15-007356 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Soler And Son Roofing Status: Closed Recommended Order on Tuesday, July 19, 2016.

Summary: For calculation of penalty assessment, DFS proved that one employee earning $10/hr was uncovered for one day for penalty of $1000 statutory minimum. DFS's interpretation of rule extending period of noncompliance 2 yrs rendered rule invalid in this case.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 15 - 7356

SOLER AND SON ROOFING,

Respondent.

_______________________________/

RECOMMENDED ORDER

On April 27, 2016 , Robert E. Meale, Administrative Law

Judge of the Division of Administrative Hearings (DOAH),

conducted the final hearing by videoconference in Miami and

Tallahassee, Florida.

APPEARANCES

For Petitioner: Jonathan Anthony Martin, Esquire

Trevor S. Suter, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 42 2 9

For Respondent : Daniel R. Vega, Esquire

Robert Paul Was hington, Esquire

Taylor Espino Vega & Touron, P.A.

2555 Ponce de Leon Boulevard, Suite 220

Coral Gables, Florida 33134

STATEMENT OF THE ISSUE S

The issues are whether, under section 440.107, Florida

Sta tutes, Petitioner may calculate a penalty assessment for a

failure to secure the payment of workers' compensation for one

day as though the failure persisted over two years and whether

Petitioner may calculate a penalty assessment based on double

the state wide average weekly wage (AWW) when the lone uncovered

employee earned $10 per hour.

PRELIMINARY STATEMENT

By Stop - Work Order (SWO) dated November 23, 2015,

Petitioner ordered Respondent to stop work at all worksites in

the state of Florida for failing to obtain coverage that meets

the requirements of chapter 440, Florida Statutes. The SWO

includes an Order of Penalty Assessment imposing a penalty of

two times the premium that Respondent would have paid when

applying approved manual rates to Respondent's payroll "during

periods for which it has failed to secure the payment of

compensation within the preceding 2 - year period."

By Petition for Administrative Hearing filed on

December 14, 2015, Respondent requested a chapter 120 hearing.

On December 30, 2015, Petitioner issued an Amended Order of

Penalty Assessment assessing a penalty of $63,434.48 and

transmitt ed the file to DOAH.

At the hearing, Petitioner called two witnesses and

offered into evidence nine exhibits: Petitioner Exhibits 1 - 9.

Respondent called one witness and offered into evidence ten

exhibits: Respondent Exhibits A - J. All of the exhibits w ere

admitted into evidence.

The court reporter filed the transcript on May 16, 2016.

Each party filed a proposed recommended order on May 26, 2016.

FINDING S OF FACT

1. Respondent was incorporated in 2008 by Ineido Soler,

Sr., and his son, Ineido Soler, Jr. Since the corporation began

operations, the wife of Mr. Soler, Jr., Idalmis Pedrero, has

served as the office manager of this family - owned company.

2. At all material times, Respondent has contracted with a

personnel leasing company to handle empl oyee matters, such as

securing the payment of workers' compensation. Ms. Pedrero's

responsibilities include informing the employee leasing company

of new hires, so the company can obtain workers' compensation

coverage, which typically starts the day follo wing notification.

3. On the afternoon of November 22, 2015, Mr. Soler, Jr. ,

telephoned his wife and told her that he and his father had

hired, at the rate of $10 per hour, a new employee, Geony

Borrego Lee, who would start work the following morning .

Customarily, Ms. Pedrero would immediately inform the employee

leasing company. However, Ms. Pedrero was working at home

because, six days earlier, she had delivered a baby by caesarian

section, and she was still recuperating and tending to her

newborn. A fatigued Ms. Pedrero did not notify the employee

leasing company that day of the new hire.

4. Late the next morning, Ms. Pedrero was awakened by a

call from her husband, who asked her if she had faxed the

necessary information to the employee leasing company.

Ms. Pedrero admitted that she had not done so, but would do so

right away. She faxed the information immediately, so that the

employee leasing company could add Mr. Lee to the workers'

compensation policy, effective the next day, November 24.

