11-002275 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Abash Enterprises, Inc. Status: Closed Recommended Order on Friday, July 22, 2011.

Summary: Company failed to provide workers' compensation coverage for its employees. The assessed penalty was less than $1,000; therefore, the minimum penalty of $1,000 should be assessed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS' COMPENSATION , )

)

Petitioner , )

)

vs. ) Case No. 11 - 2275

)

ABASH ENTERPRISES, INC. , )

)

Respondent . )

)

RECOMMENDED ORDER

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

on June 10, 201 1 , by video teleconference with sites in

Tallahassee and Fort Myers, Florida, before Susan B. Harrell, an

Administrative Law Judge of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Timothy L. Newhall, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: James McCarthy, pro se

Abash Enterprises, Inc.

Post Office Box 51246

Fort Myers, Florida 33994

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent failed to

provide workers' compensation coverage, and, if so, what penalty

should be imposed.

PRELIMINARY STATEMENT

On Sep tember 10, 2010, Petitioner, Department of Financial

Services, Division of Workers' Compensation (Department) , issued

a Stop - Work Order against Respondent, Abash Enterprises, Inc.

(Abash), and on September 15, 2010, the Department hand -

delivered an Amended Order of Penalty Assessment to Abash,

assessing a penalty of $1,000. 00. Both the Stop - Work Order and

the Amended Order of Penalty Assessment were based on the

alleged failure of Abash to secure the payment of workers'

compensation within the meaning of s ection 440.107(2), Florida

Statutes (2010) . 1/

Abash paid the penalty and requested an administrative

hearing. The case was forwarded to the Division of

Administrative Hearings on May 5, 2011, for assignment to an

Administrative Law Judge.

At the final hea ring, the Department called the following

witnesses: Jack Gumph, Carol Porter, and Lynne Murcia.

Petitioner's Exhibits 1 through 15 were admitted in evidence.

James McCarthy, the president of Abash, testified on behalf of

Abash. Abash submitted no exhi bits for ad mission in evidence.

The one - volume Transcript was filed on June 23, 2011. The

parties agreed to file their proposed recommended orders within

ten days of the filing of the Transcript. On June 30, 2011, the

Department filed the Department's Mo tion for Extension of Time

to Submit Proposed Recommended Order. The motion was granted by

Order dated July 5, 2011, and the parties were given until

July 15, 2011, to file their proposed recommended orders. The

parties timely filed their p roposed r ecomm ended o rders, which

have been considered in the preparation of this Recommended

Order.

FINDINGS OF FACT

1. Abash is a Florida corporation engaged in the business

of demolition. James McCarthy (Mr. McCarthy) is the president

and only officer of Abash.

2. The Department received a call from the City of Fort

Myers that Abash was doing demolition work at the location of a

former Publix on Cleveland Avenue in Fort Myers, Florida, and

that it was believed that Abash did not have workers'

compensation coverage. Carol Porter, the supervisor for

District 7 of the Department, assigned Jack Gumph (Mr. Gumph) , a

compliance investigator for the Department, to investigate the

matter.

3. On September 10, 2010, Mr. Gumph went to 3255 South

Cleveland Avenue, where the f ormer Publix was located. On

arriving at 9:55 a.m., he saw a large truck at the site with the

name Abash on its side. He went inside the structure and

observed two Abash employees at work with a lift truck. One

employee, Vincent Canzone (Mr. Canzone) , w as taking down light

fixtures, and another employee, Dan Myers (Mr. Myers) , was

operating the truck.

4. Mr. Gumph consulted the Coverage and Compliance

Automated System (CCAS) to determine if Abash had workers'

compensation coverage. The database showed that Abash had had

workers' compensation coverage effective June 2, 2010, but that

coverage had been cancelled September 7, 2010. Mr. Gumph

checked the Department of State records and learned that

Mr. McCarthy was the sole officer and director of Abash.

M r. Gumph again checked CCAS and learned that there was no

exemption from coverage for Mr. McCarthy. 2/

5. Mr. Gumph checked the database for the National Council

of Compensation Coverage and learned that Abash had had workers'

compensation coverage with Na tional Union Fire Insurance Company

of Pittsburg, Pa. (National Union Fire), but that the coverage

had been cancelled September 7, 2010.

6. Mr. McCarthy had received a notice of cancellation from

National Union Fire, but he thought that they would give Ab ash a

grace period and allow Abash to pay for back - coverage as long as

Abash did not have any claims for the period in which there was

no coverage in place. He was looking into alternative methods

of coverage, including using a payroll service. Mr. McCar thy

conceded at the final hearing that if an employee had been

injured during the non - covered period that National Union Fire

would not have honored the claim.

7. Abash did enter into an employee leasing contract with

Southeast Personnel Leasing on Sept ember 10, 2010; however, no

evidence was presented establishing the time of day that Abash

entered into the employee leasing contract, and the contract

with the employee leasing company does not specify the time of

day when Abash entered into the contract. The list of employees

covered by the employee leasing contract does not include

Mr. Myers, who was working for Abash when Mr. Gumph visited the

work site.

8. Mr. Gumph issued a Stop - Work Order and posted it on the

job site the day that he visited the si te. He called Abash and

spoke with a secretary who advised that Mr. McCarthy was not in

the office.

9. Mr. Gumph mailed a copy of the Stop - Work Order and a

Request for Production of Business Records for Penalty

Assessment Calculation to Abash on Septem ber 10, 2010. Abash

received the documents on September 14, 2010.

