18-000426 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Ameribuild Construction Mgt., Inc. Status: Closed Recommended Order on Thursday, September 6, 2018.

Summary: Ameribuild's failure to secure workers' compensation for its workers warrants a penalty for noncompliance.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 18 - 04 26

AMERIBUILD CONSTRUCTION MGT.,

INC.,

Respondent.

_______________________________/

RECOMMENDED ORDER

This case came before Administrative Law Judge John G.

Van Laningham for final hearing by video teleconference on

June 29, 2018, at sites in Tallahassee and West Palm Beach,

Florida.

APPEARANCES

For Petitioner: Tabitha G. Harnage , Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

For Respondent: Mason A. Pokorny, Esquire

Cotney Construction Law, LLP

8621 East Dr. Martin Luther King Jr.,

Boulevard

Tampa, Florida 33610

STATEMENT OF THE ISSUE S

The issues in this case are whether Respondent failed to

secure workers' compensation coverage for its employees, as

Petitioner a lleges; and, if so, whether a penalty based upon the

unpaid premium should be assessed against Respondent.

PRELIMINARY STATEMENT

On May 31, 2017, Petitioner Department of Financial

Services, Division of Workers' Compensation, issued a Stop - Work

Order to Re spondent Ameribuild Construction Management, Inc.,

following a random inspection at a worksite in North Miami Beach,

Florida, which had given the agency grounds for alleging that

Respondent was not in compliance with its duty to secure workers'

compensatio n on behalf of all its employees. The Stop - Work Order

required Respondent to cease all business operations at the

worksite.

On November 6, 2017, the agency served Respondent with an

Amended Order of Penalty Assessment reflecting a total penalty of

$137,71 9.54, which was based upon the imputed payroll of six

individuals employed by CJ Meeko, LLC, and an imputed payroll of

Brandon Roth, Respondent's principal.

Respondent timely requested a formal administrative hearing.

On January 25, 2018, the agency refer red the matter to the

Division of Administrative Hearings, where the case was assigned

to an Administrative Law Judge.

The final hearing took place as scheduled on June 29, 2018,

with both parties present. The agency called two witnesses,

i.e., an investi gator named Anthony Vinci and an auditor, Lynne

Murcia, whose job it was to calculate penalties for employers,

such as Respondent, alleged to have failed to secure

compensation. Petitioner's Exhibits 1 through 20 were admitted

into evidence.

Respondent' s witnesses were Mr. Roth and Jack Rosales.

Respondent's Exhibits 1 through 9 were received in evidence as

well.

The final hearing transcript was filed on July 30, 2018.

Both parties timely filed proposed recommended orders on

August 14, 2018, in accord ance with the schedule established at

the conclusion of the hearing.

Unless otherwise indicated, citations to the official

statute law of the state of Florida refer to Florida Statutes

2018.

FINDING S OF FACT

1. Petitioner Department of Financial Services , Division of

Workers' Compensation ("DFS" or the "Department"), is the state

agency responsible, among other things, for the enforcement of

the workers' compensation insurance coverage requirements

established in chapter 440, Florida Statutes.

2. Respond ent Ameribuild Construction Management, Inc.

("Ameribuild"), is a Florida corporation having its principal

office in Boca Raton, Florida. Brandon L. Roth ("Roth") is the

owner and qualifier, and a corporate officer, of Ameribuild. At

all relevant times, Ameribuild was licensed to engage in

construction activity in the state of Florida.

3. In the instant case, DFS alleges that Ameribuild, as the

general contractor for a construction project in Miami, failed to

secure workers' compensation insurance for Ro th and six employees

(the "Workers") of CJ Meeko, LLC ("CJM"), a business which, DFS

alleges, was a subcontractor of Ameribuild on the project in

question. In its defense against this allegation of

noncompliance, Ameribuild raises two disputes of material fact,

asserting that, contrary to DFS's preliminary determinations,

(i) Roth did not perform services for remuneration for

Ameribuild , and (ii) CJM was not Ameribuild's subcontractor but

was, rather, in a direct contractual relationship with Prestige

Impo rts Outparcel LLC ("Prestige"), the owner of the project.

Based on these exculpatory (but disputed) factual allegations,

Ameribuild argues that, as a matter of law, neither Roth nor any

of the Workers was a statutory "employee" (a term of art in this

cont ext) of Ameribuild , and thus, to the point, Ameribuild was

not obligated to secure compensation for these individuals.

4. Of the material facts in dispute, the question of

whether CJM was a subcontractor of Ameribuild is by far the most

significant, as th e Workers account for $132,593.32 (or 96

percent) of the $137,719.54 penalty that DFS seeks to impose.

