11-005070 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Door Depot Of Palm Beach, Inc. Status: Closed Recommended Order on Monday, January 30, 2012.

Summary: Petitioner proved, by clear and convincing evidence, that Respondent, a construction contractor, violated chapter 440, Florida Statutes, and Petitioner's rules, by failing to secure workers' compensation coverage for its subcontractors.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL )

SERVICES, DIVISION OF )

WORKERS ' COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 11 - 5070

)

DOOR DEPOT OF PALM BEACH, )

INC. )

)

Respondent. )

________________________________)

RECOMMENDED ORDER

A final hearing was conducted in this case pursuant to

sections 120.569 and 120.57(1), Florida Statutes, 1 / before

Cathy M. Sellers, an Administrative Law Judge of the Division of

Administrative Hear ings . The hearing was conducted on

December 13 , 2011, by video teleconference at sites in West Palm

Beach and Tallahassee , Florida.

APPEARANCES

For Petitioner: Paige Billings Shoemaker , Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Nancy Morris

Door Depot of Palm Beach, Inc.

18330 Jupiter Landings Drive

Jupiter, Florida 33458

STATEMENT OF THE ISSUE S

The issue s in this case are whether Respondent violated

chapter 440, Florida Statutes, and Florida Administrative Code

Chapter 69L - 6, by failing to maintain w orkers ' c ompensation

coverage for its employees, and if so, the penalty that should

be imposed.

PRELIMINARY STATEMENT

Pursuant to a Request for Production of Business Records

issued by Petitioner to Respondent on May 11, 2011, Petitioner

determined that Respondent had violated section 440.107(2) by

failing to comply with the workers ' compensation coverage

requirements under chapter 440 . On June 27, 2011, Petitioner

issued an Order of Penalty Assessment, seeking to penalize

Respondent for these alleged violations. Petitioner timely

requested an administrative hearing to contest the p enalty. The

matter was referred to the Division of Administrative Hearings

( " Division " ) on September 29 , 2011, for assignment of an

Administrative Law Judge and the conduct of a hearing pursuant

to section s 120.569 and 120.57(1 ) .

Pursuant to Petitioner ' s Stipulated Motion to Modify

Charging Document , the undersigned issued an Order Modifying

Charging Documents on December 2, 2011, accepting the " 2 nd

Amended Order of Penalty Assessment (Penalty Only) " as the

correct charging document in this proceeding.

Pursuant to notice, the final hearing was conducted on

December 13 , 2011 . Petitioner presented the testimony of

Michelle Jimerson and Teo Morel, and offered Petitioner ' s

Exhibit s 1 through 16 , all of which were admitted into evidence

without objection. R espondent presented the testimony of its

owner, Nancy Morris , and did not offer any exhibits for

admission into evidence.

The one - volume Transcript of the final hearing was filed

with the Division on December 30 , 2011. By Notice of Filing

Transcript issu ed January 4, 2012 , the parties were given until

January 9 , 201 2 , to file their Proposed Recommended Orders.

Petitioner timely filed its Proposed Recommended Order on

January 9, 2012. On January 24, 2012, Respondent filed a letter

directed to the undersigned, disputing Petitioner ' s Proposed

Recommended Order; this document has been treated as

Respondent ' s late - filed Proposed Recommended Order. Both

proposed recomm ended orders were considered in the preparation

of this Recommended Order.

FINDINGS OF FACT

The Parties

1. Petitioner, Department of Financial Services , Division

of Workers ' Compensation, is the state agency responsible for

enforcing the requirement that employers in the State of Florida

secure the payment of workers ' compensation coverage for their

employees. § 440.107(3), Fla. Stat.

2. Respondent, Door Depot of Palm Beach , Inc., is a

Florida for - profit corporation engage d in the sale and

installation of doors , which is encompassed within the

construction industry . 2 / Ms. Morris is Respondent ' s owner and

sole corporate officer.

Failure to Secure Workers ' Compensation Coverage

3. As a result of a public referral, Petitioner initiated

an investigation to determine whether Respondent had the

required workers ' compensation coverage for its employees .

Michelle Jimerson, a Compliance I nvestigator employed by

Petitioner, re searched Petitione r ' s Coverage and Compliance

A utomated System ( " CCAS " ) internal database regarding workers '

compensation coverage and compliance, and determined that

Respondent did not have current workers ' compensation coverage

and had not previously secured coverage . Ms. Jimerson ' s

research further revealed that Ms. Morris, as Respondent ' s sole

corporate officer, had a current workers ' compensation exemption

covering herself, and that she had maintained such e xemptions

s ince August 2002.

