14-005941 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. American Pro Diving Center, Inc. Status: Closed Recommended Order on Wednesday, October 7, 2015.

Summary: Department failed to prove that Respondent violated the Workers' Compensation laws as alleged in the Amended Order of Penalty Assessment.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. DOAH Case No. 14 - 5941

AMERICAN PRO DIVING CENTER,

INC.,

Respondent.

___________________________ _ _/

RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted in this

case on June 12, 2015, in Crys tal River, Florida, and on

June 18, 2015, by video teleconference at sites in Tampa and

Tallahassee, Florida, before James H. Peterson III, an

Admini strative Law Judge assigned by the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Alexander Brick , Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Res pondent: Kris tian Eiler Dunn, Esquire

Dunn and Miller, P.A.

215 East Tharpe Street

Tallahassee, Florida 32308

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 workers' compensation, as alleged in the

Amen ded Order of Penalty Assessment; and , if so, what is the

appropriate penalty.

PRELIMINARY STATEMENT

On October 1, 2014, the Department of Financial Services,

Division of Workers' Compens ation (Petitioner or the

Department) , issued a S top - W ork O rder with an accompanying Order

of P enalty A ss essment (collectively Stop - Work Order) against

American Pro Diving Center, Inc. (Respondent or American Pro

Diving ) , for Respondent's alleged failure to secure workers'

compensation insurance coverage for its employees. The Stop -

Work Order was served upon Respondent on October 15, 2014. On

October 20, 2014, the Department entered an Order Releasing

Stop - Work Order (Revocation) , which released the Stop - W ork Order

Ð effective back to the date of issuance.Ñ

On November 18, 2014, the Department issued another Order

of P enalty A ssessment (Order of Penalty Assessment) against

Respondent without an accompanying s top - work order. The Order

of Penalty Asse ssment w as in the amount of $35 ,429.50 , and

informed Respondent of its right to administrative review by

filing a petition for hearing within 21 days. Respondent timely

requested an administrative hearing , and the Department

transmitted that request to the Divisi on of Administrative

Hearings on December 16, 2014, for the assignment of an

administrative law judge to conduct an administrative hearing.

The case was originally assigned to Administ rative Law

Judge Edward T. Bauer , who scheduled this case for a final

he aring to be held February 17, 2015. The case was subsequently

transferred to the undersigned and rescheduled .

At the beginning of the June 12, 2015, hearing, the

Department 's motion dated June 5, 2015, to reduce the alleged

penalty assessed against Respon dent from $35,429.50 to

$3,581.96 , with an Amended Order of Penalty Assessment , was

granted . The Department presented the testimony of three

witnesses, including: I nvestigator Dale Russell; Nicholas

Thomas, a penalty auditor employed by the Department; a nd James

Corbin Straub, who formerly worked at American Pro Diving . The

Department introduced 17 exhibits received into evidence as

Department's Exhibits P - 1 through P - 16 and P - 19 . Respondent

presented the testim ony of Kathleen Petracco, who was accepted

as an expert witness; Mic hael Str m iska; Mariah Ellis; Michelle

Goodenow; and Ron Goodenow . Respondent introduced nine exhibits

received into evidence as Respondent 's E xhibits R - 1 through R - 9 .

The proceedings were transcribed and a transcript was

ordered. The T ranscript of the proceedings , consisting of two

volumes, was filed July 7, 2015. By agreement of the parties,

t he parties were allowed until August 31, 2015, to file their

proposed r ecommended o rders. Both parties timely filed their

respective Pro posed Recommended Orders which have been

considered in the preparation of this Recommended Order. 2/

FINDINGS OF FACT

1. The Department is the state agency responsible for

enforcing the statutory requirement that employers secure

workers' compensation cove rage for the benefit of their

employees.

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

incorporated on June 16, 1995, with its principal office located

at 821 Southeast Highway 19, Crystal River, Florida 34429 .

Since incorporation, Respondent has b een continuously engaged in

business as a scuba diving tour and retail shop.

3. In August 2014 , Department Compliance O fficer Dale

Russell (Investigator Russell) commenced an investigation to

determine whether Respondent employed more than three employees ;

and , if so, whether Respondent had secured workers' compensation

insurance coverage for its employees. The investigation of

American Pro Diving was not instituted because of any public

referral or reported injury. Rather, Investigator Russell was

alert ed to American Pro Diving based on "data mining."

