02 Oct 23

Failure to Carry Workers’ Compensation Coverage in New York: Penalties and Fines

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Last Updated on: 2nd October 2023, 06:39 pm

Failure to Carry Workers’ Comp in NY: Penalties and Fines

Hey there! If you own a business in New York and have employees, you probably know you’re required to carry workers’ compensation insurance. But what happens if you don’t? Well, unfortunately New York has some pretty hefty penalties and fines for employers who fail to carry proper workers’ comp coverage. I wanted to break it all down for you in plain English so you can make sure your business stays compliant.

First off, let’s quickly review who needs coverage. In NY, you’re required to carry workers’ comp if you have one or more employees – full time, part time, seasonal, etc. The only exceptions are certain types of businesses like sole proprietors, partnerships where the only employees are the owners and their spouses, and some volunteer ambulance corps members. But otherwise, if you’ve got employees, you need coverage.

Civil Penalties

Ok, so what happens if you don’t get coverage? Well first, you can get hit with civil penalties from the Workers’ Compensation Board (WCB). There’s a section of the Workers’ Compensation Law (Section 52-5) that says the WCB can fine you up to $2,000 for each 10-day period you don’t have proper coverage. Yikes! As you can imagine, those fines can add up super quick if you let your coverage lapse for weeks or months.

The WCB sends out computer-generated penalty notices each quarter. So even if they don’t catch you right away, don’t think you’re off the hook. You could get a nasty surprise in the mail down the road.

Now here’s the tricky part – even if you get coverage after the fact, the civil fines don’t automatically go away. You still have to pay up for the time you went without coverage. The only way to fight the fines is to show proof that you had coverage for those periods. So don’t throw out your old insurance paperwork!

Criminal Penalties

Ok, the civil fines are bad enough. But believe it or not, you can actually face criminal charges too! Here’s how it works:

  • If you failed to cover 5 or fewer employees within a 12-month period, it’s a misdemeanor punishable by a fine of $1,000-$5,000.
  • If you failed to cover more than 5 employees within a 12-month period, it’s a class E felony with a fine of $5,000-$50,000.

And if you’ve been convicted of not carrying workers’ comp within the past 5 years, any subsequent violation bumps up to a class D felony with a fine of $10,000-$50,000. Yowza!

The WCB refers cases to the New York State Office of the Attorney General for criminal prosecution. So this is serious business. You don’t want to mess around and end up with a criminal record for your business.

Paying Benefits & Medical Bills

Ok, let’s say worst case scenario – you get caught without coverage and an employee gets injured on the job. What then? Well, in addition to the fines and penalties, you’ll still be on the hook to pay their medical bills and lost wages. This gets realllly expensive realllly fast if they have surgery, hospital stays, physical therapy, etc. We’re talking tens or even hundreds of thousands of dollars.

The WCB will order you to reimburse all the medical costs and lost wages for the injured worker. And if you can’t or don’t pay up, the employee can file a lawsuit against you to recover the money. No bueno.

Stop Work Orders

One more thing you need to be aware of – the WCB can issue stop work orders against you until you get proper coverage in place. This means you’d have to completely shut down operations until you get compliant. For most businesses, this would be a total nightmare.

Getting Coverage

Alright, so now that you know what a mess you’d be in without workers’ comp, let’s talk about how to get coverage. The good news is it’s usually pretty easy and affordable, especially for small businesses. Here are some tips:

  • Shop around and get quotes from several providers. Rates can vary a lot, so don’t just go with the first option.
  • Work with an insurance broker who can help find you the best deal.
  • Ask about discounts you may qualify for as a new business or for having a good safety record.
  • Consider higher deductibles to lower your premiums.
  • Look into trade association plans if you belong to any relevant groups.

Once you choose a provider, they’ll file all the paperwork with the WCB for you certifying that you have active coverage. Just make sure to pay your premiums on time so you don’t lapse!

The Bottom Line

The bottom line is that NY doesn’t mess around when it comes to workers’ comp. Failing to carry proper coverage can lead to massive civil fines, criminal charges, uninsured injury claims, and stop work orders. It’s just not worth the risk and headache when coverage is relatively affordable for most businesses.

Do the right thing for your business and your employees – get compliant workers’ comp ASAP if you don’t already have it. And if you have any other questions, feel free to reach out and I’m happy to help however I can!