17-001229 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Best Build, Llc Status: Closed Recommended Order on Wednesday, December 20, 2017.

Summary: Petitioner proved that Respondent failed to secure workers' compensation coverage for a portion of the time covered by the imputed income of its employees. The assessment sought should be partially approved.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 17 - 1229

BEST BUILD, LLC,

Respondent.

_______________________________/

RECOMMENDED ORDER

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

Cohen, Administrative Law Judge with the Division of

Administrative Hearings ( Ð DOAH Ñ ), on October 20, 2017 , by video

teleconference at sites in West Palm Beach and Tallahassee,

Florida.

APPEAR ANCES

For Petitioner: Michael Joseph Gordon, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: John Laurance Reid, Esquire

Law Office of John Reid PLLC

1030 - 9 East Lafayette Street

Tallahassee, Florida 32314

STATEMENT OF THE ISSUE S

The issues are whether Respondent, Best Build, LLC ( ÐBest

BuildÑ) , failed to secure workersÓ compensation coverage for its

employees ; and, if so, whether the Department of Financial

Services, Division of WorkersÓ Compensation (ÐDepartmentÑ) ,

correctly calculated the penalty assessment imposed against

Respondent.

PRELIMINARY STATEMENT

This proceeding arose from the requ irement that employers

must secure workersÓ compensation insurance for their employees.

On November 3, 2016 , the Department served a Stop - Work Order and

Order of Penalty Assessment (ÐStop - Work OrderÑ or ÐSWOÑ ) on

Respondent for failing to secure workersÓ compensation for the

benefit of its employees as required by chapter 440, Florida

Statutes. An Agreed Order of Conditional Release from Stop - Work

Order was issued on November 4, 2016. Respondent filed its

p etition for h earing on November 18, 2016 , disput ing the

DepartmentÓs action and specific ally disputing the issue of

material fact that stat ed Respondent Ð did not have worker [ sÓ ]

compensation coverage for employees on November 3, 2016 . Ñ On

December 8, 2016, the Department served an Amended Order of

Pena lty Assessment (ÐAOPAÑ) on Respondent by certified mail ,

assessing a penalty of $238,681.52 . On February 22, 2017 , the

matter was referred to DOAH and was assigned to the undersigned.

On March 6 , 2017, the Department filed its Agreed Response

to Initial Order, and a hearing was scheduled in this matter for

May 16 , 2017, by video teleconference at sites located in West

Palm Beach and Tallahassee, Florida.

On April 25 , 2017, Respondent filed RespondentÓs Agreed

Motion to Continue Final Hearing , and the con tinuance was

granted. An Order Granting Continuance and Rescheduling Hearing

by Video Teleconference , setting the final hearing for Ju ly 1 1,

2017, was issued on April 26 , 2017. On June 27 , 2017, Res p ondent

filed its Second Agreed Motion to Continue Final Hearing , which

was granted. The hearing was reset for September 8 , 2017 . The

Department filed an agreed motion for continuance on August 28,

2017 . T he hearing was rescheduled for October 20 , 2017, and

proceeded as scheduled.

At the hearing, Petitioner presented the testimony of

Shelley Senfeld, compliance investigator; Odi Gibson, compliance

supervisor; and Jorge Yajure , penalty auditor; and offered four

exhibits, all of which were admitted into evidence. Respondent

presented the testimony of Alvin Bel lefleur , managing member

(officer) of Best Build ; Julio Jimenez , p resident (officer) of

Hemy Services Group, Inc. ; and offered four exhibits, all of

which were admitted into evidence.

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

November 1 6 , 2017 . Petitioner and Respondent timely submitted

their Proposed Recommended Orders on December 11 , 2017.

References to statutes are to Florida Statutes (201 7 ) ,

unless otherwise noted.

FINDING S OF FACT

1. The Department is the state agency responsibl e for

ensuring that all employers maintain workersÓ compensation

insurance for themselves and their employees. § 440.107, Fla.

Stat.

2. It is the duty of the Department to make random

inspections of jobsites and to answer complaints concerning

potentia l violations of workersÓ compensation rules.

3. At all times relevant hereto, Best Build was a limited

liability company duly existing pursuant to the laws of the State

of Florida. Best Build organized on November 20, 2002. Alvin

Bellefleur is the owne r, sole managing member, and registered

agent of Best Build. The address of record for Best Build is

378 Northlake B oulevard , S ui te 213, North Palm Beach, F lorida

33408.

4. At approximately 9:30 a.m. on November 3, 2016, the

DepartmentÓs investigator, Shelly Senfeld, conducted a routine

visit to a large construction site at 544 North Haverhill Road in

West Palm Beach. She was joined by other staff members of the

Department.