4. Data mining is conducted by the Department by comparing

information in its computer system's workers' compensation

insurance coverage data base with reports provided by businesses

to the Florida Departme nt of Revenue in the form of Re -

employment Assistance Tax reports known as "UCT - 6s . "

5. UCT - 6 information on American Pro Diving during the

pertinent time period indicated that Respondent was paying

unemployment insurance tax for 12 to 18 workers . The

D epartment's database revealed that Respondent had no workers'

compensation coverage.

6. On August 11, 2014, Investigator Russell visited

American Pro Diving in Crystal River , Florida. On that d ay ,

Respondent's owner, Ron Goodenow, was not present or ava ilable.

Mike Perry was at Respondent's service desk. Investigator

Russell introduced himself to Mr. Perry and informed him that he

was looking into whether employers were providing workers'

compensation. Investigator Russ ell left his card and asked

Mr. Perry to tell Respondent's owner to contact him.

7. During his investigation, Investigator Russell

discovered that, in addition to paying unemployment taxes,

Respondent was making W - 4 withholdings for all those working at

American Pro Diving, instead of issuing F orm 1099s and having

workers pay their own taxes and withholdings as is typical for

independent contractors.

8. On August 13, 2014, I nvestigator Russell spoke to

Mr. Ron Goodenow, on the telephone. Mr. Goodenow informed

Investigator Russell tha t Respondent had no employees because

all of those working at American Pro Diving were independent

contractors. Mr. Goodenow explained to Investigator Russell

that because of the business model, workers' compensation

insurance was not available to dive sh ops.

9. During the telephone conversation, Investigator Russell

warned Mr. Goodenow that th e Department would issue a stop - work

order and shut down Respondent's operations if Respondent was

out of compliance with the workers' compensation laws .

Investiga tor Russell provided Mr. Goodenow with the name of the

Florida Joint Underwriters Association and some companies that

provided workers' compensation coverage. Investigator Russell

also suggested, as an alternative to obtaining workers'

compensation covera ge, that Respondent use an employee leasing

company.

10. Investigator Russell further suggested that

Mr. Goodenow exempt himself from the requirements of workersÓ

compensation and designate three other people as employees.

Investigator Russell recommende d that Respondent stop paying

UCT - 6 unemployment taxes on the rest of t he people, stop paying

their wi thholding taxes, and transition to a F orm 1099 method of

payment. He also suggested that American Pro Diving enter into

signed contracts with its indepen dent contractors.

11. In response to warnings and suggestions that he had

received from Investigator Russell, Mr. Goodenow ac quired an

exemption from worker s Ó compensation for himself on

September 18, 2014 , 3/ and contacted the Florida Joint

Underwriters Association to inquire about workers' compensation

coverage . Mr. Goodenow also retained Michael Dean, Esquire, as

legal counsel for American Pro Diving. 4 /

12. According to Investigator Russell, during a

conversation with Mr. Dean after Mr. Goodenow had a dvised that

Mr. Dean was Respondent's counsel and spokesperson, Mr. Dean

admitted that American Pro Diving employed, not as independen t

contractors, but as employees , Ron Goodenow, Sarah Huggett,

James Corbin Straub, Maria Ellis, and Michael Strmiska . A

r elated e - mail dated September 22, 2014, from Mr. Dean's legal

assistant stated:

Mr. Russell,

In response to your telephone conference

with Mr. Dean this morning, here is the

status of the employees you requested:

Sarah Huggett - See attached documents.

J ames Corbin Straub - Shop Staff, part - time - on

an "as needed basis" only.

Maria Ellis - Shop Staff.

Michael St r m i ska - Shop Staff.

Stephanie Perry - our daughter - helps mom with

payroll only for extra pocket money. (Does

not have to do payroll as Michele usually

does it.)

Attached to the e - mail was a "Captains License Receipt.pdf;

Sarah Huggett - TWIC Card.pdf."

13. Rather than finding that Mr. Dean's discussions and

his legal assistant's follow - up e - mail amount to admissions that

American Pro Diving had empl oyees required to be covered by

workers' compensation insurance, it is foun d that they amount to

nothing more than settlement discussions and negotiations. 5 /

This finding is based upon the fact that, at the time, American

Pro Diving was trying to react to Investigator Russell's

warnings, as well as upon the content of e - mail attachments,

which are consistent with Mr. Goodenow's unwavering assertion

that those working with American Pro Diving were independent

contractors.

