19-005848 Department Of Financial Services, Division Of Workers&Apos; Compensation vs. James Colligan Fence, Llc Status: Closed Recommended Order on Wednesday, February 19, 2020.

Summary: Petitioner proved that Respondent did not provide workers' compensation coverage or hold a valid exemption. Income was properly imputed to calculate the penalty.

P RELIMINARY S TATEMENT

On October 1, 2019, the Department of Financial Services, Division of

Workers’ Compensation (Petitioner or the Division), filed a Stop - Work Order

against James Colligan Fence, LLC (Re spondent). Mr. Colligan, the sole

agent for Respondent, requested a hearing. On October 29, 2019, the Division

filed an Amended Order of Penalty Assessment, which alleged that

Respondent failed to secure payment of workers’ compensation within the meaning of section 440.107(2), and assessed a penalty of $15,260.56. On

November 4, 2019, the Division referred the matter to DOAH for the assignment of an administrative law judge.

On November 7, 2019, the case was noticed for hearing to commence

January 16, 202 0. Respondent was proceeding without the benefit of counsel,

so the parties participated in a telephonic prehearing conference, in order to explain to Mr. Colligan the process that would govern the hearing, and to

give him t he opportunity to ask questi ons regarding that process.

Mr. Colligan was encouraged to access the document “Representing Yourself

Before the Division of Administrative Hearings,” available on DOAH’s

website, which provides helpful information about appearing before DOAH

for persons repre senting themselves.

The hearing commenced and concluded as scheduled. Sabrina Johnson,

Kevin Sterling, and Lynne Murcia testified for the Division , and Petitioner’s

Exhibits 1 through 15 were admitted without objection. Respondent testified

on his own beh alf but presented no exhibits.

The parties were advised that the deadline for filing proposed

recommended orders would be ten days from the filing of the Transcript. The Transcript was filed on January 30, 2020 . Both Petitioner and Respondent

timely fil ed Proposed Recommended Orders, which have been considered in

the preparation of this Recommended Order.

All references to the Florida Statutes are to the 2019 codification.

F INDINGS OF F ACT

1. The Division is the state agency charged with enforcing th e

requirement in section 440.107(3), that employers in Florida secure workers’

compensation coverage for their employees.

2. Respondent is a company engaged in the construction industry. James

Colligan is its sole employee. Respondent’s office is 637 Four Point Road, Holt, Florida, 32564.

3. On or about October 1, 2019, Sabrina Johnson, a compliance

investigator for the Division, observed someone installing vinyl fencing on an

existing home located at 101 Pine Court, in Niceville, Florida. She

approached an d spoke to the lone worker, who identified himself as James

Colligan. Ms. Johnson identified herself as a compliance investigator for the Division and asked for proof of worke rs’ compensation insurance.

Mr. Colligan advised her that he had an exemption.

4. Ms. Johnson consulted the Department of State, Division of

Corporation’s website to determine the identity of Respondent’s officers, and

found that Mr. Colligan was the sole officer. She then consulted Petitioner’s

Coverage and Compliance Automated System (CCAS) for proof of workers’

compensation coverage, and for any exemptions associated with Respondent. Ms. Johnson’s research revealed that Respondent did not have a workers’

compensation policy or an employee leasing policy, and did not have a current ex emption.

5 . Mr. Colligan previously held an exemption, but it expired on July 20,

2018. He had applied for a renewal of the exemption on July 2, 2018, but his application was rejected as incomplete because the FEIN number on the

renewal application did not match the one on file. Mr. Colligan was notified

by email on July 3, 2018, that his application was being returned to him as

incomplete. He acknowledged at hearing that he had provided his email

address to the Division, but stated he gets so many emails, he does not

always read them. He did not recall ever seeing the email from the Division,

and believed that his exemption had been renewed.

6 . Mr. Colligan’s testimony was sincere and credible. However, it is his

responsibility to make sure that his exemp tion is up to date, and he did not

do so.

7 . Upon learning from Ms. Johnson that his exemption had expired,

Mr. Colligan immediately applied for and received an exemption. However,

the newly acquired exemption is prospective, and does not cove r the period of

non compliance.

8 . Investigator Johnson consulted with her supervisor, who provided

authorization for the issuance of a Stop - Work Order. She issued a Stop - Work

Order and personally served it on Mr. Colligan on October 1, 2019. At the same time, she issue d and served a Request for Production of Business

Records for Penalty Assessment Calculation. Mr. Colligan executed an

Agreed Order of Conditional Release from Stop - Work Order, paid the

minimum $1,000 fine and, as noted above, submitted a new application f or an

exemption.

