ALJDEC

01F-2318-ROC-com · Registrar of Contractors · 2002-04-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 8, 2002. APPEARANCES: COMPLAINANT: by Joe Granado, president and authorized representative. RESPONDENT: by Doug Pajak, general manager and authorized representative, with Marlene Kantra, president.

ADMINISTRATIVE LAW JUDGE: Anthony Halas. _____________________________________________________________________ This matter proceeded to a compliance hearing on April 8, 2002, at Complainant’s request, for the purpose of determining whether Respondent had substantially complied with the terms and conditions of the Registrar of Contractors’ ORDER OF CLOSING issued on December 13, 2001. Based on the testimony and evidence presented, the following Findings of Fact, Conclusions of Law, and Recommended Decision are made and submitted to the Registrar of Contractors:

FINDINGS OF FACT

1. The instant hearing was convened for the purpose of determining whether Respondent Femcon, Inc. (Femcon), License No. 107322, Class B-01, substantially complied with the terms and conditions set forth in the prior ORDER OF CLOSING entered by the Registrar of Contractors on December 13, 2001, and effective that same day. 2. The ORDER OF CLOSING, not appealed by Femcon or Complainant Uni- Tech Mechanical Contracting Corp. (Uni-Tech), adopted the Recommended Decision issued by Administrative Law Judge Allen Reed on November 29, 2001, and advised the parties that the case was subject to being reopened upon an allegation of a party that the other had failed to comply with the terms of the settlement, as memorialized by Judge Reed. 3. The scope of the original disciplinary proceeding in this matter, set for hearing on November 29, 2001, was limited by virtue of the fact of the verbal agreement reached by the parties at that time, the essential terms of which Judge Reed incorporated in his Recommended Decision as follows: 1. During the course of the hearing but before the close of the record, the parties concluded a settlement of the issues raised in the complaint. 2. Under the general terms of the Settlement Agreement (Agreement), Respondent shall pay the amount of $9000.00 to the Complainant upon the Complainant providing proof of workers compensation insurance and liability insurance for the applicable construction period on the project which is the subject of this case. In addition the Complainant shall withdraw its complaint, provide an unconditional lien release and honor the statutory warranty for the work done by the Complainant. 3. By virtue of the agreement, all rights and defenses of the parties are merged therein and if any petition for further hearing or rehearing is to be filed and granted, or if any new complaint is filed, the sole issue for determination will be whether the parties have performed their respective obligations under the terms of the Agreement.