5. Ms. Senfeld observed eight individuals performing

masonry /stucco work at the site.

6. Ms. Senfeld first approached a worker named Orturio

Flores. Mr. Flores did not speak English and conversed with

Ms. Senfeld in Spanish.

7. Ms. Senfeld stated that two other workers that she

encountered at the jobsite, Messrs. Gregorio Av ila and Santos

Martel, also spoke Spanish and did not speak English.

8. Ms. Senfeld asked if she could speak with the Ðjefe,Ñ

which is the Spanish word for boss.

9. Ms. Senfeld approached Salvador Rodriguez who stated he

was the supervisor for the site . He stated that all workers on -

site worked for Best Build, which was subcontracted from

Lotspeich of Florida.

10. Ms. Senfeld later discovered that Mr. Rodriguez was not

an employee of Best Build, but rather a subcontractor.

Mr. Rodriguez had his own c ompany and held a valid workersÓ

compensation exemption.

11. In total, Ms. Senfeld observed eight individuals

working on the jobsite on behalf of Best Build. She identified

by name seven individuals: Messrs. Orturio Flores, Gregorio

Avila , Santos Martel , Salvador Rodriguez, Artadio Lopez,

Christopher Rosier, and Filadelfo Flores Cabrera.

12. Ms. Senfeld testified that Best Build had workersÓ

compensation insurance coverage through a Professional Employ ee

Organization ( Ð PEO Ñ ), known as Cornerstone Capit al Group

( Ð Cornerstone Ñ ) .

13. Ms. Senfeld testified that she had spoken with

Ms. Brittany Alexander at Cornerstone who stated that Best Build

was a client of the PEO.

14. Ms. Senfeld offered hearsay testimony, stating that

Ms. Alexander indicated that only two individuals were listed on

the roster with the PEO , and , as a result , were covered by

workersÓ compensation insurance.

1 5 . Counsel for Best Build objected to the introduction of

this hearsay testimony as it was a sole basis for the finding

th at only two individuals were covered by the PEO roster.

1 6 . Since Ms. Alexander did not testify at the final

hearing and a copy of the PEOÓs roster from the date of the SWO

was never admitted into evidence, the statement of Ms. Alexander ,

as recalled by Ms. Senfeld , would serve as a sole basis for a

finding of fact and , therefore, cannot be considered.

1 7 . Ms. Senfeld then spoke by telephone with Best Build

owner Alvin Bellefleur , who indicated at the time that he had

hired a subcontractor named Hemy Se rvices Group, Inc. (ÐHemyÑ) ,

and had been provided a certificate of insurance showing the

subcontractor was in compliance with the requirements of

c hapter 440.

18 . Ms. Senfeld stated that Mr. Bellefleur identified the

insurer from the certificate of ins urance provided by Hemy as

being Norguard Insurance and that the policy was valid through

May 2017.

19 . Best Build Ós certificate of insurance provided by Hemy

was offered into evidence. It did state that policy was valid

through May 2017 and that the i nsurer was Norguard Insurance.

20 . Ms. Senfeld reviewed the insurance policy held by Hemy

through the DepartmentÓs database known as Ð CCAS , Ñ which showed

that the policy was set to cancel for non - payment of premium by

November 5, 2016, two days after th e issuance of the SWO.

21 . Ms. Senfeld also identified through the CCAS that the

policy for Hemy was for a gross payroll amount of $26,000.

22 . Ms. Senfeld further opined that since the gross payroll

was only $26,000, that Hemy was a shell company wh ich was

underinsured for workersÓ compensation.

23 . No evidence was introduced to support Ms. SenfeldÓs

opinion that Hemy was , in fact , a shell company. This allegation

cannot be credited.

24 . Mr. Bellefleur testified that four of the individuals

o n the jobsite were employees while the remaining individuals

were employed by subcontractor Hemy.

25 . The individuals whom Mr. Bellefleur identified were

employees of Best Build were Messrs. Lopez, Rosier, Flores

Cabrera , and Castro Fuster. The remaini ng individuals on the

AOPA , entered into evidence by the Department as Exhibit D, were

employees of Hemy. They are Messrs. Avila , Flores , and Martel.

26. The certificates of insurance provided by Respondent

covered Best Build and Hemy for the period of June 1, 2015 ,

through the date of the SWO , November 3, 2016 (the policies

actually were effective through January 1, 2017).

27. Looking back two years, for payroll and penalty

purposes , a gap in coverage exists for the period of six months

and 2 6 days ( N ovember 4 , 2014 - May 3 1 , 201 5 ). No insurance

certificate was produced by Respondent for that period, and the

DepartmentÓs CCAS records failed to show coverage for that

period.

