15-001596 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Leonard Leonard, D/B/A Leo's Touch Hand Car Wash Status: Closed Recommended Order on Thursday, July 2, 2015.

Summary: The Department proved by clear and convincing evidence that Respondent employed four or more individuals and was required to secure workers' compensation coverage which it did not have. The $50,505.36 assessment should be imposed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS Ó

COMPENSATION,

Petitioner,

vs. Case No. 15 - 1596

LEONARD LEONARD, d/b/a LEO Ó S

TOUCH HAND CAR WASH,

Respondent.

_______________________________/

RECOMMENDED ORDER

A final hearing was held in this matter before Robert S.

Cohen, Administrative Law Judge with the Division of

Administrative Hearings ( Ð DOAH Ñ ), on May 14 , 2015, by video

teleconferencing at sites located in Miami and Tallahassee,

Florida .

APPEARANCES

For Petitioner: Leon Melnicoff , Qualified Representative

Alexander Brick, Esquire

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Gil Godfrey, Esquire

Suite 205

7400 Southwest 50th Terrace

Miami, Florida 33155

STATEMENT OF THE ISSUE

The issue is whet her the Stop - Work Order , Amended Stop - Work

Order , and Amended Order of Penalty Assessment entered by

Petitioner on January 14 and 22, 2015 , and February 23, 2015 ,

respectively, should be upheld.

PRELIMINARY STATEMENT

On January 14, 2015, following an anony mous lead, Department

of Financial Services Ó Investigator Jose Lopez conducted a

workers Ó compensa tion check at 6075 Biscayne Boulevard in Miami.

He confirmed that two businesses operated from that location,

Europa Car W ash and Café, LLC ( Ð Europa Ñ ) , and L eo Ó s Touch Hand

Car W ash ( Ð Leo Ó s Touch Ñ ). Mr. Lopez determined from state

records that Europa had secured workers Ó compensation coverage,

but that Leo Ó s Touch had not. After discussing the requirements

of the W orkers Ó C ompensation L aw for covering employ ees of a

Florida business, Mr. Lopez, on the basis of Leo Ó s Touch Ó s

failure to secure workers Ó compensation coverage for its four

employees, served a Stop - Work Order and Order of Penalty

Assessment ( Ð Stop - Work Order Ñ ) to Leo Ó s Touch. On January 22,

2015, the Department of Financial Services (the Ð Department Ñ )

served an Amended Stop - Work Order and Order of Penalty Assessment

( Ð Amended Stop - Work Order Ñ ) on Leo Ó s T ouch which removed an

errant Federal Employers Identification Number from the Stop - Work

Order. On February 26, 2015, the Department served an Amended

Order of Penalty Assessment ( Ð AOPA Ñ ) to Leo Ó s Touch assessing a

total penalty of $50,505.36. Leo Ó s Touch timely filed a request

for a formal administrative hearing. The request was referred to

DOAH o n March 23, 2015.

At the hearing, Petitioner presented the testimony of Jose

Lopez, a c ompliance i nvestigator, and Nathani e l Hatten, a p enalty

a uditor , and offered 14 exhibits, all of which were admitted into

evidence. Respondent presented the testimony o f Leonard Leonard,

the owner of Leo Ó s Touch, and Georgia Leonard, his wife, and

offered no exhibits into evidence.

A one - volume Transcript of the final hearing was filed on

June 8, 2015 . After the hearing, Petitioner and Respondent filed

their proposed findings of fact and conclusions of law on June 17

and 18, 2015, respectively .

References to statutes are to Florida Statutes (201 4 ) unless

otherwise noted.

FINDING S OF FACT

1. The Department is the state agency responsible for

enforcing the statutory requirement that employers secure the

payment of workers Ó compensation for the benefit of its

employees.

2. At all times relevant to this matter, Leonard Leonard

owned Leo Ó s Touch, a business located at 6705 Biscayne Boulevard ,

Miami, F lorida 33137.

3. Leo Ó s Touch actively engaged in business as a car wash

in Florida throughout the period of January 15, 2013, through

January 14, 2015.

