19-001238 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Forgue General Contracting, Inc. Status: Closed Recommended Order on Friday, October 18, 2019.

Summary: The Department proved, by clear and convincing evidence, that Respondent failed to secure the required workers' compensation coverage for its "employees" during the period of non-compliance. The Department property calculated the penalty.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS'

COMPENSATION,

Petitioner,

vs. Case No. 19 - 1238

FORGUE GENERAL CONTRACTING,

INC.,

Respondent.

_______________________________/

RECOMMENDED ORDER

The final hearing in this matter was conducted before

J. Bruce Culpepper, Administrative Law Judge of the Division of

Administrative Hearings, pursuant to sections 120.569 and

120.57(1), Florida Statutes (2018), 1/ on August 29, 2019 , by

video teleconference at sites in Tallahassee and Tampa, Florida.

APPEARANCES

For Petitioner: Leon Melnicoff, Esquire

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 3239 9 - 4229

For Respondent: Claude M. Harden, III, Esquire

The Harden Eldridge Law Group, PA

3730 Cleveland Heights Boulevard, Suite 1

Lakeland, Florida 33803

STATEMENT OF THE ISSUE S

Whether Respondent, F orgue General Contracting, Inc.,

violated the provisions of chapter 440, Florida Statutes, by

failing to secure the payment of workers’ compensation coverage;

and, if so, what penalty is appropriate.

PRELIMINARY STATEMENT

The Department of Financial Servic es, Division of Workers’

Compensation (the “Department”), served a Stop - Work Order for

Specific Worksite Only on Respondent, Forgue General

Contracting, Inc. (“Respondent”), on November 2, 2018.

On January 4, 2019, Respondent filed a Petition for Hearing

with the Department requesting an administrative hearing to

dispute the Department’s action.

The Department referred this matter to the Division of

Administrative Hearings (“DOAH”) on March 11, 2019, and

requested that an Administrative Law Judge conduct a chapter 120

evidentiary hearing.

The final hearing was held on August 29, 2019. The

Department presented the testimony of Margaret Cavazos (a

compliance investigator), Nathaniel Hatten (a penalty auditor),

and Salma Qureshi (a district supervisor). T he Department’s

Exhibits 1 through 17 were admitted into evidence. Respondent

presented the testimony of Roberto C. Chavez. Respondent did

not offer additional exhibits.

A one - volume Transcript of the final hearing was filed with

DOAH on September 17, 20 19. At the close of the hearing, the

parties were advised of a ten - day timeframe following receipt of

the hearing transcript at DOAH to file post - hearing submittals.

Both parties timely filed Proposed Recommended Orders, which

were duly considered in pre paring this Recommended Order.

FINDING S OF FACT

1. The Department is the state agency charged with

enforcing workers’ compensation coverage requirements in

Florida, including the requirement that employers secure the

payment of workers’ compensation cover age for their employees.

See § 440.107(3), Fla. Stat.

2. Respondent operates a construction company in Florida ,

and R espondent has been in business since 2004.

3. On October 31, 2018, Margaret Cavazos, a compliance

investigator with the Department, co nducted a random workers’

compensation check at a worksite located at 1172 E ast S tate R oad

434 in Winter Springs, Florida. The worksite is a two - story

commercial building with five individual storefronts.

4. Investigator Cavazos arrived at the worksite at

8:30 a.m. There, she observed four individuals who she believed

were preparing the exterior of the building for painting. One

person was covering a window with tape and brown construction

paper. Two more individuals were standing in the bucket of a

boom lift approximately 15 feet above the ground next to the

building. They appeared to be placing blue tape over a sign of

one of the business es in the building. A fourth person was

positioned by a truck supervising the activity. Investigator

Cavazos further noticed that several of the business names had

already been covered with construction paper and tape.

5 . Investigator Cavazos approached the person standing by

the truck and introduced herself. He identified himself as Jose

Luis Chachel. Mr. C hachel informed Investigator Cavazos that he

and the other three individuals at the worksite were working for

a company called RC Painting Services, Inc. (“RC Painting”).

Mr. Chachel further stated that they were preparing the building

to be painted.

6 . The other three individuals at the worksite identified

themselves to Investigator Cavazos as Juan Carlos Vasquez

Garcia, Artemia Vasquez, and Jenny Araque. Investigator Cavazos

watched the four individuals work at the jobsite for about an

hour, then the y departed. Investigator Cavazos, however, did

not obtain any information from Mr. Chachel or the other

individuals concerning how long they had worked for RC Painting,

when they had arrived at the jobsite, their rate of pay, or

whether RC Painting had ac tually paid them for their work.

