14-001419 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Austerman, Inc. Status: Closed Recommended Order on Tuesday, October 28, 2014.

Summary: Petitioner utilized the correct classification codes and manual rates in calculating workers' compensation penalty. Recommend that Petitioner assess against Respondent a penalty of $99,571.67.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 14 - 1419

AUSTERMAN, INC.,

Respondent.

_______________________________/

RECOMMENDED ORDER

On July 22, 2014 , a f inal administrative hearing in this

case was held by video teleconference at sites in Tallahassee and

Tampa , Florida, before Linzie F. Bogan, Administrative Law Judge ,

Division of Administrative Hearings.

APPEARANCES

For Petitio ner: Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Bennett M. Miller, Esquire

Dunn and Miller, P.A.

1606 Redwood Drive

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

Whether Respondent violated the provisions of chapter 440,

Florida Statutes, by failing to secure the payment of workersÓ

compe nsation as alleged in the Stop - Work Order and 3rd Amended

Order of Penalty Assessment, and if so, what penalty is

appropriate.

PRELIMINARY STATEMENT

The issue in this case is a narrow one. It is undisputed

that Austerman, Inc. (Respondent) , failed, for th e period

November 16, 2010, through November 15, 2013, to secure the

payment of workersÓ compensation as required by chapter 440,

Florida Statutes (2013) . The parties filed a Joint Pre - Hearing

Stipulation (Stipulation). In the Stipulation, the parties f rame

the Ðissues of fact which remain to be litigatedÑ as Ð[w]hether

[Petitioner] utilized the correct NCCI class codes and approved

manual rates in assessing the 3rd Amended Order of Penalty

Assessment against Respondent.Ñ Specifically , Respondent

conten ds that if it is ultimately determined that it is proper

for Petitioner to assess a penalty against it, then the amount of

the penalty calculated by Petitioner is incorrect due to the

misclassification by Petitioner of some of RespondentÓs

employees. Alth ough the issue, as framed in the Stipulation,

suggests that Respondent seeks to also challenge the correctness

of the Ðapproved manual ratesÑ utilized by Petitioner, Respondent

makes no argument regarding this issue in its Proposed

Recommended Order.

The disputed fact hearing was held on July 22, 2014.

PetitionerÓs Exhibits 3, 9, 11, 13 and 14 were admitted into

evidence. RespondentÓs Exhibit 1 was also admitted into

evidence. Petitioner offered testimony from three witnesses:

Maureen Loganacre, r egulato ry s ervices m anager, National Council

on Compensation Insurance; Andre Cannellas, p enalty a uditor; and

John Austerman, o wner of Austerman, Inc. John Austerman also

testified on behalf of Respondent.

A Transcript from the disputed fact hearing was filed o n

August 28 , 2014, with the Division of Administrative Hearings.

On September 8, 2014, the parties filed an Amended Agreed Motion

for Extension of Time for Submission of Proposed Recommended

Orders. The motion was granted. Both parties filed P roposed

R e commended O rders, which have been considered in the preparation

of this Recommended Order.

FINDING S OF FACT

1. The parties agree to the following facts as set forth in

the Joint Pre - hearing Stipulation:

A) The Department is the state agency responsible for

enforcing the statutory requirement that employers secure the

payment of workers' compensation for the benefit of their

employees and corporate officers.

B) Respondent, a Florida corporation, was engaged in

business operations in the state of Florida from November 16,

2010, through November 15, 2013.

C) Respondent received a Stop - Work Order and Order of

Penalty Assessment from the Department on November 15, 2013.

D) Respondent received a Request for Production of Business

Records for Penalty Asses sment Calculation from the Department on

November 15, 2013.

E) Respondent received a 3rd Amended Order of Penalty

Assessment from the Department on March 11, 2014.

F) Throughout the penalty period, Respondent was an

Ð employer Ñ in the state of Florida, as that term is defined in

section 440.02(16), Florida Statutes (2013). 1/

G) All of the individuals listed on the penalty worksheet

of the 3rd Amended Order of Penalty Assessment were Ð employees Ñ

in the state of Florida (as that term is defined in sectio n

440.02(15)) of Respondent during the periods of non - compliance

listed on the penalty worksheet.

H) None of the individuals listed on the penalty worksheet

attached to the 3rd Amended Order of Penalty Assessment had a

valid Florida workers' compensation coverage exemption at any

time during the periods of non - compliance listed on the penalty

worksheet.

I) Respondent did not secure the payment of workers'

compensation insurance coverage, nor have others secure d the

payment of workers' compensation insur ance coverage, for any of

the individuals named on the penalty worksheet attached to the

3rd Amended Order of Penalty Assessment during the periods of

non - compliance listed on the penalty worksheet.

