19-002533 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. Leonard Smith, D/B/A Site Development And Pipeline Construction, Inc. Status: Closed Recommended Order on Friday, September 13, 2019.

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

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF FINANCIAL

SERVICES, DIVISION OF WORKERS Ó

COMPENSATION,

Petitioner,

vs. Case No. 19 - 2533

LEONARD SMITH, d/b/a SITE

DEVELOPMENT AND PIPELINE

CONSTRUCTION, 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 (2017), 1/ on July 23, 2019, by video

teleconference at sites in Tallahassee and Tampa, Florida.

APPEARANCES

For Petitioner: Kyle Christopher, Esquire

Florida Department of Financial Services

Office of the General Counsel

Hartman Building

2012 Capital Circle Southeast

Tallahassee, Florida 32399

For Respondent: Leonard Smith , pro se

Site Development & Pipeline

Construction, Inc .

403 South Parsons Avenue

Seffner, Florida 33584

STATEMENT OF THE ISSUE S

Whether Leonard Smith, d/b/a Site Development & Pipeline

Construction, Inc., violated the provisions of chapter 440,

Florida Statutes, by failing to secure the payment of workers Ó

compensation coverage for its employees; and, if so, what penalty

is appropriate.

PRELIMINARY STATEMENT

The Department of Financial Services, Division of Workers Ó

Compensation (the Ð Department Ñ ), served its Amended Order o f

Penalty Assessment on Respondent, Leonard Smith, d/b/a Site

Development & Pipeline Construction, Inc. ( Ð Respondent Ñ ), on

October 13, 2017.

On July 11, 2017, Respondent submitted a letter to the

Department requesting an administrative hearing. On August 1,

2017, the Department dismissed Respondent Ó s request, without

prejudice. Respondent filed a second request for a hearing on

August 17, 2017, sufficiently alleging a dispute regarding

whether the Department correctly calculated the penalty in the

Amende d Order of Penalty Assessment.

The Department referred this matter to the Division of

Administrative Hearings ( Ð DOAH Ñ ) on May 15, 2019, and requested

an Administrative Law Judge conduct a chapter 120 evidentiary

hearing.

The final hearing was held on Jul y 23, 2019. The Department

presented the test imony of Cristina Brigantty (a c ompliance

i nv estigator) and Lynne Murcia (a p enalty a udit s upervisor). The

Department Ó s Exhibits 1 through 10 and 12 through 19 were

admitted into evidence. Leonard Smith testi fied on Respondent Ó s

behalf. Respondent also presented the testimony of Joe Smith.

Respondent did not offer any exhibits.

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

DOAH on August 12, 2019. 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.

The Department timely filed a Proposed Recommended Order, which

was duly considered in preparing this Recommended Order.

FINDING S OF FACT

1 . The Department is the state agency charged with

enforcing workers Ó compensation coverage requirements in Florida,

including the requirement that employers secure the payment of

workers Ó compensation coverage for their employees. See

§ 440.107(3), Fla. Stat.

2. Leonard Smith is an 85 - year - old retired contractor.

Respondent Ó s corporate records with the Florida Division of

Corporations record that Leonard Smith is Respondent Ó s owner,

president, and registered agent. Respondent was incorporated in

Februa ry 2014. The company was administratively dissolved in

September 2015. However, Leonard Smith still does business using

Respondent Ó s name .

3. On June 13, 2017, Cristina Brigantty, a c ompliance

i nvestigator with the Department, conducted a random workers Ó

compensation check at a worksite located at 499 Lorraine Leland

Street in Dunedin, Florida. At the site, Investigator Brigantty

observed an individual operating a compact excavator/tractor

commonly called a Ð Bobcat Ñ (the manufacturer Ó s name). The Bobca t

operator was moving soil and appeared to be grading the site in

preparation for the pouring of concrete.

