88-002755 Florida Afl-Cio United Labor Agency, Inc. vs. Department Of Labor And Employment Security Status: Closed Recommended Order on Friday, January 20, 1989.

Summary: Contractor with state agency is responsible for consequences of fraud by contractor's employees and must repay funds received through employee fraud

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA AFL-CIO UNITED LABOR )

AGENCY, INC., )

)

Petitioner, )

vs. ) CASE NO. 88-2755

)

STATE OF FLORIDA, DEPARTMENT OF )

LABOR AND EMPLOYMENT SECURITY, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice a formal hearing was conducted in this case on October

19 and 20, 1988, at Tallahassee, Florida, before Michael M. Parrish, a duly

designated Hearing Officer of the Division of Administrative Hearings. The

parties were represented at the hearing as follows:

For Petitioner: Sidney L. Matthew, Esquire

Gorman & Matthew, P.A.

Post Office Box 1754

Tallahassee, Florida 32302

For Respondent: David J. Busch, Esquire

Department of Labor and

Employment Security

Suite 131, Montgomery Building

2562 Executive Center Circle, East

Tallahassee, Florida 32399-0657

ISSUES AND INTRODUCTION

By amended petition for hearing, the Petitioner requested a hearing on the

Department's determination that the Petitioner is obligated to refund to the

Department the sum of $53,724.00, which the Department asserts is the amount by

which the Petitioner was overpaid pursuant to Wagner-Peyser Contract No. SA016.

For numerous reasons recited in its Petition and argued in its post-hearing

brief, the Petitioner contends that it should not be required to refund the

disputed sum.

At the formal hearing, both parties presented the testimony of witnesses

and both parties offered exhibits in support of their respective positions.

Following the hearing, a transcript was prepared and the parties were allowed

until November 19, 1988, within which to file their proposed recommended orders.

Thereafter, upon joint motion of the parties, the period for filing post-hearing

briefs and/or proposed recommended orders was extended until December 6, 1988.

Both parties timely filed post-hearing briefs in a format more customary to

appellate than to administrative hearing proceedings. The parties' briefs have

been carefully considered during the formulation of this recommended order.

Specific rulings on the factual assertions of the parties are contained in the

appendix to this recommended order.

FINDINGS OF FACT

Based on the stipulations and admissions of the parties, on the exhibits

received in evidence, and on the testimony of the witnesses at hearing, I make

the following findings of fact.

1. In November of 1984 the Petitioner and the Respondent entered into a

contract which has the following title:

GOVERNOR'S WAGNER-PEYSER 10% DISCRETIONARY FUNDS

FIXED-UNIT PRICE CONTRACT

CONTRACT NO. SA016

"STATEWIDE FARMWORKERS JOB PLACEMENT PROJECT"

2. Paragraph 1.A. of the subject contract contains the following

description of the project activities:

The Florida AFL-CIO United Labor Agency will

operate a statewide job placement program to

meet the increased employment needs of

migrants/farmworkers and related workers in-

volved in the processing of agricultural pro-

ducts. The Agency will coordinate and work

with farmworker advocacy organizations in

Apopka and Dade City, Florida, to recruit and

identify participants. Unsubsidized employ-

ment opportunities will be developed with

unions, apprenticeship programs, and private

sector employers. The employment resources

of the Agency will be coordinated and inte-

grated with those of the Job Service and

local PICs.

3. Paragraph 2.A. of the subject contract contains a "work activity plan"

described as follows:

1. To recruit and provide employability

counseling to migrants/farmworkers;

2. To place 230 migrants/farmworkers into

unsubsidized, non-agricultural employment

with a duration of 30 days or more;

3. To integrate the employment resources of

unions and the United Labor Agency with those

of the Job Service.

4. Prepare and submit a final narrative

report to DLET documenting the success and

failures of the project.

4. Paragraph 2.B. of the subject contract contains the following

description of the performance units applicable to the contract:

1. The contractor will make up to 230 place-

ments in unsubsidized employment over the

course of the contract period at $726.00

each, for a total amount not to exceed

$166,980.00.

2. A placement will be defined as employment

by a participant engaged in work for at least

35 hours per week, in a job paying at least

the minimum wage, for a period of at least 30

calendar days.

5. At Paragraph 2.D. of the subject contract, under the subcaption

"ACTIVITY/PAYMENT SCHEDULE OF PERFORMANCE UNITS," the contract provides, in

pertinent part:

1. The contractor will be advanced

$37,062.00.

