17-000879 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Royal Roofing And Restoration, Inc. Status: Closed Recommended Order on Wednesday, January 24, 2018.

Summary: Petitioner proved by clear and convincing evidence that Respondent failed to secure workers' compensation insurance coverage for certain of its employees; Petitioner did not correctly calculate the penalty to be imposed against Respondent.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case Nos. 17 - 0879

17 - 1558

ROYAL ROOFING AND RESTORATION,

INC.,

Respondent.

_______________________________/

RECOMMENDED ORDER

A duly - noticed hearing was held in th ese case s on

September 14, 2017, in Tallahassee, Florida, before

Administrative Law Judge Suzanne Van Wyk.

APPEARANCES

For Petitioner: Leon Melnicoff, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Gary Lee Printy, Esquire

Gary Lee Printy , Attorney at Law

1804 Miccosukee Commons Drive, Suite 200

Tallahassee, Florida 32308

S TATEMENT OF THE ISSUE S

Whether Royal Roofing and Restoration, Inc. (Respondent or

Royal Roofing), failed to secure workersÓ compensation insurance

coverage for its employees; and, if so, whether the Department

of Financial Services, Division of WorkersÓ Co mpensation

(Petitioner or Department), correctly calculated the penalty to

be assessed against Respondent.

PRELIMINARY STATEMENT

On May 4 and June 8, 2016, the Department served Respondent

with Stop - Work Orders and Orders of Penalty Assessment, pursuant

to chapter 440, Florida Statutes, for failing to secure workersÓ

compensation for its employees, arising from two separate

inspections. On August 22, 2016, after review of records

received from Respondent, the Department issued an Amended Order

of Penalty A ssessment in the first case, assessing Respondent a

penalty of $30,112.34. On August 23, 2016 , the Department

issued an Amended Order of Penalty Assessment in the second

case, assessing Respondent a penalty of $76,209.64.

On September 29, 2016, Respondent filed separate requests

for hearing to dispute the Stop - Work Order and Amended Order of

Penalty Assessment in both cases. On February 9, 2017,

Petitioner referred the first case to the Division of

Administrative Hearings (Division) for assignment of an

A dministrative Law Judge to conduct a final hearing in the

matter. That case was assigned DOAH Case No. 17 - 0879.

On March 15, 2017, Petitioner referred the second case,

which was assigned DOAH Case No. 17 - 1558.

The final hearing in DOAH Case No. 17 - 0879 wa s originally

scheduled for April 6, 2017, but was continued following the

referral of DOAH Case No. 17 - 1558 and the partiesÓ request to

consolidate the cases. The cases were consolidated on March 21,

2017, and scheduled for final hearing on May 31, 2017. The

final hearing was subsequently continued twice, once at the

request of Petitioner, and again by joint request of the parties

to analyze large volumes of data in an effort to further reduce

the penalty to be assessed. The final hearing was rescheduled

to September 14, 2017.

Following records review and the deposition of RespondentÓs

President , Petitioner requested, and was granted, leave to file

a Second Amended Order of Penalty Assessment in both cases. On

August 30, 2017, Petitioner filed a Second A mended Order of

Penalty Assessment in DOAH Case No. 17 - 0879, reducing the

penalty to $19,115.84, and in DOAH Case No. 17 - 1558, reducing

the penalty to $60,072.96.

The final hearing commenced as rescheduled on September 14,

2017. At the final hearing, Peti tioner presented the testimony

of Ginger Chalker; Jesse Holman, Department Compliance

Investigator; Donald Hurst, Department Compliance Facilitator;

and Eunika Jackson, Department Penalty Auditor. PetitionerÓs

Exhibits P1 through P35, were admitted into e vidence.

Respondent offered the testimony of Traci Fisher,

RespondentÓs President , and introduced RespondentÓs Exhibits R24

through R32, which were admitted into evidence.

A one - volume Transcript of the proceedings was filed on

October 4, 2017. Petition er timely filed a Proposed Recommended

Order, which has been considered by the undersigned in preparing

this Recommended Order. Respondent requested, and was granted,

an extension of time until November 6, 2017, to submit a

proposed recommended order; how ever, as of the date of this

Recommended Order, Respondent ha s not made any post - hearing

filing.

Unless otherwise indicated, all references to the Florida

Statutes herein are to the 2016 version.

FINDING S OF FACT

1. Petitioner is the state agency charged with enforcing

the requirement of chapter 440, that Florida employers secure

workersÓ compensation c overage for their employees.

§ 440.107(3), Fla. Stat.

2. Respondent is a Florida for - profit corporation

organized on July 28, 2015, and engaged in the bu siness of

roofing and storm damage restoration. The company was formed,

and initially conducted business, in Tallahassee, Florida, but

expanded to the Panama City area in 2016.

3. Traci Fisher is RespondentÓs President and Registered

Agent, with a mailin g address of 1004 Kenilworth, Tallahassee,

Florida 32312.