4. Investigator Brigantty approached the individual

operating the Bobcat and requested his name. The driver

identified himself as Joe Smith. Joe Smith also relayed to

Investigator Brigantty that he was just hired by Leonard Smith

(no relation) to work on the site. Joe Smith added that he

expected to work approximately ten hours and be paid around

$2,000 from Leonard Smith for the job. Joe Smith then provided

Investigator Brigantty with Leonard Smith Ó s business card and

phone number.

5. At the final hearing, Investigator Brigantty testified

that her duties for the Department include inspecting businesses

to determine whether the business has ob tained the required

workers Ó compensation insurance coverage. Investigator Brigantty

explained that a business that performs construction - related work

must have workers Ó compensation coverage. Therefore,

Investigator Brigantty believed that Respondent sh ould have

secured sufficient workers Ó compensation coverage for its

employee (Joe Smith).

6. After learning Leonard Smith Ó s name, Investigator

Brigantty searched the Department Ó s Coverage and Compliance

Automated System ( Ð CCAS Ñ ) database. CCAS is a Depa rtment

database that tracks workers Ó compensation insurance coverage.

CCAS contains coverage data from insurance carriers, as well as

any workers Ó compensation exemptions on file with the Department.

Insurance providers are required to report coverage an d

cancellation information, which the Department uses to update

CCAS.

7. While reviewing CCAS, Inspector Brigantty initially

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

Leonard Smith, Respondent Ó s owner - of - record, for an exemption

from workers Ó compensation coverage. An exemption is a method by

which a business Ó s corporate officer may exempt him or herself

from the requirements of chapter 440. See § 440.05, Fla. Stat.

8 . Thereafter, based on her research of the information in

CCAS, Inspector Brigantty concluded that Respondent did not have

a valid exemption for a corporate officer (Leonard Smith) on

June 13, 2017 . Neither did Respondent carr y any workers Ó

compensation coverage for Joe Smith.

9. After determining that Respondent h ad not obtained

w orkers Ó compensation coverage for Joe Smith on the date of her

visit, Investigator Brigantty called Leonard Smith. In the

ensuing conversation, Leonard Smith told her that Joe Smith was

working for him at the job site .

10. On June 22 , 201 7, Investigator Brigantty issued a Stop -

Work Order to Respondent. W ith the Stop - Work Order, Investigator

Brigantty also served Respondent with a Request for Production of

Business Records for Penalty Assessment Calculation. Through

this document, the Dep artment requested several categories of

business records from Respondent for the period of June 14 , 2015,

through June 13 , 2017. The requested documents pertained to:

employer identification, payroll documents, account documents,

disbursements, workers Ó compensation coverage, professional

employer organization, temporary labor service, exemptions,

subcontractors, and subcontractor Ó s workers Ó compensation

coverage.

11. Based on its investigation, the Department determined

that Respondent failed to secure adequate workers Ó compensation

coverage for its employees. Therefore, the Department proceeded

to calculate a penalty based on Respondent Ó s lack of compliance

with chapter 440.

The Penalty Calculation :

12. Lynne Murcia, the p enalty a uditor who determ ined the

penalty the Department seeks to impose on Respondent, testified

regarding her computation. Ms. Murcia explained that t he penalty

essentially consists of the Ð evaded Ñ premium amount, or the

actual amount the employer would have paid in workers Ó

co mpensation insurance for the uncovered employees , multiplied by

two .

1 3 . To calculate the appropriate penalty for Respondent Ó s

failure to secure workers Ó compensation coverage, the Department

first ascertained Respondent Ó s period of non - compliance. In

de termining this time frame, the Department referred to Florida

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

The employer Ó s time period or periods of non -

compliance means the time period(s) within

the two years 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

request 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

Depart ment 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 that

Respondent Ó s period of non - complia nce was from June 1 4, 2015,

through June 1 3, 2017, which was the two - year period preceding

the date of the Stop - Work Order. 2/ (This two - year period was also

the time for which the Department requested business records from

Respondent.)