5. Uncovered for November 23, Mr. Lee joined three other

employees of Respondent and performed roofing work at a

worksite. Late in the afternoon of November 23, one of

Petitioner's investigators conducted a random inspection of

Respondent's worksite and determined that Respondent had secured

the payment of workers' compensation for the three other

employees, but not for Mr. Lee.

6. The investigator issued an SWO on the day of the

inspection, November 23. The SWO contains three parts. First,

the SWO o rders Respondent to cease work anywhere in the state of

Florida. Second, the SWO includes an Order of Penalty

Assessment , which does not contain a specific penalty, but

instead sets forth the formula by which Petitioner determine s

the amount of the penalt y to assess. Tracking the statute

discussed below, the formula included in the SWO is two times

the premium that the employer would have paid when applying

approved manual rates to the employer's payroll "during periods

for which it has failed to secure t he payment of compensation

with in the preceding 2 - year period." Third, the SWO includes a

Notice of Rights, which advises Respondent that it may request a

chapter 120 hearing.

7. On November 24, Petitioner released the SWO after

Respondent had secured the payment of workers' compensation for

Mr. Lee. On November 25, the investigator hand delivered to

Respondent a Request for Production of Business Records for

Penalty Assessment Calculation (Request). The Request covers

November 24, 2013, through Novem ber 23, 2015, and demands

records in eight categories: identification of employer,

occupational licenses, payroll documents, account documents,

disbursements, contracts for work, identification of

subcontractors, and documentation of subcontractors' worke rs'

compensation coverage.

8. The Request identifies "payroll documents" as:

all documents that reflect the payroll of

the employer . . . including . . . time

sheets, time cards, attendance records,

earning records, check stubs and payroll

summaries for both individual employees and

aggregate records; [and] federal income tax

documents and other documents reflecting the

. . . remuneration paid or payable to each

employee . . . .

9. The Request adds:

The employer may present for consideration

in lie u of the requested records, proof of

compliance with F.S. 440 by a workers'

compensation policy or coverage through

employee leasing for all periods of this

request where such coverage existed. If the

proof of compliance is verified by the

Department the requested records for that

time period will not be required.

10. The Request warns:

If the employer fails to provide the

required business records sufficient to

enable the . . . Division of Workers'

Compensation to determine the employer's

payroll for t he period requested for the

calculation of the penalty provided in

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

weekly payroll for each employee . . . shall

be the statewide average weekly wage as

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

multiplied by 2. The Depar tment shall

impute the employer's payroll at any time

after ten, but before the expiration of

twenty eight business days after receipt by

the employer of [the Request]. (FAC

69L - 6.028) . . . .

11. On December 11, 2015, Respondent provided the

following documents to Petitioner: itemized invoices, including

for workers' compensation premiums, from the employee leasing

company to Respondent and checks confirming payment, but the

invoices and checks ar e from December 2011; an employee leasing

agreement signed by Respondent on August 1, 2014, and signed by

the employee leasing company on August 5, 2014; an employee

leasing application for Mr. Lee dated November 23, 2015, showing

his date of birth as Nove mber 20, 1996, his hourly pay as $10,

and his hire date as November 23, 2015; and an employee census

dated December 1, 2015, showing, for each employee, a date of

hire and, if applicable, date of termination. Partially

compliant with the Request, this pro duction omitted any

documentation of workers' compensation coverage prior to

August 1, 2014, and any documentation of payroll except for

Mr. Lee's rate of pay.

12. On December 14, 2015, Respondent filed with Petitioner

its request for a chapter 120 hea ring. On December 30, 2016,

Petitioner issued an Amended Order of Penalty Assessment

(Amended Assessment), which proposes to assess a penalty of

$63,434.48. On the same date, Petitioner transmitted the file

to DOAH. Petitioner issued a Second Amended Or der of Penalty

Assessment on February 16, 2016, which is mentioned in, but not

attached to, the Prehearing Stipulation that was filed on

April 26, 2016, but the second amended assessment reportedly

leaves the assessed penalty unchanged from the Amended

Ass essment.

