17-003814 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Elite Restoration And Construction, Llc Status: Closed Recommended Order on Tuesday, February 20, 2018.

Summary: Clear and convincing evidence proved that the Stop-Work Order and 2nd Amended Penalty Assessment were appropriate sanctions against Respondent for failure to secure workers' compensation insurance for its employees.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 17 - 3814

ELITE RESTORATION AND

CONSTRUCTION, LLC ,

Respondent.

_______________________________/

RECOMMENDED ORDER

An administrative hearing was conducted in this case on

October 30, 2017 , in Brooksville , Flo rida, before James H.

Peterson, III, Administrative Law Judge with the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Susan L. Herendeen , Esquire

Department of Financial Services

200 East Gaines Street

T allahassee, Florida 32399

For Respondent: Brian Johnson, pro se

Elite Restoration and Construction, LLC

7185 West Village Drive

Homosassa Springs, Florida 344 4 6

STATEMENT OF THE ISSUE S

The issue in this case is whether Elite Restoration and

Construction, LLC ( Respondent ) , violated the provisions of

chapter 440, Florida Statutes, 1 / by failing to secure the payment

of workersÓ compensation, as alleged in the Stop - Work Order and

Second Amended Order of Penalty Assessment ; and , if so, what is

the appropriate penalty.

PRELIMINARY STATEMENT

On November 1, 2016 , the Department of Financial Services,

Division of Workers' Compensation (the Department) , served

Respondent with a Stop - Work Order and Order of Penalty

Assessment (Stop - Work Order) and a Request for Production of

Business Records for Penalty Assessment Calculation ( Requ est for

Production ) for RespondentÓs alleged failure to secure workersÓ

compensation for its employees as required by chapter 440. On

April 20, 2017, the Depa rtment served Respondent with an Amended

Order of Penalty Assessment (Amended Penalty) , with a pe nalty of

$21,475.30.

On May 5, 2017, Respondent timely filed a petition for

administrative hearing , and on July 7, 2017, the DepartmentÓs

referral of this case for hearing was received by the Division

of Administrative Hearings (DOAH) . The case was originally

scheduled for a hearing to be held on September 6, 2017, but was

continued and rescheduled for October 30, 2017.

On September 19, 2017, a 2nd Amended Order of Penalty

Assessment , reducing the penalty to $ 16,671.14 , was served on

Respondent. At the onset of the October 30, 2017, hearing, the

DepartmentÓs Agreed Motion for Leave to Amend Order of Penalty

Assessment was granted , amending the penalty to the amount set

forth in the 2 n d Amended Order of Penalty Assessment (2 n d

Amended Penalty) .

At the final hearing , t he Department presented the

testimonies of Department Compliance I nvestigator Michael

Robinson ; F acilitator Pete Vallejo; P enalty Auditor Lynne

Murcia ; and RespondentÓs owner, Brian Johnson . The Department

offered 14 exhibits, designated Petitioner's Exhibits P - 1

through P - 1 4 , all of which were received into evidence.

Respo ndent testified on his own behalf and offered six exhibits,

which were received into evidence as Respondent's Exhibits R - 1,

R1 - A, R - 2, R2 - A, R - 3, and R - 4 .

The proceedings were transcribed and a transcript was

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

Transcript within which to submit proposed recommended orders .

The Transcript, consisting of one volume, was filed on

November 2 0, 2017. The parties timely filed their respective

Proposed Recommended Orders, both of which have been considered

in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Department is the state agency responsible for

enforcing the statutory requirement that employers secure the

payment of workers' compensation for the benefit of their

employees and corporate officers.

2. Respondent is a n active Florida corporation tha t was

formed on August 28, 2009, with a principal address of 7185 West

Village Drive, Homosassa, Florida 34446. Respondent was engaged

in business operations in the state of Florida during the entire

period of November 2, 2014 , to November 1, 2016.

3. Br ian Johnson (RespondentÓs o wner or Mr. Johnson) is

Respondent's sole shareholder, owning 100 percent of the stock.