4. On January 14, 2015, the Department Ó s investigator, Jose

Lopez, received a public, anonymous referral , which led him to

6705 Biscayne Boulevard , Miami, F lorida 33137 to conduct a

workers Ó compensation compliance investigation of Leo Ó s Touch.

5. Investigator Lopez determined that two businesses

operated at 6705 Biscayne Boulevard -- Leo Ó s Touch and Europa.

6. At the work site, Mr. Lopez observed Leonard Leonard,

Jean Philippe Valbonard, Keny Nilas, Franc Maitre, and Mario Elma

washing cars. Messrs . Valbonard, Nilas, Maitre, and Elma wore

uniform shirts reading Ð Leo Ó s Touch Hand Car Wash. Ñ

7. Mr. Leonard told Mr. Lopez that he owned the business.

Mr. Leonard directed Investigator Lopez to enter Europa to obtain

the information regarding the occupational license and workers Ó

compensation insurance for the business.

8. Mr. Morris, the manager of Europa, informed Mr. Lope z

that Leo Ó s Touch is a separate entity subleasing the premises

from Europa and that the c afé is not responsible for the

employees of Leo Ó s Touch.

9. Mr. Leonard told Mr. Lopez that Leo Ó s Touch had no

workers Ó compensation insurance for its employees.

10. Mr. Lopez then searched the Department Ó s Coverage and

Compliance Automated System for workers Ó compensation coverage or

exemptions for Leo Ó s Touch. Leo Ó s Touch had no workers Ó

compensation coverage or exemptions.

11. Messrs. Valbonard, Nilas, Maitre, a nd Elma told

Investigator Lopez they were employees of Leo Ó s Touch for various

lengths of time ranging from six months to two years.

12. Mr. Lopez determined at this point that Leo Ó s Touch

employed at least four uninsured employees in violation of the

Wor kers Ó Compensation Law.

13. On January 14, 2015, Mr. Lopez witnessed Mr. Leonard,

as well as three other employees (Messrs. Valbonard, Nilas, and

Maitre) , onsite washing cars. Mr. Elma arrived at the site to

collect his pay, but was not observed washing cars that day.

From his investigation that day, Mr. Lopez determined that

Mr. Leonard employed four individuals at the car wash. He

concluded that workers Ó compensation coverage was required on the

part of Leo Ó s Touch.

14. On January 14, 2015, Mr. Lopez served Leo Ó s Touch with

the Stop - Work Order , as well as a Request for Production of

Business Records for Penalty Assessment Calculation ( Ð Business

Records Request Ñ ). The Business Records Request sought

production of Leo Ó s Touch Ó s employer licenses, payro ll documents,

business accounts documents, and workers Ó compensation coverage

to enable the Department to determine the appropriate penalty

owed by Leo Ó s Touch.

15. Nathaniel Hatt e n, a penalty auditor for the Department,

was assigned to calculate the appr opriate penalty to be assessed

Leo Ó s Touch in February 2015. Penalties for workers Ó

compensation violations are based upon the amount of evaded

insurance premiums over the two - year period preceding the Stop -

Work Order, multiplied by two. At the time of M r. Hatten Ó s

assignment, Leo Ó s T ouch had not provided the Department with any

business records. Mr. Hatten was, therefore, not able to

determine Leo Touch Ó s gross payroll.

16. Without sufficient payroll records from Leo Ó s Touch to

accurately calculate the amount of penalty due, Mr. Hatten was

required to impute income using twice the statewide average

weekly wage effective at the time the Stop - Work Order was issued

to Leo Ó s Touch. He calculated the penalty assessment to be

$50,505.36, which was the result of the methodology required by

section 440.107 (7) (e), Florida Statutes, and Florida

Administrative Code R ule 69L - 6.028. The Department served the

AOPA on Leo Ó s Touch on February 26, 2015.

17. For the penalty assessment calculation, Mr. Hatten

consulte d the classification codes listed in the Scopes Manual.

Classification codes are four - digit codes assigned to occupations

by the National Council on Compensation Insurance ( Ð NCCI Ñ ) to

assist in the calculation of workers Ó compensation insurance

premiums.

