16-000710 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. M. C. Jennings, Jr. Construction Corp. Status: Closed Recommended Order on Monday, June 27, 2016.

Summary: Respondent was engaged in the construction industry, had three employees, and failed to secure workers' compensation insurance. Recommend upholding penalty assessment in the amount of $8,753.66

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS '

COMPENSATION,

Petitioner,

vs. Case No. 1 6 - 0710

M. C. JENNINGS, JR. CONSTRUCTION

CORP.,

Respondent.

_______________________________/

RECOMMENDED ORDER

Pursuant to notice, a formal administrative hearing was

conducted before Administrative Law Judge Mary Li Creasy by video

teleconference with locations in Miami and Tallahassee, Florida,

on April 28 , 2016.

APPEARANCES

For Peti tioner: Thomas Nemecek, Esquire

Department of Financial Services

Division of Workers ' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Kristian Eiler Dunn , Esquire

Dunn and Miller, P.A.

215 East Tharpe Street

Tallahassee, Florida 32303

STATEMENT OF THE ISSUE

Whether Respondent violated the provisions of chapter 440,

Florida Statutes (2016) , by f ailing to secure the payment of

workers ' compensation coverage, as alleged in the Stop - work

Order. 1/

PRELIMINARY STATEMENT

This proceeding arose out of the requirement in Florida ' s

Workers ' Compensation Law that employers must secure the payment

of workers ' compensation insurance for their employees. On

January 7, 2016, the Department of F inancial Services, Workers '

Compensation Division ( " Department " ) served a Stop - w ork Order and

Order of Penalty Assessment ( " Stop - w ork Order " ) on Respondent for

failing to secure workers ' compensation for its employees as

required by chapter 440, Florida Statutes. Respondent timely

filed a request for a formal administrative hearing. On

F ebruary 10, 2016, this matter was referred to the Division of

Administrative Hearing s ( " DOAH " ). On April 19, 2016, the

Department served an Amended Order of Penalty Assessment on

Respondent via the Order Granting Petitioner ' s Motion for Leave

to Amend Order of Penalty Assessment. The penalty assessed was

$8,753.66.

On April 28, 2016, t he final hearing was held as scheduled.

The Department presented the testimony of Humberto Rivero,

compliance investigator and Sarah Beal, penalty auditor. The

Departm ent offered E xhibits 1, 2 and 4 through 16 , which were

admitted into evidence. Responde nt presented the testimony of

Ms. Patricia Krossman in an attempt to qualify her as an expert

witness. The Department had filed a Daubert motion p rior to the

final hearing and conducted voir dire of Ms. Krossman.

Respondent failed to qualify Ms. Krossman as an expert.

Respondent ' s other witness, Mr. Miles Jennings, was precluded

from testifying at the final hearing because of his evasive

conduct and refusal to answer questions at his deposition.

Respondent did not offer any exhibits. 2/

The T ranscript of the final hearing was filed with DOAH on

May 18, 2016. Both parties timely filed proposed recommended

orders , which have been considered in the preparation of this

Recommended Order.

References to st atutes and rules are to the 2016 versions,

unless other wise indicated.

FINDING S OF FACT

1. The Department is the state agency responsible for

enforcing the requirement of chapter 440 that employers in

Florida secure the payment of workers ' compensation coverage for

their employees and corporate officers. § 4 40.107, Fla. Stat .

2. Respondent , M.C. Jennings Jr. Construction Corp., is a n

active Florida for - profit corporation with its principal office

located at 3125 Mundy Street, Mia mi, Florida 33133. Miles

Jennings, Jr. , is Respondent ' s president and registere d a gent.

3. Respondent admits that d uring the time period of

January 8, 2014 , to January 7, 2016, Respondent was a business

engaged in the construction industry .

The Investigation

4. On January 6, 2016, the Department ' s compliance

investigator, Humbert o Rivero, conducted a compliance check at

Respondent ' s business address in response to a public referral.