7 . At the final hearing, Investigator Cavazos testified

that her duties for the Department include inspecting businesses

and worksites to determine whether a business has obtained the

required workers’ compensation insur ance coverage. Investigator

Cavazos explained that a business that performs construction -

related work must have workers’ compensation coverage.

Therefore, Investigator Cavazos believed that, prior to

beginning the painting activities, RC Painting should have

secured sufficient workers’ compensation coverage for all four

individuals identified at the worksite.

8 . After learning the name of the business that arranged

for the presence of the four individuals at the jobsite,

Investigator Cavazos consulted t he Department’s Coverage and

RC Painting. CCAS is a Department database that tracks workers’

compensation insurance coverage. CCAS contains coverage data

from insurance carriers, as well as any workers’ compensation

exemptions on file with the Department. Insurance providers are

required to report coverage and cancellation information, which

the Department uses to update CCAS.

9 . CCAS had no record that RC Painting carried any

workers’ c ompensation coverage for the four individuals

Investigator Cavazos observed at the worksite.

1 0 . While reviewing CCAS, Inspector Cavazos also noted

that the Department did not have on file any request from RC

Painting for an “exemption” from workers’ comp ensation coverage.

An exemption is a method by which a business’s corporate officer

may exempt him or herself from the requirements of chapter 440.

See § 440.05, Fla. Stat.

11 . CCAS also revealed to Investigator Cavazos that on the

date of her inspect ion, RC Painting had an active employee

leasing agreement with SouthEast Personnel Leasing (“SouthEast

Leasing”), an employee staffing company. At the final hearing,

Inspector Cavazos explained that a business is not required to

obtain workers’ compensati on insurance for its employees if

coverage is properly provided by or through an employee leasing

company’s workers’ compensation policy.

1 2 . However, in order for an employee leasing company to

become responsible for the workers’ compensation coverage of a

particular employee, the business seeking coverage for that

employee must ensure that th e employee submits an application to

the leasing company. Thereafter, if (and only if) the leasing

company accepts the application, the leasing company becomes

ac countable for the workers’ compensation insurance coverage for

that employee.

13 . Investigator Cavazos contacted SouthEast Leasing.

SouthEast Leasing provided Investigator Cavazos an active roster

of employees it leased to RC Painting. However, neither

Mr. Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, nor

Jenny Araque were listed on this roster. Therefore, Investigator

Cavazos concluded that none of the four individuals she

identified at the worksite were covered by workers’ compensation

insura nce under RC Painting’s leasing arrangement with SouthEast

Leasing on October 31, 2018.

1 4 . After determining that neither CCAS nor SouthEast

Leasing recorded any workers’ compensation coverage for the

persons at the worksite, Investigator Cavazos conta cted RC

Painting’s owner, Roberto Chavez. (Mr. Chachel provided

Investigator Cavazos with his phone number during her

inspection.)

1 5 . Investigator Cavazos testified that, during their phone

call, Mr. Chavez confirmed that the four individuals worked fo r

him. Mr. Chavez further informed Investigator Cavazos that RC

Painting had been hired by Respondent to paint the building.

1 6 . At that point, Investigator Cavazos called Respondent

to inquire about workers’ compensation coverage for Jose Luis

Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny

Araque. Investigator Cavazos spoke with one of Respondent’s

employees, Anthony Gonzalez. Mr. Gonzalez confirmed that

Respondent engaged RC Painting to paint the building.

1 7 . Continuing to search for active workers’ compensation

coverage, Investigator Cavazos discovered that Respondent also

had an employee leasing agreement with SouthEast Leasing.

Investigator Cavazos reviewed SouthEast Leasing’s roster which

recorded only two covered employees fo r Respondent, Anthony

Gonzalez and Edward Forgue (Respondent’s president). As with RC

SouthEast Leasing did not cover Jose Luis Chachel, Juan Carlos

Vasquez Garcia, Artemia Vasquez, or Jenn y Araque on October 31,

2018.

1 8 . As detailed below, under section 440.10(1), a

contractor is liable for, and is required to secure, workers’

compensation coverage for all employees of a subcontract or to

whom the contractor sublets work. (Section 440.10( 1)(c) also

directs the contractor to require a subcontractor to provide

evidence of workers’ compensation insurance.) Therefore, as a

contractor hiring a subcontractor for construction work,

Respondent was required to exercise due diligence to ensure that

all RC Painting’s employees who were painting the building were

covered by workers’ compensation insurance.