J) None of the individuals listed on the penalty worksh eet

of the 3rd Amended Order of Penalty Assessment were Ð independent

contractors Ñ (as that term is defined in section 440.02(15)(d)1.)

hired by Respondent for any portion of the periods of non -

compliance listed on the penalty worksheet.

K) Wages or salar ies were paid by Respondent to the

individuals listed on the penalty worksheet, whether continuously

or not, during the corresponding periods of noncompliance listed

on the penalty worksheet.

L) The gross payroll amounts (column Ð c Ñ of the penalty

worksh eet of the 3rd Amended Order of Penalty Assessment) for the

employees listed on the penalty worksheet are correct.

2. Respondent was engaged in business operations in the

state of Florida as an auto recycling store from November 16,

2010, through Novemb er 15, 2013. The store operated by

Respondent is called A&A Auto Recycling and is located at 5507

9th Street East , Bradenton, Florida. The store consists of an

enclosed retail area and an open yard area where vehicles are

kept. John Austerman is the bus iness owner and president.

3. Respondent employed at least ten employees at any given

time during the period from November 16, 2010, through

November 15, 2013.

4. Employees working in the retail area check inventory on

the computer, perform customer service, and sell parts.

Employees working in the retail area also Ð mark parts, Ñ such as

fenders, when customers bring them in for purchase from the area

on RespondentÓs property where vehicles are kept (the yard).

5. Respondent does not dispute the ass ignment of

class ification code 3821 to the employees identified as such on

the penalty worksheet of the 3rd Amended Order of Penalty

Assessment. Respondent does dispute, however, that

classification code 3821 should be assigned to John Austerman.

6. Joh n Austerman conducts physical inventories of

approximately 100 vehicles a month that arrive at the store for

recycling. Mr. AustermanÓs inventories include opening the doors

and popping the engine hoods of the vehicles. Mr. Austerman

walks the auto salva ge yard approximately once per week for ten

to fifteen minutes so as to ensure that the property is being

properly maintained. In addition to vehicle and property

inspections, Mr. Austerman also performs customer service,

accounting , and clerical work for the business .

7. T he National Council of Compensation Insurance ( Ð NCCI Ñ ),

is the rating bureau that establishes class codes for the

workers' compensation industry in Florida .

8. NCCI classification code 3821 provides as follows:

Code 3821 contempl ates dismantling o r

wrecking of used automobiles, motorcycles and

trucks for the salvaging of parts. Auto

dismantling may consist of the simple removal

o f saleable parts by means of hand tools and

retaining the frames and bodies for future

sale to outside scrap collectors. Some

dismantlers will also break up stripped

chassis and bodies with acetylene torches or

shears to be sold in the form of iron or

steel scrap. In addition to the dismantling

work, salvaged parts may be reconditioned or

repaired and so ld over the counter. New

parts may also be stocked. In the case of

larger risks, a number of other functions may

often be performed such as auto repairing,

gas station operations, glass reconditioning,

brake relining, cylinder re - boring, piston

grinding, and battery or tire repair.

* * *

Special Conditions : Store employees who do

not engage in other operations and have no

yard exposure are classified to Code 8046 .

9. NCCI classification code 8046 provides as follows:

Code 8046 applies to those e mployees of

automobile recyclers who are engaged in store

operations and have no yard exposure to the

yard. Duties conducted by these store

employees include but are not limited to

greeting and assisting customers, checking

inventory on computers, pulling smaller parts

from an inside parts warehouse an [sic]

taking payments. These store employees may

appear to have clerical duties but are

properly classified to Code 8046. Refer to

Code 3821 for all other employees of

automobile recyclers.

10. NCCI c la ss ification c ode 8046 applies to auto salvage

employees who only work in the retail area of the store and have

no yard exposure. For auto salvage employees, like John

Austerman , who engage in other salvage related operations and who

have exposure to the y ard, code 3821 is the proper classification

for such employees.

11. Respondent asserts that all employees assigned the

classification code of 8046 on the 3rd Amended Order of Penalty

Assessment should be classified as code 8810 because these

employees ha ve clerical duties . The credible evidence does no t

support such a finding. 2/ As previously noted, NCCI

classification code 8046 provides : ÐT hese store employees may

appear to have clerical duties but are properly classified to

Code 8046. Ñ Petitioner co rrectly assigned RespondentÓs employees

appearing on the 3rd Amended Order of Penalty Assessment to

classification code 8046.