18. Mr. Hatten assigned Class Code 8380, Automobile Service

or Repair Canter & Drivers, to Leo Ó s Touch Ó s payroll because

Investigator Lopez observed Messrs. Valbonard, Nilas, Maitre, and

Elma washing cars on the day of the site visit. The NCCI Scopes

M an ual class code description for 8380 specifies that Ð Code 8380

includes all types of car wash facilities. Ñ

19. Mr. Hatten applied the appropriate manual rates

corresponding to Class Code 8380 for the periods of non -

compliance in the penalty calculation. M r. Hatten utilized the

manual rates to satisfy his statutory obligation to determine the

evaded workers Ó compensation insurance premium amounts pursuant

to section 440.107 (7) (d)1.

20. Leo Ó s Touch provided no records to the Department until

the beginning o f May 2015. The records were not provided within

the time frame mandated by r ule 69L - 6.028(4). The records

provided by Leo Ó s Touch were insufficient to enable the

Department to determine the payroll of Leo Ó s Touch. The records

contained no information a bout the identity of employees, amounts

of pay, or employment periods. Therefore, the Department had no

choice but to impute Leo Ó s Touch Ó s payroll.

21. Mr. and Mrs. Leonard both gave impassioned testimony

about how little the business earns; how they rel ied upon Europa

to have been providing any necessary workers Ó compensation

coverage; how the four identified workers were no more than

casual employees; and how they could under no circumstances have

ever generated sufficient income to support an assessmen t of more

than $50,000. They appeared sincere in their testimony, yet

produced no credible evidence in the form of payroll records,

testimony from the four employees, or testimony or records from

Europa to support their contentions.

22 . The Department de monstrated by clear and convincing

evidence that Leo Ó s Touch violated the Workers Ó Compensation Law

by employing at least four nonexempt uninsured employees.

CONCLUSIONS OF LAW

23 . The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

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

24. Because administrative fines are penal in nature, the

Department has the burden of proving by clear and convincing

evidence that Respondent violated the Workers Ó Com pensation Law

during the relevant time period and that the penalty assessments

are correct. Dep Ó t of Banking & Fin. v. Osborne Stern & Co. , 670

So. 2d 932, 933 - 34 (Fla. 1996).

25 . The Department is the agency responsible for

enforcement of c hapter 440, F lorida Statutes. As the responsible

agency, the Department must abide by the statutes and rules that

govern it.

26 . Pursuant to sections 440.10, 440.107(2), and 440.38,

Florida Statutes, every Ð employer Ñ is required to secure the

payment of workers Ó comp ensation for the benefit of its employees

unless exempted or excluded under c hapter 440. Strict compliance

with the Workers Ó Compensation Law is required. See C&L Trucking

v. Corbitt , 546 So. 2d 1185, 1186 (Fla. 5 th DCA 1989).

27 . Section 440.107(2) sta tes that ÐÒ securing the payment

of workers Ó compensation Ó means obtaining coverage that meets the

requirements of this chapter and the Florida Insurance Code. Ñ

2 8 . Pursuant to section 440.107(3)(g), Ð [t] he department

shall enforce workers Ó compensation co verage requirements Ñ and

Ð shall have the power to . . . [i] ssue stop - work orders, penalty

assessment orders, and any other orders necessary for the

administration of this section. Ñ

2 9 . Section 440.02(16)(a), Florida Statutes, defines

Ð employer, Ñ in part, as Ð every person carrying on any

employment. Ñ

30 . Ð Employment Ñ is defined as Ð any service performed by an

employee for the person employing him or her , Ñ and the definition

includes Ð [a]ll private employments in which four or more

employees are employed by the same employer. Ñ § 440.02(17)(a)

and (b)2 ., Fla. Stat . Leo Ó s Touch employed at least four

individuals on January 14, 2015: Jean Philippe Valbonard, Keny

Nilas, Franc Maitre, and Mario Elma. Therefore, Leo Ó s Touch was

required to secure the payment of workers Ó compensation insurance

coverage.