13. In determining the penalty assessment, Petitioner

assigned class code 5551 from the National Council on

Compensation Insurance because Mr. Lee was performing roofing

work; determined that the entire two - year period covered in the

Request wa s applicable; identified the AWW as $841.57 based on

information provided by the Florida Department of Economic

Opportunity for all employers subject to the Florida

Reemployment Assistance Program Law, sections 443.01 et seq. ,

Florida Statutes, for the fou r calendar quarters ending June 30,

2014; applied the appropriate manual rates for class code 5551

to $841.57, doubled, and divided the result by 100 -- all of which

yielded a result of $31,717.24, which, doubled, results in a

total penalty assessment of $63 ,434.48.

14. There is no dispute that the classification code for

Mr. Lee is code 5551, the AWW is $841.57, and the manual rates

are 18.03 as of July 1, 2013, 18.62 as of January 1, 2014, and

17.48 as of January 1, 2015. Because Petitioner determined tha t

Respondent had failed to provide sufficient evidence of its

payroll, Petitioner calculated the penalty assessment by using

the AWW of $841.57, doubled, instead of Mr. Lee's actual rate of

$10 per hour.

15. Petitioner's calculations are mathematically correct.

For the 5.27 weeks of 2013, the penalty assessment is $3198.58

based on multiplying the AWW, doubled, by the manual rate of

18.03 divided by 100 multiplied by 2 and multiplied by 5.27.

For the 52 weeks of 2014, the penalty assessment is $32,593. 67

based on multiplying the AWW, doubled, by the manual rate of

18.62 divided by 100 multiplied by 2 and multiplied by 52. For

the 46.44 weeks of 2015, the penalty assessment is $27,326.48

based on multiplying the AWW, doubled, by the manual rate of

17.48 divided by 100 multiplied by 2 and multiplied by 46.44.

Adding these sums yields a total penalty assessment of

$63,118.73, which approximates Petitioner's penalty assessment

calculation of $63,434.48. (Mistranscription of difficult - to -

read manual rates or a different rule for handling partial weeks

may account for the small difference.)

16. Respondent challenges two factors in the imputation

formula: the two - year period of noncompliance for Mr. Lee

instead of one day's noncompliance and the AWW, doub led, instead

of Mr. Lee's $10 per hour rate of pay. Underscoring the

differences between the two - year period of noncompliance and

double the AWW and the actual period of noncompliance and

Mr. Lee's real pay rate, at the start of the two - year period,

Mr. L ee was three days past his 16th birthday and residing in

Cuba, and Mr. Lee continues to earn $10 per hour as of the date

of the hearing.

17. The impact of Petitioner's use of the two - year period

of noncompliance and double the AWW is significant. If th e

calculation were based on a single day, rather than two years,

the assessed penalty would be less than the statutory minimum of

$1000, which is described below, even if double the AWW were

used. One day is 0.14 weeks, so the penalty assessment would be

$ 82.38 based on multiplying the AWW, doubled, by the manual rate

of 17.48 divided by 100 multipl ied by 2 and multiplied by 0.14 .

18. If the calculation were based on the entire two years,

rather than a single day, the assessed penalty would be about

one - quarter of the proposed assessed penalty, if Mr. Lee's

actual weekly rate of pay were used instead of double the AWW.

Substituting $400 for twice the AWW in the calculations set

forth in paragraph 15 above, the penalty would be $760.14 for

2013, $7746.92 for 2014, and $6494.17 for 2015 for a total of

$15,001.23.

19. Explaining why Petitioner treated one day of

noncompliance as two years of noncompliance, one of Petitioner's

witnesses referred to Mr. Lee as a "placeholder" because the

real focus of the imputation formula is the employer. The same

witness characterized the imputation formula as a "legal

fiction," implying that the formula obviously and, in this case,

dramatically departs from the much - smaller penalty that would

result from calculating ex actly how much premium that Respondent

avoided by not covering the modestly paid Mr. Lee on his first

day of work.

