Tag Archive for: Liability Insurance

As an entrepreneur, you are starting your business and have to make tough choices about where to put your money. Rent physical space or go virtual? Do your own books or hire an accountant? Pay for answering service or hire a receptionist?

The answers to these questions will vary depending upon the type of business you are starting, what your skillset is, and how well your project is funded. One thing you should not skimp on if you have employees is purchasing workers’ compensation insurance.

Why? Because if you don’t have workers’ compensation insurance and one of your employees is injured in a workplace accident, or develops a disease or condition as a result of the workplace conditions or duties, you will likely be on the hook for their medical expenses and lost wages. In many states, that is not all… you can be fined by a workers’ compensation judge, or prosecuted for a crime by your state’s Department of Justice.

Read this article for the consequences you can avoid if you just purchase workers’ compensation for the employees of your business.

How Workers Compensation Works

The reason every state has a workers’ compensation statute mandating the purchase of workers’ compensation insurance for most employers is to remove the issue of liability from workplace injuries, provide lost wages and medical expenses for the injured worker, and lift responsibility from the employer.

The public policy concerns resolved by the workers’ compensation statute are preserving the employer-employee relationship, helping workers recover from their injuries and get back to work, and avoiding lengthy, expensive, litigation between employers and their employees over who is at fault for causing the injury.

If a worker is injured, typically, the worker will inform the employer and seek medical attention. Most statutes provide a timeline for this and give the employer and the insurer the right to specify the medical professionals an injured worker must first consult.

Employers are usually required to post notices of workers’ compensation coverage and the procedure for filing a worker’s comp claim in a conspicuous place at work, such as a break room. The worker will complete and submit the required forms, and generally, in as little as a few weeks the worker will receive compensation for the injury in the form of medical expenses and lost wages. If the worker is unable to work for a time, the worker may also receive partial or total temporary or permanent disability compensation.

If an employer does not have workers’ compensation insurance but should, the injured worker can seek recourse in workers’ compensation court and in some states, can sue the employer directly. But that employer’s employees are not the only stakeholders in the employers’ decision not to carry worker’s compensation insurance – the state is.

Because your state has a stake in whether your business has workers’ comp insurance, your state legislators will have specified in the statute what penalties will apply if an employer fails to comply with the mandates of the statute. In many states, failure to comply is a criminal offense and individual owners of a business without workers’ compensation insurance can be fined and jailed.

A Judge May Impose Civil Fines and Penalties for Failing to Comply With Your State’s Workers’ Compensation Statute

Every state’s workers’ compensation statute is a bit different, but most states require employers with at least one employee to purchase workers’ compensation insurance. If a worker is injured and goes to workers’ compensation court, the judge has the authority to not only assess the worker’s medical expenses and lost wages against an uninsured employer but fine that employer in addition, in an amount that will match the egregiousness of the conduct.

In some states, there is an uninsured employer fund that the worker can access to receive compensation more timely, and you as the uninsured employer must repay that amount as well as any fines or penalties provided for your state’s statute.

Employers Without Workers’ Compensation Insurance Can Be Criminally Prosecuted

Failing to purchase and maintain workers’ compensation for employees is a crime in most states. The degree of the crime, the fines and penalties, and the jail sentences imposed upon business owners will vary state-to-state.

For example, in Pennsylvania, failing to maintain workers’ compensation insurance is a third-degree misdemeanor, the punishment being a $2,500.00 fine and up to 1 year in jail. If an employer’s failure to maintain insurance is intentional or willful, that failure is a third-degree felony and the punishment is a $15,000.00 fine and a jail sentence of up to seven years.

Know that in most states, every day the business fails to carry workers’ compensation insurance can be charged as a separate crime. A lengthy amount of time in operation without workers’ comp insurance will certainly enhance the fines, penalties, and jail sentences.
Workers’ compensation insurance protects not only your employees, but you, the business, and other owners of the business if any. Find somewhere else to save money if you need to.

About the Author

Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with Larry Pitt, Esq., a busy workers’ compensation lawyer in Philadelphia.