14-002830 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. A To Z Roofing, Inc. Status: Closed Recommended Order on Thursday, February 5, 2015.

Summary: The evidence showed that the Stop Work Order should be upheld and that the penalty assessment should be reduced to $15,116.12

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERSÓ

COMPENSATION,

Petitioner,

vs. Case No. 1 4 - 2830

A TO Z ROOFING, INC. ,

Respondent.

/

RECOMMEND ED ORDER

Pursuant to notice, a final hearing was conducted in this

case on October 28, 201 4 , in Tallahassee , Florida, before James

H. Peterson , III, an Administrative Law Judge assigned by the

Division of Administrative Hearings.

APPEARANCES

For Petitione r: Mary K. Surles , Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent Richard Paul Morejon, pro se

A to Z Roofing, Inc.

3539 Apalachee Parkway, Suite 3 - 204

Tallahasse e, Florida 32311

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent violated the

provisions of chapter 440, Florida Statutes, 1 / by failing to

secure the payment of workersÓ compensation, as alleged in the

Stop - Work Order and Third Amend ed Order of Penalty Assessment ,

and if so, what is the appropriate penalty .

PRELIMINARY STATEMENT

On September 23, 2013 , the Department of Financial

Services, Division of WorkersÓ Compensation (Department or

Petitioner), issued and delivered a Stop - Work O rder and Order of

Penalty Assessment (Stop - Work Order) against Respondent A to Z

Roofing, Inc. (A to Z Roofing or Respondent) , ordering

Respondent to immediately cease all business operations for all

worksites in the State . On September 30, 2013, the Depa rtment

delivered an Amended Order of Penalty Assessment to Respondent.

The Stop - Work Order advised Respondent of its right to have

administrative review of the DepartmentÓs action by filing a

petition for hearing within 21 days. Respondent timely

request ed an administrative hearing by filing with the

Department a document dated October 3, 2013, entitled " Election

of Proceeding " (Request for Hearing) in which Respondent

contested one or more of the Department's allegations in the

Stop - Work Order and Amende d Order of Penalty Assessment . The

Department's Agency Clerk's stamp indicates that Respondent's

Request for Hearing was filed with the Department on October 10,

201 3 . Despite the requirement in section 120.569(2) (a) , Florida

Statutes, that an agency not ify the Division of Administrative

hearing by electronic means within 15 days from receipt of a

petition or request for hearing , the Department did not transmit

Respondent's Request for Hearing to the Division of

Administrative Hearings for the assignment of an administrative

law judge to conduct an administrative hearing until June 16,

2014 .

Pursuant to the partiesÓ Joint Response to the Initial

Order, this case was initially consolidated with Department of

Financial Services v. A 2 Z Roofing , DOAH Case N o. 14 - 2829, and

the final hearing for the consolidated cases was scheduled for

September 3, 2014 . Thereafter, at the DepartmentÓs request, the

hearing was continued and rescheduled for October 28, 2014.

Prior to the final hearing, a telephonic hearing w as held

September 11, 2014, on RespondentÓs Motion to Clarify, from

which a n Order dated September 12, 2014, was entered sever ing

this case from DOAH Case No. 14 - 2829 , and ordering the parties

to be " prepared to discuss the implications of the seemingly

in ordinate delay between the time that Respondent requested a

hearing and PetitionerÓs referral of the case to the Division of

Administrative Hearings . " Thereafter, the Department filed a

Motion to Consolidate Cases, seeking to again consolidate this

case w ith DOAH Case No. 14 - 2829 and further postpone the final

hearing in this case , on the ground that RespondentÓs president ,

Richard Morejon, had acquired the stock of the respondent in

Case No. 14 - 2829 ( A 2 Z, Inc. ). The Motion to Consolidate was

opposed b y Respondent and was denied .