4. The Department's investigator, Michael Robinson,

commenced a random worksite compl iance investigation on

November 1, 2016, at a gas station at 970 Atlantic Boulevar d,

Jacksonville, Florida 32225. He observed Respondent's owner,

Mr. Johnson, and three others, Tim Neeld, Derrick Windier , and

James Ingash, painting a metal canopy covering the gas pumps.

5. Mr. Johnson told the investiga tor that his company,

Elite Restoration & Construction, LLC, was a subcon tractor for

Aluminum Plus of DeL and, Florida.

6. By searching the Division's Coverage and Compliance

Automated System, the investigator determined that Brian Johnson

obtained a workers' compensation exemption on October 12, 2016,

or 20 days prior to the investigation, and furt her determined

that an employee leasing contract previously held by Respondent

terminated on January 15, 2015, which is more than nine months

prior to the i nvestigation. Mr. Johnson confirmed that

Respondent had an exemption for himself , effective October 12,

2016, but did not have any workers' compensation insurance for

its employees.

7. On November 1, 2016, a fter consulting with a

supervisor, the Department's investigator issued the Stop - Work

Order , which was posted at Respondent's worksite and personally

served upon Respondent Ós o wner . On the same day, t he

investigator also personally served the Request for Production ,

which requested business records to determine Respondent's

payroll during the two - year penalty period proscribed by section

440.107(7) ( d)1 . , which in this case is from November 2, 2014 , to

November 1, 2016.

8. The Request for Production explicitly states that the

requested records must be provided within 10 business days from

receipt of the request.

9. Respondent obtained an Agreed Order of Conditional

Release from the Stop - Work Order on November 8, 2016, by

te rminating the three workers observed during the c ompliance

investigation who did not have workersÓ compensation coverage

and paying the Department a $1,000 down payment toward the

penalty that would be calculated in this case.

10. Respondent produced business records for penalty

calculation on November 17, 2016 , and February 28, 2017 , which

is beyond the 10 - day time period required by the Request for

Production . 2/

11. The Department's penalty auditor, Lynne Murcia, used

those records to calculate a $2 1,475.30 penalty for failing to

comply with the workers' compensation insurance requirements of

chapter 440 .

12. On April 20, 2017, when RespondentÓs o wner came to the

DepartmentÓs Jacksonville office, he was personally served with

the Amended Penalty and advised of his right to seek

administrative review of the Stop - Work Order and Amended Penalty.

13. Mr. Johnson filed a petition for hearing on behalf of

Respondent on May 5, 2017, stating that the penalty calculated

was wrong because it included income earned in states other than

Florida.

14. Respondent produced add itional business records on

May 17 , August 21, and August 31, 2017, for the purpose of

demonstrating that a port ion of his companyÓs payroll was

derived from work completed at worksites outside of Florida, and

arguing that the out - of - state payroll should not be included in

the penalty calculation. The invoices showed $182,056.78 in

total income, consisti ng of $77,268 from 14 jobs in Florida, and

$104,788.60 for 14 jobs outside of the State of Florida. Upon

initial review, the DepartmentÓs auditor declined to make any

adjustments because the invoices did not provide information

showing earnings of specific employees for jobs outside of

Florida.

15. Thereafter , Mr. Johnson produced additional records

that allowed the DepartmentÓs auditor to trace out - of - state

employment to transactions in RespondentÓs general ledger. The

Department's auditor review ed Resp ondent's additional records

and removed out - of - state payroll and per diem payments. In

accordance with that review, t he Department issued the 2 n d

Amended Penalty which reduc ed the penalty to $16,671.14 . Th e

2 n d Amended P enalty also reduced the 2016 payroll attributed to

Respondent's o wner .

16. Respondent was an "employer" in the state of Florida, as

that term is defined in secti on 440.02(16), from November 2, 2014 ,

to November 1, 2016.

17. Respondent did not secure the payment of workers'

compensation insurance coverage, nor have others secure d the

payment of workers' compensation insurance coverage for the

employees listed on the penalty worksheet of the 2 n d Amended

Penalty during the periods of non compliance listed on the penalty

worksheet.

