14-006004 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Axiom Construction Design Corporation Status: Closed Recommended Order on Tuesday, June 2, 2015.

Summary: Petitioner established that Respondent did not have workers' compensation coverage for his workers/sub-contractor. The third amended penalty is affirmed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 14 - 6004

AXIOM CONSTRUCTION DESIGN

CORPORATION,

Respondent.

_______________________________/

RECOMMENDED ORDER

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

March 24, 2015, in Bartow, Florida, before Administrative Law

Judge Lynne A. Quimby - Pennock of the Division of Administrative

Hearings (Division).

APPEARANCES

For Pet itioner: Hugh Dolisca, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Nancy Jo Lair - Goodfellow, C.P.A.

Goodfellow and Company, CPA, Inc.

344 South Woodland Boulevard

Deland, Florida 32720

STATEMENT OF THE ISSUE S

The issues in this case are whether Respondent, Axiom

Construction Design Corporation (Axiom) , fa iled to provide

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

be imposed.

PRELIMINARY STATEMENT

On July 23, 2014, Petitioner, Department of Financial

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

an O rder of P enalty A ss essment against Axiom. On October 13, the

Department filed a 2nd A mended O rder of P enalty A ssessment

against Axiom. Axiom disputed the O rder of P enalty A ssessment

and requested an administrative hearing. The case was forwarded

to the Division on Decembe r 18, for the assignment of an

a dministrative l aw j udge. The hearing was originally scheduled

for February 10, 2015.

On March 18, 2015, the Department filed a M otion to A mend

the O rder of P enalty A ssessment ( M otion). The M otion was heard

and granted. Th e 3rd A mended O rder of P enalty A ssessment was for

$20,221.62 , which was $1,271.58 less than the 2 n d A mended O rder

of P enalty A ssessment.

Following one continuance, the final hearing was scheduled

for and heard on March 24. At the hearing, AxiomÓs presiden t,

Michael Pratt , appeared with Nancy Jo Lair - Goodfellow, who was

accepted as AxiomÓs q ualified r epresentative.

At the hearing, the Department presented the testimony of

investigator supervisor Jamari Bellaflores - Brown and penalty

auditor Rean Knopke from the Department. The Department

presented 15 exhibits, all of which were admitted into evidence.

Axiom called Mr. Pratt to testify. Axiom offered Exhibits one,

and three through five, which were admitted into evidence. The

DepartmentÓs counsel requested to file its proposed recommended

order 15 days after the transcript was filed. AxiomÓs qualified

representative did not object, and the request was granted.

The one - volume Transcript was filed on April 8 . On April 9 ,

a Notice of Filing Transcript was issued , wherein the parties

were informed that the Transcript had been filed and their

proposed recommended orders (PROs) were to be filed before the

close of business on April 23. On April 14, an A greed M otion for

an E xtension of T ime to S ubmit the PROs was filed. The motion

was granted, and the parties were informed to file their PROs

before the close of business on May 11. The Department filed its

PRO on May 11. On May 11, Axiom filed an E mergency M otion for

E xtension to F ile P roposed R ecommended Or der, citing good cause

and containing the notice that the Department did not object.

The motion was granted and Axiom timely filed its PRO on May 18.

Each PRO has been considered in the preparation of this

Recommended Order. Axiom filed an attachment to its PRO t hat was

not produced at hearing, and therefore not subject to cross

examination . T hat attachment has not been considered.

References to statutes are to Florida Statutes (2014) ,

unless otherwise noted.

FINDING S OF FACT

1. The Department is the s tate agency responsible for

enforcing the various requirements of chapter 440, Florida

Statutes. S ection 440.107(3) mandates, in relevant part, that

employers in Florida must secure workersÓ compensation insurance

coverage for their employees.

2. At all times relevant, Axiom was a small Florida

corporation engaged in the construction industry, principally

installing drywall. AxiomÓs principal office is located at 1067

Walt Williams Road, Lakeland, Florida. Mr. Pratt is AxiomÓs

owner, sole corporate offi cer , and registered agent.

3. On July 23, 2014, Randall Durham conducted a job site

workersÓ compensation compliance investigation ( C ompliance

I nvestigation). Mr. Durham spoke with Mr. Pratt at a job site at

109 Cattleman Road, the new Sarasota mall. Mr . Pratt and

Al Lappohn were working the job site at the new mall. Mr. Pratt

had a workersÓ compensation policy in place with Southeast

Personnel Leasing. Mr. Lappohn did not have an exemption from

workersÓ compensation coverage, and he was not covered b y AxiomÓs

Southeast Personnel Leasing policy.