20. Regardless of how Petitioner characterizes the

imputation formula, the statutory mandate, as discussed below,

is to determine the "per iods" during which Respondent failed to

secure workers' compensation insurance within the two - year

period covered by the Request. The focus is necessarily on the

employee found by the investigator to be uncovered and any other

uncovered employees. Petiti oner must calculate a penalty based

on how long the employee found by the investigator on his

inspection has been uncovered, determining how many other

employees, if any, in the preceding two years have been

uncovered, and calculating a penalty based on ho w long they were

uncovered.

21. There is evidence of one or two gaps in coverage

during the relevant two years, but Petitioner has failed to

prove such gaps by clear and convincing evidence. One of

Petitioner's witnesses testified to a gap of one month

"probably" from late January to late February 2015. This

witness relied on Petitioner Exhibit 2, but it is completely

illegible. Ms. Pedrero testified that Respondent had workers'

compensation coverage since 2011, except for a gap, which she

thought had occurred prior to August 2014, which is the start

date of the current policy. This conflicting evidence does not

establish by clear and convincing evidence any gap, and, even if

a gap had been proved, no evidence establishes the number of

uncovered emplo yees, if any, during such a gap, nor would such a

gap justify enlarging the period of noncompliance for Mr. Lee.

22. Ms. Pedrero testified that her mother - in - law, Teresa

Marquez cleaned the office and warehouse on an occasional basis,

last having worked s ometime in 2015. Respondent never secured

workers' compensation coverage for Ms. Marquez, but she did no

roofing work and appears to have been a casual worker, so her

periods of employment during the two - year period covered by the

Request would not consti tute additional periods for which

Respondent failed to secure workers' compensation insurance.

23. Based on the foregoing, Petitioner has proved by clear

and convincing evidence only a single day of noncompliance,

November 23, concerning one employee, Mr. Lee, within the

relevant two - year period for the purpose of calculating the

penalty assessment.

24. Likewise, Petitioner has proved by clear and

convincing evidence a rate of pay of only $10 per hour for the

purpose of calculating the penalty assessmen t. At no time has

Respondent provided payroll records of all its employees for

November 23, 2015. Respondent Exhibit E covers payroll for

Respondent's employees for a two - week period commencing shortly

after November 23, 2015. But the evidence establish es that

Mr. Lee's rate of pay was $80 for the day, which, as discussed

below, rebuts the statutory presumption of double the AWW.

CONCLUSIONS OF LAW

25. DOAH has jurisdicti on over the subject matter.

§§ 120.569 , 120.57 , and 440.107(13), Fla. Stat. (2015). (All

statutory references are to 2015 Florida Statutes.)

Section 440.107(13) provides that, if contested, proposed agency

action "must be contested as provided in chapter 120."

26. A chapter 120 hearing is de novo. § 120.57(1)(k).

"'De novo' means to try a matter anew, as though it had not been

heard before and no decision had been rendered." Lee v.

St. Johns Cnty. Bd. of Cnty. Comm'rs , 776 So. 2d 1110, 1113

(Fla. 5th DCA 2001). The purpose of a chapter 120 hearin g is to

formulate final agency action, not to review proposed agency

action. Dep't of Transp. v. J.W.C. Co., Inc. , 396 So. 2d 778

(Fla. 1st DCA 1981).

27 . Because Petitioner seeks to impose an administrative

penalty or fine against Respondent, Petitioner has the burden of

proving the material allegations by clear and convincing

evidence. Dep't of Banking & Fin. v. Osborne Stern & Co. , 670

So. 2d 932, 935 (Fla. 1996). Clear and convincing evidence must

make the facts "highly probable" and produce in the mind of the

trier of fact "a firm belief or conviction as to the truth of

the facts sought to be established," leaving "no substantial

doubt." Slomowitz v. Walker , 429 So. 2d 797, 799 (Fla. 4th DCA

1983).