14. In the meantime, Mr. Goodenow' s attempt to acquire

workersÓ compensation coverage was being frustrated. In

response to his inquiry, the Florida Joint Underwriters

Association suggested that Respondent be issued a class code for

oil - spill cleanup workers, as opposed to a code that woul d

reflect American Pro Diving ' s operations.

15. Mr. Goodenow contacted Investigator Russell by

telephone on September 26, 2014, and explained his frustration.

During the conversation Mr. Goodenow reiterated his position

that American Pro Diving did not h ave employees. After

conferring with his supervisors, Investigator Russell called

Mr. Goodenow back and informed him that if Respondent did not

come into compliance, a stop - work order would be issued.

16. Thereafter, without interviewing any of the

"empl oyees" purportedly identified by Mr. Dean, other than

Mr. Goodenow, on October 1, 2014, the Department issued the

Stop - Work Order against Respon dent. It was served on

October 15, 2015.

17. Prior to service of the Stop - Work Order, on October 2,

2014, Resp ondent submitted workers' compensation application

information to Investigator Russell with the assistance of its

new legal counsel, Kristian Dunn . Although the Department

introduced the submission and argued that it was an admission by

Respondent that it had employees, it is found that the

submission is nothing more than another attempt at settlement.

See E ndnote 4, below.

18. T he Department entered the Revocation on October 20,

2014 , releasing the Stop - Work Order Ðeffective back to the date

of issuance .Ñ A related Department memo dated October 20, 2014,

signed by Investigator Russell and his supervisor , explained,

"SWO [Stop - Work Order] was served after the employer obtained

his exemption which brought the total number of employees to

under four."

19. On November 18, 2014, the Department issued the Order

of Penalty Assessment against Respondent in the amount of

$35,429.50, without an accompanying stop - work order. The amount

of the assessment was based on imputed payroll during an alleged

penalty peri od from October 2, 2012, through Oc tober 1, 2014,

for alleged emp loyees Ron Goodenow, Sarah Huggett, James Corbin

Straub, Maria Ellis, and Michael Strmiska .

20. There is no evidence that any of the alleged

employees, other than Ron Goodenow, were inter viewed prior to

the issuance of the Order of Penalty Assessment.

21. The Department's Order of Penalty Assessment was

amended at the beginning of the hearing upon the granting of the

Department's Motion to Amend Order of Penalty Assessment , filed

June 5, 2015, just one week before the final hearing. The

D epartment's Amended O rder of Penalty Assessment reduced the

Order of Penalty Assessment from $35,429.50 , which was based on

imputed payroll, to $3,581.96 , based upon actual payroll

information . The penal ty period under the Amended Order of

Penalty Assessment is from December 5, 20 13, through October 1,

2014 .

22. Nicholas Thomas, penalty auditor for the Department,

calculated the Amended Order of Penalty Assessment against

Respondent based on the Depa rtment's allegation that Ron

Goodenow, Mariah Ellis, James Corbin Straub, Michelle Goodenow,

and Michael Strmiska were Respondent's employees.

23. In the Amended Order of Penalty Assessment, Mr. Thomas

used the payroll information in Respondent's bank re cords and

Department of Revenue UCT - 6 employment tax rep orts to calculate

the payroll for Respondent's alleged employees. Mr. Thomas

explained that, although he had the tax reports for over five

months, the delay in calculating the Amended Order of Penalt y

Assessment was because Respondent's bank records, alone, had

been determined insufficient, and he was initially unsure

whether he could use tax report information to assist in the

calculation of actual payroll.

24. Upon determining that he could use t he tax report s ,

Mr. Thomas then applied the premium rate associated with retail

shop operations to Respondent's payroll to determine the amounts

that Respondent would have paid in workers' compensation

insurance premiums for the alleged employees had Respo ndent

secured coverage during the penalty period.

25. As it was alleged that Respondent did not secure

required workers' compensation coverage for the named employees,

Mr. Thomas doubled this amount, pursuant to section

440.107(7)(d)l., Florida Statutes , to arrive at the penalty of

$3,581.96.

26. In his testimony, Mr. Thomas admitted that a person

having their UCT - 6 taxes paid by a company does not

automatically mak e that person an employee of that company.