1 9 . On October 31, 2018, based on her findings,

Investigator Cavazos issued a Stop - Work Order to RC painting.

Later that day, Mr. Chavez ventur ed to the Department’s local

office to determine how his business could be released from the

Stop - Work Order. There, he met with district supervisor, Salma

Qureshi. Ms. Qureshi informed Mr. Chavez that, in order for his

company to return to work, he need ed to pay a $1,000 fine and

complete an Affirmation. She explained to Mr. Chavez that on

the Affirmation, he was to describe how RC Painting intended to

come into full compliance with workers’ compensation coverage

requirements.

20 . Mr. Chavez had, in f act, brought with him a cashier’s

check for $1,000. (The amount was included on the Stop - Work

Order.) Mr. Chavez then completed an Affirmation before

Ms. Qureshi. On the Affirmation, Mr. Chavez wrote the names of

the four individuals Investigator Cavaz os identified at the

jobsite. Next to each name, Mr. Chavez wrote “$20.” Below the

names, he wrote “I am terminating.” Mr. Chavez then signed and

dated the Affirmation. At the final hearing, Ms. Qureshi

expressed that Mr. Chavez told her that he was go ing to pay each

of the four individuals $20 for the day’s work they performed on

October 31, 2018, and then he was terminating them.

2 1. In addition to issuing the Stop - Work Order to RC

Painting, o n October 31, 2018, Investigator Cavazos issued a

Stop - Work Order for Specific Worksite Only to Respondent, which

was served on November 2, 2018. Investigator Cavazos also

served Respondent with a Request for Production of Business

Records for Penalty Assessment Calculation. Through this

document, the Depart ment requested several categories of

business records from Respondent for the period of November 1,

2016, through October 31, 2018. The requested documents

pertained to: employer identification, payroll documents,

account documents, disbursements, worker s’ compensation

coverage, professional employer organization records, temporary

labor service, exemptions, subcontractor records, and

subcontractors ’ workers’ compensation coverage.

22 . Based on Investigator Cavazos’s investigation, the

Department determi ned that Respondent failed to secure adequate

workers’ compensation coverage for its employees. Therefore,

the Department proceeded to calculate a penalty based on

Respondent’s lack of compliance with chapter 440.

The Penalty Calculation :

2 3 . Nathaniel Hatten, the penalty auditor who determined

the penalty the Department seeks to impose on Respondent,

testified regarding his computation. Mr. Hatten explained that

the penalty essentially consists of the “avoided” premium

amount, or the actual premium the employer would have paid in

workers’ compensation insurance for the uncovered employees,

multiplied by two.

24 . To calculate the appropriate penalty for Respondent’s

failure to secure workers’ compensation coverage, the Department

first ascertained Respo ndent’s period of non - compliance. To

determine this time frame, the Department referred to Florida

Administrative Code Rule 69L - 6.028(2), which directs that:

The employer’s time period or periods of

non - compliance means the time period(s)

within the two y ears preceding the date the

stop - work order was issued to the employer

within which the employer failed to secure

the payment of compensation pursuant to

chapter 440, F.S., and must be either the

same time period as set forth in the

business records reques t for the calculation

of penalty or an alternative time period or

period(s) as determined by the Department,

whichever is less. The employer may provide

the Department with records from other

sources, including, but not limited to, the

Department of State , Division of

Corporations, the Department of Business and

Professional Regulation, licensing offices,

and building permitting offices to show an

alternative time period or period(s) of non -

compliance.

Based on these instructions, the Department deduced t hat

Respondent’s period of non - compliance ran from November 1, 2016,

through October 31, 2018, which was the two - year period

preceding the date of the Stop - Work Order. (This two - year

period was also the time for which the Department requested

business rec ords from Respondent.)

25 . After determining Respondent’s period of non -

compliance, the Department then calculated the monetary penalty

it should impose upon Respondent. In accordance with section

440.107(7)(d)1., the Department must assess against an employer:

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.

Therefore, the Department reviewed the business records

Respondent provided to ascertain the amount of Respondent’s

payroll during the two - year period of non - compliance.

26 . In response to the Department’s request for documents,

Respondent produced its client leasing agreement with SouthEast

Leasing. This leasing agreement, however, only covered

Mr. Forgue and Mr. Gonzalez. Further, the leasing agreement was

only in effect from Februa ry 7, 2018, through October 30, 2018,

for Mr. Forgue and February 21, 2018, through October 30, 2018

for Mr. Gonzalez.