28 . An employer is required to secure the payme nt of

workers' compensation for its employee s. § 440.10(1)(a). An

employer is any person carrying on employment. § 440.02(16)(a).

In the construction industry, employment occurs when at least

one employ ee is employed by an employer, § 440.02(17)(b)2. ,

although an "employee" does not include a person whose

employment is "casual" and not in the course of the trade or

business of the employer. § 440.02(15)(d)5. Respondent is an

employer required to secure the payment of workers' compensation

for its empl oyees, such as Mr. Lee. However, Petitioner has

failed to prove that Ms. Marquez is ineligible for the exclusion

set forth at section 440.02(15)(d)5. because the evidence failed

to establish that she performed roofing work and failed to

preclude the possi bility that Ms. Marquez satisfied the criteria

for casual employment, as defined in section 440.02(5).

29. Petitioner enforces the requirement that an employer

secure the payment of workers' compensation. § 440.107(3).

Petitioner is authorized to order the p roduction of business

records, § 440.107(3)(f) and (5) , and to issue penalty

assessment orders. § 440.107(3)(g). Petitioner is authorized

to issue an SWO when it determines that an employer has failed

to secure the payment of workers' compensation o r has failed to

produce business records within ten business days after receipt

of a Request. § 440.107(7)(a). Petitioner is required to

release an SWO when an employer complies with the coverage

requirements, apparently even though an independent reason for

issuing an SWO -- the failure to produce business records -- may

persist or emerge after coverage is secured. Id. However,

Petitioner has the power to subpoena business records, and a

court may punish noncompliance with Petitioner's subpoena by

civil or criminal contempt. § 440.107(6).

30. Petitioner is required to assess against any employer

that has failed to secure the payment of workers' compensation

"a penalty equal to" the greater of $1000 or "2 times the amount

the employer would have paid in premium when applying approved

manual rates to the employer's payroll during periods for which

it failed to secure the payment of workers' compensation . . .

within the preceding 2 - year period . . . ." (emphasis

supplied) . § 440.107(7)(d)1. T his is a penal statute that, if

ambiguous, must be construed against Petitioner. See, e.g. ,

Osborne Stern , supra ; Lester v. Dep't of Prof'l & Occupational

Regulations , 348 So. 2d 923, 925 (Fla. 1st DCA 1977).

31. Petitioner has adopted a rule that provid es for a

shorter alternative period to a two - year period of

noncompliance. Florida Administrative Code Rule 69L - 6.028(2)

states:

The employerÓs period of non - compliance

shall be either the same as the time period

requested in the business records reques t

for the calculation of penalty or an

alternative period of non - compliance as

determined by the department, whichever is

less. The department shall determine an

alternative period of non - compliance by

obtaining records from other sources,

including, but not limited to, the

Department of State, Division of

Corporations, the Department of Business

and Professional Regulation, licensing

offices, building permitting offices and

contracts, that evidence a period of non -

compliance different than the time period

requested in the business records request

for the calculation of penalty.

32. The first sentence of the rule states nothing more

than that the calculation of the penalty assessment shall be for

a period of up to the two years set forth in the Request. The

second sentence of the rule provides that Petitioner will use an

alterna tive (i.e., shorter) period of noncompliance if evidence

indicates that the period of noncompliance is "different" (i.e.,

shorter) than the two - year period set forth in the Request.

Under this interpretation of the rule, it does not conflict with

the stat utory requirement that Petitioner calculate a penalty

assessment for all periods of noncompliance within the relevant

two - year period, but only for such periods.