At the beginning of the final hearing held October 28,

2014, PetitionerÓs Motion for Official Recognition was denied to

the extent that it sought official recognition of PetitionerÓs

Exhibits 1 through 16 and 20 through 23 , con sisting of

investigative matters in the DepartmentÓs file relating to

Respondent. Although not articulated at the final hearing, the

undersigned recognizes the statutes cited in paragraphs 1

through 5 of PetitionerÓs Motion for Official Recognition, as

we ll as the excerpt from the SCOPES® Manual, the Workers Ó

Compensation approved rates, and the Average Weekly Wage Report

for years 2009 - 2013, referenced in the Motion and provided to

the undersigned as PetitionerÓs E xhibits 17 through 19 , and as

to those ma tters, PetitionerÓs Motion for Official Recognition

is granted .

During the hearing, the Department presented the testimony

of three witnesses , including : complainant Yasar Korkmaz ;

Respondent's president, Richard Paul Morejon; and Chad Mason, a

penalty a uditor employed by the Department. PetitionerÓs

E xhibits P - 1 through P - 2 5 were received into evidence.

Respondent presented the testimony of complainant Yasar Ko r kmaz ,

who testified on his own behalf. Respondent offered three

exhibits which were receive d into evidence as Respondent's

Exhibits R - 1 through R - 3.

The proceedings were transcribed and a transcript was

ordered. The parties requested and were given 3 0 days from the

filing of the t ranscript with the Division of Administrative

Hearings within whi ch to submit proposed recommended orders .

The Transcript , consisting of two volume s , was filed on November

17, 2014 . By Order gran ting the parties' agreement for

extension of time, the parties were given additional time, until

December 31, 2014 , within w hich to file their proposed

recommended orders. The parties thereafter timely filed their

respective Proposed Recommended Orders, both of which have been

considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Department is the s tate agency responsible for

enforcing the statutory requirement that employers secure

workersÓ compensation coverage for the benefit of their

employees.

2. Respondent is a Florida, for - profit corporation with

its principal office located at 3539 Apalachee Parkway, Suite

3 - 204, Tallahassee, Florida 32311. Respondent was incorporated

on October 26 , 2012 , and has been engaged in the construction

industry in Florida as a roofing company since October 31, 2012.

3. From RespondentÓs inception, Richard Paul Morejon has

been RespondentÓs president, secretary, and trea surer , and has

received compensation from RespondentÓs roofing contract

proceeds .

4 . In July or August 2013, t he Department received a

complaint alleging that Respondent was not in compliance wi th

Florida's Workers' Compensation Law. The Department assigned

investi gation of the complaint to then - Department investigator

Carey Horn .

5 . Based upon materials apparently gathered and reports

purportedly authored by Investigator Horn, the Department issued

a stop - work order dated September 23, 2013, to Respondent

alleging that Respondent did not secure workersÓ compensation

coverage for its employees as required . The Department,

however, did not call Investigator Horn as a witness, and,

despite Mr. M orejonÓs attempt to subpoena her to testify in this

case, Investigator Horn could not be found. The DepartmentÓs

delay in referrin g this case for a final hearing either caused

or contributed to Investigator Horn Ós unavailab ility as a

witness in this proce eding.

6 . T he reports and conclusions of Investigator Horn were

prepared in anticipation of litigation and are hearsay . 2/

Therefore , they have not been used to support factual findings

in this Recommended Order unless corroborative of non - hearsay

evidenc e. 3/

7. In addition, on October 20, 2014, the Department filed

a document entitled " Joint Prehearing Stipulation " signed by the

DepartmentÓs counsel and Mr. Morejon purporting to contain a

number of stipulated facts and factual admissions by Mr. Morejon

o n behalf of Respondent . However, a t the final hearing, the

manner in which the Joint Prehearing Stipulation was procured

was brought into question when Mr. Morejon advised that he was

told to sign it and that the stipulation would be Ðironed outÑ

at the f inal hearing. The DepartmentÓs counsel confirmed that

the conversation occurred regarding the correct classification

code to be utilized in calculating the penalty against

Respondent. Accordingly, it was ruled at the final hearing that

the Joint Stipulat ion would not be used to support a finding

regarding the classification. Up on further consideration of

Mr. MorejonÓs comments and the DepartmentÓs coun se lÓs admission

as to the manner in which at least one of the stipulated facts

was secured, the undersig ned has not utilized and otherwise

rejects as untrustworthy the document entitled " Joint Prehearing

Stipulation " filed in this case on October 20, 2014 , finding

that it does not represent any bona fide stipulations or

admissions .

