Stop-Work Orders/Penalty Assessment For Companies Not Based In Florida Can Be A Big Surprise

DATE: June 2, 2019

POSTED BY: Kris Dunn

Hello friends, this scenario happens quite often in Florida.

A good case that I like to relate is the case of U.S. Builders, L.P. v. DFS, DoAH Case#07-4428 (see docket at: https://www.doah.state.fl.us/ALJ/searchDOAH/docket.asp?T=12/11/2012%202:59:36%20PM).  This case actually has FOUR fascinating components; Today, I will talk about the issues involved regarding U.S. Builders, L.P.’s (hereafter, “USB”) reliance on their Texas workers’ compensation insurance policy. The other component is USB’s Request for Hearing, this is also very interesting, but since it happens so rarely, I will talk about that issue in my next blog post. Another component, not mentioned in the case above, is what happens when one of your subcontractors fails to get a valid form of workers’ compensation coverage. The final component is how USB narrowly avoided a Stop-Work Order and got an Order of Penalty Assessment, instead (This will be talked about in another blog entry later.).

So the basic facts behind this case are pretty simple: USB is contracted to build a Walgreens in the Jacksonville area. Because it’s a relatively large construction project it brought the attention of the Division of Workers’ Compensation Compliance Bureau (“DWC”). The DWC investigators stopped by and checked to see if the general contractor, USB, and its various subcontractors had valid workers’ compensation insurance policies (“WC policy”). The investigators contacted the USB foreman and he showed the investigators his WC policy/ The WC policy was from a Texas insurance company and it was a valid WC policy for Texas, included on the policy was an “all-states endorsement.” An “all-states endorsement” appears to be one of those insurance salesman things that they pitch when they don’t really know what they are talking. This type of endorsement allows you to work in a lot of states, but not all of the states, it covers about 35 of the 50 states (It should be called a “some-states-endorsement”.).

So we have a company, USB, with a WC policy that’s valid in Texas and quite a few other states. They come to Florida to work. They get the permit to begin construction. They start working, then they get issued a Order of Penalty Assessment (“OPA”) for even though they have a WC policy (Why they did not receive a  Stop-Work Order is another topic). What went wrong?

Well, I was the prosecutor in this case, so I am very familiar with the details.

1. The Texas WC Policy was valid in Texas and in many other states. When we deposed the insurance carrier, the carrier even said “that were an accident to happen in Florida, USB would be covered.” This seems pretty much good for the righteous intent and purpose of the law, right? Not quite, see #2.

2. Florida has a zero tolerance policy for those companies who come here to work and don’t have workers’ comp coverage. In the DWC’s viewpoint, USB had NO coverage. USB and it’s good faith belief that it did have coverage was inconsequential. The fact that the insurance carrier, under oath at the deposition, stated that any industrial accident would be covered made a hill-of-beans worth of difference.

3. What needed to have happened for the DWC to have been satisfied, is for the WC policy to have contained a Florida Specific Endorsement. The problem lies at the foot of the insurance salesman. The insurance salesman did not know enough about workers’ compensation coverage requirements, outside of Texas. If he did, he would have sold USB the Florida Specific Endorsement.

So the moral of the story is: you are on the hook for bad choices/ ignorance of your insurance agent. Florida is not a reciprocal state for “all-state” WC policies. Certain states like Florida, New York, California, and a few other “big union” or large population states require their own state-specific endorsements.

The good news is that an error committed by your insurance agent will usually be covered by his “errors and omissions” policy, which they are required to have. This is why the case went to trial in retrospect, because without that judgment against USB, they probably would not have been able to recover from it. I’m am pretty sure in the end that is why we spent nearly a year litigating a $14k case. I would be sure that USB’s legal bills were covered by the insurance agent’s policy.