9. The records requested fall into five categories: 1) payroll documents,

such as time sheets, time cards, attendance records, earning records, check

stubs, and payroll summaries, as well as federal income tax documents and

other documents that would provide the amount of remuneration paid or

payable to each employee; 2) account documents, including all business check

journals and statements, cleared checks for all open and/or closed business

accounts, records of check and cash disbursement s, cashier’s checks, bank

checks , and money orders; 3) disbursement records, meaning all records of

each business disbursement including , but not limited to , check and cash

disbursements, indicating chronologically the disbursement date, to whom

the money was paid, the amount , and the purpose for which the

disbursement was made; 4) subcontractor records, identifying the identity of

each subcontractor of the employer, the contractual relationship held, and

any payments to those subcontractors; and 5) documen tation of

subcontractor’s workers’ compensation coverage.

10 . Respondent worked as a subcontractor, but there was no evidence

presented that he hired subcontractors, so records falling into the categories

related to subcontractors likely do not exist. Resp ondent provided copies of

bank statements, but these records did not contain earning records, income

tax filings, check images, or other sufficient records from which the Division

could determine payroll.

11. Lynne Murcia reviewed Respondent’s records in her capacity as a

penalty auditor for the Division. She testified credibly that income can be

identified through direct wage payments to an employee, bonuses given,

income distributions, loans that are not repaid, and the like. The bank statements provide d by Respondent were simply insufficient for her to

determine which items were reflective of payroll. Therefore, in accordance

with section 440.107(7)(e) and Florida Administrative Code Rule 69L - 6.028,

she determined payroll in this case by imputing payrol l for the work

classification assigned to the identified work being performed.

12. On October 29, 2019, the Division issued an Amended Order of

Penalty Assessment, which was served on Respondent on October 30, 2019.

The penalty assessed for noncompliance w ith chapter 440 workers’

compensation requirements was $15,260.56.

13. The penalty calculation is based upon the classification codes listed in

the Scopes® Manual, which have been adopted through the rulemaking

process through rules 68L - 6.021 and 69L - 6.031 . Classification codes are codes

assigned to different occupations by the National Council on Compensation

Insurance, Inc. (NCCI), to assist in the calculation of workers’ compensation

insurance premiums.

14 . Ms. Murcia used classification code 6400 for Mr. Colligan. The

description for code 6400 is for “specialist contractors engaged in the erection

of all types of metal fences, i.e., chain link, woven wire, wrought iron or

barbed wire fences.” There is no dispute that Code 6400 was the appropriate

class ification code for the type of work Respondent performed.

15. Using this classification code, Ms. Murcia used the corresponding

approved manual rates for that classification and the period of

noncompliance. Ms. Murcia multiplied the average weekly wage b y 1.5, in

accordance with section 4 40.107(7)(e). The period of non compliance in this

case ran from the expiration of Mr. Colligan’s exemption (July 21, 2018), to

the day that he applied for and received a new exemption (October 1, 2019).

16. The average we ekly wage i s established by the Department of

Economic Opportunity. Because the period of noncompliance involved two different pay rates, Ms. Murcia provided a separate calculation for each

calendar year. The imputed gross payroll for July 21 , 2018 through

December 31, 2018, was $33,013.55, which she divided by 100 and then

multiplied by the manual approved rate ($9.73), times two , to reach the

amount of penalty to be imposed for that calendar year. A similar calculation

was performed for the period from Ja nuary 1, 2019 through October 1, 2019,

using the manual approved rate of $8.01. All of the penalty calculations are in accordance with the Division’s penalty calculation worksheet.

17. The Division proved by clear and convincing evidence that Respondent

wa s engaged in the construction business for the period beginning July 21,

2018, and ending October 1, 2019, without prior workers’ compensation coverage or a valid exemption. The Division also demonstrated by clear and

convincing evidence that the documents submitted by Respondent, which

may be all of the documentation that Respondent possessed, were not sufficient to establish Respondent’s payroll, thus requiring the imputation of

payroll. Finally, the Division proved by clear and convincing evidence that

t he required penalty for the period of noncompliance is $15,260.56.

C ONCLUSIONS OF L AW

18. The Division of Administrative Hearings has jurisdiction over the

subject matter and the parties to this proceeding pursuant to sections

120.569 and 120.57(1).

19. C hapter 440 is known as the “Workers’ Compensation Law.” § 440.01,

Fla. Stat.