4. On December 14, 2001, Complainant Uni-Tech’s representative, Joe Granado (Granado), filed correspondence with the Registrar requesting that the case be reopened for Respondent’s failure to comply with the terms of the settlement. 5. On January 14, 2002, the Registrar issued ORDER REOPENING COMPLAINT and directing that a compliance hearing be scheduled. Therefore, consistent with the Registrar’s Order of Closing and the Recommended Decision, the scope of this proceeding on compliance is limited to a determination whether the parties have complied with the terms of the settlement. 6. With his request to reopen the claim, Granado included copies of documents he had provided Respondent by facsimile on December 5, 2001 relative to his obligation to provide proof of workers compensation insurance and liability insurance. By stipulation of the parties, administrative notice is taken of those documents: A. Copy of “Certificate” dated 12/2/2000, indicating that Safeco Insurance of America (Safeco) was affording worker’s compensation and employer’s liability coverage in policy no. WC2358322A to the insured, Diversified Human Resources, Inc., for effective dates 1/01/00 through 6/1/01, to cover all employees of the insured with respect to the employee leasing agreement with Construction Staffing Services and Uni-Tech. B. Copy of “Certificate of Liability Insurance” dated 11/30/01indicating that Nova Casualty Company (Nova) was affording commercial general liability coverage in policy no. AZAP052198 to the insured, Uni-Tech Mechanical Contracting Corp., for effective dates 03/02/00 through 01/17/01, for all work done by the named insured on behalf of the certificate holder, Femcon, Inc. 7. At the compliance hearing, Granado testified to explain that prior to Uni-Tech’s subcontracting with Respondent general contractor Femcon, Inc. (Femcon) to perform H.V.A.C. work on the “Las Cascadas” project, he had arranged (as the corporation’s president) to have himself and other Uni- Tech workers employed through Diversified Human Resources, Inc., an employee leasing company (which also provided payroll services through its subsidiary, Construction Staffing Services), and through which worker’s compensation and employer’s liability insurance would be provided. 8. According to Granado, it was for that reason that the Certificate for worker’s compensation and employer’s liability coverage by Safeco (policy no. WC2358322A) had named as the insured Diversified Human Resources, Inc., the employee leasing company, based on its employee leasing agreement with Construction Staffing Services and Uni-Tech. 9. Granado described the commercial general liability coverage by Nova (policy no. AZAP052198) to be additional general liability coverage, but not including worker’s compensation. 10. Granado denied having any workers onsite on this project, including himself, at any time before early February, 2000, and stated that in any event, policy no. WC2358322A was in effect from January 1, 2000 through June 1, 2001, a time period covering all work done by Uni-Tech for Respondent Femcon, which work was substantially completed by December, 2000. 11. Granado believed that the certificates of insurance coverage he had provided Respondent on December 5, 2001 satisfied his primary obligation under the settlement agreement, but he also verified that he intended to honor any statutory warranty work which might be necessary (although he stated no one from Femcon had asked him to do any warranty work since sometime before the November 29, 2001 hearing). In addition, he agreed that he would immediately provide an unconditional lien release and withdraw his complaint upon receipt of the $9000.00 from Femcon, but could not complete those items until he had received the $9000.00. 12. Doug Sajak, general manager and authorized representative for Respondent Femcon, and Marlene Kantra, the company’s president, testified to explain that Femcon had not paid the agreed-upon sum of $9000.00 to Uni- Tech due to the concerns they had about whether the copies of the certificates Granado had faxed them in December 2001 were sufficient for Femcon’s needs, in light of their company’s responsibilities as the general contractor. 13. Sajak and Ms. Kantra both conceded that to the best of their knowledge, no worker’s compensation or general liability claims had ever occurred or been made relative to the work done by Uni-Tech on the Las Cascadas project. 14. However, Sajak and Ms. Kantra expressed specific concerns that the certificates did not identify just which employees were actually covered by either or both policies at any one time relative to just which employees had worked on the project. This concern was based on verbal information Sajak had apparently been provided by the employee leasing service indicating that Granado had been the only employee (which information Granado disputed as incorrect). 15. Kantra also was concerned that Femcon’s records indicated Uni- Tech employees had been on-site as early as February 17, 2000, while the Nova general liability policy no. AZAP052198 only went into effect on March 1, 2000, after the fact. 16. Sajak and Kantra also explained that Femcon was currently being audited by its worker’s compensation carrier (and might be audited by its general liability carrier) relative to monies paid out to its subcontractors (and suppliers) on the Las Cascadas project, and they were presently uncertain whether the documents provided by Granado for Uni-Tech would be sufficient to prevent their carrier from backcharging Femcon for worker’s compensation premiums for their entire payroll paid to Uni-Tech. 17. Sajak and Kantra agreed that once the question of insurance coverage was resolved, and premised on Granado’s testimony of his willingness to have Uni-Tech perform warranty work, then the unconditional lien release and withdrawal of the instant complaint by Uni-Tech could both be accomplished at the time the $9000.00 payment would be made by Femcon to Uni-Tech.

CONCLUSIONS OF LAW

1. On close consideration of the record, it is concluded by the undersigned that: Complainant Uni-Tech has substantially performed its current obligation under the settlement agreement by providing Respondent Femcon the two certificates of insurance; that Uni-Tech has verified willingness to comply with its independent obligation to honor statutory warranty work, and; that the company will immediately provide an unconditional lien release and withdraw its complaint upon receipt of $9000.00 from Femcon. 2. It is further concluded by this tribunal that Respondent Femcon has not substantially complied with its obligation to pay the amount of $9000.00 to Complainant Uni-Tech. This is so despite the good faith concerns expressed by Femcon as to the sufficiency of the information contained in the certificates of insurance provided by Uni-Tech. However, on their face, the certificate copies are deemed to comply with the terms of the settlement agreement, and there has been no showing that the certificate copies are misleading, altered, or fraudulently used as proof of Uni-Tech’s worker’s compensation and liability insurance for the applicable construction period on the Las Cascadas project. 3. In light of the fact that Respondent Femcon did not comply with its obligation under the terms of the settlement agreement, which terminated the possibility of the Registrar of Contractors imposing disciplinary sanctions against Respondent’s Class B-01 license, it is determined that it is appropriate for the Registrar of Contractors to consider and impose disciplinary sanctions at this time, should Respondent fail to comply with the payment terms and conditions of the settlement agreement by the effective date of the Registrar’s Order in this compliance proceeding.

RECOMMENDED DECISION In light of the foregoing, IT IS RECOMMENDED that commencing on the effective date of the Registrar of Contractors’ Order on Compliance in this matter, the Class B-01 license of Respondent Femcon, Inc. be suspended until the Registrar receives proof that Respondent has paid Complainant $9000.00. IT IS FURTHER RECOMMENDED that if Respondent accomplishes payment of that amount on or before the effective date of the Order entered in this matter, then the license suspension shall not take place, and upon completion of Complainant’s obligations contingent on such payment, this Citation, and the Complaint upon which it is based, shall be closed. Done this day, April 22, 2002.

______________________________________ Anthony Halas Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2002, to:

Registrar of Contractors Michael P. Goldwater ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826