5. Prior to visiting the business, Mr. Rivero checked the

Division of Corporations ' website to obtain the federal employee

identification number and information on the corporate officers.

6. After this, Mr. Rivero searched the Coverage and

Compliance Automated System ( " CCAS " ) to verify whether or not

Respondent is covered with workers ' compensation insurance and

whether there is an exemption for the c orporate officers.

Mr. Rivero also searched the National Council on Compensation

Insurance ( " NCCI " ).

7. Mr. Rivero routinely checks for coverage before going

out for a site visit in response to public referrals. Upon

searching the NCCI database and the CCAS database, Mr. Rivero

learned that Respondent had no workers ' compensation coverage and

so the referral appeared to be accurate. Mr. Rivero also

determined there were no exemptions.

8. Next, Mr. Rivero arrived at the business address for

Respondent, went into a fenced yard, up the steps to a trailer,

and identified himself and the reason he was there. Mr. Rivero

described the office trailer as the type he goes in to on

constru ction projects. There was a desk, manuals, schedules, and

drawings or blue prints on a rack. Mr. Rivero did not personally

observe any construction activity at the site.

9. Mr. Rivero spoke with Shawn Denise Welch - Perryman.

Ms. Welch - Perryman indicated she did not have acce ss to

information on workers ' compensation and could not get

Mr. Jennings beca u s e he was in a meeting and could not to be

disturbed . Ms. Welch - Perryman said Ms. Hallman, the property

manager for Respondent, ma y be able to help.

10. Mr. Rivero contacted Darlene Hallman by tele phone.

Ms. Hallman indicated she did not have access to information on

workers ' compensation. Ms. Hallman admitted she is an employee

of Respondent and has been there for several years. Ms. Hallman

said she gets paid by company check , but did not want to disclose

how much.

11. Aft er this, Mr. Rivero interviewed Ms. Welch - Perryman,

as he had with Ms. Hallman, and Ms. Welch - Perryman admitted to

be ing an employee of Respondent. Ms. Welch - Perryman also gets

paid by company check.

12. Mr. Rivero was provided with the name Ed Fowler,

R espondent ' s insurance agent. Mr. Rivero talked to Mr. Fowler to

check on whether Respondent was covered. Mr. Fowler said the

company did not have coverage , but it was working on it.

13. This information was consistent with the searches

Mr. Rivero perfo rmed prior to his visit at Respondent ' s business

location.

14. Mr. Rivero told Ms. Welch - Perryman to have Mr. Jennings

call him by the end of that day, January 6th. Mr. Jennings did

not call Mr. Rivero on the 6th.

15. On January 7, 2016, Mr. Rivero spok e with Mr. Jennings

by phone. During this conversation , Mr. Jennings confirmed that

the two women were hi s employees and he did not have insurance ,

but was working on securing it.

16. Mr. Jennings agreed to meet with Mr. Rivero at the

office trailer at 1 p.m. When Mr. Rivero returned that

afternoon, the site was locked with the fence closed by padlock.

17. Mr. Rivero called Ms. Welch - Perryman and Ms. Hallman to

see why the site was locked and left messages , but received no

response . Mr. Rivero called h is supervisor, Scarlet Aldana, to

inform her of what he found. She advised Mr. Rivero to call

Mr. Jennings and tell him of the consequences of not being there

and not having insurance.

18. Mr. Rivero called Mr. Jennings and left a message.

After waiting about 15 minutes, Mr. Rivero called his supervisor

again to explain the situation. Ms. Aldana authorized a S top -

w ork O rder to be issued and posted in a prominent place.

Mr. Rivero posted the Stop - w ork O rder on Respondent ' s mailbox and

photographed it.

19. While at the business location, Mr. Rivero was with

se nior investigator Julio Cabrera . Mr. Rivero w a s directed by

Mr. Cabrera to photograph a dump truck on site with a general

contractor ' s number on it. According to Mr. Rivero, there were

many more pieces of equipment , but he focused on photogr aphing

the posting of the Stop - w ork Order and the dump truck.