8. Nevertheless, i n his t estimony during his deposition

and at the final hearing in this case , Mr. Morejon admitted a

number of factual matters demonstrating that Respondent was not

in compliance with FloridaÓs WorkersÓ Compensation Law on

September 23, 2013.

9 . The factual fin dings in this Recommended Order are

derived from Mr. MorejonÓs testimony, non - hearsay evidence, and

corroborative hearsay sub mitted during the final hearing.

10 . On September 23, 2013, Investigator Horn visited a

jobsite at a residence located at 5747 Sio ux Drive, Tallahassee,

Florida (Jobsite) , where Respondent , through employees, was

performing roofing and related activities.

11 . On that date, Mr. Morejon was on the ground

supervising two men on the roof engaged in roofing activities

and two men on the ground picking up debris, for a total of five

men , including Mr. Morejon, at the J obsite working for

Respondent. There was another man sitting in a vehicle at the

Jobsite that day who never did any work for Respondent.

1 2 . There is no evidence that Respo ndent provided workersÓ

compensation coverage for any of the men working at the J obsite

that day.

1 3 . The two men working on the roof were Guadalupe Perez -

Martinez and Hermilo Perez - Martinez. At the time, Guadalupe

Perez - Martinez had an exemption from the requirements for

workersÓ compensation through his company, Lupe Builders, LLC .

Although Hermilo Perez - Martinez previously had an exemption from

the requirements of workersÓ compensation through Perez

Builders, LLC, that exemption expired the previous month, on

August 3, 2013.

1 4 . There is no evidence that the two men picking up

debris, Hermilo Pantaleon Paz and Timotio Aguilar, qualified for

an exemption from workersÓ compensation coverage that day.

1 5 . A lthough Mr. Morejon ha d an exemption from the

requirements of Florida's Workers' Compensation Law for a

separate and unaffiliated company, Comerxio, Mr. Morejon did not

have an exemption from the coverage requirements of Florida's

Workers' Compensation Law for Respondent on September 23, 2013,

or du ring the relative time periods of this case.

1 6 . According to Mr. Morejon, other than Guadalupe Perez -

Martinez , none of the other workers at the Jobsite that day had

ever performed work for Respondent. Mr. Morejon also recalled

that another person on the Jobsite that day, David Amaro -

Rodriguez, just sat in a car and performed no work.

Mr. MorejonÓs recollections are unrefuted. The DepartmentÓs

delay in referring this case undoubtedly affected the ability of

either party to call other witnesses, includin g a number of the

workers or the investigator, who were at the Jobsite that day.

1 7 . During the relevant time periods, Respondent did not

maintain a bank account to pay its employees and it did not

directly pay Mr. Morejon or other employees. Rather,

his torically, proceeds from roofing contracts performed by

Respondent were deposited into a bank account held by another

corporation named " A 2 Z Roofing, Inc. " After paying various

expenses, including permit fees, materials, and other costs

associated with the roofing contract s , A 2 Z Roofing, Inc., pa id

Mr. Morejon, and any others performing work under the contracts,

by check.

1 8 . On September 23, 2013, the Department personally

served the Respondent with a stop work order (Stop Work Order)

and a re quest for p roduction of b usiness records for p enalty

a ssessment c alculation ( Records Request ).

1 9 . The Records Request requested RespondentÓs corporate

records , licenses, payroll documents, account documents,

disbursements, contracts for work, employee leasing information,

subcontractors, and workers' compensation coverage or exemptions

" for the per iod fro m 10/31/2012 through 09/23/2013 [the Non -

Compliance Period]. " The Records Request further stated , in

part:

The employer should scan and email the

records req uested herein to the investigator

with the Department of Financial Services,

Division of WorkersÓ Compensation for

examination within 5 business days after

receipt of this Request for Production of

Business Records. If the employer fails to

provide the re quired business records

sufficient to enable the Department of

Financial Services , Division of WorkersÓ

Compensation to determin e the employerÓs

payrol l for the period requested for the

calculation of the penalty provided in

section 440.107(7)(d), F.S., th e imputed

weekly payroll for each employee, corporate

officer, sole proprietor, or partner shall

be the statewide average weekly wage as

defined in section 440.12(2), F.S.

