98-002496 Department Of Labor And Employment Security, Division Of Workers` Compensation vs. Patrick Jackey, D/B/A Bert`s Word Of Color Status: Closed Recommended Order on Friday, December 4, 1998.

Summary: Petitioner proved that one worker was an employee, rather than an independent contractor, so as to make his employer liable for $8356.42 in penalty based on unpaid worker`s compensation premiums.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF LABOR AND )

EMPLOYMENT SECURITY, DIVISION )

OF WORKERS' COMPENSATION, )

)

Petitioner, )

)

vs. ) Case No. 98-2496

)

PATRICK JACKEY, d/b/a )

BERT'S WORLD OF COLOR, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division of

Administrative Hearings, conducted the final hearing in Fort

Myers, Florida, on October 5, 1998.

APPEARANCES

For Petitioner: Louise T. Sadler

Senior Attorney

Department of Labor and

Employment Security

Suite 307, Hartman Building

2012 Capital Circle, Southeast

Tallahassee, Florida 32399-2189

For Respondent: Patrick Jackey, pro se

STATEMENT OF THE ISSUE

The issue is whether Respondent unlawfully failed to obtain

workers' compensation insurance coverage for five employees

between May 1995 through April 1998 and, if so, what is the

proper amount of the penalty.

PRELIMINARY STATEMENT

By Notice and Penalty Assessment Order issued May 5, 1998,

Petitioner alleged that Respondent unlawfully failed to carry

workers' compensation insurance coverage for his employees and

assessed a penalty of $43,488.

By Petition for Formal Hearing or Request for Review,

Respondent requested a formal administrative hearing.

At the hearing, Petitioner called four witnesses and offered

into evidence seven exhibits. Respondent called no witnesses and

offered into evidence two exhibits. All exhibits were admitted.

The court reporter filed the transcript on November 9, 1998.

FINDINGS OF FACT

1. Respondent has been a residential painting subcontractor

in Florida for the past 12 years. From May 1995 through April

1998, Respondent provided no workers' compensation insurance

coverage for any persons whom he hired to work as painters.

Respondent has treated such persons as independent contractors,

rather than employees.

2. On April 29, 1998, one of Petitioner's investigators

visited a residential job site in the Rotunda development in

Englewood. He found two painters working inside a new home that

was under construction.

3. Interviewing Respondent, the investigator learned that

Respondent was in charge of the painting crew and was supplying

the painting labor and material for the house. Respondent stated

that he was paid by another contractor, who was paid by the

general contractor.

4. Respondent admitted that he paid his crew on an hourly

rate for the work that they performed each week. Respondent's

testimony at the hearing that he paid his crew by the job, and

not a specific hourly rate, is discredited.

5. Dale Keaser, one of the two painters, testified. He has

worked for Respondent since August 1996. At all times,

Respondent paid Mr. Keaser $10 per hour. Respondent never paid

Mr. Keaser by the job, and Mr. Keaser never incurred any expenses

in connection with the work, except for occasional use of his

truck, for which Respondent reimbursed him for gas. Respondent

invariably supplied the materials necessary to do the work.

Respondent directed Mr. Keaser what to do and when to do it, and

Respondent inspected the work frequently. Mr. Keaser never had

an exemption from workers' compensation coverage and never

provided Respondent an affidavit attesting to his satisfaction of

the criteria defining independent contractors.

6. Respondent paid Mr. Keaser wages of $400 in 1996,

$11,095 in 1997, and $3080 in 1998. The premium rate of the

National Council on Compensation Insurance for each of these

years was, respectively, 32.18 percent, 28.47 percent, and 28.92

percent. The resulting unpaid amount of workers' compensation

premium is thus $4178.21.

7. Petitioner has failed to prove by admissible evidence

that the other persons working for Respondent were employees.

CONCLUSIONS OF LAW

8. The Division of Administrative Hearings has jurisdiction

over the subject matter. Section 120.57(1), Florida Statutes.

(All references to Sections are to Florida Statutes.)

9. Section 440.10(1)(a) provides that every employer must

obtain workers’ compensation coverage for its employees.

Respondent satisfies the statutory threshold, as set forth in

Section 440.02(15)(b)2, of one employee in the construction

industry. The issue in this case is whether Petitioner has shown

that Respondent's workers were employees, rather than independent

contractors.

10. Section 440.02(13)(d)1 provides that "employee" does

not include "independent contractor" if

a. The independent contractor maintains a

separate business with his own facility,

truck, equipment, materials, or similar

accommodations;

b. The independent contractor holds or has

applied for a federal employer identification

number, unless the independent contractor is

a sole proprietor who is not required to

obtain a federal employer identification

number under state or federal requirements;

c. The independent contractor performs or

agrees to perform specific services or work

for specific amounts of money and controls

the means of performing the services or work;

d. The independent contractor incurs the

principal expenses related to the service or

work that he performs or agrees to perform;

e. The independent contractor is responsible

for the satisfactory completion of work or

services that he performs or agrees to

perform and is or could be held liable for a

failure to complete the work or services;

f. The independent contractor receives

compensation for work or services performed

for a commission or on a per-job or

competitive-bid basis and not on any other

basis;

g. The independent contractor may realize a

profit or suffer a loss in connection with

performing work or services;

h. The independent contractor has continuing

or recurring business liabilities or

obligations; and

i. The success or failure of the independent

contractor’s business depends on the

relationship of business receipts to

expenditures.

12. Section 440.10(1)(g) provides that a person is

conclusively presumed to be an independent contractor if he

provides his general contractor with an affidavit attesting that

he meets all of the requirements of Section 440.13(d) and either

a valid certificate of workers’ compensation insurance or a valid

certificate of exemption issued by Petitioner.