4. On July 23, 2014, Mr. Pratt, as AxiomÓs representative ,

was hand - served a Stop - Work Order 1/ and a Request for Production

of Business Records for Penalty Assessment Calculation (Request).

This Request enc ompassed all of AxiomÓs payroll documents,

account documents, disbursements, workersÓ compensation coverage

policies, and professional employer organization records from

January 4, 2013 , through July 2 3 , 2014.

5. Mr. Pratt provided the certificates of lia bilities ,

payroll and tax records for 2013, and additional business records

to the Department. These records were given to Mr. Knopke to

calculate the penalty. In reviewing the records, Mr. Knopke

determined that Mr. Pratt, Mr. Lappohn and Frank Cutts we re

employees of Axiom, and that Axiom did not provide workers Ó

compensation coverage for them.

6. Mr. Cutts worked for Axiom at a Family Dollar Store

build - out in Orlando in early 2014. Mr. Cutts swept up after the

drywall was installed in the store, and was paid $125.

7. Axiom conceded it owed the workers Ó compensation penalty

based on the work Mr. Lappohn and Mr. Cutts performed.

8. The business records provided that during the audit

period Mr. Pratt had dual employment, payment being paid outside

of leasing. Dual employment is when a business has a leasing

policy and there is extraneous payroll that is paid outside of

the leasing policy. Payments received outside of a leasing

policy are considered unsecured payroll for the purposes of

calculating a penalty against an employer. Mr. Knopke included

Mr. PrattÓs outside distributions in the penalty calculation.

9. The ÐScopes ManualÑ is published by the National Council

on Compensation Insurance, Inc. (NCCI), the nationÓs most

authoritative data coll ecting and disseminating organization for

workersÓ compensation. The manual contains certain codes related

to the construction industry and trades considered to be within

that industry. The installation of drywall, wallboard,

sheetrock, plasterboard or c ement board is considered to be

ÐconstructionÑ under the relevant codes in the manual. The

manual, with its codes and classifications, is relied upon in the

insurance industry and has been adopted by the Department in

Florida Administrative Code Rule 69L - 6.021.

10. Mr. Knopke, using the manual , determined the

appropriate classification code for RespondentÓs employees was

5445. Mr. Knop k e applied the correct rates and used the

methodology found in section 440.107(7)(d)1., and Florida

Administrative Code Rules 69L - 6.027 and 69L - 6.028 to calculate

the penalty assessment. Based upon the testimony and exhibits,

the 3rd A mende d P enalty A ssessment in the amount of $20,221.62 is

accurate and correct.

CONCLUSIONS OF LAW

11. The Division has jurisdiction over th e parties to and

the subject matter of this proceeding. §§ 120.569 and 120.57,

Fla. Stat.

12. The Department has the burden of proof in this case and

must show by clear and convincing evidence that the employer

violated the workers' compensation law and that the penalty

assessments were correct under the law . Dep't of Banking & Fin.

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

13. In Evans Packing Co mpany v. Dep artment of Agric ulture

& Consumer Serv ices , 550 So. 2d 112, 116, n.5 (Fla. 1st DCA

19 89), the Court defined clear and convincing evidence as

follows:

Clear and convincing evidence requires that

the evidence must be found to be credible;

the facts to which the witnesses testify must

be distinctly remembered; the evidence must

be precise and explicit and the witnesses

must be lacking in confusion as to the facts

in issue. The evidence must be of such

weight that it produces in the mind of the

trier of fact the firm belief of conviction,

without hesitancy, as to the truth of the

allegations s ought to be established.

Slomowitz v. Walker , 429 So. 2d 797, 800

(Fla. 4th DCA 1983).

14. Employers are required to secure workers' compensation

coverage for their employees. Chapter 440 is known as the

"Workers' Compensation Law." §§ 440.10(1)(a) and 440.38(1), Fla.

Stat. Section 440.107(3) charges the Department with the

responsibility for enforcing compliance with the workersÓ

compensation l aw and requires issuance of Stop - Work Orders and

Penalty Assessment Orders in carrying out the enforcement of

workersÓ compensation coverage requirements.

15. Section 440.02(15)(a) defines "employee" in part as:

a ny 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 .

16. Section 440.02(16)(a) defines "employer" in part as:

every person carrying on any employment,

. . . ÐEmployerÑ also includes employment

agencies, employee leasing companies , and

similar agents who provide employees to other

persons. If the employer is a corporation,

parties in actual control of the corporation,

including, but not limited to, the president,

officers who exercise broad corporate powers,

directors, and all sha reholders who directly

or indirectly own a controlling interest in

the corporation, are considered the employer

for the purposes of ss. 440.105, 440.106, and

440.107.

