18-004121 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Almirola Building Services, Inc. Status: Closed Recommended Order on Thursday, March 14, 2019.

Summary: Respondent had employees who were required to be covered by workers' compensation insurance, yet were not. Other employees were covered so the Department's assessment should be reduced to $58,746.52.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS Ó

COMPENSATION,

Petitioner,

vs. Case No. 18 - 4121

ALMIROLA BUILDING SERVICES,

INC.,

Respondent.

_______________________________/

RECOMMENDED ORDER

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

Cohen, an Administrative Law Judge with the Division of

Administrative Hearings ( Ð DOAH Ñ ), on December 5, 2018 , by video

teleconference at sites in Tampa and Tallahassee, Flori da.

APPEARANCES

For Petitioner: Leon Melnicoff, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

For Respondent: Herbert Fiss, Esquire

He rbert W. Fiss, Jr., P.A.

341 South Plant Avenue

Tampa, Florida 33606

STATEMENT OF THE ISSUE

The issues are whether Respondent, Almirola Building

Services, Inc. ( Ð Respondent Ñ ), failed to secure workers Ó

compensation cover age for its employees; and, if so, whether the

Department of Financial Services, Division of Workers Ó

Compensation ( Ð Petitioner Ñ or ÐDepartmentÑ ), correctly calculated

the penalty assessment imposed against Respondent.

PRELIMINARY STATEMENT

This proceeding arose from the requirement that employers

must secure workers Ó compensation insurance for their employees.

On May 15, 2018 , Petitioner served a Stop - Work Order for Specific

Worksite Only and Order of Penalty Assessment on Respondent for

failing to secure workers Ó compensation for the benefit of its

employees as required by chapter 440, Florida Statutes (2017) .

Petitioner issued an Agreed Order of Conditional Release from

Stop - Work Order to Respondent on May 16, 2018. Respondent filed

its petition for he aring on June 5, 2018, disputing the issue of

material fact of whether Respondent had any employees.

On August 6, 2018 , the matter was referred to DOAH and was

assigned to the undersigned. On August 13, 2018, Petitioner

filed a Motion for Leave to Amend O rder of Penalty Assessment

seeking to impose an Amended Order of Penalty Assessment on

Respondent and assessing a penalty of $117,013.08.

On August 13, 2018 , Respondent filed a Reply to Initial

Order . Petitioner filed a Unilateral Response to Initial Orde r

on August 14, 2018 , and a hearing was scheduled in this matter

for October 8, 2018 , by video teleconference at sites located in

Tampa and Tallahassee, Florida. On August 15, 2018, the Motion

for Leave to Amend Order of Penalty Assessment was granted.

On September 25, 2018, Petitioner Ó s Agreed Motion to

Continue Final Hearing was filed and granted. The undersigned

entered a n Order Granting Continuance and Rescheduling Hearing by

Video Teleconference, setting the final hearing for December 5,

2018, and th e hearing proceeded as scheduled.

At the hearing, Petitioner presented the testimony of Munal

Abedrabbo, compliance investigator; and Lynne Murcia, penalty

auditor; and offered 23 exhibits, all of which were admitted into

evidence without objection. Respo ndent presented the testimony

of Elizabeth Hernandez , who handles payroll, human resources, and

contracts for DeVito Builders, Inc.; Karina Almirola, a corporate

director of Respondent; and offered eight exhibits, all of which

were admitted into evidence.

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

December 21, 2018.

Petitioner and Respondent timely submitted their P roposed

R ecommended O rder s on January 18, 2019.

References to statutes are to Florida Statutes (2017),

unless otherwise noted.

FINDING S OF FACT

1. Petitioner is the state agency responsible for enforcing

the statutory requirement that employers secure the payment of

workers Ó compensation for the benefit of their employees pursuant

to section 440.107 .

2. Respondent is a Florida corporation established on

May 8, 2016. Respondent has operated since 2007, providing

roofing, repairs, and painting services, primarily on residential

structures. According to the 2018 Annual Report filed with the

Florida Secretary of State, no officer s are indicated, but Juan

Carlos Almirola, Caridad Almirola, and Karina Almirola are each

listed as directors of the company.

3. Respondent operates out of an office at 4715 Mullins

Road, Tampa, Florida 33614, and provides its services in Tampa,

Clearwate r, St. Petersburg, and Pasco County, Florida.

4. Respondent does not directly employ workers to perform

the roofing, repairs, and painting services that it provides to

customers.

5. Respondent asserts that it does not utilize

subcontractors to provide roofing, repair s , and painting

services. Rather, Respondent asserts that it Ð borrows Ñ employees

from DeVito Builders, Inc. ( Ð DeVito Ñ ) , to perform roofing,

repairs, and painting services. Pursuant to this Ð borrowing Ñ

process, Respondent pays DeVito for th e services of DeVito Ó s

employees , who then perform the actual roofing, repairs, and

painting services for Respondent Ó s customers .

6. N o evidence was presented that DeVito was ever a

licensed employee leasing company authorized to lend employees to

other e ntities.