27 . No evidence establishes that Respondent made any other

payments for workers’ compensation insurance coverage outside of

the SouthE ast Leasing agreement. Consequently, the evidence in

the record establishes that Respondent had no workers’

compensation coverage for any of its employees, officers, or

subcontractor employees from November 1, 2016, through

February 6, 2018. And, only M r. Forgue and Mr. Gonzalez were

covered from February 2018 through October 30, 2018.

28 . Further, Respondent did not provide any payroll

information to the Department per its request for business

records. Consequently, the documentation was not comprehen sive

enough for the Department to determine all the wages Respondent

paid to its employees, or the work they performed for the period

of November 1, 2016, through October 31, 2018. Therefore, the

Department determined that Respondent did not provide busin ess

records sufficient for it to calculate Respondent’s complete

payroll or the actual employee wages it paid over the two - year

period of non - compliance. Accordingly, the Department exercised

its option to “impute” Respondent’s weekly payroll from

Novemb er 1, 2016, through October 31, 2018.

2 9. To calculate Respondent’s imputed weekly payroll,

section 440.107(7)(e) directs that the gross payroll for an

employer who provides insufficient business records is imputed

at the statewide average weekly wage, m ultiplied by 1.5, for

each employee who worked during the period requested for the

penalty calculation. Therefore, the Department obtained the

statewide average weekly wage effective at the time of the Stop -

Work Order ($917.00) 2/ for each identified emplo yee, corporate

officer, and subcontractor, then multiplied that number by 1.5.

See § 440.107(7)(e), Fla. Stat.; and Fla. Admin. Code R. 69L -

6.028(3)(a).

30 . The Department imputed the payroll for all four

individuals Investigator Cavazos observed at th e worksite on

O ctober 31, 2018 (Jose Luis Chachel, Juan Carlos Vasquez Garcia,

Artemia Vasquez, and Jenny Araque) , for all periods of non -

compliance (November 1, 2016 through October 31, 2018). No

evidence established that these individuals were covered u nder a

workers’ compensation policy either through Respondent, RC

Painting , or SouthEast Leasing.

3 1. The Department also included Mr. Forgue for a period

of non - compliance from January 22, 2018 , through February 8,

2018. The Department imputed his payr oll during this period of

time explaining that Respondent did not have an active workers’

compensation exemption on file for Mr. Forgue. Neither was he

covered by SouthEast Leasing’s policy during this brief

timeframe. Therefore, Respondent was required to carry workers’

compensation for Mr. Forgue from January 22, 2018, through

February 8, 2018. See Fla. Admin. Code R. 69L - 6.028(3)(b).

3 2. To calculate a penalty based on the imputed payroll,

the Department assigned Respondent’s employees the highest r ated

workers’ compensation classification code. The classification

code is based on either the business records submitted or the

investigator’s observation of the employees’ activities. In

this case, the business records Respondent provided to the

Depart ment were not sufficient to categorize the exact type of

work that the identified workers performed for Respondent over

the two - year period of non - compliance. However, during her

investigation of the jobsite on October 31, 2018, Investigator

Cavazos obser ved the four employees engaging in activities

associated with “painting.”

33 . According to the Scopes Manual issued by the National

Council on Compensation Insurance, Inc. (“NCCI”), class code

5475 is applied to “painting contractors engaged in paintin g.” 3/

Consequently, the Department used class code 5474 for all

Respondent’s employees and corporate officer for the penalty

period. See Fla. Admin. Code R. 69L - 6.028(3)(b) and 69L -

Therefo re, to calculate the premium amount for the workers’

compensation insurance Respondent should have paid for its

“employees” (Jose Luis Chachel, Juan Carlos Vasquez Garcia,

Artemia Vasquez, and Jenny Araque) and officer (Mr. Forgue), the

Department applied the manual rates corresponding to class

code 5474.

34 . Thereafter, based on: 1) the total periods of non -

compliance, 2) Respondent’s calculated payroll for the periods

of non - compliance, and 3) the estimated premium for workers’

compensation insurance, t he Department issued the Amended Order

of Penalty Assessment (“Penalty Assessment”) on November 30,

2018, which was served on Respondent on February 28, 2019. The

Penalty Assessment seeks to impose a penalty of $129,089.60

against Respondent.

35 . At th e final hearing, Respondent argued that the

individuals Investigator Cavazos identified at the worksite on

October 31, 2018, were never hired by Respondent’s

subcontractor, RC Painting. Therefore, they are not “employees”

under chapter 440, and Respondent is not an “employer” for

purposes of securing workers’ compensation coverage.