17. Section 440.02(17)(b)2. defines ÐemploymentÑ in

pertinent part as:

with respect to the construction industry,

all private employment in which one or more

employees are employed by the same employer.

18. Section 440.107(2) provides in pertinent part:

For the purposes of this section, Ðsecuring

the payment of workersÓ compensationÑ means

obtaining coverage that meets the

requirements of this chapter and the Florida

Insurance Code.

19. Section 440.107(7)(d)1 . provides in pertinent part:

In addition to any penalty, stop - work order,

or injunction, the department shall assess

against any employer who has failed to secure

the payment of compensation as required by

this chapter a penalty equal to 2 times the

amount the employer would have paid in

premium when applying approved manual rates

to the employerÓs payroll during periods for

which i t failed to secure the payment of

workersÓ compensation required by this

chapter within the preceding 2 - year period or

$1,000, whichever is greater.

The method of penalty calculation described in section

440.107(7)(d) is mandatory.

20. Section 440.02(8) provides:

ÐConstruction industryÑ means for - profit

activities involving any building, clearing,

filling, excavation, or substantial

improvement in the size or use of any

structure or the appearance of any land.

. . . The division may, by rule, establish

c odes and definitions thereof that meet the

criteria of the term Ðconstruction industryÑ

as set forth in this section.

21 . Pursuant to that authority , the DepartmentÓs Division

of WorkersÓ Compensation promulgated Florida Administrative Code

Rule 69L - 6.02 1, which adopts the classification codes and

descriptions found in the Scopes Manual, as referenced in the

above findings of fact.

22. Rule 69L - 6.035 provides the definition of payroll for

calculating penalty as:

(1) For purposes of determining payroll f or

calculating a penalty pursuant to Section

440.107(7)(d)1., F.S., the Department shall

when applicable include any one or more of

the following as remuneration to employees

based upon evidence received in its

investigation:

(a) Wages or salaries paid to employees by

or on behalf of the employer;

(b) Payments, including cash payments, made

to employees by or on behalf of the employer;

(c) Payments, including cash payments, made

to a third person or party by or on behalf of

the employer for services prov ided to the

employer by the employees;

(d) Bonuses paid to employees by or on

behalf of the employer;

(e) Payments made to employees by or on

behalf of the employer on any basis other

than time worked, such as piecework, profit

sharing, dividends, income distributions, or

incentive plans;

(f) Expense reimbursements made to employees

by or on behalf of the employer, to the

extent that the employerÓs business records

do not confirm that the expense was incurred

as a valid business expense;

(g) Loans made to employees by or on behalf

of the employer to the extent that such loans

have not been repaid to the employer;

(h) Payments or allowances made by or on

behalf of the employer to employees for tools

or equipment used by employees in their work

or operati ons for the employer, even in cases

where the tools are supplied directly by the

employee or to the employee through a third

party;

(i) Total contract price of a service

provided by the employer, excluding the cost

for materials as evidenced in the employ erÓs

business records or contract. In the event

the costs for materials is included in the

total contract price and cannot be separately

identified in the total contract price,

eighty percent of the total contract price

shall be the employerÓs payroll; an d

(j) Income listed in ÐForm 1099

Miscellaneous IncomeÑ issued to a person,

excluding the cost of materials as evidenced

by business records from the person to whom

the Form 1099 Miscellaneous Income was

issued. In the event such records are not

provided to the Department to determine the

cost of such materials, the entire amount of

the income listed on the ÐForm 1099

Miscellaneous IncomeÑ shall be included in

the employerÓs payroll.

23. Based upon AxiomÓs concessions and records, Mr. Knopke

correctly c alculated the third amended penalty, for the period of

noncompliance with the workersÓ compensation law using the

penalty calculation adopted in the statute and rule s .

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is REC OMMENDED that the Department of Financial Services,

Division of WorkersÓ Compensation , issue a final order upholding

the 3 rd Amended Order of Penalty Assessment, and assess a penalty

in the amount of $20,221.62.

DONE AND ENTERED this 2nd day of June , 2015 , in Tallahassee,

Leon County, Florida.

S

LYNNE A. QUIMBY - PENNOCK

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 2nd day of June , 2015 .

ENDNOTE

1/ AxiomÓs representative, Mr. Pratt, paid a $1,000.00 fine, and

was given temporary authority to work agai n. No other evidence

was presented on this payment or the temporary authority to

continue to work at the mall location.

COPIES FURNISHED:

Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 6502

(eServed)

Nancy Jo Lair - Goodfellow, C.P.A.

Goodfellow and Company, CPA, Inc.

344 South Woodland Boulevard

Deland, Florida 32720

(eServed)

Hugh Dolisca, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

(eSe rved)

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 ex ceptions 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.