12. Petitioner assigned the proper classification codes to

each of RespondentÓs employees. Respondent, in its Proposed

Recommen ded Order, makes no argument with respect to the approved

manual rates and only argues that the 3rd Amended Order of

Penalty Assessment be amended Ðto reflect that all employees on

the penalty calculation worksheet not classified as Ò3821Ó [be]

properly cl assified as Ò8810.ÓÑ Given that there is no dispute

regarding whether Petitioner applied the appropriate approved

manual rates, it is determined that Petitioner assign ed the

appropriate approved manual rates to assess the workers'

compensation insurance c overage premium amounts that Respondent

would have paid during the penalty period had Respondent obtained

workers' compensation insurance coverage.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction over the subject matter and parties pursuant to

sections 120.569 and 120.57(1), Florida Statutes (201 4 ).

14. Petitioner is the agency of the State of Florida

charged, pursuant to section 440.107(3), with the duty to:

enforce workers' compensation coverage

requirements, including the requirement that

the employer secure the payment of workers'

compensation, and the requirement that the

employer provide the carrier with information

to accurately determine payroll and correctly

assign classification codes. In addition to

any other p owers under this chapter, the

department shall have the power to:

(a) Conduct investigations for the purpose

of ensuring employer compliance.

(b) Enter and inspect any place of business

at any reasonable time for the purpose of

investigating employer compliance.

(c) Examine and copy business records.

* * *

(g) Issue stop - work orders, penalty

assessment orders, and any other orders

necessary for the administration of this

section.

(h) Enforce the terms of a stop - work order.

(i) Levy and purs ue actions to recover

penalties.

(j) Seek injunctions and other appropriate

relief.

15. Petitioner has the burden of proof in this case and

must show by clear and convincing evidence that Respondent

violated the Workers' Compensation Law during the rel evant period

and that the penalty assessments are correct. § 120.57(1)(j),

Fla. Stat.; DepÓt of Banking & Fin., Div. of Sec. & Inv. Prot. v.

Osborne Stern & Co. , 670 So. 2d 932 (Fla. 1996); Ferris v.

Turlington , 510 So. 2d 292 (Fla. 1987); Pou v. DepÓt of Ins. , 707

So. 2d 941 (Fla. 3d DCA 1998). Clear and convincing evidence

Ðrequires more proof than a Òpreponderance of the evidenceÓ but

less than Òbeyond and to the exclusion of a reasonable doubt.ÓÑ

In re Graziano , 696 So. 2d 744, 753 (Fla. 1997).

16. It is well - established that the Department has Ðbroad

powers to investigate employers, to halt any work where employers

are not complying, and to assess penalties on those who do not

comply.Ñ Twin City Roofing Constr. Specialists, Inc. v. Dep't of

Fin. S ervs. , 969 So. 2d 563, 566 (Fla. 1st DCA 2007).

17. Pursuant to sections 440.10 and 440.38, every

"employer" is required to secure the payment of workers'

compensation for the benefit of its employees unless exempted or

excluded under chapter 440. Stric t compliance by the employer

is, therefore, required . See , e.g . , Summit Claims Mgmt. v.

Lawyers Express Trucking, Inc. , 913 So. 2d 1182, 1185 (Fla. 4th

DCA 2005); C&L Trucking v. Corbitt , 546 So. 2d 1185, 1186 (Fla.

5th DCA 1989).

18. Section 440.02(16 )(a) defines ÐemployerÑ to include

Ðevery person carrying on any employment.Ñ

19. Section 440.02(15)(a) defines ÐemployeeÑ to include

Ðany person who receives remuneration from an employer for the

performance of any work or service while engaged in any

e mployment.Ñ

20. Section 440.02(17) defines ÐemploymentÑ to include Ðany

service performed by an employee for the person employing him or

her,Ñ and includes , for non - construction employers, Ð[a]ll

private employments in which four or more employees are em ployed

by the same employer.Ñ

21. By stipulation of the parties, the record contains

clear and convincing evidence that Respondent was an "employer"

for workers' compensation purposes . As such, Respondent was

required to secure and maintain workers' co mpensation for its

employees pursuant to section 440.10.

22. Section 440.107(7)(d)1. provides that:

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 comp ensation 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 payroll during periods for

which it failed to secure the payment of

workers' compensa tion required by this

chapter within the preceding 3 - year period or

$1,000.00, whichever is greater.