3 1 . A statutory exception exists for employment which is

Ð both casual and not in the course of trade, business,

profession, or occupation of the employer. Ñ § 440.02(15)(d)5.,

Fla. Stat. Casual employment Ð ref ers only to employments for

work that is anticipated to be completed in 10 working days or

less. Ñ § 440.02(5), Fla. Stat. Messrs. Valbonard, Nilas,

Maitre, and Elma all stated they worked for Leo Ó s Touch for more

than ten days. The only business for Leo Ó s Touch was washing

cars. Accordingly, their employment required workers Ó

compensation coverage. See Dep Ó t of Fin. Serv s ., Div. of

Workers Ó Comp. v. All Custom Hurricane Shutters & Sec . , Inc. ,

Case No. 03 - 2472 (Fla. DOAH Apr . 9, 2004; Fla. DFS June 23, 2004)

( rejecting claim that an employee was casual because the employee

was building storm shutters which was required in the course of

the employer Ó s business).

3 2 . Part - time , as well as full - time , employees are required

to be covered by workers Ó compens ation insurance. See Dep Ó t of

Fin. Serv s ., Div. of Workers Ó Comp. v. Valou Enterprises, Inc.,

d/b/a Mr. Rooter Plumbing , Case No. 08 - 3739 (Fla. DOAH Apr . 28,

2009; Fla. DFS June 3, 2009) (finding that a part - time employee

of a business was required to be covered by workers Ó compensation

insurance).

3 3 . The W orkers Ó C ompensation L aw requires employers to

secure the payment of compensation for their employees.

§§ 440.10(1)(a) and 440.38(1), Fla. Stat. (2006).

3 4 . Section 440.107(7)(a), Florida Statutes, st ates, in

relevant part:

Whenever the department determines that an

employer who is required to secure the

payment to his or her employees of the

compensation provided for by this chapter has

failed to secure the payment of workers Ó

compensation required by this chapter . . .

such failure shall be deemed an immediate

serious danger to public health, safety, or

welfare sufficient to justify service by the

department 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.

On January 14, 2015, Leo Ó s Touch had at least four uninsured and

non exempt employees. Therefore, the Stop - Work Order was mandated.

3 5 . Pursuant to s ection 440.05, the Department may grant

applications for certificates of election of exemption from the

Workers Ó Compensation Law.

3 6 . Pursuant to section 440.05(6), Ð [ a ] certificate of

election to be exempt which is issued on or before January 1, 2013,

i n accordance with this section shall be valid for 2 years after

the effective date stated thereon. Ñ Leo Ó s Touch did not have a

certificate of exemption for the period or any part of the period

for which the two - year assessment applies.

3 7 . I n determining the number of employees of a particular

employer :

T he prevailing theory is that liability of an

employer should not vary from day to day

according to the number of persons in his

employ on each day, but should be governed by

the established mode or plan o f his business

or operation, and from that determine he

regularly and customarily employs the

requisite number.

Mathers v. Sellers , 113 So. 2d 443, 445 (Fla. 1 st DCA 1959).

3 8 . Respondent is a sole proprietorship in a non -

construction industry, and at all times relevant for the

calculation of the monetary penalty in this matter, had four or

more employees conducting business in Florida. For the purpose

of determining Respondent Ó s employees, the employees at each

distinct business location who were paid by Respondent are

considered its employees.

3 9 . The Department is empowered to examine and copy the

business records of any employer conducting business in Florida

to determine whether it is in compliance with the Workers Ó

Compensation Law. See § 440. 107(3), Fla. Stat. Whenever the

Department finds an employer who is required to have such

coverage but fails to do so, such failure is deemed an immediate

serious danger to the public health, safety, or welfare

sufficient to justify service by the Departm ent of a stop - work

order on the employer requiring the cessation of all business

operations. See § 440.107(1) and (7)(a), Fla. Stat.

40 . Section 440.107(7)(d) 1 . provides that the Department :

[S] hall assess against any employer who has

failed to secure th e 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 employer Ó s payroll during

periods for which it failed to secure the

payment of wo rkers Ó 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.

4 1 . The Department is required to impute the payroll of an y

employer that is out of compliance and fails to provide business

records sufficient to enable the Department to determine the

employer Ó s payroll for the period requested for the calculation

of a penalty. § 440.107(7)(e), Fla. Stat. The imputed payroll

is equal to two times the statewide average weekly wage. Id.