27. Although Mr. Thomas had made an assumpt ion that one of

the payments in Respondent's records indicated that it had paid

for one of its workerÓs Coast Guard certifications, at the final

hearing, he admitted that the records provided by American Pro

Diving did not prove that any certifications or equipment for

the alleged employees was ever bought by Respondent.

28. Mr. Thomas accurately explained that for a non -

construction entity , a business with three or less employees is

not required to obtain workers' compensation coverage.

29. Mr. Thomas al so correctly stated that independent

contractors are not considered employees for purposes of

workersÓ compensation , and that such persons should not be

listed on a penalty worksheet .

30. Mr. Thomas obtained the names of the five alleged

employees for th e penalty calculation from Investigator Russell.

Mr. Thomas did not know whether the persons he listed on the

penalty work sheet had been interviewed by Investigator Russell.

Although Mr. Thomas spoke to Investigator Russell's supervisor,

he never spoke t o Investigator Russell about the people named on

the penalty worksheet. And, o ther than Mr. Goodenow, Mr. Thomas

did not know whether the other four people listed on the penalty

worksheet were independent contractors or employees.

31. In conducting the investigation, Investigator Russell

did not follow the Department's training procedures which direct

its investigators to interview all a lleged independent

contractors. It is clear that Mr. Goodenow told Investigator

Russell that all workers at American P ro Diving were independent

contractors. Other than his interview of Mr. Goodenow, however,

Investigator Russell did not interview any of the alleged

employees listed on the pen alty worksheet.

32. In contrast, with the exception of Ron Goodenow, all

of th ose workers at American Pro Diving interviewed by

Investigator Russell were determine d to be independent

contractors or otherwise excluded from the penalty worksheet.

33. According to the testimony of Kathleen Petracco, a 10 -

year employee of the Departmen t, who also worked in its Bureau

of Enforce ment for the Division of Worker s Ó Compensation, it is

improper and against Department procedure to assume the status

of a worker by looking only at UCT - 6 forms and the W - 4

applications without interviewing the wor kers to hear how the

workers describe themselves. That testimony is credited.

34. Alth ough there were up to 18 workers at American Pro

Diving who had their UCT - 6 taxes paid by Respondent, only the

five listed on the penalty worksheet were deemed employee s.

And, for those ultimately determined to be independent

contractors or otherwise absent from the penalty worksheet ,

Investigator Russell advised that his supervisors, not him, made

the determination. He did not know the basis of that

determination.

35. During his investigation, the only person Investigator

Russell observed working at the shop was Mike Perry, but Mike

Perry was not classified as an employee or listed on the penalty

worksheet.

36. Investigator Russell attempted to explain the decisi on

of who to list on the penalty worksheet by referencing

information he had seen on Respondent's website , which describes

the various backgrounds and talents of those working at American

Pro Diving . I t is found , however, that the website information

was i nsufficient to establish whether those workers were

employees when compared to the actual testimony and other

evidence adduced at the final hearing.

37. Respondent's owner, Goodenow, gave credible testimony

regarding his dive shop's business model and it s dependence on

independent contractors. Mr. Goodenow bought the dive shop 15

years ago. Since that time, he has been its president and only

officer . Before he bought it, Mr. Goodenow was an independent

contractor for the previ ous owners of the dive sho p, not an

employee . As now - owner and president, Mr. Goodenow was an

employee of American Pro Diving prior to receiving his

exemption .

38. American Pro Diving Ós business depends on tourists in

the Crystal River area for recreational diving tours. The

tou rs , in turn, are dependent on the seasons, the weather, and

manatee availability . As usual and customary for American Pro

Diving a nd other dive tour businesses in the industry,

Respondent utilizes individual independent contractors , as

opposed to employee s, in order to rem ain profitable and

competitive. With the use of independent contractors, labor

costs remain flexible and can adapt to seasonal and weather

fluctuations which impact the number of tourists.

39. In addition, the dive industry traditiona lly has been

populated by individuals that prefer to be independent

contractors because of the increased independence, mobility , and

schedule flexibility .

