

Department's investigator issued the Stop-Work Order against

Respondent, the corporation had only issued one check

representing the payment of wages, and she used that number to

represent the gross payroll. She then ascertained the approved

manual rate for that class code, computed the premium Respondent

would have paid for workers' compensation coverage, and

multiplied that amount by 1.5. Since the penalty thus

calculated was $61.34, she assessed the minimum penalty against

Respondent of $1,000.

8. There is a three-fold problem with the penalty

assessment sought by the Department in this proceeding. First,

the penalty calculator misread Respondent's check stub regarding

the only wages paid during the short time when Respondent was

obligated to have workers' compensation coverage. The check

stub reveals that the amount of the check was $25, not $325, and

that the balance left in the account after the $25 check was

written was $300. In other words, the person calculating the

penalty read the beginning balance line rather than the line on

which the amount of the check was written.

9. Second, no evidence was offered as to what the check

for $25 for labor written to O'Connell was for and whether it

was for labor considered to be construction rather than non-

construction labor, such as window-washing or janitorial

services.

10. Third, no evidence was offered as to when the labor,

if it involved a construction activity, was performed. There is

no basis for assuming the labor was performed after O'Connell's

exemption expired rather than assuming it was for labor

performed while O'Connell's exemption was in force but he was

not paid until a month later.

11. At the commencement of the final hearing, the

Department asked Respondent's representative to stipulate that

Respondent was actively involved in business operations in the

State of Florida between December 7, 2009, and January 14, 2010,

and O'Connell so stipulated. The vagueness of that stipulation,

which could mean many different things, renders that stipulation

inadequate to cure the factual deficiencies in the penalty

assessment, as described in Paragraphs numbered eight through

ten of this Recommended Order. Accordingly, the proposed

penalty assessment is devoid of a factual basis.

12. A few days before his exemption expired, O'Connell

realized that he had not applied for a new exemption. He went

on the Internet and found a business called All Florida Firm

Inc., which advertised that it would prepare the exemption

application form for $60 per officer and would give 1-2 business

day rush service for an extra $50. He filled out the required

information on the internet, authorized the company to charge

him $60 plus the $50 charge for expedited service, and submitted

the information to All Florida.

13. That company, however, did not actually file

applications with the Department; it merely filled in the blanks

and mailed the form to the customer. O'Connell did not receive

the form from All Florida until after the Department issued its

Stop-Work Order against Respondent.

14. Respondent's bank statement reflects that on

December 7, 2009, All Florida charged Respondent both $150 and

$110, rather than just the $110 it represented to be the charge

for 1-2 business day rush service involving one exemption.

15. Although the record is clear that Respondent did not

have workers' compensation coverage for its officer/employee and

that O'Connell did not have a valid exemption from workers'

compensation insurance coverage for the approximate six weeks

after his exemption expired and until the issuance of the

Department's Stop-Work Order, it is clear that O'Connell's

failure to timely renew his exemption arose from neglect rather

than from any willful intent to evade Florida's workers'

compensation laws.

CONCLUSIONS OF LAW

16. The Division of Administrative Hearings has

jurisdiction over the subject matter hereof and the parties

hereto. See §§ 120.569 and 120.57(1), Fla. Stat.

17. Because administrative fines are penal in nature, the

Department is required to prove by clear and convincing evidence

Respondent's failure to secure the payment of workers'

compensation coverage and the appropriate amount of the penalty

Respondent should pay, if any. See Dep't of Banking & Fin. v.

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

has failed in its burden to prove the appropriate amount of the

penalty.

18. There is no dispute that pursuant to Sections 440.10,

440.107, and 440.38, Florida Statutes, employers must secure the

payment of workers' compensation for their employees and that

the Department is authorized to enforce compliance with that

requirement. Further, the parties have stipulated as to the

appropriate construction classification code used in this

proceeding. Lastly, there is no dispute that Respondent was

required to provide workers' compensation coverage for its one

officer/employee unless that employee had a valid exemption.

See

(12), Fla. Stat.

19. Since Respondent did not have workers' compensation

coverage between the time O'Connell's exemption expired and the

date the Department issued its Stop-Work Order, and since

O'Connell did not have an exemption when the Stop-Work Order was

issued, Respondent failed to comply with the requirements of

Florida's workers' compensation laws. The Department's burden

of proof on this issue was met.

20. However, as to the amount of any penalty assessment to

be imposed or even whether a penalty assessment should be

imposed, the Department has failed to offer any evidence, let

alone clear and convincing evidence, that would support a

penalty assessment. The penalty calculator misread Respondent's

check stub and computed a penalty based upon the beginning

balance of Respondent's bank account, $325, rather than the

amount of the check, $25.

21. Further, there is no evidence as to whether the $25

represented wages paid to O'Connell for plastering during the

time O'Connell's exemption was expired, for plastering during a

time period when O'Connell's exemption was in effect, or for

something else. Since the Department had the burden of proving

by clear and convincing evidence what the $25 check was for and

offered no proof thereof, the Department has failed to meet its

burden to prove the correctness of its penalty assessment.

Without any evidence as to the time period for which wages were

paid, the Department's Stop-Work Order and Order of Penalty

Assessment issued January 14, 2010, and the Amended Order of

Penalty Assessment issued January 19, 2010, cannot be enforced.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered dismissing the

Stop-Work Order, Order of Penalty Assessment, and Amended Order

of Penalty Assessment issued against Respondent.

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

Tallahassee, Leon County, Florida.

S

LINDA M. RIGOT

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 :

Justin H. Faulkner, Esquire

Holly R. Werkema, Esquire

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-4299

Patrick E. O'Connell

Pat O'Connell Plastering, Inc.

1319 Woodbine Street

Daytona Beach, Florida 32114

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 32399-0307

Julie Jones, CP, FRP, Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tallahassee, Florida 32399-0390

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.