14. After determ ining Respondent Ó 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 a mount the

employer would have paid in premium when

applying approved manual rates to the

employer Ó s payroll during periods for which

it failed to secure the payment of workers Ó

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 Ó s

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

15. In response to the Department Ó s request for documents ,

Respondent produced a number of financial records . These records

consisted primarily of bank statements and cancelled checks. The

documentation Respondent submitted, however, was not

comprehensive enough for the Department to determine all the

wages Re spondent paid to its employees, or the work they

performed for the period of June 13, 2015, through June 14, 2017.

Specifically, Respondent failed to provide complete bank

statements or the corresponding check images for the periods of

January 1 through A pril 30, 2016 ; June 1 through July 31, 2016 ;

and June 1 through June 13, 2017 . Consequently, the Department

determined that Respondent did not provide business records

sufficient for it to calculate Respondent Ó s complete payroll or

the actual employee wag es it paid over the two - year period of

non - compliance. Therefore , the Department exercised its option

to Ð impute Ñ Respondent Ó s weekly payroll from June 1 3, 2015 ,

through June 14, 2017.

16. In addition to Joe Smith, the Department imputed wages

for sever al other individuals and entities it identified in

Respondent Ó s business records. Based on Respondent Ó s financial

records, between June 14, 2015, and June 13, 2017, Respondent

made payments to Earl Cockeranoham, Ð J.M.L., Ñ Martin Moore,

Ð Peterson, Ñ and Rob ert Tamburan. The Department also identified

a subcontractor Respondent paid in 2015 named Roger Ó s Dirt Works,

Inc. The Department further determined that a t the time of the

transaction, Roger Ó s Dirt Works, Inc. , had neither workers Ó

compensation coverag e, nor a n exemption for a corporate officer.

(Roger Ó s Dirt Works, Inc., subsequently obtained a valid

exemption.) Therefore, the Department included R oger Ó s Dirt

Works, Inc. , in the penalty for the period of June 14 through

December 31, 2015.

17. The De partment also added to Respondent Ó s payroll

Ð uninsured labor Ñ for the full period of non - compliance.

Ms. Murcia relayed that Ð uninsured labor Ñ reflects undesignated

cash transactions for which the recipient was not identified or

Ð validated Ñ by Respondent Ó s business records and receipts. See

Fla. Admin. Code R . 69L - 6.035(1)(k). Respondent Ó s financial

records revealed four separate cash payments totaling $6,892.

18. Finally, the Department included Leonard Smith in all

periods of non - compliance. The De partment explained that Leonard

Smith was registered as a corporate officer of Respondent.

However, he did not have an active workers Ó compensation

exemption on file. Therefore, Respondent was also required to

carry workers Ó compensation for himself. Se e Fla. Admin. Code

R. 69L - 6.028(3)(b).

19. To calculate Respondent Ó s imputed weekly payroll,

section 440.107(7)(e) directs that t he 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 for the period requested for the calculation of the

penalty . Therefore, the Department obtained the statewide

average weekly wage effective at the time of the Stop - Work Order

($886.46) 3/ for each identified employee , cor porate 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).

20. To calculate a penalty based on an imputed payroll, the

Department assign s an employer Ó s employees the highest rated

workers Ó compensation classification code . The classification

code is based on either the business records submitted or the

investigator Ó s observation of the employee s Ó activities . In this

case, the business records Respondent provided to t he Department

were not sufficient to categorize the exact type of work that Joe

Smith, or any of the other identified employees, performed for

Respondent over the two - year period of non - compliance. However,

duri ng her investigation of the job site on June 13, 2017,

Investigator Brigantty observed Joe Smith engaging in activities

consistent with excavating, such as filling, backfilling, and

moving earth.

2 1. According to the Scopes Manual issued by the National

Council on Compensation Insurance, Inc. ( Ð NC CI Ñ ), class code 6217

is the Ð Excavation and Drivers Ñ classification. 4/ Consequently,

the Department applied class code 6217 to all Respondent Ó s

employees and officer for the entire penalty period. See Fla.

