Florida Statutes 440.381 – Application for coverage; reporting payroll; payroll audit procedures; penalties
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(1) Applications by an employer to a carrier for coverage required by s. 440.38 must be made on a form prescribed by the Financial Services Commission. The Financial Services Commission shall adopt rules for applications for coverage required by s. 440.38. The rules must provide that an application include information on the employer, the type of business, past and prospective payroll, estimated revenue, previous workers’ compensation experience, employee classification, employee names, and any other information necessary to enable a carrier to accurately underwrite the applicant. The rules must include a provision that a carrier or self-insurance fund may require that an employer update an application monthly to reflect any change in the required application information.
(2) Submission of an application that contains false, misleading, or incomplete information provided with the purpose of avoiding or reducing the amount of premiums for workers’ compensation coverage is a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084. The application must contain a statement that the filing of an application containing false, misleading, or incomplete information provided with the purpose of avoiding or reducing the amount of premiums for workers’ compensation coverage is a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084. The application must contain a sworn statement by the employer attesting to the accuracy of the information submitted and acknowledging the provisions of former s. 440.37(4). The application must contain a sworn statement by the agent attesting that the agent explained to the employer or officer the classification codes that are used for premium calculations. The sworn statements by the employer and the agent are not required to be notarized.
(3) The Financial Services Commission, in consultation with the department, shall establish by rule minimum requirements for audits of payroll and classifications to ensure that the appropriate premium is charged for workers’ compensation coverage. The rules must ensure that audits performed by both carriers and employers are adequate to provide that all sources of payments to employees, subcontractors, and independent contractors are reviewed and that the accuracy of classification of employees is verified. The rules must require that employers in all classes other than the construction class be audited at least biennially and may provide for more frequent audits of employers in specified classifications based on factors such as amount of premium, type of business, loss ratios, or other relevant factors. Employers in the construction class, generating more than the amount of premium required to be experience rated must be audited at least annually. The annual audits required for construction classes must consist of physical onsite audits for policies only if the estimated annual premium is $10,000 or more. Payroll verification audit rules must include, but need not be limited to, the use of state and federal reports of employee income, payroll and other accounting records, certificates of insurance maintained by subcontractors, and duties of employees. At the completion of an audit, the employer or officer of the corporation and the auditor must print and sign their names on the audit document and attach proof of identification to the audit document.
(4) Each employer must submit a copy of the quarterly earnings report required by chapter 443 at the end of each quarter to the carrier and submit self-audits supported by the quarterly earnings reports required by chapter 443 and the rules adopted by the Department of Commerce or by the state agency providing reemployment assistance tax collection services under contract with the Department of Commerce through an interagency agreement pursuant to s. 443.1316. The reports must include a sworn statement by an officer or principal of the employer attesting to the accuracy of the information contained in the report.
(5) Employers shall make available all records necessary for the payroll verification audit and permit the auditor to make a physical inspection of the employer’s operation. If the employer fails upon request of the auditor to provide access to the documents specified in this section and the carrier cannot complete the audit as a result, the employer shall pay $500 to the carrier to defray the costs of the audits.
(6)(a) If an employer understates or conceals payroll, or misrepresents or conceals employee duties so as to avoid proper classification for premium calculations, or misrepresents or conceals information pertinent to the computation and application of an experience rating modification factor, the employer, or the employer’s agent or attorney, shall pay to the insurance carrier a penalty of 10 times the amount of the difference in premium paid and the amount the employer should have paid and reasonable attorney’s fees. The penalty may be enforced in the circuit courts of this state.
Attorney's Note
Under the Florida Statutes, punishments for crimes depend on the classification. In the case of this section:| Class | Prison | Fine |
|---|---|---|
| Felony of the third degree | up to 5 years | up to $5,000 |
Terms Used In Florida Statutes 440.381
- Accident: means only an unexpected or unusual event or result that happens suddenly. See Florida Statutes 440.02
- adopted: means legal adoption prior to the time of the injury. See Florida Statutes 440.02
- Agency: means the Agency for Health Care Administration. See Florida Statutes 440.02
- carrier: as used in this chapter , means an insurer as defined in this subsection. See Florida Statutes 440.02
- Compensation: means the money allowance payable to an employee or to his or her dependents as provided for in this chapter. See Florida Statutes 440.02
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Department: means the Department of Financial Services; the term does not include the Financial Services Commission or any office of the commission. See Florida Statutes 440.02
- Employee: includes any person who is an officer of a corporation and who performs services for remuneration for such corporation within this state, whether or not such services are continuous. See Florida Statutes 440.02
- Employer: means the state and all political subdivisions thereof, all public and quasi-public corporations therein, every person carrying on any employment, and the legal representative of a deceased person or the receiver or trustees of any person. See Florida Statutes 440.02
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Injury: means personal injury or death by accident arising out of and in the course of employment, and such diseases or infection as naturally or unavoidably result from such injury. See Florida Statutes 440.02
- Insurer: means a group self-insurers' fund authorized by…. See Florida Statutes 440.02
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Self-insurer: means :(a) Any employer who has secured payment of compensation pursuant to…. See Florida Statutes 440.02
- Wages: means the money rate at which the service rendered is recompensed under the contract of hiring in force at the time of the injury and includes only the wages earned and reported for federal income tax purposes on the job where the employee is injured and any other concurrent employment where he or she is also subject to workers' compensation coverage and benefits, together with the reasonable value of housing furnished to the employee by the employer which is the permanent year-round residence of the employee, and gratuities to the extent reported to the employer in writing as taxable income received in the course of employment from others than the employer and employer contributions for health insurance for the employee or the employee's dependents. See Florida Statutes 440.02
(b) If the department determines that an employer has materially understated or concealed payroll, has materially misrepresented or concealed employee duties so as to avoid proper classification for premium calculations, or has materially misrepresented or concealed information pertinent to the computation and application of an experience rating modification factor, the department shall immediately notify the employer’s carrier of such determination. The carrier shall commence a physical onsite audit of the employer within 30 days after receiving notification from the department. If the carrier fails to commence the audit as required by this section, the department shall contract with auditing professionals to conduct the audit at the carrier’s expense. A copy of the carrier’s audit of the employer shall be provided to the department upon completion. The carrier is not required to conduct the physical onsite audit of the employer as set forth in this paragraph if the carrier gives written notice of cancellation to the employer within 30 days after receiving notification from the department of the material misrepresentation, understatement, or concealment and an audit is conducted in conjunction with the cancellation.
(7) If an employee suffering a compensable injury was not reported as earning wages on the last quarterly earnings report filed with the Department of Commerce or the state agency providing reemployment assistance tax collection services under contract with the Department of Commerce through an interagency agreement pursuant to s. 443.1316 before the accident, the employer shall indemnify the carrier for all workers’ compensation benefits paid to or on behalf of the employee unless the employer establishes that the employee was hired after the filing of the quarterly report, in which case the employer and employee shall attest to the fact that the employee was employed by the employer at the time of the injury. Failure of the employer to indemnify the insurer within 21 days after demand by the insurer is grounds for the insurer to immediately cancel coverage. Any action for indemnification brought by the carrier is cognizable in the circuit court having jurisdiction where the employer or carrier resides or transacts business. The insurer is entitled to a reasonable attorney’s fee if it recovers any portion of the benefits paid in the action.
(8) If an employer fails to provide reasonable access to payroll records for a payroll verification audit, the employer shall pay a premium to the carrier or self-insurer not to exceed three times the most recent estimated annual premium.