Now on to the interesting part:  Why doesn’t Florida accept other states WC coverage? After all, if the insurance carrier mentioned in their deposition that they would have covered any industrial accident that occurred, whether or not the policy was valid in Florida, is not that want the spirit of the law wants: workers to be covered in case of an accident? My personal understanding of the issue which was confirmed when the opposing counsel asked a similar question to our Jacksonville Bureau Chief. Essentially, there are several reason: most insurance companies are not as generous as the carrier that answered the deposition. If they are not legally required to cover an accident, then the insurance is operating on charity’s sake. Florida lawmakers don’t believe that insurance companies will be as charitable as that company, that means if a worker did get hurt, he could become a burden to the public as he check’s into the emergency room and is then forced to take unemployment, the medical bills may not be covered by any insurance but if the workers’ comp policy is in effect all of those things are covered. A second rationale is that certain states outside of Florida have lower WC policy rates than Florida. This means that the out-of-state company may actually have a competitive advantage if the home state has a lower WC insurance premium rate (each state has their own rates assigned due to various factors such as litigation, payout amounts, etc.). So imagine a scenario when a hurricane hits Florida and part of the recovery efforts include having out-of-state contractors come to Florida for the rebuilding effort (Dept. of Business Professional Regulation will waive the license requirements if you are licensed in another state); you don’t want to have a large number of inexperienced crews of roofers falling off roofs, getting denied by their out-of-state carriers and then have a giant public expense incurred by the residents of Florida.

Well, I hope that helped, and as I mentioned there are several other parts of this case which merit discussion, stay tuned!

Stop Work Order Case; The Potential Benefits Of Not Producing Records. DFS v. ALL PHASE CONSTRUCTION AND DEVELOPMENT, LLC

This is a neat case about the benefits of not producing records and going to trial. All Phase Construction and Development, LLC (“All Phase,” hereafter) received a Stop Work Order and a Penalty Assessment totaling $34,141.15. The full docket can be accessed via https://www.doah.state.fl.us/ALJ/searchDOAH/docket.asp?T=11/29/2012%202:43:27%20PM.

According to the Recommended Order, the DFS investigator received an anonymous complaint alleging that All Phase did not carry any Workers’ Compensation Insurance Coverage “WC coverage”). The Investigator arrived at the office of All Phase and met a Receptionist. The Principal was not in the office. The investigator asked about the number of employees All Phase had and the nature of WC coverage, if any. The receptionist said there six total employees. The investigator was able to find, through his computer database, that All Phase had used a payroll company for one year, but that coverage had already expired. The investigator returned the following day and posted a Stop Work Order along with a Request For Production of Business Records. No records were ever produced by All Phase. The only records the investigator was able to find was the one year-long coverage with the payroll company.

After much legal rigmarole, this case finally entered the Division of Administrative Hearings and was heard in early September 2012. After the hearing, the Administrative Law Judge (“ALJ”) ruled that the Department could only sustain $18,263.29 worth of penalty. The Department did not prove that all the workers named by the secretary were employed by All Phase. The Department could not prove that the workers listed on the payroll company’s ledgers were employed by All Phase at times when the coverage lapsed. The ALJ could only sustain a penalty against the receptionist and the Principal.

The moral of the story: Sometimes you have to go to court to get the right answer. The Department is the enforcing authority, sometimes they believe your version, sometimes they don’t.

However, the lack of records did benefit the company if one assumes a “worst case scenario” of having four other construction workers on the clock for two years (remember there was coverage for one year of the three year period). Again, I entitled this post the POTENTIAL benefits based on the fact that assuming the worst case scenario the company could have been liable for a lot more. The likelihood in Florida’s tepid construction climate that all four workers were putting in 40 hour weeks for three years straight is unlikely and their potential liability for penalty may have been lower than what the Judge ordered. The real moral of the story is that if you do have records let a professional look at them (me!) to determine what the true penalty really is. If the true penalty is higher than the imputed penalty, then the withholding of records may be a good strategy!

*Please note, that as I look at this blog post again, I mentioned the three years’ worth of records requirement in this post written in 2012. In 2015, the Division of Workers’ Compensation amended their rules and now only asks for two years’ worth of records. They also now offer a 25% reduction in penalty assessment if the records are timely produced. Two very different factors from when this was posted in 2012.

If you ever have any questions about how to handle your business records, please feel free to call the office at 850-583-5380, and we can help you out with handling your SWO and business records issues!