DOAH Case No. 17 - 0879

4. On May 4, 2016, Department Compliance Investigator

Jesse Holman, conducted a routine workersÓ compensation

compliance inspection at 374 Brown Place in Crestview, Florida.

Mr. Holman observed four men removing shingles from the roof of

a residential structure at that address.

5. Mr. Holman first interviewed a worker who identified

himself as Dustin Hansel and reported that he and the other

three workers on site were a ne w crew for Respondent, the permit

for the job had not yet been pulled, and the workers were not

aware of the rate of pay for the job.

6. Mr. Hansel telephoned RespondentÓs sales manager,

Dillon Robinson, who then spoke directly with Mr. Holman via

teleph one.

7. Mr. Robinson informed Mr. Holman that Respondent

obtained workersÓ compensation coverage through Payroll

Management Inc. (PMI), an employee - leasing company.

8. Mr. Holman identified the three remaining workers at

the job site as Milton Trice, Wi nston Perrotta, and Kerrigan

Ireland.

9. Mr. Holman contacted PMI and secured a copy of

RespondentÓs then - active employee roster. None of the workers

at the job site, including Mr. Hansel, were included on

RespondentÓs employee roster.

10. Upon inquiry, Mr. Holman was informed that PMI had no

pending employee applications for Respondent.

11. Mr. Holman consulted the DepartmentÓs Coverag e

Compliance Automated System (CCAS ) and found Respondent had no

workersÓ compensation insurance policy and no active e xemptions.

12. During Mr. HolmanÓs onsite investigation, the workers

left the job site.

13. Mr. Holman could not immediately reach Ms. Fisher, but

did speak with her husband, Tim Fisher. Mr. Fisher informed

Mr. Holman that the crew was on their way to the PMI Fort Walton

office to be enrolled on RespondentÓs employee roster.

14. On May 5, 2016, based on his investigation, and after

consultation with his supervisor, Mr. Holman issued Respondent

S top - W ork O rder (SWO) 16 - 148 - 1A, along with a Business Rec ords

Request (BRR) for records covering the audit period of July 27,

2015 through May 4, 2016.

15. Later that day, Mr. Holman spoke to Ms. Fisher, who

informed him the crew did not have permission to begin the work

on that date, as she had not yet pulled the permit for the

reroof. Ms. Fisher further explained that the crewmembers had

been instructed to complete applications with PMI prior to

departing Tallahassee for Crestview. Ms. Fisher confirmed the

crewmembers were completing applications at PMI For t Walton that

same day.

16. Mr. Holman met with Ms. Fisher the following day and

personally served SWO 16 - 148 - 1A. Ms. Fisher delivered to

Mr. Holman an updated employee roster from PMI which included

Mr. Hansel, Mr. Perrotta, and Mr. Ireland; a letter d ocumenting

Mrice was not employed by Respondent; and a $1000 check as

downpayment on the penalty.

17. Respondent initially submitted business records in

response to the BRR on May 23 and 25, 2017.

DOAH Case No. 17 - 1558

18. On June 8, 2016 , Mr. Holm an conducted a random

workersÓ compensation compliance inspection at 532 Rising Star

Drive in Crestview. The single - family home at that address was

undergoing renovations and Mr. Holman observed three men on the

roof removing shingles.

19. None of the m en on the roof spoke English, but a

fourth man, who identified himself as Jose Manuel Mejia,

appeared and stated he worked for Respondent, and that all the

workers onsite were pa i d through PMI at a rate of $10.00 per

hour. Mr. Mejia admitted that one of t he workerÓs onsite,

Emelio Lopez, was not enrolled with PMI and explained that

Mr. Mejia brought him to the worksite that day because he knew

Mr. Lopez to be a good worker.

20. The remaining workers onsite were identified as Juan

Mencho and Ramon Gonzale z, both from Atlanta, Georgia.

Mr. Mejia produced some PMI paystubs for himself and Mr. Mencho.

21. Mr. Mejia stated that he and his crews also received

reimbursement checks directly from Respondent for gas, rentals,

materials, and the like.

22. Mr. H olman contacted PMI, who produced RespondentÓs

then - active employee roster. Mr. Mejia and Mr. Mencho were on

the roster, but neither Mr. Gonzalez nor Mr. Lopez was included.

23. Mr. Holman next contacted Ms. Fisher, who identified

Mr. Mejia as a subcont ractor, but was not familiar with any of

the other men Mr. Holman encountered at the worksite.

24. Mr. Holman consulted via telephone with his

supervisor, who instructed him to issue an SWO to Respondent for

failing to secure workersÓ compensation covera ge for its

employees. Mr. Holman issued SWO 16 - 198 - 1A by posting the

worksite on June 8, 201 6 . Department Facilitator Don Hurst,

personally served Ms. Fisher with SWO 16 - 198 - 1A in Tallahassee

that same day.

SWO 16 - 148 - 1A Penalty Calculation 1/

25. Depa rtment Penalty Auditor Eunika Jackson, was

assigned to calculate the penalties associated with the SWOs

issued to Respondent.