2 8 . Mr. Bellefleur testified that Messrs. Lopez, Rosier,

Flores Cabrera , and Ca stro Fuster were added to the PEO roster

prior to the issuance of the SWO.

2 9 . Mr. Bellefleur entered into evidence copies of some

Best Build business records, specifically payroll records,

showing that Messrs. Lopez, Rosier, Flores Cabrera , and Castro

Fuster were paid through Cornerstone and were covered by a valid

workersÓ compensation insurance policy. However, those records

consisted of only a single payroll period, October 30, 2016,

through November 5, 2016 , and, except for Mr. Bellefleur, appear

t o cover just the hours for that pay period (from no hours for

Messrs. Avila, Lopez Cueyar, Roger Maldonado, and Nestor Perez,

to hours ranging from ten hours for Mr. Ar t adio Lopez to 20 hours

for Messrs. Fuster, Flores, and Rosier). The hours listed for

M r. Bellefleur show a cumulative number for the year of 600,

while no cumulative hours are provided for the other eight

employees. While this is a credible payroll report, it does not

cover the other 23. 75 months of the penalty period. No

explanation was given for RespondentÓs failure to provide the

remaining payroll records for the two - year period at issue.

30 . Mr. Bellefleur also testified that he sought

confirmation of workersÓ compensation coverage by the

representative of Hemy.

31 . At about the time Hemy was retained as a subcontractor

by Best Build, Mr. Bellefleur received a copy of Hemy Ós local

business tax receipt for Miami - Dade County and an executed IRS

Form W - 9.

32 . Mr. Bellefleur testified that when hiring a

subcontractor, he also seeks verification that it is in

compliance with c hapter 440.

3 3 . Mr. Bellefleur confirmed that Hemy provided Best Build

with a certificate of insurance at the time their services were

retained.

34 . Mr. Bellefleur entered into evidence a copy of the

certi ficate of insurance provided to him by Hemy. While the

undersigned has no reason to doubt the authenticity of the

coverage certificates for both Best Build and Hemy , without the

payroll records, it is impossible to determine a mitigation of

any payroll or penalty for periods not covered by the insurance

certificates.

3 5 . On cross - examination, Ms. Senfeld conceded that the

workersÓ compensation insurance policy held by Hemy appeared on

its face to be valid as of the date the SWO was issued.

36 . Despite the validity of the insurance certificates for

June 1, 2015 , through November 3, 2016, without business records

having been submitted by Respondent, the Department has no basis

for mitigation of any payroll determination , except for the one

pay period refl ected in the records described in paragraph 29

above. Accordingly, payroll must be imputed for the periods not

covered by the records produced.

37. However, the penalty assessment may be mitigated for

the periods covered by the certificates of insuranc e, namely all

b ut the six month s and 2 6 days from November 4 , 2014 , through

November 3, 2016 (208 days total) .

38. Reviewing the records of insurance coverage leaves

208 days of the 730 days (the DepartmentÓs two - year auditing

period) looking back from th e date of the SWO, November 3, 2016.

39. Based upon Ms. SenfeldÓs observations at the jobsite on

November 3, 2016, the DepartmentÓs auditor assigned National

Council on Compensation Insurance (ÐNCCIÑ) classification

code 5022, applying to individuals eng aged in the stucco

occupation, to determine the penalty to be imposed for the

periods when workersÓ compensation coverage has not been secured.

40. The auditor applied the approved manual rates for

classification code 5022 to the related periods of non -

compliance. The application of these rates w as utilized by the

methodology specified in section 440.107(7)(d)1. and Florida

Administrative Code R ule 69L - 6.027, to determine the final

penalty. The Department determined the gross payroll for

RespondentÓs e mployees pursuant to this same statutory

methodology . As for the one payroll period represented by the

only payroll - related exhibit offered by Respondent at hearing ,

the Department could not use that as the sole basis for

determining the actual payroll ov er a two - year period. One

weekly payroll report is insufficient to make such an

extrapolation .

41. On December 8, 2016 , the Department served the AOPA on

Respondent, assessing a penalty of $238,681.52. This penalty was

fully imputed.

42. Since Respo ndent provided evidence of workersÓ

compensation insurance coverage for 522 days out of the 730 days

of the two - year period for imputing the penalty, the penalty

should be reduced by 72 percent (522/730) . Th e result is a

penalty to be assessed of $66,830. 83.

CONCLUSIONS OF LAW

43 . The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties to this

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

44. The burden of proof in this matter is on the Department

because it is asserting the affirmative of the issue. Ferris v.