40. The independent contractor s utilized by American Pro

Diving provide their own gear and are respo nsible for the

acquisition and maintenance of their educational and

professional credentials . None of the workers at American Pro

Diving have fixed employment schedule s , there are no hourly

wage s , and everyone is paid based on tasks they undert ake, such

a s participating in dive tour s , handling boat s , or cleaning the

pool utilized for instruction. In addition, the workers Ó pay is

dependent on the number of customers on a boat, commission s from

gear sold, tips received from customers, or the numbers of

vide o s sold to the tourists.

41. Under Coast Guard regulations , vessel captains are

ultimately responsib le for their passengers . All captains

working with American Pro Diving carry , and personally pay for,

insurance to cover that potential liability. In fac t, all of

the workers at American Pro Diving carry their own liability

insurance , with the exception Mr. Straub and Mr. Strmiska , who

are teenagers without requisite experience.

42. America Pro Diving is insured for up to $2,000,000 for

the building and $ 2,000,000 for the business to cover its

customers and independent contractors. The coverage is

specifically designed to cover independent contractors and

customers, not employees.

43. All of those working at American Pr o Diving, with the

exception of Mr . Straub and Mr. Strmiska, possess Transportation

Worker Identification Card s (TWIC) issued by the Department of

Homeland Security. Those workers paid for the card application,

background check, and renewal . No portion of the expense was

paid by Responde nt.

44. Mr. Goodenow gave those working at American Pro Diving

the option of receiving payments using the W - 4 tax form metho d

whereby Respondent took out withholdings, as opposed to the form

1099 method . For convenience, a ll of the workers initial ly

chos e the W - 4 method. T he reason that Respondent also paid

unemployment taxes , evidenced by UCT - 6 reports for the workers ,

was because RespondentÓs accountant advi sed Mr. Goodenow to do

so to be consistent with the W - 4 form withholdings. During the

investiga tion in this case, however, Respondent began using the

form 1099 method of payment and stopped making withholding s .

45. Ms. Michelle Goodenow is Mr. GoodenowÓ s wife.

Although married to Mr. Goodenow, she is not an owner or officer

of American Pro Diving and shares no financial accounts with

Respondent or her husband.

46. Ms. Goodenow is a licensed captain who maintains her

own gear and pays for her own insurance, TWIC card, dive

cer tifications , captainÓs credentials and training costs . S he

also develo ped a school outreach program and makes school

presentations to bring in school groups to American Pro Diving

for tours. The amount of her pay is not by hourly wage or

salary, but based upon the amount of business she brings to

American Pro Diving . She m akes no money if no customers are

booked and could suffer a financial loss i f any of the equipment

is damaged . She receives no sick leave or vacation. She is

free to take her business to another dive shop if she chooses.

47. Ms. Goodenow chose to have her taxes withheld by

Respondent via the W - 4 method out of convenience, not because

she considered herself to be an employee. She has always viewed

herself as an independent contractor and never consid ered

herself to be an employee. T he Department exclu ded all other

licensed captain s from its list of RespondentÓs alleged

employees. The evidence otherwi se demonstrates that

Ms. Goodenow is not an employee of American Pro Diving, but

rather, is an independent contractor.

48. Michael Strmiska is Mr. and M r s. GoodenowÓs son.

There is no evidence that he has ever had an ownership interest

in American Pro Diving. He was 17 years old at the time of

Investigator RussellÓs investigation and 18 years old at the

final hearing. He possesses his own open - water div ing

credentials and equipment for work .

49. Mr. Strmiska works at American Pro Diving in Ð tour

support .Ñ Tour support encompasse s a variety of tasks from

helping customers with gear, helping tour operators with boat

handling and summer snorkel camps, a nd loading and unloading the

boat s. While helping gear - up customers, h e also sells gear and

receives commission s for sales over $1,500. He has never

received any hourly wage for the tasks he completed at American

Pro Diving.

50. A good portion of the money Mr. Strmiska made at

American Pro Diving was through conducting snorkel camps in the

summer with young children. If he did not have any at tendees ,

he would make no money. If the attendees were few in number,

his profits were less, because he was r esponsible for the cost

of setting up the camp, gas for the trucks, and potential for

damage to the equipment for which he was responsible .

51. Like the others work ing at American Pro Diving,

Mr. Strmiska never had a set schedule and would call in for

ava ilable work. He has always viewed himself as an independent

contractor due to the fact that he could work as much or as

little as he wanted . His skill and training are not entry

level . The money that he made was variable , depending on the

number of cust omers going on trips or purchasing gear. He also

had the option of accruing extra money on a per - task basis, as

opposed to hourly, by completing extra tasks, such as cleaning

the boats, washing the trucks, and cleaning the indoor pool

area.