How to avoid a Stop Work Order!

It's relatively easy to be issued a Stop Work Order (SWO) but how do you avoid it?

1. Get your workers' compensation coverage in place! This is a no-brainer, but I meet so many 1st-time business owners who are unaware of their need to get it. Basically, if you are in the construction fields, you need to be covered by a workers' compensation exemption, have an employee leasing company cover your wages, and/or have a workers' compensation policy.

If you are in the non-construction fields, you can skate by without the coverage listed above if you have fewer than four employees.

2. If the Division of Workers' Compensation (DWC) investigator starts asking questions to you or your crew, simply don't answer! The DWC investigators are not cops. They cannot hold you against your will, force you to answer questions, or make you show them your insurance paperwork. This doesn't mean they can't ask other people, look at any permits pulled, or read the sticker on the side of your work truck advertising your business, and send you a legal demand later; but you are not required to help the person that wants to shut your business down.

3. Once you get a Stop Work Order, sometimes the SWO may have been levied by mistake. This is absolutely true. When I was a DWC prosecutor there were numerous times we had to tell the investigator to drop the SWO because it was based on either bad evidence or bad law. As an attorney, who defends companies that have received SWOs, I have been able to get quite a few companies' SWOs removed!

Once again, if you get a Stop Work Order, please feel free to give our office a call and see if we can help you.

How did they find your business to give you a Stop Work Order?

You may have a question of "how'd they find out that I did not have workers' compensation coverage?"
Well there are several ways that you got that Stop Work Order (SWO):

  1. Most common is the random site visit. This is when the Division of Workers' Compensation (DWC) investigator drives by a construction site and just checks up on the people working there.
  2. The other common method is when the DWC checks the Unemployment Compensation Tax (UCT) rolls and looks at companies with more than three employees, then cross checks those companies with their workers' compensation insurance coverage data base. This method is increasing in use as the technology becomes more refined. When I first started in this field in 2007, this method wasn't invented!
  3. The other way may be from an anonymous  "referral," such as a former worker, a business competitor, or someone with an axe to grind, like a vindictive ex-spouse.
  4. The other method is when the DWC does statewide sweeps, where they will gather a team of investigators, coordinate a target, usually a giant condo or apartment complex in the middle stage of construction, and then descend on the job site 'en masse' and hand out SWOs to every business they find out of compliance.
  5. The final way, fortunately, happens very infrequently, but the injured worker will attempt to secure workers' compensation coverage, finds out that there is none, and then calls the DWC.

Whatever way, shape, or form, that Stop Work Order comes in, you, as a business owner must take it very seriously, since there are potential felony charges that could be levied against you and large financial penalties levied against your company. Please contact our firm, we are eager to help you and have handled more SWO trials than any of our competitors. Experience counts.

The Stop-Work Order Explained

Stop Work Orders and the Construction Industry

PLEASE FORGIVE THE FORMATTING BELOW. THIS WAS ORIGINALLY PREPARED ON A WORD DOCUMENT AND WHEN I TRANSFERRED IT TO THIS BLOG, THE FORMAT OF THE OUTLINE DID NOT TRANSFER AS SMOOTHLY AS PLANNED.

  1. Sources of law for the Stop Work Order (SWO):
    1. Chapter 440, specifically 440.107.
    2. Florida Administrative Code 69L-6.
    3. Civil enforcement authority: Department of Financial Services, Division of Worker’s Compensation (DWC), Bureau of Compliance.
    4. Criminal enforcement authority: DFS, Division of Insurance Fraud, and any other local law enforcement authority. See Sec. 440.105.

i.      The penalties begin at a 3rd Degree Felony and go all the way to a 1st Degree Felony, if you have committed over $100,000 in fraud.

ii.      It used to be rare for these types of prosecutions but apparently they are picking these cases up more.

  1. The genesis of an SWO:
    1. Bureau of Compliance sends out an investigator.

i.      Over 2000 SWOs issued each year.