multiplied by 1.5. The Department shall

impute the employerÓs payroll at any time

a fter ten, but before the expiration of

twenty business days after receipt by the

employer of a written request to produce

such business records. (FAC 69L - 6.028) If

the employer is unable to scan an d email

these documents, please mail or deliver

copies to our office located at 200 East

Gaines Street Tallahassee, FL, 32399 - 4228.

20 . The next day, September 24, 2013, Mr. Morejon hand

delivered RespondentÓs business records to the Department in

response to the Records Request . The business records delivere d

by Mr. Morejon included roofing permit applications ; roofing

permits issued to A to Z Roofing, Inc. ; several contracts

between homeowners and A to Z Roofing, Inc., identifying

Mr. Morejon as project manager ; five checks from A 2 Z Roofing,

Inc. (not Resp ondent), payable to the City of Tallahassee; and

24 checks from A 2 Z Roofing, Inc., payable to " Mr. Morejon Î

Petty Cash . "

21 . The 24 checks from A 2 Z Roofing, Inc. , to Mr. Morejon

totaled $ 55,955 . 4/ T he checks , dated from November 17, 2012, to

August 23, 2013 , constitute all of the money paid to Mr. Morejon

from RespondentÓs roofing contract proceeds during the Non -

Compliance Period .

2 2 . In addition to the 24 checks payable to Mr. Morejon,

it is evident that the Department also received other checks

from A 2 Z Roofing, Inc. , from the records requests made in this

case and in DOAH Case No. 14 - 2829 , made payable to Lupe

Builders, LLC , Gene Pfund, and perhaps others , during the Non -

Compliance Period. The Department, however, did not utilize

those recor ds in its determinations in this case. In fact, the

DepartmentÓs penalty auditor did not utilize payments made by A

2 Z Roofing, Inc. , in calculating the penalty because , in the

DepartmentÓs penalty auditorÓs opinion, Respondent was not

compliant because it did not have a bank account. Final Hearing

Transcript, pp. 232 - 233.

2 3 . The determination of payroll, however, is not

dependent on whether an employer has a bank account or whether

the employer is the entity that pays its employees . Rather, the

Depar tmentÓ s own rule defining payroll consider s " [p]ayments,

including cash payments, made to employees by or on behalf of

the employer " in determining payroll . See Fla. Admin. Code Rule

69L - 6.035(1)(b) (emphasis added) .

2 4 . During the hearing, the Department , through counsel,

stated that the payments from A 2 Z Roofing to Lupe Builders,

LLC , or Gene Pfund were not considered because those entities

had valid exemptions from the requirements of workersÓ

compensation. In addition, the Department complained that their

receipt of bank records from A 2 Z Roofing, Inc., had been

delayed and took the position that bank records from A 2 Z

Roofing, Inc. , would not be utilized in this case. The

DepartmentÓs own discovery tactics, however, were responsible

for delays in responses to its requests for records from A 2 Z

Roofing, Inc. 5/

2 5 . Considering the records produced by Respondent

introduced into evidence in this case, the testimony of

Mr. Morejon regarding the checks payable to him from A 2 Z

Roofing, Inc., the Depa rtmentÓs unwillingness to utilize other

records from A 2 Z Roofing, Inc. , in its possession , and

evidence of the total payments to Mr. Morejon duri ng the Non -

Compliance Period, it is found that the DepartmentÓs decision to

impute payroll is unfounded.

2 6 . Imputation of payroll would improperly allow the

Department to benefit from its own lack of analysis. T he

imputed payroll determined by the Department in the amount of

$347,334.69 exceeds RespondentÓs total revenue for the Non -

Compliance Period by more than $100,000 6/ and is based, at least

in part, upon hearsay evidence prepared by a w itness whose

unavailability was likely caused by the DepartmentÓs undue delay

in referring RespondentÓs Request for Hearing.