7. On May 15, 2018, a company called Maurer and Maurer was

contracted to perform a re - roof at 518 West 122nd Avenue, Tampa,

Florida. Maurer and Maurer subcontracted that re - roof to

Respondent, i.e., Respondent performed the work for which Maurer

and Maurer was contractually obligated to complete. Respondent,

through Karina Almirola, pulled a permit for the job on May 10,

2018. The Hillsborough C ounty permit number is ROF38978.

Respondent then subcontracted the re - roof to DeVito, from whom

Resp ondent asserts it Ð borrowed Ñ employees to complete the work

originally contracted by Maurer and Maurer. For purposes of

w orkers Ó c ompensation l aw, Respondent , which was Maurer and

Ma u rer Ó s subcontractor, subsequently contracted its requirements

under the original contract to a sub - subcontractor, specifically

DeVito.

8. Respondent identified the employees being Ð borrowed Ñ for

the re - roof on May 15, 2018, as Didier Rodriguez, Rolando Perez -

Perez, Martin Barrera Huerta, and Octavio Leon.

9. Munal Abedrabbo is an investigator for Petitioner , who

investigates worksites to determine if employers have secured the

payment of workers Ó compensation for their employees.

10. On May 15, 2018, Mr. Abedrabbo investigated the

worksite at 518 West 122nd Avenue, Tampa, Fl orida, a residential

home. Mr. Abedrabbo testified that he observed six individuals

on the roof of the home actively engaged in tearing off the

existing roof by removing the shingles and dumping the shingles

into a dumpster.

11. The individuals observed at the worksite were

performing activities consistent with National Council on

Compensation Insurance ( Ð NCCI Ñ ) class code 5551, Ð Roofing Î All

Kinds & Drivers. Ñ

12. The six individuals found at the worksite by

Mr. Abedrabbo identified themselves to Mr. Ab edrabbo as Didier

Rodriguez, Rolando Perez - Perez, Martin Barrera Huerta, Moises

Enrique Castro, Octavio Leon, and Lencho Martinez .

13. Didier Rodriguez identified himself to Mr. Abedrabbo as

the crew leader and said that the workers on - site worked for

Ð Carlos. Ñ A phone number for Ð Carlos Ñ was on a work trailer

parked at the worksite , which had Respondent Ó s company name and

contractor license number on it. Mr. Abedrabbo placed a call to

Ð Carlos , Ñ who said he was close to the worksite and would go

there. Mr. Abedrabbo identified Ð Carlos Ñ as Juan Carlos Almirola

because Juan Carlos Almirola arrived at the worksite in response

to Mr. Abedrabbo Ó s telephone call to the Ð Carlos Ñ listed on the

work trailer.

14. While waiting for Juan Carlos Almirola to arriv e,

Mr. Abedrabbo searched Petitioner Ó s Coverage and Compliance

Automated System ( Ð CCAS Ñ ) database for workers Ó compensation

coverage and any exemptions held by Respondent.

15. CCAS contains workers Ó compensation insurance

information , as well as workers Ó compensation exemptions. The

workers Ó compensation insurance information in CCAS comes from

the NCCI, which obtains that information directly from insurance

carriers. All carriers writing workers Ó compensation policies

must notify Petitioner within 21 da ys of writing a policy

pursuant to section 440.185(6). Petitioner grants exemptions and

then inputs that data into CCAS where Mr. Abedrabbo would

reasonably expect to find such information if it existed .

16. Mr. Abedrabbo Ó s search of CCAS revealed that o n May 15,

2018, Respondent had no workers Ó compensation insurance coverage

and only one exemption, for Karina Almirola. There were no

active exemptions for Juan Carlos Almirola and Caridad Almirola

on that date. Mr. Almirola was an active participant in the

roofing job. Ms. Caridad Almirola works in the office and runs

errands and secures notices of commencement for the company.

17. Mr. Almirola informed Mr. Abedrabbo that Karina

Almirola , a licensed roofing contractor, had pulled the building

permit fo r the job and that Respondent subcontracted the work to

DeVito. Mr. Almirola further indicated that the workers present

were working for DeVito.

18. Mr. Abedrabbo observed a copy of the building permit

pulled by Respondent , which was posted at the worksi te.

19. On May 15, 2018, DeVito secured the payment of workers Ó

compensation solely through an employee leasing agreement with

SouthEast Personnel Leasing , Inc . ( Ð SouthEast Ñ ) . Of the six

individuals on - site, De V ito Ós employee leasing agreement covered

on ly two, Rolando Perez - Perez and Didier Rodriguez. On May 15,

2018, DeVito had one active workers Ó compensation exemption ,

which was for Nicholas DeVito. Neither Respondent nor DeVito

purchased a policy of workers Ó compensation insurance at any time

relev ant to this proceeding.

20. Mr. Abedrabbo contacted Nicholas DeVito of DeVito, who

confirmed that the workers on - site were working for DeVito.

Mr. Abedrabbo informed him that DeVito had not added four of the

six workers present to the employee leasing ag reement, to which

Mr. DeVito replied that DeVito would add them by the end of the

day.