2. The advance will be repaid monthly by

deducting $6,177.00 per month from the amount

of deliverables produced over a six month

period, beginning with the November 1984

invoice and being completed with the April

1985 invoice.

3. There will be one performance unit for

this contract, and it will be for placement

at the rate of $726.00 each.

6. Paragraph 14.e. of the subject contract reads as follows:

The Contractor is responsible for fulfilling

all terms and conditions of this Contract.

While the DLET shall monitor the Contrac-

tor's performance under the Contract, the

Contractor remains solely responsible for

its performance. The DLET monitoring of the

Contract shall not constitute a waiver or

modification of any term or condition. Terms

and conditions may only be modified by

written contract amendment as specified

herein.

7. One of the documents used in the administration of the subject contract

was a Form BRI-100, which was designed so that three individuals had to sign the

form to certify that a valid job placement had been accomplished. The required

signatures were those of the employer, the farmworker/employee, and a

representative of the Petitioner. Early in the administration of the contract

the Petitioner began to have problems obtaining employer signatures on Form BRI-

100, especially where employment was obtained through union hiring halls. At

the behest of the Petitioner, the Respondent deleted the requirement that the

employer sign the form and permitted the form to be signed by a representative

of the union hiring hall.

8. During the course of the Petitioner's performance of the subject

contract, one of the Petitioner's employees submitted fraudulent documentation

on numerous occasions. The fraudulent documentation purported to be evidence of

successful job placements under the contract. The fraudulent documentation was

submitted to the Respondent and the Respondent paid money to the Petitioner on

the basis of the fraudulent documentation. A post-performance audit revealed

that 74 of the job placements for which the Petitioner was paid were in fact

fictitious placements supported by fraudulent documentation. As a result of the

fraudulent documentation, the Petitioner was paid $726.00 for each of 74

fictitious job placements, a total of $53,724.00. The $53,724.00 which was paid

on the basis of fraudulent documentation was paid to the Petitioner solely

because at the time of making the payment the Respondent believed that the

Petitioner had made 74 placements which, in fact, were never made. The

Respondent's belief that the 74 placements had been made was based on the fact

that the Petitioner submitted fraudulent documentation claiming payment for 74

job placements that had not been made.

9. In fairness to the Petitioner it should be noted that at the time the

fraudulent documentation was submitted the officers and managing agents of the

Petitioner did not know that one of their employees was preparing fraudulent

documentation. Further, as soon as the officers and managing agents of the

Petitioner discovered that one of their employees had been submitting fraudulent

documentation, they candidly reported the problem to the Respondent.

10. The employee who prepared the fraudulent documentation described above

did not abscond with the proceeds derived from his fraudulent actions. The

$53,724.00 that was paid on the basis of the 74 fictitious job placements was

paid to and retained by the Petitioner.

11. The Respondent did very little in the way of monitoring the subject

contract. More extensive monitoring might well have resulted in earlier

detection of the fraudulent documentation submitted by Petitioner's employee.

CONCLUSIONS OF LAW

Based on the foregoing findings of fact and on the applicable statutes,

rules, and court decisions, I make the following conclusions of law.

12. The Division of Administrative Hearings has jurisdiction over the

subject matter of and the parties to this proceeding. Sec. 120.57, Fla. Stat.

13. It is well settled in this state that the language of written

contracts, like the language of statutes, must be given its plain and ordinary

meaning. It is also well established that contracts are to be applied and

enforced so as to give meaning to the intent of the parties as expressed in the

contract. It is clear from the title of the contract and from the language of

the contract that the sole basis for payment to the Petitioner under the

contract is the placement of eligible individuals into eligible jobs. For each

such job placement the Petitioner is entitled to payment in the amount of

$726.00. The Petitioner is not entitled to payment for performing any other

activity required under the contract. The Petitioner was paid for 74 fictitious

job placements based on the fraudulent activities of its own employee. There is

no basis under the contract for the Petitioner to retain the amount paid for

those 74 fictitious job placements.

14. The Petitioner argues that the contract is ambiguous and that such

ambiguities should be resolved in the Petitioner's favor. There are provisions

in the contract which appear to be ambiguous, but none of those provisions bear

on the issues in this case. The portions of the contract relevant to this case,

principally the portions that set forth the basis for payment to the Petitioner,

are clear and unambiguous, and those provisions clearly limit the Petitioner's

entitlement to payment under the contract to one specific thing, successful job

placements.