18. None of the employees listed on the penalty worksheet

of the 2 n d Amended Penalty had a valid Florida workers'

compensation coverage exem ption during the periods of

non compliance listed on the penalty worksheet.

19. In the p ast, Respondent had an employee leasing

contract with Southeast Personnel Leasing, Inc. That contract

was terminated on January 15, 2015, due to the leasing companyÓs

concerns about out - of - state employment that would not be covered

by the leasing company' s workers' compensation insurance.

20. None of the employees listed on the penalty worksheet

of the 2 n d Amended Penalty were "independent contractors" as

that term is d efined in section 440.02(15)(d) 1.

21. None of the employees listed on the penalty worksheet

of the 2 n d Amended Penalty were employees of a temporary labor

company.

22. Employees on the penalty worksheet of the 2 n d Amended

Penalty are correctly classified under Class Code 5474,

painting, as de fined in the "Scopes Manual" published by the

National Council on Compensation Insurance, Inc. (NCCI) , and

adopted in Florida Administrative Code Rule 69L - 6.021(2)(jj).

23. The approved manual rates used in the penalty worksheet

of the 2 n d Amended Penalty , as defined by the NCCI Scopes Manual

and adopted by the Office of Insurance Regulation, are the correct

manual rates for the corresponding periods of noncompliance listed

on the penalty worksheet.

24. In calculating the 2 n d Amended Penalty, the

Departme ntÓs auditor used the worksheet required by rule

69L - 6.027, along with RespondentÓs bank statements, check

images, general ledger, and tax returns filed with the Internal

Revenue Service. The auditor capped RespondentÓs o wnerÓs pay

for that portion of 2014 falling with in the penalty period

because his salary and dividend totaling $73,484 in 2014

exceeded the statewide average of $862.51 per week or $44,850.52

per year. She also adjusted the period of noncompliance for

Mr. Johnson, pursuant to r ule 69L - 6.028(2), because he obtained

an exemption from FloridaÓs W orke rsÓ Compensation L aw on

October 12, 2016.

25. The auditor explained that she used RespondentÓs tax

returns for 2014 and 2015 because she believed they were the

most reliable indi cation of salaries and wages, officer

compensation, and payroll for outside services and

subcontractors. She further explained that she used

RespondentÓs tax returns and general ledger as the most accurate

sources for determining payroll for 2016. The auditorÓs

explanation is reasonable and credited.

26. Mr. Johnson questioned the auditorÓs method of

determining payroll and offered alternative methods using

spreadsheets he created to identify what he called Ðmember

draws Ñ and other summaries. Th e invoices provided by Respondent

to the Department, however , do not match the summaries; and

RespondentÓs method of determining payroll , when compared to the

method utilized by the Department, is not accurate or reliable.

27. The auditorÓs method reflected in the 2 n d Amended

Penalty appropriately applied approved manual rates

corresponding to Class Code 5474, painting, to determine the

evaded workersÓ compensation insurance premium . Then, the

evaded premium was properl y multiplied by two in accord ance with

section 440.107(7)(d)1 .

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this

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

29. Chapter 440 is known as the ÐWorkersÓ Compensation

Law.Ñ § 440.01, Fla. Stat.

30. 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." § 440.107(2), Fla. Stat.

31. Secti on 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 other orders

necessary for the administration of this section.Ñ

§ 440.107(3), Fla. Stat.

32. Because the Department is seeking to prove statutory

violations 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).

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

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

34. Every employer is required to secure the payment of

workers' compensation for the benefit of its employees, unless

exempted or excluded under chapter 440. § 440.10, Fla. Stat.