4 2 . Rule 69L - 6.028 sets forth the method for imputing an

employer Ó s payroll:

(3) When an employer fails to provide

business records sufficient to enable the

department to determine the employe r Ó s

payroll for the time period requested in the

business records request for purposes of

calculating the penalty provided for in

Section 440.107(7)(d), F.S., the imputed

weekly payroll for each employee, corporate

officer, sole proprietor or partner shall be

calculated as follows:

(a ) For each employee, other than corporate

officers, identified by the department as an

employee of such employer at any time during

the period of the employer Ó s non - compliance,

the imputed weekly payroll for each week of

the employer Ó s non - compliance for each such

employee shall be the statewide average

weekly wage as defined in Section 440.12(2),

F.S., that is in effect at the time the stop -

work order was issued to the employer,

multiplied by 2. Employees include sole

propri etors and partners in a partnership.

* * *

(4) If the department imputes the employer Ó s

payroll, the employer shall have twenty

business days after service of the first

amended order of penalty assessment to

provide business records sufficient for t he

department to determine the employer Ó s

payroll for the period requested in the

business records request for the calculation

of the penalty or for the alternative period

of non - compliance. The employer Ó s penalty

will be recalculated pursuant to Section

440.107(7)(d), F.S., only if the employer

provides all such business records within the

twenty days after the service of the first

amended order of penalty assessment.

Otherwise, the first amended order of penalty

assessment will remain in effect.

The im putation methodology is required for all employees

identified by the Department when it cannot determine the

employer Ó s payroll. It does not vary or allow the Department to

impute for some employees and not others during any period of

time in which the De partment is able to determine only a portion

of the employer Ó s payroll.

4 3 . Rule 69L - 6.028(3)(d) mandates that Ð [t]he imputed

weekly payroll for each employee . . . shall be assigned to the

highest rated workers Ó compensation classification code for an

em ployee based upon records or the investigator Ó s physical

observation of that employee Ó s activities. Ñ

44 . By not providing for the payment of workers Ó

compensation insurance, Respondent violated chapter 440 on

January 14, 2015 , and for the two years preced ing that date.

Further, Leo Ó s Touch failed to provide the Department with

records within 20 business days of service of the AOPA and never

provided payroll records or any documents sufficient to prove

either the four employees were not subject to workers Ó

compensation coverage or that the amounts they were paid could be

established without imputation. No evidence was produced to

demonstrate any coverage existed for the two - year period

immediately preceding the date of the site visit by the

Department. De spite the honest and impassioned testimony given

by Respondent and his wife, they were unable to produce any

documentation or credible testimony that they did not employ at

least four individuals; that their payroll was anything other

than what was imputed to them; or that they should be exempt from

the statutory requirement to secure workers Ó compensation

coverage for their employees. While it stretches the imagination

to conclude sufficient revenues were generated by a hand car wash

to support the impute d income and the penalty assessment, without

credible, tangible evidence to support his defense against the

Department Ó s penalty assessment, Respondent did not successfully

counter the strong evidence offered by the Department. The

Department was , therefo re , justified in issuing the Amended

Stop - Work O rder and the AOPA .

4 5 . The Department utilized the appropriate worksheet,

occupation codes, and salary information for calculating the

appropriate penalty to be assessed against Respondent for

conducting bu siness without the required workers Ó compensation

coverage. Its calculation of the penalty in the amount of

$ 50,505.36 is accurate and is supported by clear and convincing

evidence.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department issue a f inal o rder

upholding the Amended Stop - Work Order and Amended Order of

Penalty Assessment, and assess a penalty in the amount of

$ 50,505.36.

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

L eon County, Florida.

S

ROBERT S. COHEN

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 Ju ly , 2015 .

COPIES FURNISHED:

Gil Godfrey, Esquire

Suite 205

7400 Southwest 50th Terrace

Miami, Florida 33155

(eServed)

Alexander Brick, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 6502

(eServed)

Leon Melnicoff , Qualified Representative

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

(eServed)

NOTICE OF RIGHT TO 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.