2 7 . Furthermore, the records produced by R espondent and

the evidence in this case are sufficient to determine

Respondent's payroll for use in the calculat ion of a penalty

pursuant to section 44 0.107(7)(d)l.

2 8 . The evidence demonstrated that the $ 55,955 reflected

in checks payable to Mr. Morejon from A 2 Z Roofing, Inc.,

represent all of the payments to RespondentÓs employees who were

not covered by workersÓ compensation while performing services

for roofing contracts during the Non - Compliance Period, other

than payments reflected in records the D epartment may have in

its possession but did not present at the final hearing.

2 9 . It was also shown, however, that the $ 55,955 was paid

to Mr. Morejon without the maintenance of a cash log or cash

journal and without securing the payment of workers'

comp ensation coverage for Mr. Morejon or others receiving cash

payments from those funds. And, t here is no evidence that any

of those employees were exempt from the requirements of workersÓ

compensation.

30 . Respondent was required to secure workers'

compens ation coverage and failed to secure that coverage under

FloridaÓs WorkersÓ Compensation Law for its employees who were

paid $ 55,955 .00 during the Non - Compliance Period. Therefore,

the Department was justified in issuing the Stop Work Order

delivered to Mr . Morejon on September 23, 2013.

31 . Although the Department failed to show that

RespondentÓs payroll should be imputed, the evidence adduced at

the final hearing demonstrated that a penalty should be imposed

against Respondent for failure to pay workersÓ compensation for

its employees who were paid a total of $ 55,955 during the Non -

Compliance Period.

3 2 . For determining the appropriate penalty, t he

Department has adopted a penalty calculation worksheet to aid in

calculating penalties against employers pu rsuant to section

440.107, Florida Statutes. See Florida Administrative Code Rule

69L - 6.027 .

3 3 . The classification codes listed in the National

Council on Compensation Insurance ( " NCCI " ) Scopes® Manual have

been adopted by the Department through Florid a Administrative

Code Rules 69L - 6.021 and 69L - 6.031 . Classification codes are

four - digit codes assigned to occupations by NCCI to assist in

the calculation of workers' compensation insurance premiums.

3 4 . Under the descriptions listed in the NCCI Scopes ®

Manual, the proper classification code for RespondentÓs

employees is 5551, which corresponds to " Roofing - All Kinds and

Drivers. "

3 5 . The Department has adopted the approved manual rates

in the Florida Administrative Code, as authori zed by sect ion

440 .107(7). Rule 69L - 6.027 adopts form number DFS - F4 - 1595, the

Penalty Calculation Worksheet, which specifically incorporates

approved manual rates.

3 6 . As accurately set forth in the Penalty Calculation

Worksheets attached to the Amended Order of Penalty A ssessment,

the approved manual rates for the following periods of Non -

Compliance were:

From 10/31/2012 t o 12/31/2012 the rate was 17.10 ;

From 01/01/2013 t o 06/30/2013 the rate was 18.17;

From 07/01/2013 t o 09/23/2013 the rate was 18.03.

3 7 . A breakdown of RespondentÓs total payroll of $ 55,955

based upon check dates corresponding to the manual rate s in

effect during the Non - Compliance Period, is as follows:

From 10/31/2012 to 12/31/2012 payroll totaled $ 6,300 ;

From 01/01/2013 to 06/30/2013 payroll total ed $ 33,655 ;

From 07/01/2013 to 09/23/2013 payroll totaled $ 16,0 0 0.

3 8 . Calculation of the penalty, u sing the Penalty

Calculation Worksheet and RespondentÓs payroll based on records

(as opposed to imput ed) during the Non - Compliance Period,

results in a to tal penalty of $15,116.12 , as follows:

Calculation (a) (b) (c) (d) (e) (f) (g)

Method Class Non - Compliance Gross /100 Approved Premium Penalty

Code period Payroll Rates (d)X(e) (f)X 1.5

Records 5551 10/31/12 12/31/12 6,300 63 17.10 1,077.30 1,616.25

Records 5551 01/01/13 06/30/13 33,655 336.55 18.17 6,115.11 9,172.67

Records 5551 07/01/13 09/23/13 16,000 160 18.03 2,884.80 4,327.20

Totals: $55,955.00 $15,116.12

3 9 . The clear and convincing evidence in this proceeding

demonstrated that Respondent was in violation of FloridaÓs

WorkersÓ Compensation law because it employed one or more

uninsured employees in the construction industry throughout the

Non - Compliance Penalty , and that the appropriate penalty, based

upon RespondentÓs payroll, i s in the amount of $15,116.12 .

