ALJDEC

97F-M0027-ROC · Registrar of Contractors · 1998-05-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 13, 1998.

APPEARANCES: Complainant Ted J. Arunski, appeared in his own behalf.

Respondent, Alpha and Omega Fiberglass Finishes, appeared through its authorized employee, Robert L. Robinson.

ADMINISTRATIVE LAW JUDGE: Robert. I. Worth _____________________________________________________________________

Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

1. Complainant had been performing work as a salesperson for Respondent under ongoing arrangements covering an approximate 15-month period that are found to have been more consistent with an employer- employee relationship than that of an independent contractor status. Complainant’s compensation was to be paid by way of an agreed sales commission based upon percentage amounts of various sales agreements obtained by Complainant from potential customers providing for the application by Respondent of certain finishing products onto existing pool surfaces.

2. Complainant’s regular functions included the measurement of the pool’s perimeter in linear feet, a conversion of the resulting measurement into square footage by use of a chart, the quoting of a rate per square foot of the applied materials and the calculation of an entire contract price for the project. Depending upon the quoted dollar rate per square foot by which the total contract price was to be determined, the percentage rate of sales commission payable to Complainant would fluctuate. For some time periods, especially at the early stages of the employment relationship, Respondent paid a weekly fixed draw to Complainant which was to be applied against future earned commission amounts. Respondent had provided contract forms for use by Complainant with his potential customers that admittedly enabled Complainant to bind Respondent to the contents of the agreements.

3. Credible evidence was presented by Complainant consisting of a detailed historical and chronological account of the amounts of all sales agreements on which commissions were to be due and the calculated amounts of commissions or advances paid by Respondent, including credits for sums withheld from such payments for employee payroll deductions. Following the termination of the employment arrangements in May, 1996 and the transmitting of a check for $917.20 in August, 1996, representing only 47% of the $1,940.50 balance of commissions calculated by Complainant to be owing, the amount of $1,023.30 was left unpaid by Respondent.

4. Respondent sought to reduce the amount of otherwise payable commissions by attempting to apply deductions or charge-backs that were never adequately explained or demonstrated to the employee or to this tribunal. The existence of several notations made by Respondent on copies of commission reports, some of which being barely comprehensible, are found not to validly support any claimed set-offs against Complainant’s calculated commission amounts. The adjustment of already-earned commissions, the only form of compensation in this employment arrangement, may not properly be placed within the uncontrolled discretion of the employer, nor may Respondent arbitrarily attempt to make Complainant an insurer of the profitability of every project.

5. The evidence of record revealed absolutely no valid indication that jobs were being purposely underbid by Complainant or that pool dimensions were being intentionally under-measured in order to gain a competitive advantage so as to conclude a sale. (It should be noted, in passing, that 90-plus per cent of the monetary benefits from all ultimate sales would be retained by Respondent whenever the bid on its behalf successfully prevailed over that of any competitor, as compared with receiving nothing on any unsuccessful bid). On the contrary, the weight of credible evidence tended to show that the linear measurements by Complainant were accurately taken and correctly converted into square footage measurements by use of the charts furnished by Respondent.

6. To the extent that deductions were made from earned commissions by Respondent’s unilateral application of a lower rate of commission because of a purportedly greater square footage of any pool surface, without even giving Complainant any opportunity to verify such adjustment, it is found that such deductions were wholly unwarranted. Similarly, to the extent that Respondent was attempting to recoup from Complainant’s earnings any extra costs incurred in the performance of several sales agreements turned in by Complainant, or any losses experienced due to the eventual failure to receive payment from the customer, such deductions are also determined to have been inappropriate.

7. Notwithstanding the foregoing evaluation of the testimonial and documentary evidence introduced at the hearing, one of the elements forming part of the instant claim was the sum of $50.70 that did not relate to a sales contract but instead was based upon the giving of a repair estimate on April 27, 1996 which entailed a 90-mile drive plus two hours of time on the part of Complainant. Although the computation utilized, based upon $20.00 per hour plus 25-cents per mile, was not intrinsically unreasonable, the commission arrangements between these parties are found not to have encompassed reimbursement for these submitted expenses. Irrespective of any prior instances when certain expenses were mutually agreed to be and were ultimately reimbursed, Complainant’s entitlements based upon his travel and time outlays relating to the above-described repair estimate was not the subject of any advance definitive

agreement and is not properly includable as part of the applicable commission arrangements. Recovery of such reimbursed amounts must be obtained, if at all, by pursuing available remedies through a Justice Court or Small Claims Court action.