33. In its proposed recommended order, Petitioner

interprets its rule to provide a two - year period for calculating

a penalty assessment, even when the evidence shows one or more

periods of noncompliance totaling less than two years. When an

employer fails to produce payroll business records, Petitioner

contends that the proper period is two yea rs because "the period

of non - compliance is based upon the employer's compliance, not a

particular employee." Pet. PRO, ¶ 37. Petitioner cites the

last sentence of rule 69L - 6.028(2) for the uncontroversial

principle that: "For purposes of this rule, 'no n - compliance'

means the employers' failure to secure the payment of workers'

compensation . . .."

34. Petitioner's argument is unpersuasive. Obviously,

noncompliance is a failure of an employer, not an employee, so

the focus is on the employer in this sense. But the point of

the inquiry is to identify the periods of noncompliance; this

requires a determination of when particular employees were

uncovered and for how long. Properly interpreted, the rule says

that the period of noncompliance is the two y ears stated in the

Request or, if shorter, the period or periods within these two

years that the employer was in noncompliance.

35. Q uoting from its final order in De partment of

Financial Services v. Aleluya Roofing Plus Construction, Inc. ,

2016 Fla. Di v. Adm in . Hear. LEXIS 109 ( Fla. DOAH Jan. 29, 2016) ,

Petitioner again worries that "a non - compliant employer could

simply provide . . . records demonstrating that the employees

observed by the Department were only employed on the date of the

investigation, and the Department would be precluded from

imputing payroll for each of those employees for the remaining

periods of non - compliance." Along these lines, as quoted in

Petitioner's proposed recommended order, one of its witnesses

testified that she could n ot use a "shorter alternative period

of non - compliance for Respondent because "[n]o records were

provided to show payroll and payroll records [that] are needed

to show if any payments occurred outside of leasing of

employees." (Tr. 46).

36. These concern s and suspicions do not warrant

Petitioner's imputation of a two - year period of noncompliance

when an employer fails to produce business records.

Understandably, Petitioner prefers the expedience of the

imputation of a two - year period of noncompliance to the proof of

an actual period of noncompliance. If it matters, these

concerns and suspicions fail to account for the remedies that

are available to Petitioner if an uncooperative employer tries

to shorten the penalty period by doling out selected business

records. Although the statutory requirement of releasing an SWO

when an employee secures the payment of workers' compensation

probably undermines the utility of an SWO in obtaining business

records, Petitioner still has the explicit authority to obtain

a n adjudication of civil or even criminal contempt, presumably

of the principals of a corporate employer. And the de novo

hearing provides the opportunity for discovery and sanctions for

the failure to respond to discovery, including the sanction of

striki ng the employer's request for hearing, thus leaving

Petitioner's proposed penalty assessment intact and the employer

subject to the more onerous penalty - calculation provisions that

apply prior to the transmittal of the file to DOAH, as discussed

in paragra ph 46 below.

37. More importantly, Petitioner's preference for

imputation over proof, as reflected in its unsustainable

interpretation of rule 69L - 6.028(2), effectively creates an

evidentiary presumption: if an employer fails to provide its

business reco rds, its failure to have secured the payment of

workers' compensation will be presumed to have persisted for the

entire two years. However, the power to create evidentiary

presumptions is reserved to the legislature and the courts and

does not extend to t he executive branch. See, e.g. , McDonald v.

Dep't of Prof'l Regulation , 582 So. 2d 660 (Fla. 1st DCA 1991).

38. In Twin City Roofing Constru ction Specialists, Inc. v.

Department of Fin ancial Ser vices , 969 So. 2d 563 (Fla. 1st DCA

2007) (per curiam), two uncovered employees had worked in

Florida for "one - half" of an eight - month period of

noncompliance. Petitioner calculated the penalty for the entire

period of noncompliance. Affirmin g, the opinion cites section

440 .107(7)(e), which, as discussed below, establishes a

vanishing presumption of earnings during the pre - DOAH phase when

an employer fails to provide payroll business records. The

opinion does not cite rule 69L - 6.028 because Petitioner adopted

the rule in the year following the Twin City opinion. In the

brief mention of section 440 .107(7)(e), the opinion fails to

note that this statute establishes a presumption of the AWW, not

a two - year period of noncompliance. Twin City should be limited

to its facts in which, possibly on evidentiary grounds, the

court sustained Petitioner's determination not to start and stop

noncompliance periods within a relative short overall period.