Admin. Code R. 69L - 6.028(3)(b) and 69L - 6.021(2) (mmm)(excavation

is classified as Ð construction activity Ñ ). Therefore, to

calculate the premium amount for the workers Ó compensation

insurance Respondent should have paid for its employees, the

Department applied the manual rates corresponding to class

co de 6217.

2 2 . Thereafter, based on: 1) the total periods of non -

compliance, 2) Respondent Ó s calculated payroll for the periods of

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

compensation insurance, t he Department issued the Amended Order

of Penalty Assessment ( Ð Penalty Assessment Ñ ) on October 1 3 , 2017.

The Penalty Assessment imposed a penalty of $42,407.08 against

Respondent.

23. Ms. Murcia explained that the initial penalty amount

was calculated without the benefit of Respondent Ó s busine ss

records. However, after Respondent began providing its financial

records in October 2017, the D epartment r educed its penalty

assessment three times. On November 30, 2018, the Department

served a 2nd Amended Order of Penalty Assessment , which adjusted

the penalty down to $ 11,958.46 . O n May 29, 2019 (following leave

by the undersigned), the Department produced a 3rd Amended Order

of Penalty Assessment , which further reduced the penalty to

$ 8,443.96 . Finally, at the final he aring (in light of Leonard

Sm ith Ó s deposition) , the Department introduced a 4th Amended

Order of Penalty Assessment with a revised (and final) penalty

amount of $8,3 66.44 .

24. At the final hearing, Leonard Smith was adamant that

Joe Smith was not his employee on June 13, 2017, or at any point.

Instead, Leonard Smith explained that he is just a Ð broker Ñ to

help place workers with construction projects. Leonard Smith

claimed that for the last nine years, he simply does estimating

and consulting for other small contractors. Consequent ly,

because he no longer engages in construction work or employs any

workers, Leonard Smith asserted that he does not need to carry

workers Ó compensation insurance.

25. Regarding the work that Investigator Brigantty

witnessed on June 13, 2017, Leonard S mith testified that a church

contacted him about supplying, filling, and spreading dirt on its

property. Leonard Smith explained that t he church was to pay him

$12,840.00 for the job.

26. Leonard Smith referred to Joe Smith as a Ð private

contractor. Ñ Leonard Smith relayed that he met Joe Smith in June

2017. Joe Smith expressed that he was looking for work. Leonard

Smith told him about the job in Dunedin, Florida . On June 13,

2017, Leonard Smith met Joe Smith, who had brought his Bobcat, at

the churc h and discussed the job. Leonard Smith then left him to

complete the work.

27. Leonard Smith insisted that he never Ð paid Ñ Joe Smith.

Instead, he simply agreed to share the money the church was

giving him for the job. Leonard Smith called his own porti on a

Ð consulting fee. Ñ

28. On June 23, 2017, after he had received the $12,840 .00

from the church, Leonard Smith wrote a check to Joe Smith for

$3,440.00 .

29. Joe Smith never worked for Respondent or Leonard Smith

before or since June 13, 2017.

30 . Regarding the payment to Earl Cockeranoham recorded in

Respondent Ó s business records, Leonard Smith testified that

Mr. Cockeranoham never worked for him. Instead, t he money he

paid to Mr. Cockeranoham in 201 5 ($460 .00 ) was for work

Mr. Cockeranoham perf ormed for the same church .

31. Regarding evidence of a payment to Martin Moore,

Leonard Smith testified that he pa id Mr. Moore $500.00 in 2016

for Mr. Moore Ó s rent . Leonard Smith denied that he paid

Mr. Moore for construction work. Respondent further te stified

that Respondent had known Mr. Moore a long time .

32. Joe Smith testified at the final hearing regarding his

understanding of his employment relationship with Respondent on

June 13, 2017. Initially, Joe Smith explained that he had been

out of work for several months and was looking for a job when he

met Leonard Smith in June 2017. Leonard Smith offered him the

work at the church spreading soil. Joe Smith relayed that he

owned the Bobcat and brought it with him to the jobsite.

