A framing subcontractor in Melbourne is three weeks into a townhome project when a state compliance investigator walks onto the site, asks each worker who they work for and checks the state’s coverage database on a phone. The owner has a valid construction exemption. His three helpers, paid on 1099s, have no coverage at all. Before lunch, the investigator posts a stop-work order. The crew packs up, the general contractor brings in another framer to keep the schedule, and the owner learns that his penalty will be calculated on a full year of payroll, not just the three weeks on this job.
Florida enforces workers’ compensation more aggressively than most states, and its main tool, the stop-work order, works the same way whether a business has three employees or three hundred. It shuts the business down immediately, it stays in place until coverage is bought and the penalty is dealt with, and the penalty is designed to cost far more than the coverage would have.
How Investigations Start
The Florida Division of Workers’ Compensation employs compliance investigators who visit businesses and job sites across the state. Some visits are routine sweeps, especially on construction sites, where an investigator may check every contractor and subcontractor on a project. Others start with a tip from a competitor, a former employee or a member of the public, a report of a workplace injury, or a records match that suggests a business has employees but no coverage. Building permits, license applications and payroll tax filings can all bring a business to the Division’s attention.
Investigators do not need an appointment. On a job site, they typically ask workers for their names and who pays them, then check each employer against the state’s coverage and exemption records on the spot. At a storefront or office, they may ask the owner how many employees the business has and for proof of coverage. Our article on what happens if a workers’ comp inspector visits your practice walks through a visit to a medical office.
What a Stop-Work Order Does
If the investigator determines that a business required to carry workers’ compensation does not have it, the Division issues a stop-work order. Served at a job site, it takes effect immediately at that site, and once the employer is served, it applies to every location where the business is out of compliance in Florida. The business has to stop operating until the Division releases the order. Stop-work order information is also posted on the Division’s website and remains public for years, where general contractors, property managers and customers can find it.
The order can also follow the owners. A new company formed by the same principals in the same trade can be bound by the original order, so closing one business and opening another under a new name does not escape it.
Working anyway is expensive. Florida law imposes an additional penalty of $1,000 for each day a business operates in violation of a stop-work order, on top of the original penalty.
How the Penalty Is Calculated
The penalty is not a flat fine. It is calculated as two times the premium the business would have paid, at the state’s approved rates, for the periods it was required to have coverage and did not, with a minimum of $1,000. The look-back period is normally the preceding twelve months. It extends to twenty-four months for a business that has had a prior stop-work order or penalty, or that materially understated or concealed payroll.
That is why the numbers get large quickly. Consider a small framing contractor with $150,000 in uncovered payroll over the past year in a class code rated at $10 per $100 of payroll. The premium it should have paid is $15,000, and the penalty is twice that, or $30,000, before any other charges. In a high-rated construction class, a modest crew can produce a five-figure penalty, and a larger one can reach six figures.
Records matter a great deal. The Division requests the business’s payroll and related records, and the business has twenty-one days to produce them. If the records are missing or not good enough to calculate payroll, the Division imputes payroll for each employee and owner using one and a half times the statewide average weekly wage, which is usually much higher than what small businesses actually pay. A business that cannot document its payroll often ends up with a larger penalty than one that can.
Misclassification adds another layer. Florida can impose a separate penalty of up to $5,000 for each worker the business represented as an independent contractor who is found to be an employee. Our article on 1099 workers and independent contractors in Florida explains how the state decides.
Reductions for First-Time Violations
Florida offers some relief to businesses receiving their first stop-work order or penalty. A first-time employer may receive credit for the initial premium it pays on the new policy, if it provides proof of coverage and payment within twenty-one days of the records request. The penalty can be reduced by twenty-five percent if the business provides the required records within twenty-one days, and by a further fifteen percent if the owner completes the Division’s online compliance tutorial at a Division office within the same period. The $1,000 minimum still applies. These reductions only help businesses that act quickly, which is another reason to call your agent the day the order is served.