52. The evide nce showed that Mr. Strmiska was an

independent contractor.

53. Maria Ellis is a 28 - year - old female, d ivemaster -

certified videographer for American Pro Diving tours . Although

not a licensed boat c aptain at the time of the investigation ,

she was working to get her hours to become a licensed captain.

While receiving tips from customers for her work as a boat mate,

the majority of her income was derived from sales of DVDs to

customers from her videography. If she failed to execute a

high - quality product, her sales would suffer.

54. Although she had her own video equipment when she

moved to Crystal River to work with American Pro Diving, she

used RespondentÓs camera to film the dive shopÓs customers

because it was compatible with the DVD copier at the di ve shop.

She was responsible for any damage to the equipment. Ms. Ellis

brought her own particular videographer skill s to American Pro

Diving that she acquired on her own through hours of practice,

personal expense, and trial and error.

55. Ms. Ellis w as otherwise responsible for her own gear,

liability insurance, dive certifications, dive equipment, and

was never paid by an hourly wage. Other than tips and payments

as a mate on a per - capita basis , s he made no money if no videos

were sold and could suf fer a financial loss if any of the

equipment was broken .

56. In order to work a tour, Ms. Ellis would call into

American Pro Diving to see if work was available .

57. Although Ms. Ellis chose to have her taxes withheld

under the W - 4 method for convenien ce, s he always considered

herself a sole proprietor, independent contractor , with her

office at her home. The facts support this conclusion.

58. James Corben Straub , who was at all pertinent times a

teenager, was the only one listed on the DepartmentÓs p enalty

calculation sheet, other than Mr. Goodenow, who testified at the

final hearing that he considered himself an employee, as opposed

to an independent contractor. His testimony was different than

his deposition testi mony, wherein, in response to a que stion of

whether he was an independent contractor, he testified that it

could go either way. Mr. Straub testified that he changed his

opinion about whether he was an independent contractor after

doing some research and considering the fact that he had bee n

required to sign a non - compete agreement with American Pro

Diving. 6 /

59. During the time that he wor ked at American Pro Diving,

Mr. Straub was never paid an hourly wage and was not on a work

schedule, but rather found out whether there was work to be d one

by calling in. In fact, Mr. Straub was infrequently at American

Pro Diving because of his involvement with the Four - H Club.

60. While working at American Pro Diving, Mr. Straub Ós pay

was based on a task - by - task basis, even if the tasks took longer

on some days than others . His tasks and opportunities at

American Pro Diving were similar to those of Mr. Strmiska. Like

Mr. Strmiska and other independent contractors at American Pro

Diving, Mr. Straub could potentially suffer a loss from damaging

a vehic l e or equipment under his charge.

61. Mr. Straub admitted that he chose to be paid on a W - 4

tax withholding basis for convenience, instead of having to fill

out a quarterly report , if paid under the F orm 1099 method. He

never received traditional benefit s associated with employees.

When he attempted to renegotiate with Mr. Goodenow for an

employee - type position with traditional benefits, he was

unsuccessful.

62. Mr. Straub may not have considered himself an

independent contractor when he testified at tr ial , but his work

schedule, responsibilities and expectations were much the same

as other independent contractors working at American Pro Diving.

CONCLUSIONS OF LAW

63. The Division of Administrative Hearings has

jurisdiction over the subject matter and p arties of this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat . (2015).

64. The Department is responsible for enforcing the

requirement that employers coming within the provisions of

chapter 440 obtain workers' compensation coverage for their

employees " that meets the requirements of [chapter 440] and the

Florida Insurance Code." § 440.107(2), Fla. Stat.

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

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

66. Every employer is required t o secure the payment of

workers' compensation for the benefit of its employees , unless

exempted or excluded und er chapter 440 . § 440.10, Fla. Stat.

67. "Employment , " subject to Florida's workers'

compensation law , includes Ð[a]ll private employments in which

four or more employees are employed by the same employer or,

with respect to the construction industry, all private

employment in which one or more employees are employed by the

same employer. § 440.02(17)(a) & (b)(2), Fla. Stat.

68. The term "empl oyee , " as used in chapter 440 , includes

"[a]n independent contractor working or performing services in

the construction industry .Ñ § 440.02(15)(c) 3. , Fla. Stat.