  1. For construction companies/ jobsites you are “easy money” for the investigator. They can see you a mile away and they don’t have to get out of their car.

i.      Construction rules v. Non-construction rules

  1. Everyone in the construction field must be covered by WC
    1. Coverage through:

i.      Exemption

ii.      WC policy (stand-alone)

iii.      Payroll company/ Employee leasing service

  1. Sole proprietors must be covered despite the insanity of it.

i.      If a sole proprietor injures himself on the job would he sue himself?

ii.      The ease of spotting a jobsite (part 1):

  1. Investigator is in the state-issued Chevy Impala just driving around
  2. 7 districts in FL and roughly 40 investigators, total.
  3. Inv. can see a job site and the activity.
  4. Inv. will utilize a wireless tablet and ascertain the companies’ coverage.
  5. They can ascertain companies from the permit board, decals on work trucks, T-shirts, and finally approaching random workers.

iii.      Ongoing investigation (part 2):

  1. Inv. will try and confirm that each company/ entity is in compliance.
  2. Inv. will sometimes believe what they want to believe and place a SWO on the company for no apparent reason. This is an illegal SWO and the ramifications are immense. Including arrest if Div. of Fraud is tagging along!
  3. Remember procedure is paramount.
    1. I’ve been able to overturn several SWOs against a company that was not compliant, due to the procedural issues and mishaps done by the rookie investigator.
    2. I think that a lot of companies just go with the flow unaware that procedure was ever violated.
    3. Getting a SWO
      1. SWO is attached with an Order of Penalty of $1000.00

i.      This is not your final penalty

  1. SWO is attached with a Notice of Rights (NOR).

i.      Back side of SWO, basically outlines what you need to do to protest the SWO

  1. Allows 21 days to lodge protest or you lose your right.

ii.      SWO is attached with an Election of Proceeding.

iii.      Relatively new, since 2010, DFS basically realized that no-one was reading the NOR and consequently made it easier for laymen to protest their SWOs.

iv.      SWO also comes along with a Request for Production of Business Records for Assess Penalty (called a Business Records Request a.k.a. “BRR”).

  1. It demands 3 years worth of records, eg: payroll, WC ins. Info, bank records, taxes, exemptions, etc.
  2. Not required to provide it

i.      If not provided the Inv. can impute a penalty.

  1. Number of workers they saw, plus any corp officers are imputed wage of roughly $60k/ year.
  2. Sometimes it can be a strategy to withhold info, but not very often.
  3. Getting a penalty (Amended Order of Penalty Assessment “AOPA”).
    1. They try and get them done as soon as possible but waits of up to two weeks are common. More if the records are voluminous.
    2. The Inv. used to calculate the penalty, but not since 2009. They have a specialist called a penalty calculator (PC).

i.      Problem is that the PC knows nothing about the business and they really don’t communicate with the inv. except through reading the inv. reports.

ii.      Penalties seem to be produced at a slower rate.

  1. Penalties come with a 21-day NOTICE of RIGHTS.

i.      Second bite at the apple. Technically you protest only the penalty, not the stop, but I have never seen the Dept. argue that.

  1. Penalties may be amended throughout the process of discovery.
  2. Practical Considerations
    1. How do I get the SWO lifted?

i.      Pay 10% of the penalty, arrange a payment plan up to 60 months for the remaining 90% (no interest).

ii.      Prove that your business is in compliance (eg: a policy, exemptions, or covered through a payroll company).

iii.      You then get a CONDITIONAL release of the SWO.

iv.      You are put on a “probationary” status, meaning the department can check on your business for compliance. They passed this agency 2010, but I have never seen them actually do this.

  1. If you fail to pay for several consecutive months, the SWO will be re-imposed.

i.      To lift it again, you have to pay off the ENTIRE BALANCE.

