16-005085 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Thompson Enterprises Of Jacksonville, Llc Status: Closed Recommended Order on Thursday, April 27, 2017.

Summary: The Department proved by clear and convincing evidence the allegations in the Stop-Work Order and 2nd Amended Penalty Assessment.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 16 - 5085

THOMPSON ENTERPRISES OF

JACKSONVILLE, LLC,

Respondent.

_______________________________/

RECOMMENDED ORDER

An administrative hearing was conducted in this case on

January 10 , 2017, in Tallahassee, Florida, before James H.

Peterson , III, Administrative Law Judge with the Division of

Administrative Hearings .

APPEARANCES

For Petitioner: Tabitha G. Harnage, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

For Respondent: Michael W. Thompson

Thompson Enterprises of Jacksonville, LLC

7600 Bailey Body Road

Jacksonville, Florida 32216

STATEMENT OF THE ISSUE S

Whether Thompson Enterprises of Jacksonville, LLC

( Respondent ) , violated the provisions of chapter 440, Florida

Statutes, 1/ by failing to secure the payment of workers'

compensation, as alleged in the Stop - Work Order and 2nd Amen ded

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

penalty.

PRELIMINARY STATEMENT

On May 6, 2016, the Department of Financial Servic es,

Division of WorkersÓ Compensation (the Department) , served

Respondent with Stop - Work Order #16 - 210 - D1 (Stop - Work Order), an

Order of Penalty Assessment, and a Request for Production of

Business Records for Penalty Assessment Calculation (Request for

Production) , alleging that Respondent failed to secure workers'

compensation for Respondent's employees as required by

chap ter 440 . Respondent timely responded to the Request for

Production and the Department, in turn, calculated an Amended

Order of Penalty Assessment . The Amended Order of Penalty

Assessment assessed a penalty of $33,788.90, and was served on

Respondent on June 13, 2016.

On July 6, 2016, Respondent filed a petition with the

Department requesting a hearing to dispute the Stop - Work Order

and Amended Order of Penalty Assessment. Respondent provided

additional business records, and , based on those records, the

Department calculated a 2nd Amended Order of Penalty Assessment

which assessed a lesser penalty of $33,112.44, served on

Respondent on August 22, 2016.

On September 6, 2016, this matter was referred to the

Division of Administrative Hearings ( DOAH ). The final hearing

was held on January 10, 2017. At the final hearing, the

Depa rtment presented the testimony of Compliance Investigator

Ann Johnson and Penalty Auditor Eunika Jackson. The Department

offered 10 exhibits, all of which were received into evidence.

Respondent presented the testimony of Michael Thompson, Jr., as

a managing member of Respondent, and offered four exhibits, all

of which were received into evidence. On March 15, 2017 , in

accordance with a ruling at the hearing , the Department filed

Exhibit P - 11, consisting of RespondentÓs EmployerÓs Quarterly

Reports (RT 6s) , tax forms, and employee ear ning summaries

provided to the Department by Respondent .

The proceedings were transcribed and a transcript was

ordered. The parties were given 30 days after the filing of the

transcript to file their proposed recommended orders. The

T ranscript of the fin al hearing was filed with DOAH on

February 14, 2017. The Department timely filed its Proposed

Recommended Order on March 16, 2017 , which has been considered

in preparing this Recommended Order . Respondent did not submit

a proposed recommended order.

FINDINGS OF FACT

1. The Department is the state agency responsible for

enforcing workers' compensation coverage requirements applicable

to employers under Florida law.

2. Respondent is a Florida limited - liability company

organized on October 25, 2011. The managing members listed on

RespondentÓs State of Florida Articles of Organization are

Thomas Thompson, Michael Thompson, and Vicky Thompson.

3. In May 2016, Department Compliance Investigator Ann

Johnson was assigned to conduct a job site visit on RespondentÓs

business because its name appeared on the DepartmentÓs Bureau of

Compliance Ós Ð lead list. Ñ The Ð lead list Ñ is one of the

DepartmentÓ s databases listing employers that are potentially

out of compliance with Florida's workers' compe nsation insurance

requirements.

4. Prior to the job site visit , Investigator Johnson

reviewed the Division of Corporations website , www.sunbiz.org ,

and confirmed Respondent's address, managing members' names, and

that Respondent was a current, active Florida company.

R espondentÓs website advertised towing, wrecker, mechanic, and

body shop services.

