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Steep Cost for Non-Compliance of New York Workers’ Comp Laws

The New York State Legislature first passed the Workers’ Compensation Law in 1914, and it served as a compromise between the interests of employers and employees. Where workers largely lost the right to sue their bosses for job-related negligence resulting in injury or illness, they also no longer had to prove the company was at-fault when filing a claim for compensation.
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As part of the deal, companies are required to maintain workers’ compensation insurance, and to properly classify eligible workers. Historically, there have always been businesses that try to skirt the law in an effort to avoid the monthly insurance premiums or hefty claim pay-outs. However, other companies that aren’t in compliance are likely not aware of it. Worker classification can be a confusing prospect, and businesses sometimes step afoul of the law without realizing it.

Regardless of the reason, if the state discovers a company is non-compliant with workers’ compensation law, the consequences are likely to be severe, and may include criminal as well as civil penalties.

According to the New York State Workers’ Compensation Board, Section 52[1](a) of the state’s worker compensation law outlines penalties for failure to secure a payment of compensation for five or fewer employers in a one-year time frame is a misdemeanor, punishable by fines of up to $5,000 for each offense. If the company fails to secure workers’ compensation payouts for more than five eligible employees in a 12-month span, it’s considered a class E felony, punishable by fines of up to $50,000.

Further, if a business owner has previously been convicted for failure to secure workers’ compensation payment within the preceding five years, a subsequent violation is considered a class D felony.

If an employer fails to keep accurate records of the number of workers, wages, classifications and accidents dating back at least four years, the company could face a fine of up to $50,000, plus other penalties. Violations under this provision of the law might include intentionally understating or concealing payroll, concealing a worker’s duties to avoid proper classification of that worker, or concealment of any other information pertinent to secure adequate compensation. Also included are offenses such as paying workers “off the books,” failure to report wages to non-citizens, classifying workers as “independent contractors” when they are, in fact, employees, or not properly classifying the work conducted by employees in order to make it seem less hazardous.

A company could also be penalized for failure to secure workers’ compensation insurance for more than 10 days, the firm could face fines of up to $2,000 for each 10-day stretch of non-compliance, which may not exceed the cost of twice its monthly payroll expenses.

It’s important to note employers are fully responsible for footing the bill for coverage, and workers can’t legally be asked to contribute to any portion of the cost.

In addition to criminal convictions and fines, companies that violate these statutes may be barred from contracting with the government for public work projects under Section 141-B.

If a company receives notice of a penalty, fine, judgment or Stop Work Order for failure to have workers’ compensation insurance, it’s important not to respond with any kind of admission of the violation. By allowing an experienced workers’ compensation attorney to handle the claim, you could effectively be saving your firm tens or even hundreds of thousands of dollars.

One of the worst things a company can do is ignore a workers’ compensation notice because this could result in a default judgment against the business or the owner personally. In addition to severe fines and penalties, the firm may be required to pay higher insurance premiums for many years to come.

It’s worth noting even if the owner has shuttered the business, it’s possible he or she may still be held personally responsible for prior violations.

The Law Offices of Ira S. Newman provides workers’ compensation representation in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or send us an e-mail.

Additional Resources:
A GUIDE TO WORKERS’ COMPENSATION IN NEW YORK, New York City Bar
More Blog Entries:
New York Workers’ Compensation: Great Neck Construction Falls a Concern, Feb. 15, 2014, New York City Workers’ Compensation Lawyer Blog