17-002480 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Michael Clay Bishop, D/B/A J And M Enterprises Status: Closed Recommended Order on Thursday, September 28, 2017.

Summary: Petitioner proved by clear and convincing evidence that Respondent failed to secure workers' compensation insurance for its employee and that Petitioner correctly calculated the penalty to be imposed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. C ase No. 17 - 2480

MICHAEL CLAY BISHOP,

d/b/a J AND M ENTERPRISES,

Respondent.

_______________________________/

RECOMMENDED ORDER

A duly - noticed hearing was held in this case on June 30,

2017, via video teleconference with sites in Tallahassee and

Panama City, Florida, before Administrative Law Judge Suzanne

Van Wyk.

APPEARANCES

For Petitioner: Michael Joseph Gordon, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Michael Clay Bishop, pro se

8623 North Lagoon Drive , Unit C3

Panama City Beach , Florida 32408

STATEMENT OF THE ISSUE S

Whether Michael Clay Bishop , d/b/a J and M E nterprises

( Ð Respondent Ñ ), failed to secure the payment of workersÓ

compensation insurance coverage for its employees; and, if so,

whether the Department of Financial Services, Di vision of

WorkersÓ Compensation ( Ð Petitioner Ñ or Ð Department Ñ ), correctly

calculated the penalty to be assessed against Respondent.

PRELIMINARY STATEMENT

On January 31, 2017, the Department served Respondent with

a Stop - Work Order and Order of Penalty Asse ssment, pursuant to

chapter 440, Florida Statutes, for failing to secure workersÓ

compensation for its employees.

On February 21, 2017, Respondent requested a hearing to

dispute the Stop - Work Order and Order of Penalty Assessment. On

April 25, 2017, Petit ioner referred this matter to the Division

of Administrative Hearings (ÐDivisionÑ), for assignment of an

Administrative Law Judge to conduct a final hearing in the

matter.

On May 10, 2017, Respondent, who is not represented by

counsel, filed a Motion to Di smiss (ÐMotionÑ), arguing that the

Division lacked subject matter jurisdiction over his company,

which he claimed is an ÐUnincorporated Business Trust

Organization.Ñ The Motion raised issues of constitutionality of

the WorkersÓ Compensation statue and the jurisdiction of the

Division of WorkersÓ Compensation.

On May 11, 2017, the undersigned entered an Order Denying

RespondentÓs Motion to Dismiss, explaining that, to the extent

RespondentÓs Motion was directed to the DepartmentÓs application

of an otherwis e constitutional statute in a way that violated

his constitutional rights, Respondent was required to exhaust

his administrative remedies and build his record for appeal.

The O rder also explained that, to the extent Respondent was

challenging the facial v alidity of the WorkersÓ Compensation

statute, the Division had no jurisdiction to rule on that

challenge and Respondent could seek redress in a court of

competent jurisdiction.

The final hearing was scheduled for June 30, 2017, via

video teleconference at sites in Tallahassee and Panama City,

and commenced as scheduled.

At the final hearing, Petitioner presented the testimony of

Department Compliance Investigator, Carl Woodall; Department

Compliance Facilitator, Donald Hurst; and Department Penalty

Audito r, Eunika Jackson. PetitionerÓs Exhibits P1, P2, P4

through P6, and P8 through P11, were admitted in evidence.

Respondent offered the testimony of Carl Woodall and

Michael Clay Bishop, and introduced Exhibits R1 through R5,

which were admitted in evidenc e. 1/

A one - volume Transcript of the proceedings was filed on

August 3, 2017. Both parties timely filed Propos ed Recommended

Orders, which have been considered by the undersigned in

preparing this Recommended Order.

Unless otherwise indicated, a ll re ferences to the Florida

Statutes herein are to the 2016 version.

FINDING S OF FACT

1. The Department is the state agency charged with

enforcing the requirement of chapter 440, Florida Statutes, that

employers in Florida secure workersÓ compensation coverag e for

their employees. § 440.107(3), Fla. Stat.

2. Respondent purports to be a ÐPrivate Common Law Non -

Associated Unincorporated Business Trust Organization ,Ñ or

ÐUBTO,Ñ engaged in business in Florida. 2 / Michael Clay Bishop is

one of RespondentÓs truste es.

3. The nature of RespondentÓs business was a disputed

issue at the final hearing.

4. Mr. Bishop testified that he performed handyman

services, such as cleaning, yardwork, removal of old furniture,

and repair of flood - damaged properties.

5. The rec ord contains RespondentÓs business card, which

Mr. Bishop provided to the DepartmentÓs Compliance Investigator,

Carl Woodall, on January 31, 2017. The business card reads,

ÐJ & M Enterprises,Ñ and advertises as follows:

Quality repairs, restoration and re models;

paint interior/exterior, flooring, fencing,

decks, crown molding, concrete.