The Department, which has the burden of proving the affirmative

of this crucial question, relies largely (although not entirely)

on the hearsay statemen ts of Roth and Eugene Parker ("Parker"),

the latter an employee of Ameribuild at all material times who

was foreman or superintendent of the subject project. These

statements are admissible as substantive evidence under the

"admissions" exception to the h earsay rule. 1 / DFS introduced the

statements of Roth and Parker through its investigator, Anthony

Vinci, to whom (according to Mr. Vinci) the statements were made.

Mr. Vinci also testified about statements made to him by Jack

Rosales, the owner of CJM (a nd one of the six Workers mentioned

above). To the extent offered for the truth of the matters

asserted, Mr. Rosales's out - of - court statements to Mr. Vinci

constitute hearsay that does not fall within any recognized

exception. The undersigned has not mad e any findings of fact

based, in whole or in part, on Mr. Rosales's hearsay statements. 2 /

5. Roth and Mr. Rosales testified at hearing. Both men

denied that CJM had been Ameribuild's subcontractor,

contradicting the section 90.803 , Florida Statutes, admi ssions to

which Mr. Vinci attested. Because the resolution of this

particular dispute turns on credibility determinations, the

undersigned will discuss the testimony itself in somewhat more

detail than is usually warranted.

6. On May 31, 2017, Mr. Vinc i performed a random worksite

inspection at 15050 Biscayne Boulevard, North Miami Beach,

Florida, where an automobile dealership was being constructed on

a site that had been occupied by a drugstore. He immediately

observed several men performing drywall work and debris removal.

The first person to whom Mr. Vinci spoke was Mr. Rosales, who

identified himself as the owner of CJM and confirmed that the

five laborers presently at work were CJM's employees. Mr. Vinci

immediately conducted on online database search and discovered

that Mr. Rosales did not have an active exemption for himself or

workers' compensation coverage for any of CJM's employees at the

worksite.

7. Parker, the Ameribuild employee, was present at the

worksite, too, when Mr. Vinci arrived . As the project foreman,

his duties included coordinating the job and making sure that the

work flow continued. Parker told CJM's employees what to do. He

opened and closed the worksite daily, coordinated all the

subcontractors, and kept a log of perso ns entering and leaving

the area. Parker, in short, was "in charge" on site.

8. Mr. Vinci interviewed Parker, who acknowledged being an

employee of Ameribuild and identified CJM as Ameribuild's

subcontractor. Parker named Roth as Ameribuild's owner and gave

Mr. Vinci Roth's name and number. Before calling Roth, Mr. Vinci

went to his car and conducted an online search of Ameribuild's

records. He learned that Ameribuild had workers' compensation

coverage through a leasing company, which showed coverage f or

Parker. The leasing roster, however, did not cover Roth or any

of CJM's employees.

9. Mr. Vinci then got Roth on the phone to notify him that

Ameribuild had not secured workers' compensation coverage for all

of its employees and that, consequently, the Department would

enforce compliance, including through the issuance of a Stop - Work

Order ("SWO") . At hearing, Roth denied having spoken to

Mr. Vinci at this time. 3 / Mr. Vinci's contemporaneous notes,

however, corroborate his recollection of the discu ssion at issue,

and, equally important, the conversation fits comfortably into

the undisputed chain of events, whereas its nonexistence would be

harder, albeit not impossible, to reconcile with the parties'

subsequent conduct. The undersigned finds that, in fact,

Mr. Vinci and Roth spoke on the telephone on the afternoon of

May 31, 2017.

10. As recounted by Mr. Vinci, the ensuing discussion was,

for the most part, about what you'd expect. After introducing

himself, Mr. Vinci asked Roth about CJM and whet her its Workers

were covered. When Roth replied that Mr. Rosales had an

exemption from workers' compensation, which he (Roth) had seen,

Mr. Vinci informed him that, actually, Mr. Rosales did not have

one. Asked whether he (Roth) had an exemption, Roth an swered

that he would need to check. In response to another of

Mr. Vinci's inquiries, Roth told the investigator (according to

the latter's contemporaneous notes) that he (Roth) did not

receive any remuneration from Ameribuild. According to

Mr. Vinci, who se testimony in this regard is hotly disputed, Roth

stated that he had hired Mr. Rosales's company, CJM, as

Ameribuild's subcontractor on the project in question.

