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!