(Although the appeal did not address this issue, the

Administrative Law Judge applied the preponderance of evidence

standard , rather than the clear - and - convincing standard. Dep't

of Fin. Serv. v . Twin City Roo fing Constr. Specialist, Inc. ,

Case No. 06 - 0024 ( Fla. DOAH August 30, 2006).)

39. The Administrative Law Judge recognizes that, for many

years, Petitioner has reversed r ecommended orders on this issue,

adding conclusions of law to implement a presumptive two - year

period of noncompliance when the employer fails to produce its

business records, despite evidence of a shorter period or

periods of noncompliance. See Aleluya , supra ; Dep't of Fin.

Serv. v. Nobles Quality Serv., LLC , 2016 Fla. Div. Adm in . Hear.

LEXIS 179 ( Fla. DOAH April 5, 2016); Dep't of Fin. Serv. v.

Lockhart Builders, Inc. , 2008 Fla. Div. Adm in . Hear. LEXIS 181

(Fla. DOAH March 31, 2008), Amended Final Order (DFS Case No.

92390 - 07 - WC September 15, 2009).

40. Because this proceeding is not a rule challenge, under

former law, the Administrative Law Judge lacked the authority

effectively to invalidate the rule, if Petitioner were to

persist with its interpretation that conflicts with section

440.107(7)(d)1., Clemons v. State Risk Mgmtust Fund , 870 So.

2d 881, 884 (Benton, J., concurring), even though an appellate

court is not so constrained. See, e.g. , Willette v. Air

Products , 7 00 So. 2d 3 97 (Fla. 1st DCA 1997) . Effective July 1,

2016, section 120.57(1)(e)1. provides that neither an agency nor

an administrative law judge may "base agency action that

determines the substantial interests of a party on . . . a rule

that is an inval id exercise of delegated legislative authority."

Ch. 2016 - 116, §§ 4 and 8 , Laws of Fla. As interpreted by

Petitioner to impose a two - year noncompliance on the facts of

this case, rule 69L - 6.028(2) contravenes section

440.107(7)(d)1., within the meaning o f section 120.52(8)(c), and

is thus an invalid exercise of delegated legislative authority,

so that Petitioner may not rely on this rule in this case.

Without implying that this determination is within the

substantive jurisdiction of Petitioner so as to a uthorize

Petitioner to disturb this Conclusion of Law, as set forth in

section 120.57(1)(l), this recommended order includes an

alternative penalty assessment based on the contingency of

conclusions of law in Petitioner's final order sustaining its

calcula tion of the penalty assessment for the entire two years,

but using Mr. Lee's actual rate of pay.

41. By contrast, there is statutory authority for

Petitioner's use of the AWW, doubled, in place of Mr. Lee's

actual rate of pay when the employer fails to pr ovide payroll

business records. Section 440.107(7)(e) provides:

When an employer fails to provide business

records sufficient to enable the department

to determine the employerÓs 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 shall

be the statewide average weekly wage as

defined i n s. 440.12(2) multiplied by 2 .

(The multiplier of 2 r educes to 1.5, effective October 1, 2016.

Ch. 2016 - 56, §§ 3 and 11 , Laws of Fla. )

42. Section 440.107(7)(e) imposes a consequence for an

employer's failure to produce payroll business records: the

uncovered employee or employees will be presumed to have earned

double the AWW. This statute does not authorize the use of the

entire two years in the event of a failure to produce; for the

period or periods that the doubled AWW is to be applied, section

440.107(7)(e) defers to section 440.107(7)(d)1., which, as noted

above, authorizes the calculation of a penalty assessment only

for the period or periods of noncompliance.

