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No Workers Comp? Go to Jail! Go
Directly to Jail!
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. |