18-005347 Department Of Financial Servces, Division Of Workers&Apos; Compensation vs. Dave's Tractor, Llc Status: Closed Recommended Order on Friday, May 3, 2019.

Summary: Employer failed to timely file business records after penalty assessment issued. Agency properly imputed payroll during review period.

S TATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERV I CES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 18 - 5347

DAVE'S TRACTOR, LLC,

Respondent.

_______________________________/

RECOMMEN DED ORDER

Administrative Law Judge D. R. Alexander conducted a hearing

in this case by video teleconference on March 15, 2019, at sites

in Tampa and Tallahassee, Florida.

APPEARANCES

For Petitioner: Steven R. Hart, Qualified Representative

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

Kyle Christopher, Esquire

Department of Financial Services

Hartman Building

2012 Capital Circle Southeast

Tallahassee, Florida 32399

For Respondent: Adrian S hawn Middleton, Esquire

Middleton & Middleton, P.A.

1469 Market Street

Tallahassee, Florida 32312 - 1726

STATEMENT OF THE ISSUE

The issue is whether the Amended Order of Penalty

Assessment issued to Respondent, Dave's Tractor, LLC, on

August 27, 2018, is correct.

PRELIMINARY STATEME NT

On June 30, 2018, following a routine compliance inspection

of a job site, the Department of Financial Services, Division of

Workers' Compensation (Department), issued Respondent a Stop - Work

Order and Order of Penalty Assessment and Request for Business

Records for Penalty Calculation. On August 27, 2018, the

Department served Respondent with an Amended Order of Penalty

Assessment reflecting a total penalty of $165,654.10. Respondent

timely requested a hearing and the matter was referred by the

Departm ent to the Division of Administrative Hearings to resolve

the dispute.

At the hearing, the Department presented the testimony of

one witness. Department Exhibits 1 through 13 were accepted in

evidence. Respondent's managing member testified on the

compa ny's behalf. Respondent's Exhibits 1 and 2 were accepted

in evidence.

A one - volume Transcript of the hearing was prepared.

Proposed findings of fact and conclusions of law were filed by

the parties on April 18 and 26, 2019, and they have been

considered in the preparation of this Recommended Order.

FINDING S OF FACT

1. Respondent is a limited liability company engaged in the

construction business with offices at 434 Skinner Boulevard,

Suite 105, Dunedin, Florida. It uses tractors and a grading

process t o prepare land prior to building construction for

commercial clients. Its managing member is David Richardson.

2. The Department is the state agency responsible for

enforcing the requirement of the Workers' Compensation Law that

employers secure the paym ent of workers' compensation coverage

for their employees and corporate officers. § 440.107, Fla.

Stat.

3. To enforce this requirement, the Department conducts

random inspections of job sites and investigates complaints

concerning potential violations of workers' compensation rules.

4 . On May 25, 2018, Christina Brigantty, a Department

investigator, conducted a routine inspection of a job site at

3691 Tampa Road, Oldsmar, Florida. She observed two men working

in a ditch, one man mixing cement, the oth er man driving a

tractor.

5 . Investigator Brigantty observed four individuals at the

job site , including the two working in the ditch : Dylan

Richardson; Ismael Demillon; Javier Mastica; and Jorge Duran.

She was informed by the individuals that they wo rked for

Richardson Trailers, LLC.

6 . Investigator Brigantty called Mr. Ramsey, corporate

officer for Respondent, who confirmed that Respondent hired

Richardson Trailers, LLC, as a subcontractor. She later

confirmed through discussions with Dylan Richa rdson and the

Coverage and Compliance Automated System that Richardson

Trailers, LLC, had no workers' compensation insurance on its

employees. The parties have stipulated that at the time of the

inspection, Respondent had not secured workers' compensation for

any of the four individuals observed on the job site.

7 . Investigator Brigantty received approval from her

supervisor to issue Respondent a Stop - Work Order and Request for

Business Records for Penalty Calculation (BRR). These papers

were served on Respondent on June 30, 2018.

8 . The BRR requested numerous types of business records for

the period May 26, 2016, through May 25, 2018, including business

tax receipts (occupational licenses), trade licenses or

certifications , and competency cards held by Respondent or any of

its principals; payroll documents (time sheets, time cards,

attendance records, earnings records, check stubs, and payroll

summaries for both individual employees and aggregate payrolls,

and federal income tax documents reflecting the amount of

remuneration paid or payable to each employee, including cash);

and account documents including all business check journals and

s tatements , which would include c leared checks for all open

and/or closed business accounts established by the e mployer.

9 . Respondent failed to provide any business records in

response to the BRR to determine Respondent's payroll for the

audit review period. Therefore, the Department proceeded to

compute a penalty based on imputed payroll in accordance with

secti on 440.107(7)(e) , Florida Statutes . This formula produced a

penalty assessment of $165,654.10.

10 . On August 27, 2018, the Department served Respondent

with an Amended Order of Penalty Assessment totaling $165,654.10.

Pursuant to Florida Administrative Code Rule 69L - 6.028(4), the

Department also gave Respondent 20 business days in which to

provide business records that would confirm Respondent's actual

payroll during the two - year review period. This meant the

records were due by September 25, 2018.