4. On May 11, 2011, Ms. Jimerson conducted an on - site

visit to Respondent ' s place of business . At that time,

Petitioner issued a Request for Business Records to Respondent ,

seeking copies of payroll documents; bank statements; business

tax receipts; check stubs and check ledgers; names of

subcontractors; rec ords of payments or disbursements to

subcontractors; contracts; and proof of workers ' compensation

coverage for, or exemptions held by, the subcontractors .

Respondent produced the requested records.

5. From a review of the records, Ms. Jimerson determine d

that Respondent had contracted with three subcontractors , Breeze

Image, Inc ., 3 / Mi ke Jacobs, and Ross Whitehouse, to provide

const ruction industry services (specifically, door repair and

installation work), between April 22, 2011, and May 10, 2011.

6. Ms. Jimerson ' s review of Petitioner ' s CCAS database

revealed that none of these subcontractors was exempt from the

workers ' compensation coverage requirement during the period in

which they contracted with Respondent to provide construction

industry se rvices , that none had secured workers ' compensation

coverage for themselves, and that Respondent had not secure d

workers ' compensation coverage for them during this period .

7. B ecause Respondent came into compliance with chapter

440 during Petitioner ' s investigation and before initiation of

this enforcement action , Petitioner did not issue a Stop - Work

Order. 4 /

8 . Nancy Morris testified on Respondent ' s behalf. She

admitted that Respondent had not secured workers ' compensation

coverage for these subc ontractors . She credibly testified that

she had asked if they were exempt from the workers ' compensation

coverage requirement, that they had told her they were, and that

she had believed them.

P enalty Assessment

9 . On May 24, 2011, Petitioner issued to Respondent a

Request for Production of Business Records for Penalty

Assessment Calculation, seeking copies of payroll documents;

bank statements; business tax receipts; check stubs and check

ledgers; names of subcontractors; records of payments o r

disbursements to subcontractors; contracts; and proof of

workers ' compensation coverage for, or exemptions held by, the

subcontractors. R espondent produced the requested documents.

1 0 . Using these documents, Petitioner ' s Penalty

Calculator, Teo More l, calculated the penalty assessment for

Respondent.

1 1 . Section 440.107(7)(d)1., establishes a formula for

determining the penalty to be assessed against an employer who

fails to secure workers ' compensation as required by chapter

440. Specifically, t he penalty is one and a half (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 within the preceding three - year period, or $1000,

whichever is greater.

1 2 . Petitioner has adopted a penalty worksheet for

calculating the penalty prescribed by section 440.107(7)(d)1.

See Fla. Admin. Code R. 69L - 6.027. Ms. Morel used the worksheet

in calculating the penal ty to be assessed against Respondent.

1 3 . Specifically, Ms. Morel identified the subcontractors

for which Respondent had not secured workers ' compensation and

identified the applicable construction industry classification

NCCI Manual code for each ( here , classification code 5102). For

each subcontractor, she identified the periods of noncompliance

for the preceding three - year period as required by section

440.107(7)(d)1., determined the subcontractor ' s gross payroll

amount and divided that amount by 100 , then multiplied this

amount by the NCCI Manual rate applicable to the 5102

classification code . This calculation yielded the workers '

compensation premium Respondent should have paid for each

subcontractor , had Respondent complied with chapter 440. The

premium amount was then multiplied by 1.5 to determine the total

penalty amount to be assessed.

1 4 . Pursuant to the information Respondent provided, and

performing the statutorily prescribed calculation, Petitioner

initially calculated the total penalty to be assessed as

$20,266.59.

1 5 . Respondent subsequently provided additional business

records consisting of raw job worksite notes. These documents

showed that the subcontractors were paid a total contract amount

for each job. However, the notes did not indicate the cost of

materials per contract , and Respondent was un able to provide

records containing this information .

1 6 . Because the cost of materials for each contract was

indeterminable , pursuant to Florida Administrative Code Rule

69L - 6.035(1)(i), Petitioner assumed that the m aterials cost

constit uted 20 percent of each contract, deducted this amount

from each subcontractor ' s gross payroll, and recalculated the

premium amount. As a result, the total penalty assessment was

reduced by 20 percent, to $16,213.30.