20. According to the records of the Department of Business

and Professional Regulation, an active general cont ractor license

number belongs to Mr. Jennings and Respondent.

21. On January 15, 2016, Mr. Jennings contacted Mr. Rivero

to say he had come into compliance by purchas ing coverage for

nine employees .

22. Mr. Rivero asked for the broker ' s name and ph one number

so he could verify coverage . Mr . Rivero spoke by phone with Stan

Shelton at Madison Insurance Company. Mr. Shelton verified the

company had coverage for nine employees, paid a down payment of

$500, and the premium was $31,763.

23. On January 19, 2016, Mr. Rivero met with Mr. Jennings

and went over the business records request, informing

Mr. Jennings that in order to calculate a penalty , the Department

needed certain records. Mr. Jennings was informed of the ten

business da ys he had to submit the records.

Penalty Calculation

24. Penalty A uditor Sarah Beal was assigned to calculate

the penalty in this case .

25. Ms. Beal did not receive any records from Respondent in

response to the business records request.

26. Without any records, Ms. Beal had to impute the gross

payr oll which is equal to two times the average weekly wage that

was in effect when the Stop - work O rder was issued. Ms. Beal

determined the period of noncompliance to be the full two years

of January 8, 2014 , to January 7, 2016. Ms. Beal identified the

emplo yees on the penalty worksheet from the investigator ' s on -

site observations and narrative.

27. Based on Mr. Rivero ' s observations on January 6, 2016,

and the information he had gathered , Ms. Beal initially used the

classification code 8810 listed in t he Scopes® Manual, which has

been adopted by the Department through Florida Administrative

Code Rule 69L - 6.021(1). Classification codes are four - digit

codes assigned to various occupations by the NCCI to assist in

the calculation of workers ' compensation insurance premiums.

28. Classification code 8810 applies to clerical workers

and Ms. Beal preliminarily used this code for Ms. Hall man ,

Ms. Welch - Perryman , and Mr. Jennings. Ms. Beal then utilized the

corresponding approved manual rates for those class codes and the

period of noncompliance to determine a penalty , which she

submitted to her supervisor for review .

29 . Ms. Beal was subsequently directed to change the class

code for Mr. Jennings to Scopes Code 5606, a construction class

code for con struction foreman/project manager.

30 . On April 8, 2016, based on Ms. Beal ' s re - calculation ,

using class code 5606 for Mr. Jennings, the Department issued an

Amended Order of Penalty Assessment to Respondent. The Amended

Order of Penalty Assessment asses sed a penalty of $8,753.66.

CONCLUSIONS OF LAW

3 1 . DOAH has jurisdiction over the subject matter of and

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

(2015).

32 . Chapter 440 is known as the " Workers ' Compensation

Law. " § 440.01, Fl a. Stat.

33 . Because administrative fines are penal in nature, the

Department is required to prove by clear and convincing evidence

that Respondent failed to secure the payment of workers '

compensation and that it calculated the appropriate amount of

pena lty owed by Respondent. See Dep ' t of Banking & Fin. v.

Osborne Stern & Co. , 670 So. 2d 932, 935 (Fla. 1996).

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

every " employer " is required to secure the payment of workers '

compensation for the bene fit of its employees unless exempted or

excluded under chapter 440. Strict compliance with the Workers '

Compensation Law is required by the employer. See C&L Trucking

v. Corbitt , 546 So. 2d 1185, 1187 (Fla. 5th DCA 1989); Dep ' t of

Fin. Serv. v. L & I Con solidated Serv., Inc. , Case

No. 08 - 5911 (Fla. DOAH M ay 28, 2009; Fla. DFS July 2, 2009).