BIG OR SMALL WE DO IT ALL!

The business card indicates the business is ÐInsuredÑ and has

Ðreferences available.Ñ

6. Mr. Bishop did not dispute that the business card

bel onged to Respondent, or that it accurately represented the

services provided by Respondent.

7. Respondent accepts monetary payments for work performed

by check made out to J and M Enterprises. 3 / Respondent maintains

a business checking account in the na me of J and M Enterprises

to which Respondent deposits payments for services performed by

Respondent.

8. On January 31, 2017, Mr. Woodall encountered Mr. Bishop

at a residence undergoing remodeling at 8623 Lagoon Drive in

Panama City Beach. Mr. Woodall observed Mr. Bishop engaged in

the act of filling cracks in a bar area of the residence with

putty, presumably to prepare the surface for painting.

9. Mr. Bishop testified that he was Ðcleaning some

caulking that wasnÓt done very well.Ñ Mr. Bishop objec ted to

characterization of his work as painting, or preparing the

surface for painting. However, Mr. Bishop admitted that he was

hired by Chris Roberts of Rainbow International as a

subcontractor on the remodel.

10. Mr. Woodall testified that he spoke w ith Chris Roberts

on the date in question, who informed him that Mr. Bishop was

hired to perform painting services on the remodel, and that he

was compensating J and M Enterprises at the rate of $20 per hour

for the painting services. Mr. WoodallÓs notes, made on his

Field Interview Worksheet, corroborate his testimony on these

facts.

11. Mr. BishopÓs testimony was neither credible nor

reliable. It is inconceivable that Rainbow International hired

Respondent to clean caulking at $20 per hour.

12. The ev idence supports a finding that Respondent is

engaged in the business of residential painting, including

preparation of surfaces for painting.

13. It is uncontested that Respondent was not covered by

workersÓ compensation insurance at all times material he reto.

Mr. Bishop testified that he was under a mistaken assumption

that he was exempt from workersÓ compensation insurance since he

had no employees. However, at final hearing, he explained that

he had been made aware that the requirement applies to any

business in the construction industry with one or more

employees.

14. Mr. Woodall personally served Mr. Bishop with a

Stop - Work Order and Request for Production of Business Records

on January 31, 2017.

15. At all times material hereto, Mr. Bishop mainta ined

that RespondentÓs business records were confidential, pursuant

to the business trust agreement, and that to disclose those

business records would violate his obligation to RespondentÓs

trustees.

16. A document purported to be RespondentÓs trust

inden ture was admitted in evidence as RespondentÓs Exhibit R4.

Article 29, Section 29.1, of the Indenture is titled,

ÐDisclosure of Documents,Ñ and provides as follows:

NO document, record, bank account, or any

other written information dealing with the

intern al affairs or the operations of this

UBTO shall be disclosed to any third party,

except upon formal written board approval of

the Board of Trustees given at a regular or

special meeting of the Board of Trustees as

set forth above.

17. Respondent did not comply with the DepartmentÓs

request for business records, such as check stubs, bank

statements, or tax returns, from which the Department could

establish RespondentÓs payroll for the audit period. 4 /

18. Department Penalty Auditor, Eunika Jackson, was

ass igned to calculate the penalty to be assessed against

Respondent.

19. Pursuant to section 440.107(7)(d), Florida Statutes,

the DepartmentÓs audit period is the two - year period preceding

the date of the Stop - Work Order.

20. The audit period in this case is from February 1, 2015

through January 31, 2017. Respondent provided no evidence that

Respondent was not engaged in business at any time during the

audit period. RespondentÓs trust indenture is dated January 19,

2012.

21. Because Respondent provided no business records from

which the Department could establish RespondentÓs payroll for

the audit period, Ms. Jackson imputed RespondentÓs payroll,

pursuant to section 440.112(2 ) .

22. Based upon Mr. WoodallÓs observations of the work

being performed at the jobsite, Ms. Jackson determined that the

type of construction work performed was painting. Ms. Jackson

consulted the Scopes Manual published by the National Council on

Compensation Insurance (NCCI) a nd utilized classification

code 5474, the general paint ing classification, for purposes of

calculating the penalty.

23. Ms. Jackson then applied the corresponding approved

manual rates for classification code 5474 for the related

periods of non - compliance. Ms. Jackson applied the correct

approved manual rate s and correctly utilized the methodology

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

Code Rules 69L - 6.027 and 69L - 6.028 to determine the penalty to

be imposed.

24. Because Respondent did not provide records sufficient

to determine its payroll during the audit period, Ms. Jackson

correctly assigned the statewide average weekly wage (AWW) to

Mr. Bishop, the only employee identified on the jobsite on the

date in question. § 440.107(7)(e) , Fla. Stat. Ms. Jackson

likewise correctly utilize d the AWW multiplied by two when

applying the statutory formula for calculating the penalty to be

assessed. See § 440.107(7)(d)1. , Fla. Stat.