8. In this administrative action the total monetary amount sought by Complainant of $1023.30 must be appropriately reduced by deleting the sums applicable for the April 27, 1996 time and travel charge of $50.70, leaving a balance long past due, unpaid and owing of $972.60. Respondent’s prolonged failure to pay Complainant these earned commissions when due not only is found to violate the charged non-payment provisions of the State’s contracting laws but also is determined to constitute a wrongful act to the financial detriment of Complainant within the meaning of another charged code section.

9. It is not a proper function of either the Office of Administrative Hearings or the Registrar of Contractors to adjudicate and award money damages which must be recovered, if at all, through civil court action. However, the Registrar is empowered by statute to impose reasonable conditions which may serve to reduce or eliminate any otherwise appropriate disciplinary penalties for proven violations of the State’s contracting laws. In this way, a Complainant in an administrative action who has sustained the burden of proving contracting law violations does not have to await the outcome of protracted civil litigation in order to recover at least a portion of a demonstrated loss and, of equal or perhaps greater significance, a licensed contractor/Respondent is given the means to control, to some extent, the severity of any disciplinary penalty. Moreover, any amounts paid in satisfaction of a condition affecting licensure may properly be evaluated, credited or applied against any civil judgment ultimately obtained in favor of either party. Under the facts and circumstances of this case, demonstrating a breach by Respondent of the terms of its employment agreement with Complainant, the inclusion of a condition in the nature of a monetary payment of a significant portion of the within claim is fully appropriate and equitably justified.

10. It did appear from the case file, and it was also admitted during the hearing testimony of both parties, that no written directive had been issued by the Registrar’s assigned Inspector requiring the payment by Respondent of any sum certain to

Complainant. The wording of a form letter seeking to prompt Respondent to resolve the filed claim, if valid, cannot be equated with the issuance of an order for specific remedial action. The absence of any definitive monetary determination and directed payment action in the Inspector’s letter would serve to generate no duty of compliance by Respondent and provides no basis for supporting a finding of any violation of A.R.S. §32- 1154A(23) or even for having included this charge in the Citation.

11. The testimony at the hearing generated some realistic concerns with respect to the adequacy and integrity of Respondent’s record-keeping methods and its manner of communicating with company personnel while conducting business activities within its organization. These operational concerns must be promptly and effectively addressed by Respondent as it continues to function as a licensed contractor. In this connection, and in view of the contracting law violations found herein, notice has been taken of Respondent’s prior license records which reveal the filing of numerous complaints over a relatively short time span, many of which relate to charged failures to pay monies when due in the course of its construction activities. This less-than-enviable record may be considered by the Registrar when formulating an appropriate Order in this disciplinary action.

CONCLUSIONS OF LAW

1. The Complainant has sustained his burden of proving entitlement to most all of sums alleged to be remaining due, owing and unpaid, as set forth in his filed complaint. Consequently, the evidence of record sufficiently established that Respondent has violated the provisions of A.R.S. §32-1154A(7) and (11). However, no violations by Respondent of the provisions of A.R.S.§32-1154A(23) were adequately proven hereunder.

RECOMMENDED ORDER

In view of the foregoing, it is recommended commencing on the effective date of this Order (thirty-five [35] days after the date of mailing by the Registrar of Contractors)

that Respondent’s Class B license be actively and temporarily suspended until the Registrar receives proof that Respondent has paid or tendered the sum of $972.60 to Complainant.

It is further recommended that if Respondent pays or tenders the above-specified monetary amount to Complainant on or before this Order’s effective date, then no active license suspension shall be imposed.

It is further recommended, in addition to the above-provided active license suspension, if any, that the Class B license of Respondent be placed on disciplinary probation for a period of 60 days, such additional penalty to commence on the effective date of this Order or on the date on which written notice of compliance with the payment condition by Respondent is filed with the Registrar, whichever is later.

It is further recommended, in addition to the above provided penalties, that any restoration of Respondent’s rights to resume contracting, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of thirty-six (36) months, including future renewal periods, in the amount of $1,000.00, such bond or deposit to be in addition to the required surety bond, cash deposit or recovery fund participation set forth in A.R.S. § 32-1152 (D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided thirty-six (36) month period and only if no claims are then pending.

Dated: May 20, 1998.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert. I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Mr. Michael P. Goldwater, Director Registrar of Contractors 800 West Washington, 6th Floor Phoenix, AZ 85007

ATTN: Joyce Armijo -----------------------

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826