CONCLUSIONS OF LAW

40 . The Division of Administrative Hearings has

jurisdiction over the subject matter and parties to this

proceeding. §§ 120.569 and 120.57(1 ), Fla. Stat.

41 . The Department is responsible for enforcing t he

requirement that employers coming within the provisions of

chapter 440, Florida Statutes, obtain workers' compensation

coverage for their employees " that meets the requirements of

[chapter 440] and the Florida Insurance Code." § 440.107(2),

Fla. Stat.

4 2 . As the party asserting the affirmative in this

proceeding, t he Department has the burden of proof. See , e.g. ,

Balino v. DepÓt of H RS , 348 So. 2d 349 (Fla. 1st DCA 1977).

4 3 . Because the Department is seeking to prove violations

of a statute and impo se administrative fines or other penalties,

it has the burden to prove the allegations in the complaint by

clear and convincing evidence. Ferris v. Turlington , 510 So. 2d

292 (Fla. 1987).

4 4 . Chapter 440 broadly defines "employer" as "every

person carryi ng on any employment." § 440.02(16)(a), Fla. Stat.

4 5 . "Employment" subject to Florida's workers'

compensation law " means any service performed by an employee for

the person employing him or her . . . [and] with respect to the

construction industry, [inc ludes] all private employment in

which one or more employees are employed b y the same employer."

§ 440.02(17)(a) & (b)(2), Fla. Stat.

4 6 . The definitional section of chapter 440 defines

" e mployee " as " 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, ali ens and minors. " § 440.02(15)(a), Fla. Stat.

4 7 . The term "employee" as used in chapter 440 also

includes "[a]n independent contractor working or performing

services in the construction industry . . . [as well as a] sole

proprietor who engages in the con struction industry and a

partner or partnership that is engaged in the construction

industry." § 440.02(15)(c), Fla. Stat.

4 8 . In addition, the chapter 440 definition of "employee"

includes "[a] ll persons who are being paid by a construction

contractor a s a subcontractor, unless the subcontractor has

validly elected an exemption as permitted by this chapter, or

has otherwise secured the payment of compensation coverage as a

subcontractor , consistent with s. 440.10 , for work performed by

or as a subcontractor. " § 440.02(15)(c)(2), Fla. Sta t.

4 9 . O fficers of corporations, however, including up to

three listed office rs of a corporation involved in the

construction industry who each own at least a 10 percent share

of the corporation, may elect to be exempt from the requirement

that they be covered by workers' compensation insurance. An

officer of a corporation who val idly elects to be exempt by

filing a notice of the election with the Department is not an

employee . § 440.02(15)(b), Fla. Stat .

50 . Section 440.107 sets out the Department's duties and

powers to enforce compliance with the requirement that an

employer se cure the payment of workers' co mpensation for its

employees. The Department is empowered to examine and copy the

business records of any employer conducting business in the

state of Florida to determine whether it is in compliance with

the Workers' Compen sation Law. § 440.1 07(3), Fla. Stat.

Whenever the Department finds that an employer required to

secure workers' compensation coverage for an employee has failed

to do so, such failure is deemed an immediate serious danger to

the public health, safety, a nd welfare sufficient to justify

service by the Department of a stop - work order on the employer,

requiring the cessation of all business operations.

§§ 440.107(1) & (7)(a), Fla. Stat.

51 . Section 440.02(8), Florida Statutes, defines

"construction industr y" as "for - profit activities involving any

building, clearing, fi l ling, excavation , or a substantial

improvement in the size or use of any structure or the

appearance of any land." Section 440.02(8) further provides

that "[t]he division may, by rule, esta blish standard industrial

classification codes and definitions thereof which meet the

criteria of the terms 'construction industry' as set forth in

this section."