35. "Emp loyment," subject to Florida's W orkers'

C ompensation L aw, includes Ð[a]ll private employments in which

four or more employees are employed by the same employer or,

with respect to the construction industry, all private

employment in which one or more emplo yees [ 3/ ] are employed by the

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

36. Sect ion 440.107(2) states ÐÒsecuring the payment of

workersÓ compensationÓ means obtaining coverage that meets the

requirements of this chapter and the Florida Insurance Code.Ñ

37. " Every employer who is required to provide workers'

compensation coverage for employees engaged in work in this

state shall obtain a Florida policy or endorsement for such

employees that utilizes Florida class codes, rates, rules and

manuals that are in compliance with and approved under the

provisions of Chapter 440, F.S., and the Florida Insurance Code,

pursuant to Sections 440.10(1) ( g) and 440.38(7 ), F.S."

Fla. Admin. Code R. 69L - 6.019.

38. 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 und er chapter 440 .

39. Strict compliance with the WorkersÓ Compensation Law

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

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

40. Whenever the Department finds that an employer who is

required to secure the payment of workers' compensation coverage

has failed 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 or Order

of Penalty A ssessm ent on the employer. § 440.107 , Fla . Stat .

41. The evidence presented in this case, in view of

applicable law, clearly and convincingly demonstrated that

Respondent was an employer that employed three employees without

workersÓ compensation insurance , a nd that the Department

properly issued and served the Stop - Work Order, Amended Penalty,

and 2nd Amended Penalty on Respondent.

42 . Section 440.107(7)(d)1. provides that Ð the

[D]epartment shall assess against any employer who has failed to

secure the payment of compensation as required by this chapter a

penalty equal to 2 times the amount the employer would have paid

in premium when applying approved manual rates to the employ erÓs

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.Ñ

43 . These statutory provisions mandate that the Department

assess a penalty for noncomp liance with chapter 440 and do not

provide any authority for the Department to reduce the amount of

the penalty.

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

for the DepartmentÓs penalty auditors to utilize Ð[f]or purposes

of calculating penalties to be assessed against employers

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

Code R. 69L - 6.027(1).

45 . 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 payments. Fla. Admin. Code

R. 69L - 6.035(1).

46 . Considering evidence of RespondentÓs payroll for its

employees during the appl icable time frame and the applicable

method for calcula ting penalties , it is found that t he

Department applied the proper methodology in computing the

Amended Order of Penalty Assessment and 2nd Amended Order of

Penalty Assessment pursuant to section 440.107(7 )(d)1 . and r ules

69L - 6 .027 and 69L - 6. 035 .

47 . Therefore, under the evidence and law as outlined

above, it is concluded that the Department proved by clear and

convincing evidence that Respondent failed to secure workersÓ

compensation coverage for its employees , and that the Department

correctly calculated and issued the Stop - Work Order and 2nd

Amended Order of P enalty Assessment of $ 16,671.14 against

Respondent.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is RECOMMENDED that the Depart ment enter a final

o rder , consistent with this Recom mended Order , upholding the

Stop - Work Order and imposing the penalty set forth in the 2 n d

Amended Order of Penalty Assessment against Elite Restoration

and Construction, LLC.

DONE AND ENTERED this 20th day of February, 2018 , 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.us

Filed with the Clerk of the

Division of Administrative Hearings

t his 20th day of February, 2018 .

ENDNOTES

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.

2/ While the Department seeks no penalty for RespondentÓs delay

in producing records, RespondentÓs failure to produce sufficient

records within 10 days disq ualifies Respondent from the 25 -

percent reduction in penalty afforded by chapter

440 . 1 0 7 (7)( d ) 1 . b .

3 / Florida law defines ÐemployeeÑ in part as Ðany person who

receives remuneration from an employer for the performance of

any work or service whil e engaged in any employment.Ñ

§ 4 40.02(15)(a), Fla. Stat. Also included in the definition of

ÐemployeeÑ is Ðany perso n who is an officer of a corporation and

who performs services for remuneration for such corporation

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

§ 440.02(15)(b), Fla. Stat.

COPIES FURNISHED :

Susan L. Herendeen , Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Brian Johnson

Elite Restoration and Construction, LLC

7185 West Village Drive

Homosassa Springs, Florida 344 4 6

Julie Jones, CP, FRP, Agency Clerk

Division of L egal 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.