5. On May 6, 2016, Investigator Johnson visited

Respon dent's principal address located at 7600 Bailey Body Road,

Jacksonville, Florida 32216. She noted a large commercial sign

near RespondentÓs address that advertised towing and wrecker

services.

6. During her visit, Investigator Johnson spoke with Vicky

Thompson and Michael Thompson, both of whom advised that they

were owners of Respondent . The Thompsons informed Investigator

Johnson that Respondent had six employees, including the three

listed as managers on RespondentÓs Articles of O rganization.

When Investigator Johnson asked for proof of workersÓ

compensation coverage, Michael Thompson admitted that Respondent

had no such coverage .

7. Under Florida law, e mployers in the non - construction

industry, such as Respondent, must secure workers' compensation

insurance if "four or more employees are employed by the same

employer." §§ 440.02(17)(b) and 440.107, Fla. Stat.

8. On the same day as her site visit, Investigator Johnson

confirmed RespondentÓs lack of insurance with a search of the

Department's internal database, Coverage and Compliance

Automated System. At the time , Respondent had no active

exemptions from the requirements of obtaining workersÓ

compensation for its three managing members.

9. Base d on her investigation , Investigator Johnson served

Respondent with the Stop - Work Order and a Request for Production

on May 6, 2016. Upon serving the documents, Investigator

Johnson explained the effect and purpose of the documents and

how Respond ent could come into compliance.

10. Respondent came into compliance that same day by

paying a $1,000 down payment, reducing Respondent's workforce to

three employees, applying for exemptions for its three managing

me mbers, and executing an agreed O rder of conditional release

with the D epartment.

11. Respondent subsequently complied with the DepartmentÓs

Request for Production.

12. In June 2016, the Department assigned Penalty Auditor

Eunika Jackson to review records obtained from Respondent and

calculate the penalty to be assessed against Respondent. In

accordance with applicable law, t he Department's audit span ned

the preceding two - year period, sta rting from the date of the

Stop - Work O rder. See § 440.107(7)(d)1., Fla. Stat. The audit

period in this case was from May 7, 2014 , through May 6, 2016.

13. Based on information obtained during the

investigation , Auditor Jackson assigned classification codes

7219, 8380, and 8810 to those identified as employees working

for Respondent during the audit period.

14. Classification codes a re four - digit codes assigned

to various occupations by the National Council on Compensation

Insurance ("NCCI") to assist in the calculation of workers'

c ompensation insurance premiums. Classification code

8810 applies to clerical office employees, code 7219 applies to

trucking and "towing companies , " and code 8380 applies to

automobile service or repair centers.

15. According to Respondent , it was out of compliance with

the coverage requirements of ch apter 440 for only "368 days"

during the two - year audit period. Respondent's records ,

however, do not support this contention .

16. Respondent provided a detailed "Employee Earnings

Summary" for each employee stating the employee Ó s name , pay

rate, and pay period. Respondent's payroll records reflect that

Respondent employed "four or more employees" during the audit

period. Throughout the two - year audit period, Respondent

employed four or more employees with the following duties: Anna

Lee, mechanic/bodywork; Cedric Blake, mechanic/bodywork; David

Raynor, mechanic/bodywork; James Budner, mechanic/bodywork; Jason

Leighty, mechanic; Kevin Croker, Jr., porter/detailer; Nicholas

Conway, bodywork; Ralph Tenity, bodywork; Rebecca Thompso n,

secretary/office help; Stephen Collins, shop helper/porter; Todd

Gatshore, tow truck driver/shop helper; and Williams Reeves, tow

truck driver/sho p helper.

17. E vidence further demonstrated that, during the audit

period, m anaging member Michael Thompso n worked as a wrecker

truck driver, and work ed with the Sheriff's Office to clear

traffic accidents . He was assigned class code 7219 Ï tow truck

driver.

18. Managing member Vicky Thompson was give n the clerical

class code 8810 because she was observed working in the office

during Investigator Johnson's site visit.

19. Managing member Thomas Thompson was assigne d the

clerical class code 8810 based upon the fact that he

occasionally does office work for the business.

20. T he corresponding approved manual rates for

classification codes 8810, 7219, and 8380 were correctly applied

to each employee for the related periods of non - compliance to

determine the final penalty.