26. On June 8, 2016, Ms. Jackson began calculating the

penalty associated with SWO 16 - 148 - 1A. Ms. Jackson reviewed the

document s submitted by Respondent in response to the BRR. The

documents included RespondentÓs Wells Fargo bank statements,

check images, and PMI payroll register for the audit period. 2/

27. Based on a review of the records, Ms. Jackson

identified the following individuals as RespondentÓs employees

because they received direct payment from Respondent at times

during the audit period: Davi d Rosinsky, Dylan Robinson, Jar od

Bell, Tommy Miller, and David Shields.

28. Ms. Jackson determined periods of non - complianc e for

these employees based on the dates they received payments from

Respondent and were not covered for workersÓ compensation via

PMI employment roster, separate policy, or corporate officer

exemption.

29. Ms. Jackson deemed payments to each of the indi viduals

as gross payroll for purposes of calculating the penalty.

30. Based upon Ms. FisherÓs deposition testimony,

Ms. Jackson assigned National Council on Compensation Insurance

(NCCI) class code 5551, Roofing, to Mr. Miller; NCCI class

code 5474, Pain ting, to Mr. Rosinsky; NCCI class code 8742,

Sales, to Mr. Bell and Mr. Robinson; and NCCI class code 8810,

clerical office employee, to Mr. Shields.

31. Utilizing the statutory formula for penalty

calculation, Ms. Jackson calculated a total penalty of $ 191.28

associated with these five Ðemployees.Ñ

32. Ms. Jackson next calculated the penalty for Dustin

Hansel, Kerrigan Ireland, Milton Trice, and Winston Perrotta,

th e workers identified at the job site as employees on May 4,

2016.

33. The Department ma intains that the business records

submitted by Respondent were insufficient to determine

RespondentÓs payroll to these Ðemployees,Ñ thus, Ms. Jackson

used the statutory formula to impute payroll to these workers.

34. Ms. Jackson calculated a penalty of $ 14,970.12 against

Respondent for failure to secure payment of workersÓ

compensation insurance for each of these four ÐemployeesÑ during

the audit period. The total pen alty associated with these

four ÐemployeesÑ is $59,880.48.

35. Ms. Jackson calculated a total penalty of $60,072.96

to be imposed against Respondent in connection with SWO 16 - 148 -

1A.

Business Records

36. In compliance with the DepartmentÓs BRR, Respondent

submitted additional business records on several occasions --

March 21, May 3 and 31 , June 7, and August 15 and 24, 2017 -- in

order to establish its complete payroll for the audit period.

While the Department admits that the final documents submitted

do establish RespondentÓs complete payroll, the Department did

not issue amended penalty assessment based on those records in

either case. The Department maintains Respondent did not timely

submit records, pursuant to Florida Administrative Code Rule

69L - 6.028(4), which allows an employer 20 business days after

service of the first amended or der of penalty assessment to

submit sufficient records to establish payroll.

37. All business records submitted by Respondent were

admitted in evidence and included as part of the record. The

undersigned is not limited to the record before the Departmen t

at the time the amended penalty assessments were imposed, but

must determine a recommendation in a de novo proceeding. The

undersigned has relied upon the complete record in arriving at

the decision in this case.

Penalty Calculation for Ireland, Trice , and Perrotta

38. For purposes of workersÓ compensation insurance

coverage, an ÐemployeeÑ is Ðany person who receives remuneration

from an employerÑ for work or services performed under a

contract. § 440.02(15)(a), Fla. Stat.

39. Respondent did not iss ue a single check to

Mr. Ireland, Mrice, or Mr. Perrotta during the audit period.

40. Mr. Ireland, Mrice, and Mr. Perrotta are not

included on any PMI leasing roster included in the record for

the audit period.

41. The uncontroverted evidence, in cluding the credible

and unrefuted testimony of each person with knowledge,

established that Mr. Ireland, Mrice, and Mr. Perrotta were

newly hired for the job in Crestview on May 4, 2016, and began

working that day prior to submitting applications at P MI ,

despite Ms. FisherÓs directions otherwise.

42. Petitioner did not prove that either Mr. Ireland,

Mr. Trice, or Mr. Perrotta was RespondentÓs employee at any time

during the audit period.

43. Petitioner did not correctly calculate the penalty of

$44,9 11.26 against Respondent for failure to secure workersÓ

compensation insurance for Mr. Ireland, Mrice, and

Mr. Perrotta during the audit period.

Penalty Calculation for Hansel

44. Ms. Fisher testified that Mr. Hansel has owned several

businesses with which Respondent has conducted business over the

years.

45. Originally, Mr. Hansel owned a dumpster rental

business, now owned by his father. Mr. Hansel also owned an

independe nt landscaping company with which Respondent

occasionally transacted busines s.

46. When Respondent expanded business into the Panama City

area, Ms. Fisher hired Mr. Hansel as a crew chief to supervise

new crews in the area. The job on May 4, 2016, was his first

roofing job.