1 7 . Respon dent disputes the amount of the amended penalty

assessment on the basis that materials costs for each contract

constituted more than 20 percent of each contract ' s amount.

However, Ms. Morris was unable to provide any evidence

substantiating the cost of materials for each contract.

1 8 . Ms. Morris credibly testified that if Respondent is

required to pay the assessed penalty of $16,213.30, it likely

will be forced to go out of business.

19 . Ms. Morris fully cooperated with Pe titioner throughout

its compliance investigation leading to this enforcement action

against Respondent .

CONCLUSIONS OF LAW

2 0 . The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this

proceeding, pursuant to section 120.57(1), Florida Statutes.

2 1 . In this proceeding, Petitioner seeks to penalize

Respondent for failure to secure the payment of workers '

compensation coverage for the benefit of its employees, as

required by chapter 440. Accordingly, Petitioner must prove the

alleged violations and the factual basis for the penalty sought

by clear and convincing evidence. Dep ' t of Banking & Fin., Div.

of Secs. & Investor Prot. v. Osborne Stern, Inc. , 670 So. 2d

932, 935 (Fla. 1996); Ferris v. Turlington , 510 So. 2d 292, 294

(Fla. 1987). 5 /

2 2 . Section 440.10(1) provides in pertinent part:

(a) Every employer coming within the

provisions of this chapter shall be liable

for, and shall secure, the payment to his or

her employees . . . of the compensation

payabl e under ss. 440.13, 440.15, and

440.16. Any 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.

(b) In case a contractor sublets any part

or parts of his or her contract work to a

subcontractor or subcontractors, all of the

employees of such contractor and

subcontractor or subcontractors engaged on

such contract work shall be deemed to be

employed in one and th e same business or

establishment, and the contractor shall be

liable for, and shall secure, the payment of

compensation to all such employees, except

to employees of a subcontractor who has

secured such payment.

2 3 . Section 440.02(16)(a) defines " employ er " to include

" every person carrying on any employment. " This section further

provides in pertinent part:

If the employer is a corporation, parties in

actual control of the corporation,

including, but not limited to, the

president, officers who exercise broad

corporate powers, directors, and all

shareholders who directly or indirectly own

a controlling interest in the corporation,

are considered the employer for the purposes

of ss. 440.105, 440.106, and 440.107.

2 4 . Section 440.02(15 )(c) defines " employee " in pertinent

part to include:

2. All persons who are being paid by a

construction contractor as a subcontractor,

unless the subcontractor has validly elected

an exemption as permitted by this chapter,

or has otherwise secured the payment of

comp ensation coverage as a subcontractor,

consistent with s. 440.10, for work

performed by or as a subcontractor.

2 5 . Section 440.02(17 ) ( b) defines " e mployment " to include ,

" with respect to the construction industry, all private

employment in which one or m ore employees are employed by the

same employer. "

26. Florida Administrative Code Rule 69L - 6.032 addresses

contractor requirements for obtaining evidence that its

subcontractors possess workers ' compensation coverage or

otherwise comply with chapter 44 0. Specifically, this rule

requires contractor s to obtain evidence of its subcontractors '

workers ' compensation coverage or c ertificate s of e lection to be

e xempt . If the contractor fails to obtain evidence of a

subcontractor ' s coverage or exemption, and has not provided

coverage for the subcontractor, the contractor is subject to

penalty for failing to comply with chapter 440. See Fla. Admin.

Code R. 69L - 6.032(1),(6).

2 7 . Pursuant to these provisions , Respondent, as a

contractor in the construction in dustry, was required to secure

workers ' compensation coverage for the subcontractors with which

it contracted to provide construction industry services , unless

the subcontractors secured coverage for themselves or held a

valid exemption from the coverage r equirement. Here, the

subcontractors were neither covered nor exempt. Accordingly,

Respondent was required to secure coverage.

2 8 . Petitioner demonstrated, by clear and convincing

evidence, that Respondent fail ed to secure workers ' compensation

coverage for these subcontractors , in violation of these statute

and rule provisions .

2 9 . With respect to determining the total penalty to be

assessed for such violation, section 440.107 (7)(d)1. , provides

in pertinent part:

[T] he departm ent 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 employer ' s pay roll 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.