10. Abash produced copies of its businesses records to the

Department. Lyn n e Murcia (Ms. Murcia) , a penalty calculator for

the Department, calculated the penalty assessment based on

Abash 's business records. She reviewed Abash's records for the

past three years and determined that the period in which there

was no workers' compensation coverage was September 7 to

September 10, 2010. Abash's financial records did not reveal

that Mr. Canzon e and Mr. Myers had been employees for Abash

other than the day that Mr. Gumph visited the job site. The

financial records identified seven other employees during the

period of non - coverage, but there were no transactions listed

for these employees for Se ptember 10, 2010.

11. Ms. Murcia assigned a class code to each employee

based on the type of work they did. The class codes are

specified in the Florida Contracting Classification Premium

Adjustment Program, which is published in the Florida exception

pa ges of the National Council on Compensation Insurance, Inc.

(NCCI), Ba sic Manual (October 2005 ed.).

12. For seven employees, Ms. Murcia assigned a class code

of 5445, which is for the installation of wallboard within

buildings. Although the work was dem olition of wallboards, the

same class code applies. For two employees, a class code

of 8742 was assigned. This class code deals with outside sales.

One employee was assigned class code 5221, which deals with

concrete work. Mr. McCarthy agreed at the fi nal hearing that

the class codes assigned were appropriate.

13. The gross payroll is determined for each employee and

divided by 100. 3/ The resulting quotient is multiplied by the

approved minimum rate for the class code to determine the

premium that sho uld have been paid for coverage. Ms. Murcia

listed the premium that should have been paid for the

non - covered period for all Abash employees , which was $170.48.

The premium was multiplied by 1.5 to determine the penalty

assessment for each employee, whic h Ms. Murcia determined was

$255.75; however, section 440.107 (7) (d)1. provides that the

minimum penalty that can be assessed is $1,000.00.

14. Because the employee leasing contract provided

coverage for Mr. Canzone on September 10, 2010, the penalty

calcu lation should exclude Mr. Canzone. There was no coverage

for Mr. Myers on September 10, 2010. The penalty assessment for

Mr. Myers and Mr. Canzone was $16.88 each. The penalty

assessments based on the remaining employees were for days other

than Septemb er 10, 2010. Excluding Mr. Canzone from the penalty

assessment results in a penalty assessment of $238.87. However,

the statutory minimum assessment is $1,000.00.

15. On September 15, 2010, Mr. McCarthy went to

District 7's office, where he was personal ly served with the

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

assessing the penalty at $1,000. 00 Mr. McCarthy paid the

penalty.

CONCLUSIONS OF LAW

16. The Division of Administrative Hearings has

jurisdiction over the parties to and the s ubject matter of this

proceeding. §§ 120.569 & 120.57, Fla. Stat.

17. The Department has the burden to establish the

allegations in the Administrative Complaint by clear and

convincing evidence. Dep't of Banking & Fin. v. Osborne Stern &

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

18. The Department has alleged that Abash failed to

secure workers' compensation coverage for its employees.

Section 440.10 provides that "[a]ny contractor or subcontractor

who engages in any public or private construction in the state

shall secure and maintain compensation for his or her employees

under this chapter as provided in s. 440.38."

19. The Department has established by clear and convincing

evidence that Abash did not have workers' compensation coverage

from September 7 throu gh September 9, 2010, for some of its

employees and did not have coverage on September 10, 2010, for

its employee, Mr. Myers.

20. The Department calculated the premium that should have

been paid during the period from September 7, 2010, to

September 9, 20 10, and for Mr. Myers on September 10, 2010,

using the correct class codes and the premiums associated with

those codes. The Department incorrectly included Mr. Canzone in

its assessment calculation for September 10, 2010. The premiums

that would have be en due had there been coverage was $159.23.

21. The Department may enforce the requirement that the

employer secure workers' compensation payments for its employees

by issuing stop - work orders and penalty assessment orders.

§ 440.107(3), Fl a . Stat. Sect ion 440.107(7)(d)1. provides:

(d)1. In addition to any penalty, stop - work

order, or injunction, 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 employerÓs payroll

during periods for which it failed to secure

the payment of workersÓ compensation

required by this chapter within the

preceding 3 - year period o r $1,000, whichever

is greater.

22. When the premium is multiplied by 1.5, the penalty is

$238.87. This amount is less than the minimum penalty provided

in section 440.107(7)(d)1. Therefore, the penalty which must be

assessed is $1,000. 00.

RECOMMENDATI ON

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a f inal o rder be entered finding that

Abash failed to secure workers' compensation coverage and

assessing a penalty of $1,000 .00 , which has been paid by Abash.

DONE AND ENTE RED this 22nd day of July , 2011 , in

Tallahassee, Leon County, Florida.

S

SUSAN B. HARRELL

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florid a 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 22nd day of July , 2011 .

ENDNOTES

1/ Unless otherwise indicated, all references to the Florida

Statutes are to the 2010 version.

2/ Section 440.05(3) provides that each corporate officer of a

construction business may elect to be exempt from workers'

compensation coverage by filing an appropriate notice with the

Department.

3/ The gross payroll is divided b y 100 because the monetary risk

assigned to the NCCI classification codes is expressed as per

$100 .00 of payroll.

COPIES FURNISHED :

Julie Jones, CP, FRP, Agency Clerk

Department of Financial Services

Division of Legal Services

200 East Gaines Street

Tal lahassee, Florida 32399 - 0390

Timothy L. Newhall, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

James McCarthy

Abash Enterprises, Inc.

Post Office Box 51246

Fort Myers, Florida 33994

NOTICE OF RIGHT TO SUB MIT 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.