47. A review of RespondentÓs records reveals Responden t

issued the following checks to Mr. Hansel during the audit

period: December 4, 2015 , in the amount of $360, $300 of which

was for Ðdumpster rentalÑ and the remaining $60 for ÐsodÑ;

May 4, 2016 , in the amount of $200 for Ðsod repairÑ; May 6,

2016 , in the amount of $925 as reimbur sement for travel

expenses; May 9, 2016 , in the amount of $ 1,011.50 (with no

memo); and May 21, 2016 , in the amount of $100 for

Ð7845 Preservation.Ñ

48. Mr. Hansel was included on RespondentÓs PMI leasing

roster beginning on May 13, 2016.

49. Petitioner proved that Mr. Hansel was RespondentÓs

employee at times during the audit period.

50. Petitioner did not prove that RespondentÓs records

were insufficient to determine payroll to Mr. Hansel during the

audit period, which would h ave required an imputed penalty.

51. Petitioner did not correctly calculate the penalty of

$14,970.42 against Respondent for failure to secure workersÓ

compensation insurance coverage for Mr. Hansel during the audit

period.

52. Sod repair by Mr. Hansel i s a service performed for

Respondent during the audit period.

53. Reimbursement of travel expenses is specifically

included in the definition of payroll for purposes of

calculating the penalty. See Fla. Admin. Code R. 69L -

6.035(1)(f) (ÐExpense reimbursem ents, including reimbursements

for travelÑ are included as remuneration to employees Ðto the

extent that the employerÓs business records and receipts do not

confirm that the expense incurred as a valid business

expense.Ñ) .

54. Dumpster rental is neither w ork performed on behalf

of, nor service provided to, Respondent during the audit period.

55. The correct uninsured payroll amount attributable to

Mr. Hansel is $2,296.50.

56. Petitioner correctly applied NCCI class code 5551,

Roofing, to work performed b y Mr. Hansel based on the

observation of Mr. Holman at the worksite on May 4, 2016.

57. With respect to Mr. HanselÓs services for sod and sod

repair, Petitioner did not correctly apply NCCI class code 5551.

58. Petitioner did not introduce competent subs tantial

evidence of the applicable NCCI class code and premium amount

for landscaping services performed during the audit period. 3/

59. Uninsured payroll attributable to Mr. Hansel for

roofing services during the audit period is $2,036.50.

60 . The approv ed manual rate for workersÓ compensation

insurance for NCCI class code 5551 during the period of non -

compliance -- May 9 and 21, 2016 -- is $ 18.60.

61 . The premium amount Respondent would have paid to

provide workersÓ compensation insurance for Mr. Hansel is

$378.79 (One percent of Mr. HanselÓs gross payroll during the

non - compliance period -- $20.36 -- multiplied by $ 18.60).

62 . The penalty for RespondentÓs failure to secure

workerÓs compensation coverage insurance for Mr. Hansel during

the period of non - complia nce is calculated as two times the

amount Respondent would have paid in premium for the non -

compliance period.

63. The correct penalty for RespondentÓs failure to

maintain workersÓ compensation coverage for Mr. Hansel during

the period of non - compliance i s $757.58.

Penalty Calculation for Salesmen

64. Independent contractors not engaged in the

construction industry are not employees for purposes of

enforcing workersÓ compensation insurance requirements. See

§ 440.02(15)(d)1., Fla. Stat.

65. Sales is a n on - construction industry occupation.

66. The Department calculated a penalty associated with

payroll attributable to the following persons identified by

Ms. Fisher as independent salesmen: Dylan Robinson, Kevin

Miller, Marc Medley, Mike Rucke r, Colby Fis her, David Jones,

Ja rod Bell, Matt Flynn, and Todd Zulauf.

67. Section 440.02(15)(d)1. provides that an individual

may be an independent contractor, rather than an employee, as

follows:

a. In order to meet the definition of

independent contractor, at l east four of the

following criteria must be met:

(I) The independent contractor maintains a

separate business with his or her own work

facility, truck, equipment, materials, or

similar accommodations;

(II) The independent contractor holds or

has applie d for a federal employer

identification number, unless the

independent contractor is a sole proprietor

who is not required to obtain a federal

employer identification number under state

or federal regulations;

(III) The independent contractor receives

co mpensation for services rendered or work

performed and such compensation is paid to a

business rather than to an individual;

(IV) The independent contractor holds one

or more bank accounts in the name of the

business entity for purposes of paying

busines s expenses or other expenses related

to services rendered or work performed for

compensation;

(V) The independent contractor performs

work or is able to perform work for any

entity in addition to or besides the

employer at his or her own election without

the necessity of completing an employment

application or process; or

(VI) The independent contractor receives

compensation for work or services rendered

on a competitive - bid basis or completion of

a task or a set of tasks as defined by a

contractual agr eement, unless such

contractual agreement expressly states that

an employment relationship exists.

b. If four of the criteria listed in sub -

subparagraph a. do not exist, an individual

may still be presumed to be an independent

contractor and not an emplo yee based on full

consideration of the nature of the

individual situation with regard to

satisfying any of the following conditions:

(I) The independent contractor performs or

agrees to perform specific services or work

for a specific amount of money and controls

the means of performing the services or

work.