21. At hearing, Respondent presented the testimony of

Elizabeth Hernandez , who handles human resources and payroll for

DeVito, as well as handling paperwork for when Re spondent

Ð borrows Ñ employees from DeVito. Ms. Hernandez claimed that

DeVito employed Martin Barrera Huerta and Octavio Leon for the

first time on May 15, 2018, but that Moises Castro and Lencho

Martinez were never hired by DeVito. Ms. Hernandez claimed t hat

DeVito employed Martin Barrera Huerta and Octavio Leon because

they filled out applications for DeVito Ó s employee leasing

agreement. Ms. Hernandez claimed that DeVito did not hire Moises

Castro and Lencho Martinez because DeVito did not add Moises

Cas tro and Lencho Martinez to DeVito Ó s employee leasing

agreement. Ms. Hernandez further claimed that DeVito did not

hire Moises Castro and Lencho Martinez because DeVito ultimately

did not pay them .

22. Ms. Martinez Ó s claims of the employment relationship

between DeVito and Martin Barrera Huerta, Octavio Leon, Moises

Enrique Castro, and Lencho Martinez are directly contradicted by

the defined terms of Florida Ó s Workers Ó Compensation Law, as

detailed below . Martin Barrera Huerta and Octavio Leon had not

yet been hired by DeVito to perform the roofing job on May 15 ,

2018 , but had received applications for employment from DeVito ,

which they had not yet returned completed to the company. Moises

Enrique Castro, and Lencho Martinez were hired by DeVito to

perfor m a re - roof on May 15, 2018 , which was their first day on

the job with DeVito .

23. Respondent did not request an employee leasing roster

from DeVito prior to the commencement of the work at the

worksite. In this regard, Respondent affirmatively assumed t he

risk that DeVito may not have had required workers Ó compensation

coverage in place for its employees.

24. Based on the findings of his investigation,

Mr. Abedrabbo determined that Respondent failed to ensure that

its subcontractor, DeVito, secured the payment of workers Ó

compensation for its employees. Section 440.10(b) provides that

when a contractor sublets any part of its contract to a

subcontractor , the employees of such contractor and subcontractor

are deemed to be employed in one and the same bus iness and the

contractor shall be liable for the payment of compensation to all

such employees. As a result, on May 15, 2018, Petitioner issued

Respondent a Stop - Work Order for Specific Worksite Only and Order

of Penalty Assessment for engaging employees in the construction

industry without securi ng the payment of workers Ó compensation.

25. On May 15, 2018, Petitioner issued Respondent a Request

for Production of Business Records for Penalty Assessment

Calculation. The Request for Production of Business Records for

Penalty Assessment Calculation requested several categories of

business records from Respondent for the period of September 17,

2017, through May 15, 2018, to determine Respondent Ó s payroll

during that period. Included in the Request for Produ ction of

Business Records for Penalty Assessment Calculation was a request

for Respondent to provide all business check journals and

statements including cleared checks for all open and/or closed

business accounts established by Respondent. Respondent was also

requested to provide payroll documents including time sheets,

time cards and attendance records, earnings records, check stubs

and payroll summaries, and federal income tax documents;

disbursements including check and cash disbursements; workers

comp ensation coverage information; professional employer

organization records; and subcontractor records includ ing all

documents which reflect the identity of each subcontractor, the

contractual relationship with them, and payments to the

subcontractor includi ng , but not limited to: contracts,

invoices, check stubs , and check ledgers.

26. Petitioner penalizes employers for the amount of

workers Ó compensation premium s that they have evaded paying

during the preceding two - year period. Petitioner determines

eva ded premium s by reviewing the employer Ó s business records.

27. Respondent submitted business records to Petitioner

consisting of bank statements , check images, and a check detail

report. However, the records Respondent submitted were

incomplete.

28. Res pondent submitted bank statements for two accounts,

a checking account ending in 3595 and a checking account ending

in 0052. Respondent failed to submit complete copies of the

records for these two accounts. For the account ending in 3595,

Respondent fai led to produce the account statements for March,

April, and May 2018, which were the final three months of the

penalty audit period. For the account ending in 0052, Respondent

submitted an incomplete statement for March 2018, which was

missing the check l ist. Some of the check images were also

missing, which precluded analysis of the corresponding payments.

29. The check detail report provided by Respondent failed

to identify whether the checks paid as subcontractor expenses and

payroll expenses were net or gross wages. Because workers Ó

compensation premiums are based on gross payroll , the Department

could not determine Respondent Ó s payroll without knowing if the

amounts in the check detail report were net or gross wages.

30. More significantly, however , an analysis of

Respondent Ó s bank records revealed the possibility that

Respondent had another business bank account. Respondent Ó s bank

records included multiple transfers to a checking account ending

in 0411. If this account is another business account , then

Respondent could have paid additional, uncovered, employees or

subcontractors out of that account. If this account was a

personal or non - business account, then it could have been

excluded from the penalty. Respondent provided no information

regard ing the owner of this third account, despite Petitioner

informing Respondent that this information was needed on

September 4 and November 9, 2018.