15. The Petitioner also argues that it should be excused from repayment of

the $53,724.00 in dispute because the fraudulent actions of its employee were

unforeseeable. The established law is otherwise. As noted at 2 Fla. Jur. 2d,

Agency and Employment, Sec. 90:

It is well settled that a principal is

liable for the deceit and false representa-

tions made by his agent in the scope and

course of his employment, and it makes no

difference whether the principal authorized

or was cognizant of the misrepresentations

and deceit of his agent or not... One who

puts an agent in a position that enables the

agent, while apparently acting within his

authority, to commit a fraud upon third

persons, is liable to such third persons for

the fraud and he is not relieved from liabi-

lity by the fact that the apparent agent

acts entirely for his own purposes, unless

such third persons have notice of such fact.

16. The Petitioner next argues that it should be excused from repayment

because the Respondent facilitated the fraud committed by Petitioner's employee.

In this regard, Petitioner directs attention to the fact that during the

contract period the Respondent deleted a requirement that the employer sign Form

BRI-100 when a placement was made, and that this deletion facilitated the

implementation of the fraud. What this argument overlooks is that with or

without the requirement of the employer's signature on the Form BRI-100,

Petitioner's employee was required to forge the same number of signatures to

work his fraud. The argument also overlooks the fact that the deletion of the

requirement that the employer sign the Form BRI-100 was at the behest of the

Petitioner, because the Petitioner was having problems getting employers to sign

the forms. More fundamentally, the Petitioner must bear the responsibility for

the wrongdoing of its own employee, particularly where, as here, the Petitioner

has reaped the benefit of the wrongdoing.

17. A further Petitioner argument is that it should be excused from the

repayment sought by the Respondent because the Respondent failed to properly

monitor the Petitioner's performance under the contract. In this regard it is

argued that better monitoring would likely have resulted in earlier detection of

the fraudulent activities of the Petitioner's employee. The argument misses the

point. The Petitioner is not being penalized because of the fraudulent

activities of its employee; it is being asked to return the fruits of that

fraudulent activity. The timing of the discovery of the fraud has no bearing on

the Petitioner's obligation to repay fraudulently obtained funds.

18. The Petitioner next argues that it should be excused from repayment

because it has substantially performed the contract. The proof is otherwise.

With regard to the 74 fictitious placements which form the basis for the

Respondent's claim for repayment, the greater weight of the evidence is that

those 74 alleged placements were total frauds. This is not a case of doing the

substance of the job and then "fudging" a little bit on the paperwork; it is a

case of claiming $53,724.00 on the basis of total fiction.

19. The Petitioner's final argument is another variation on the theme of

"unforeseeable intervening actions." There is neither a factual nor a legal

basis to support this argument. The only case cited in support of this argument

deals with tort law rather than contract law. Simply stated, the Petitioner is

not entitled under the subject contract to retain funds paid to it on the basis

of fraudulent documents provided by its own employee.

RECOMMENDATION

Based on all of the foregoing, I recommend the entry of a Final Order

finding that the Petitioner has received $53,724.00 to which it is not entitled

under the subject contract and ordering the Petitioner to repay that amount to

the Respondent.

DONE AND ENTERED this 20th day of January, 1989, at Tallahassee, Florida.

___________________________________

MICHAEL M. PARRISH, Hearing Officer

Division of Administrative Hearings

The Oakland Building

2900 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 20th day of January, 1989.

APPENDIX TO RECOMMENDED ORDER

IN CASE NO. 88-2755

The following are my specific rulings on all proposed findings of fact

submitted by all of the parties.

Findings proposed by Petitioner:

The Brief of Petitioner does not contain any section specifically

identified as proposed findings of fact. It does contain a distinct section

captioned "STATEMENT OF THE FACTS," which I have treated as the Petitioner's

proposed findings. The page numbers below refer to pages of the Brief Of

Petitioner.

Page 2: All but last four lines are rejected as subordinate and unnecessary

background details. The last four lines are accepted in substance.

Page 3: All but last five lines are accepted in substance. The last full

paragraph on the page is rejected as unnecessary commentary.

Page 4: First fourteen lines (plus last line on page 3) accepted in

substance, but with most details omitted as unnecessary. The remainder of page

4 and the top four lines of page 5 are rejected as subordinate and unnecessary

details, as for the most part irrelevant, and as containing implications

contrary to the greater weight of the evidence.

Page 5: First full paragraph is rejected as constituting subordinate and

unnecessary details; I have found that little was done to monitor the contract

performance. The last four lines are rejected as argument or unnecessary

commentary rather than findings of fact.

Page 6: First twenty lines rejected as irrelevant and as unnecessary

details. Paragraph beginning at sixth line from bottom is accepted in

substance.