(II) The independent contractor incurs the

principal expenses related to the service or

work that he or she performs or agrees to

perform.

(III) The independent contractor is

responsible for the s atisfactory completion

of the work or services that he or she

performs or agrees to perform.

(IV) The independent contractor receives

compensation for work or services performed

for a commission or on a per - job basis and

not on any other basis.

( V) The independent contractor may realize

a profit or suffer a loss in connection with

performing work or services.

(VI) The independent contractor has

continuing or recurring business liabilities

or obligations.

(VII) The success or failure of the

independen t contractorÓs business depends on

the relationship of business receipts to

expenditures.

68. Ms. Fisher testified that each of the above - named

salesmen sold roofing jobs for her at various times during the

audit period on a commission - only basis. The c ontractors

inspect homeowner roofs, draft schematics, use their own

equipment (e.g., drones), incur all of their own expenses, and

handle the insurance filing for the homeownerÓs insurance to pay

on the claim.

69. Ms. Fisher further testified that each of the salesmen

also sells for other roofing contractors in the Tallahassee

area. She pays the salesmen on a per - job basis. Ms. Fisher

does not compensate the salesmen for the time involved in

inspecting a roof, preparing schematics, or making the sale.

N or does Ms. Fisher reimburse the salesmen for travel to sales

jobsites.

70. Ms. FisherÓs testimony was credible, persuasive, and

uncontroverted.

71. Respondent introduced in evidence four ÐIndependent

Contractor ChecklistsÑ allegedly completed by Mr. Rob inson,

Mr. Medley, Mr. Fisher, and Mr. Flynn. Each form checklist

follows the format of section 440.02(15)(d)1., listing the

criteria set forth in subparagraphs a. and b. The forms

indicate that they each meet all the criteria listed in

subparagraph b.: they perform, or agree to perform services for

a specific amount of money and control the means of performing

the service; they incur the principal expenses related to the

service performed; they are responsible for satisfactory

completion of the services performed; they receive compensation

for the services performed on a per - job or commission basis;

they may realize a profit or suffer a loss in connection with

performing the services; they have continuing and recurring

business liabilities or obligations ; and the success or failure

of their business depends on the relationship of business

receipts to expenditures. 4/

72. In its Proposed Recommended Order, Petitioner conceded

the nine men identified by Respondent as independent sales

contractors Ðwould not be considered employees of RespondentÑ

because the Ðsalesmen would seem to meet the majority of [the]

requirements [of section 440.02(15)(d)1.b.].Ñ

73. Respondent issued Dylan Robinson, Mark Medley, Colby

Fisher, Matt Flynn, Kevin Miller, Mike Rucker, Ja rod Bell, David

Jones, and Todd Zulauf an IRS FORM 1099 - MISC for income paid

during the 2016 tax year.

74. Respondent did not prove by clear and convincing

evidence that the above - named salesmen were RespondentÓs

employees during the audit period.

75. Fo r SWO 16 - 148 - 1A, Respondent did not correctly

calculate the penalty because Respondent included a penalty

associated with PetitionerÓs failure to provide workersÓ

compensation insurance coverage for Dylan Robinson and Jarod

Bell.

76. Penalty in the amount of $20.70 associated with Dylan

Robinson and Jarod Bell should not be included in the total

penalty.

77. The correct penalty amount for SWO 16 - 148 - 1A, based on

records submitted by Respondent on or before March 20, 2016,

is $929.16.

Draft Revised Second Amended Order of Penalty Assessment

78. The additional records submitted by Respondent

revealed payments made to persons during the audit period who

were not included in the Department Ós Second Amended Order of

Penalty Assessment. The Department and Resp ondent disagreed at

hearing whether the payments qualified as payroll.

79. At hearing, Petitioner submitted a draft revised

second amended penalty calculation for SWO 16 - 148 - 1A based on

all records received from Respondent. The revised penalty is in

the amount of $61,453.50.

80. Ms. Jackson populated the spreadsheet with the name of

every individual to whom a check was written on RespondentÓs

business bank account during the audit period, removing only

those payments to individuals and entities which, t o

PetitionerÓs knowledge, were not RespondentÓs employees.

81. RespondentÓs calculations in the revis ed penalty

suffer from some of the same errors as in the second amended

penalty calculation -- they include individuals Petitioner did not

prove were Respon dentÓs employees , as well as payments which

were not uninsured payroll.

82. For the reasons explained herein, Petitioner did not

prove that salesmen David Jones, Dylan Robinson, Jarod Bell,

Kevin Miller, Mark Medley, Matt Flynn, Mike Rucker, Tim Fischer,

and Colby Fisher were RespondentÓs employees during the audit

period.

83. Respondent did not accurately calculate the penalty

associated with those persons.

84. Respondent made payments to David Shields during the

audit period, which the Department argue s should be included as

payroll. The Department included payments to Mr. Shields in its

draft revised second amended order of penalty assessment and

assigned NCCI class code Ð8810Ñ for clerical work.