31. Petitioner calculated an Amended Order of Penalty

Assessment , which imposed a $117,013.08 penalty agains t

Respondent.

32. At no point during the penalty audit review period did

Respondent secure the payment of workers Ó compensation.

33. Respondent failed to submit records sufficient for

Petitioner to determine Respondent Ó s payroll, which required

Petitione r to calculate the Amended Order of Penalty Assessment

based on completely imputed payroll. The gross payroll for an

employer , who provides insufficient records , is imputed at the

statewide average weekly wage multiplied by 1.5 for each employee

for the p eriod requested for the calculation of the penalty.

34. Petitioner properly included Juan Carlos Almirola and

Caridad Almirola in the Amended Order of Penalty Assessment as

employees of Respondent because they performed services for

Respondent and Respond ent remunerated them for those services.

The Almirolas Ó remuneration for services provided to Respondent

is undisputed. The Almirolas further fill positions of authority

listed in the articles of incorporation with the Department of

State and receive rem uneration for services.

35. Juan Carlos Almirola worked for Respondent between

September 2017 and May 2018, as an estimator. Respondent paid

him a salary for this work.

36. Although Juan Carlos Almirola was listed on the

SouthEast employee leasing rost er for DeVito , this coverage was

only effective for work that he performed while he was being paid

by SouthEast.

37. Caridad Almirola worked for Respondent full time

between September 2017 and May 2018, pulling permits, recording

notices of commencement, and running errands. Respondent paid

her a salary for this work.

38. Respondent Ó s subcontractor, DeVito, failed to secure

the payment of workers Ó compensation for its employees Lencho

Martinez, Martin Barrera Huerta, Moises Enrique Castro, and

Octavio Le on on May 15, 2018. Because Respondent subcontracted

its obligations under the Maurer and Maurer contract to DeVito,

wh ich failed to secure workers Ó compensation coverage , Respondent

became the statutory employer of DeVito Ó s unsecured employees by

operati on of law .

39. Respondent , therefore , had four employees required to

have workers Ó compensation : Juan Carlos Almirola, Caridad

Almirola, Martin Barrera Huerta, and Octavio Leon. As described

above, Juan Carlos Almirola and Caridad Almirola had no activ e

exemptions and were thus required to have coverage ; and Martin

Barrera Huerta and Octavio Leon were required to have coverage in

place prior to their beginning work for Respondent on May 15,

2018, even though that was their first day working for Responde nt

or DeVito.

40. In a penalty based on imputed payroll, an employer Ó s

period of noncompliance shall be either the same time period

requested in the Request for Production of Business Records for

Penalty Assessment Calculation or an alternative period of

noncompliance as determined by Petitioner, whichever is less. In

this case, Respondent has been in operation since 2007, but

Petitioner requested business records from September 19, 2017,

through May 15, 2018, which became th e period of non compliance.

Be tween September 2017 and May 2018, Respondent continuously

operated without securing workers Ó compensation for its

employees.

41. Juan Carlos Almirola and Caridad Almirola acquired

workers Ó compensation exemptions on May 16, 2018, after the end

of the per iod of noncompliance.

42. When Petitioner calculates a penalty based on imputed

payroll, Petitioner assigns the employer Ó s employees to the

highest rated workers Ó compensation classification code based

upon records submitted or the investigator Ó s physical observation

of any employee Ó s activities. In this case, Mr. Abedrabbo

observed the employees on - site conducting roofing activities,

which was the highest rated code indicated by the investigation.

Petitioner applied the corresponding NCCI class code, 55 51, for

all of Respondent Ó s employees for the entire period of

noncompliance.

43. Petitioner determines the amount of evaded workers Ó

compensation insurance premium s by multiplying the employer Ó s

gross payroll by the approved manual rates. Because Respo ndent

failed to provide sufficient records to determine its payroll,

Petitioner imputed Respondent Ó s gross payroll at 1.5 times the

statewide average weekly wage for each employee. The approved

manual rate is the workers Ó compensation premium dollar amoun t

associated with each class code expressed as dollars per $100 of

gross payroll. Petitioner determined the evaded premium by

multiplying Respondent Ó s imputed gross payroll by the approved

manual rates. Petitioner then multiplied the evaded premium by

tw o which resulted in a penalty of $117,013.08.

44. Petitioner has demonstrated by clear and convincing

evidence that Respondent violated Florida Ó s Workers Ó Compensation

Law by employing employees in the construction industry without

securing the payment of workers Ó compensation or elections to be

workers Ó compensation exempt, which required the issuance of the

Stop - Work Order for Specific Worksite Only and Order of Penalty

Assessment. Petitioner further demonstrated by clear and

convincing evidence that Re spondent failed to submit sufficient

records for Petitioner to determine Respondent Ó s payroll during

the penalty audit review period. However, based upon the

findings above that only four of the eight employees in question

were working for all or part of the period of noncompliance, that

penalty assessment must be adjusted to remove any calculations

for Rolando Perez - Perez, Didier Rodriguez, Moises Enrique Castor,

and Lencho Martinez since they were either covered for workers Ó

compensation by SouthEast (Pe rez - Perez and Rodriguez) or had not

yet become employees of DeVito (Castro and Martinez).