11 . A final hearing was scheduled initially for

January 24, 2019. By agreement of the parties, on January 4,

2019, the case was rescheduled to March 15, 2019. One ground for

granting a continuance was that the parties were "waiting on

outstanding dis covery that is being located and is necessary for

an amicable resolution," presumably referring to items listed in

the BRR.

12 . The final hearing was conducted on March 15, 2019, or

almost seven months after the Amended Order of Penalty

Assessment was is sued. A week before the final hearing,

Respondent began providing business records to the Department,

including bank statements and checks on March 8 , 2019, and a

general ledger on March 13 , 2019 . Given the time constraints,

they were not reviewed by the auditor until the day before the

final hearing. The auditor conceded at hearing that these

records would result in a "significantly lower" penalty, and they

were sufficient to recalculate the penalty. Even so, at this

late date, the Department refuses t o recalculate the assessment.

13 . Respondent's principal, Mr. Richardson, testified that

he has "no way to pay" the penalty, it will force him out of

business, and he will be required to terminate his employees.

Mr. Richardson also testified that he requ ested the records from

the bank on "numerous occasions , " but the bank refused to provide

them directly to the Department or referred him to other branch

offices. However, bank records are not the only way an employer

can demonstrate the amount of payroll. This also can be

established by business taxes or other records described in the

BRR. Mr. Richardson denied knowing that business taxes are an

option if bank records are unavailable.

CONCLUSIONS OF LAW

14 . Because the imposition of an administrative fi ne is

penal in nature, the Department is required to prove by clear

and convincing evidence that Respondent failed to secure the

payment of workers' compensation and that it calculated the

appropriate amount of penalty owed by Respondent. Dep't of

Bankin g & Fin. v. Osborne Stern & Co. , 670 So. 2d 932, 935 (Fla.

1996).

15 . Section 440.10(1)(a) provides that "every employer

coming within the provisions of this chapter shall be liable for,

and shall secure, the payment to his or her employees . . . of

the c ompensation payable under ss. 440.13, 440.15, and 440.16."

16 . The only issue in this case is whether a penalty based

on imputed payroll should be assessed against Respondent. See

§ 440.107(7)(e), Fla. Stat. The procedure for calculating a

penalty i s set forth in r ule 69L - 6.035. After that calculation

is made, and an amended order of penalty assessment issued, an

employer is given the opportunity to provide business records to

demonstrate the actual payroll during the audit period. However,

rule 69 L - 6.028(4) provides the following deadline for submission

of those records:

(4) If the Department imputes the employer's

payroll, the employer will have twenty

business days after service of the first

amended order of penalty assessment to

provide busines s records sufficient for the

Department to determine the employer's

payroll for the period requested in the

business records request for the calculation

of the penalty or for the alternative time

period(s) of non - compliance. The employer's

penalty will be recalculated pursuant to

paragraph 440.107(7)(d), F.S., only if the

employer provides all such business records

within the twenty days after the service of

the first amended order of penalty

assessment. Otherwise, the first amended

order of penalty asses sment will remain in

effect.

17 . If the deadline in rule 69L - 6.028(4) is not met, the

payroll for the original penalty must remain imputed. Dep't of

Fin. Servs. v . Doherty Home Repair, Inc. , Case No. 17 - 3385 (Fla.

DOAH Dec. 27, 2017; Fla. DFS Mar. 12, 2 018)(if business records

are not submitted in a timely manner, the Department has no legal

obligation to consider them or recalculate the penalty).

18 . There is no provision in the statute or rules that

permits the late submission of business records. E ven though

sufficient records eventually were submitted by Respondent, long

after the Amended Order of Penalty Assessment was issued, there

is no legal requirement that the Department recalculate the

penalty. Otherwise, the 20 - day deadline would be meanin gless,

and an employer would have no incentive to produce its records

until the Department was prepared to take final agency action.

19 . This result is especially harsh here since the late -

filed records, if considered, would significantly reduce the

penal ty and allow Respondent to remain in business. By way of

argument, Respondent asserted that in other cases, with only one

identified, the Department has accepted business records in

settlement long after the 20 - day deadline has expired. While

this may be true, and something the Department may consider in

this case before issuing a final order, there is clear and

convincing evidence to impose the penalty based on imputed

payroll.

RECOMMENDATION

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

that Respondent violated the workers' compensation laws by

failing to secure and maintain required workers' compensation

insurance for its employees, and imposing a penalty of

$165,654.10.

DONE AND ENTERED this 3rd day of May, 2019 , in Tallahassee,

Leon County, Florida.

S

D. R. ALEXANDER

Administrative Law Judge

Division of Administrative Hearings

T he 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 3rd day of May, 2019.

COPIES FURNISHED:

Steve n R. Hart, Qualified Representative

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 4229

(eServed)

Kyle Christopher, Esquire

Department of Financial Services

Hartman Building

2012 Capital Circle Southeast

Tallahassee, F lorida 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)

Adrian Shawn Middleton, Esquire

Middleton & Middleton, P.A.

1469 Mark et Street

Tallahassee, Florida 32312 - 1726

(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.