85. Mr. Shields is a licensed professional roofing

con tractor who acts as ÐqualifierÑ for RespondentÓs business. A

qualifier is a licensed professional who certifies plans for

permit applications submitted by another business.

86. Respondent pays Mr. Shields a flat fee per permit

application qualified by hi m.

87. The record evidence does not support a finding that

Mr. Shields provides clerical services to Respondent.

Mr. Shields provides some sort of professional services to

Respondent, and is likely an independent contractor providing

his own materials an d supplies, maintaining his own business

accounts, and liable for his own business success.

88. Assuming Mr. Shields were RespondentÓs employee, the

Department introduced no evidence of an appropriate NCCI class

code for Mr. ShieldsÓ services.

89. The Department did not prove that payments to

Mr. Shields should be included as RespondentÓs uninsured payroll

during the audit period.

90. Respondent paid Susan Swain a total of $258 during the

audit period for clerical work. Ms. Fisher maintained

Ms. Swain Ós work was casual at first, and the payments reflect a

time when she worked on - again, off - again, handling the paperwork

for restoration insurance claims. Later, Ms. Swain came to work

for Respondent full - time and was added to the PMI leasing

roster.

91. Section 440.02(15)(d)5. provides that a person Ðwhose

employment is both casual and not in the course of the trade,

business, profession or occupation of the employerÑ is not an

employee. The statute defines ÐcasualÑ employment as work that

is anticipate d to be completed in 10 working days or less and at

a total labor cost of less than $500. See § 440.02(5), Fla.

Stat.

92. In its Proposed Recommended Order, the Department

argues Ms. SwainÓs wages should be included as payroll because

the Ðtestimony rega rding Ms. Swain does not suggest that she was

employed for less than 10 days[.]Ñ However, it was the

DepartmentÓs burden to prove that Ms. Swain was a statutory

employee.

93. The Department did not prove that Ms. SwainÓs wages

should be included within R espondentÓs uninsured payroll.

94. The largest portion of the penalty assessed by the

Department, as well as in the draft revised second amended

penalty assessment, against Respondent is in connection with

various roofers who were employed by Respondent a t times during

the audit period.

95. Each of the roofers was included on RespondentÓs PMI

leasing roster, but received checks directly from Respondent in

addition to PMI payroll checks. The Department included all the

direct payments to those roofers a s payroll for purposes of

calculating a penalty in this case.

96. As Ms. Fisher explained, the company bids a reroof on

a per job basis -- usually a per square foot price. Ms. Fisher

adds each roofing contractorÓs name to the PMI leasing roster to

ensure t hat each roofer is covered by workersÓ compensation

insurance for the duration of the job. When the job is

completed (which is a matter of just a few days), the contractor

reports to Ms. Fisher what amount of the contract price was

spent on materials, sup plies, or other non - labor costs.

Ms. Fisher cuts a check to the contractor for that amount and

authorizes PMI to issue payroll checks for the Ðlabor costÑ (the

difference between the contract price and the non - labor costs ).

Ms. Fisher refers to this proc ess as Ðback - chargingÑ the

contractors for their materials, maintenance, tools, and other

non - labor costs.

97. The Department is correct that the direct payments are

payroll to the roofing contractors. See Fla. Admin. Code R.

69L - 6.035(1)(b) and (h) (rem uneration includes Ðpayments,

including cash payments, made to employees by or on behalf of

the employerÑ and Ðpayments or allowances made by or on behalf

of the employer for tools or equipment used by employees in

their work or operations for the employer .Ñ) .

98. The Department would be correct to include these

payments in the penalty calculation if they represented

uninsured payroll. However, the evidence supports a finding

that the direct payments to the roofing contractors were made

for the same jobs on which Respondent secured workersÓ

compensation coverage through PMI. The roofing contractors were

covered for workersÓ compensation throughout the job, even

though they may have received partial payment for the job

outside of the PMI payroll checks. 5/

99. The direct payments were not for separate reroofs on

which the roofers were not otherwise insured.

100. The Department did not correctly calculate penalties

associated with the following roofing contractors: Donald

Tontigh, Joseph Howard, Keith Mi lls, Aaron Kilpatrick, Gustavo

Tobias, Jose Mejia, and Tommy Miller.

101. Ms. Fisher also received cash payments from

Respondent during the audit period. These payments were made in

addition to her payroll through PMI.

102. Ms. Fisher described these pa yments as Ðcash

tickets , Ñ which were paid outside of her PMI payroll to

reimburse her for investments made in the company.

103. For purposes of calculating the penalty in this case,

these Ðcash ticketsÑ are clearly payroll, as that term is to be

calculate d pursuant to rule 69L - 6.035.

104. Similar to the issue with the roofing contractors,

the question is whether the payments represent uninsured

payroll.

105. Ms. Fisher did not hold a corporate officer exemption

at any time relevant hereto. Ms. Fishe r testified that she was

covered through PMI payroll leasing.