Accordingly, Petitioner has shown by clear and convincing

evidence that Petitioner is correct that some penalty is due, but

not the full amount previously calculated by its staff as a

penalty for Respondent Ó s evaded workers Ó compensation insurance

premium based on imputed gross payroll for the entire period of

noncompliance (except for the two employees who worked for only

one day of the noncompliance period, May 15, 2018 ) .

CONCLUSIONS OF LAW

45 . The Division of Administrative Hearings has

jurisdiction over the subject matter and parties to this

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

46. 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).

47 . Because administrative fines are penal in nature, the

Department has the burden of proving by clear and convincing

evidence that Respondent violated FloridaÓs Workers Ó Compensation

Law during the relevant time period and that the penalty

assessments are correct. Dep Ó t of Banking & Fin. v. Osborne

Stern & Co. , 670 So. 2d 932, 933 - 34 (Fla. 1996).

48. The Department is the agency responsible for

enforcement of ch apter 440. As the responsible agency, the

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

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

every Ð employer Ñ is required to secure the payment of workers Ó

compensation for the benefit of its employees unless exempted or

excluded under chapter 440. Strict compliance with the w orkers Ó

c ompensation l aw is required. See C&L Trucking v. Corbitt ,

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

50 . Section 440.107(2) states that ÐÒ securing the payment

of workers Ó compensation Ó means obtaining coverage that meets the

requirements of this chapter and the Florida Insurance Code. Ñ

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

(3) The department shall enforce workers Ó

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.

5 2 . Section 440.02(16)(a) defines Ð employer, Ñ in part, as

Ð every per son 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 di rectly

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.

5 3 . FloridaÓs W orkers Ó C ompensation L aw requires employers

to secure the payment of compensation for th eir employees.

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

54. An employer is required to have workers Ó compensation

coverage in the form of a workers Ó compensation insurance policy,

a workers Ó compensation employee leasing agreement, self -

insuranc e, or a workers Ó compensation exemption, for all

employees if the employer is operating in the construction

industry. §§ 440.02(16)(a), 440.02(17)(b)2., 440.02(24), 440.10,

and 440.38, Fla. Stat.

55. Ð Employee Ñ includes any person who receives

remunerat ion from an employer for the performance of any work or

service while engaged in any employment. § 440.02(15)(a), Fla.

Stat. Respondent employed Juan Carlos Almirola and K arina

Almirola because Respondent paid them salaries in exchange for

services they provided to Respondent .

5 6 . 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 for by this chapter has

failed to se cure 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 stop - work order on the

employer, req uiring the cessation of all

business operations. If the department makes

such a determination, the department shall

issue a stop - work order within 72 hours.

5 7 . The Department is empowered to examine and copy the

business records of any employer conduct ing business in Florida

to determine whether it is in compliance with FloridaÓs Workers Ó

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 d eemed 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) and (7)(a), Fla. Stat.

5 8 . Ð Employee Ñ also includes any person who is an officer

of the corporation and who performs services for remuneration.

§ 440.02(15)(b), Fla. Stat. A corporate officer is any person

who fills an office provided for in the corporate charter or

articles of incorporation. § 440.02(9), Fla. Stat. The original

a rticles of i ncorporation for Respondent provide for directors as

the only officers of the corporation as do the subsequent annual

reports filed with the Florida Department of State. Juan Carlos

Almiro la, Caridad Almirola, and Karina Almirola are listed on

Respondent Ó s a rticles of i ncorporation filed with the Florida

Department of State as directors of Respondent. Thus, the

Almirolas are filling the offices provided for in Respondent Ó s

articles of inco rporation and would be considered officers of the

corporation. § 440.02(9), Fla. Stat. Further, at the time of

the site visit where the Stop - Work Order for Specific Worksite

Only was imposed, only Karina Almirola held a workers Ó

compensation exemption. A workers Ó compensation exemption holder

must be a corporate officer of the business. § 440.05, Fla.

Stat. To obtain these exemptions, Karina Almirola swore under

penalty of perjury that she w as a corporate officer of

Respondent. When Juan Carlos Almiro la and Caridad Almirola

subsequently sought exemptions (that were not in place on May 15,

2018), they made similar pledges that they were corporate

officers.

59. Regarding the employee leasing agreement between

SouthEast and DeVito, section 440.11(2) states:

The immunity from liability described in

subsection (1) shall extend to an employer

and to each employee of the employer which

uses the services of the employees of a help

supply services company, as set forth in

North American Industrial Classifi cation

System Codes 561320 and 561330, when such

employees, whether management or staff, are

acting in furtherance of the employerÓs

business. An employee so engaged by the

employer shall be considered a borrowed

employee of the employer and, for the

purp oses of this section, shall be treated as

any other employee of the employer. The

employer shall be liable for and shall secure

the payment of compensation to all such

borrowed employees as required in s. 440.10,

except when such payment has been secured by

the help supply services company.