43. As it does with its misconstruction of its rule, so as

to transform it into a self - made presumption concerning the

two - year period of noncompliance, so Petitioner mistakenly

treats the statutory assumption concerning the doubled AWW as an

irrebuttable presumption. According to Petitioner, if an

employer fails to produce business records, the penalty

assessment will invariably be calcul ated over the entire two

years using double the AWW. By these means, Petitioner forges a

$63,000 penalty out of an evidentiary record clearly

establishing no more than a one - day failure to secure workers'

compensation for an employee making $10 per hour. Under

Petitioner's approach, on the penalty - calculation issue, the

sole effect of an employer's demand for a chapter 120 hearing is

that an Administrative Law Judge will check Petitioner's

arithmetic.

44. The above - cited case law concerning de novo

adm inistrative hearings does not support Petitioner's

restrictive approach to the penalty - calculation issue. But a

nonadministrative case also reveals, from an evidentiary

perspective , the flaw in Petitioner's approach. In Universal

Insurance Co. v. Warfel , 82 So. 3d 47 (Fla. 2012), a homeowner

insurer processing a sinkhole claim hired an engineer to

investigate the claim, as required by statute . The engineer

determined that the damage was not due to a sinkhole, and the

insurer denied the claim. The homeo wner commenced a legal

action. By statute, the engineer's findings and opinions were

presumed correct. At the request of the insurer, the trial

judge instructed the jury that the engineer's findings and

opinions had a presumption of correctness, although it was

rebuttable.

45. The district court of appeal reversed, and the supreme

court affirmed the district court, holding that the trial court

should not even have informed the jury of the presumption. The

supreme court held that a presumption of this type, which did

not involve public policy (such as presumptions of civil sanity,

birth legitimacy, and marriage validity), is a vanishing or

bursting - bubble presumption that does not alter the burden of

proof under section 90.304, but only the burden of pr oducing

evidence under section 90.303. Id. at 53 - 54. In determining

that the subject presumption was a vanishing presumption, the

court engaged in a detailed analysis of the relevant statutes

and concluded that "nothing in the sinkhole claim process

stat utory scheme . . . applies that scheme in the litigation

context." Id. at 57. These statutes served the purpose of

providing insurers "a framework . . . to follow when

encountering specific types of claims," but the application of

such provisions to the "evidentiary context is both misguided

and inappropriate." Id.

46. Similarly, the provision of section 440.107(7)(e)

authorizing the use of double the AWW following an employer's

failure to produce its business records and, assuming its

correctness for this discussion, Petitioner's interpretation of

rule 69L - 6.028(2) authorizing the use of a two - year period of

noncompliance following an employer's failure to produce its

business records apply only to the phase of the penalty -

assessment process that culm inates with the issuance of a

penalty assessment. These provisions lose their force once an

employer produces contrary evidence in a chapter 120 hearing.

47. Based on the foregoing, the penalty in this case is

the statutory minimum penalty of $1000; pr ovided, however, if

Petitioner replaces the Conclusions of Law interpreting rule

69L - 6.028(2) with conclusions supporting a determination that

Respondent failed to secure the payment of workers' compensation

for Mr. Lee for two years, the penalty would be $15,001.23 based

on his actual rate of pay of $10 per hour.

RECOMMENDATION

It is

RECOMMENDED that the Department of Financial Services enter

a final order determining that Respondent has failed to secure

the payment of workers' compensation for one employee for one

day within the two - year period covered by the Request and

imposing an administrative penalty of $1000.

DONE AND ENTERED this 19th day of July , 2016 , in

Tallahassee, Leon County, Florida.

S

ROBERT E. MEALE

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 Administra tive Hearings

this 19th day of July , 2016 .

COPIES FURNISHED:

Jonathan Anthony Martin, Esquire

Trevor S. Suter, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

(eServed)

Daniel R. Vega, Esquire

Robert Paul Washington, Esquire

Taylor Espino Vega & Touron, P.A.

2555 Ponce De Leon Boulevard, Suite 220

Coral Gables, Florida 33134

(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.