ALJDEC decisions subject to certification as final

2011A-1252-ROC · Registrar of Contractors · 2011-08-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 8, 2011, at 8:00 a.m. APPEARANCES: Complainant Adam Rentscheler appeared on his own behalf; Respondent Presmyk and Sons Construction, Inc. appeared through Shawn E. Nelson, Esq. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In June 1998, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC135450, Class B for residential general contracting to Presmyk and Sons Construction, Inc. (“Respondent”). Respondent’s qualifying party and officer is Kevin Leigh Presmyk. The only other person listed on Respondent’s license is Dorthea Elaine Presmyk. Respondent’s address of record is 3975 West Shea Lane, Camp Verde, Arizona 86322-8529. In September 2005, the Registrar issued License No. ROC211937, Class B to Lionheart Construction, L.L.C. (“Lionheart”). On Lionheart’s license, Kevin Leigh Presmyk’s son, Kevin Duane Presmyk (“Mr. Presmyk”), is the qualifying party and a member, and Jennifer Lynn Presmyk is a member. According to the Registrar’s electronic record, Lionheart’s license expired on October 1, 2010, and was revoked on March 3, 2011, for failure to pay a civil penalty. Lionheart’s address of record is 6749 North 14th Drive, Phoenix, Arizona 85013-1060. On October 28, 2010, the Arizona Corporation Commission (“the ACC”) incorporated Presmyk and Sons Roofing, Inc. (“Presmyk and Sons Roofing”). According to the ACC’s records, Presmyk and Sons Roofing’s domestic address is the same as Lionheart’s address of record with the Registrar, and the directors of the corporation are the same persons as are listed on Lionheart’s license. Presmyk and Sons Roofing is not licensed by the Registrar. On March 2, 2011, the Registrar received a complaint from Adam Rentscheler (“Complainant”) against Respondent. Complainant alleged that Respondent had failed to pay Complainant $43,850.00 it owed for labor and materials on numerous jobs at multiple addresses. Complainant is not and has never been listed on any contractor’s license issued by the Registrar. Complainant requested that the Registrar issue a citation against Respondent. On May 12, 2011, the Registrar issued a Citation and Complaint, charging Respondent with violations of A.R.S. § 32-1154(A)(10) and (11). Respondent’s attorney filed a timely written answer to the Citation and Complaint, denying any statutory violations and affirmatively alleging that Complainant owed money to Respondent and that Respondent did not pay Complainant “as a licensed contractor.” The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on August 8, 2011. The Registrar assigned the complaint to its inspector, Rick Oelke, for investigation. Because Inspector Oelke was not available due to a family emergency, Inspector Beau Cruz testified at the hearing about the Registrar’s policies. Complainant submitted three exhibits, testified on his own behalf, and presented the testimony of Leia Bond, who worked with him on the roofing jobs. Respondent submitted two exhibits and presented the testimony of Mr. Presmyk and three members of Complainant’s roofing crews: (1) Christopher Nathan “Nate” Rubio; (2) Terrance Coleman; and (3) Percy Griffin. Hearing Evidence On October 5, 2010, a serious hail storm hit the Phoenix area, damaging more than 250,000 residential roofs. The aftermath of the storm offered contractors an opportunity for substantial work, especially since many of the residences were insured against storm damage, after a work slow down due to the economic recession. Mr. Presmyk testified that most contractors who took advantage of the business opportunity that the hail storm created hired crews as independent contractors, rather than hiring additional employees. Inspector Cruz testified that “independent contractors” was not the right term. Inspector Cruz testified that the Registrar considers so-called “independent contractors” to be unlicensed subcontractors. Mr. Presmyk hired Complainant, who advertised on Craigslist and hired two roofing crews to tear off and replace roofs. Between October 2010, and February 2011, Complainant and his crews tore off and replaced approximately 130 residential asphalt shingle roofs for Mr. Presmyk and Respondent. Mr. Presmyk testified that the homeowners’ or their insurers’ contracts were with Respondent, and that Respondent’s name and license number were on the signs posted in the yards of the roofs that Complainant’s crew tore off and replaced. Mr. Presmyk testified that he told Complainant’s crews to say