An employee leasing company is not responsible for a claimant Ó s

workers Ó compensation coverage where there is no evidence that

the claimant was an employee of the leasing company at the time

of the accident. Crum S erv s. v. Lopez , 975 So. 2d 1184, 1186

(Fla. 1 st DCA 2008). An employee leasing company has employees

the same way that any other employer has employees, by

compensating people for services provided. § 440.02(15)(a), Fla.

Stat. If another company, however, pays the employees of an

employee leasing company directly, that company has not engaged

the services of the employee leasing company to lease its

employees. Id. (finding that an employee leasing company is only

responsible for providing workers Ó compensa tion coverage to an

employee when the employee meets the requirements agreed to by

the parties to lease those employees). In that scenario, the

other company has become a second employer to that employee and

becomes responsible to provide the required wor kers Ó compensation

to that employee for the services performed without coverage

under the employee leasing agreement. Id.

60. In th is case, Respondent paid Juan Carlos Almirola

directly for services rendered to Respondent rather than engaging

SouthEast t o lease his services. Accordingly, Juan Carlos

Almirola was Respondent Ó s employee on the jobs for which

Respondent directly compensated him.

61. Despite Respondent Ó s common law theory of Ð borrowed

employees Ñ (more commonly known as the Ð borrowed servant

doctrine Ñ ), in this instance, the process meets the definition of

subcontracting. A subcontractor is a person who enters into a

contract with a contractor for the performance of any part of the

contractor Ó s contractual obligation to a third party. See

§ 713.01(28), Fla. Stat. A contract is an agreement to improve

real property, written or unwritten, express or implied. See

§ 713.01(6) , Fla. Stat. Florida retains the common law Ð borrowed

servant Ñ doctrine that one employer can lend its employee to

anoth er temporary employer. See, e.g. , Pensacola Christian

Coll . v. Bruhn , 80 So. 3d 1046, 1049 (Fla. 1st DCA 2011). The

company to whom the employee is lent is sometimes known as the

Ð special employer. Ñ Fossett v. S.E. Toyota Distribs., LLC ,

60 So. 3d 1155, 1157 - 58 (Fla. 1st DCA 2011 ) ( Ð A special employer

qualifies as such where Ò (1) there was a contract for hire,

either express or implied, between the special employer and the

employee; (2) the work being done at the time of the injury was

essentially that o f the special employer; and (3) the power to

control the details of the work resided with the special

employer. ÓÑ ) (quoting St. Lucie Falls Prop. Owners Ass Ó n v.

Morelli , 956 So. 2d 1283, 1286 ( F la. 4th DCA 2007).

62. Respondent did not establish suffic ient facts to

support its Ð lent employees Ñ scenario. Here, Respondent engaged

DeVito as a subcontractor to provide the labor for roofing,

repair, and painting services that Respondent was obliged to

perform for Maurer and Maurer under the original contrac t. See

Cent. Fla. Lumber Unlimited, Inc. v. Quaqish , 12 So. 3d 766, 769

(Fla. 2d DCA 2009) (finding that when a subcontractor

subcontracts part of its work , the employees of both the

contractor and subcontractor are deemed employed in one and the

same bus iness or establishment , and the contractor is liable for

payment of workers Ó compensation to those employees); Proctor &

Gamble Cellulose Co. v. Mann , 667 So. 2d 338, 341 (Fla. 1 st DCA

1995) (finding that to establish a statutory employment

relationship , t he entity claimed to be a contractor must have

incurred a contractual obligation to a third party and must have

delegated or sublet a part of its contractual obligation to a

subcontractor); and Miami Herald Pub lÓg v. Hatch , 617 So. 2d 380,

384 (Fla . 1 st DC A 1993) (finding that to sublet means to pass on

to another an obligation under a contract for which the person is

primarily obligated).

63. A person who does not receive remuneration for services

is presumed to be a volunteer unless there is substantia l

evidence that a valuable consideration was intended by both

employer and employee. § 440.02(15)(d)6., Fla. Stat.

Ms. Hernandez conceded that some of the individuals working at

the worksite were there for DeVito and that they expected payment

for their work, i.e., they were not volunteers. However ,

Ms. Hernandez Ó s testimony that two of the workers at the jobsite,

Moises Castro and Lencho Martinez had never completed the

paperwork to allow them to be employees is credible , and they

should be excluded fro m any assessments , since they had not been

hired for the job. The reasonable expectation of remuneration

for construction work performed at the worksite created an

employment relationship between DeVito and Martin Barrera Huerta,

and Octavio Leon, but not Moises Castro and Lencho Martinez.

§ 440. 02( 15 ) (a), Fla. Stat. Moreover, i t was not reasonable for

the individuals whose paperwork had not been received by the

employer to be considered employees. The mere fact they showed

up at a jobsite ready to work d id not make them employees.