69. However, i ndependent contractors who are not working

in the construction industry are spe cifically excluded from the

chapter 440 definition of employee. See 440.02(15)(d)1., Fla.

Stat. (ÐÒEmployeeÓ does not include . . . [a]n independent

contractor who is not engaged in the construction industry.Ñ).

70. Respondent i s a non - constructi on bus iness entity in

the dive industry. As a non - construction entity, the

requirements for workersÓ compensation coverage are triggered

when four or more employees are hired by a business . If there

are under three employees then the business may operate witho ut

workersÓ compensation coverage. S ee § 440.02(17)(a) & (b)(2),

Fla. Stat. , quoted above.

71. Because the Department is seeking to prove violations

of a statute and impose administrative fines or other penalties,

it has the burden to prove the allegatio ns in the complaint by

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

292 (Fla. 1987).

72. Even though the Department has the ultimate burden , in

this case, Respondent is asserting that all of its workers,

except for its owner, Ron Goode now, are independent contractors.

Section 440 .02 (15)(d)1. c. provides:

Notwithstanding anything to the contrary in

this subparagraph, an individual claiming to

be an independent contractor has the burden

of proving that he or she is an independent

contrac tor for purposes of this chapter.

73. The criteria required to meet the definition of

independ ent contractor are set forth in s ection

440.02(15)(d)1 .a. & b . , which provide :

a. In order to meet the definition of

independent contractor, at least four of the

following criteria must be met:

(I) The independent contractor maintains

a separate business with his or her own work

facility, truck, equipment, materials, or

similar accommodations;

(II) The independent contractor holds or

has applied for a federal employer

identification number, unless the

independent contractor is a sole proprietor

who is not required to obtain a federal

employer identification number under state

or federal regulations;

(III) The independent con tractor receives

compensat ion for services rendered or work

performed and such compensation is paid to a

business rather than to an individual;

(IV) The independent contractor holds one

or more bank accounts in the name of the

business entity for purposes of paying

business expe nses or other expenses related

to services rendered or work performed for

compensation;

(V) The independent contractor performs

work or is able to perform work for any

entity in addition to or besides the

employer at his or her own election without

the necessity of completing an employment

application or process; or

(VI) The independent contractor receives

compensation for work or services rendered

on a competitive - bid basis or completion of

a task or a set of tasks as defined by a

contractual agreeme nt, unless such

contractual agreement expressly states that

an employment relationship exists.

b. If four of the criteria listed in sub -

subparagraph a. do not exist, an individual

may still be presumed to be an independent

contractor and not an employe e based on full

consideration of the nature of the

individual situation with regard to

satisfying any of the following conditions:

( I) The independent contractor performs

or agrees to perform specific services or

work for a specific amount of money and

controls the means of performing the

services or work.

(II) The independent contractor incurs

the principal expenses related to the

service or work that he or she performs or

agrees to perform.

(III) The independent contractor is

responsible for the satisfactory completion

of the work or services that he or she

p erforms or agrees to perform.

(IV) The independent contractor receives

compensation for work or services performed

for a commission or on a per - job basis and

not on any other basis.

(V) The independent contractor may

realize a profit or suffer a loss in

connection with performing work or services.

(VI) The independent contractor has

continuing or recu rri ng business liabilities

or obligations .

(VII) The success or failure of the

inde pendent contractor's business depends on

the relationship of business receipts to

expenditures.

74. As noted in the Findings of Fact, above, of those five

alleged employees listed on the penalty worksheet, Michelle

Goodenow, Mariah Ellis, and Michael Str miska , all believed

themselves to be independent contractors, and they are found , as

a matter of fact, to be independent contractors. Further, by

c omparing the factual evidence of those three employees to the

above criteria set forth in section 440.02(15) (d)1. , quoted

above, it is concluded that each demonstrated that they

satisfied the following four criteria set forth in section

440.02(15)(d)1. a. : (I) [maintained their own equipment] ;

II [were sole proprietors not required to obtain a federal

emplo yer identification number]; III [we re able to work for any

entity]; and VI [ pay based on completion of task or series of

tasks].

75. In addition to meeting four criteria under section

440.02(15)(d)1.a., the three employees also satisfied I, III,

IV , V, an d VI of section 440.02(15)(d)1.b.