Consequently, Respondent argues that the penalty the Department

seeks to assess against Respondent is not warranted.

3 6 . Mr. Chavez testified at the final hearing for

Respond ent describ ing his employment relationship with Jose Luis

Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny

Araque. Initially, Mr. Chavez confirmed that Respondent hired

RC Painting to paint the exterior of the shopping plaza.

37 . Regardin g the four individuals Investigator Cavazos

identified at the jobsite, however, Mr. Chavez denied that they

were “employees” of RC Painting on October 31, 2018. Mr. Chavez

explained that he used SouthEast Leasing to “hire” his

employees. Mr. Chavez asser ted that before he put s someone to

work, he requires them to complete an employment application

with South E ast Leasing. Only after South E ast Leasing approved

the employee would he allow the individual to work on a job.

38 . In this matter, Mr. Chavez de nied that he had ever

worked with Mr. Chachel before, or ever met the other three

individuals that Mr. Chachel brought with him to the jobsite.

Mr. Chavez maintained that he called Mr. Chachel on the evening

of October 30, 2018, about the prospective pain ting job. He

then asked Mr. Chachel to bring two other workers and meet him

at the jobsite the following morning. Mr. Chavez testified that

he instructed Mr. Cha chel that he would need to send information

to South E ast Leasing before anyone actually start ed working on

the project.

39 . Mr. Chavez further contended that he did not have any

discussion with Mr. Chachel about wages or the rate of pay for

the job. He declared that he never commits to paying any

prospective employee before ascertaining what t ype of skills

they possess. Mr. Chavez explained that, “anyone can tell you,

know how to paint, or they don’t know how to do anything.”

40 . I n response to Inspector Cavazos’s testimony,

M r. Chavez exclaimed that he never told her that the four

individuals were his “employees.” He merely relayed that they

were “with” him. Mr. Chavez also insisted that he never

authorized Mr. Chachel or his crew to start preparing the

building for painting prior to meeting with him. Mr. Chavez

further relayed that Respondent provided the boom lift for the

job. But, he never instructed Mr. Chachel to begin using it.

Mr. Chavez arrived at the shopping plaza around 9:30 a.m.

However, b y that time Investiga tor Cavazos had issued the Stop -

Work Order, and o nly Mr. Chachel remained at the scene.

4 1. Regarding the Affirmation he completed at the

Department’s district office, Mr. Chavez testified that, other

than Mr. Chachel, he did not know the names of indiv iduals who

Investigator Cavazos identified at the jobsite. He asserted

that he wrote their names on the Affirmation only after

Ms. Qureshi spelled them out for him on a sticky note.

42 . Mr. Chavez further professed that he only penned “$20”

by each na me because Ms. Qureshi told him that the Department

would not release him from the Stop - Work Order until he added

the wages he paid to each individual. Mr. Chavez claimed that

Ms. Qureshi specifically instructed him to insert a number by

each employee. M r. Chavez declared that he felt like he had no

choice but to include “$20” on the Affirmation if he wanted to

return to work. In actuality, however, Mr. Chavez insisted that

he did not pay Jose Luis Chachel, Juan Carlos Vasquez Garcia,

Artemia Vasquez, or Jenny Araque anything for their activities

on October 31, 2018.

43 . Ms. Qureshi testified for the Department on rebuttal.

She credibly voiced that she did not write out the names of the

four “employees” for Mr. Chavez to list on his Affirmation.

Neit her did she suggest a wage amount for their work, or force

Mr. Chavez to write that he “terminated” them. On the contrary,

Ms. Qureshi attested , clearly and without hesitation, that

Mr. Chavez independently completed his sworn Affirmation, and he

did not ask for her assistance with the specific information he

wrote down. Ms. Qureshi persuasively stated that Mr. Chavez

knew the names of Jose Luis Chachel, Juan Carlos Vasquez Garcia,

Artemia Vasquez, and Jenny Araque when he composed the

Affirmation. Furt her, Mr. Chavez expressly told her that he was

going to pay the four individuals $20 for the day, and that he

was terminating them.

44 . The competent substantial evidence in the record

establishes that Jose Luis Chachel, Juan Carlos Vasquez Garcia,

Artemi a Vasquez, and Jenny Araque were “employees” of RC Painting

under section 440.02(15) on October 31, 2018. Based on this

finding, the Department demonstrated, by clear and convincing

evidence , that Respondent failed to secure workers’ compensation

insuranc e coverage or a workers’ compensation exemption for four

employees for the period of November 1, 2016, through

October 31, 2018, as well as its corporate officer from January

22, 2018, through February 8, 2018. Accordingly, the Department

met its burden of proving that Respondent violated chapter 440

and should be penalized.