11. Armed with this information, DFS prepared a SWO for

issuance to Ameribuild, which comman ded Ameribuild to cease all

business operations at the worksite and assessed a monetary

penalty (exact amount to be determined) equal to two times the

premium Ameribuild would have paid to provide the required

coverage during the preceding two years. Mr. Vinci called Roth

to tell him about the SWO and make arrangements for the service

thereof. (Roth's denial of his participation in this

conversation is rejected as unpersuasive.) Roth was informed of

the requirements for obtaining a conditional release fr om the SWO

so that Ameribuild could resume operations at the worksite

pending a final release upon compliance and payment in full of

the assessed penalty. Roth agreed to meet Mr. Vinci the

following day at the Department's Miami office.

12. That meeting took place as scheduled. Mr. Vinci

personally served Roth with the SWO and a Request for Production

of Business Records for Penalty Assessment Calculation ("BRR").

Roth then paid $1,000.00 towards the penalty, which had yet to be

calculated, and delivere d a signed "reduction - of - workforce"

letter, i.e., a sworn statement, on Ameribuild letterhead,

promising DFS that "Ameribuild Construction Management will no

longer permit CJ Meeko LLC or his employees [to] work on the

jobsite @ 15050 Biscayne Blvd., North Miami Beach, FL 33132 until

CJ Meeko LLC is in compliance with Florida State Law." Upon

receipt of Ameribuild's check and reduction - of - workforce letter,

the Department executed an Agreed Order of Conditional Release

from Stop - Work Order, which authorized Ameribuild to resume

operations at the worksite.

13. There is no evidence suggesting that, during this

meeting on June 1, 2017, Mr. Vinci or anyone else interrogated

Roth, who could have remained silent and refused to comment on

DFS's allegations, given that it would be DFS's burden to prove

the charges, were Ameribuild to request a hearing. Roth,

however, volunteered his opinion that if CJM lacked coverage (as

DFS alleged), then Mr. Rosales must have made an "honest mistake"

because he (Roth) sincerely believed that Mr. Rosales had applied

for and obtained an exemption. The point of this statement,

obviously, was not to deny the violation, but to minimize it as

having been neither knowing nor intentional. Roth, it appears,

was offering up facts that he probably hoped would mitigate the

penalty. Regardless, more telling is what Roth ÏÏ in responding to

the accusation that Ameribuild was responsible for its

subcontractor's (CJM's) failure to secure compensation ÏÏ did not

say. If CJM really were not Ameribu ild's subcontractor, it would

be expected that Roth would protest the Department's

misunderstanding of this basic fact, and state that, in fact, CJM

was Prestige 's contractor. While Roth's silence in this regard

perhaps does not rise to the level of an ev identiary admission, 4 /

the undersigned finds that his failure then (or later) to inform

the Department of the "true" contractual relationships is

suspiciously inconsistent with Ameribuild's current litigating

position. If Ameribuild did not have a contrac t with CJM, then

Roth, if he were not going to keep quiet, should have been making

that point early and often.

14. In the months that followed, Ameribuild provided

documents to DFS responsive to the BRR, which DFS deemed

insufficient for purposes of deter mining Ameribuild's payroll for

the audit period of June 1, 2015, through May 31, 2017. In such

situations, where the records are insufficient to establish

actual payroll, the Department is authorized to base its penalty

assessment upon an "imputed payrol l." Consequently, using the

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

Florida Administrative Code Rule 69L - 6.027, DFS determined (for

the entire audit period) Ameribuild's imputed payroll, which is

the compensation that Ameribuild is de emed to have paid the

Workers and Roth.

15. It is unnecessary in this case to make detailed

findings regarding the assumptions behind Ameribuild's imputed

payroll figures because Ameribuild does not dispute them or the

amount of the resulting penalty ($ 137,719.54), which was set

forth in an Amended Order of Penalty Assessment served on

November 6, 2017. Rather, Ameribuild maintains that DFS has

failed to prove the alleged violations, meaning there can be no

penalty, which makes the imputed payroll irrel evant. If, on the

other hand, Ameribuild were found to have violated a duty to

secure compensation for Roth and Workers, which Ameribuild of

course believes should not happen, then Ameribuild would concede

that the imputed payroll and concomitant penalty are correct.