  1. The Dept. does not “settle” cases. They are completely ludicrous about this.

i.      I can remember only twice the Dept. settling a case:

  1. There was a pizza franchise which had a $970k fine that was brought to $3k. Reason: it was an election year 2010 and the owner told Alex Sink, via a polite letter, he would smear her name in the Orlando Sentinel for closing his 5 shops and having 120+ jobs destroyed.
  2. There was a time an attorney depo’d the Chief of the Bureau of Compliance and she failed miserably in her depo and she knocked the penalty from $2.5 million to $435k. She was fearful of being put on the stand at DOAH. This person is not the current Bureau Chief.

ii.      The DWC cites the language of “shall assess” a penalty (based on payroll) as an absolutely inviolate command. The DWC then tells legal that legal will not settle a case. The problem is that the lawyers at legal would love to settle a case and bring some definite money into the DWC Trust Fund. The DWC seems to have this all or nothing approach.

iii.      So when the lawyers lose a case the DWC always blames the lawyers and they never blame themselves for such a crappy case.

  1. I personally believe this system should be retooled and hopefully with a few fee cases that I plan on winning, maybe they will reconsider.
  2. The Division of Administrative Hearings “DOAH” process.
    1. Your filing the Request for Hearing initiates the process.
    2. You have the opportunity to have a hearing anywhere in the state.

i.      Video hearing through “skype-like” technology if you choose to have the hearing outside of Tallahassee.

  1. Strategically best to have it in TLH, I’m just old-school like that.

i.      I tell clients that I see the ALJs in my local bar meetings and have developed a good rapport and reputation (it’s true!).

  1. DOAH, is basically a court very similar to any other, Evidentiary rules are slightly relaxed (hearsay is permitted), but I pretty much treat every case like a circuit court case. I recommend you treat it like Circuit Court.
  2. The trial date is expedited generally held within 40-70 days from the day of the initial order.
  3. The trial is pretty expedited: simple opening, witnesses brought forth, and that’s it. You save your closing for the Proposed Recommended Order (PRO) where you encapsulate your Statement of Facts, Conclusions of Law, and Argument.
  4. The PRO is supposed to be filed by the 10th day after you receive the transcript.

i.      Can request additional time, but this gets the ALJ off the hook for abiding by his timeline for producing his Recommended Order (RO).

  1. Judge required to produce RO within 30 days.

i.      if litigants file PROs later than 10, then the judge has no time limit, but most are pretty good about it.

ii.      Litigants may file “Exceptions” to the RO and direct them to the AGENCY.

  1. RO is filed with AGENCY (DFS) and they have to produce a Final Order (FO)
  2. The FO need not agree with the judge’s finding of facts or conclusions of law, but the standard is pretty high to overturn the judge’s FO.
  3. FO is filed with DOAH
  4. What happens if you get a SWO revoked?
    1. You can seek fees by going after the agency under 120.595.

i.      Up to $50k in legal fees.

ii.      Includes costs, as well.

  1. This is a separate DOAH hearing.
  2. The Department pays out fees maybe once a year.

i.      Only because so few lawyers know how to defeat a SWO

ii.      Not many lawyers know about 120.595

  1. What should you do when your client gets one?
    1. Ensure that they protect themselves by Challenging the SWO and Penalty (remember you get TWO bites) once at SWO and once when the AOPA is issued.
    2. DON’T give them records right off the bat.

i.      I’d like to know if there is more exposure as opposed to less.

  1. Feel free to give me a call
  2. Questions from callers.
    1. Please ID your name, firm, and town.
    2. Fire away with your question(s).

The Importance of Contesting the Stop-Work Order (Part 2).

Hello friends,

This is the second part of my case analysis of US Builders, LP  (see my prior post for part 1: https://www.krisdunnlaw.com/stop-work-orders-order-of-penalty-assessment-for-companies-not-based-in-florida-can-be-a-big-surprise/ ).

This case was almost not a case because US Builders, LP (hereafter “USB”) did not properly contest the Department’s action. When I say “properly contest” what I mean is that USB failed to follow the form for a proper contest. There were seven elements required and USB only enunciated 4 items. They failed to say they wanted a “Hearing,” they said they wanted “an appeal.” They did send this in writing to our district office but not up to Tallahassee’s legal office. This is what they sent: https://www.doah.state.fl.us/DocDoc/2007/004428/07004428L-092607-13350135.PDF

At the time, my boss ordered me to argue this case. I did and I lost, but the importance of making sure your business files a protest (written) is extremely important. Without filing your protest and Request For Hearing, you ensure that your legal rights to contest the Stop-Work Order and the associated penalty.