106. In contrast to the roofing contractors, Ms. FisherÓs

direct payments do not directly coincide with any particular job

or specific time frame during which Ms. Fisher was covered for

workers Ó compensation insurance through PMI. The evidence was

insufficient to determine that the amounts were insured payroll.

107. The Department properly calculated a penalty

associated with payroll attributable to Ms. Fisher.

108. Respondent made one paymen t of $75 to Donald Martin

during the audit period. The Dep artment calculated a penalty

of $27.90 associated with t his payment to Mr. Martin.

Ms. Fisher explained that Mr. Martin was a down - on - his - luck guy

who came by the office one day complaining that M r. Hansel owed

him some money. Ms. Fisher offered to put him on a roofing crew

and wrote him the $75 check to help him out.

109. Ms. FisherÓs testimony was both credible and

unrefuted.

110. Mr. Martin was never hired by Respondent, put on any

roofing cr ew, or added to the PMI leasing roster.

111. Mr. Martin was not RespondentÓs employee because he

did not receive remuneration for the Ðperformance of any work or

service while engaged in any employment under any appointment or

contract for hireÑ with Resp ondent. § 440.02(15)(a), Fla. Stat.

112. Cale Dierking works for Respondent full - time in a

clerical position. During the audit period, Respondent paid

Mr. Dierking directly by check for $1,306.14. This payment was

made outside of Mr. DierkingÓs PMI pay roll checks.

113. Ms. Fisher testified that she paid Mr. Dierking

directly on one occasion when ÐPMIÓs payroll got stuck in

Memphis, I believe it was a snow - in situation where payroll

checks didnÓt come.Ñ Rather than ask her employee to go without

a time ly paycheck, she advanced his payroll.

114. Ms. FisherÓs testimony was both credible and

unrefuted.

115. The payment to Mr. Dierking is clearly payroll.

However, Mr. Dierking was covered for workersÓ compensation

through PMI for the period during which the check was issued.

Thus, there is no evidence that it was uninsured payroll.

116. The Department did not correctly calculate a penalty

associated with payments to Mr. Dierking.

117. The correct penalty to be assessed against Respondent

for failure to secure workersÓ compensation coverage for its

employees during the audit period in connection with SWO 16 - 148 -

1A is $770.60.

Penalty Calculation for SWO 16 - 198 - 1A

118. Ms. Jackson calculated a total penalty against

Respondent in connection with SWO 16 - 19 8 - 1A in the amount of

$19,115.84, as reflected in the Second Amended Order of Penalty

Assessment.

119. The Department correctly imputed penalty against

Respondent in the amount of $91.68 each for uninsured payroll to

Mr. Gonzalez and Mr. Lopez. The evide nce supported a finding

that these workers were Responden tÓs statutory employees on

June 8, 2016, and were not enrolled on the PMI leasing roster.

120. The Department did not correctly calculate the

penalty associated with salesmen Dylan Robinson, Jarod B ell,

Kevin Miller, Mark Medley, Matt Flynn , and Todd Zulauf.

121. The Department did not correctly calculate the

penalty associated with roofing contractors Abraham Martinez -

Antonio, Edwin Kinsey, Dustin Hansel, Efrian Molina - Agustin,

Jose Mejia, Joseph Howard, Keith Mills, Samuel Pedro, and Tommy

Miller.

122. The Department did not correctly calculate the

penalty against Respondent associated with Mr. Shields,

RespondentÓs qualifier.

123. Based on a review of RespondentÓs complete ÐuntimelyÑ

records, the Department discovered direct payments made to

additional employees not included on the Second Amended Order of

Penalty Assessment.

124. Respondent made a direct payment to Ethan Burch in

the amount of $602.50 during the audit period.

125. Ethan Burch is one of RespondentÓs full - time clerical

employees. The evidence is insufficient to determine whether

the payment of $602.50 was insured or uninsured payroll. As

such, the Department did not prove it correctly calculated the

penalty associated with Mr. Burch.

126. Respondent also made a direct payment to Chelsea

Hansel in the amount of $965 during the audit period.

Ms. Hansel is another clerical employee. Ms. Hansel Ós PMI

enrollment was delayed due to some background investigation.

Respondent paid M s. Hansel for work she completed prior to

enrollment.

127. The direct payment to Ms. Hansel constitutes

uninsured payroll.

128. The Department correctly calculated the penalty

associated with the payment to Chelsea Hansel .

129. The correct penalty amoun t to be imposed against

Respondent for failure to secure payment of workersÓ

compensation coverage for its employees (Gonzalez, Lopez, and

Chelsea Hansel ) during the audit period in connection with

SWO 16 - 198 - 1A is $187.80.

CONCLUSIONS OF LAW

130. The Div ision of Administrative Hearings has

jurisdiction of the subject matter of and the parties to this

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

131. Employers are required to secure payment of workersÓ

compensation for their employees unless exem pted or excluded.

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

132. ÐEmployerÑ includes Ðevery person carrying on any

employment.Ñ £ 440.02(16)(a), Fla. Stat.