20. The Division is seeking a fine for failure to provide workers’

compensation coverage. Because a fine is considered a penal measure, the

Division bears the burden of proof and must establish its case by clear and

convincing evidence. Dep ’ t of Banking and Fin. v. Osborne Stern & Co . , 670

So. 2d 932, 935 (Fla. 1996); Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

21. Clear and convincing evidence is a stringent standard. It “re quires

more proof than a ‘preponderance of the evidence’ but less than ‘beyond and

to the exclusion of a reasonable doubt.’” In re Graziano , 69 6 So. 2d 744, 753

(Fla. 1997). As stated by the Supreme Court of Florida:

Clear and convincing evidence requires that the

evidence must be found to be credible; the facts to which the witnesses testify must be distinctly

remembered; the testimony must be precise and lacking in confusion as to the facts in issue. The evidence must be of such a weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the

allegations sought to be established.

In re Henson , 913 So. 2d 579, 590 (Fla. 2005)(quoting Slomowitz v. Walker ,

429 So. 2d 797, 800 (Fla. 4th DCA 1983 )). The clear and convincing standard

may be met when there is conflicting evidence, but not when the evidence

presented is ambiguous . Westinghouse Elec. Corp. v. Shuler Bros. , 590 So. 2d

986, 989 (Fla. 1991).

22. To meet this burden, the Division must pro ve that Respondent was

required to comply with the Workers’ Compensation Law, that Respondent

failed to comply with the requirements of the law, and that the penalty

assessed by the Division is appropriate.

23. Section 440.02(17)(a) defines “employment” as “any service performed

by an employee for the person employing him or her.” It includes “all private

employments in which four or more employees are employed by the same

employer, or, with respect to the construction industry, all private

employment in wh ich one or more employees are employed by the same

employer.” § 440.02(17)(b)2., Fla. Stat.

24. Every employer is required to secure the payment of workers’

compensation coverage for the benefit if its employees, unless chapter 440

provides an exemption. I n order to enforce this requirement, the Division is

authorized to examine the records of an employer to determine whether it is

in compliance, and if not, to assess a penalty equal to “2 times the amount the

employer would have paid in premium when applyi ng approved manual rates

to the employer’s payroll during the periods for which it failed to secure payments of workers’ compensation … as reported to the Department of

Economic Opportunity … reported annually to the Legislature.”

25. The records submitted by Respondent are not sufficient to establish its

payroll during the period Mr. Colligan did not have an exemption. Imputing payroll appears to result in a payroll amount that may be far more than what

Respondent may have earned as a company during that p eriod. However, it is Respondent’s responsibility to keep sufficient records of its payroll, and it did

not do so.

26. In a case such as this one, where no valid exemption was in place

during the relevant period and insufficient documentation exists to est ablish

payroll, section 440.107(7)(e) requires that the Division impute payroll for

penalty calculation purposes. The Division properly imputed payroll in

accordance with the method identified in rule 69L - 6.028(3):

(3) When an employer fails to provide bus iness

records sufficient to enable he Department to

determine the employer’s payroll for the time

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.

27. Petitioner properly utilized the procedures mandated by statute and

rule to calculate the penalty Respondent owes as a result of its failure to

comply with the coverage requirements of ch apter 440, and failure to provide

sufficient records to allow Petitioner to determine its payroll.

28. Petitioner has proven by clear and convincing evidence that it

properly issued a Stop - Work Order and Order of Penalty Assessment for

failure to maintain workers’ compensation coverage, and properly calculated

the penalty contained in the Amended Order of Penalty Assessment.

R ECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

R ECOMMENDED that the Department of Financial Services enter a final order

finding that Respondent failed to comply with the requirements of section

440.107 and impose the penalty identified in the Amended Order of Penalty

Assessment, with credit for the $1,000 already paid.

D ONE A ND E NTERED this 1 9 t h day of February , 2020 , in Tallahassee, Leon

County, Florida.

L ISA S HEARER N ELSON

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 1 9 th day of February , 2020 .

C OPIES F URNISHED :

James Colligan

637 Four Point Road

Holt, Florida 32564

Rean Knopke, Esquire

Department of Financial Servi ces

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Kami Alexis Sidener, Law Clerk

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399

(eServed)

Leon Melnicoff, Esquire Department of Financial Services

200 Eas t Gaines Street

Tallahassee, Florida 32399

(eServed)

Julie Jones, CP, FRP, Agency Clerk

Division of Legal Services

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399 - 0390

(eServed)

N OTICE OF R IGHT T O S UBMIT E XCEPTIONS

A ll 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.