64. Moreover, w hether DeVito Ó s employees are Respondent Ó s

borrowed servants or employees of a subcontractor is a

distinction without a difference because Florida Ó s Workers Ó

Compensation Law imposes identical responsibilities under both

classifications. Regarding a subcontractor workers Ó compensation

coverage liability, section 440.10 (1) (b) provides in relevant

part:

In case a contractor sublets any part or

parts of his or her contract work to a

subcontractor or subcontractor s, all of 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

compensation to all such employees, except to

employees of a subcontractor who has secured

such payment . (Emphasis added ).

Regarding workers Ó compensation coverage liability for Ð borrowed

servants, Ñ section 440.11(2) provides in relevant part:

An e mployee so engaged by the employer shall

be considered a borrowed employee of the

employer and, for the purposes of this

section, shall be treated as any other

employee of the employer. The employer shall

be liable for and shall secure the payment of

comp ensation to all such borrowed employees

as required in s. 440.10, except when such

payment has been secured by the help supply

services company. (Emphasis added ).

When an employer Ð borrows Ñ employees it becomes responsible for

providing workers Ó compens ation insurance coverage for those

employees unless the entity they are borrowing those employees

from has already secured workers Ó compensation insurance coverage

for those employees. Hazealeferiou v. Labor Ready , 947 So. 2d

599, 603 (Fla. 1 st DCA 2007) (finding that an employer borrowing

employees becomes a special employer to those employees,

responsible for securing the payment of workers Ó compensation

unless the lender of the employees has already done so); Folds v.

J.A. Jones Const r . Co. , 875 So. 2d 700, 703 (Fla . 1 st DCA 2004)

(finding that an employer borrowing employees becomes the

statutory employer of the borrowed employees); Dep Ó t of Fin.

S ervs . v. Michael Cribbs Const r . of Pensacola, Inc. , Case

No. 13 - 4577 (Fla. DOAH Aug. 22, 2014; Fla. DFS Oc t. 2, 2014)

(finding that section 440.11(2) requires an employer borrowing

employees to secure the payment of workers Ó compensation unless

the lending employer, or general employer, has already done so).

65. Further, no evidence was presented that DeVito is an

employee leasing company, thereby entitling it to employ the

workers who were on the jobsite in question . DeVito Ó s business

manager, Ms. Hernandez, never asserted the contractor was as

much.

66. Respondent , as a contractor, was required to request

evidence of workers Ó compensation insurance coverage from DeVito.

§ 440.10 (1) (c), Fla. Stat. Since DeVito Ó s coverage was through

an employee leasing company, Respondent was required to obtain a

list of the employees leased to DeVito from the employee lea sing

company as of the date DeVito commenced work for Respondent on

the project. Fla. Admin. Code R . 69L - 6.032(3). Such evidence of

leased employees was not presented at hearing, nor was a

representative of South E ast called to testify or authenticate

doc uments that would show any relationship between the employee

leasing company and either DeVito or Respondent.

67. As an employer engaged in employment, Respondent was

required to secure the payment of workers Ó compensation insurance

coverage for its emplo yees. § 440.10(1), Fla. Stat. Two of the

six purported employees at the site on May 15, 2018, Moises

Enrique Castro and Lencho Martinez, reported for work without

having submitted their applications for employment or ever having

been put on the payroll b y DeVito and, therefore, had never been

hired by the company. Consequently, they never became

Ð employees Ñ of Respondent or DeVito, and cannot have income

assigned or imputed to them. They must be excluded from any

penalty assessment sought to be imposed by Petitioner. Moreover,

since two other workers on the jobsite on May 15, 2018, Martin

B a rrera Huerta and Octavio Leon, had submitted employment

applications to DeVito and were sent to the job at issue for

their first day of work on May 15, 2018, they ca n only be

considered Ð employees Ñ of DeVito for that single day, not for any

portion of the previous period of the penalty assessment.

Insufficient evidence of their having been added to the employee

leasing company prior to their employment on May 15, 201 8, was

offered by Respondent. Therefore, these two individuals are

subject to the penalty assessment for one day of work.

68. Regarding the issuance of a stop - work order on an

employer, section 440.107(7)(a) states in relevant part:

Whenever the depar tment determines that an

employer who is required to secure the

payment to his or her employees of the

compensation provided for by this chapter has

failed to secure the payment of workersÓ

compensation . . . such failure shall be

deemed an immediate serio us danger to 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. If the

department makes such a determination, the

department shall iss ue a stop - work order

within 72 hours.

69. Retroactive compliance after a violation has been

identified is not sufficient to comply with an employer Ó s

responsibility to secure the payment of workers Ó compensation.

Dep Ó t of Fin. Servs. v. Mad Dog Mktg . Gr p, Inc. , Case No. 13 - 3217

(Fla. DOAH Dec. 20, 2013; Fla. DFS Mar . 17, 2015) (finding that a

workers Ó compensation insurance coverage not effective at the

time of the Stop - Work Order and Order of Penalty Assessment did

not cure the violation even where the policy issued was backdated

to have an effective time of before the violation).