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

45 . Because administrative fines are penal in nature, the

Department has the burden of proving by clear and convincing

evidence that Respondent violated the W orkersÓ Compensation Law

during the relevant time period and that the penalty assessments

are correct. DepÓt of Banking & Fin. v. Osborne Stern & Co. , 670

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

46 . The Department is the agency responsible for

enforcement of c ha pter 440. As the responsible agency, the

Department must abide by the statutes and rules that govern it.

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

every ÐemployerÑ is required to secure the payment of workersÓ

compensation for the benefit of its employees unless exempted or

excluded under c hapter 440. Strict compliance with the WorkersÓ

Compensation Law is required. See C&L Trucking v. Corbitt , 546

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

48 . Section 440.107(2) states that ÐÒ securing the p ayment

of workersÓ compensation Ó means obtaining coverage that meets the

requirements of this chapter and the Florida Insurance Code.Ñ

49 . Pursuant to section 440.107(3)(g) :

(3) The department shall enforce workers'

compensation coverage requirements . . . the

department shall have the power to:

* * *

(g) Issue stop - work orders, penalty

assessment orders, and any other orders

necessary for the administration of this

section.

50 . Section 440.02(16)(a) defines Ðemployer,Ñ in part, as

Ðevery pers on carrying on any employment.Ñ Further ,

[i]f the employer is a corporation, parties

in actual control of the corporation,

including, but not limited to, the president,

officers who exercise broad corporate powers,

directors, and all shareholders who dir ectly

or indirectly own a controlling interest in

the corporation, are considered the employer

for the purposes of ss. 440.105 , 440.106 ,

and 440.107 .

51 . The workers' compensation law requires employers to

secure the payment of compensation for their emp loyees.

§§ 440.10(1)(a) and 440.38(1), Fla. Stat. (2015).

52 . Section 440.107(7)(a) states, in relevant part:

Whenever the department determines that an

employer who is required to secure the

payment to his or her employees of the

compensation provided fo r by this chapter has

failed to secure the payment of workersÓ

compensation required by this chapter . . .

such failure shall be deemed an immediate

serious danger to public health, safety, or

welfare sufficient to justify service by the

department of a st op - work order on the

employer, requiring the cessation of all

business operations. If the department makes

such a determination, the department shall

issue a stop - work order within 72 hours.

53 . The Department is empowered to examine and copy the

busine ss records of any employer conducting business in Florida

to determine whether it is in compliance with the WorkersÓ

Compensation Law. See § 440.107(3), Fla. Stat. Whenever the

Department finds an employer who is required to have such

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

serious danger to the public health, safety, or welfare

sufficient to justify service by the Department of a stop - work

order on the employer requiring the cessation of all business

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

54 . The Department properly issued a SWO since the eight

individuals providing work on the jobsite on behalf of Best Build

were either covered by a workersÓ compensation exemption , by a

valid workersÓ compensation insurance policy thr ough a PEO

(employees Bellefleur, Fuster, Flores Cabrera , Lopez , and

Rosier ) , or through a valid workersÓ compensation insurance

policy held by a subcontractor (employees Avila , Flores, and

Martel) ; h owever, no evidence was produced to demonstrate

coverage for the period of November 4, 2014, through May 31,

2015.

55 . As to penalties, section 440.107(7)(d)1. states:

In addition to any penalty, stop - work order,

or injunction, the department shall assess

against any employer who has failed to secure

the paym ent of compensation as required by

this chapter a penalty equal to 2 times the

amount the employer would have paid in

premium when applying approved manual rates

to the employerÓs payroll during periods for

which it failed to secure the payment of

workersÓ compensation required by this

chapter within the preceding 2 - year period or

$1,000, whichever is greater.

56 . The Department proved by clear and convincing evidence

that Respondent failed to provide the requested proof of

insurance for the p eriod of No vember 4, 2014 , through May 31,

2015 . However, the remainder of the assessment period, June 1,

2015 , through November 3, 2016, was covered under certificates of

insurance issued to either Best Build or Hem y .

57 . Unfortunately for Respondent, it failed to provide the

business records of payroll that could have excused it completely

from the payment of a penalty assessment . Had those records

shown a lower payroll, the assessment, even for the period where

no workersÓ compensation insurance coverage had b een secured,

November 4, 2014 , through May 31, 2015, might have been excused

from penalty as well.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

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

assessing Respond ent $66,830.83.

DONE AND ENTERED this 20th day of December , 2017 , in

Tallahassee, Leon County, Florida.

S

ROBERT S. COHEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Par kway

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 20th day of December , 2017 .

COPIES FURNISHED:

Michael Joseph Gordon, Esquire

Depart ment of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

John Laurance Reid, Esquire

Law Office of John Reid PLLC

1030 - 9 East Lafayette Street

Tallahassee, Florida 32314

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Divi sion 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.