NCCI classification codes

23. Section 440.107(9) provides that Ð[t]he department

shall adopt rules to administer this section.Ñ

24. Rule 69L - 6.031(1) provides, in pertinent part, that:

(1) Under paragraph 440.107(7)(b), F.S.,

stop - work orders or orders of penalty

assessment issued against a corporation,

limited liability company, partnership, or

sole proprietorship shall be in effect

against any succe ssor corporation or business

entity that has one or more of the same

principals, limited liability company

members, or officers as the predecessor

corporation or business entity against which

the stop - work order was issued and are

engaged in the same or eq uivalent trade or

activity.

* * *

(b) For employers engaged in the non -

construction industry, a corporation, . . .

and the successor corporation . . . are

engaged in the same or equivalent trade or

activity if they each perform or have

performed bus iness operations that include

operations described in at least one

classification code that is in the

manufacturing, goods and services, or the

office and clerical industry group listed in

subsection (6) of this rule. (emphasis

added).

25. Rule 69L - 6.0 31(6) provides, in pertinent part, that:

List of class codes, descriptions, and

industry groups. A complete description of

class codes is contained in the SCOPES®

Manual Classifications (October 2005)

published by the National Council on

Compensation Ins urance, Inc. (NCCI) and is

available for viewing through the Division of

WorkersÓ Compensation, Bureau of Compliance,

2012 Capital Circle, S.E., Hartman Building,

Tallahassee, Florida 32399 - 4228 or a copy is

available, for a fee, by calling NCCI at

1(800)6 22 - 4123. The SCOPES® list of codes,

descriptions and industry groups is as

follows:

* * *

(d) Industry Group: Goods & Services

* * *

24. 3821 AUTOMOBILE RECYCLING & DRIVERS

* * *

47. 8046 AUTOMOBILE PARTS AND ACCESSORIES Î

NOC & DRI VERS

26. Respondent argues that Ðthe classification of

John Austerman as Ò3821Ó . . . was not based on any statute,

administrative rule, or properly adopted department policy.Ñ The

argument is rejected as it is clear that the Department, through

rule 69L - 6.031, has incorporated by reference the NCCI SCOPES®

Manual Classification codes. DepÓt of Fin. Servs. v. Barber

Custom Builders, Inc. , Case No. 13 - 2536, RO (Fla. DOAH April 30,

2014).

27. By failing to secure the payment of workers'

compensation i nsurance coverage for its employees, Respondent was

in violation of chapter 440, Florida Statutes , on November 15,

2013, and for the preceding three years. Petitioner was

justified in issuing the Stop - Work Order and the 3rd Amended

Order of Penalty Assess ment.

28. Petitioner has established by clear and convincing

evidence that Respondent failed to secure the payment of workers'

compensation as required by chapter 440, Florida Statutes, that

the Department was justified in the issuance of the Stop - Work

O rder, and that the 3rd Amended Order of Penalty Assessment was

correctly calculated in the amount of $99,571.67.

RECOMMENDATION

Based on the Findings of Fact and Conclusions of Law set

forth herein, it is

RECOMMENDED that the Department of Financial Serv ices,

Division of WorkersÓ Compensation , enter a final order assessing

a penalty in the amount of $99,571.67 against Respondent,

Austerman, Inc., for its failure to secure and maintain required

workersÓ compensation insurance for its employees.

DONE AND EN TERED this 28th day of October , 2014 , in

Tallahassee, Leon County, Florida.

S

LINZIE F. BOGAN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 3 2399 - 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 28th day of October , 2014 .

ENDNOTE S

1/ All subsequent references to Florida Statutes will be to 2013,

unless oth erwise indicated.

2/ RespondentÓs Exhibit 1 is a workersÓ compensation rate sheet

from a company named Employer Solution. There was no testimony

offered during the final hearing from anyone affiliated with

Employer Solution. The rate sheet generically places

RespondentÓs employees into two classification codes; clerical

8810 and auto salvage 3821. Respondent relies on this Exhibit

for the purpose of establishing that he, and other employees not

classified in the 3821 group, should be classified as Ðcle rical

8810.Ñ This Exhibit is rank hearsay that neither supplements ,

explains other admissible evidence , nor is otherwise admissible

over objection in civil actions. Accordingly, RespondentÓs

Exhibit 1 is not sufficient in itself to support a finding of

f act. £ 120.57(1)(c) Fla. Stat. (2014). Even if RespondentÓs

Exhibit 1 were considered, it would be given little if any

evidentiary weight because the qualifications of the p erson

expressing an opinion therein are unknown and there is no

supporting eviden ce to explain how the author of the document

reached the conclusions stated .

COPIES FURNISHED:

Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Bennett M. Miller, Esquire

Dunn and Mi ller, P.A.

1606 Redwood Drive

Tallahassee, Florida 32301

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

(eServed)

NOTICE OF RIGHT TO SUBM IT 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.