16. As mentioned above, it is Ameribuild's contention that

the Workers were not "employees" of Ameribuild for workers'

compensation purposes because CJM was under contract, not to

Ameribuild, but to the owner of the project, Prestige. Both R oth

and Mr. Rosales testified about this purported contract; under

the CJM - Prestige agreement as they described it, 5 / the Workers

might not have been Ameribuild's employees. 6 /

17. Ameribuild sought to introduce a copy of the contract

as proof of the fact that CJM was Prestige's contractor. The

Department objected because Ameribuild had not disclosed the

contract as an exhibit until a few days before the hearing, long

past the deadline established in the Order of Pre - h earing

Instructions. Ameribuild could provide no explanation for the

late disclosure. Wanting to avoid the exclusion of evidence that

could be dispositive, but unwilling to countenance the prejudice

DFS might suffer if the surprise exhibit were admitted, the

undersigned ruled that the docume nt would be received on the

condition that the hearing be recessed for a reasonable, but

brief, period so that DFS could depose the appropriate person(s)

at Prestige about the purported CJM - Prestige agreement, and then

supplement the record with the deposi tion(s).

18. Ameribuild, however, elected to withdraw the exhibit to

prevent the Department from obtaining Prestige's testimony about

the alleged contract. Thus, Ameribuild neither offered (nor

proffered) the purported CJM - Prestige agreement , which,

acco rdingly, is not in the evidentiary record. The undersigned

probably would be permitted to draw an adverse inference from

Ameribuild's counterintuitive failure to introduce the written

agreement, which was obviously available and within Ameribuild's

immedi ate control, and which (if genuine) would be, if not

dispositive, certainly persuasive exculpatory evidence directly

rebutting the Department's case - in - chief. The undersigned

reasonably could infer from the totality of the circumstances

that Ameribuild ha d reason to believe Prestige would not

recognize and authenticate the purported contract if asked about

it under oath in deposition, which reason being (need it be

said?) that the purported contract is a fake.

19. The undersigned declines to draw such a n inference.

Instead, the undersigned finds that, without the contract as

corroborating evidence, Ameribuild has failed to present proof

sufficient to undermine the strength of the Department's prima

facie case. DFS has carried its burden of proving, by clear and

convincing evidence, that CJM was Ameribuild's subcontractor.

20. On the question of whether Roth was an employee of

Ameribuild for compensation purposes during the period when his

name did not appear on the coverage roster, however, the

undersi gned finds that the Department failed to carry its burden

of proof. Roth testified at hearing that he had received no

remuneration from Ameribuild during the months in 2016 and 2017

when he was not included in the company's compensation coverage,

which te stimony was consistent with his prior statement to

Mr. Vinci in this regard. Other documentation in evidence shows

that in 2015, when Roth received remuneration from Ameribuild, he

was also provided workers' compensation coverage, through South

East Perso nnel, Inc., a leasing company. While the evidence

fails clearly to establish that Roth did not receive remuneration

from Ameribuild, it fails clearly and convincingly to prove that

he did. It is determined, therefore, that Roth was not an

uncovered emplo yee during the audit period.

21. The proposed penalty must be adjusted to remove the

amount attributable to Roth ÏÏ $5,126.22. Ameribuild's penalty for

noncompliance, based on the Workers' imputed payroll, should be

$132,593.32.

CONCLUSIONS OF LAW

22. The Division of Administrative Hearings has personal

and subject matter jurisdiction in this proceeding pursuant to

sections 120.569 and 120.57(1), Florida Statutes.

23. The Department is required to prove by clear and

convincing evidence that Ameribuild fai led to secure the payment

of workers' compensation and that the Department calculated the

penalty appropriately. See Dep't of Banking & Fin. v. Osbourne

Stern & Co. , 670 So. 2d 932, 935 (Fla. 1996).

24. Pursuant to sections 440.10 and 440.38, every

"empl oyer" is required to secure the payment of workers'

compensation for the benefit of its employees unless exempted or

excluded under chapter 440. The term "e mployer" means "every

person carrying on any employment" and, "if the employer is a

corporation, [i ncludes] parties in actual control of the

corporation, [e.g.,] officers who exercise broad corporate

powers, directors, and all shareholders who directly or

indirectly own a controlling interest in the corporation."

§ 440.02(16)(a), Fla. Stat.

25. The te rm "employee" includes, as relevant here:

(i) "any person 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,"

section 440.02(15)(b); and (ii) " [a]ll persons who are being paid

by a construction contractor as a subcontractor, unless the

subcontractor has validly elected an exemption as permitted by

this chapter, or has otherwise secured the payment of

compensation coverage as a subcontractor, cons istent with

s. 440.10, for work performed by or as a subcontractor."

§ 440.02(15)(c)2 . , Fla. Stat.