33. Joe Smith sta ted that, on June 13, 2017, he met Leonard

Smith at the church. There, Leonard Smith informed him that he

was to bring an area of land up to proper elevation. They also

discussed how they would split payment for the job. Joe Smith

understood that the ch urch was going to pay Leonard Smith. Then,

Leonard Smith was going to give him his share.

34. Joe Smith confirmed that Leonard Smith sent him

approximately $3,000 .00 several weeks after the job. Joe Smith

also conceded that he was not covered by workers Ó compensation on

June 13, 2017. Joe Smith further testified that Investigator

Brigantty showed up at the worksite the day he started working.

35. Finally, at the final hearing , Joe Smith was dismayed

that he had created this issue regarding workers Ó c ompensation

coverage. He expressed that he was simply looking for work, and

Leonard Smith was kind enough to help him out. Joe Smith did not

want to get anyone in trouble.

36. Based on the competent substantial evidence in the

record, the Department d emonstrated, by clear and convincing

evidence, that Respondent failed to secure workers Ó compensation

insurance coverage or workers Ó compensation exemptions for its

Ð employees Ñ for the periods of June 14, 2015 , through June 13,

2017. Accordingly, the Depa rtment met its burden of proving that

Respondent violated chapter 440 and should be penalized. (As

more fully addressed below, the evidence in the record does not

sufficiently establish that either Earl Cockeranoham or Martin

Moore were Ð employees Ñ of Res pondent under chapter 440.

Therefore, they should not be included in the penalty

calculation.)

CONCLUSIONS OF LAW

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

matter of, this proceeding pursuant to sections 120.569 and

120.57(1).

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

every employer is required to obtain workers Ó 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 Ó t of Fin. Servs. , 969 So. 2d 563,

564 (Fla. 1st DCA 2007)( Ð Florida law requires any company

performing construction to secure the payment of workers Ó

compensation. Ñ ) . Strict compliance with the workers Ó compensation

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

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

39 . Ð Construction industry Ñ means Ð 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 land. Ñ § 440.02(8), Fla. Stat.

40 . Ð Employer Ñ is defined as Ð every person carrying on any

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

4 1. Ð Employment, Ñ with respect to the construction industry,

includes Ð all private employment in which one or more employees

are employed by the same employer. Ñ § 440.02(17)(b)2., Fla. Stat.

4 2. Ð Employee Ñ means Ð 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 contract for

hire or apprenticeship, express or implied, oral or written,

whether lawfully or unlawfully employed. Ñ Ð Employee Ñ also

includes Ð any person who is an officer of a corporation and who

performs services for remuneration for such corporation within

this state. Ñ § 440.02(15)(a) and (b), Fla. Stat.

43 . In addition, under section 440.02(15)(c), Ð employee Ñ

encompasses:

2. All persons who are being paid by a

construction contractor as a subcontractor,

unless the subcontractor has va lidly elected

an exemption 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.

44 . Regarding a contractor Ó 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 c ontractor 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 empl oyees, except to

employees of a subcontractor who has secured

such payment.

(c) A contractor shall require a

subcontractor to provide evidence of workers Ó

compensation insurance. A subcontractor who

is a corporation and has an officer who

elects to be e xempt as permitted under this

chapter shall provide a copy of his or her

certificate of exemption to the contractor.

45 . 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 Ó compensation coverage in violation

of chapter 440. 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 of compe nsation 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 Ó s payroll during periods for which it

failed to secure the payment of workers Ó

compensatio n 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.

4 6. Because administrative fines are penal in nature, t he

Department has the burden to prove, by clear and convincing

evidence, that Respondent violated chapter 440 by failing to

secure the payment of workers Ó compensation, and that the penalty

proposed to be assessed is correct. See Dep Ó t of Banking & Fin.,

Div. of Sec. & Inv esto r Prot. v. Osborne Stern & Co. , 670 So. 2d

932, 935 (Fla. 1996). Clear and convincing evidence requires

Ð more proof than a Ò preponderance of the evidence Ó but less than

Ò beyond and to the exclusion of a reasonable doubt. ÓÑ In re

Gra ziano , 696 So. 2d 744, 753 (Fla. 1997).