25. On April 18, 2017, by certified mail, the Department

served Respondent with an Amended Order of Penalty Asse ssment

assessing a penalty of $30,600.44, which was fully imputed.

26. Respondent made a payment of $1,000 to the Department

which has been applied to the imputed penalty. The DepartmentÓs

Penalty Calculation worksheet notes a balance due of $29,600.44.

CONCLUSIONS OF LAW

27. The Division 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.

28. Employers are required to secure payment of workersÓ

compensation f or their employees unless exempted or excluded.

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

29. ÐEmployerÑ includes Ðevery person carrying on any

employment, and the . . . trustees of any person.Ñ

§ 440.02(16)(a), Fla. Stat.

30. ÐÒEmployeeÓ means any person who receives remuneration

from an employer for the performance of any work or service

while engaged in any employment under any . . . contract for

hire . . . whether express or implied, oral or written[.]Ñ

§ 440.02(15)(a) , Fla. Stat .

31. ÐEmploym entÑ means Ðany service performed by an

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

Fla. Stat .

32. 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).

33. 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 the 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).

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

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

the Cou rt 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 b e

established. Slomowitz v. Walker ,

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

35. The Department proved by clear and convincing evidence

that Respondent is an employer subject to the WorkersÓ

Compensation statute, and that Mr. Bishop is RespondentÓs

emplo yee, who is required to be covered by, or obtain an

exemption from, workersÓ compensation insurance.

36. The Department demonstrated by clear and convincing

evidence that Respondent was engaged in the construction

industry in Florida during the audit peri od and that Respondent

failed to secure the payment of workersÓ compensation insurance

for its employees at times during the audit period as required

by FloridaÓs WorkersÓ Compensation Law.

37. The Department likewise demonstrated by clear and

convincing evidence that it correctly calculated the penalty to

be imposed under the law.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

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

Department of Financial Services, Division of WorkersÓ

Compensation, finding that Michael Clay Bishop , d/b/a J and M

Enterprises , violated the w orkersÓ c ompensation i nsurance l aw

and assessing a penalty of $30,600.44.

DONE AND ENTERED this 2 8 th day of September , 2017 , 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 2 8 th day of September , 2017 .

ENDNOTE S

1/ RespondentÓs Exhibit R1 was admitted, in part. Paragraphs 4,

10, 11, 12, 13, and 17 were stricken as inadmissible.

2 / Florida statu tory law does not recognize a UBTO . Chapter

609, Florida Statutes (2017) , governs common law declarations of

trust , and contemplates use of that business structure by

organizations selling certain securities. A common law business

trust is required to fi le its declaration of trust with the

Department of State, pay a filing fee of $350, and be issued a

certificate to transact business in this state.

Respondent introduced its purported trust documents in evidence,

but did not introduce any proof of filing that instrument with,

or any certificate issued by , the Secretary of State. In

RespondentÓs Motion to Dismiss, Mr. Bishop argued the Division

lacked jurisdiction over the UBTO, arguing it is not a statutory

trust, but is rather a Ðpure trustÑ established by the right to

contract guaranteed by the U.S. Constitution.

The Internal Revenue Service provides information on its website

regarding Abusive Trust Tax Evasion Schemes.

https://www.irs.gov/business/small - businesss - self -

employed/abusive - trust - tax - evasion - schemes - facts - section - iii

(August 3, 2017). Among the listed tax evasion schemes is an

arrangement in which a business owner transfers an ongoing

business to an unincorporated business organization, a pure

trust, or a constitutional trust, giving the appearance that the

taxpayer has relinquished control of his or her business, when

in reality the business owner retains control o f the businessesÓ

income stream and runs the day - to - day activities.

The legal status of RespondentÓs business organization is murky,

at best. Fortunately, resolution of that issue is not nece ssary

to determine the disputed issues in this matter , namely, whether

Respondent secured workersÓ compensation insurance for its

employees; and , if not, whether the Department correctly

calculated the penalty to be imposed .

3 / Mr. Bishop testified that he sometimes works in exchange for

goods, such as the furniture from damaged residences, rather

than monetary remuneration.

4 / Respondent did not seek a protective order from this tribunal

to prevent disclosure of documents relating to the internal

operation of the trust during the discovery period.

COPIES FURNISH ED:

Michael Clay Bishop

Unit C3

8623 North Lagoon Drive

Panama City Beach, Florida 32408

(eServed)

Michael Joseph Gordon, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Jonathan Anthony Martin, Esq uire

Department of Financial Services

Legal Services Division

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee , Florida 32399 - 0390

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

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

to this Recommended Order should be filed with the agenc y that

will issue the Final Order in this case.