Rules must be followed as to who is required to have a workers compensation policy in place. Employers who fail to comply face serious fines, penalties and even criminal charges levied on them by their individual state authority. Keep in mind that workers compensation insurance is an individual state mandated requirement. Every state is different but most have some sort of rules in place that dictate when a policy is required. Lets look at New York State and what they can do to a non-complying employer.
New York State – Workers compensation for the State of New York is overseen by the New York State Workers Compensation Board. State law in New York requires employers to provide workers comp insurance for all employees which also includes family members. The Board carefully monitors all employers in the state for compliance. They have at their disposal many different resources.
- Insurance companies providing coverage within their state are required to report a policy is written, changed or cancelled. This information is gathered within their database.
- They coordinate with other state agencies for compliance including the Department of State, responsible for monitoring business entities, and Department of Labor.
- Reported claims information and their own Board files and special investigations.
When there’s a gap in coverage, they know about it. And they react. If they notice they do not have current policy information on a specific employer they will typically:
- Send a request to the employer requiring them to provide information as to how the employer is complying with their workers comp law.
- If they do not have a response they will send a penalty letter or notice.
You’ve got it! It’s the employers responsibility to prove to the Board how they comply to the law! It’s not the Boards responsibility. And yes, you are correct that without a response to their inquiry the Board will start applying penalties, hefty ones!
Penalties for noncompliance include:
- A penalty of $2,000 for every 10 days without coverage.
- Civil and Criminal charges including misdemeanor, Class D and E Felony.
- Fines ranging from $1,000 to $50,000.
- The penalty applies for the period of time the employer had employees but had no coverage.
- If the employer does not respond to the Boards request to provide proof of coverage, the Board assumes they had no coverage and levies the penalties.
- The employer has 30 days after the penalty has been applied to ask provide pertinent information and ask for a redetermination of the penalty. Information provided by the employer must include a reason why a lapse in coverage occurred.
- The Board has the authority to remove penalties, reduce or uphold them.
- The Board has the authority to send to collections or issue a judgement directly against the employer when penalties go unpaid.
- You can’t hide behind protections of your business entity either! Sole Proprietors, Partners, the President, Secretary and Treasurer of a Corporation are all personally liable!
As a final thought. The State of New York is really no different from most other states when it comes to assesing liabilities upon uninsured employers. They all take the lack of coverage very serious. Don’t fool yourself by thinking workers compensation coverage is taken lightly by the authorities. And if you operate a business in New York you had better make sure you provide workers compensation coverage for your employees!
I’ll write more about other states and how they handle non-complying employers in the future.
Hope this helps you out! Thanks!