Now USB, did get their hearing, but they spent a fortune on their lawyer to ensure their legal rights were asserted.

Do your business well by TIMELY filing the request for an Administrative Hearing.

Remember you have 21 days and if you fail to preserve your rights, you are deemed to have been in acceptance of the Stop-Work Order.

Stop-Work Orders/ Order of Penalty Assessment for companies not based in Florida can be a big surprise!

Hello friends, this scenario happens quite often in Florida.

A good case that I like to relate is the case of U.S. Builders, L.P. v. DFS, DoAH Case#07-4428 (see docket at: https://www.doah.state.fl.us/ALJ/searchDOAH/docket.asp?T=12/11/2012%202:59:36%20PM).  This case actually has FOUR fascinating components; Today, I will talk about the issues involved regarding U.S. Builders, L.P.’s (hereafter, “USB”) reliance on their Texas workers’ compensation insurance policy. The other component is USB’s Request for Hearing, this is also very interesting, but since it happens so rarely, I will talk about that issue in my next blog post. Another component, not mentioned in the case above, is what happens when one of your subcontractors fails to get a valid form of workers’ compensation coverage. The final component is how USB narrowly avoided a Stop-Work Order and got an Order of Penalty Assessment, instead (This will be talked about in another blog entry later.).

So the basic facts behind this case are pretty simple: USB is contracted to build a Walgreens in the Jacksonville area. Because it’s a relatively large construction project it brought the attention of the Division of Workers’ Compensation Compliance Bureau (“DWC”). The DWC investigators stopped by and checked to see if the general contractor, USB, and its various subcontractors had valid workers’ compensation insurance policies (“WC policy”). The investigators contacted the USB foreman and he showed the investigators his WC policy/ The WC policy was from a Texas insurance company and it was a valid WC policy for Texas, included on the policy was an “all-states endorsement.” An “all-states endorsement” appears to be one of those insurance salesman things that they pitch when they don’t really know what they are talking. This type of endorsement allows you to work in a lot of states, but not all of the states, it covers about 35 of the 50 states (It should be called a “some-states-endorsement”.).

So we have a company, USB, with a WC policy that’s valid in Texas and quite a few other states. They come to Florida to work. They get the permit to begin construction. They start working, then they get issued a Order of Penalty Assessment (“OPA”) for even though they have a WC policy (Why they did not receive a  Stop-Work Order is another topic). What went wrong?

Well, I was the prosecutor in this case, so I am very familiar with the details.

1. The Texas WC Policy was valid in Texas and in many other states. When we deposed the insurance carrier, the carrier even said “that were an accident to happen in Florida, USB would be covered.” This seems pretty much good for the righteous intent and purpose of the law, right? Not quite, see #2.

2. Florida has a zero tolerance policy for those companies who come here to work and don’t have workers’ comp coverage. In the DWC’s viewpoint, USB had NO coverage. USB and it’s good faith belief that it did have coverage was inconsequential. The fact that the insurance carrier, under oath at the deposition, stated that any industrial accident would be covered made a hill-of-beans worth of difference.

3. What needed to have happened for the DWC to have been satisfied, is for the WC policy to have contained a Florida Specific Endorsement. The problem lies at the foot of the insurance salesman. The insurance salesman did not know enough about workers’ compensation coverage requirements, outside of Texas. If he did, he would have sold USB the Florida Specific Endorsement.

So the moral of the story is: you are on the hook for bad choices/ ignorance of your insurance agent. Florida is not a reciprocal state for “all-state” WC policies. Certain states like Florida, New York, California, and a few other “big union” or large population states require their own state-specific endorsements.

The good news is that an error committed by your insurance agent will usually be covered by his “errors and omissions” policy, which they are required to have. This is why the case went to trial in retrospect, because without that judgment against USB, they probably would not have been able to recover from it. I’m am pretty sure in the end that is why we spent nearly a year litigating a $14k case. I would be sure that USB’s legal bills were covered by the insurance agent’s policy.