30 . Rule 69L - 6.035(1)(i) further provides:

[T] he Department shall when a pplicable

include any one or more of the following as

remuneration to employees based upon

evidence received in its investigation:

* * *

(i) Total contract price of a service

provided by the employer, excluding the cost

for materials as evidenced in the employer ' s

business records or contract. In the event

the costs for materials is included in the

total contract price and cannot be

separately identified in the total contract

price, eighty percent of the total contract

price shall be the employer ' s payro ll;

* * *

31. Petitioner demonstrated, by clear and convincing

evidence, that pursuant to these statutory and rule provisions,

the correct total penalty assessment for Respondent ' s failure to

comply with the requirement to secure workers ' compensation

coverage in violation of chapter 440 is $16,213.30.

32. Unfortunately, neither chapter 440 nor Petitioner ' s

rules authorize a reduction of the penalty assessment due to

mitigating circumstances ÏÏ in this case, Respondent ' s full

cooperation i n Petitioner ' s investigation, and its lack of

culpability due to its owner having trusted the representations

of the subcontractors with which it was doing business.

33. However, Florida Administrative Code Rule 69L - 6.025

authorizes P etitioner to enter i nto a Payment Agreement Schedule

for Periodic Payment of Penalty with employers . Indeed, this

rule allows Petitioner to enter into a Payment Agreement

Schedule for Periodic Payment of Penalty even where Petitioner

previously has entered a Stop - Work Order Ï Ï circumstances much

more egregious than are present in this case, where the

undisputed evidence establishes that Respondent was in

compliance with chapter 440 before Petitioner initiated its

enforcement action.

34. Under these circumstances, and given that in the

absence of s uch relief , it is likely Respondent will be forced

out of business, the undersigned strongly urges Petitioner to

enter into a Payment Agreement Schedule for Periodic Payment of

Penalty with Respondent, pursuant to rule 69L - 6.025, to enable

Respondent to make a down payment of ten percent of the total

assessed penalty and repay the remaining penalty in 60

consecutive month ly installments .

R ECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

law, it is hereby RECOMMENDED that Petitioner enter a Final

Order determining that Respondent violated the requirement in

chapter 440, Florida Statutes, to secure workers ' compensation

coverage; imposing a total penalty assessment of $16,213.30; and

providing that Petitione r will execute with Respondent a Payment

Agreement Schedule for Periodic Payment of Penalty, pursuant to

Florida Administrative Code Rule 69L - 6.025, under which

Respondent shall make a down payment to Petitioner of ten

percent of the total assessed penalty amount, which is

$1,621.33, and shall repay the remaining penalty in 60

consecutive monthly installments.

DONE AND ENTERED this 30 th day of January , 201 2 , in

Tallahassee, Leon County, Florida.

S

Cathy M. Sellers

Administrative Law Judge

Division 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 Administrativ e Hearings

this 26th day of January, 2012.

ENDNOTES

1 / Unless otherwise stated, all references are to Florida

Statutes (2011).

2 / Florida Administrative Code Rule 69L - 6.021(1)(o)(2007) and the

National Council on Compensation Insurance, Inc., SCOPES Manual

(Oct. 2005)(hereafter " NCCI Manual " ) assign construction

industry classification code 5102 to door, door frame, or sash

erection .

3 / Ronald Coursol is the sole officer and employee of Breeze

Image, Inc. Respondent paid Mr. Coursol for the services

rendered.

4 / In fact, Respondent ' s actions to come into compliance may

ultimately have precipitated this enforcement proceeding. M s.

Morris testified that when she discovered that Mr. Whitehouse

did not have a current exemption from workers ' compensation

coverage, she immediately terminated Respondent ' s relationship

with him. She claimed that he then contacted Petitioner to

report t hat Respondent was not in compliance with state

licensing law.

5 / Clear and convincing evidence requires that:

[t]he evidence must be found to be credible;

the facts to which the witnesses testify

must be distinctly remembered; the testimony

must be precise and lacking in confusion as

to the facts in issue. The evidence must be

of such a weight that it produces in the

mind of the trier of fact a firm belief or

conviction, without hesitancy, as to the

truth of the allegations sought to be

established .

Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

COPIES FURNISHED :

Paige Billings Shoemaker, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Nancy Morris

Door Depot of Palm Beach, Inc.

1033 Wynndale Way

Lantana, Florida 33462

Julie Jones, Agency Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions wi thin

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.