CONCLUSIONS OF LAW

45 . DOAH has jurisdiction over the parties to, and subject

matter of, this proceeding pursuant to sections 120.569 and

120.57(1).

46 . Under sections 440.10(1)(a), 440.107(2), and 440.38,

every employer is required to obtain workers’ compensation

coverage for the benefit of its employees, unless exempted or

otherwise excluded under chapter 440. See Twin City Roofing

Constr. Specialists, Inc. v. Dep’t of Fin. Servs. , 969 So. 2d

563, 564 (Fla. 1st DCA 2007)(“Florida law requires any company

performing construction to secure the payment of workers’

compensation.”). Strict compliance with the workers’

compensation law by the employer is required. See C & L Trucking

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

47 . “Construction industry” means “for - profit activities

involving any building, clearing, filling, excavation, or

substantial improvement in the size or use of any structure or

the appearance of any l and.” § 440.02(8), Fla. Stat.

4 8 . “Employer” is defined as “every person carrying on any

employment.” § 440.02(16)(a), Fla. Stat.

4 9 . “Employment,” with respect to the construction

industry, includes “all private employment in which one or more

emplo yees are employed by the same employer.” § 440.02(17)(b)2.,

Fla. Stat.

50 . “ Employee” means “any person who receives remuneration

from an employer for the performance of any work or service

while engaged in any employment under any appointment or

contrac t for hire or apprenticeship, express or implied, oral or

also includes “any person who is an officer of a corporation and

who performs services for remuneration for such corporation

within thi s state.” § 440.02(15)(a) and (b), Fla. Stat.

51 . In addition, under section 440.02(15)(c), “employee”

encompasses:

2. All persons who are being paid by a

construction contractor as a subcontractor,

unless the subcontractor has validly elected

an exempt ion as permitted by this chapter,

or has otherwise secured the payment of

compensation coverage as a subcontractor,

consistent with s. 440.10 , for work

performed by or as a subcontractor.

3. An independent contractor working or performing services in the construction industry.

4. A sole proprietor who engages in the

construction industry.

52 . Regarding a contractor’s relationship and

responsibility for subcontractors, section 440.10(1) states:

(b) In case a contractor sublets any part

or parts of his or her contract work to a

subcontractor or subcontractors, 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 cont ractor 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.

(c) A contractor shall require a

subcontractor to provide evidence of

workers’ compensat ion insurance. A

subcontractor who is a corporation and has

an officer who elects to be exempt as

permitted under this chapter shall provide a

copy of his or her certificate of exemption

to the contractor.

See Cent. Fla. Lumber Unlimited, Inc. v. Qaqish , 12 So. 3d 766,

769 (Fla. 2d DCA 2009)(“If a contractor subcontracts part of his

work, then the employees of both the contrac tor and

subcontractor are ‘ deemed to be employed in one and the same

business or establishment’ and the contractor i s liable for

pa yment of workers’ compensation to those employees.”); Miami -

Dade Cn ty v. Acosta , 757 So. 2d 539, 541 (Fla. 3d DCA 2000) ( “ It

is clear that section 440.10(1)(b) places on the statutory employer , [ the contractor] . . . the responsibility for

providing, or ens uring that the subcontractor provides, workers’

compensation coverage to it s, including its subcontractors’ ,

employees ” ); and Mena v. J.I.L. Constr. Grp. Corp. , 79 So. 3d

219, 224 (Fla. 4th DCA 2012)( “ where a subcontractor performing

part of the work of a contractor fails to secure payment of

compensation, the contractor is liable for the same. ” ) .

5 3 . Regarding the penalty for non - compliance with

chapter 440, section 440.107(7) establishes the method to

calculate the penalty the Department shall impose on an employer

based on its failure to secure workers’ compensation cov erage.

Section 440.107(7)(d)1. states:

In addition to any penalty, stop - work order,

or injunction, the department shall assess

against any employer who has failed to secure

the payment o f 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 employer’s payroll during periods for

which it failed to secure the payment of

workers’ comp ensation required by this

chapter within the preceding 2 - year period or

$1,000, whichever is greater.

This provision does not provide the Department authority to

reduce the amount of the statutory penalty.