21. In accordance with the Request for Production,

Respondent provided the Department payroll summary reports, tax

reports, and unemployment tax reports. The payroll summary

reports and records provided by Respondent listed the payroll and

duties f or each employee. The gross payroll amounts for each

e mpl oyee reflected in the penalty in this case were derived from

those do cuments . Upon receiving those reports and records, the

Department correctly determined the gross payroll for

Respondent's employees .

22. On June 13, 2016, the Department served the Amended

Order of Penalty Assessment on Respondent, ass essing a penalty

of $33,788.90. A portion of the first penalty was based on

imputed payroll for RespondentÓs three managing members .

23. After service of the Amended Order of Penalty

Assessment , Resp ondent provided additional records showing the

payroll of its three managing members , and the 2nd Amended Order

of Penalty Assessment was calculated after removing the imputed

payroll. On August 22, 2016, the Department served the 2nd

Amended Order of Pen alty Assessment on Respondent, assessing a

penalty of $33,112.44 , which was correctly calculated in

accordance with section 44 0.107(7)(d)1. and Florida

Administrative Code R ule 69L - 6.027(1).

24. In sum, the clear and convincing evidence demonstrated

that Respondent was a tow truck company engaged in the

wrecker/tow truck and body shop mechanic industries in Florida

during the periods of noncompliance; that Respondent failed to

secure the payment of workers' compensation for its employees in

violation of Florida's Workers' C ompensation Law; and that the

Department correctly utilized the methodology specified in

section 440.107( 7)(d)1. and rule 69L - 6.027(1) to determine the

appropriate penalty of $33,112.44.

CONCLUSIONS OF LAW

25. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

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

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

Law." § 440.01, Fla. Stat.

27. The Department is responsible for enforcing the

requirement that employers coming within the provisions of

chapter 440 obtain workers' compensation coverage for their

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

Florida Insurance Code." § 4 40.107(2), Fla. S tat.

28. Section 440.107(3) provides that Ð[t]he department

shall enforce workersÓ compensation coverage requirements,Ñ and

Ðthe department shall have the power to . . . (g) [i]ssue stop -

work orders, penalty assessment orders, and any oth er orders

necessary for the administration of this section.Ñ

29. Because the Department is seeking to prove violations

of a statute and impose administrative fines or other penalties,

it has the burden to prove the allegations in the complaint by

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

292 (Fla. 1987).

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

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

31. "Employment " subject to Florida's Workers'

Compensation Law includes Ð[a]ll private employments in which

four or more empl oyees are employed by the same employer or,

with respect to the construction industry, all private

employment in which one or more employees are employed by the

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

32. Under sections 440.10, 440.107(2), and 440.38 every

employer is required to secure the payment of workersÓ

compensation for the benefit of its employees unless exempted or

excluded under chapter 440.

33. At the final hearing, RespondentÓs managing member

Michael Thompson testified that a letter sent by the Department

to Respondent in February 2012 , led him to believe that

Respondent was exempt from being required to comply with

workers' compensation requirements .

34. The letter, appearing on the State of Florida Chief

Financial Officer's letterhead , is entitled "VERIFICATION OF

AUTOMATIC EXEMPT STATUS FROM WORKERS' COMPENSATION COVERAGE

REQUIRMENTS." The initial sentence of the letter states:

This letter verifies that the individual

listed below is AUTOM ATICALLY EXEMPT from

Florida's workers' compensation coverage

requirements within the scope of the non -

construction business or trade listed below

and is not required to obtain an exemption

issued by the Division of Workers'

Compensation in order to achiev e exempt

status.

35. Michael Thompson is th e " individual listed below "

referenced in the letter . Th e last paragraph of the letter,

however, states:

If MICHAEL THOMPSON is a corporate officer as

defined in Section 440.02(9), Florida

Statutes, this verification of Automatic

Exemption Status from Workers' Compensation

Coverage Requirements does not apply. In

order to become exempt, MICHAEL THOMPSON is

r equired to complete an exemption application

and submit the application to the Division of

Workers' Compensation.

36. Sect ion 440.02(9) defines a corporate officer as:

[A]ny person will fills an office

provided for in the c orporate charter or

articles of incorpora tion filed with the

Division of Co rporations of the Department

of State . . . . The term "officer of a

corporation" includes a member owning at

least 10 percent of a limited liability

company created and approved under chapter

608.

