Worker’s Compensation is insurance that covers an employee in case of injury on the job. Employers are often looking for ways to cut costs and consider skipping having worker’s compensation insurance as it is often quite expensive, especially in industries such as construction, trucking, and other industries with a greater risk of injury. This is not only unwise, it is illegal in most states. The following rules apply in California:
1. It’s a Crime:
Failing to have workers’ compensation coverage is a misdemeanor punishable by either a fine of up to $10,000 or imprisonment in the county jail for up to one year, or both. Additionally, the state issues penalties of up to $100,000 against illegally uninsured employers.
2. Stop Order:
If the state labor commissioner determines an employer is operating without workers’ compensation coverage, a stop order will be issued. This order prohibits the use of employee labor until coverage is obtained, and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days, or by a fine of up to $10,000, or both. The Division of Labor Standards Enforcement will also assess a penalty of $1,000 per employee on the payroll at the time the stop order is issued and served, up to $100,000 (Labor Code section 3722(a)).
3. Worker’s Compensation Appeals Board
If an injured worker files a workers’ compensation claim that goes before the Workers’ Compensation Appeals Board and a judge finds the employer had not secured insurance as required by law, when the dispute is resolved the uninsured employer may be assessed a penalty of $10,000 per employee on the payroll at the time of injury if the worker’s case was found to be compensable, or $2,000 per employee on the payroll at the time of injury if the worker’s case was non-compensable, up to a maximum of $100,000 (Labor Code section 3722(b)).
4. Civil Action:
If an employee gets hurt or sick because of work and you are not insured, you are responsible for paying all bills related to the injury or illness. Contact your local Division of Worker’s Compensation of the Department of Industrial Relations office for further information.
You should be aware that workers’ compensation benefits are only the exclusive remedy for injuries suffered on the job when you are properly insured. If you are illegally uninsured and an employee gets sick or hurt because of work, that employee can file a civil action against you in addition to filing a workers’ compensation claim.
You can purchase workers’ compensation insurance coverage through an agent or a broker from any of the privately licensed insurers authorized to write policies in California.
Don’t risk penalties or jail time for not having coverage for you employees in case of an accident. It just isn’t worth it.
For more information on this topic, see www.dir.ca.gov/dwc/faqs.html
To find out the worker’s compensation requirements in your state, refer to this link.