70. Regarding the assessment of penalties, section

440.107(7)(d)1. states in relevant part:

In addition to any penalty, stop - work order,

or injunction, the department shall a ssess

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 employerÓs payroll during p eriods 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.

71. Florida Ó s Workers Ó Compensation Law requires Respondent

to maintain and produce upo n demand business records , which would

have allowed Petitioner to determine Respondent Ó s payroll.

§ 440.107(5), Fla. Stat.; see also § 440.107(3)(c), Fla. Stat.

and Fla. Admin. Code R . 69L - 6.015. The requisite records include

bank statements and check im ages for all business bank accounts.

Id. Respondent is also required to maintain other business

records which would have allowed Petitioner to determine

Respondent Ó s payroll and to produce them upon demand including,

among other items : employment record s which include identifying

information and start dates; all forms together with supporting

reports and schedules filed with the Internal Revenue Service;

written contracts or agreements entered into with employees; and

all employment and unemployment repo rts filed pursuant to Florida

law. Id. Respondent produced only a subset of the records it

could have produced and that subset was incomplete. Respondent Ó s

selective and incomplete records are insufficient to accurately

determine Respondent Ó s payroll.

7 2. Rule 69L - 6.028 sets forth the method for imputing an

employer Ó s payroll:

(3) When an employer fails to provide

business records sufficient to enable the

Department to determine the employerÓs

payroll for the time period requested in the

business reco rds request for purposes of

calculating the penalty pursuant to paragraph

440.107(7)(d), F.S., the imputed weekly

payroll for each current and former employee,

corporate officer, sole proprietor or partner

identified by the Department during its

investigat ion will be the statewide average

weekly wage as defined in subsection

440.12(2), F.S., that is in effect at the

time the stop - work order was issued to the

employer, multiplied by 1.5.

(a) If a portion of the period of

non - compliance includes a partial w eek of

non - compliance, the imputed weekly payroll

for such partial week of non - compliance will

be prorated from the imputed weekly payroll

for a full week.

(b) The imputed weekly payroll for each

employee, corporate officer, sole proprietor,

and partner w ill be assigned to the highest

rated workersÓ compensation classification

code for an employee based upon records or

the investigatorÓs physical observation of

any employeeÓs activities.

Petitioner is required to use the imputation methodology when an

emp loyer fails to provide sufficient records for Petitioner to

determine the employer Ó s payroll. § 440.107(7)(e), Fla. Stat. ;

Twin City Roofing Const r . Specialists, Inc. v. Dep Ó t of Fin.

Servs . , 969 So. 2d 563, 566 (Fla. 1 st DCA 2007) (when an employer

refus es to provide business records the Department is required to

impute the missing payroll for the period requested in order to

assess the penalty). This methodology does not permit Petitioner

to impute payroll for some employees and not others during any

pe riod of time for which Petitioner is unable to determine the

employer Ó s payroll. § 440.107(7)(e), Fla. Stat.

73. Petitioner properly utilized the procedures mandated by

section 440.107(7)(d)1. and (7)(e) and r ule 69L - 6.028 to

calculate the penalty owed b y Respondent as a result of

Respondent Ó s failure to comply with the covera ge requirements of

chapter 440 and Respondent Ó s failure to provide sufficient

records to allow Petitioner to determine Respondent Ó s payroll.

74. Therefore, Petitioner has proven by clear and

convincing evidence that it properly issued a Stop - Work Order for

Specific Worksite Only and Order of Penalty Assessment to

Respondent, and that the penalty assessment of $ 117,013.08

originally imposed should be reduced to $58,746.52, which

repre sents the full penalty assessment levied for Juan Carlos

Almirola and Caridad Almirola ($29,253.27 each) , as well as one

day Ó s worth of penalty assessment being levied for Martin Huerta

and Octavio Leon ($119.99 each) . These numbers represent imputed

inco me against the four identified employees of Respondent (or

DeVito) who were no t proven to be covered by workers Ó

compensation insurance for the period of noncompliance or

properly exempt from workers Ó compensation coverage by

Respondent. The specific figu res are taken from the Penalty

Calculation Worksheet prepared by Mr. A b e d ra bb o and entered into

evidence as part of Petitioner Ó s Exhibit 13 , which provides the

calculations for all of the individuals alleged by Respondent to

be employees and subject to the First Amended O rder of Penalty

Assessment .

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Financial Services

enter a f inal o rder assessing Respondent $ 58,746.52 .

DONE AND ENTERED this 1 4 th day of March , 2019 , in

Tallahassee, Leon County, Florida.

S

ROBERT S. COHEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 30 60

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 1 4 th day of March , 2019 .

COPIES FURNISHED:

Leon Melnicoff, Esquire

Department of Financial Services

200 East Gaines St reet

Tallahassee, Florida 32399 - 4229

(eServed)

Herbert Fiss, Esquire

Herbert W. Fiss, Jr., P.A.

341 South Plant Avenue

Tampa, Florida 33606

(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 agency that

will issue the Final Order in this case.