The penalty audit: how Florida calculates a stop-work order penalty

By Adrian Middleton, Sword & Shield, PLLC · Updated Friday, October 9, 2026

The formula

Section 440.107(7)(d)1 sets the penalty at 2 times the premium the employer would have paid, applying the approved manual rates to the employer's payroll for the periods it failed to secure coverage, within the lookback period, or $1,000, whichever is greater. In worksheet form, for each worker and period:

The lookback period

The default period is the preceding 12 months. It becomes the preceding 24 months if the order was issued for materially understating or concealing payroll, or if the employer was previously issued a stop-work order or order of penalty assessment. The period ends on the date of the order and runs back from there; only weeks without coverage count.

Class codes and rates

Each worker's payroll is assigned to the NCCI classification code that matches the work actually performed, and the Florida approved manual rate for that code (a dollar amount per $100 of payroll) is applied. Roofing, framing and concrete carry some of the highest rates in the manual; clerical (8810) and outside sales (8742) carry among the lowest. An investigator who saw a worker on a roof will code everyone on site as roofing unless records show otherwise. The code assignments are one of the most productive places to challenge a worksheet. See NCCI class codes in the guide.

What counts as payroll

Remuneration paid to employees: wages, salary, cash, bonuses, 1099 payments to construction workers who have no valid exemption or policy, and payments to officers who perform services without an exemption. What does not count, and what the Department will include anyway unless you prove otherwise:

• Payments to vendors and material suppliers.
• Payments to fabricators and manufacturers who did the work in their own shop as a separate business.
• Payments to subcontractors who had their own policy or a valid exemption on each payment date.
• Payments to non-construction businesses with fewer than four employees that are bona fide separate employers.
• Payroll for weeks when a policy or PEO agreement was in force.
• Reimbursements, loan repayments and owner distributions that are not remuneration for services.

The audit worksheet in the guide separates every payment into one of these categories, so you see the records-based penalty with and without each exclusion.

Imputed payroll: when records are not produced

If the employer does not provide records sufficient to determine payroll, section 440.107(7)(e) and Rule 69L-6.028 direct the Department to impute weekly payroll for each employee, corporate officer, sole proprietor or partner at the statewide average weekly wage multiplied by 1.5, for every week of the period, assigned to the highest-rated class code supported by the records or the investigator's observations. For 2026 the statewide average weekly wage is $1,357.95, so each imputed worker carries $2,036.93 of payroll per week.

Imputation is a blunt instrument, and that cuts both ways. For an employer with a large cash payroll it can be far less than the records would show. For a small employer with a few part-time workers it is usually far more. Rule 69L-6.028 allows an employer to provide the records within 20 business days after service of the first penalty assessment calculation (or the first Amended Order of Penalty Assessment) and have the penalty recalculated from the records. That window is the strategic heart of most cases. See imputed payroll.

Credits and reductions for first-time employers

An employer that has not previously been issued a stop-work order or order of penalty assessment is entitled to three things under section 440.107(7)(d)1, each tied to the 21 days after receipt of the records request:

Even after all three, the penalty cannot drop below $1,000. The 25 percent reduction is the reason the records decision is rarely simple: refusing to produce records and taking imputation forfeits it.

Other amounts the Department can add

• $1,000 per day for each day the employer operates in violation of the order (s. 440.107(7)(c)).
• $5,000 per worker the employer represented to the Department or carrier as an independent contractor who does not meet the statutory definition (s. 440.107(7)(f)); section 440.10(1)(f) authorizes the same per-worker amount as a cap.
• Costs, investigation expenses and attorney's fees if the Department has to sue to collect (s. 440.107(10)).

Worked example

A framing contractor with three uninsured 1099 carpenters paid a combined $180,000 over the 12-month period, coded 5651, at an illustrative rate of $12 per $100. Premium: $180,000 ÷ 100 × 12 = $21,600. Penalty: × 2 = $43,200. The contractor binds a policy and pays a $6,000 initial premium within 21 days (credit), and produces records within 21 days (25 percent): ($43,200 − $6,000) × 0.75 = $27,900. Passing the tutorial would take off another 15 percent of $37,200, or $5,580, leaving $22,320.

Under imputation instead: three workers × 52 weeks × $2,036.93 = $317,761 of imputed payroll, × 12 ÷ 100 × 2 = $76,263, with no 25 percent reduction. For this employer, producing records wins. Change the facts to a crew of eight paid mostly in cash with $900,000 of actual payroll, and the comparison flips. The free calculator runs both numbers; the guide does it line by line.

Questions