133. ÐEmploymentÑ means Ðany service performed by an

employee for the person employing him o r her.Ñ £ 440.02(17)(a),

Fla. Stat.

134. Respondent is an ÐemployerÑ subject to the statutory

requirement to provide workersÓ compensation insurance coverage

for its employees.

135. Strict compliance with the WorkersÓ Compensation Law

is required by the employer. See C&L Trucking v. Corbett ,

546 So. 2d 1185, 1187 (Fla. 5th DCA 1989).

136. The Department has the burden of proof in this case

and must show by clear and convincing evidence that the employer

violated the WorkersÓ Compensation Law and that t he penalty

assessments were correct under the Law. See DepÓt of Banking

and Fin. v. Osborne Stern and Co. , 670 So. 2d 932 (Fla. 1996);

and Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

137. In Evans Packing Co. v. Department of Agriculture and

Consu mer Services , 550 So. 2d 112, 116 n.5 (Fla. 1st DCA 1989),

the Court defined clear and convincing evidence as follows:

[C]lear and convincing evidence requires

that the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

evidence must be precise and explicit and

the witnesses must be lacking in confusion

as to the facts in issue. The evidence must

be of such weight that it produces in the

mind of the trier of fact the firm belief

or conviction, without hesitancy, as to

the truth of the allegations sought to be

established. Slomowitz v. Walker ,

429 So. 2d 797, 800 (Fla. 4th DCA 1983).

138. The Department proved by clear and convincing

evidence that Respondent is an employer subject to the Work ersÓ

Compensation statute.

139. For SWO 16 - 148 - 1A, the Department proved by clear and

convincing evidence that Mr. Hansel and Ms. Fisher were

RespondentÓs employees required to be covered by, or obtain an

exemption from, workersÓ compensation insurance du ring the audit

period, and that such coverage was not secured for specified

periods of non - compliance.

140. The Department did not demonstrate by clear and

convincing evidence that it correctly calculated the penalty to

be imposed under the law.

141. The correct penalty to be assessed against Respondent

for failure to secure workersÓ compensation coverage for its

employees during the audit period in connection with SWO 16 - 148 -

1A is $770.60.

142. For SWO 16 - 198 - 1A, the Department proved by clear and

convi ncing evidence that M r. Lopez, Mr. Gonzalez, and Ms. Hansel

were RespondentÓs employees required to be covered by, or obtain

an exemption from, workersÓ compensation insurance during the

audit period, and that such coverage was not secured for

specified pe riods of non - compliance.

143. The Department did not demonstrate by clear and

convincing evidence that it correctly calculated the penalty to

be imposed under the law.

144. The correct penalty amount to be imposed against

Respondent for failure to secure payment of workersÓ

compensation coverage for its employees (Gonzalez, Lopez, and

Chelsea Hansel ) during the audit period in connection with

SWO 16 - 198 - 1A is $187.80.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is REC OMMENDED that a final order be entered by the

Department of Financial Services, Division of WorkersÓ

Compensation, finding that Royal Roofing and Restoration, Inc.,

violated the workersÓ compensation insurance law and, in DOAH

Case No. 17 - 0879, assessing a penalty of $770.60; and in DOAH

Case No. 17 - 1558, assessing a penalty of $187.80.

DONE AND ENTERED this 24th day of January , 2018 , in

Tallahassee, Leon County, Florida.

S

SUZANNE VAN WYK

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 24th day of January , 2018 .

ENDNOTE S

1/ The penalties referred to herein are from the DepartmentÓs

Second Amended Order of Penalty Assessment, which are the

DepartmentÓs final calculations and the subject of the instant

Petition.

2/ Ms. JacksonÓs calculations were also i nformed by the

deposition testimony of Ms. Fisher taken on April 6, 2017.

3/ Department Exhibit 35 is a draft revised second amended

penalty calculation spreadsheet prepared by Ms. Jackson based on

records received from Respondent which were deemed by th e

Department as Ðuntimely.Ñ For some of the payments issued to

Mr. Hansel, Ms. Jackson assigned NCCI class code 0042, but she

did not testify as to what type of work corresponded with that

NCCI class code or from what source she obtained the NCCI class

co de.

4/ While the checklists are pure hearsay, they were admissible

to corroborate Ms. FisherÓs testimony regarding the nature of

work performed by the salesmen and the payment arrangement

between the salesmen and Respondent. See Fla. Admin. Code R.

28 - 1 06.213(3).

5/ While this payment method may have payroll tax implications,

that issue is beyond the scope of the instant proceeding.

COPIES FURNISHED:

Traci Fisher

Royal Roofing & Restoration, Inc.

616 North Bronough Street

Tallahassee, Florida 32301

Gary Lee Printy, Esquire

Gary Lee Printy, Attorney at Law

Suite 200

1804 Miccosukee Commons Drive

Tallahassee, Florida 32308

(eServed)

Leon Melnicoff, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

(eSe rved)

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written ex ceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.