5 2 . An employer is engaged in the construction industry

when any portion of the employer's b usiness operations is

described in the construction classification codes that are

adopted in Florida Administrative Code Rule 69L - 6.021.

S ubsection (uu) of r ule 69L - 6.021 identifies classification code

5551 as "Roofing - All Kinds and Drivers . "

5 3 . The r oofing activities performed by the Respondent

throughout the Non - Compliance Period constituted employment

within the construction industry. Because the Respondent was in

the construction industry, it was an employer if it had a t least

one employee. § 440 .02(17)(b)2., Fla. Stat.

5 4 . Respondent had at least one or more employees ,

including Mr. Morejon, throughout the Non - Compliance Period.

Mr. Morejon did not validly elect to be exempt as an officer of

Respondent from the requirement that he be covered wi th workers'

compensation insurance for work performed for Respondent . In

addi tion, evidence indicated that Respondent employed at least

one other worker without workersÓ compensation coverage during

the Non - Compliance Period. Therefore, Respondent was re quired

to have secured the payment of workers' compensation coverage

for its employees.

5 5 . Section 440.107(7)(a) provides:

W henever the department determines that an

employer who is required to secure the

payment to his or her employees of the

compensati on provided for by this chapter

has failed to secure the payment of workers'

compensation required by this chapter . . .

such failure shall be deemed an i mmediate

serious danger to public health , safety, or

welfare sufficient to justify service by the

depa rtment of a stop - work order on the

employer, requiring the cessation of all

business operations. If the department

makes such a determination, the department

shall issue a stop - work order within 72

hours.

5 6 . On September 23, 2013, the Respondent had at least one

employee in the construction industry without workersÓ

compensation coverage or a valid exemption from such coverage.

Therefore, the Stop Work Order was justified. Thereafter, after

receiving RespondentÓs Request for Hearing on October 10, 201 3,

t he Department unjustifiably delayed referral of this case for

eight months beyond the 15 - day time period set forth in section

120.569(2)(a) .

5 7 . Regarding the assessm ent of penalties, section

440.1 07(7)(d)1. provides that:

[i]n 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 applyin g 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.

5 8 . Section 440.10(1)(g) requ ires employers to obtain

workers' compensation insurance policies that "utilize the

manual rates," approved pursuant to the Florida Insurance Code.

The Department therefore is required to utilize these approved

manual rates to comply with its statutory re quirement to assess

penalties based on evaded workers' compensation insurance

premiums.

5 9 . Pursuant to this statutory authority, the Department

has promulgated Florida Administrative Code Rule 69L - 6.021,

which adopts the definitions found in the NCCI Sco pes® Manual,

including updates through February 1, 2011. Fla. Admin. Code R.

69L - 6.021(1), (2), and (3).

60 . Rule 69L - 6.021(2) lists the workplace operations that

fall within the statutory definition of "construction industry"

and includes "Roofing - All Kinds and Drivers" using the NCCI

Scopes® Manual description of classification code 5551. Fla.

Admin. Code R. 69L - 6.021(2) (uu).

6 1 . Section 440.107(7)(e) provides that:

When an employer fails to provide business

records sufficient to enable the departme nt

to determine the employer's payroll for the

period requested for the calculation of the

penalty provided in paragraph (d), for

penalty calculation purposes, the imputed

weekly payroll for each employee, corporate

officer, sole proprietor, or partner sha ll

be the statewide average weekly wage as

defined in s. 440.12 (2) multiplied by 1.5.

6 2 . As indicated in the Findings of Fact above, however,

under the circumstances, the evidence failed to show that the

records timely provided by Respondent were insuff icient to

enable the Department to determine payroll , and RespondentÓs

records are otherwise found to be sufficient. Therefore,

imputation of payroll pursuant to section 440.107(7)(e) was not

necessary or appropriate in this case.

6 3 . The correct method ology for calculating the penalty in

this case uses the classification codes listed in the NCCI

Scopes® Manual, which has been adopted by the Department through

Florida Administrative Code Rule 69L - 6.021 . In addition,

pursuant to se ction 440.107(7)(d)1., the penalty is 1.5 times

the amount Respondent should have paid in workers' compensation

premiums for the Non - Compliance Period .