How to Get Back to Work
A business cannot reopen until it has workers’ compensation coverage in place and has dealt with the penalty. It can pay the penalty in full and receive a release, or, if any previous penalty has been paid, it can pay $1,000 and agree to a payment schedule for the rest to receive a conditional release. If the business does not pay or enter an agreement within twenty-one days after the first penalty calculation is served, or later misses a payment, the stop-work order is reinstated and the entire unpaid balance becomes due at once. Unpaid penalties can become a lien on the business’s property, and the Division can go to court to stop the business from operating.
In practice, the closure usually lasts as long as it takes to buy a policy, gather payroll records and arrange the penalty. For a business that already has an agent and organized records, that can be a few days. For one that has to find a carrier willing to write it after a stop-work order and reconstruct a year of payroll, it can be weeks, and the lost revenue during that time is often larger than the penalty itself. Our article on stop-work orders for restaurants shows what a closure means for a business that cannot simply move its crew to another job.
Who Gets Caught Most Often
Most stop-work orders go to construction businesses, because the requirement starts at one employee and investigators visit job sites regularly. The typical pattern is the one in the opening: an owner with a valid exemption and a crew with no coverage, or a subcontractor working under someone else’s certificate. Our articles on workers’ comp exemptions, the shell company problem in Florida construction and workers’ compensation for Florida contractors explain how to avoid it, and our Spanish-language guide to workers’ comp para contratistas covers the same ground.
Outside construction, the businesses most often caught are those that grew past four employees without noticing, such as restaurants, salons, cleaning companies and retail stores that added part-time or seasonal staff, and businesses that pay workers on 1099s who are really employees. Expired exemptions and policies cancelled for non-payment also lead to orders, because the state’s records show the gap even if the owner did not realize coverage had lapsed. Our articles on whether you need workers’ comp in Florida and ¿Necesito workers’ comp en Florida? explain how the state counts employees.
How to Stay Out of Trouble
Most stop-work orders are avoidable. Count employees the way the state does, including part-time, seasonal and 1099 workers, and buy coverage when you reach the threshold rather than after. Check that every owner exemption is approved and current in the state’s database. In construction, collect a certificate of insurance from every subcontractor before they start, and do not rely on an exemption to cover a crew. Keep payroll records organized so that, if an investigator ever does ask, you can produce them quickly. And pay attention to cancellation notices, because a policy cancelled for non-payment leaves the business uncovered from the cancellation date. Our article on what to expect at a workers’ comp payroll audit covers the record-keeping that helps in both situations.
If a Stop-Work Order Is Served
Call your agent the same day. The first steps are to get a workers’ compensation policy bound, gather the payroll records the Division will request, and decide whether to pay the penalty in full or arrange a conditional release. Acting within the first twenty-one days preserves the first-time reductions and avoids having the order reinstated. A business that is hard to place after an order may still find coverage through specialty carriers, the state’s market of last resort or a professional employer organization; see our article on PEO workers’ comp in Florida.
What Business Owners Should Confirm
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Have you counted every employee the way the state does, including part-time, seasonal and 1099 workers?
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Is your workers’ compensation policy active, with payments current?
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Are owner exemptions approved and showing in the state’s database?
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Does every subcontractor have its own policy, not just an exemption?
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Could you produce a year of payroll records within twenty-one days?
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Does anyone in your business know to call your agent the day an investigator arrives?
Workers’ Compensation With Prestige
Prestige Insurance Group places workers’ compensation for contractors, restaurants, cleaning companies, security firms and small businesses across Miami, Fort Lauderdale, West Palm Beach, Orlando, Tampa and throughout Florida, including businesses that need coverage quickly after a stop-work order. We work with over 100 MGAs and specialty markets, so a business that has been served an order still has options. For the full picture, see our page on workers’ compensation insurance in Florida and our guide to how much workers’ compensation costs in Florida. If you have received a stop-work order, or want to make sure you never do, call the office nearest you. Se habla español.
Miami: 305-969-8776 Orlando: 407-993-2331
General information only, not legal advice. Penalty amounts, look-back periods, reductions and release conditions are set by Section 440.107, Florida Statutes, and Division rules, and they change over time. The penalty example above is for illustration only. Confirm current requirements with the Florida Division of Workers’ Compensation and consult qualified counsel if you have received a stop-work order.
