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Seven Things To Know When You Receive A Notice Of Investigation From The Department Of Health

Stop Work Orders


By Christopher E. Brown & George F. Indest III

Under Florida law, workers’ compensation insurance coverage is required for all businesses that employ four or more employees. When an employer fails to secure this required insurance coverage, this opens the door to investigations by the Florida Department of Financial Services and the potential for a Stop-Work Order and significant fines and penalties.

Often a professional or other new business obtains faulty legal advice that it can treat its employees as “independent contractors” and avoid a number of mandatory costs associated with this. These may include, for example, paying social security, Medicare and other mandatory assessments. Additionally, the employer may believe that it can avoid expenses, such as workers’ compensation insurance coverage, that are required by law.
The Stop-Work Order is one tool that is used by the Florida Department of Financial Services to halt an employer’s business activities until it comes into compliance with the required insurance coverage mandated by Section 440.10, Florida Statutes. The issuance of such an Order can be a death sentence to a small business due to the limitations and penalties that it places on a business owner. To avoid this situation it is critical to understand the requirements of Chapter 440, Florida Statutes, and the penalties an employer can face when it fails to be compliant with Florida’s workers’ compensation laws.
The most common reason we have seen for an employer’s failure to obtain workers’ compensation insurance coverage (resulting in a Stop-Work Order), is the misclassification of employees as independent contractors. All too often, an employer will classify its employees as independent contractors to avoid both taxes and the costs of insurance coverage. However, the Florida Legislature has outlined very specific requirements in Section 440.02(15)(d)(1), Florida Statutes, that must be met in order for a worker to be classified as an independent contractor. Most regular employees that work in an office setting or medical practice setting do not qualify as “independent contractors.” Typically, everyday employees such as medical assistants, receptionists, billing clerks, nurses, and clerical staff will not meet these requirements.
It is also important to note that in addition to the Stop-Work Order, Section 440.10(2)(f), Florida Statutes, permits the Department of Financial Services to assess a penalty of up to $5,000 for each employee who is incorrectly classified by the employer as an independent contractor, but who is found by the agency to not meet the specific criteria for that status.
Typically, the Department of Financial Services will receive a complaint or a tip, often from a former employee, but sometimes from a competitor. An investigator from the Department of Financial Services will then begin an investigation, often visiting the business suspected of the infraction. A detailed records request or subpoena, requesting all financial documents (including bank statements, tax returns, cancelled checks, payrolls, ledgers, books, and other sensitive financial documents), will be served on the business, with only a short time to produce these. If there are egregious violations or if the employer does not immediately comply, the Department of Financial Services may issue a Stop-Work Order, in addition to the documents request. This closes down the business down completely until the investigation is finished, the business is proven to be in compliance, or an administrative law judge or court orders it re-opened. Often the quickest and most efficient method to obtain a lifting of the Stop-Work Order is to demonstrate compliance.
The issuance of a Stop-Work Order can lead to tens of thousands of dollars in lost income and profits and can force both large and small businesses to close their doors forever. It requires the employer to cease all business operations immediately. It applies not only to the location where the Order was served, but to all other locations where the employer may be out of compliance. The employer’s failure to abide by this Order can result in a penalty of $1,000 per day for each day that the employer continues to conduct business operations.
In the case where a Stop-Work Order is issued, the employer is entitled to an expedited hearing, upon request. However, the employer must request this in writing and be able to sustain the economic loss to its business while such a hearing is scheduled and takes place.
The Stop-Work Order will not be lifted until your business is in compliance and the penalty has been assessed and paid. In determining the penalty, the agency will assess a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer’s payroll during the periods for which it failed to secure payment of workers’ compensation. If an employer fails to provide the requested business records, the weekly payroll for each employee shall be the statewide average weekly wage multiplied by 1.5. These penalties can be quite extensive and costly.
Physicians and other health professionals, especially those just starting a new business, should avoid taking shortcuts and attempting to avoid paying taxes and assessments that the law requires.
Ultimately, if confronted with a Stop-Work Order it is imperative to immediately contact an attorney experienced in these matters. An attorney can assist you in producing the necessary documents and can mitigate the penalties that may be assessed. Furthermore, in cases where either the Stop-Work Order or subsequent penalties have been issued in error, it may be possible to dispute these actions. If you have the financial means to challenge the action, and can afford the time and expense of an administrative hearing, you may request an expedited hearing and prove that you are actually in compliance with the law; you may even be entitled to an assessment of your legal fees and costs against the agency.

Tips to Avoid Stop-Work Orders, Fines and Penalties Assessed by the DFS

  1. Do not attempt to scrimp on taxes and expenses by treating regular employees, even part-time or hourly employees, as “independent contractors.”
  2. Officers and shareholders (owners) of a business may be entitled to an exemption so that they do not count as an employee of the business for the purposes of reaching the statutory minimum number (four employees); however, they must apply for this in advance of any investigation or complaint.
  3. Use a reliable commercial payroll service to make all mandatory deductions, withholdings, tax payments and assessments.
  4. If you have employees, purchase workers compensation insurance, regardless of the number of employees. This will help protect you from liability for employee injuries on the job.
  5. Consult with an experienced attorney when setting up your business or medical practice.
  6. If you receive a notice that you are being investigated, a documents request, or a Stop-Work Order, consult an attorney experienced in such matters immediately.
    Example of a Stop-Work Order and Notice of Rights

This is for information purposes only and does not constitute legal advice.

© Copyright 2011 George F. Indest III, Board Certified by The Florida Bar in Health Law, The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, Florida 32714. Phone: (407) 331-6620. All rights reserved.