Now on to the interesting part:  Why doesn’t Florida accept other states WC coverage? After-all, if the insurance carrier mentioned in their deposition that they would have covered any industrial accident that occurred, whether or not the policy was valid in Florida, is not that want the spirit of the law wants: workers to be covered in case of an accident? My personal understanding of the issue which was confirmed when the opposing counsel asked a similar question to our Jacksonville Bureau Chief. Essentially, there are several reason: most insurance companies are not as generous as the carrier that answered the deposition. If they are not legally required to cover an accident, then the insurance is operating on charity’s sake. Florida lawmakers don’t believe that insurance companies will be as charitable as that company, that means if a worker did get hurt, he could become a burden to the public as he check’s into the emergency room and is then forced to take unemployment, the medical bills may not be covered by any insurance but if the workers’ comp policy is in effect all of those things are covered. A second rationale is that certain states outside of Florida have lower WC policy rates than Florida. This means that the out-of-state company may actually have a competitive advantage if the home state has a lower WC insurance premium rate (each state has their own rates assigned due to various factors such as litigation, payout amounts, etc.). So imagine a scenario when a hurricane hits Florida and part of the recovery efforts include having out-of-state contractors come to Florida for the rebuilding effort (Dept. of Business Professional Regulation will waive the license requirements if you are licensed in another state); you don’t want to have a large number of inexperienced crews of roofers falling off roofs, getting denied by their out-of-state carriers and then have a giant public expense incurred by the residents of Florida.

Well, I hope that helped, and as I mentioned there are several other parts of this case which merit discussion, stay tuned!

Stop Work Order case; the potential benefits of not producing records. DFS v. ALL PHASE CONSTRUCTION AND DEVELOPMENT, LLC

This is a neat case about the benefits of not producing records and going to trial. All Phase Construction and Development, LLC (“All Phase,” hereafter) received a Stop Work Order and a Penalty Assessment totaling $34,141.15. The full docket can be accessed via https://www.doah.state.fl.us/ALJ/searchDOAH/docket.asp?T=11/29/2012%202:43:27%20PM

According to the Recommended Order, the DFS investigator received an anonymous complaint alleging that All Phase did not carry any Workers’ Compensation Insurance Coverage “WC coverage”). The Investigator arrived at the office of All Phase and met a Receptionist, the Principal was not in the office. The investigator asked about the number of employees All Phase had and the nature of WC coverage, if any. The receptionist said there 6 total employees. The investigator was able to find, through his computer database, that All Phase had used a payroll company for one year, but that coverage had already expired. The investigator returned the following day and posted a Stop Work Order along with a Request For Production of Business Records. No records were ever produced by All Phase. The only records the investigator was able to find was the one year-long coverage with the payroll company.

After much legal rigmarole, this case finally entered the Division of Administrative Hearings and was heard in early September 2012. After the hearing, the Administrative Law Judge (“ALJ”) ruled that the Department could only sustain $18,263.29 worth of penalty. The Department did not prove that all the workers named by the secretary were employed by All Phase. The Department could not prove that the workers listed on the payroll company’s ledgers were employed by All Phase at times when the coverage lapsed. The ALJ could only sustain a penalty against the receptionist and the Principal.

The moral of the story: The ALJ has been very fair to the employer; I’ve had several trials with him and have had similar outcomes where he essentially halved the penalty. Were this another ALJ the results could be different. However the lack of records did benefit the company if one assumes a “worst case scenario” of having four other construction workers on the clock for two years (remember there was coverage for one year of the three year period). Again I entitled this post the POTENTIAL benefits based on the fact that assuming the worst case scenario the company could have been liable for a lot more. The likelihood in Florida’s tepid construction climate that all four workers were putting in 40 hour weeks for three years straight is unlikely and their potential liability for penalty may have been lower than what the Judge ordered. The real moral of the story is that if you do have records let a professional look at them (me!) to determine what the true penalty really is. If the true penalty is higher than the imputed penalty, then the withholding of records may be a good strategy!