Page 7: Top four lines (and last line of page 6) rejected as Irrelevant.

Lines five through twenty-two are for the most part rejected as irrelevant or as

not supported by persuasive competent substantial evidence, with exception of

proposed finding that an employee committed fraud and that Petitioner promptly

reported the fraud when it was discovered. Last four lines rejected as

irrelevant.

Page 8: First full paragraph is rejected as being for the most part

irrelevant and as in part contrary to the greater weight of the evidence.

Second full paragraph is rejected as argument or unnecessary commentary. Third

full paragraph is rejected as Irrelevant. Last four lines accepted in substance

with some unnecessary details omitted.

Page 9: Top two lines rejected; the greater weight of the evidence is that

all "disallowed costs" were caused by the fraud of one employee. First full

paragraph rejected as irrelevant. Second full paragraph is rejected as for the

most

12 part irrelevant, although some details have been included. Last three

lines rejected as irrelevant.

Page 10: Rejected as irrelevant.

Findings proposed by Respondent:

The Brief Of Respondent does not contain any section specifically

identified as proposed findings of fact. It does contain a distinct section

captioned "STATEMENT OF THE CASE AND FACTS," which I have treated as the

Respondent's proposed findings of fact. The page numbers below refer to pages

of the Brief Of Respondent.

Page 2: Rejected as subordinate and unnecessary background details.

Page 3: Rejected as subordinate and unnecessary background details.

Page 4: First paragraph accepted in substance. The remainder of this page

is accepted in substance with some details and some argumentative passages

omitted.

Page 5: Accepted as correct statement, but omitted as unnecessary details.

Page 6: First paragraph rejected as constituting subordinate and

unnecessary details. Second paragraph rejected as constituting subordinate and

unnecessary details. Third paragraph rejected as constituting subordinate and

unnecessary details. Last paragraph accepted in substance with unnecessary

details omitted.

Page 7: Rejected as subordinate and unnecessary details.

COPIES FURNISHED:

Sidney L. Matthew, Esquire

Gorman & Matthew, P.A.

Post Office Box 1754

Tallahassee, Florida 32302

David J. Busch, Esquire

Department of Labor and

Employment Security

Suite 131, Montgomery Building

2562 Executive Center Circle, East

Tallahassee, Florida 32399-0657

Hugo Menendez, Secretary

Department of Labor and

Employment Security

206 Berkeley Building

2590 Executive Center Circle, East

Tallahassee, Florida 32399-2152

Stephen Barron, Esquire

General Counsel

Department of Labor and

Employment Security

Suite 131, Montgomery Building

2562 Executive Center Circle, East

Tallahassee, Florida 32399-0657

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF LABOR AND EMPLOYMENT SECURITY

FLORIDA AFL-CIO UNITED LABOR

AGENCY, INC.,

Petitioner,

vs. CASE NO. 88-2755

STATE OF FLORIDA DEPARTMENT OF

LABOR AND EMPLOYMENT SECURITY,

Respondent.

_________________________________/

FINAL ORDER

THIS MATTER came on for final agency action before Robert D. Johnston,

Director of the Division of Labor, Employment and Training, upon the Recommended

Order dated January 20, 1989, by Michael M. Parrish, an administrative hearing

officer with the State of Florida, Division of Administrative Hearings, and upon

the Petitioner's exceptions to Recommended Order of Hearing Officer, dated

February 2, 1989, copies of which are attached hereto as Exhibit A and Exhibit

respectively, and made a part hereof by reference.

Upon review of the Recommended Order, the argument of the parties, and

after a review of the complete record in this case, I hereby make the following

findings and conclusions.

CONCLUSIONS OF LAW

1. The conclusions of law set forth in the Recommended Order are approved

and adopted and incorporated herein.

2. There is competent substantial evidence to support the conclusions of

law.

RULING ON EXCEPTIONS

Petitioner filed four exceptions to the Recommended Order, which shall be

addressed in sequence.

Exception No. 1. Petitioner first excepts all findings of fact proposed by

Petitioner which were rejected by the hearing officer. My review of the record

indicates that the hearing officer's findings are supported by competent

substantial evidence. That being the case, I am not at liberty to reject those

findings. Section 120.57(1)(b)10, Florida Statutes. This exception, therefore,

is rejected.

Exception No. 2. Petitioner objects to the conclusion that Petitioner

repay the sum of $53,724 on the grounds that Petitioner was not entitled to said

funds pursuant to the contract. Having determined that there was competent

substantial evidence to support the hearing officer's findings of fact and

conclusions of law, it follows that the recommendation that Petitioner repay the

amount so found to be due would also be supported thereby. This exception,

therefore is rejected.

