Part 1 of a series: The 6 things every employer MUST know
about workers compensation insurance
Having just returned from the annual Pennsylvania Workers'
Compensation Practice and Procedure symposium, it's evident
that the only constant in the workers comp arena remains
what a huge headache it is for employers. Sure, the price
for workers' compensation insurance has been declining
recently, but proper compliance remains a challenge. These
are not minor issues folks. Screw up here and you may find
yourself out of business, in jail, or both!
Because I have with both the insurance industry and the
legal profession, I am occasionally conflicted about what
the right answer ultimately is in any particular employer /
employee situation. However, if you employ people, you
absolutely MUST carry workers compensation insurance. No
exceptions ' well, unless your employees are all Amish.
The requirement
The Pennsylvania Workers' Compensation Act mandates that
employers pay for the medical bills of workers who suffer a
job related injury or illness. If the employee is unable
to work due to the injury, wage loss benefits are also
required until the employee is able to return to the job.
If the worker is killed or subsequently dies, death
benefits are paid to the worker's dependent survivors. The
employer has the choice of buying coverage to pay for these
benefits from a private insurance company, from the State
Workers Insurance Fund (SWIF), or self-insuring.
The Pennsylvania Department of Labor and Industry website
outlines who is subject to the requirements of the Act:
The requirement to insure workers' compensation liability
is mandatory for any employer who:
a. Employs at least one employee who could be injured or
develop a work-related disease in this state, or
b. Could be injured outside the state if the employment is
principally localized in Pennsylvania, or
c. Could be injured outside the state, while under a
contract of hire made in Pennsylvania, if the employment is
not principally localized in any state, if the employment
is principally localized in a state whose workers'
compensation laws do not apply or the employment is made
outside the United States and Canada.
Some employers foolishly don't think this applies to them
if they use seasonal or part-time workers. Not true. It
also doesn't matter if the business or organization is a
non-profit, partnership, corporation, LLC, sole
proprietorship, etc...
What if I "blow off" the requirement?
The short answer is that you can incur both civil and
criminal liability. Section 305 of the Pennsylvania
Workers' Compensation Act states that an employer's failure
to insure its workers' compensation liability is a criminal
offense. Every day an employer fails to insure is a
separate offense. Depending on the circumstances, the
crime will either be classified as a third-degree
misdemeanor or a third-degree felony. So what does all
that mean? In Pennsylvania, a third-degree misdemeanor
conviction can get you a $2,500 fine and up to one year in
jail for every day you are non-compliant with the Act. A
felony conviction can result in a $15,000 fine and up to
seven years imprisonment for each day of non-compliance.
Not enough to convince you yet? Not only does an uninsured
employer face criminal charges, the employer is subject to
tremendous civil liability as well. An injured employee can
now sue the employer for work-related injuries or diseases.
Such suits are normally barred if the employer maintains
workers' compensation insurance. Furthermore, it is very
likely the employee will win an amount that is much higher
than they would have been awarded under workers'
compensation. The court will also require the employer pay
court costs and the cost of prosecuting the case. OUCH! A
recent example of what can happen.
On January 22, 2008, a local roofing and siding company and
its owner, each pled guilty to nine misdemeanor counts of
the third degree in the Bucks County Court of Common Pleas
for failing to insure its workers' compensation liability.
The owner was sentenced to seven years of probation and
also had to pay restitution in the amount of $93,108.06 to
an injured employee and payment of the cost of prosecution.
The company was also sentenced to pay restitution and
prosecution costs. The company is s no longer in business.
They'll never catch me?
Maybe. Maybe not. But did you know that if one your
competitors' thinks you are operating without workers'
compensation insurance they can have you investigated? Not
a bad deal. Pick up the phone, call Labor and Industry,
and eliminate the competition. I don't know about you but
I wouldn't want the future of my business in the hands of
an adversary. Quite frankly, with workers' compensation
insurance being readily available at historically
reasonable prices, there is simply no reason to risk
criminal and civil penalties for non-compliance.
----------------------------------------------------
Eric D. Patrick, is an attorney and Chief Operating Officer
of Consumers Insurance Agency Inc.
http://www.consumers-insurance.com . He is involved in two
law practices and engages in insurance and legal consulting
through his RiskAssure Consulting Group
http://www.ThatsNotCovered.com . Please contact him for
further information.
No comments:
Post a Comment