that they worked for Respondent. Mr. Presmyk testified that Respondent issued federal Internal Revenue Service (“IRS”) form 1099s to Complainant for the monies that he and his crews were paid. Mr. Presmyk acknowledged that Respondent did not pay workers’ compensation insurance for Complainant and his crews. Although Respondent’s qualifying party, Kevin Leigh Presmyk, attended the hearing, he did not testify. Mr. Presmyk testified that he regularly sent e-mails and made telephone calls about the roofing jobs and Complainant’s crews’ work to his father in Camp Verde. No evidence showed that Kevin Leigh Presmyk visited the jobsites or was actively involved in his son’s performance of the roofing contracts or the day-to-day operations of Complainant’s crews in the Phoenix area. Every Friday, Complainant and Mr. Presmyk met to discuss the payment that was due to Complainant and his crews. Mr. Presmyk paid the amounts that Complainant requested, and Complainant paid his crews. After Complainant’s crews finished a roof, Complainant requested that Mr. Presmyk assign another residence whose roof Complainant’s crews would tear off and replace. Mr. Presmyk ordered the supplies that he thought were needed for each roof and had the supplies delivered to the jobsite. Complainant did not have a written contract with Respondent or Mr. Presmyk. Complainant and Ms. Bond testified that at some point Mr. Presmyk agreed to pay Complainant $50.00 or $100.00 for removing and resetting roof- mounted air conditioning units on the houses on which Complainant’s crews were working. Complainant testified that Respondent also was liable for the monies that Complainant paid out-of-pocket for plywood sheathing that Mr. Presmyk failed to order and for a $50.00 trip fee every time a member of Complainant’s crew had to go to Lowe’s or Home Depot to purchase additional supplies. Inspector Cruz testified that because removing and resetting air conditioning units was beyond the scope of Respondent’s Class B license, Respondent would have needed to subcontract this work to a subcontractor who had a C-39 license for air conditioning work. Mr. Presmyk denied ever agreeing to pay Complainant anything extra for removing and resetting air conditioning units or for trip charges, and denied that he ever failed to pay Complainant for the reasonable cost of plywood used on the jobs. Mr. Presmyk testified that he paid Complainant what was due for his crews’ work, and that he did not hear about the extra charges until he stopped giving Complainant work. Mr. Presmyk testified that Complainant’s crews’ work was shoddy, and that he paid others to repair their work. Messrs. Rubio, Coleman, and Griffin all testified that Complainant failed to pay them for work that they had performed on Complainant’s crews. Mr. Presmyk testified that he hired some members of Complainant’s crews and paid them money that Complainant owed. According to the Registrar’s electronic record, Respondent’s license was current and in good standing on the date of the hearing. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] Complainant bears the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[2] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] Complainant did not establish that Respondent failed to pay more than $750.00 that it owed under the parties’ agreement for Complainant’s work, in violation of A.R.S. § 32-1154(A)(11).[5] Instead, Respondent established that Complainant submitted additional charges that Respondent had never agreed to pay after Mr. Presmyk informed Complainant that his services were no longer needed. Licensed contractors are required to comply with general labor statutes that require employers to provide workers’ compensation, social security, and unemployment insurance for their employees.[6] Nothing in Title 32, Chapter 10 expresses any intent by the legislature to allow licensed contractors to evade the requirement that they comply with labor statutes through the fiction of calling the persons they hire to do their contracting work “independent contractors.” The evidence at hearing shows that no one paid workers’ compensation insurance for Complainant and his crew. In addition, it appears likely that no one paid payroll and social security taxes for the crews’ members’ wages, or reported these wages to the IRS.