13. The burden of proof is on Petitioner, which seeks to

impose a fine against Respondent. The standard of proof is a

preponderance of the evidence. Although violations of Chapter

440 can result in a substantial fine, which may even render an

employer insolvent, the employer nonetheless does not have a

license or property interest at stake so as to raise the standard

of proof to clear and convincing evidence.

14. The only competent, admissible evidence concerning the

employment status of persons working for Respondent comes from

the observations of Petitioner's investigator, who saw that

Mr. Keaser and his coworker were clearly engaged in the

construction industry, opined as to the so-called "pattern of

payroll" that he deduced from Respondent's business records, and

generally established jurisdictional prerequisites; the

admissions of Respondent to Petitioner's investigator; the

testimony of Respondent; the testimony of Mr. Keaser; and

Respondent's business records.

15. This evidence establishes that Mr. Keaser served as an

employee of Respondent. His employment clearly failed the first,

third, fourth, fifth, and sixth criteria for establishing

independent-contractor status and probably failed the seventh,

eighth, and ninth criteria, as well.

16. However, the evidence is insufficient to show that Mr.

Keaser's coworker or that other workers in the past also served

as employees, rather than independent contractors, of Respondent.

17. The record does not establish that Respondent's workers

had exemption certificates, so Respondent is not entitled to the

benefit of the conclusive presumption that they were independent

contractors. Respondent bears the burden of showing entitlement

to this conclusive presumption because he would enjoy the benefit

that the presumption confers.

18. Section 440.02(13)(d)1 establishes nine criteria to

determine if an individual is an employee or independent

contractor. To qualify as an independent contractor, an

individual must meet all nine criteria. The Legislature

recognized that this is a departure from the balancing approach

present in other statutory schemes, such as federal tax law and

labor law, or under the common law: the flush language of Section

440.02(13)(d)1 applies the common law test for independent

contractors to individuals in certain classes of employment.

19. In cases such as this that do not involve the

conclusive presumption concerning employment status, the question

arises as to which party has the burden of proof or burden of

going forward with the evidence on the issue of the employment

status of the two individuals. In other words, the question is

whether Petitioner must prove that Respondent's workers are

employees and not independent contractors or whether Respondent

should have to prove that they are independent contractors and

not employees.

20. The facts concerning an individual’s employment status

are more available to the employer than to Petitioner, so as to

suggest that the burden of going forward with the evidence as to

employment status should be on Respondent. Imposing the burden

of going forward with the evidence as to the employment-status

issue would also relieve Petitioner of the difficult burden of

proving a negative--i.e., that the individuals are not

independent contractors.

21. However, imposing upon Respondent the burden of going

forward with the evidence on the employment-status issue

effectively shifts the entire burden of proof to Respondent, at

least in cases such as the present where the sole issue is the

employment status of workers. The purpose of placing the burden

of proof on Petitioner is to relieve Respondent of the burden of

proof that it is not guilty of the violation with which it is

charged. Moreover, the burden imposed upon Petitioner is not

great because, in cases governed by the statutory criteria,

Petitioner must merely show that the putative employees failed to

meet any one of the nine criteria.

22. Thus, Petitioner must prove that the workers are not

independent contractors, rather than require Respondent to prove

that they are. Absent a showing that the workers failed any one

of the nine statutory tests, Respondent prevails.

23. The only criteria implicated by the business records,

in terms of the "pattern of payroll," are the third and sixth

criteria. The third criterion is that the "independent

contractor performs or agrees to perform specific services or

work for specific amounts of money and controls the means of

performing the services or work." The sixth criterion is that

the "independent contractor receives compensation for work or

services performed for a commission or on a per-job or

competitive-bid basis and not on any other basis." Recurring

payments of equal amounts to a single payee may suggest hourly

employment or payment on a per-job basis for a series of

identical jobs requiring the same amount of time to perform--

e.g., $400 per house with one house done per week.

24. Thus, Petitioner has proved only that Respondent failed

to pay $4178.21 in workers' compensation insurance premiums on

behalf of Mr. Keaser.

25. Section 440.107(3) provides that, in addition to any

stop-work order or other relief, Petitioner may assess an

employer failing to obtain workers’ compensation coverage a

penalty in the amount of double the amount that the employer

"would have paid during periods it illegally failed to secure

payment of compensation in the preceding 3-year period based on

the employer’s payroll during the preceding 3-year period" or, if

greater, $1000.

26. The statutory penalty in this case is thus double the

unpaid premium amount, or $8356.42. Section 440.107(3) provides

for the accrual of interest at the rate of one percent per month.

RECOMMENDATION

It is

RECOMMENDED that Petitioner enter a final order asse ssing

Respondent a penalty of $8356.42, plus any lawful interest.

DONE AND ENTERED this 4th day of December, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 4th day of December, 1998.

COPIES FURNISHED:

Louise T. Sadler

Senior Attorney

Department of Labor and

Employment Security

Suite 307, Hartman Building

2012 Capital Circle, Southeast

Tallahassee, Florida 32399-2189

Patrick Jackey

Bert's World of Color

365 South Oxford Drive

Englewood, Florida 34223

Edward A. Dion, General Counsel

Department of Labor and Employment Security

307 Hartman Building

2012 Capital Circle, Southeast

Tallahassee, Florida 32399-2152

Douglas L. Jamerson, Secretary

Department of Labor and Employment Security

303 Hartman Building

2012 Capital Circle, Southeast

Tallahassee, Florida 32399-2152

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order must be filed with the agency that will

issue the Final Order in this case.