5 4. Because administrative fines are penal in na ture, the

Department has the burden to prove, by clear and convincing

evidence, that Respondent violated chapter 440 by failing to

secure the payment of workers’ compensation, and that the

penalty proposed to be assessed is correct. See Dep’t of Banking

& Fin., Div. of Sec. & Investor Prot. v. Osborne Stern & Co. , 670

So. 2d 932, 935 (Fla. 1996). Clear and convincing evidence

In re Graziano , 696 So. 2d 744, 753 (Fla. 1997).

55 . Turning to the facts in this matter, the Department

demonstrated, by clear and convincing evidence, that Respondent

violated chapter 440, as charged in the Stop - Work Order for

Specific Worksite Only, by f ailing to provide workers’

compensation coverage for its “employees.”

56 . Initially, the evidence in the record establishes that

Jose Luis Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez,

and Jenny Araque all qualify as “employees” of RC Painting u nder

section 440.02(15)(c) . The Department proved that, on October

31, 2018, these individuals were working at the jobsite located

at 1172 E ast S tate R oad 434 in Winter Springs, Florida, through

an agreement, either “express or implied, oral or written” w ith

RC Painting. The Department further proved that each individual

received $20 in “remuneration” 4/ from Mr. Chavez for their

activities preparing a building for painting. Therefore, in

accordance with section 440.10(1)(b), Respondent was statutorily

re sponsible for securing workers’ compensation coverage for the

work they performed.

57 . Respondent vigorously argues that none of the four

individuals identified at the worksite should be considered an

“employee” under chapter 440 based on Mr. Chavez’s t estimony that

he did not formally hire them (despite the fact that they had

worked at least an hour prior to his arrival), as well as his

declaration that he did not actually pay them for their work.

58 . Mr. Chavez’s representations at the final hearing were

not persuasive. Instead, the undersigned finds Mr. Chavez’s

Affirmation on October 31, 2018, dispositive on the issue of who

RC Painting employed at the worksite ( Jose Luis Chachel, Juan

Carlos Vasquez Garcia, Artemia Vasquez, and Jenny Araque), as

well as the remuneration for their work ($20 each). When

Mr. Chavez signed and dated his Affirmation, he swore that his

statement was “true and correct to the best of his (or her)

knowledge and belief.” He further acknowledged that it was

unlawful for h im “to knowingly make any false, fraudulent, or

misleading oral or written statement.” Mr. Chavez’s recantation

of his Affirmation one year later at the final hearing did not

ring true. Further, Ms. Qureshi’s testimony that Mr. Chavez

independently wrote down the names of the four individuals, as

well as the wages he paid them, was credible and convincing.

Accordingly, based on the evidence in the record, Jose Luis

Chachel, Juan Carlos Vasquez Garcia, Artemia Vasquez, and Jenny

Araque meet the definition of RC Painting’s “employees” under

section 440.02(15)(a).

59 . The Department also demonstrated that it properly

applied the procedure mandated by section 440.107(7)(d)1.

and (e) to determine Respondent’s penalty. The Department

correctly calculated th e appropriate penalty to impose on

Respondent in its Amended Order of Penalty Assessment.

60 . Florida law requires Respondent, as an “employer,” to

maintain and produce business records which allow the Department

to determine its payroll. § 440.107(5), F la. Stat.; see also

§ 440.107(3)(c), Fla. Stat.; and Fla. Admin. Code R. 69L -

6.015(1). Respondent, however, did not provide any payroll

records in response to the Department’s Request for Production

of Business Records for Penalty Assessment Calculation.

Consequently, the Department established that Respondent failed

to provide business records sufficient for it to determine

Respondent’s actual payroll for the two - year period of non -

compliance requested for the penalty calculation (November 1,

2016, thro ugh October 31, 2018).

61 . Because the Department was unable to sufficiently

calculate the wages Respondent paid to its employees between

November 1, 2016, through October 31, 2018, the Department is

required to impute Respondent’s weekly payroll. See Tw in City ,

969 So. 2d at 566. Rule 69L - 6.028 sets forth the method for imputing an employer’s payroll and provides:

(3) When an employer fails to provide

business records sufficient to enable the

Department to determine the employer’s

payroll for the tim e period requested in the

business records 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

investigation 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 week 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 will be assigned to the highest

rated workers’ compensation classification

code for an employee based upon records or

the investigator’s physical observation of

any employee’s activities.

See also § 440.107(7)(e), Fl a. Stat.