Exception No. 3. This exception actually objects to seven conclusions of

law, each of which shall be addressed.

1. Petitioner excepts conclusion of law contained in Paragraph 3 as being

contrary to the evidence. Based upon my review of the record, the hearing

officer's conclusion that the portions of the contract that set forth the basis

of payment to the Petitioner are clear and unambiguous is supported by competent

substantial evidence. The exception, therefore, is rejected.

2. a. Petitioner first objects to the conclusion of law contained in

Paragraph 4 of the Recommended Order concerning excuse from repayment on the

grounds that the actions of Petitioner's employee were unforeseeable. The

hearing officer has accurately described the law of agency as it applies to the

facts of this case. The exception, therefore, is rejected.

b. Petitioner excepts conclusion of law contained in Paragraph 5 of the

Recommended Order relating to excuse from repayment on the grounds that

Respondent facilitated the fraud committed by Petitioner's employee. There is

no competent evidence in the records to support Petitioner's contention on this

point. This exception, therefore, is rejected.

c. Petitioner excepts the conclusion of law contained in Paragraph 6 of

the Recommended Order, asserting excuse from repayment on the grounds that

Respondent failed to properly monitor performance under the contract. Paragraph

14.e. of the subject contract provides, in pertinent part:

The Contractor [Petitioners is

responsible for fulfilling all

terms and conditions of this

Contract. While the DLET

shall monitor the Contractor's

performance under the Contract,

the Contractor remains solely

responsible for its performance

The LET monitoring of the

Contract shall not constitute a

waiver or modification of any

term or condition. (Emphasis

supplied.)

d. Petitioner excepts the conclusion of law contained in Paragraph 7 of

the Recommended Order on the grounds that Petitioner should be excused from

repayment because it has substantially performed the contract. Based upon my

review of the record, the hearing officer properly found that the 74 alleged

placements were total frauds. This exception, therefore, is rejected.

Exception No. 4. Petitioner objects to the conclusion of law contained in

Paragraph 8 as being contrary to Barrett, Daffin & Figg v. McCormick, 362 So.2d

966 (Fla. 1st DCA 1978). It is apparent that the cited case is inapplicable to

the instant case since the employer had no contract with the injured party

(McCormick) and did not directly benefit from its employee's fraud, as the

Petitioner has in this action. The hearing officer has, again, correctly

concluded that the cited case is distinguishable from the case at bar. The

exception, therefore, is rejected.

Exception No. 5. Petitioner also takes exception to the conclusion of law

contained in Paragraph 4 of the Recommended Order as being in direct

contradiction to Martin v. United Security Services, Inc., 373 So.2d 720 (Fla.

1st DCA 1979). Although not previously cited by the Petitioner, Davis is

clearly distinguishable on the grounds that since the Petitioner received the

funds associated with its employee's fraudulent activity, it is reasonable to

conclude that the motive for the employee's actions was the furtherance of

Petitioner's interests, not the employee's. Since the employer has directly

benefited from its employee's actions, it is liable for those actions. This

exception, therefore, is likewise rejected.

THEREFORE, IT IS HEREBY ORDERED AND ADJUDGED AS FOLLOWS:

1. That Petitioner, FLORIDA AFL-CIO UNITED LABOR AGENCY, INC., has

received the sum of $53,724.00 to which it was not entitled under its contract

with Respondent, STATE OF FLORIDA DEPARTMENT OF LABOR AND EMPLOYMENT SECURITY.

2. That Respondent recover from Petitioner the sum of $53,724.00 as

repayment therefore.

DONE and ORDERED this 17th day of March, 1989, at Tallahassee, Leon County,

Florida.

_______________________________

ROBERT D. JOHNSTON, Director

Division of Labor, Employment

and Training

Florida Department of Labor

and Employment Security

Suite 300, Atkins Building

1320 Executive Center Drive

Tallahassee, Florida 32399-0667

COPIES FURNISHED:

Sidney L. Matthew, Esquire

Gorman & Matthew, P.A.

Post Office Box 1754

Tallahassee, Florida 32302

Hugo Menendez, Secretary

Florida Department of Labor and

Employment Security

Suite 206, Berkeley Building

2590 Executive Center Circle, East

Tallahassee, Florida 32399-2152

Stephen D. Barron, Esquire

Florida Department of Labor and

Employment Security

Suite 131, Montgomery Building,

2562 Executive Center Circle, East

Tallahassee, Florida 32399-0657