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

proved, by clear and convincing evidence, that Respondent violated

chapter 440, as charged in the Stop - Work Order, by failing to

provide workers Ó compensation coverage for its employees as

required by chapter 440.

48 . The Department also demonstrated that it properly

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

and (e) to calculate Respondent Ó s penalty. The Department

correctly calculated the appr opriate penalty to impose on

Respondent in its 4th Amended Order of Penalty Assessment, with

the exception of two entries detailed below.

4 9 . Florida law requires Respondent, as an Ð employer, Ñ to

maintain and produce business records which allow the Depar tment

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

440.107(3)(c), Fla. Stat.; and Fla. Admin. Code R. 69L - 6.015(1).

The testimony establishes that Respondent failed to provide

business records sufficient to enable the Department to determ ine

its payroll for the two - year period of non - compliance requested

for the penalty calculation.

50 . Because Respondent Ó s business records were out of

compliance and incomplete, the Department is required to impute

Respondent Ó s payroll. See Twin City , 96 9 So. 2d at 566.

Rule 69L - 6.028 sets forth the method for imputing an employer Ó s

payroll and provides:

(3) When an employer fails to provide

business records sufficient to enable the

Department to determine the employer Ó s payroll

for the time period re quested 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 Depa rtment 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 -

com pliance 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, s ole proprietor,

and partner will be assigned to the highest

rated workers Ó compensation classification

code for an employee based upon records or the

investigator Ó s physical observation of any

employee Ó s activities.

See also § 440.107(7)(e), Fla. Stat.

5 1 . Regarding which employees should be included in

Respondent Ó s imputed weekly payroll, the evidence identifies six

individuals and entities Respondent Ð employed Ñ over the two - year

period of non - compliance. Initially, Joe Smith qualifies as an

Ð employee Ñ under chapter 440. While Leonard Smith tenaciously

argued that he did not hire Joe Smith, both men agreed that

Leonard Smith directly paid Joe Smith for his work moving soil at

the church. In addition to giving him Ð remuneration, Ñ Leonard

Smith told Joe Smith about the job, met Joe Smith at the jobsite

before he began working, and instructed Joe Smith on his specific

job responsibilities. Based on these facts, Respondent

constitutes an Ð employer, Ñ and Joe Smith his Ð employee Ñ for whom

Respondent was req uired to provide workers Ó compensation

coverage. 5/

52 . The Department also demonstrated that Respondent

employed at least five other Ð employees Ñ in the construction

industry between June 14, 2015, and June 13, 2017. R espondent Ó s

financial records revea l that Respondent paid for services

rendered by certain individuals identified as Ð J.M.L., Ñ

Ð Peterson, Ñ and Robert Tamburan.

53 . The evidence further establishes that Roger Ó s Dirt

Works, Inc., was Respondent Ó s Ð employee Ñ for the period of June 14

throug h December 31, 2015. Respondent Ó s financial records show

that Respondent paid Roger Ó s Dirt Works, Inc., $3,480 .00 in 2015.

Section 440.02(15)(c)2. directs that the employer is responsible

to ensure that workers Ó compensation insurance covers Ð all persons

who are being paid by a construction contractor as a

subcontractor. Ñ No evidence shows that Roger Ó s Dirt Works, Inc.,

had validly elected an exemption from chapter 440 for the period

of June 14 through December 31, 2015.

54 . The Department also proved that Ð uninsured labor Ñ should

be included in Respondent Ó s imputed payroll. Respondent Ó s

business records document cash payments to one or more unnamed

recipients between 2015 and 2017. Rule 69L - 6.035(1)(k) requires

the Department to include unidentified Ð cash withdrawal amounts Ñ

for purposes of determining payroll for calculating a penalty

pursuant to section 440.107(7)(d)1.