62 . Regarding which employees should be included in

Respondent’s imputed payroll, as discussed above, the evidence

establishes that Jose Luis Chachel, Juan Carlos Vasquez Garcia,

Artemia Vasquez, and Jenny Araque are considered Respondent’s

“emp loyees” over the two - year period of non - compliance. 5/

63 . The Department also demonstrated that Respondent’s

corporate officer, Edward Forgue, should be included in the

penalty calculation for the period of January 22, 2018 , through

February 8, 2018. M r. Forgue was not covered by workers’

compensation insurance by either Respondent or SouthEast Leasing

during this timeframe. Neither did Respondent produce evidence

that it had obtained a valid exemption for Mr. Forgue from the

workers’ compensation cove rage requirements.

64 . Finally, the Department correctly applied NCCI

classification code 5474 to Respondent’s imputed payroll. Class

code 5474 covers “painting contractors.” The work Investigator

Cavazos observed the four individuals performing on Octo ber 31,

2018, meets the NCCI definition of “painting.”

6 5. Accordingly, based on the evidence and testimony

produced at the final hearing, the Department proved, by clear

and convincing evidence, that the penalty calculated in the

Amended Order of Penal ty Assessment ($129,089.60) is the

appropriate penalty that should be assessed against Respondent

pursuant to section 440.107(7)(d)1. and (e) and rule 69L - 6.028.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMEND ED that the Department of Financial

Services, Division of Workers’ Compensation, enter a final order

determining that Respondent, Forgue General Contracting, Inc.,

violated the requirement in chapter 440 to secure workers’

compensation coverage, and imposi ng a total penalty of

$129,089.60.

DONE AND ENTERED this 18th day of October , 2019 , in

Tallahassee, Leon County, Florida.

J. BRUCE CULPEPPER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Build ing

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 18th day of October , 2019.

ENDNOTE S

1/ nces are to Florida Statutes (2018), All statutory refere

which was the law in effect at the time of Respondent’s alleged

violation and, therefore, applies to this proceeding.

See McCloskey v. Dep ’ t of Fin. Servs. , 115 So. 3d 441, 444 (Fla.

5th DCA 2013).

2 / The Department obtained this figure from the Florida

Department of Economic Opportunity, which determined that the

statewide average weekly wage paid by employers beginning on

January 1, 2018, equaled $917.00.

3 / The Scopes Manual classification codes are four - digit c odes

assigned to various occupations by the NCCI to assist in the

calculation of workers’ compensation insurance premiums. The

Department has adopted the Scopes Manual through rule 69L -

6.021(1). Class code 5474 is the general painting

classification and contemplates:

surface preparation and other work

incidental to the painting process as well

as the installation and dismantling of

scaffolding or other equipment used to

facilitate the painting and the preparation

of surfaces to be painted when these

ope rations are performed in conjunction with

an insured’s painting operations at a

particular job site.

4 / “Remuneration” is defined as “something that remunerates:

for a service, loss, or expe nse.” Merriam - Webster Dictionary ,

at http://www.merriam - webster.com. See Seagrave v. State , 802

So. 2d 281, 286 (Fla. 2001)(“When necessary, the plain and

ordinary meaning of words [in a statute] can be ascertained by

reference to a dictionary.”); see al so Raymond James Fin. Servs.

v. Phillips , 110 So. 3d 908, 910 (Fla. 2d DCA 2011)(“It is

appropriate to refer to dictionary definitions when construing

statutes or rules.”).

5 / The Department asserts that a weekly payroll for each of the

four “employees ” should be imputed for the entire two - year

period of non - compliance. The competent substantial facts,

however, establish that Jose Luis Chachel, Juan Carlos Vasquez

Garcia, Artemia Vasquez, and Jenny Araque only worked one day

for RC Painting (October 31 , 2018). At the final hearing, the

Department explained that, because Respondent’s business records

were not sufficient to enable the Department to confirm

Respondent’s payroll for all of its employees, it is authorized

to calculate the penalty for the fo ur individuals from

November 1, 2016, through October 31, 2018. While this penalty

might appear inequitable based on one day of work, the language

of chapter 440 allows this severe result.

COPIES FURNISHED:

Leon Melnicoff, Esquire

Department of Financ ial Services 200 East Gaines Street Tallahassee, Florida 32399 - 4229

(eServed)

Claude M. Harden, Esquire

The Harden Eldridge Law Group, PA

Suite 1

3730 Cleveland Heights Boulevard

Lakeland, Florida 33803

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Div ision 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 R ecommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Fina l Order in this case.