76. While arguably, Mr. Straub also qualified as an

independent contractor, as the statute places the burden on one

claiming to be an independent contractor to satisfy the

criteria, a determination of whether Mr. Straub i s an employee

or independent contractor has not been made. Moreover , as three

of the five listed on the penalty worksheet demonstrated that

they were not employees, further determination of Mr. StraubÓs

classification is unnecessary because the Department failed to

meet its burden of proving that Respondent had four or more

employees as alleged in the Amended Order of Penalty Assessment

asserted against American Pro Diving. See § 440.02(17)(a) &

(b)(2), Fla. Stat., quoted above ; see also Balino v. DepÓt o f

HRS , 348 So. 2d 349 (Fla. 1st DCA 1977) ( party asserting the

affirmative has the burden of proof ) .

77. Although the Department relied on the fact that

Respondent made W - 4 tax withholdings and filed UCT - 6s for those

working at American Pro Diving, that ev idence, in light of other

evidence and law analyzed above , was insufficient to establish

that four or more of the workers listed on the penalty

calculation worksheet, were employees. See e.g. , D.F.S v. DTS,

LLC , Case No. 09 - 3484 (Fla. DOAH Jan. 29, 2010; Fla. DepÓt. of

Fin. Servs. Apr. 28, 2010)(adopted R ecommended O rder finding

that workers were independent contractors despite evidence that

federal income tax withholdings and various other deductions,

such as Social Security and Medicare, were withheld fr om

compensation).

78. In sum, t he Department did not establish by clear and

convincing evidence that Respondent failed to secure the payment

of workers' compensation under chapter 440 .

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusio ns

of Law, evidence of record, candor and demeanor of the

witnesses, and arguments of the parties, it is , therefore,

RECOMMENDED that a final order be entered by the Department

of Financial Services, Division of WorkersÓ Compensation,

dismissing the Amend ed Order of Penalty Assessment, in its

entirety.

DONE AND ENTERED this 7th day of October , 2015, in

Tallahassee, Leon County, Florida.

S

JAMES H. PETERSON, III

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apal achee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 7th day of October , 2015.

ENDNOTES

1/ Unless otherwise indicated, all citations to the Florida

St a tutes are to the 2014 versions.

2/ Unfortunately, the Department's Proposed Recommended Order

failed to provide citations to the record.

3/ An officer of a corporation who validly elects to be exempt

by filing a notice of the election with the Departme nt , as

provided in section 440.05 , is not an employee.

§ 440.02(15)(b) 3. , Fla. Stat.

4 / Although the exact timing was not established, the evidence

also showed that, after Mr. Goodenow received Investigator

RussellÓs warnings and suggestions, Respondent stopped fil ing

UCT - 6s and switched to the F o rm 1099 method of payment.

Mr. Goodenow also acquired a written contract form with the

intent of entering into written agreements to make it clear that

those working with American Pro Diving were independent

co ntractors. The form apparently contained a non - compete

clause. Although some workers signed those forms, no signed

contracts were submitted into evidence. While the Department

argued that the purported non - compete clauses were contrary to

RespondentÓs p osition that its workers were independent

contractors, the evidence showed that inclusion of a non - compete

clause was inadvertent, that Respondent never attempted to

enforce a non - compete clause, and that al l workers at American

Pro Diving were always free to work and use their skills with

any other dive shops or tours in the dive industry.

5 / Ð Evidence of an offer to compromise a claim which was

disputed as to validi ty or amount, as well as any relevant

conduct or statements made in negotiations concerni ng a

compromise, is inadmissible to prove liability or absence of

liability for the claim or its value. Ñ § 90.408, Fla. Stat.

6 / The alleged non - compete agreement was not offered or

introduced into evidence. Although Mr. Straub testified that he

was re quired to sign a non - compete agreement when he began

working at American Pro Diving, considering other evidence and

testimony that workers were not required to sign contracts until

after Investigator RussellÓs suggestions to Mr. Goodenow during

his investi gation, it is found that the purported non - compete is

in the same category as described in E nd note 3, above.

COPIES FURNISHED :

Kristian Eiler Dunn, Esquire

Dunn and Miller, P.A.

215 East Tharpe Avenue

Tallahassee, Florida 32308

(eServed)

Alexander Br ick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 03 90

(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 with the

agency that will issue the Final Order in this case.