3 5 . Florida law defines " employment " as " any service

performed by an employee for the person employing him or her, "

and " with respect to the construction industry, a ll private

employment in which one or more employees are employed by the

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

36 . Florida law defines " employee " in part as " any person

who receives remuneration from an employer for the performance of

any wor k or service while engaged in any employment. "

§ 440.02(15)(a), Fla. Stat. Also included in the definition of

" employee " is " any person who is an officer of a corporation and

who performs services for remuneration for such corporation

within this state, whether or not such services are continuous.

§ 440.02(15)(b), Fla. Stat.

37 . " Corporate officer " or " officer of corporation " is

defined as " any person who fills an office provided for in the

corporate charter or articles of incorporation filed with the

D ivision of Corporations of the Department of State or as

permitted or required by chapter 607. " § 440.02(9), Fla. Stat.

38 . Section 440.107(2) states "' securing the payment of

workers ' compensation ' means obtaining coverage that meets the

requirements of this chapter and the Florida Insurance Code. "

39 . Section 440.107(3)(g) authorizes the Department to

issue stop - work orders and penalty assessment orders in its

enforcement of workers ' compensation coverage requirements.

40 . Despite admitting during dis covery that it was engaged

in the construction industry during the relevant period,

Respondent argues that the Departm ent improperly issued the Stop -

w ork Order because Mr. Rivero did not personally observe

construction activity taking place at the worksite . Further, by

refusing to provide any records during the investigation or in

response to discovery, Respondent asserts that the Department was

precluded from making a determination that the business was in

the construction industry.

4 1 . Respondent reason s that because a non - construction

business must have four or more employees before it is required

to secure workers ' compensation insurance, and Mr. Rivero only

saw three employees who were not actively eng aged in

construction, the Stop - w ork Order and the resulting penalty

assessments were in error.

4 2 . In support, Respondent cites r ule 69L - 6.028 , which

states :

(d) The imputed weekly payroll for each

employee, corporate officer, sole proprietor,

or partner shall be assigned to the highest

rated workers ' c ompensation classification

code for an employee based upon records or

the investigator ' s physical observation of

that employee ' s activities.

4 3 . Because the Department received no records from

Respondent, Respondent asserts that there is no basis up on which

Mr. Jennings should have been designated as a class code 8810 for

the con s truction industry.

4 4 . This argument suggests that any construction employer

can frustrate the purposes of the W orkers ' Compensation L aw by

refusing to turn over reco r ds to the Department and engaging in

sancti onable discovery practices.

4 5 . Respondent ' s argument is specious at best. Respondent

wholly ignores the facts , supported by competent substantial

evidence , that were known to the Dep a rtment at the time the Stop -

w ork Order was issued :

a. T he name of the business is M.C. Jennings

Jr. Construction Corp. ;

b. Mr. M.C. Jennings, Jr. , and Respondent

hold active general contra c tor licenses ;

c. Respondent operates out of a construction

trailer with con s truction equipment and

related construction - related materials on the

premises ;

d. Mr. Rivero spoke to two employees who

admitted working for Respondent during the

rele vant time period; and

e. There was no evidence of these employees

carrying on any business ot her than that

related to M.C. Jennings Jr. Construction

Corp.

4 6 . The only logical inference to be drawn from these facts

is that Respondent was a business engaged in construction

activities as of the date of the on - site inspection.

4 7 . This i s also the only rational explanation for why

Respondent would admit the same during discovery and immediately

take steps to secure coverage for nine workers to lift the Stop -

w ork Order . If Respondent was not actively engaged in

construction activities, th ere would be no i mmediate need to lift

the Stop - w ork Order.

4 8 . There is no mandate in statu t e or rule that the

investigator , at the time of issuing a Stop - w ork Orde r to a

business with less than four employees , must demonstrate by clear

and convinci ng evidence, that a business is engaged in

construction activities. In fact, the statutory scheme is such

that once the Stop - w ork Order issues, the employer has the right

to present business records that would conclusively demonstrate

the nature of its bu siness and an entitlement to an amended

penalty assessment to conform to the provided business records .