37. Certain officers, partners, shareholders, and sole

proprietors may elect to be exempt from the coverage

requirements of chapter 440 . §§ 440.02(15)(b) and 440.05, Fla.

Stat. O nly those officers of a limited - liability company with

"at least 10 percent" sto ck ownership may elect to be exempt

from the coverage requirements of chapter 440.

§ 440.02(15)(b)(2), Fla. Stat.; Fla. Admin. Code R. 69L - 6.012.

38. Michael Thompson, Vicky Thompson, and Thomas Thompson

are the managing members of Respondent. All three officers own

"at least 10 percent of the stock" of Respondent, evidenced by

the three exemptions obtained after the Stop - Work O rder was

issued.

39. Corporate officers who qualify for a workers'

compensation coverage exemption are not automatically exempt.

Rather, in order to qualify for an exemption, corporate officers

must submit a Notice of Election to B e Exempt and comply with

certain other requir ements set forth in section 440.02(15)(b) .

Fla. Admin. Code R. 69L - 6.012 (2)(a) .

40. In this case, Respondent did not have a workers'

compensation policy in place, nor were there any active

exemptions for the managing members of Respondent at t he time of

the issuance of the Stop - Work O rder . Rather, Respondent filed

its applications for exemptions for its three managing members

after the issuance of the S top - W ork O rder.

41. In his testimony, managing member Michael Thompson

further suggested that Respondent's failure to obtain workers'

compensation insurance coverage should be excused as a "mistake"

and a "terrible oversight . " Mr. Thompson also complained that

t here was "no warning" received from the Department that

Respondent was out of compliance and that the "first time

[Respondent] heard from the Division of Workers' Compensation was

on the date" of the S top - Work O rder.

42. Mr. Thompson admitted, however, that Respondent was

aware that the prior owners of the tow truck co mpany had a

workers' compensation insurance policy in place.

43. Further, a violation of the workers' compensation

insurance requirements of Florida's Workers' Compensation Law

requires no intent. Section 440 .107(7)(d)1. provides for the

assessment of a penalty for noncompliance with chapter 440, and

does not provide authority or discretion for a reduction in the

penalty.

44. The penalty for an employer who has failed to secure

the payment of compensation as required is equal t o two times

the amount the employer would have paid i n premium within the

preceding two - year period , or $1,000, whichever is greater.

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

for the Department's penalty auditors to utilize "[f ] or purposes

of calculating penalties to be assessed against employers

pursuant to section 440.107, Florida Statutes." Fla. Admin.

Code R. 69L - 6.027(1).

46 . Rule 69L - 6. 0 35 defines payroll for calculating

penalties. Remuneration includes, but is not limited to, wages,

salaries, loans, 1099 income, profit sharing, income

distributions, dividends, and cash pa yments. Fla. Admin. Code

R. 69L - 6.035(1).

47 . Considering evidence of payroll during the applicable

period , the classification codes , and the applicable process for

determining the penalty, it is concluded that t he Department

applied the proper methodology in computing the Amended Order of

Penalty Assessment and 2nd Amended Order of Penalty Assessment

in accordance with sections 440.107(7)(d)1 . and 440.107 (7)(e)

and r ules 69L - 6.027, 69L - 6.028, and 69L - 035 .

48 . Therefore, the Department has proven by clear and

convincing evidence that it correctly issued the Stop - Work Order

and c alculated the 2nd Amended Order of Penalty Assessment of

$33,112.44, for Thompson Enterprises of Jacksonville, LLC.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

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

order, consistent with this Recommended Order, upholding the

Stop - Work Order an d imposing the penalty set forth in the 2nd

Amended Order of Penalty Assessment against Thompson Enterprises

of Jacksonville , LLC .

DONE AND ENTE RED this 27 th day of April , 2017 , in

Tallahassee, Leon County, Florida.

S

JAMES H. PETERSON, III

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.u s

Filed with the Clerk of the

Division of Administrative Hearings

this 27 th day of April , 2017 .

ENDNOTE

1/ Unless otherwise indicated, all citations to the Florida

Statutes are to current versions which have not substantively

changed since the time of the allegations in this case.

COPIES FURNISHED:

Tabitha G. Harnage, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0333

(eServed)

Michael W. Thompson

Thompson Enterprises of Jacksonville, LLC

7600 Bailey Body Road

Jacksonville, Florida 32216

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Depa rtment 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.