55 . Finally, Respondent Ó s corporate officer, Leonard Smith,

should be included in the penalty calculation for the two - year

perio d of non - compliance. Leonard Smith admitted that he received

Ð remuneration Ñ fo r his services to the church on June 13, 2017.

See § 440.02(15)(b), Fla. Stat. Leonard Smith did not produce

evidence that he held a valid exemption from the workers Ó

compensa tion coverage requirements under chapter 440.

56 . Conversely, the Department did not establish that either

Earl Cockeranoham or Martin Moore should be included in the

penalty calculation. Based on the testimony at the final hearing,

the Department did no t prove, by clear and convincing evidence,

that the money Respondent paid to either of these individuals was

for the performance of some work or service in Respondent Ó s

construction business. Therefore, the final penalty calculation,

as determined in the 4th Amended Order of Penalty Assessment, must

be reduced by $71.58 and $75.80 , respectively.

5 7. Finally, the Department correctly applied NCCI

class ification code 6217 to Respondent Ó s imputed payroll. Class

code 6217 covers Ð excavating and drivers. Ñ T he work Investigator

Brigantty observed Joe Smith conduct on June 13, 2017, meets the

NCCI definition of Ð excavating. Ñ

58 . Accordingly, based on the evidence and testimony

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

convincing evi dence, that the penalty calculated in the

4th Amended Order of Penalty Assessment, adjusted down to

$8,219.66 per paragraph 56 above, 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 RECOMMENDED that the Department of Financial Services,

Division of Workers Ó Compensation, enter a final order

determining that Respondent, Leonard Smith, d/b/a Site

Development & Pipeline Construction, Inc., violated the

requirement in chapter 440 to secure workers Ó compensation

coverage, and imposing a total penalty of $8,219.06.

DONE AND ENTERED this 13th day of September , 2019 , in

Tallahassee, Leon County, Fl orida.

S

J. BRUCE CULPEPPER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state. fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 13th day of September , 2019 .

ENDNOTE S

1/ All statutory references are to Florida Statutes (2017), which

was the law in effect at the time of Respondent Ó s alleged

violation and, therefore, applies to this proceeding.

2 / The Stop - Work Order was formally served on Leonard Smith by

certified mail on June 22, 2017. The Stop - Work Order records

that its Ð issuance date Ñ was June 14, 2017.

3 / 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, 2017, equaled $886.46.

4 / The Scopes Manual classification codes are four - digit codes

assigned to various o ccupations by the NCCI to assist in the

calculation of workers Ó compensation insurance premiums. The

Department has adopted the Scopes Manual through r ule 69L -

6.021(1).

5 / The Department asserts that a weekly payroll for Joe Smith

should be imputed for the entire two - year period of non -

compliance. The competent substantial facts, however, establish

that Joe Smith only worked one day for Respondent (June 13,

2017). At the final hearing, the Department explained that,

because Respondent Ó s business record s were not sufficient to

enable the Department to confirm the exact dates that Joe Smith

was Respondent Ó s Ð employee, Ñ it is authorized to calculate a

penalty for Joe Smith from June 14, 2015, through June 13, 2017.

The penalty the Department seeks based s olely on Respondent Ó s

failure to secure workers Ó compensation coverage for Joe Smith is

$5,615.48, approximately 68 percent of the total fine. While

this penalty appears inequitable based on Joe Smith Ó s one day of

work, the language of chapter 440 allows this severe result.

COPIES FURNISHED:

Kyle Christopher, Esquire

Florida Department of Financial Services

Office of the General Counsel

Hartman Building

2012 Capital Circle Southeast

Tallahassee, Florida 32399

(eServed)

Leonard Smith

Site Development & Pipeline Construction, Inc.

403 South Parsons Avenue

Seffner, Florida 33584

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 R IGHT 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 cas e.