26. Section 440.10(1)(b) provides that when "a contractor

sublets any part or parts of his or her contract work to a

subcontractor or subcontractors, all o f the employees of such

contractor and subcontractor or subcontractors engaged on such

contract work shall be deemed to be employed in one and the same

business or establishment, and the contractor shall be liable

for, and shall secure, the payment of comp ensation to all such

employees, except to employees of a subcontractor who has secured

such payment."

27. Because it has been determined, as a matter of fact,

that CJM was Ameribuild's subcontractor on a construction

project, the law deems the Workers sta tutory "employees" of

Ameribuild for whom Ameribuild, as a construction contractor, was

required to secure the payment of compensation. As found above,

Ameribuild did not, in fact, secure compensation for the Workers.

28. While Ameribuild did not secure compensation for Roth

for part of the audit period, the evidence, as found above, is

insufficient to support a finding that Roth provided services for

remuneration during the time when he was not provided

compensation. Thus, he was not shown to have been Ameribuild's

"employee" for purposes of chapter 440, which means that

Ameribuild was not required to secure the payment of workers'

co mpensation for his benefit.

2 9. The department must "assess against any employer who

has failed to secure the payment of compensation as required by

. . . chapter [440] a penalty equal to 2 times the amount the

employer would have paid in premium when applying approved manual

rates to the employer's payroll during periods for which it

failed to secure the payment of workers' compensation required by

this chapter within the preceding 2 - year period or $1,000,

whichever is greater." § 440.107(7)(d)1. , Fla. Stat.

30. There is no dispute that the statutory penalty based on

the payroll imputed to the Workers is $132,593.32.

RECO MMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial Services,

Division of Workers' Compensation, enter a final order finding

Ameribuild Construction Management, Inc., in violation of its

obligation to secure workers' compensation and imposing a penalty

of $132,593.32 for such noncompliance.

DONE AND ENTERED this 6th day of September , 2018 , in

Tallahassee, Leon County, Florida.

S

JOHN G. VAN LANINGHAM

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 6th day of September , 2018 .

ENDNOTE S

1/ See § 90.803(18) , Fla. Stat . Roth's statements on behalf of

his company are obviously attributable to Ameribuild. Parker's

statements fall under section 90.803(18)(d), Florida Statutes,

which cove rs statements "by the party's agent or servant

concerning a matter within the scope of the agency or employment

thereof, made during the existence of the relationship."

2 / Resort to section 120.57(1)(c) , Florida Statutes, was not

necessary.

3 / This tes timony might have come as a surprise to Ameribuild's

counsel, who previously had stated, during the direct examination

of Mr. Vinci, that Ameribuild did not object "to [the] existence

of [the] phone call per se," contrary to DFS's belief, but rather

disput ed Mr. Vinci's testimony concerning what Roth had said to

Mr. Vinci during their telephone conversation. at 38.

4 / See § 90.803(18)(b), Fla. Stat. In determining whether the

declarant's silence in the face of an accusatory statement

constitutes an admission by acquiescence, the "essential inquiry

[is] whether a reasonable person would have denied the

statement[] under the circumstances." Nelson v. State , 748 So.

2d 237, 243 (Fla. 1999).

5 / Because Ameribuild was attempting to prove the contents o f the

writing, the testimony about the contract's terms might have been

excluded on a timely "best evidence" objection. See § 90.952,

Fla. Stat. Such an objection was not made, however, probably

because, as will be discussed, Ameribuild had put the purpo rted

contract on its exhibit list, which might have caused the

Department's counsel to suppose that the document would be

admitted into evidence. Aside from the best evidence rule, there

is also a latent hearsay issue, given that the purpose of the

testim ony about the contract's terms was to establish the truth

of the matters asserted therein, which would show, supposedly,

that CJM and Prestige were contractually bound to an exclusive

undertaking. The undersigned is unaware of an exception to the

hearsay rule that would authorize the admission of testimony

about the terms of a contract whose only relevance is the truth

those terms. It is not necessary, however, to deem the testimony

at issue inadmissible or incompetent because it is insufficiently

persuas ive in any event.

6 / DFS has asserted alternative legal theories under which

Ameribuild would be required to secure compensation for the

Workers even if Mr. Rosales's testimony about the contents of the

alleged CJM - Prestige contract were credited. Becau se the

undersigned does not believe this testimony, however, it is

unnecessary to address DFS's alternative theories.

COPIES FURNISHED:

Mason A . Pokorny, Esquire

Cotney Construction Law, LLP

8621 East Dr. Martin Luther King Jr.,

Boulevard

Tampa, Flor ida 33610

(eServed)

Tabitha G. Harnage, Esquire

Department of Financial Services

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 f iled with the agency that

will issue the Final Order in this case.