[7] A.R.S. § 32-1127[8] required Kevin Leigh Presmyk to be actively involved as Respondent’s qualifying party in the performance of the numerous contracts that his son, Kevin Duane Presmyk, entered into with Complainant to tear off and construct new roofs on residences that were damaged in the October 5, 2010 hail storm. The evidence of record established that although Respondent may have employed Kevin Duane Presmyk, Respondent’s qualifying party, Kevin Leigh Presmyk, did not supervise and was not actively involved in Complainant’s crews’ work that Kevin Duane Presmyk undertook on Respondent’s behalf. Therefore, the evidence of record established that Respondent violated A.R.S. § 32-1154(A)(10) by aiding and abetting Kevin Duane Presmyk, an unlicensed person, to evade the requirements of Title 32, Chapter 10.[9] Respondent as a licensed contractor was legally able to perform its contracting work only by hiring appropriately licensed subcontractors or by hiring legal employees for whom Respondent complied with all applicable labor statutes. The evidence of record established that Respondent also violated A.R.S. § 32-1154(A)(10) by authorizing Mr. Presmyk to aid and abet Complainant, an unlicensed person, to evade the requirements of Title 32, Chapter 10. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order in this matter, the Registrar suspend Respondent Presmyk and Sons Construction, Inc.’s License No. B.135450-R until it has remedied the violations of A.R.S. § 32-1154(A)(10) that were established in this matter. It is further recommended that the Registrar not suspend Respondent’s license but, instead, close Case No. 2011-1252 if on or before the effective date of the Registrar’s order, Respondent provides written proof that is satisfactory to the Registrar that it has remedied its violations of A.R.S. § 32-1154(A)(10). It is recommended that at a minimum, this written proof establish to the Registrar’s satisfaction the following: (1) Respondent’s qualifying party, Kevin Leigh Presmyk, has become actively involved in the contracting operations that his son, Kevin Duane Presmyk, conducts under Respondent’s name; or (2) Kevin Duane Presmyk has ceased conducting contracting operations under Respondent’s name; and (3) Respondent no longer uses “independent contractors” to perform its contracting operations, but only duly licensed subcontractors or employees for whom Respondent pays payroll taxes and workers’ compensation insurance. It is further recommended that, in addition to any license suspension that may result from this matter, Respondent’s Class B license be placed on disciplinary probation for a period of 180 days, commencing on the effective date of the Registrar’s order or the date on which Respondent files notice of compliance, whichever is later. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of that certification. Done this day, August 25, 2011. /s/ Diane Mihalsky Administrative Law Judge Transmitted electronically to: William A. Mundell, Director Registrar of Contractors ----------------------- [1] See 32-1101 et seq. [2] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [3] See A.A.C. R2-19-119(B)(2). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] A.R.S. § 32-1154(A)(11) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure by a licensee . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.” [6] See A.R.S. § 32-1154(A)(4). [7] Mr. Presmyk’s testimony that Respondent reported monies paid to Complainant to the IRS was not credible, because he knew that Complainant paid much of that money to the individual members of Complainant’s crews. No evidence showed that Complainant reported his crews’ earnings to the IRS or paid payroll taxes and workers’ compensation insurance for his crews. [8] A.R.S. § 32-1127 defines “responsible managing employee” and “qualifying party” in relevant part as follows:

The terms "responsible managing employee" and "qualifying party" shall, for the purpose of administering this chapter, be synonymous, and shall mean an employee who is regularly employed by the licensee and is actively engaged in the classification of work for which such responsible managing employee qualifies in behalf of the licensee. While engaged as a qualifying party for a licensee, the qualifying party shall not take other employment that would conflict with his duties as qualifying party or conflict with his ability to adequately supervise the work performed by the licensee. [9] A.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[a]iding or abetting a licensed or unlicensed person to evade this chapter, knowingly combining or conspiring with a licensed or unlicensed person, allowing one’s license to be used by a licensed or unlicensed person with intent to evade this chapter.”

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