6 4 . The total penalty calculated in the amount of

$15,116.12 by utilizing the methodolo gy prescribed by section

440.107 is the correct penalty to be assessed against Respondent

under the facts and law in this case.

6 5 . The clear and convincing evidence in this case

demonstrated that Respondent was required but failed to secure

the payment of workers' compensation for its employe es during

the Non - Compliance Period as required by Florida's Workers'

Compensation Law , and the penalty for that violation is

$15,116.12 .

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is recommended that the Department enter a Final

Order consistent with this Recommended Order upholding the Stop

Work Order, and reducing the penalty set forth in the Amended

Order of Penalty Assessment to $15,116.12 by recalculating the

penalty based upon RespondentÓs payroll of $55,955.0 0 during the

Non - Compliance Period .

DONE AND ENTERED this 5th day of February , 201 5 , in

Tallahassee, Leon County, Florida.

S

JAMES H. PETERSON, III

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 5th day of February , 201 5 .

ENDNOTES

1 / Unless otherwise indicated, all citations to the Florida

Statutes are to current version s which have not substantively

changed since the time of the allegations in this case .

2/ § 90.801(c) , Fla. Stat. (definition of ÐhearsayÑ); see also

King v. Auto Supply of Jupiter, Inc. , 917 So. 2d 1015, 101 9

(Fla. 1st DCA 2005) (quoting Professor Ehrhardt comments,

Florida Evidence , § 803.6 at 786 (2004)) ( If "a record is made

for the purpose of preparing for litigation, its trustworthiness

is suspect and should be closely scrutinized." ).

3/ § 120.5 7(1)(c ), Fla. Stat.

4/ There were a total of 25 checks attached to Exhibit P - 12.

The last page of the exhibit, however, contains a n extra

duplicate of check number 2381 and was excluded from the total.

5/ While this case and DOAH Case No. 14 - 2829 were conso lidated,

the Department sought bank records from " A 2 Z Roofing, Inc.

d/b/a A to Z Roofing, Inc. " As explained in the O rder entered

after a telephonic motion hearing in this case on September 12,

2014 :

[RespondentÓs] Motion to Clarify is GRANTED

to the e xtent that it requests protection

from discovery for those bank records sought

from A 2 Z Roofing, Inc.Ós bank with

subpoenas seeking records of " A 2 Z Roofing

d/b/a A to Z Roofing, Inc. " For reasons

explained during the telephonic hearing, it

cannot be a ssumed that A 2 Z Roofing, Inc.,

was or is doing business as A to Z Roofing,

Inc. Therefore, discovery of A 2 Z Roofing,

Inc.Ós banking records may only be obtained

through subsequent discovery requests that

are not styled as, or purport to seek

records f rom, A 2 Z Roofing Inc. d/b/a A to

Z Roofing, Inc.

6/ According to records produced by Respondent, and as explained

by Mr. MorejonÓs testimony, which is credited, there were a

total of 31 roofing permits issued to Respondent for projects

that were comple ted during the Non - Compliance Period. See

Exhibits P - 9, P - 14, and P - 15. Although the business records

produced by Respondent did not contain all of the contracts

between the owners and A to Z Roofing, Inc., for those projects,

the " valuation " amount set forth on the corresponding permits

reflect the contract amounts paid to Respondent for all of the

roofing projects completed by Respondent during the Non -

Compliance Period. The valuation amounts on the 31 permits for

roofing projects completed by Responde nt during the Non -

Compliance Period total $223,616. The $223,616 in proceeds

represents RespondentÓs total revenue for the Non - Compliance

Period.

COPIES FURNISHED :

Mary K. Surles , Esquire

Department of Financial Services

200 East Gaines Street

Tallahas see, Florida 32399

(eServed)

Richard Paul Morejon

A to Z Roofing, Inc.

3539 Apalachee Parkway, Suite 3 - 204

Tallahassee, Florida 32311

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 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 wi th the agency that

will issue the Final Order in this case.