Here, the Respondent purposely cho se not to provide any records .

4 9 . Mr. Rivero correctly concluded that Respondent was not

in compliance with the cov erage requirements of chapter 440 on

January 7, 2016 . Therefore, the Department properly issued and

ser ved the Stop - w ork Order .

50 . The Department has the duty of enforcing the employer ' s

compliance with the requirements of the Workers ' Compensation

Law. To that end, the Department is empowered to examine and

copy the business records of any employer conducting business in

the state of Florida to determine whether it is in compliance

with the Workers ' Compensation Law. § 440.107(3), Fla. Stat.

51 . Sec tion 440.107(7)(d)l. provides that the Division:

[S] hall 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 applyin g approved manual

rates to the employer ' s payroll during

periods for which it failed to secure the

payment of workers ' compensation required by

this chapter within the preceding 2 - year

period or $1,000, whichever is greater.

This statutory provision mand ates that the Department assess

a penalty for non - compliance with chapter 440 and does not

provide any authority for the Department to reduce the amount of

the penalty.

52 . Rule 69L - 6.027 adopts a penalty calculation worksheet

for the Department ' s penalty auditors to utilize " for purposes of

calculating penalties to be assessed against employers pursuant

to section 440.107, Florida Statutes. "

5 3 . The Department applied the proper methodology in

computing the Amended Order of Penalty Assessment pursuant to

section 440.107(7)(d)l. and rules 69L - 6.027 and 69L - 6.028.

5 4 . Ms. Beam properly utilized the penalty worksheet

mandated by rule 69L - 6.027 and the procedure mandated by section

440.107(7)(d)1. and (7)(e) to calculate the penalty owed by

Respondent as a result of its failure to comply with the coverage

requirements of chapter 440.

5 5 . T he Department has proven by clear and convincing

evidence that it correctly calculated and issued the penalty in

the amount of $8,753.66 in the Amended Order of Penalty

Assessment purs uant to section 440.107(7)(d)1. and r ule 69L -

6.027.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department enter a final order

upholding the Stop - w ork Order and the Amended Order of Penalty

Assessment and assess a penalty against Respondent in the amount

of $8,753.66.

DONE AND ENTERED this 27th day of June , 2016 , in

Tallahassee, Leon County, Florida.

S

MARY LI CREASY

Administrative Law Judge

Div ision 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 27th day of Jun e , 2016 .

ENDNOTE S

1/ The issue s identified in the Notice of Hearing were :

Whether Respondent violated the provisions of

chapter 440, Florida Statutes, by failing to

secure the payment of workers ' compensation

coverage, as alleged in the Stop - work Orde r,

and if so, what penalty is appropriate.

However, as a result of Respondent ' s blatant discovery

violations and refus a l to comply with the undersigned ' s Order

Granting Motion t o Compel, issued April 8, 2016, Respondent w as

precluded , as a discovery sanction, from disputing the amount of

the penalty derived from the Stop - w ork Order and Amended Order of

Penalty Assessmen t. This ruling is consistent with Respondent ' s

representation that it supplied no business records and did not

cooperate with the dep osition of its corporate office r, Miles C.

Jennings, Jr. , because it did not intend to c o ntest that amount

of the penalty assessment, but rather only the issue of whether

any penalty was warranted. See Order Granting Motion for

Sanctions dated April 19, 2 016.

2/ The deposition transcript of Mr. Miles Jennings , Jr. , was not

introduced into evidence at the final hearing. However, i t was

made part of the record when the Department filed it with DOAH on

April 27, 2016 , in conjunction with its Second Motion for

Sanctions .

COPIES FURNISHED:

Thomas Nemecek, Esquire

Department of Financial Services

Division of Workers ' Compensation

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Kristian Eiler Dunn, Esquire

Dunn and Miller, P.A.

215 East Tharp e Street

Tallahassee, Florida 32303

(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 pa rties 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.